Full Transcript: FGI Industries Q2 2026 Earnings Call

On Thursday, FGI Industries (NASDAQ: FGI ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. This content is powered APIs. For comprehensive financial data and transcripts, visit Access the full call at Summary FGI Industries, Inc.

7 million due to tariff impacts. Strategic investments in organic growth initiatives, particularly in sanitary ware and bath furniture, have contributed to revenue growth, while the shower systems segment saw a decline. The company is actively pursuing a China-plus-one strategy to diversify its sourcing in response to tariff uncertainties, with positive progress expected in the coming quarters. FGI maintained its full-year 2025 revenue guidance of $135 to $145 million and expects adjusted operating income and net income to potentially range from negative to positive figures.

Management expressed confidence in overcoming tariff-related challenges through strong supplier and customer relationships and emphasized ongoing global sourcing diversification to mitigate risks. Full Transcript OPERATOR Good day and welcome to FGI Industries, Inc. Second Quarter 2025 Results Conference Call. All participants will be in listen-only mode.

Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask a question. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two.

Please note this event is being recorded. I would now like to turn the conference over to Jae Chung, Chief Financial Officer. Please go ahead. Jae Chung, CFO Thank you.

Welcome to FGI Industries 2025 Second Quarter Results Conference Call. Leading the call today are Chief Executive Officer David Bruce and Chief Financial Officer Jae Chung. 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.

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. Today's call will begin with a performance review and strategic update from David Bruce, followed by a financial review from Jae Chung.

At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to David. David Bruce, Chief Executive Officer Thank you, Jae. Good morning, everyone, and thank you for joining our call today.

I am pleased to share our second quarter results reflect the strategic investments we've made in our organic growth initiatives across our brands, products, and channels, or BPC strategy. 5%. 9% compared to the prior year. 5% in the second quarter of 2024, a decline of 240 basis points due primarily to the ongoing tariff environment.

FGI was impacted by an industry-wide pause during the quarter as customers evaluated the impact of tariffs on their businesses. FGI and our customers continue to evaluate a China-plus-one strategy to diversify and broaden our geographic sourcing. The industry outlook remains uncertain due to tariffs, but our strategic investments in our brands, products, and channels have driven revenue growth well above the market. FGI second quarter revenue increased compared to the second quarter of 2024 due to the growth in our sanitary ware, bath furniture, and Covered Bridge Cabinetry businesses, while shower systems revenue declined.

S. 7% in Canada and Europe, respectively. 3% year over year in the second quarter compared to the prior year period. 7% year over year as our shift to market-aligned program pricing and design drove new business wins.

2% even as demand trends remained positive. 7% in the quarter driven by continued order momentum, expanded geographies, and higher dealer count. Isla Porter, our digital custom kitchen joint venture, continues to establish relationships with the premium design community with on-trend products via an AI-backed digital sales platform. Our geographic expansion in Europe and India holds 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 2025 and beyond. Before I hand it over to Jae, I want to say a few words about tariffs. The increasing tariff environment in 2025 remains fluid.

FGI is working with our suppliers and customers to support one another as we navigate the new normal together. We went through a similar process during the first Trump administration's tariff increases, so this is not new to us. We are confident that we can work through what comes given the close relationships we have cultivated over the years with our vendors and customers. We are seeing the order pipeline recovering even as some customers remain cautious due to the continued tariff uncertainty.

With that, I'll hand it over to Jae for a more detailed financial review. Jae Chung, CFO Thank you, David, 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 2025.

5% compared to the second quarter of 2024. 9% year over year. 5% the prior year. 4 million in the prior year due primarily to investing in initiatives related to our BPC growth strategy, including Isla Porter in India, and one-time costs related to optimizing our warehouse operations.

5 million the prior year. Lower gross margin and higher operating expenses due to investing in our growth initiatives accounted for the loss. 4 million in total liquidity, which we believe is more than sufficient to fund our growth initiatives. We are maintaining our 2025 guidance as follows.

Our revenue guidance is $135 to $145 million. 5 million. 9 million to a positive $1 million. Please note that the guidance for adjusted operating income excludes certain non-recurring items.

Adjusted net income excludes certain non-recurring items and includes an adjustment for minority interest. That concludes our prepared remarks. Operator, we are now ready for the question-and-answer portion of our call. OPERATOR Thank you.

We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.

At this time, we will pause momentarily to assemble our roster. The first question comes from Ruben Garner with Benchmark. Please go ahead. Ruben Garner, Analyst at Benchmark Thank you.

Good morning, guys. David Bruce, Chief Executive Officer Good morning. Ruben Garner, Analyst at Benchmark Let's see, you referenced your customers kind of pausing for tariffs. I'm curious, is that more so they're concerned about demand degradation from the consumer itself, or is it about just kind of the moving target on the tariff front and not wanting to buy inventory at tariff levels that could potentially come lower?

Or is it a combination of the two? David Bruce, Chief Executive Officer Yeah, so that's a great question. And, you know, as we sit here in August, this tariff pause took place back at the beginning of the quarter. And if you remember, the tariffs that were originally announced were quite large and substantial and then, you know, subsequently had been reduced.

So because of that tremendous uncertainty, there was a pause because everyone was trying to determine, you know, at the time, had they brought product in with those larger tariffs, it would have been impacted dramatically. So due to the uncertainty, there was a length of time, several weeks, where orders were paused, and obviously it impacted the quarter. But since, you know, we've been feeling really good about our order pipeline and how it's been moving along, so we don't feel that we're going to see something like that again. But as you also have watched the more recent news regarding tariffs, some things are still unsettled.

China tariff discussions were paused again for another 90-day reprieve. So I think there'll still be some caution in the marketplace, but not to the extreme that we saw at the early part of Q2, which impacted our numbers in the quarter. Ruben Garner, Analyst at Benchmark And the China-plus-one strategy you referenced, is that in all segments of your business, including sanitary ware? I know that's a place in the past that's been heavily reliant on China.

David Bruce, Chief Executive Officer Yes, you're 100% correct. And yes, it will be impacting all of our businesses. You know, there's some things we won't be able to reveal quite yet, but we are extremely active right now in diversifying our global sourcing base. And, you know, as I've said to a lot of people more recently, there'll be a completely different picture from a global sourcing footprint map this time next year than you've seen today from our company.

So there'll be impacts across all the product categories for FGI. Ruben Garner, Analyst at Benchmark Okay. And I know we have limited history with you guys being a public company, but it looks like your operating expenses historically were higher in the second quarter than the first, and they were lower. Just curious if that was kind of a temporary pullback on your end tied to the uncertainty.

How should we expect, I guess, both gross margin and operating expenses to trend in the second half? What's embedded in the guidance? David Bruce, Chief Executive Officer Yeah, I mean, you know, so we understood and took action based on what we saw occurring in the quarter. We were very diligent in watching our expenses.

We have some expense levers to pull to do that. You know, in our margins, you know, I think we had said when our margins got substantially higher previously, you know, we didn't expect them to remain that high, that we still saw a realistic picture in the upper 20s to continue. And we still believe that, you know, based on, again, the pipeline and particularly what we've talked about, the growth of new programs and new introductions, which is where most of the growth is coming from at this point.

Jae Chung, CFO Yeah, I mean, as far as the expenses are concerned, you know, I think it was very prudent to try to cast a very careful eye on where we're spending our expense dollars. So, you know, we've cut where we could without sacrificing growth for the future. And, you know, I would expect that we would continue that process throughout the year and into 2026. Ruben Garner, Analyst at Benchmark Okay, just a clarification from me, and this is my last question.

The upper 20s — that's a gross margin comment. And is that the back half? We think we can get there even with the tariff situation? David Bruce, Chief Executive Officer Yeah, I mean, we have pretty good confidence that the new businesses that we continue to implement, and I say that positively because those were some of the things that were paused a bit in Q2.

Those new programs should allow us, if all goes well and as planned, to achieve those margin levels. Ruben Garner, Analyst at Benchmark Great. Thanks for the detail, guys, and good luck for the rest of the year. David Bruce, Chief Executive Officer Thank you.

OPERATOR The next question comes from Greg Gibus with Northland Securities. Please go ahead. Greg Gibus, Analyst at Northland Securities Hey, good morning, David and Jae. Thanks for taking the question.

Wanted to, I guess, follow up on your ability to navigate the effects of tariffs with vendors and customers and kind of how, you know, maybe the negotiations have gone. If you could touch on, you know, maybe how that's played out as expected to date, and just kind of how those discussions have gone. David Bruce, Chief Executive Officer Yeah, I think it's been a little different than last time. You know, we've been through this before, as I mentioned, and the first time this happened back in '18, you know, it was sort of like an initial impact of tariff.

And I think the biggest difference was the amount of uncertainty that surrounded tariffs the first time was quite small because things were sort of firm, and then everybody implemented a plan to work with customers on pricing adjustments and work with our suppliers. This time things were quite fluid and still are quite fluid, and the amount of the tariffs were so large, there was obviously only so much any supplier could do or any factory. But we still worked together with our customers and our suppliers and we adjusted pricing where we could to help our customers maintain value.

And what I mean by that is the key that we see is how do we continue to maintain value in a certain price band for certain products and certain categories to make them make sense. You also saw, I think, in the market, in some cases with us but definitely with others, a shift in where maybe efforts were going and where to invest in product. Certain products maybe lost value and were more challenging to maintain a value for the end consumer. And I think you're going to continue to see that going into next year.

You're going to see better-value products that offer very fair price and good quality, more so than ever before. I think you might have read that private label businesses that we're pretty strong in have been doing quite well because we offer a greater value in many cases than some of the brands potentially. So that's the big difference — the uncertainty this time and the length of time of this uncertainty with the lack of the definitive final tariff adjustments globally, not just from China, have made things more challenging.

But through all of that, what we have seen is our adjustment with our customers work, and more importantly, all of the new businesses that we've been talking about and the new wins and taking share in the market continue to happen. Some of that has been a little delayed, but the execution plans are in place right now to continue through and we'll see results from that going into Q3 and Q4. Greg Gibus, Analyst at Northland Securities Great, that's helpful and totally makes sense regarding your commentary about the most severe impact of the tariffs and at least the kind of lag or pauses on decision making taking place at the beginning of the quarter.

You said you feel good about the order pipeline and kind of how it's improved. Wonder if you could maybe provide a little bit more color on the degree of the improvement from the beginning of Q2 to where we are today in terms of those pauses and uncertainty on decision making? David Bruce, Chief Executive Officer Yeah, I would say that we were on a positive trajectory going into this pre-tariff impact, and we had, like I mentioned, newer programs that were scheduled to launch, and some of that got delayed.

Obviously that wasn't canceled, and orders were paused, so everything was sort of just a big slowdown all at one time that had a more precipitous impact in a short period of time. And I would say for the most part we're back to feeling that same momentum that we had prior to this. Right. And there's peaks and valleys there with some little one-offs of individual customers or products that we're still trying to get our hands around.

And of course we're still navigating the global tariff environment. And I think the added differential is the acceleration that we've had with our global sourcing initiatives, which will start to impact our business this year but will have a much more dramatic, I'll say, impact overall next year, especially when you look overall at our global footprint compared to what it was at the beginning of this year. So I think the offering that we're going to be able to bring to our customer base as far as global sourcing options and de-risking their sourcing in China particularly will be pretty dramatic for us. Greg Gibus, Analyst at Northland Securities Got it.