FGI Industries Ltd. (NASDAQ:FGI) Q1 2023 Earnings Conference Call May 11, 2023 8:00 AM ET

Company Participants

Paul Bartolai - Managing Director, Vallum Capital Advisors

David Bruce - President and Chief Executive Officer

Perry Lin - Chief Financial Officer

Conference Call Participants

Greg Gibas - Northland Securities, Inc.

Operator

Good morning and welcome to the FGI Industries, Inc., First Quarter 2023 Earnings Call. All participants will be in listen only-mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Paul Bartolai, Managing Director, Vallum Advisors. Please go ahead.

Paul Bartolai

Thank you. Welcome to FGI Industries first quarter 2023 results conference call. Leading the call today are President and CEO, David Bruce; and Chief Financial Officer, Perry Lin. 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.

Today’s call will begin with a performance review and strategic update from David Bruce, followed by a financial review from Perry Lin. At the conclusion of these prepared remarks, we will open the line for questions.

With that, I’ll turn the call over to Dave.

David Bruce

Thanks, Paul. Good morning to everyone and thanks for joining our call today. We were very pleased with our strong operational execution and continued progress against our strategic initiatives during the first quarter, despite what remains a very challenging market environment. Even with the destocking headwinds pressuring our revenues, we were able to generate meaningful first quarter gross margin improvement, while our consistent focus on our organic growth initiatives should position the company to return to profitable growth as inventory conditions normalize.

We reported a first quarter gross margin of 26.5%, which was up 925 basis points compared to the prior year period, and up 285 basis points versus the fourth quarter, despite the ongoing customer inventory correction and uneven demand trends in the repair and remodel market witnessed during the quarter. While our gross margins were helped by lower freight costs and the benefit of last year’s pricing actions, the biggest factor has been our focus on higher margin product categories and our good, better, best product strategy, which has resulted in a significantly improved product mix.