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FGI Industries Ltd. (FGI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $31.0M (+5.5% y/y) but missed S&P Global consensus of ~$32.7M; GAAP diluted EPS was -$0.64 vs consensus +$0.25, a significant miss driven by tariff-related margin compression and a temporary order pause early in the quarter *.
  • Gross margin of 28.1% improved sequentially vs Q1 (26.8%) but declined 240 bps y/y; management expects a return to “upper 20s” gross margin in the back half as new programs launch and tariffs stabilize .
  • Segment performance was mixed: Sanitaryware (+4.3% y/y) and Bath Furniture (+2.7%) grew; Shower Systems (-11.2%) declined; “Other” (primarily Covered Bridge cabinetry) rose +67.7% on expanded geographies and dealer count .
  • FY2025 guidance was maintained: revenue $135–145M, adjusted operating income $(2.0)–$1.5M, adjusted net income $(1.9)–$1.0M, signaling confidence in pipeline recovery and sourcing diversification (China+1) despite a fluid tariff backdrop .
  • Near-term stock reaction catalysts: clarity on tariff policy, evidence of gross margin normalization, cadence of new program launches, and progress on China+1 sourcing footprint .

What Went Well and What Went Wrong

What Went Well

  • Revenue grew 5.5% y/y to $31.0M, with strong momentum in Covered Bridge cabinetry and steady gains in Sanitaryware and Bath Furniture .
  • Sequential margin improvement: gross margin reached 28.1% in Q2 from 26.8% in Q1, with management reiterating confidence in “upper 20s” margin recovery in H2 as delayed programs resume .
  • Strategic initiatives on track: Isla Porter’s AI-backed platform engagement with premium designers and accelerated China+1 sourcing diversification to de-risk tariff exposure; “completely different” global sourcing footprint expected over the next year .

What Went Wrong

  • EPS and revenue significantly missed consensus; GAAP EPS -$0.64 vs +$0.25 consensus and revenue ~$31.0M vs ~$32.7M consensus, reflecting tariff-driven gross margin pressure and early-quarter order pause *.
  • Shower Systems revenue declined 11.2% y/y; combined with higher freight costs and increased operating expenses tied to growth initiatives, operating loss widened to -$0.8M .
  • Canada/Europe mix volatility: Europe rebounded strongly (+36.7%) but U.S. was slightly down (-0.4%), underscoring uneven regional demand in a tariff-uncertain environment .

Financial Results

Consolidated Performance vs Prior Year and Prior Quarter

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$29.371 $33.213 $30.998
Gross Profit ($USD Millions)$8.963 $8.900 $8.707
Gross Margin %30.5% 26.8% 28.1%
Operating (Loss)/Income ($USD Millions)$(0.450) $(1.281) $(0.832)
Net (Loss)/Income to Shareholders ($USD Millions)$0.164 $(0.629) $(1.232)
Diluted EPS ($USD)$0.08 $(0.07) $(0.64)

Q2 2025 Actual vs S&P Global Consensus

MetricQ2 2025 ActualQ2 2025 Consensus
Revenue ($USD Millions)$30.998 $32.657*
Diluted EPS ($USD)$(0.64) $0.25*

Values retrieved from S&P Global.*

Segment Revenue Breakdown

SegmentQ2 2024Q1 2025Q2 2025
Sanitaryware ($USD Millions)$17.3 $20.2 $18.1
Bath Furniture ($USD Millions)$4.0 $4.1 $4.1
Shower Systems ($USD Millions)$5.9 $5.7 $5.2
Other (Kitchen Cabinets) ($USD Millions)$2.1 $3.3 $3.5

KPIs and Liquidity

KPIDec 31, 2024Mar 31, 2025Jun 30, 2025
Cash & Equivalents ($USD Millions)$4.558 $1.226 $2.519
Total Debt ($USD Millions)$14.502 $13.172 $12.559
Availability under Credit Facilities ($USD Millions)$11.0 $13.0 $13.9
Total Liquidity ($USD Millions)$15.6 $14.3 $16.4

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
Total Net RevenueFY 2025$135–145M $135–145M Maintained
Adjusted Operating IncomeFY 2025$(2.0)–$1.5M $(2.0)–$1.5M Maintained
Adjusted Net IncomeFY 2025$(1.9)–$1.0M $(1.9)–$1.0M Maintained

Note: Adjusted measures exclude specified non-recurring items and include minority interest adjustments where applicable .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
AI/Technology (Isla Porter)AI-backed digital sales platform gaining relationships Continued engagement with premium design community Ongoing traction with premium design community via AI-backed platform Stable, expanding
Supply Chain (China+1)Not emphasized in Q4 releaseWorking with suppliers/customers amid tariffs Active diversification; “completely different” sourcing footprint expected within a year Accelerating
Tariffs/Macro“Increasing tariff environment in 2025 remains fluid” Tariff pressure noted; freight headwinds Early-quarter order pause; ongoing uncertainty; pipeline improving Still fluid; signs of recovery
Product PerformanceBroad-based growth across segments Bath Furniture +32.7%, Covered Bridge +135.7%; Sanitary/Shower down modestly Sanitaryware +4.3%, Bath Furniture +2.7%, Shower -11.2%, Other +67.7% Mixed; cabinet strength persists
Regional TrendsUS +14.7%, Canada +9.9%, Europe +23.3% US +8.0%, Canada +3.8%, Europe -2.8% US -0.4%, Canada +2.0%, Europe +36.7% Europe rebound; US soft; Canada modest

Management Commentary

  • CEO: “Gross margin was 28.1%… decline of 240 bps… due primarily to the ongoing tariff environment… FGI and our customers continue to evaluate a China+1 strategy to diversify and broaden our geographic sourcing.”
  • CEO on order dynamics: “There was a length of time, several weeks where orders were paused… we’re back to feeling that same momentum… pipeline recovering” .
  • CFO: “Operating expenses increased 1.3% y/y to $9.5 million due to investing in initiatives related to our BPC growth strategy… and one-time costs related to optimizing our warehouse operations… total available liquidity of $16.4 million” .
  • Margin outlook: “We still saw a realistic picture in the upper 20s to continue… new programs… should allow us… to achieve those margin levels” .

Q&A Highlights

  • Tariff-driven order pause: Management detailed a several-week pause when initial tariff proposals were “quite large,” followed by reductions; pipeline recovery underway, though caution persists amid a 90-day reprieve extension in China tariff discussions .
  • China+1 execution: FGI is “extremely active” in diversifying global sourcing across all businesses; expects a “completely different” global sourcing footprint map within a year .
  • Expense discipline and margin trajectory: Pulling expense levers without sacrificing growth; confidence in resuming “upper 20s” gross margins in H2 as delayed new programs roll out .
  • Customer negotiations: Company adjusted pricing with suppliers/customers to maintain value bands amidst tariff uncertainty; private label strength noted as a value lever .
  • Program timing: Some summer launches delayed to Q3/Q4 due to tariffs, but expected to contribute in H2; impact “baked into guidance” .

Estimates Context

  • Q2 2025 results missed consensus: revenue $31.0M vs ~$32.7M consensus and EPS -$0.64 vs +$0.25 consensus; one EPS estimate and two revenue estimates underpin the consensus. The miss was driven by tariff-related gross margin pressure and early-quarter order pauses, partially offset by strength in Covered Bridge cabinetry and sequential margin improvement *.
  • Forward estimate implications: Expect analysts to lower near-term EPS/margin assumptions given tariff fluidity and Q2 miss, while maintaining revenue growth trajectories linked to new programs and China+1 sourcing diversification .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Bold miss vs consensus: Revenue $31.0M vs ~$32.7M and EPS -$0.64 vs +$0.25; tariff uncertainty and order pause were key drivers; watch for margin normalization signals in Q3 *.
  • Sequential margin recovery: Gross margin rose to 28.1% from 26.8% in Q1; management targets “upper 20s” in H2 as delayed programs commence .
  • Mixed segments: Shower Systems remained weak (-11.2% y/y), but Covered Bridge surged (+67.7%); segment mix will influence gross margin trajectory .
  • Guidance steady: FY2025 ranges reiterated, suggesting confidence in pipeline and sourcing initiatives despite macro/tariff headwinds .
  • Strategic sourcing: Accelerating China+1 diversification should mitigate tariff exposure and support margin resilience over the next year .
  • Liquidity adequate: $16.4M total liquidity at quarter end, with lower debt and higher availability; supports continued internal investments .
  • Near-term focus: Monitor tariff developments, Q3 program launches, Europe demand durability, and cost controls; these are likely to drive estimate revisions and stock narrative .
Bolded misses/beats in tables indicate significant variance vs consensus.

Non-GAAP definitions and reconciliations are provided by the company; adjusted guidance excludes specified non-recurring items **[1864943_20250811NY48792:2]** **[1864943_0001628280-25-039581_fgi-202508xex99x1.htm:3]**.