FGI Industries Ltd. (NASDAQ:FGI) Q2 2022 Earnings Conference Call August 11, 2022 8:00 AM ET Company Participants Paul Bartolai - Managing Director David Bruce - President and CEO Perry Lin - Chief Financial Officer Conference Call Participants Reuben Gardner - Benchmark Greg Gibas - Northland Securities Operator Thank you for standing by. This is the conference operator. Welcome to the FGI Second Quarter 2022 Earnings Call. As a reminder, all participants are in listen-only mode and the conference is being ...

TRE ITT ric ga VIII III u il h (@@ 1 伊 s 195 @ FGI the Price a I I ] I 2008 37 ( [■ R 8 t and D DISCLAIMER Certain matters discussed in this presentation contains forward-looking statements concerning our business, operations and financial performance and conditions, as well as our plans, objectives and expectations for our business operations and financial performance and condition. These statements may be preceded by, followed by or include the words "may," "expect," "will," "will likely result," "should, ...

Financial Data and Key Metrics Changes - Revenue for Q1 2022 totaled $43.6 million, representing a 20% increase year-over-year, driven by 3% volume growth and a 17% benefit from price mix [26][27] - Adjusted operating income was $0.9 million, down from $2 million in the prior year, due to supply chain issues and inflationary pressures [8][33] - Gross profit margin was 17.3%, down from 20.1% in the prior year, but improved nearly 300 basis points from the fourth quarter [31][32] - GAAP net income was $0.5 million, or $0.05 per diluted share, down from $3 million or $0.42 in the same period last year [34] Business Line Data and Key Metrics Changes - Sanitaryware revenue was $28 million, a 24% increase year-over-year, driven by 3% volume growth and a 21% benefit from price mix [28] - Bath Furniture revenue decreased by 12% to $10 million, impacted by order push-outs due to supply chain challenges [29] - Other revenue surged by 153% to $5.3 million, driven by growth in the Jetcoat Shower Wall System [30] Market Data and Key Metrics Changes - Revenue in the US market increased by 24%, while Canada saw a 29% increase; however, Europe experienced a modest decline [27] - The company noted that approximately 80% of its revenue is tied to the repair and remodel market, which is more stable than new construction [12] Company Strategy and Development Direction - The company aims for above-market growth through product innovation, operational improvements, and efficient capital deployment [16][24] - The BPC strategy (Brands, Products, Channels) is a key driver for organic growth, focusing on expanding into new product categories [19] - The company plans to implement SAP in Q3 or Q4 to enhance operational efficiency [23] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the stability of the kitchen and bath markets despite inflation and rising rates, expecting continued demand for home improvement [10][15] - The company anticipates a flat to modest decline in the industry volume for 2022, but is optimistic about its growth trajectory [38] - Management has baked in a conservative 5% reduction in home improvement spending for 2022, reflecting cautious optimism [43][45] Other Important Information - The company has $8.8 million in cash and cash equivalents and total debt of $16.3 million, with total liquidity of $10.5 million [35][36] - Capital spending needs are expected to remain around 1% of revenue, with a focus on organic growth strategies [37] Q&A Session Summary Question: Trends in US and Canada - Management noted consistent order patterns and confidence in continued demand despite macroeconomic concerns [42][43] Question: Year-over-year price and cost adjustments - Management indicated that approximately 75% of cost inflation has been captured through price adjustments, with further actions planned [47][48] Question: Impact of rising mortgage rates - Management stated that rising rates typically lead to increased investment in home improvements rather than decreased demand [49][50] Question: European market trends - Management explained that order volume in Europe was affected by prior large orders and a shift towards higher-margin products [52][54] Question: Inventory situation in North America - Management reported a recent easing of inventory constraints and expects a return to normal order cadence [56][58] Question: Guidance visibility for the back half of the year - Management expressed confidence in demand visibility for the next 3 to 6 months, with a conservative forecast for volume growth [60][62] Question: Supply chain pressures - Management noted improvements in shipping costs from China and consistent lead times, with expectations for further gross margin improvements [64][68] Question: Future bolt-on opportunities - Management clarified that while there are opportunities for bolt-ons, focus is currently on large organic growth initiatives [70][72]

Revenue Performance - Revenues increased by $7.2 million, or 19.8%, to $43.6 million for the three months ended March 31, 2022, compared to $36.4 million for the same period in 2021[162]. - Sanitaryware sales accounted for 64.7% of total revenues, increasing by 23.6% to $28.2 million for the three months ended March 31, 2022[168]. - Bath Furniture sales decreased by 11.9% to $10.1 million, representing 23.3% of total revenues for the three months ended March 31, 2022[169]. - Revenues from other products increased by 152.9% to $5.3 million, driven by strong sales of Jetcoat Shower wall systems[170]. - For the three months ended March 2022, revenue was $43,575,239, an increase from $36,375,689 in the same period of 2021, representing a growth of approximately 19.1%[211]. Profitability - Gross profit increased by $0.2 million, or 2.8%, to $7.5 million, with gross profit margin decreasing to 17.3% due to higher raw material and freight costs[176][177]. - Income from operations decreased by 63.3% to $690,746 for the three months ended March 31, 2022, compared to $1,883,771 in 2021[162]. - Net income fell by 82.1% to $530,193 for the three months ended March 31, 2022, down from $2,961,414 in the same period last year[162]. - Adjusted income from operations for March 2022 was $923,058, down from $1,999,671 in March 2021, reflecting a decrease of about 53.8%[211]. - Adjusted net income for March 2022 was $804,321, compared to $1,114,714 in March 2021, showing a decrease of around 28%[211]. - Adjusted operating margins fell to 1.6% in March 2022 from 5.2% in March 2021, a decline of 3.6 percentage points[211]. Expenses - Selling and distribution expenses rose by $0.7 million, or 18.7%, to $4.7 million, attributed to increased sales and returning business activities to pre-COVID-19 levels[178]. - General and administrative expenses increased by $0.5 million, or 35.6%, to $1.8 million for the three months ended March 31, 2022, compared to the same period in 2021[179]. - Research and development expenses remained stable and are relatively immaterial to the company's financial statements[180]. - Non-recurring IPO-related compensation and stock-based compensation expense for March 2022 was $232,312, with no such expense reported in March 2021[211]. - COVID one-time expenses were recorded as $115,900 in March 2021, with no such expenses in March 2022[211]. Cash Flow and Debt - Cash and cash equivalents increased to $8.8 million as of March 31, 2022, from $3.9 million as of December 31, 2021[185]. - Net cash used in operating activities was approximately $9.1 million for the three months ended March 31, 2022, primarily due to a decrease in accounts payable of approximately $8.1 million[195]. - Net cash provided by financing activities was approximately $14.0 million for the three months ended March 31, 2022, which includes net proceeds from the IPO of $12.4 million[200]. - Total debt as of March 31, 2022, was represented by a credit facility with East West Bank, with an outstanding balance of $16.3 million[192]. - The interest rate on the East West Bank loan was 3.75% as of March 31, 2022, up from 3.50% as of December 31, 2021[190]. Future Outlook - The company expects to resume margin expansion in the latter half of 2022 as measures to offset supply chain disruptions take effect[156]. - The company may seek additional cash resources in the future for investments, acquisitions, or strategic cooperation[186]. - The tax impact of adjustments for March 2022 was $41,816, compared to a tax impact of $(281,700) in March 2021[211]. - The company recorded an income tax expense of $0.1 million for the three months ended March 31, 2022, down from $0.5 million for the same period in 2021, reflecting a decrease in reported income before taxes of $2.8 million, or 80.7%[182].

TABLE OF CONTENTS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☒ For the fiscal year ended December 31, 2021 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-41207 ☐ FGI Industries Ltd. (Exact Name of Registrant as Specified in Its Charter) Cayman Islands 98-1603252 (State or Other Jurisdict ...