FGI Industries Ltd.

Previous wording

Consistent with our long-term strategic plan, we intend to drive value creation for our shareholders through a balanced focus on product innovation, organic growth, and efficient capital deployment. The following initiatives represent key strategic priorities for us:

Current wording

Consistent with our long-term strategic plan, we expect to continue to make significant investments across our business in order to continue to attract new customers, expand existing relationships, develop new products and manufacturing capabilities and expand into new jurisdictions, thereby prioritizing long-term growth over short-term profitability. We intend to drive long-term value creation for our shareholders through a balanced focus on product innovation, organic growth, and efficient capital deployment. The following initiatives represent key strategic priorities for us:

Previous wording

•“BPC” (Brands, Products, Channels) strategy to drive above-market organic growth. We have continued to invest in our BPC strategy despite the market challenges, which is expected to drive improved organic growth in the longer term. We have entered into a 5-year licensing agreement that will provide us access to an industry leading overflow toilet technology. We will continue to market this technology as FLUSH GUARD® Overflow Technology. We were recently awarded product placements at several large customers, including two of the largest commercial distributors in North America. In addition, we continue to focus on our initiatives to expand geographically, with recently signed agreements providing entry into India, Eastern Europe and the UK.

Current wording

•“BPC” (Brands, Products, Channels) strategy to drive above-market organic growth. We have continued to invest in our BPC strategy despite the market challenges, which is expected to drive improved organic growth in the longer term. We have entered into a 5-year licensing agreement that will provide us access to an industry leading overflow toilet technology. We will continue to market this technology as FLUSH GUARD® Overflow Technology. In addition, we continue to focus on our initiatives to expand geographically, with recently signed agreements providing entry into India, Eastern Europe and the UK.

Previous wording

•Enhanced margin performance. Our focus on higher-margin products has continued to deliver results, with gross margins reaching 26.9% in 2024 and 27.4% in 2023, a significant rise from 19.5% in 2022. This positive trajectory reflects our commitment to optimizing our product mix and operational efficiency. Looking ahead, we anticipate gross margins to remain in line with the levels achieved in 2024 and 2023.

Current wording

•Enhanced margin performance. Our focus on higher-margin products has continued to deliver results, with gross margins reaching 26.9% in 2024 and 27.4% in 2023, a significant rise from 19.5% in 2022. This positive trajectory in margins reflects our commitment to optimizing our product mix and operational efficiency despite recent headwinds from tariffs. Looking ahead, we anticipate gross margins to remain in line with the levels achieved in 2024 and 2023.

Previous wording

•Efficient capital deployment. We will continue to prioritize capital deployment in support of organic growth opportunities, while continuing to evaluate strategic M&A opportunities. With total liquidity of $14.3 million as of March 31, 2025, the Company believes it has sufficient financial flexibility to fund its organic growth strategy.

Current wording

•Efficient capital deployment. We will continue to prioritize capital deployment in support of organic growth opportunities, while continuing to evaluate strategic M&A opportunities. With total liquidity of $16.4 million as of June 30, 2025, the Company believes it has sufficient financial flexibility to fund its organic growth strategy.

Previous wording

The following table summarizes the results of our operations for the three months ended March 31, 2025 and 2024 and provides information regarding the dollar and percentage increase (decrease) during such periods.

Current wording

The following table summarizes the results of our operations for the three and six months ended June 30, 2025 and 2024 and provides information regarding the dollar and percentage increase (decrease) during such periods.

Previous wording

Our revenue increased by $2.5 million, or 8.0%, to $33.2 million for the three months ended March 31, 2025, from $30.8 million for the three months ended March 31, 2024. The increase in our revenue was primarily driven by increases in sales of bath furniture and custom kitchen cabinetry.

Current wording

Our revenue increased by $1.6 million, or 5.5%, to $31.0 million for the three months ended June 30, 2025, from $29.4 million for the three months ended June 30, 2024. The increase in our revenue was primarily driven by increases in sales of sanitaryware and custom kitchen cabinetry.

Previous wording

We derive the majority of our revenue from sales of sanitaryware, which accounted for 60.7% of our total revenue for the three months ended March 31, 2025, compared to 66.7% for the comparable period of 2024. Revenue generated from the sales of sanitaryware decreased by 1.7% to $20.2 million for the three months ended March 31, 2025 from $20.5 million for same period of 2024. While the U.S. and China have temporarily agreed to reduce their reciprocal tariffs during trade talks, we expect demand for this category to be uncertain due to the current environment as consumers await clarity on tariffs affecting a number of jurisdictions.

Current wording

We derive the majority of our revenue from sales of sanitaryware, which accounted for 58.3% and 59.6% of our total revenue for the three and six months ended June 30, 2025, compared to 59.0% and 63.0% for the comparable periods of 2024. Revenue generated from the sales of sanitaryware increased by 4.3% to $18.1 million for the three months ended June 30, 2025 from $17.3 million for same period of 2024. For the six months ended June 30, 2025, this revenue increased by 1.0% to $38.2 million from $37.9 million for the same period of 2024. While the U.S. and China have temporarily agreed to reduce their reciprocal tariffs during trade talks, we expect demand for this category to be uncertain due to the current environment as consumers await clarity on tariffs affecting a number of jurisdictions.

Previous wording

Our revenue from bath furniture sales accounted for 12.3% of our total revenue for the three months ended March 31, 2025, compared to 10.0% for the comparable period of 2024. Bath Furniture sales increased by 32.7% to $4.1 million for the three months ended March 31, 2025, compared to $3.1 million for the same period of 2024. Our recently launched mid-tier products to better address the current demand environment of trading down to lower priced offering is gaining traction.

Current wording

Our revenue from bath furniture sales accounted for 13.3% and 12.8% of our total revenue for the three and six months ended June 30, 2025, compared to 13.7% and 11.8% for the comparable periods of 2024. Bath Furniture sales increased by 2.7% to $4.1 million for the three months ended June 30, 2025, compared to $4.0 million for the same period of 2024. For the six months ended June 30, 2025, revenue from Bath Furniture sales increased by 15.7% to $8.2 million from $7.1 million for the same period of 2024. Our recently launched mid-tier product lines, launched to better address the current demand environment of trading down to lower priced offerings, is gaining traction.

Previous wording

Revenue from sales of Shower Systems made up approximately 17.1% of our total revenue for the three months ended March 31, 2025, compared to 18.7% for the comparable periods of 2024. Revenue from sales of shower systems decreased by 1.3% to $5.7 million for the three months ended March 31, 2025, compared to $5.8 million for the comparable period of 2024. While revenue dropped slightly this quarter, our recently launched programs have driven growth in recent periods and we anticipate being a positive driver moving forward. Similar to Sanitaryware, however, we expect demand to be uncertain due to the current environment as consumers await tariff clarity, which may offset the impact of these programs.

Current wording

Revenue from sales of Shower Systems made up approximately 16.9% and 17.0% of our total revenue for the three and six months ended June 30, 2025, compared to 20.1% and 19.4% for the comparable periods of 2024. Revenue from sales of shower systems decreased by 11.2% to $5.2 million for the three months ended June 30, 2025, compared to $5.9 million for the comparable period of 2024. For the six months ended June 30, 2025, revenue from sales of shower systems decreased by 6.3% to $10.9 million from $11.7 million for the same period of 2024. While shower system revenue dropped year-over-year this quarter, our recently launched programs have driven growth in recent periods and we anticipate them continuing to be a positive driver moving forward. Similar to Sanitaryware, however, we expect demand to be uncertain due to the current environment as consumers await tariff clarity, which may offset the impact of these programs.

Previous wording

Our revenue from sales of other products (custom kitchen cabinetry and other small offerings) increased by 135.7% to $3.3 million for the three months ended March 31, 2025, compared to $1.4 million for the same period of 2024. The increase was primarily driven by volume growth resulting from continued strength in sales of the Covered Bridge custom-kitchen cabinetry businesses.

Current wording

Our revenue from sales of other products (custom kitchen cabinetry and other small offerings) increased by 67.7% to $3.5 million for the three months ended June 30, 2025, compared to $2.1 million for the same period of 2024. For the six months ended June 30, 2025, other revenue increased by 94.6% to $6.8 million from $3.5 million for the same period of 2024. The increase was primarily driven by volume growth resulting from continued strength in sales of the Covered Bridge custom-kitchen cabinetry businesses.

Previous wording

We generated the majority of our revenue in the United States market, which amounted to $21.2 million for the three months ended March 31, 2025, compared to $19.6 million for the three months ended March 31, 2024, representing a 8.0% increase for the three-month periods. Such revenue consistently accounted for 63.7% of our total revenue for the three months ended March 31, 2025 and 2024. The growth was largely attributable to higher sales of bath furniture and kitchen cabinetry, as previously discussed.

Current wording

We consistently generated the majority of our revenue in the United States market, which amounted to $18.0 million for the three months ended June 30, 2025 and June 30, 2024. For the six months ended June 30, 2025, however, revenue from United States market increased by 4.0% to $39.1 million, compared to $37.6 million for the same period of 2024. Such revenue accounted for approximately 60% of our total revenue for the three and six months ended June 30, 2025 and 2024, with minor period-to-period variation. The growth during the six months period was largely attributable to higher sales of bath furniture and kitchen cabinetry, as previously discussed, partially offset by a decrease due to tariff related uncertainties in the second quarter.

Previous wording

Our second largest market is Canada. Our revenue generated in the Canadian market was $8.2 million for the three months ended March 31, 2025, compared to $7.9 million for the three months ended March 31, 2024, representing a 3.8% increase. The increased sales in the Canada market were primarily driven by stabilized demand from wholesale customers.

Current wording

Our second largest market is Canada. Our revenue generated in the Canadian market was $8.8 million for the three months ended June 30, 2025, compared to $8.6 million for the three months ended June 30, 2024, representing a 2.0% increase. For the six months ended June 30, 2025, revenue from Canadian market increased by 2.9% to $17.0 million, compared to $16.5 million for the same period in 2024. The increased sales in the Canada market were primarily driven by stabilized demand from wholesale customers.

Previous wording

We also derive revenue from Europe, which consists primarily of sales in Germany. This amounted to $3.1 million for the three months ended March 31, 2025, compared to $3.2 million for the three months ended March 31, 2024, representing a 2.8% decrease for the three-month period.

Current wording

We also derive revenue from Europe, which consists primarily of sales in Germany. This amounted to $3.6 million and $6.7 million for the three and six months ended June 30, 2025, compared to $2.7 million and $5.9 million for the three and six months ended June 30, 2024, representing a 36.7% and 15.1% increase for the three-month and six-month periods, respectively.

Previous wording

Gross profit was $8.9 million for the three months ended March 31, 2025, an increase of 5.8% compared to the same periods of 2024, due to higher sales volumes. Gross profit margin remained relatively stable at 26.8% for the three months ended March 31, 2025, down 60 basis points from 27.4% for the three months ended March 31, 2024.

Current wording

Gross profit was $8.7 million and $17.6 million for the three and six months ended June 30, 2025, a decrease of 2.9% and an increase of 1.3% compared to the same periods of 2024, respectively. Gross profit margin was 28.1% and 27.4% for the three and six months ended June 30, 2025, down 240 and 150 basis points from 30.5% and 28.9% for the three and six months ended June 30, 2024, respectively.

Previous wording

Selling and distribution expenses primarily consisted of personnel costs, marketing and promotion costs, commission, and freight and leasing charges. Our selling and distribution expenses increased by $1.0 million, or 16.8%, to $7.2 million for the three months ended March 31, 2025, from $6.1 million for the three months ended March 31, 2024. The increase was largely due to expanded marketing efforts aimed at supporting our growth initiatives including Isla Porter and FGI India, higher personnel-related expenses, and the one-time cost associated with the termination of a warehouse lease. These investments were aligned with our strategic focus on strengthening brand visibility and optimizing our distribution network.

Current wording

Selling and distribution expenses primarily consisted of personnel costs, marketing and promotion costs, commission, and freight and leasing charges. Our selling and distribution expenses decreased by $0.1 million, or 0.8%, to $6.2 million for the three months ended June 30, 2025, from $6.3 million for the three months ended June 30, 2024, and increased by $1.0 million, or 7.9%, to $13.4 million for the six months ended June 30, 2025, from $12.4 million for the six months ended June 30, 2024. The increase was largely due to expanded marketing efforts aimed at supporting our growth initiatives including Isla Porter and FGI India, higher personnel-related expenses, and the one-time cost associated with the termination of a warehouse lease. These investments were aligned with our strategic focus on strengthening brand visibility and optimizing our distribution network.

Previous wording

General and administrative expenses primarily consisted of personnel costs, professional service fees, depreciation, travel, and office supply expenses. Our general and administrative expenses increased by $0.4 million, or 18.3%, to $2.7 million for the three months ended March 31, 2025, from $2.3 million for the three months ended March 31, 2024. The increase was primarily due to inflationary pressures and additional expenditures related to corporate support activities.

Current wording

General and administrative expenses primarily consisted of personnel costs, professional service fees, depreciation, travel, and office supply expenses. Our general and administrative expenses increased by $0.2 million, or 8.5%, to $2.8 million for the three months ended June 30, 2025, from $2.6 million for the three months ended June 30, 2024, and increased by $0.6 million, or 13.1%, to $5.5 million for the six months ended June 30, 2025, from $4.9 million for the six months ended June 30, 2024. The increase was primarily due to inflationary pressures and additional expenditures related to corporate support activities.

Previous wording

We recorded a benefit of income taxes of $0.7 million for the three months ended March 31, 2025, and provision for income taxes of approximately $22,000 for the three months ended March 31, 2024. The fluctuation in effective tax rate was primarily driven by foreign operations with various tax rates and non-deductible items.

Current wording

We recorded a benefit of income taxes of $0.2 million and $1.0 million for the three and six months ended June 30, 2025, and a benefit of income taxes of approximately $0.3 million and $0.3 million for the three and six months ended June 30, 2024. The fluctuation in effective tax rate was primarily driven by foreign operations with various tax rates and non-deductible items.

Previous wording

We incurred net loss of $0.8 million and $0.5 million for the three months ended March 31, 2025 and 2024, respectively. These changes had resulted from the combination of the changes discussed above.

Current wording

We incurred net loss of $1.4 million and $23,000 for the three months ended June 30, 2025 and 2024, respectively, and net loss of $2.2 million and $0.6 million for the six months ended June 30, 2025 and 2024, respectively. These changes had resulted from the combination of the changes discussed above.

Previous wording

The Company's unaudited condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue to operate in the normal course of business and will be able to realize its assets and discharge its liabilities as they become due. However, substantial doubt exists about the Company's ability to continue as a going concern. The Company has incurred net loss of $0.8 million and $1.7 million for the three months ended March 31, 2025 and the year ended December 31, 2024, respectively. In addition, the Company had net cash used in operating activities of $1.7 million and $7.4 million for the same respective periods. As of March 31, 2025, the Company had approximately $1.2 million in cash and cash equivalents and had $13.2 million outstanding under its credit facilities, which were used primarily for working capital purposes.

Current wording

The Company's unaudited condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue to operate in the normal course of business and will be able to realize its assets and discharge its liabilities as they become due. However, substantial doubt exists about the Company's ability to continue as a going concern. The Company has incurred net loss of $2.2 million and $1.7 million for the six months ended June 30, 2025 and the year ended December 31, 2024, respectively. In addition, the Company had net cash provided by operating activities of $0.2 million and net cash used in operating activities of $7.4 million for the same respective periods. As of June 30, 2025, the Company had approximately $2.5 million in cash and cash equivalents and had $12.6 million outstanding under its credit facilities, which were used primarily for working capital purposes.

Previous wording

•Commercial launch and promotion of new product lines, including anti-overflow toilets, shower systems, and custom kitchen cabinetry, which began generating increased revenue lately.

Current wording

•Commercial launch and promotion of new product lines, including anti-overflow toilets, shower systems, and custom kitchen cabinetry, which have begun generating increased revenue.

Previous wording

Each sum of borrowings under the Credit Agreement is deemed due on demand and is classified as a short-term loan. The outstanding balance of such loan was $10.7 million and $9.6 million as of March 31, 2025 and December 31, 2024, respectively.

Current wording

Each sum of borrowings under the Credit Agreement is deemed due on demand and is classified as a short-term loan. The outstanding balance of such loan was $9.5 million and $9.6 million as of June 30, 2025 and December 31, 2024, respectively.

Previous wording

FGI Canada Ltd. (“FGI Canada”) has a line of credit agreement with Royal Bank of Canada (“RBC”), successor by amalgamation of HSBC Canada (the “Canadian Revolver”). The revolving line of credit with RBC allows for borrowing up to CAD7.5 million (USD5.2 million as of March 31, 2025). This is an assets-based line of credit, the borrowing limit is calculated based on certain percentage of accounts receivable and inventory balances. Pursuant to the Canadian Revolver, FGI Canada is required to maintain (a) a debt to tangible net worth ratio of no more than 3.00 to 1.00; and (b) a ratio of current assets to current liabilities of at least 1.25 to 1.00. The loan bears interest at a rate of Prime rate plus 0.50%. As of March 31, 2025, FGI Canada was in compliance with these financial covenants.

Current wording

FGI Canada Ltd. (“FGI Canada”) has a line of credit agreement with Royal Bank of Canada (“RBC”), successor by amalgamation of HSBC Canada (the “Canadian Revolver”). The revolving line of credit with RBC allows for borrowing up to CAD7.5 million (USD5.4 million as of June 30, 2025). This is an assets-based line of credit, the borrowing limit is calculated based on certain percentage of accounts receivable and inventory balances. Pursuant to the Canadian Revolver, FGI Canada is required to maintain (a) a debt to tangible net worth ratio of no more than 3.00 to 1.00; and (b) a ratio of current assets to current liabilities of at least 1.25 to 1.00. The loan bears interest at a rate of Prime rate plus 0.50%. As of June 30, 2025, FGI Canada was in compliance with these financial covenants.

Previous wording

Borrowings under this line of credit amounted to $0 and $2.6 million as of March 31, 2025 and December 31, 2024, respectively. The facility matures at the discretion of RBC upon 60 days’ notice.

Current wording

Borrowings under this line of credit amounted to $1.2 million and $2.6 million as of June 30, 2025 and December 31, 2024, respectively. The facility matures at the discretion of RBC upon 60 days’ notice.

Previous wording

On January 25, 2024, FGI International entered into an omnibus credit line (the “CTBC Credit Line”) with CTBC Bank Co., Ltd. (“CTBC”). Under the CTBC Credit Line, FGI International may borrow, from time to time, up to $2.3 million, with borrowings limited to 90% of FGI International’s export “open account” trade receivables. On January 14, 2025, FGI International and CTBC agreed to increase the CTBC Credit Line to $3.0 million. The CTBC Credit Line will bear interest at a rate of “Base Rate”, which is based on monthly or quarterly Taipei Interbank Offered in effect from time to time, plus 120 base points and handling fees, unless otherwise agreed to by the parties. The CTBC Credit Line is unsecured and is fully guaranteed by the Company and partially guaranteed by Liang Chou Chen. Borrowings under this line of credit amounted to $2.5 million and $2.3 million as of March 31, 2025 and December 31, 2024, respectively.

Current wording

On January 25, 2024, FGI International entered into an omnibus credit line (the “CTBC Credit Line”) with CTBC Bank Co., Ltd. (“CTBC”). Under the CTBC Credit Line, FGI International may borrow, from time to time, up to $2.3 million, with borrowings limited to 90% of FGI International’s export “open account” trade receivables. On January 14, 2025, FGI International and CTBC agreed to increase the CTBC Credit Line to $3.0 million. The CTBC Credit Line will bear interest at a rate of “Base Rate”, which is based on monthly or quarterly Taipei Interbank Offered in effect from time to time, plus 120 base points and handling fees, unless otherwise agreed to by the parties. The CTBC Credit Line is unsecured and is fully guaranteed by the Company and partially guaranteed by Liang Chou Chen. Borrowings under this line of credit amounted to $1.8 million and $2.3 million as of June 30, 2025 and December 31, 2024, respectively.

Previous wording

The following table summarizes the key components of our cash flows for the three months ended March 31, 2025 and 2023.

Current wording

The following table summarizes the key components of our cash flows for the six months ended June 30, 2025 and 2024.

Previous wording

Our capital expenditures were incurred primarily in connection with the acquisition of property and equipment. Our capital expenditures amounted to $0.5 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively. We do not expect to incur significant capital expenditures in the immediate future.

Current wording

Our capital expenditures were incurred primarily in connection with the acquisition of property and equipment. Our capital expenditures amounted to $0.6 million and $1.9 million for the six months ended June 30, 2025 and 2024, respectively. We do not expect to incur significant capital expenditures in the immediate future.

Previous wording

A discussion of our critical accounting policies and significant accounting estimates is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Form 10-K. The preparation of the unaudited condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of some assets and liabilities and, in some instances, the reported amounts of revenue and expenses during the applicable reporting period. Actual results could differ materially from these estimates. Changes in estimates are recorded in results of operations in the period that the events or circumstances giving rise to such changes occur. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in different policies or estimates being reported for the three months ended March 31, 2025.

Current wording

A discussion of our critical accounting policies and significant accounting estimates is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Form 10-K. The preparation of the unaudited condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of some assets and liabilities and, in some instances, the reported amounts of revenue and expenses during the applicable reporting period. Actual results could differ materially from these estimates. Changes in estimates are recorded in results of operations in the period that the events or circumstances giving rise to such changes occur. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in different policies or estimates being reported for the six months ended June 30, 2025.