FGI Industries Ltd (FGI) 2024 Q3 法說會逐字稿

Good day, and welcome to the FGI Industries third quarter 2024 results conference call. (Operator Instructions) Please note, this event is being recorded.

美好的一天，歡迎參加 FGI Industries 2024 年第三季業績電話會議。（操作員說明）請注意，正在記錄此事件。

I would now like to turn the conference over to Jae Chung, Vice President of FGI Industries. Please go ahead.

現在我想將會議交給 FGI Industries 副總裁 Jae Chung。請繼續。

Thank you. Welcome to FGI Industries 2024 third quarter results conference call.

謝謝。歡迎參加 FGI Industries 2024 年第三季業績電話會議。

Leading the call today are President and CEO, David Bruce; and Chief Financial Officer, Perry Lin. We issued a press release after the market closed yesterday detailing our recent operational and financial results. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control.

今天主持會議的是總裁兼執行長 David Bruce；和財務長 Perry Lin。昨天收盤後，我們發布了一份新聞稿，詳細介紹了我們最近的營運和財務表現。我想提醒您，管理層在今天的電話會議上的評論和對問題的回答可能包括前瞻性陳述，這些陳述本質上是不確定的，超出了公司的控制範圍。

Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the risk factors section of our latest filings with the SEC. Additionally, please note that you can find reconciliations of historical non-GAAP financial measures in the press release issued yesterday and in the appendix of this presentation, which is available on the company's website.

儘管這些前瞻性陳述是基於管理階層目前的預期和信念，但實際結果可能存在重大差異。有關可能導致實際結果不同的一些因素的討論，請參閱我們向 SEC 提交的最新文件中的風險因素部分。此外，請注意，您可以在昨天發布的新聞稿和本簡報的附錄中找到歷史非公認會計準則財務指標的調節表，該附錄可在公司網站上找到。

Today's call will begin with a performance review and strategic update from Dave Bruce, followed by a financial review from Perry Lin. At the conclusion of these prepared remarks, we will open the line for questions.

今天的電話會議首先由 Dave Bruce 進行績效評估和策略更新，然後由 Perry Lin 進行財務評估。在準備好的發言結束後，我們將開放提問專線。

With that, I'll turn the call over to Dave.

這樣，我會將電話轉給戴夫。

Thank you, Jae. Good morning, everyone, and thank you for joining our call today. I am pleased to share our third quarter results reflect the strategic investments we've made in our organic growth initiatives across our brands, products and channels or BPC strategy.

謝謝你，傑。大家早安，感謝您今天加入我們的電話會議。我很高興與大家分享我們第三季的業績，這反映了我們對跨品牌、產品和通路的有機成長計畫或 BPC 策略的策略投資。

FGI reported total revenue of $36.1 million in the quarter, representing a year-over-year increase of 20.6%. Gross profit was a record $9.3 million, growing 18.9% compared to the prior year. Gross margin was 25.8% compared to 26.2%, a decline of 40 basis points compared to the third quarter of 2023, due in part to a higher mix of Sanitaryware and Bath Furniture, and higher freight costs in the Bath Furniture and Cover Bridge segments.

FGI報告本季總營收為3,610萬美元，年增20.6%。毛利達到創紀錄的 930 萬美元，比上年增長 18.9%。毛利率為 25.8%，較 26.2% 下降，較 2023 年第三季下降 40 個基點，部分原因是衛浴設備和浴室家具的組合增加，以及浴室家具和蓋橋細分市場的貨運成本較高。

The industry outlook remains relatively flat overall with our customers forecasting minimal growth in 2024, but our investments have driven revenue growth well above the market. FGI's third quarter revenue increased significantly compared to the third quarter 2023 due to growth across all our businesses and geographies.

產業前景整體仍相對平穩，我們的客戶預測 2024 年將成長極小，但我們的投資推動營收成長遠高於市場水準。由於我們所有業務和地區的成長，FGI 第三季的營收與 2023 年第三季相比顯著成長。

Revenue grew 21%, 9% and 39% in the quarter for the US, Canada and Europe markets, respectively. Sanitaryware revenue increased 3% year-over-year in the third quarter, reversing the decline in the prior quarter compared to the prior year period. Our Bath Furniture revenue increased 64% year-over-year as our shift towards lower-priced offerings and new programs that are more aligned with the market pricing and design trends gain traction.

美國、加拿大和歐洲市場本季營收分別成長 21%、9% 和 39%。第三季衛浴營收年增3%，扭轉了上一季年減的局面。隨著我們向低價產品和更符合市場定價和設計趨勢的新計劃的轉變，我們的浴室家具收入年增 64%。

The Shower Systems business reported an increase in revenue of 45% as demand trends remain positive, driven by new customer programs. In custom kitchen cabinetry, Covered Bridge revenue increased 93% in the quarter, driven by continued strong dealer and customer expansion across the US.

由於新客戶計畫的推動，需求趨勢保持積極，淋浴系統業務收入成長了 45%。在客製化廚房櫥櫃領域，受美國經銷商和客戶持續強勁擴張的推動，Covered Bridge 本季營收成長了 93%。

Isla Porter, our digital custom kitchen joint venture is off to a strong start, establishing relationships with the premium design community with on-trend products via an AI-backed digital sales platform. Our geographic expansion plans in Europe and India hold significant promise of driving growth in coming quarters. Our strategic growth initiatives are progressing well and are expected to fuel above-market organic future growth. I commend our FGI team for their dedication to our long-term objectives, positioning the company for success for the remainder of 2024 and beyond.

我們的數位客製化廚房合資企業 Isla Porter 已經有了一個良好的開端，透過人工智慧支援的數位銷售平台，透過流行產品與優質設計社群建立了關係。我們在歐洲和印度的地域擴張計劃有望推動未來幾季的成長。我們的策略性成長計畫進展順利，預計將推動未來高於市場的有機成長。我讚揚我們的 FGI 團隊致力於我們的長期目標，使公司在 2024 年剩餘時間及以後取得成功。

With that, I'll hand it over to Perry for a more detailed financial review.

這樣，我會將其交給佩里進行更詳細的財務審查。

Thank you, Dave, and good morning, everyone. I will begin by providing additional details on the quarter, followed by an update on our current liquidity and balance sheet. Finally, I will conclude with our guidance for the full year 2024.

謝謝戴夫，大家早安。我將首先提供有關本季度的更多詳細信息，然後介紹我們當前流動性和資產負債表的最新情況。最後，我將以我們對 2024 年全年的指導作為結束語。

As Dave mentioned, for the third quarter 2024, revenue totaled $36.1 million, an increase of 20.6% compared to the third quarter of 2023. Gross profit was a record $9.3 million in the quarter, an increase of 18.9% year-over-year. Our gross margin declined to 25.8% in the quarter compared to 26.2% in the prior year. Our operating expense increased 27.6% to $9.4 million from $7.3 million in the prior year due to ongoing investment in our growth initiative in the kitchen cabinet business, which includes Cover Bridge and Isla Porter and investing in distribution for our Canada business.

正如 Dave 所提到的，2024 年第三季的營收總計為 3,610 萬美元，較 2023 年第三季成長 20.6%。該季度毛利達到創紀錄的 930 萬美元，年增 18.9%。本季我們的毛利率下降至 25.8%，去年同期為 26.2%。由於我們對廚櫃業務成長計劃（包括 Cover Bridge 和 Isla Porter）的持續投資以及對加拿大業務分銷的投資，我們的營運費用從上一年的 730 萬美元增加了 27.6% 至 940 萬美元。

GAAP operating income was negative $0.1 million in the quarter, down from a positive $0.5 million in the prior year. Lower gross margin and higher operating expense due to investing in our growth initiative accounted for the loss.

本季 GAAP 營業收入為負 10 萬美元，低於去年同期的正 50 萬美元。由於投資於我們的成長計劃，毛利率較低，營運費用較高，造成了虧損。

Moving to our balance sheet. At the end of third quarter, FGI had $16.3 million in total liquidity, which we believe is more than sufficient to fund our growth initiative. We are updating our 2024 guidance as follows, our revised revenue guidance is $127 million to $131 million compared to the previous range of $115 million to $128 million, the new adjusted operating income guidance is negative $1 million to breakeven from the previous range of $2.8 million to $3.8 million; the new adjusted net income guidance is negative $1 million to breakeven from the previous guidance of $1.2 million to $2 million.

轉向我們的資產負債表。截至第三季末，FGI 的流動資金總額為 1,630 萬美元，我們認為這足以為我們的成長計畫提供資金。我們正在更新2024 年指引如下，修訂後的營收指引為1.27 億美元至1.31 億美元，先前的範圍為1.15 億美元至1.28 億美元，新調整後的營業收入指引為負100 萬美元，以實現盈虧平衡，之前的範圍為280 萬美元至 380 萬美元；新的調整後淨收入指引為負100萬美元，以實現盈虧平衡，而先前的指引為120萬美元至200萬美元。

Please note that the guidance for adjusted operating income excludes certain nonrecurring items. Adjusted net income excludes certain nonrecurring items and includes an adjustment for minority interest.

請注意，調整後營業收入的指導不包括某些非經常性項目。調整後淨利潤不包括某些非經常性項目，並包括少數股東權益的調整。

That concludes our prepared remarks. Operator, we are now ready for the question-and-answer portion of our call.

我們準備好的演講到此結束。接線員，我們現在已準備好進行通話的問答部分。

(Operator Instructions)

（操作員說明）

Reuben Garner, The Benchmark Company.

魯本·加納，基準公司。

Wondering if you could help us with the components of the growth year-over-year in the quarter? How much of the outperformance? I mean, I certainly think it was still a down market and you grew 20%. How much of that was that new product offering within the Bath Furniture?

想知道您是否可以幫助我們了解本季同比成長的組成部分？業績超額有多少？我的意思是，我當然認為市場仍然低迷，但你成長了 20%。浴室家具中的新產品有多少？

Was that a onetime kind of stocking benefit that goes away? Or is that an ongoing item? And I've got a couple of follow-ups.

這是一種曾經消失的庫存福利嗎？或者這是一個正在進行的項目？我還有一些後續行動。

Yeah, sure. No problem. Good question. So no, it's not a onetime event. We had a nice revenue bounce based on what we've been talking about the last couple of quarters, which is really reengineering that assortment to meet more of the pricing trends in the market, which we've talked about, higher ticket, higher retail furniture has suffered more recently in the last year or so.

是的，當然。沒問題。好問題。所以不，這不是一次性事件。根據過去幾季我們一直在談論的內容，我們的收入出現了不錯的反彈，這實際上是在重新設計該品種，以滿足市場上更多的定價趨勢，我們已經討論過，更高的票價，更高的零售量家具在過去一年左右的時間裡遭受了更多的損失。

And we've been working diligently to change that assortment, and we're starting to see the results. We're getting new placement. We're taking some share. We've had a couple of large customers also do the same by adding new product into the mix. And we would fully expect to see that type of growth continue as we start to comp this new business.

我們一直在努力改變這種分類，我們已經開始看到結果。我們正在獲得新的安置。我們正在分享一些份額。我們有一些大客戶也透過添加新產品來這樣做。當我們開始計算這項新業務時，我們完全期望看到這種類型的成長繼續下去。

Okay. And then can you talk about the impact on gross profit margins? In the quarter is that -- I think it was 25.9% or 25.6%. Is that the new way to think about it with this new portfolio mix? Or was there anything kind of unique in the quarter that dragged it down?

好的。那麼您能談談對毛利率的影響嗎？在本季度，我認為是 25.9% 或 25.6%。這是思考新投資組合的新方法嗎？或者本季有什麼獨特的因素拖累了它嗎？

Yes. There was -- we don't expect these margins in the quarter that you saw continue. We fully would anticipate to get back to where we were in previous quarters. Mostly what drove the margin change in Q3 were a couple of things. One, ocean freight rates did spike. They have been going up this year. They were higher in Q3. And we did have larger cabinet shipments from our kitchen business, as you saw in the results, which impacted gross margin. As well as the growth in the bathroom furniture and other products that we had brought in.

是的。我們預計本季的利潤率不會像您看到的那樣持續下去。我們完全預計會回到前幾季的水平。推動第三季利潤率變動的因素主要有以下幾個因素。第一，海運費確實飆升。今年他們一直在上漲。他們在第三季更高。正如您在結果中看到的那樣，我們的廚房業務確實有較大的櫥櫃出貨量，這影響了毛利率。以及我們引進的浴室家具和其他產品的成長。

So there was impact on freight. And at the same time, there were some promotional costs associated with launching some of the new bathroom furniture, which impacted margin. But we're very confident with the cadence that we have going into Q4 with the gross margin that we're going to get back to where we were in that 27-plus range for gross margin.

所以對運費有影響。同時，推出一些新浴室家具會產生一些促銷成本，這影響了利潤率。但我們對進入第四季的毛利率很有信心，我們將回到毛利率 27 以上的水平。

Okay. And then -- so does that mean that that's the primary difference between your profitability guide from -- I mean, you've outperformed on the revenue front. You raised your revenue guide. The profitability side comes in some -- Is that entirely driven by the change in the freight component and the promotional piece that -- and I guess, was the promotional piece not expected before? Or was there new -- even new wins sort of post last quarter that impacted that?

好的。然後——這是否意味著這是你的獲利指南與——我的意思是，你在收入方面的表現優於其他公司。您提高了收入指南。盈利能力方面有一些——這完全是由貨運部分和促銷部分的變化驅動的——我猜，促銷部分是之前沒有預料到的嗎？或者上個季度後是否有新的——甚至是新的勝利對此產生了影響？

Yeah. So I think there's two ways to look at this. So from a gross margin perspective, looking at that 25.6% number, whatever it was -- 25.8%. That's -- like I said, we're very confident we're going to get back to that 27-plus number based on our mix. And with freight normalizing again, we don't anticipate freight rates to be as spiked as they were in Q3.

是的。所以我認為有兩種方式來看待這個問題。因此，從毛利率的角度來看，看看 25.6% 的數字，無論它是什麼——25.8%。就像我說的，我們非常有信心根據我們的組合恢復到 27 以上的數字。隨著運費再次正常化，我們預計運費不會像第三季那樣飆升。

But I think you're also talking about operating expense, which impacted our bottom line, right? So our -- we expect, and I think I mentioned this on one of the last calls, is we fully expect that we'll be able to leverage a lot of our operating costs. We have some good leverage here. And we fully expect that we'll be able to, in the short term, in the near term and the midterm, continue to reduce our operating expense ratio, which is really critical and leverage what we are investing, particularly in the new businesses such as Isla Porter and the kitchen growth, which has been large areas of investment for us, which have, in the short term, negatively impacted our bottom line.

但我認為您也在談論營運費用，這影響了我們的利潤，對吧？因此，我們預計，而且我想我在最後一次電話會議中提到了這一點，我們完全預計我們將能夠利用大量營運成本。我們在這裡有一些很好的槓桿作用。我們完全期望我們能夠在短期內、近期和中期繼續降低我們的營運費用率，這非常關鍵並充分利用我們正在投資的資金，特別是在新業務，例如Isla Porter 和廚房的成長對我們來說是一個很大的投資領域，但在短期內對我們的利潤產生了負面影響。

But as you're starting to see, is now starting to impact positive results on the revenue side, which in turn will drive gross margin and gross profit dollars. So it's a twofold thing in the quarter, the continued investments in our -- what we feel are some of our key core growth categories as well as that little bit of a blip with promotional costs and freight on the gross margin perspective.

但正如您開始看到的那樣，現在開始對收入產生積極的影響，這反過來又會提高毛利率和毛利。因此，本季有雙重因素，我們認為是我們的一些關鍵核心成長類別的持續投資，以及從毛利率角度來看促銷成本和運費的一點波動。

Okay. Great. I'm going to sneak one more big picture question in. What are your customers saying today as -- I know it's early, but kind of initial thoughts for next year? I mean, I think there was a lot of optimism over the last couple of months that rates coming in could have a meaningful impact, but it seems that in the near term, at least rates have actually gone the other direction. Is it muted outlook for '25 for the industry still the right way to look at it? Or do you sense that there is increasing optimism from your customers?

好的。偉大的。我將再偷偷地提出一個大問題。您的客戶今天怎麼說——我知道現在還為時過早，但對明年的初步想法是什麼？我的意思是，我認為過去幾個月人們非常樂觀地認為利率的上升可能會產生有意義的影響，但似乎在短期內，至少利率實際上已經走向了另一個方向。25 世紀該產業的黯淡前景是否仍是正確的看待方式？還是您感覺到您的客戶越來越樂觀？

I would say there's cautious optimism. I do think muted is a good term. I believe some of our industry comps for some of our customers, you're looking at zero to low single-digit growth potential next year. For us, however, we're starting to take share in some of the key categories we do business with -- that we do business in. And so we're not necessarily tied to where the market goes, only because we're gaining incremental new sales.

我想說的是謹慎樂觀。我確實認為“靜音”是一個很好的詞。我相信我們的一些行業比較對於我們的一些客戶來說，明年的成長潛力為零到低個位數。然而，對我們來說，我們開始在我們開展業務的一些關鍵類別中分享份額。因此，我們不一定與市場走向掛鉤，只是因為我們正在獲得漸進式新銷售。

But to answer the question, I think the industry is cautiously optimistic about some improvements. And I think if rates, which we would -- it seems everybody expects that rates will improve, and that should spur a little bit of market activity beyond just the incremental growth that we're expecting.

但回答這個問題，我認為業界對一些改進持謹慎樂觀的態度。我認為，如果利率提高，似乎每個人都預期利率將會提高，這應該會刺激一些市場活動，而不僅僅是我們預期的增量成長。

Congrats on the progress.

祝賀取得的進展。

With no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to David Bruce for any closing remarks.

沒有其他問題了，我們的問答環節就結束了。我想將會議轉回給大衛布魯斯發表閉幕詞。

Thank you for your time and interest today. We appreciate your continued support of FGI. Stay well. And if we don't connect during the quarter, we look forward to speaking with you on our next quarterly call.

感謝您今天的時間和興趣。我們感謝您對 FGI 的持續支持。保持健康。如果我們在本季度沒有聯繫，我們期待在下一個季度的電話會議上與您交談。

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

會議現已結束。感謝您參加今天的演講。您現在可以斷開連線。