FGI Industries Ltd. Q2 FY2025 earnings call

• FGI's second quarter results reflect strategic investments in organic growth initiatives. Revenue increased 5.5% year-over-year. Gross margin declined due to the tariff environment. - FGI and customers are evaluating a China Plus One strategy to diversify sourcing. - Sanitaryware, Bath Furniture, and Covered Bridge cabinetry businesses contributed to revenue growth, while Shower Systems declined. - Isla Porter joint venture is establishing relationships with the premium design community. - Geographic expansion in Europe and India holds growth promise.

FGI reported total revenue of $31 million in the second quarter. Sanitaryware revenue increased 4.3% year-over-year, contributing a portion to the total. Bath Furniture revenue increased 2.7% year-over-year. Shower Systems revenue declined 11.2%. Other revenue (primarily Covered Bridge) increased 67.7% in the quarter. Revenue in the U.S. declined 0.4%, while Canada grew 2% and Europe grew 36.7%.

• Revenue guidance: $135 million to $145 million. - Adjusted operating income guidance: negative $2 million to positive $1.5 million. - Adjusted net income guidance: negative $1.9 million to positive $1 million. Guidance excludes certain nonrecurring items.

• Tariff uncertainty remains a significant risk, with ongoing fluidity in tariff adjustments globally. - Industry-wide pauses by customers due to tariff impact on business evaluation. - Potential for demand degradation and inventory challenges due to uncertain tariff levels.

Q: Customers paused due to tariffs, what's the reason?

A: Uncertainty from large and changing tariffs led to order pauses initially, but order pipeline is recovering.

Q: China Plus One strategy across segments?

A: FGI is actively diversifying global sourcing across all product categories, with significant changes expected in global sourcing footprint next year.

Q: Operating expenses and gross margin trend in second half?

A: Expenses were managed carefully, and gross margin is expected to rebound based on new programs and plans, with confidence in maintaining upper 20s margin range.

Q: Tariff negotiations with vendors and customers?

A: Uncertainty and fluidity are different from previous tariffs, but adjustments with customers to maintain value continue, with private label doing well due to value offering.