FGI INDUSTRIES ANNOUNCES SECOND QUARTER 2022 RESULTS
FGI Industries Ltd. (Nasdaq: FGI) reported second-quarter 2022 revenues of $47.8 million, up 12.5% year-over-year. Operating income decreased to $1.7 million, down 47.9% from the previous year, mainly due to increased supply chain disruptions and public company costs. Net income fell by 53.3% to $1.2 million, reflecting ongoing operational challenges. The company expects continued margin improvement in the second half of 2022, driven by strategic pricing actions and declining freight costs. FGI reaffirmed its fiscal 2022 guidance, projecting total revenue between $182 million and $189 million.
- Total revenue increased 12.5% y/y to $47.8 million.
- Sanitaryware revenue grew 55.5% y/y, indicating strong demand.
- Sequential operating margin improved by roughly 200 basis points.
- Cash position of $3.1 million with $6.4 million total liquidity.
- Operating income dropped 47.9% y/y to $1.7 million.
- Net income decreased by 53.3% y/y to $1.2 million.
- Bath Furniture revenue declined 52% y/y due to supply chain issues.
- Gross profit margin fell to 17.6%, down from 21.6% y/y.
EAST HANOVER, N.J., Aug. 10, 2022 /PRNewswire/ -- FGI Industries Ltd. (Nasdaq: FGI) ("FGI" or the "Company"), a leading global supplier of kitchen and bath products, today announced results for the second quarter of 2022.
SECOND QUARTER 2022 HIGHLIGHTS
(As compared to the Second Quarter of 2021)
- Total Revenues of
$47.8 million , +12.5% y/y - Operating Income of
$1.7 million , (47.9% ) y/y - Net Income of
$1.2 million , (53.3% ) y/y - Adjusted Operating Income of
$1.8 million , (47.2% ) y/y - Adjusted Net Income of
$1.2 million , (52.6% ) y/y - Reaffirmed full-year 2022 financial guidance
Total revenue increased by
The Company reported operating income of
For the three months ended June 30, 2022, the Company reported GAAP net income of
MANAGEMENT COMMENTARY
"Demand trends remained strong across our key product categories during the second quarter, with total revenue increasing by
"I am extremely pleased by our solid execution in the quarter, as we made additional progress on our margin recovery initiatives, with pricing actions and other measures to offset the supply chain challenges driving roughly 200 basis points of sequential improvement in operating margin during the second quarter," continued Bruce. "A less favorable business mix masked some of the progress we made during the quarter, but we continue to successfully implement strategic pricing actions that will benefit second half results and as a result we expect to see additional sequential margin improvement in the back half of the year."
"The supply chain headwinds have resulted in a period of elevated working capital usage in recent quarters, but these issues are beginning to normalize, and we expect strong cash flow conversion in the back half of the year as balance sheet metrics return to historical levels," stated Perry Lin, Chief Financial Officer of FGI. "We exited the second quarter of 2022 in a strong financial position with cash of
"We were able to post another quarter of solid financial performance despite the challenging business environment, which is a direct result of the hard work and dedication of our highly motivated team members across the organization," continued Bruce. "We continue to pursue a number of programs that have the potential to drive strong incremental organic growth over the long-term, including investments in manufacturing capacity to support potentially meaningful growth in our Covered Bridge custom kitchen cabinetry brand in the coming quarters and years. We are excited by the strong growth potential for FGI and remain encouraged by our ability to drive improving profitability despite the ongoing supply chain challenges. Based on these factors, we remain confident in our financial outlook for the year and are reiterating our full-year 2022 financial guidance."
STRATEGIC UPDATE
Consistent with its long-term strategic plan, FGI intends to drive value creation for its shareholders through a focus on product innovation, execution of its Brands, Products and Channels ("BPC") strategy to drive organic growth, margin expansion, and efficient capital deployment. Notable progress against these initiatives achieved during the second quarter were as follows:
- FGI has expanded its relationship with Hajoca Corporation, the nation's largest privately held wholesale distributor of plumbing, heating, and industrial supplies in the United States. Hajoca is now offering almost the entire portfolio of FGI's products to its customers
- FGI continues to grow its custom kitchen cabinetry business, generating strong growth in its dealer network which totaled 119 at June 30, 2022, up from 71 at the start of the year. FGI is also in active discussions with large national customers for even greater growth potential in the years ahead. As a result, the Company is investing in manufacturing capacity to support the growth trajectory of its custom kitchen cabinetry business.
- FGI generated roughly 200 basis points of sequential operating margin improvement during the second quarter of 2022 as compared to the first quarter of 2022 owing to price increases and other efficiency measures. Based on continued strategic price actions and declining freight costs, FGI expects to generate continued margin improvement in the back half of 2022.
- FGI continues to focus its capital deployment efforts on organic growth strategies in the near-term (as illustrated by its investment in manufacturing capacity for its custom kitchen cabinetry business) and continues to focus on attractive organic growth initiatives that could contribute significant growth in the coming years. In addition, the Company is actively screening potential M&A opportunities to supplement its organic growth strategy.
SECOND QUARTER 2022 RESULTS
Revenue totaled
- Sanitaryware revenue was
$32.2 million during the second quarter of 2022, an increase of55.5% compared to the prior-year period, primarily driven by continued volume strength in the pro channel as well as solid demand in the retail channel. Order momentum for the Sanitaryware business remains on track with no indications of a slowdown visible at this point. - Bath Furniture revenue was
$7.7 million during the second quarter of 2022, a decrease of52% compared to the prior-year period. The Company continued to experience order delays due to supply chain issues and elevated levels of channel inventory. This is largely a timing issue, as end consumer demand has moderated slightly but remains solid. The Company expects these issues to begin normalizing in the second half of 2022 as orders are expected to be placed and shipped in the coming quarters. - Other revenue was
$7.9 million during the second quarter of 2022, an increase of35.5% compared to the prior-year period, primarily driven by volume growth resulting from continued strength in sales of the Jetcoat Shower wall systems, shower doors, and Covered Bridge custom-kitchen cabinetry.
Gross profit was
Operating income was
FINANCIAL RESOURCES AND LIQUIDITY
As of June 30, 2022, the Company had
FINANCIAL GUIDANCE
The outlook for FGI's business and the long-term trends in the repair and remodel markets remains strong. The Company reiterates its fiscal 2022 guidance as follows:
- Total Revenue of between
$182 million and$189 million - Total Operating Income of between
$6.5 million and$7.5 million - Total Net Income of
$5.0 million to$6.0 million
SECOND QUARTER CONFERENCE CALL
FGI will conduct a conference call on Thursday, August 11 at 8:00 am Eastern Time to discuss the quarterly results.
A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of the Company's corporate website at https://investor.fgi-industries.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register and download and install any necessary audio software.
To participate in the live teleconference:
Toll Free: | 1-855-327-6837 | |
International Live: | 1-631-891-4304 |
To listen to a replay of the teleconference, which will be available through August 25, 2022:
Domestic Replay: | 1-844-512-2921 | |
International Replay: | 1-412-317-6671 13727517 | |
Conference ID: | 10019643 |
ABOUT FGI INDUSTRIES
FGI Industries Ltd. (Nasdaq: FGI) is a leading global supplier of kitchen and bath products. For over 30 years, we have built an industry-wide reputation for product innovation, quality, and excellent customer service. We are currently focused on the following product categories: sanitaryware (primarily toilets, sinks, pedestals and toilet seats), bath furniture (vanities, mirrors and cabinets), shower systems, customer kitchen cabinetry and other accessory items. These products are sold primarily for repair and remodel activity and, to a lesser extent, new home or commercial construction. We sell our products through numerous partners, including mass retail centers, wholesale and commercial distributors, online retailers and specialty stores.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as "anticipate," "expect," "could," "may," "intend," "plan", "see" and "believe," among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements regarding FGI's guidance, the Company's growth strategies, outlook and potential acquisition activity, the effect of the COVID-19 pandemic and the associated impact on the national and global economy, the effect of supply chain disruptions and freight costs. These forward-looking statements are based on currently available operating, financial, economic and other information, and are subject to a number of risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. A variety of factors, many of which are beyond our control, could cause actual future results or events to differ materially from those projected in the forward-looking statements in this release. For a full description of the risks and uncertainties which could cause actual results to differ from our forward-looking statements, please refer to FGI's periodic filings with the Securities & Exchange Commission including those described as "Risk Factors" in FGI's annual report on Form 10-K for the year ended December 31, 2021, and in quarterly reports on Form 10-Q filed thereafter. FGI does not undertake any obligation to update forward-looking statements whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
FGI INDUSTRIES LTD. | |||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||
June 30 | June 30, | ||||||||
2022 | 2021 | 2022 | 2021 | ||||||
USD | USD | USD | USD | ||||||
REVENUES | $ | 47,809,014 | $ | 42,490,357 | 91,384,254 | $ | 78,866,047 | ||
COST OF REVENUES | 39,388,061 | 33,301,420 | 75,438,715 | 62,360,079 | |||||
GROSS PROFIT | 8,420,953 | 9,188,937 | 15,945,539 | 16,505,968 | |||||
OPERATING EXPENSES | |||||||||
Selling and distribution | 4,362,707 | 4,088,739 | 9,040,059 | 8,029,209 | |||||
General and administrative | 2,093,162 | 1,623,917 | 3,935,969 | 2,982,939 | |||||
Research and development | 235,735 | 155,356 | 549,416 | 289,124 | |||||
Total operating expenses | 6,691,604 | 5,868,012 | 13,525,444 | 11,301,272 | |||||
INCOME FROM OPERATIONS | 1,729,349 | 3,320,925 | 2,420,095 | 5,204,696 | |||||
OTHER INCOME (EXPENSES) | |||||||||
Interest income | 102 | 2,578 | 133 | 10,778 | |||||
Interest expense | (107,440) | (85,983) | (239,192) | (167,295) | |||||
Other income, net | (66,074) | (101,295) | 32,771 | 1,504,947 | |||||
Total other (expenses) income, net | (173,412) | (184,700) | (206,288) | 1,348,430 | |||||
INCOME BEFORE INCOME TAXES | 1,555,937 | 3,136,225 | 2,213,807 | 6,553,126 | |||||
PROVISION FOR (BENEFIT OF) INCOME TAXES | |||||||||
Current | 298,300 | 528,571 | 469,799 | 833,530 | |||||
Deferred | 87,107 | 99,753 | 43,285 | 250,281 | |||||
Total provision for income taxes | 385,407 | 628,324 | 513,084 | 1,083,811 | |||||
NET INCOME | 1,170,530 | 2,507,901 | 1,700,723 | 5,469,315 | |||||
OTHER COMPREHENSIVE INCOME | |||||||||
Foreign currency translation adjustment | (69,416) | 325,637 | (126,596) | 325,236 | |||||
COMPREHENSIVE INCOME | $ | 1,101,114 | $ | 2,833,538 | $ | 5,794,551 | |||
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES | |||||||||
Basic* | 9,168,508 | 7,000,000 | 9,168,508 | 7,000,000 | |||||
Diluted* | 11,662,293 | 7,000,000 | 11,662,293 | 7,000,000 | |||||
EARNINGS PER SHARE | |||||||||
Basic* | $ | 0.13 | $ | 0.36 | $ | 0.19 | $ | 0.78 | |
Diluted* | $ | 0.10 | $ | 0.36 | $ | 0.15 | $ | 0.78 | |
* Shares and per share data are presented on a retroactive basis to reflect the reorganization on January 27, 2022. |
FGI INDUSTRIES LTD. | |||||
As of | As of | ||||
USD | USD | ||||
ASSETS | |||||
CURRENT ASSETS | |||||
Cash | $ | 3,126,305 | $ | 3,883,896 | |
Accounts receivable, net | 25,068,641 | 26,350,650 | |||
Inventories, net | 18,681,768 | 21,263,961 | |||
Prepayments and other current assets | 2,630,749 | 1,546,623 | |||
Prepayments and other receivables – related parties | 8,638,531 | 3,119,822 | |||
Total current assets | 58,145,994 | 56,164,952 | |||
PROPERTY AND EQUIPMENT, NET | 333,503 | 387,655 | |||
OTHER ASSETS | |||||
Intangible assets | — | 42,683 | |||
Operating lease right-of-use assets, net | 7,455,006 | 8,087,969 | |||
Deferred tax assets, net | 1,424,193 | 1,478,589 | |||
Other noncurrent assets | 3,102,234 | 2,989,012 | |||
Total other assets | 11,981,433 | 12,598,253 | |||
Total assets | $ | 70,460,930 | $ | 69,150,860 | |
LIABILITIES AND PARENT'S NET INVESTMENT | |||||
CURRENT LIABILITIES | |||||
Short-term loans | $ | 14,690,048 | $ | 14,657,280 | |
Accounts payable | 21,203,868 | 32,009,851 | |||
Income tax payable | 875,797 | 1,220,939 | |||
Operating lease liabilities – current | 1,155,559 | 1,315,848 | |||
Accrued expenses and other current liabilities | 4,485,430 | 5,512,438 | |||
Total current liabilities | 42,410,702 | 54,716,356 | |||
OTHER LIABILITIES | |||||
Operating lease liabilities – noncurrent | 6,410,859 | 6,884,794 | |||
Total liabilities | 48,821,561 | 61,601,150 | |||
COMMITMENTS AND CONTINGENCIES | |||||
SHAREHOLDERS' EQUITY | |||||
Preference Shares ( |
— |
— | |||
Ordinary shares ( |
950 |
700 | |||
Parent's net investment | — | 7,549,010 | |||
Additional paid-in capital | 20,719,024 | — | |||
Retained earnings | 1,700,723 | — | |||
Accumulated other comprehensive income | (781,328) | — | |||
Total shareholders' equity | 21,639,369 | 7,549,710 | |||
Total liabilities and shareholders' equity | $ | 70,460,930 | $ | 69,150,860 | |
* Shares and per share data are presented on a retroactive basis to reflect the reorganization on January 27, 2022. |
FGI INDUSTRIES LTD. | ||||
For the Six Months Ended June 30, | ||||
2022 | 2021 | |||
USD | USD | |||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Net income | $ | 1,700,723 | $ | 5,469,315 |
Adjustments to reconcile net income to net cash used in operating activities | ||||
Depreciation and amortization | 138,213 | 142,248 | ||
Share-based compensation | 144,733 | — | ||
Provision for doubtful accounts | 75,940 | 14,749 | ||
(Reversal of) provision of defective return | (637,879) | 3,108,807 | ||
Foreign exchange transaction loss | 2,850 | 94,316 | ||
Interest expenses | 239,192 | 167,295 | ||
Gain on Forgiveness of PPP loan | — | (1,680,900) | ||
Deferred income taxes | 54,397 | 233,846 | ||
Loss on disposal of property and equipment | — | (3,000) | ||
Changes in operating assets and liabilities | ||||
Accounts receivable | 1,843,947 | (1,852,844) | ||
Inventories | 2,582,193 | (4,366,126) | ||
Prepayments and other current assets | (1,470,609) | (175,021) | ||
Prepayments and other receivables – related parties | (5,348,158) | (23,294) | ||
Other noncurrent assets | (113,223) | (3,841,292) | ||
Right-of-use assets | 632,963 | 565,630 | ||
Income taxes | (345,143) | 598,290 | ||
Accounts payable | (10,805,982) | 360,438 | ||
Accounts payable-related parties | — | 807,902 | ||
Operating lease liabilities | (634,224) | (581,649) | ||
Accrued expenses and other current liabilities | (1,050,269) | 1,591,062 | ||
Net cash used in operating activities | (12,990,336) | 629,772 | ||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Proceeds from disposal of property and equipment | — | 3,000 | ||
Purchase of property and equipment | (42,752) | (4,751) | ||
Net cash used in investing activities | (42,752) | (1,751) | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Net proceeds from (repayments of) revolving credit facility | 32,768 | 6,358,188 | ||
Net proceeds from issuance of ordinary shares in IPO | 12,370,800 | — | ||
Net changes in parent company investment | — | (7,430,516) | ||
Net cash provided by (used in) financing activities | 12,403,568 | (1,072,328) | ||
EFFECT OF EXCHANGE RATE FLUCTUATION ON CASH | (128,071) | 226,359 | ||
NET CHANGES IN CASH | (757,591) | (217,948) | ||
CASH, BEGINNING OF PERIOD | 3,883,896 | 4,018,558 | ||
CASH, END OF PERIOD | $ | 3,126,305 | $ | 3,800,610 |
SUPPLEMENTAL CASH FLOW INFORMATION | ||||
Cash paid during the period for interest | (240,183) | (163,956) | ||
Cash paid during the period for income taxes | (808,048) | (251,354) | ||
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||
Net changes in parent company investment | — | (7,430,516) | ||
NON-GAAP FINANCIAL MEASURES
In addition to the measures presented in our unaudited condensed consolidated financial statements, we use the following non-GAAP measures to evaluate our business, measure our performance, identify trends affecting our business and assist us in making strategic decisions. Our non-GAAP measures are: Adjusted Income from Operations, Adjusted Net Income and Adjusted Net Income Per Share. These non-GAAP financial measures are not prepared in accordance with GAAP. They are supplemental financial measures of our performance only, and should not be considered substitutes for net income, income from operations or any other measure derived in accordance with GAAP and may not be comparable to similarly titled measures reported by other entities.
We define Adjusted Income from Operations as GAAP income from operations excluding the impact of certain non-recurring expenses, including IPO-related compensation and stock-based compensation expense and expenses related to COVID-19 protocols. We define Adjusted Net Income as GAAP net income excluding the tax-effected impact of certain non-recurring expenses and income, such as IPO-related compensation and stock-based compensation expense, expenses related to COVID-19 protocols and the impact of our PPP loan. We define Adjusted Net Income Per Share as GAAP net income per share excluding one-time expenses and income, including IPO-related compensation and stock-based compensation expense, expenses related to COVID-19 protocols and the impact of our PPP loan.
We use these non-GAAP measures, along with U.S. GAAP measures, to evaluate our business, measure our financial performance and profitability and our ability to manage expenses, after adjusting for certain one-time expenses, identify trends affecting our business and assist us in making strategic decisions. We believe these non-GAAP measures, when reviewed in conjunction with U.S. GAAP financial measures, and not in isolation or as substitutes for analysis of our results of operations under U.S. GAAP, are useful to investors as they are widely used measures of performance, and the adjustments we make to these non-GAAP measures provide investors further insight into our profitability and additional perspectives in comparing our performance over time on a consistent basis.
The following table reconciles Income from Operations to Adjusted Income from Operations, as well as net income to Adjusted Net Income and net income per share to Adjusted Net Income Per Share for the periods presented.
For the quarter ended June 30, | ||
2022 | 2021 | |
Income from operations . | 1,729,349 | 3,320,925 |
Adjustments: | ||
Non-recurring IPO-related compensation and stock- | 23,559 | — |
Adjusted income from operations | 1,752,907 | 3,320,925 |
For the quarter ended June 30, | ||
2022 | 2021 | |
Net Income | 1,170,530 | 2,507,901 |
Adjustments: | ||
Non-recurring IPO-related compensation and stock- | 23,559 | — |
Total | 1,194,089 | 2,507,901 |
Tax impact of adjustment at | 4,241 | — |
Adjusted net income | 1,189,848 | 2,507,901 |
Net income per share | 0.10 | 0.36 |
Adjustments: | ||
Non-recurring IPO-related compensation and stock- | 0.00 | — |
Adjusted net income per share | 0.10 | 0.36 |
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SOURCE FGI Industries Ltd.
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