FGI Industries .(FGI) - 2023 Q4 - Annual Results

Financial Highlights FGI Industries experienced a Q4 revenue decline but significant gross profit and margin expansion, with full-year revenue dropping while gross profit slightly increased and margins substantially improved Q4 2023 Financial Highlights (vs Q4 2022) | Metric | Value | Change | | :--- | :--- | :--- | | Total Revenues | $31.0 million | -2.6% | | Gross Profit | $9.0 million | +20.1% | | Gross Margin | 29.2% | +549 bps | | Net Income | $0.5 million | - | | Adjusted Net Income* | $0.5 million | - | | Adjusted Operating Income* | $1.4 million | - | Full-Year 2023 Financial Highlights (vs Full-Year 2022) | Metric | Value | Change | | :--- | :--- | :--- | | Total Revenues | $117.2 million | -27.5% | | Gross Profit | $32.1 million | +1.8% | | Gross Margin | 27.4% | +788 bps | | Net Income | $0.6 million | - | | Adjusted Net Income* | $1.0 million | - | | Adjusted Operating Income* | $2.8 million | - | Management Commentary and Outlook Management reported a challenging 2023 with a strong Q4 finish, achieving record gross margins, and anticipates above-market growth in 2024 driven by new programs - Despite a challenging 2023 marked by uneven demand and inventory de-stocking, the company finished the year with improved order trends in Q4 and expects momentum to continue into 2024[3] - A strategic focus on higher-margin products led to a record quarterly gross margin of 29.2% in Q4, an increase of 549 basis points year-over-year, with full-year gross margin increasing by 788 basis points[3][5] - The company maintained strong financial discipline, ending the year with $24.4 million in total liquidity, which it plans to prioritize for internal investment and potential strategic M&A[5] Fiscal Year 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Total Revenue | $115 million to $128 million | | Adjusted Operating Income | $2.8 million to $3.8 million | | Adjusted Net Income | $1.2 million to $2.0 million | Strategic Update FGI is executing its BPC strategy, achieving geographic expansion and dealer network growth in 2023, with 2024 priorities focused on new product launches and digital business expansion - Entered a 5-year licensing agreement for FlushGuard™ Overflow Technology and secured product placements with major commercial distributors[6] - Expanded geographically with new agreements in India, Eastern Europe, Australia, and the UK[6] - The premium Covered Bridge kitchen cabinetry brand added 203 new dealers in 2023, reaching a total of 302 active dealers[9] - Key priorities for 2024 under the BPC strategy include launching value-priced bath furniture, expanding products with FlushGuard technology, and introducing the Isla Porter digital custom kitchen cabinetry business[9] Financial Performance Analysis Q4 revenue declined due to Bath Furniture weakness, offset by Shower Systems growth, while gross profit and margin significantly improved, and the company maintained strong liquidity Fourth Quarter 2023 Results Q4 revenue showed mixed segment performance, with strong Shower Systems growth offsetting Bath Furniture decline, leading to improved gross profit and net income Q4 2023 Revenue by Segment (vs Q4 2022) | Segment | Revenue (Q4 2023) | YoY Change | Commentary | | :--- | :--- | :--- | :--- | | Sanitaryware | $20.6 million | +1.8% | Normalizing order patterns | | Bath Furniture | $2.5 million | -59.0% | Macro headwinds and trade-down | | Shower Systems | $5.7 million | +55.3% | New programs gaining momentum | | Other (Kitchen Cabinetry) | $2.1 million | +23.5% | Continued dealer growth | - Q4 gross profit increased 20.1% to $9.0 million, with gross margin improving 549 basis points to 29.2%, driven by a mix shift to higher-margin products and lower logistics costs[8] - GAAP net income for Q4 2023 was $0.5 million, or $0.05 per diluted share, compared to $0.7 million, or $0.08 per diluted share, in Q4 2022[11] Financial Position and Liquidity The company maintained a strong liquidity position at year-end 2023, characterized by substantial cash and available credit facilities Liquidity Position as of December 31, 2023 | Item | Amount | | :--- | :--- | | Cash and cash equivalents | $7.8 million | | Total debt | $7.0 million | | Availability under credit facilities | $16.6 million | | Total Liquidity | $24.4 million | Financial Statements Consolidated financial statements show increased total assets, a significant full-year revenue decline, reduced net income, and positive cash flow from operations Consolidated Balance Sheets The balance sheet reflects an increase in total assets and shareholders' equity, alongside a rise in total liabilities by year-end 2023 Selected Balance Sheet Items (As of Dec 31) | Account | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Total current assets | 46.1 million | 45.9 million | | Total assets | 65.7 million | 60.4 million | | Total current liabilities | 28.0 million | 29.8 million | | Total liabilities | 41.7 million | 37.6 million | | Total shareholders' equity | 24.0 million | 22.7 million | Consolidated Statements of Income The income statement shows a significant full-year revenue decline and reduced net income, despite a slight increase in gross profit Full-Year Income Statement Summary (Years Ended Dec 31) | Account | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Revenues | 117,241,604 | 161,718,543 | | Gross Profit | 32,077,282 | 31,509,005 | | Income from Operations | 2,304,443 | 5,091,978 | | Net Income | 579,564 | 3,679,920 | | Diluted EPS | 0.07 | 0.39 | Consolidated Statements of Cash Flows The cash flow statement indicates positive cash generation from operating activities, offset by investing and financing outflows, resulting in a net cash decrease Cash Flow Summary (Year Ended Dec 31, 2023) | Activity | Net Cash Flow ($) | | :--- | :--- | | Operating Activities | 1,389,699 | | Investing Activities | (942,614) | | Financing Activities | (2,835,876) | | Net Change in Cash | (2,290,187) | Non-GAAP Financial Measures FGI utilizes non-GAAP measures like Adjusted Operating Income and Net Income to present core performance, showing declines in both for full-year 2023 compared to 2022 - The company uses non-GAAP measures to evaluate its business by excluding non-recurring expenses such as those related to its IPO, legal fees, and business expansion costs[19] Reconciliation of GAAP to Non-GAAP Measures (Full-Year Ended Dec 31) | Metric | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | GAAP Income from Operations | 2,304,443 | 5,091,978 | | Adjusted Income from Operations | 2,840,401 | 5,873,129 | | GAAP Net Income | 579,564 | 3,679,920 | | Adjusted Net Income | 1,014,226 | 4,320,464 |