Good morning, and welcome to the FGI Industries Ltd. third quarter 2023 earnings call. All participants will be in a 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 questions. To ask a question, you may press star, then one on your telephone keypad. 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. Thank you. Welcome to FGI Industries third 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 in 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 your questions. With that, I'll turn the call over to Dave. Thanks, Paul. Good morning to everyone, and thanks for joining our call today. We are beginning to see some signs of normalization in inventory levels and order patterns in certain categories. However, inventory destocking continues to impact our results, with the recent macro headwinds prolonging the expected inventory recovery, as well as impacting overall demand across our categories. While our top line results are facing challenges, we continue to see the benefits of our margin improvement initiatives during the third quarter, with gross margin improving 530 basis points from last year. As a result, our gross profit declined only 3% during the quarter, despite the 22% drop in revenues. We could see some short-term variability in our gross margins as we invest in our growth initiatives and see a rebound in our pro channel and bath furniture business. But we believe our improved gross margin profile should be sustainable longer term, owing to our strategic focus on higher-margin categories and improved operating scale. As we have discussed in recent quarters, the industry-wide inventory correction that began in the back half of 2022 has persisted into 2023, with uneven demand in the R&R channel and macro uncertainty adding another layer of pressure. This has caused many key industry players to take a very cautious stance on inventory levels, with many participants looking to reduce inventories to levels below historical averages. This has prolonged the destocking headwinds, particularly in the pro channel. In addition, our European business, centered in Germany, has faced pressure due to a combination of destocking headwinds along with macroeconomic pressures in that country. Despite these near-term headwinds, we remain bullish on the long-term outlook for our industry and FGI in particular. The median age of owner-occupied homes is roughly 40 years in the United States. Home equity levels remain high, and homeowners are staying put longer due to the high interest rates. All of this provides a favorable backdrop for long-term remodeling demand. As a result, while market demand may be uneven in the near term, we remain focused on our brands, products, and channel growth strategy, which we are confident will enable us to drive above-market growth in the coming years, and we remain steadfast in our efforts to continue our strategic investments. Our confidence in our long-term value creation formula has not changed. As a reminder, our long-term strategic plan is focused on three key initiatives, which include driving organic growth using our BPC Strategy, operational improvements, and efficient capital deployment. I am very excited by the progress we made against these strategic initiatives during the third quarter, so I would like to walk through some of our key accomplishments. As it relates to our BPC program and our organic growth initiatives, we continue to execute on recently awarded new programs. We were awarded an important expansion on a recent partnership, and we continued our geographic expansion during the quarter. First, we are very excited to have extended our licensing agreement for an industry-leading overflow toilet technology into Canada. We look forward to launching new sanitaryware products utilizing this technology at the 2024 Kitchen and Bath Show. Second, we continue to expand our geographic footprint, building on the recently signed agreements providing entry into India, Eastern Europe, Australia, and the U.K. During the third quarter, we initiated a partnership with our first distribution partner in India, while our products were approved for use in large commercial projects for a new national construction company partner. Third, I'm excited to announce that we are unveiling an exciting collaboration with vurtu.uk, a highly regarded bath distributor in the U.K. Under this exclusive arrangement, FGI will be the sole supplier of sanitaryware, featuring a range of new toilets and sinks, including the company's innovative rimless technology toilet. Vurtu.uk will showcase FGI's products on popular e-commerce platforms such as ManoMano, Homebase, and B&Q, as well as extending this exceptional offering to their entire customer base. Fourth, we won a significant award for new business with a major U.S. retailer that has agreed to expand their in-store bath furniture assortment with FGI. Several new collections consisting of over 20 new bath furniture items will be added, featuring brand-new and exciting finishes, styles, and configurations that will roll into stores in the second quarter of 2024. Next, FGI was awarded a new toilet program at a major national U.S. wholesaler. This program will include unique product updates to current toilet offerings at this customer, while also adding the recently announced new overflow toilet to the program. We expect this program will begin shipping in Q1 2024. Finally, our custom cabinetry business continues to grow rapidly, with our premium Covered Bridge brand adding 93 new dealers thus far in 2023, bringing the total active dealer count to 198 at the end of the third quarter. We also continue to make progress on our new custom kitchen cabinetry investment, which is expected to formally launch in early 2024. We plan to have a large display at the 2024 Kitchen and Bath Show that showcases its Covered Bridge custom kitchen cabinetry line. We are very excited by our progress on our strategic initiatives, and we remain confident that this will help us drive above-market organic growth as market conditions normalize. The second focus of our value creation strategy is on operating efficiency and driving margin expansion. We are pleased to have once again reported another quarter of strong year-over-year gross margin improvement, driven in large part by our strategic decision to focus on higher-margin categories. Finally, our third focus is on efficient capital deployment. We have made meaningful progress in recent quarters in reducing our working capital usage, which has resulted in improved free cash flow conversion and lower net debt levels. This further bolstered our solid liquidity position and financial flexibility. While debt repayment and investment in organic initiatives has been our main priority, we continue to evaluate strategic bolt-on acquisition opportunities. The demand environment remains uneven, which is prolonging the destocking headwinds that have impacted our results over the last year, with several industry forecasters predicting mid-to-high single-digit declines in home improvement industry spending in 2024. While we have faced headwinds in our end markets, I am proud of the continued progress we have achieved on our strategic growth initiatives, and we have several exciting programs that should contribute to improved growth opportunities in the coming quarters. We have indicated on previous calls that we plan to continue to invest in our business despite the recent market weakness, and we have, in fact, increased our investments during 2023 relative to our initial expectations, which we feel demonstrates our confidence in our growth opportunities. However, the incremental growth investments, including a strategic investment we made with a major retail customer in Q3 that is expected to lay the groundwork for future growth opportunities, have impacted our outlook for 2023. Softening consumer demand, coupled with continued destocking and investments for future growth, have caused us to revise our full-year outlook. As a result, we now expect full-year 2023 revenues of $115 million-$120 million, adjusted operating income of $2 million-$2.8 million, and adjusted net income of $1 million-$1.5 million. While we are disappointed by our recent revenue results, we are excited about our BPC growth initiatives, and we remain committed in our efforts to continue our strategic investments in this promising direction. We believe our execution of the BPC strategy, coupled with our strategic investments, will allow us to outpace the negative market predictions and should enable FGI to drive organic growth in the coming year. With that, I will turn it over to Perry for a more detailed review of our financials. Thank you, Dave, and good morning, everyone. I will provide some additional detail on the quarter, given the update on our liquidity and balance sheet, and wrap it up with our full year 2023 guidance. Revenue totaled $29.9 million during the third quarter of 2023, a decrease of 22% compared to prior year due to continued inventory destocking, as well as some modest weakness in the broader home improvement market. We continue to see large customer take a cautious stance regarding inventory level, given sluggish demand trends, which is prolonging the inventory correction. Looking at our business line, sanitaryware revenue was $20.7 million during the third quarter, down from $25.5 million during the prior year period due to the destocking headwind, particularly in the pro channel and the more muted demand trends. However, our sanitaryware revenue increased 10.2% sequentially from the second quarter of 2023, the second consecutive quarter of sequential revenue gains, as some customers are beginning to return to more normal order patterns and new customer programs are benefiting results. Bath furniture revenue was $2.5 million during the third quarter, down from $5.6 million in the prior year period. The broader bath furniture market continued to be one of the product categories most impacted by the macro headwinds. Our product mix in bath furniture is more focused on higher end price point, which is causing additional challenges, given the more pronounced weakness in the higher ticket item. As a result of a recent market change, we are expanding our product offering in the mid-tier category to better address current demand. Shower system revenue was $4.9 million during the third quarter, down from $5.4 million last year, but up 15% sequentially from the second quarter of 2023. While the shower business has experienced some modest inventory, destocking, demand trend remains steady and recently launched program are gaining momentum. This new program include the online shower door program with a large Canadian retailer, as well as new shower wall system rollout at as many as 300 locations of a large U.S. retailer. We continue to expand recently awarded new program to drive improved trend in the back half of 2023 and into 2024. Other revenue, which consists primarily of custom kitchen cabinetry business, was $1.7 million during the third quarter, down modestly from $2 million last year. Momentum in the business remains strong as we continue to add new data to the network and new kitchen cabinetry initiative we have discussed is on track for launch in early 2024. Gross profit was $7.8 million during the third quarter, a decrease of only 2.6% compared to last year, due to a shift in revenue mix toward higher margin products, lower logistic cost, and the full benefit of pricing action taken during 2022. As a result, gross margin improved to 26.2%, up 530 basis points from the prior year. Our operating expense increased to $7.3 million during the third quarter, up from $6.4 million last year. As we continue to invest in our growth initiative, the higher operating expenses reflect marketing spending for the recent launch of the overflow toilet product line, expenses tied to new custom kitchen cabinetry, business development opportunities, as well as the strategic investment with a major retailer that Dave discussed. GAAP operating income was $480,000 during the third quarter, down from income of $1.7 million in the prior year. Excluding certain non-recurring expenses, adjusted operating income was $600,000 during the third quarter. The decline in operating income was a result of the revenue decline and the continued investment in operating expenses tied to growth initiatives, partially offset by the improved gross margin. As a result, adjusted operating margin was 2% during the third quarter, down from 4.5% in the same period last year. GAAP net income was $340,000, or $0.04 per diluted share during the third quarter of 2023, versus net income of $1.3 million, or $0.13 per diluted share in the same period last year. Excluding certain non-recurring items, adjusted net income of third quarter of 2023 was $0.4 million, or $0.05 per diluted share. Now turning into the balance sheet and our liquidity. As of September 30th, 2023, the company had $5.4 million of cash and cash equivalent and total debt of $8 million. At the end of the quarter, we had $15.6 million of availability under our credit facility. Net of letter of credit combined with cash, total liquidity was $20.9 million at quarter end. We believe we are in a good, solid liquidity position that is more than sufficient to fund our growth initiative. Finally, turning into guidance, as Dave detailed, our incremental growth investment, combined with the macro headwind that are pressuring industry volumes, have led us to lower our outlook for the full year. Our revised range calls for revenue in the range of $115 million-$120 million. Adjusted operating income in the range of $2 million-$2.8 million, and adjusted net income of between $1 million-$1.5 million. Please note that the guidance for net income and adjusted operating income is being provided on an adjusted basis and excludes certain non-recurring items. In addition, our guidance includes approximately $500,000 in expense for our new kitchen cabinetry initiative, incremental marketing spend for our new overflow toilet technology offering, as well as increased investment during the third quarter in support of a major retail customer that we expect to lead to attractive incremental growth opportunity in the incoming quarters. That completes our prepared remarks. Operator, we are now ready for the question and answer portion of our call. Thank you. We will now begin our question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're 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 just pause momentarily to assemble our roster. Thank you. The first question today will come from Reuben Garner from Benchmark. Please go ahead. Thank you. Good morning, everyone. Good morning, Reuben. Good morning, Reuben. Maybe let's start with the what you're seeing and hearing from your customers. So it sounds like maybe a little bit conflicting. There's still some destocking going on, but some customers are showing signs of returning to normal order patterns. Can you kind of talk us through that a little more detail? Is it dependent on the channel? Is it dependent on the product? What are you seeing there? Yeah, no, it's a great question, Reuben, and yes. So, you know, as you know, we have a relatively broad product base within each of our categories, and we have a broad category offering. So I think we mentioned, you know, the inventory moderation or the moderation of inventory destocking is uneven for us. In many cases, I think we've highlighted that bath furniture, in particular, has been more of a sore spot in the sense that we have such a broad assortment of cabinetry, and cabinetry has been a little bit more affected due to our high-end assortment. So many of our customers are shifting with us. We're reengineering a lot of those assortments, and it's taking longer. If you look at shower and sanitaryware, as Perry mentioned, we're starting to see sequential quarterly growth. Those inventory levels are moderating, but it also is impacted due to the fact that we have broad assortments within those categories. So, we're confident, you know, going into as we exit Q4 into next year, that we would fully expect to see a more, you know, improved order cadence getting back to more normalized levels that we were used to prior to these destocking issues. Okay, it seems like there are three buckets of items that impacted this year's results. I was hoping you could quantify them for me so we can try to kind of parse out what's not going to be negatively impacting next year. So you had the destocking piece, you had investments tied to future revenue opportunities that you didn't, you know, that you didn't realize in 2023, so a cost element. And then, you know, the potential benefits of those investments that didn't come this year, but will come next year. Can you kind of walk us through those three buckets with maybe some, you know, numbers behind it? Sure. Well, I'm not going to get into very specific numbers, but I can tell you that, you know, our feeling about entering 2024 is that so many, not all of those, first of all, the investments that we made in 2023 are not just for 2024, they're for 2024 and beyond. But we will start to realize a return on many of those investments in 2024. We've talked about our digital kitchen venture, which is going to launch in Q1. We've discussed our new toilet technology, which is going to be launched at our KBIS show in February. And, you know, going back to the inventory situation that you mentioned, that we were talking about destocking. You know, we sort of feel there's going to be almost a natural organic- All right. Pardon me. This is the conference operator. We've lost audio from our main presenting location. Oh. Please stand by. Mr. Bruce, are you there? Yes, I'm- Okay. I'm here. Your line seems to be cutting out a little bit there. Sorry. Please proceed. Okay. Hello, Reuben, are you still there? I am here. You cut off kind of early in the answer, so if you wouldn't mind. Sorry. I apologize. We must have a technical issue. So, yeah, we fully expect going into next year that we're going to see a couple of things. So regarding the investments, the investments in 2023 are obviously not just for next year, they're for next year and beyond. And then from an inventory perspective, we as I sort of mentioned, you know, we would expect to start to see more normal order cadence as we enter 2024. And that's going to be sort of almost a natural organic growth opportunity for us just to get back to more normal cadence. As I mentioned, you know, we've seen sequential quarterly growth, quarter-over-quarter in the sanitary ware and in the shower already. and again, we've mentioned new opportunities that are going to be incremental despite where market predictions are right now. And as we've, I think we mentioned in the release, you know, the R&R market is, by many industry insiders, predicted to be down mid to possibly high single digits. But our incremental new programs that we're discussing, our new kitchen opportunities, the continued growth of the Covered Bridge business, our shower expansions, we would fully expect to be able to outpace any negative market, momentum in 2024. Okay. And in that kind of backdrop where maybe market's down mid-single digits or more, you guys are maybe down or down less than that, like, what—how do we think about what margins look like for next year? I know you're, it's early, and you're not giving guidance, but what are the kind of the puts and takes we have to think about, when we're trying to put that together? No, it's a great question, and we're pretty excited about it, actually. You know, if you go back to when we first went with the IPO a couple of years ago, we talked about our goals to get our margins to, you know, in the near to midterm to, in the range of, you know, between 25% and 30%. You know, we're already above 25 now, and a lot of the opportunities we've mentioned, not only this quarter but in previous quarters, are focused on the higher margin businesses, right? So, you know, you. There was a, there was a, kitchens is starting to scale itself to a degree that it's having larger impact now on our margins. We're investing, like we spoke about, in technologies and businesses such as our shower and the digital kitchen business, which is higher margin. So, you know, at the same time, as some of our pro business may come back and some more mid-price vanity business, we may see some of that gross profit percentage have some dips here and there, but that's gonna contribute to larger gross margin dollar growth, which will impact our EBIT targets. Which, you know, again, we've, we've discussed getting our EBIT margins into the mid to high single digits, and we would fully expect with a combination of the higher margin categories, along with the margin dollar growth, that we're on our way to those goals as we had previously discussed. And just to be clear, I mean, those mid- to high-single digits, is there a certain revenue level you need to get there, a volume level, or can you do it kind of in that flattish to down revenue environment potentially next year? Well, Reuben, this is Perry. I think, you know, it's a mix to us because we are working on the volume, we are working on the margin in different product category and channels. But our goal, because our, you know, scale, so the more gross margin dollar that we can generate, the higher operating margin that we can see in the bottom. Okay, thanks, guys. Good luck with the rest of the year. Thank you. Thank you. And again, if you have a question, please press star, then one. The next question is from Greg Gibas from Northland Securities. Please go ahead. Hey, good morning, David and Perry. Thanks for taking our question. Hey, good morning, Greg. You know, it seems like, assuming a little bit of a recovery in Q4 and planning guidance, and just wanted to get a sense of maybe your underlying assumptions there and how destocking trends have continued into Q4? Well, you can make some inferences based on, you know, our guidance and what you saw in the first three quarters, that, you know, we would, we would hope to expect, to your point, a little bit of recovery. You know, we've, we've had, I think we've mentioned last quarter, that we're gonna start-- we've started to see some new orders come in for some of those new programs we discussed. The majority will come next year, but some have trickled in, you know, as we would, as we had mentioned. Continued moderation of inventory destocking. I don't think. I think what we won't see, which we've historically seen, is larger orders in the end of Q4 in preparation for, you know, as you know, we, we source 75% of our product is outsourced over in Asia, and, you know, due to the Asian holidays at the beginning of the year, we historically have had a larger spike in December. We don't think we'll see as large a spike as we used to, but that still remains to be seen depending upon, again, you know, where those inventory levels are and also where the end markets go, right? And where the macro levels go. So I, I think if you just wanna, you know, you could, you could make your inferences based on our, our new guidance and the Q. But, you know, as we've entered Q4, I could say that, you know, we feel pretty good about what we're seeing, but, you know, we still got some time to go. Got it. Makes sense. And then, you know, curious, like, if you're seeing any, you know, movement on pricing or margin pressures. I mean, it look, it looks like gross margins are still holding up pretty well. And, you know, just a little surprised that as a result of the, you know, lower inventory levels or basically destocking, reducing demand levels, just a little surprised that, you know, we didn't really see much movement on margins as a result. Yeah, well, we've been pretty strategic about that, and, you know, we have made adjustments where necessary in regards to price. But, you know, most of that focus, I hate to go back to this constantly, but a lot of that focus has been on our bath furniture side. That bath furniture assortment that we've had in the market is probably the most broad product category that we have from a SKU perspective and a collection perspective. Our partners, our retail partners and wholesale partners are really trying to rightsize that business. You know, there were so many, there were so many offerings out in the marketplace, and then when, inventory became an issue, and then price, you know, at certain point, I think Perry mentioned, you know, most of our assortments had been focused on the, on the higher end. You know, again, we ran the gamut from, you know, good, better, best, but, it was mostly focused on the best. So we're right sizing a lot of those programs. I think I mentioned one of our, our big retail customers, just we've won a big award there to, you know, add new collections going in the next year, and that's part of that strategy, right? So, so while that's happened, we've been expanding, the higher margin businesses. You know, the shower business, the kitchens, like I said, are starting to scale to a size where it's having more impact to our overall margin and our assortments, and that's going to continue. You know, we absolutely expect that to continue as we enter next year. So that's part of the reason why the margins have held up well. I think our teams have done a fantastic job helping our customers na- Ladies and gentlemen, once again, we have a little bit of an audio loss there. Mr. Bruce, we just lost you. Just, I think we're back now. But please proceed. Okay. Greg, I apologize, Hey, David, no problem. I think we kind of got the full answer out. I think you were just kind of summarizing at the end, but very helpful and makes total sense. You know- Yeah. Lastly- Mm-hmm. Curious, you know, I know it's still early, but, if you could discuss the opportunity in India, you know, great to see that you initiated your first distributor partnership there. Yeah. How should we think about maybe the rollout in that market and how you're thinking about expanding into it? Yeah. So our initial foray into India is gonna be focused primarily on our sanitaryware business. There's a large opportunity. You could only imagine. I mean, obviously, it's one of the largest markets in the world. Sanitaryware is a growing category there with a lot of expansion. There's some local, municipal, and national government incentive similar to what the United States had done with low-flow toilets, for example, when there were rebates given to convert from higher flow. So, that's our main focus. And we're partnering, as we mentioned, with a very formidable distributor that will take our products into the market, into showrooms and local – I'll call it local building opportunities and some hospitality opportunities. At the same time, we're aligning ourselves with, at least initially so far, a larger construction company that is speccing our product and has approved our product for spec to expand into larger commercial projects such as airports, new apartment buildings, larger hotels, national programs. So there's a lot of legwork still to do, but we've made those initial, we've broken down those initial barriers, so to speak, and we have upcoming meetings in Q4 with our distributor to set the plans in place to execute this program as we enter next year. So we're excited about it. Got it. Thanks for the color. Yep, no problem. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to David Bruce for any closing remarks. Thank you for the time and interest today. We appreciate your continued support of FGI. Please note that we will be attending the Benchmark Discovery Conference on December 7th. Stay well, and if we don't connect during the quarter, we look forward to speaking with you on our next quarterly call. Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.