Q3 2023 FGI Industries Ltd Earnings Call
[music].
Speaker 1: Good morning and welcome to the FGI Industries Inc. third quarter 2023 earnings call.
Good morning, and welcome to the F. G. I Industries, Inc. Third quarter 2023 earnings call.
Speaker 1: 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.
All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
Speaker 1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. Please note, this
After todays 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.
Speaker 1: I would now like to turn the conference over to Paul Bartolai, Managing Director, Valem Advisors. Please go ahead.
I would now like to turn the conference over to Paul part of Lai Managing Director Vallum Advisors. Please go ahead.
Speaker 1: Thank you. Welcome to FGI Industries, 3rd quarter, 2020, 30 results conference calls.
Thank you welcome.
Welcome to <unk> industries third quarter 2020 results conference call.
Speaker 1: Leading the call today, our President and CEO , David Bruce, and Chief Financial Officer, Perry Lane.
Leading the call today are president and CEO, David Bruce and Chief Financial Officer.
Speaker 1: We issued a press release after the market closed yesterday detailing our recent operational and financial results.
We issued a press release after the market closed yesterday detailing our recent operational and financial results.
Speaker 1: I would like to remind you that manager and commentary and responses to questions on today's conference call may include four looking statements, which by their nature are uncertain and outside.
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.
Speaker 1: Although these four different statements are based on measurements current expectations and beliefs, actual results made different materialists.
Although these forward looking statements are based on management's current expectations and beliefs.
Actual results may differ materially.
Speaker 1: For discussion of some of the factors that could cause actual results to differ, please refer to the risk factor section of our latest filings with the SEC.
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.
Speaker 1: 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.
Additionally, please note that you can find reconciliations of historical non-GAAP financial measures.
Our press release issued yesterday and in the appendix of this presentation.
Speaker 1: Today's call will begin with a performance review as strategic update from David Bruce, followed by a financial review from Perry Lass.
Today's call will begin with a performance review and strategic update from David Bruce followed by a financial review from Portland.
Speaker 1: 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.
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.
Speaker 2: Thanks, Paul. Good morning to everyone and thanks for joining our call today.
Speaker 2: 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.
We are beginning to see some signs of normalization of 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.
Speaker 2: While our top-run 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.
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.
Speaker 2: As a result, our gross profit declined only 3% during the quarter, despite the 22% profit revenue.
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 approach and Bath furniture business, but we believe our improved gross margin profile should be sustained.
Speaker 2: 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.
Longer term, owing to our strategic focus on higher margin categories.
Proved operating scale.
Speaker 2: As we have discussed in recent quarters, the industry-wide inventory correction that began 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 average.
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.
Speaker 2: This has prolonged the destocking headwinds, particularly in the Pro Channel. In addition, our European business, Senator in Germany, has faced pressure due to a combination of destocking headwinds, along with macroeconomic pressures in that country.
This is prolonged destocking headwinds, particularly in the pro channel in.
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.
Speaker 2: Despite these near-term headlands, 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 to longer due to the high interest rate.
Despite these near term headwinds we remain bullish on the long term outlook for our industry and F. G. I in particular.
Median age of owner occupied homes is roughly 40 years in the United States home equity levels remain high and homeowners are staying longer due to the high interest rates all of this provides a favorable.
Speaker 2: All of this provides a favorable backdrop for long-term remodeling demand.
Backdrop for long term remodeling demand.
Speaker 2: As a result, while market demands may be uneven in the near term, we remain focused on our brand's products and channel growth strategy, which we are confident will enable us to drive a love market growth in the coming years. And we remain steadfast in our efforts to continue our strategic investments.
As a result, while market demand maybe 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.
Speaker 2: Our confidence in our long-term value creation formula has not changed.
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 or BPC strategy operational improvements and efficient capital deployment.
Speaker 2: As a reminder, our long-term strategic plan is focused on three key initiatives, which include driving organic growth using ORBPC strategy, operational improvements, and efficient capital deployment.
Speaker 2: 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.
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.
Speaker 2: 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 sanitary wear products, utilizing this technology at the 2024 Kitchen and Bass Show.
As it relates to our PPC program and or however.
Ganic growth initiatives, we continue to execute on our recently awarded new programs. We were awarded an important expansion on our 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 sanitary ware products utilizing this technology at the 'twenty 'twenty, four kitchen and Bath shop.
Speaker 2: Second, we continue to expand our geographic footprint, building on a recently signed agreements providing entry into India, Eastern Europe , Australia, and the UK. 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.
Second we continue to expand our geographic footprint building on our recently signed agreements providing entry into India, Eastern Europe, Australia, and the UK during the third quarter, we initiated a partnership with our first distribution partner in India, while our products were approved for use in a large commercial projects for our new national.
Construction company partner.
Speaker 2: Third, I'm excited to announce that we are unveiling an exciting collaboration with v2.uk, a highly regarded Baptist Remitter in the UK.
I am excited to announce that we are unveiling an exciting collaboration with Virtu Dot UK, a highly regarded bath distributor in the U K.
Speaker 2: Under this exclusive arrangement, FGI will be the sole supplier of sanitary wear, featuring a range of new toilets and sinks, including the companies in the VATER RIMLUS technology toilet.
Under this exclusive arrangement <unk> will be the sole supplier of sanitary ware.
<unk> in a range of new toilets, and sinks, including the company's innovative rimless technology toilet.
Speaker 2: Virtury.uk will showcase FTI products on popular e-commerce platforms such as Mano Mano, HomeBase, and B&Q, as well as extending this exceptional offering to their entire customer base.
Virtual dot UK will showcase FTE ice products on popular e-commerce platform, such as mono mono homebase and be in Q as well as extending this exceptional offering to their entire customer base.
Speaker 2: For it, we want a significant award for new business with a major US retailer that has agreed to expand their in-store BATS furniture assortment with FGI. Several new collections consisting of over 20 new BATS 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.
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 without Gi 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 2024.
Speaker 2: Next, FGI was awarded a new toilet program at a major national U.S. wholesale.
Next STI was awarded a new toilet program at a major National U S wholesaler.
Speaker 2: 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, 2020 for.
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.
Speaker 2: Finally, our custom cabinetry business continues to grow rapidly with our premium, covered bridge brand at a 93 new dealers thus far in 2023, bringing the total active dealer count to 198 at the end of the third quarter.
Finally, our custom cabinetry business continues to grow rapidly with our premium covered bridge brand added 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 digital custom kitchen cabinetry investment.
Speaker 2: We also continue to make progress and our new digital custom kitchen cabinetry investment, which is expected to formally launch in early 2024.
Which is expected to formally launch in early 2024, we plan to have a large display at the 2020 for kitchen and Bath show that showcases its covered bridge custom kitchen cabinetry lines.
Speaker 2: We plan to have a large display at the 2024 Kitchen and Bath Show that showcases its covered bridge custom kitchen cabinetry line.
Speaker 2: 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.
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.
Speaker 2: The second focus of our value creation strategy is on operating efficiency and driving margin.
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.
Speaker 2: 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, a focus on higher margin categories.
Speaker 2: Finally, our referred focus is on efficient capital deployment.
Finally, our third focus is on efficient capital deployment.
We have made meaningful progress in recent quarters, and reducing our working capital usage, which has resulted in improved free cash flow conversion and lower net debt levels.
This further bolsters, our solid liquidity position and financial flexibility.
Well 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 I mean.
Which is prolonging the destocking headwinds that have impacted our results over the last year with several industry forecasters are predicting mid to high single digit declines in home improvement industry spending in 2024.
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.
The incremental growth investments, including a strategic investment we made with our 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.
Caused us to revise our full year outlook.
As a result, we now expect full year 2023 revenues of $115 million to $120 million adjusted operating income of $2 million to $2 8 million and adjusted net income of $1 million to $1 5 billion.
While we are disappointed by our recent revenue results. We are excited about our BPC growth initiatives.
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 <unk> 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 four 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 browser to home improvement market. We continue to see large customers take a car.
Show stains and regarding inventory label, given sluggish demand change, which is prolonging the inventory correction.
At our base Nissan Alliance sanitary way of wrapping it was $20 7 million during the third quarter down from $25 5 million during the prior year period due to the Destocking headwinds, particularly in the pro channel and the more muted the demand change However, our cemetery the way of revenue in.
<unk>, 10.2% sequentially from the second quarter of 2023.
<unk> consecutive quarter of sequential revenue gains. So some customers are beginning to return to more normal order patterns and new customer program benefiting waste out.
<unk> total revenue was $2 5 million during the third quarter down $5 six a median in the prior year period. The proud of Bath furniture market continued to be one element of product categories. Most impacted by the mine called headwinds all product mix in Bath furniture is.
More focus on higher end price point, which is causing additional challenges given the more pronounced weakness in the higher ticket items.
As a result of our recent market changes, we are expanding our product offering in the mid tier category two beta address current demand.
Shall I take them around I mean, it was a $4 9 million during the third quarter down from $5 4 million last year, but up 15% sequentially from the second quarter of 2020 story why on the Shallowest business has experienced some modest inventory destocking.
<unk> remains steady and.
Recently launch a program are gaining momentum.
Recent new program include the online shower door program with a large Canadian retail is the warehouse new shower to wall system rollout.
Many.
<unk> hundred location offer large U S retailer, we continue to expand recently awarded.
New program to drive an improved trend in the back half of 2023 and into 2020 for.
Although revenue, which consists primarily of custom qichen, Kevin I would say based on these was $1 7 million during the third quarter down modestly from 2 million last year momentum in the business remains strong as we continued to add new data to that network and new kitchen, Cabinetry initiative, where we have to discuss.
<unk> is on track for a launch in early 2024.
Profit was $7 8 million during the third quarter, a decrease of only two 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 actions taken during 2020 to reach out.
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.
From $6 4 million last year. So we continue to impact our growth initiative. The higher operating expense have great track marketing spending for that reason lunch Olaf road toll it a proud online expansion tied to new costume kitchen cabinetry business development opportunity.
That's the way us and a strategic investment we sell a lot major retailer that Dave discussed.
GAAP operating income was 480000 during the third.
The water down from income of a 1.5 of media in the prior year, excluding certain non recurring expenses adjusted operating income was 600000 during the third quarter. The decline in operating income was a result of the revenue decline and the continuing investment in operating.
This benefit tied to growth of initiative, partially offset by the improved gross margin as a result, adjusted operating margin was 2% during the third quarter down from four 5%.
N P O ran last year.
GAAP net income was 340000 or four cents per diluted share.
The third quarter of 2023 versus the main income of $1 3 million or 17 cents per diluted share in the same period last year.
<unk>, so 10 non recurring items.
To state the name income of third quarter of 2020 story was 0.4 million or <unk> <unk> put that date to share now turning into the balance sheet and our liquidity.
September 30th.
So our company had a fine point fall median alpha cash and cash equivalent and total debt of a media and again over the quarter and we had a $15 six immediate availability.
Availability under our credit facility net Albert later of credit to come by with cash total liquidity was $20 9 million at quarter end. We believe we are in a solid liquidity position that as a more than sufficient to fund our growth initiated finally turning to guidance.
Ah stay with detail.
Our incremental growth in Vas and when combined with the micro headwinds that are pressuring industry volumes have led us to lower our outlook for the full year I'll revised range called for revenue in the range of 115 million to 120 minute adjusted operating income in the range.
2 million to $2 8 million and adjusted net income of between 1 million to one 5 million. Please note that the guidance upon the income and.
Operating income is being provided.
Adjusted databases and the East coast Southern nonrecurring item. In addition, our guidance include.
Approximately half of median it means for our new kitchen cabinet chain initiated incremental marketing spend for our new overthrow tall led technology opening.
Oh I see 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.
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At this time, we will just pause momentarily to assemble our roster.
Yeah.
Thank you and the first question today will come from Reuben Garner from benchmark. Please go ahead.
Thank you and good morning, everyone.
Good morning, or good morning in women.
Maybe let's start with the what Youre seeing and hearing from your customers. So it.
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 that channel as it depends on the product what are what are you seeing there yeah no. It's a great question Ruben and yes. So 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 us.
A sore spot in the sense that we have such a broad assortment of cabinetry and cabinetry. He 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 sanitary Ware as Perry mentioned, we're starting to see sequential quarterly growth those inventory levels are moderating, but it also.
It was impacted due to the fact that we have broad assortments within those categories. So.
We're confident going into as we exit Q4 into next year that where we would fully expect to see a more.
Improved order cadence getting back to more normalized levels that we were used to prior to.
These destocking issues.
Okay and it seems like there there are three buckets of items that impacted this year as a result, I was hoping you could quantify them for me. So we can try to kind of parse out what's not gonna be negatively impacting next year. So you had the destocking.
Piece, you had investments tied to.
Future revenue opportunities that you that you didn't you know.
That you Didnt realize in 2023, so a cost element and then you know the 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.
Numbers behind it.
Sure well I'm not going to get into very specific numbers, but I can tell you that you know are our feeling about entering 2024.
Is that.
Not all of those first of all the investments that we made in 2023 are not just for 2024, there 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.
Launched at our cadence show in February.
And.
Going back to the inventory situation that you mentioned that we were talking about destocking, we sort of feel theres going to be almost a natural organic.
Pardon me this is the conference operator.
Lost audio from our main presenting location.
Standby.
Mr. Bruce do you there seems.
Seems to be cutting out a little bit there. Please proceed okay.
Hello, everybody is 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.
Yes, 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, there for next year and beyond.
And then from an inventory perspective.
We as I sort of mentioned, 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 as I mentioned, we've seen sequential quarterly growth.
Quarter over quarter in the sanitary ware and in the shallower 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 our release the R&R market is by.
By many industry insiders predicted to be down mid to possibly high single digits, but our incremental new programs that we are discussing our new kitchen opportunities that continued growth.
The covered bridge business, our shower expansions.
We would fully expect to be able to outpace any negative market.
In 2024.
Okay and in that kind of backdrop, where maybe markets 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, 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.
It's a great question and we're we're we're pretty excited about it actually.
Go back to when we when we first went with the IPO a couple of years ago, we talked about R. R.
Goal is to get our margins to you know in the near to midterm to and are in the range of between 25% to 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.
Our focus on the higher margin businesses right. So you know there was a there was a kitchen is starting to scale itself to a degree that is having a larger impact now on our margins.
We're investing like we spoke about in technologies and businesses, such as our shower and the digital digital business, which is higher margin. So at the same time as some of our pro business may come back and some more mid priced Vanity business. We may see some of that gross profit percentage would have some dips here and there but.
That's going to contribute to larger gross margin dollar growth, which will impact our EBIT targets, which you know again, 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 paired with you I think you know.
It's a mix to us because we are walking on the volume we are walking on the margin.
In different product categories and channels, but I'll go because of our scale. So the more gross margin dollars. That's a weekend generated the highest operating margin that we can see in the bottom.
Okay. Thanks, guys. Good luck with the rest of the year.
Thank you.
And again, if you have a question. Please press Star then one.
Next question is from Gregg Gilbert from Northland Securities. Please go ahead.
Hey, good morning, David Perry, Thanks for taking.
Greg.
It seems like assuming a little bit of a recovery in Q4, our 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 we would we would hope to expect to your point a little bit of a recovery.
We've had a 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 as larger orders in.
The end of Q4 in preparation for as you know we source, 75% of our product is outsourced over in Asia and do the Asian holidays at the beginning of the year, we historically have had a larger spike.
In December we don't think we will see as largest spike as we used to but that is still remains to be seen.
Depending upon again, you know where those inventory levels are and also where the and market's got right where the macro levels go. So I think if you just want to you know you could.
You could make your inferences based on our new guidance.
The Q, but you know as we've as we've entered Q4 I can say that we feel.
Pretty good about what we're seeing but.
We still got some sometime ticked up.
Got it makes sense and then I'm curious if you're seeing any.
Movement on pricing or margin pressures I mean, it looks like gross margins are still holding up pretty well and.
Just a little surprised that as a result of the lower inventory levels are basically destocking reducing demand levels.
A little surprised that you know.
We didn't really see much.
Much movement on margins as a result.
Yeah, well, we've been pretty strategic about that and you know we have made.
The adjustments were necessary in regards to price.
But 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.
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 of perspective, and our partners. Our retail partners that wholesale partners are really trying to rightsize that business.
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 most of our Assortments have been focused on the on the higher end.
Again, we ran the gamut from 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 big retail customers. Just we've won a big award there too.
You know add new collections going into next year, that's part of that strategy right. So so while that's happened.
We've been expanding the higher margin business as 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 in our assortments and that's going to continue 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 now.
And 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 let's please okay.
Greg I apologize.
No problem I think you've kind of got the full answer out I think you were just kind of summarizing at the end, but very helpful and it makes total sense.
Lastly.
Curious you know I know, it's still early but.
And if you could discuss the opportunity in India, you know great to see that you initiated your first distributor partnership there how should we think about maybe the rollout of that market, how you're thinking about expanding into it.
Yes, so our initial foray into India has got a be focused primarily on our sanitary ware business Theres, a large opportunity you could only imagine I mean, obviously, it's one of the largest markets in the world.
Sanitary wear is a growing category there with a lot of expansion there is some local municipal and national government.
Incentive.
Similar to what the United States have done with low flow toilets. For example, whenever rebates given to to convert from from higher flow. So that's our main focus and where we're looking at it right now is sort of a two pronged fork, where we're partnering as we mentioned with a very formidable distributor.
That will.
Take our products into the market into our showrooms and in local.
I'll call it local building opportunities and some hospitality.
Opportunities and at the same time.
We're aligning ourselves with them at.
At least initially so far larger construction company.
That is spec ing, our product and has approved our product for spec too.
Spanned into larger commercial projects, such as airports new apartment buildings larger hotels, a national program. So there's a lot of leg work 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.
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.
Yep.
And 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 F. Gi. 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.
Yeah.
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Yeah.
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