News Classic

VANCOUVER, British Columbia, Nov. 11, 2024 (GLOBE NEWSWIRE) — Gatos Silver, Inc. (NYSE/TSX:GATO) (“Gatos Silver” or the “Company”) today announced its third quarter of 2024 financial and operating results including earnings per share of $0.14, up 200% from $0.05 in the third quarter of 2023. The Company will host an investor and analyst call on November 12, 2024, details of which are provided below.

The Company has a 70% interest in the Los Gatos Joint Venture (“LGJV”), which in turn owns the Cerro Los Gatos (“CLG”) mine in Mexico. The Company’s reporting currency is US dollars.

On September 5, 2024, Gatos Silver and First Majestic Silver Corp. (“First Majestic”) announced that they entered into a definitive merger agreement pursuant to which First Majestic will acquire all of the issued and outstanding common shares of Gatos Silver (the “Merger”). The proposed Merger is expected to close in the first quarter of 2025 and would consolidate three world-class, producing silver mining districts in Mexico to create a leading intermediate primary silver producer.

On September 25, 2024, Gatos Silver reported an updated life of mine plan (“LOM plan”) that adds two years of additional reserves and a 36% increase in silver equivalent production compared with the prior LOM plan at CLG.

Production for the third quarter of 2024 and improved guidance for the full year were disclosed on October 9, 2024.

“CLG’s strong third quarter 2024 production and cost performance together with higher metal prices resulted in record quarterly free cash flow at the LGJV and a record quarter-end cash balance for Gatos Silver,” said Dale Andres, CEO of Gatos Silver. “We believe we are well positioned to deliver significant value into the combination with First Majestic given the Company’s strong cash position and free cash flow generation together with CLG’s track record of performance, the extended mine plan disclosed in September and ongoing exploration efforts across the broader Los Gatos district.”

Summary

LGJV Q3 2024 results compared to Q3 2023 (100% basis):

• Revenue of $93.8 million, up 40% from $67.0 million
• Cost of sales of $31.2 million, down 1% from $31.4 million
• Record net income of $25.7 million, up 71% from $15.1 million
• Record EBITDA¹ of $57.2 million, up 87% from $30.6 million
• Record cash flow from operations of $58.2 million, up 98% from $29.4 million
• Record free cash flow¹ of $42.6 million, up 199% from $14.3 million
• Silver production of 2.42 million ounces, up 9% from 2.22 million ounces
• Silver equivalent production² of 3.84 million ounces, up 11% from 3.46 million ounces
• Co-product AISC¹ of $16.13 per ounce of payable silver equivalent, down 9% from $17.64
• By-product AISC¹ of $9.61 per ounce of payable silver, down 35% from $14.71

Gatos Silver Q3 2024 results compared to Q3 2023:

• Net income of $9.9 million, up from $3.3 million, and adjusted net income¹ of $15.2 million
• Basic and diluted earnings per share of $0.14, up from $0.05 per share, and adjusted basic and diluted earnings per share¹ of $0.22 and $0.21, respectively
• EBITDA¹ of $9.1 million, compared to $3.2 million, and adjusted EBITDA¹ of $14.4 million
• Cash flow provided by operating activities and free cash flow¹ of $34.2 million, compared to $33.3 million

__________________

¹ See “Non-GAAP Financial Measures” below.
² See definition of silver equivalent production below.

At the LGJV, the 40% increase in revenue in Q3 2024, compared to the same quarter in 2023, was primarily attributable to higher sales volumes and higher realized metal prices. Cost of sales decreased by 1% despite the higher sales volumes. Site operating unit costs of $96.93/t milled were 8% lower than in Q3 2023 primarily due to higher mill throughput in the quarter. By-product AISC¹ per ounce of payable silver decreased to $9.61 primarily due to significantly higher silver and by-product production and sales volumes.

For Gatos Silver, higher unadjusted and adjusted net income, earnings per share and EBITDA¹ for Q3 2024 were primarily attributable to the higher equity income from the LGJV and higher interest income. General and administrative expenses were higher in Q3 2024, mainly due to $5.3 million of costs related to the proposed Merger with First Majestic (which are excluded from adjusted net income¹, adjusted earnings per share and adjusted EBITDA¹ as described below), partially offset by a decrease of $1.1 million in non-cash stock-based compensation expense, a $0.9 million decrease in legal and consulting fees not associated with the proposed Merger, and a $0.4 million decrease in insurance expense.

As of September 30, 2024, the Company and the LGJV reported cash and cash equivalents of $116.7 million and $33.9 million, respectively. The Company’s quarter-end cash balance was a new record, up 40% from $82.5 million at the end of June 30, 2024. The increase in cash was due to $37.9 million of cash distributions received during the third quarter. As of October 31, 2024, the Company and the LGJV had cash and cash equivalents of $114.8 million and $47.3 million, respectively. On November 7, 2024, the LGJV made a capital distribution to its partners of $40.0 million, of which the Company received $28.0 million. The Company continues to be debt free with $50.0 million available under the Revolving Credit Facility.

Financial and Operating Results

Below is select operational and financial information for the three and nine months ended September 30, 2024 and 2023. For a detailed discussion of the three and nine months ended September 30, 2024 financial and operating results refer to the Form 10-Q expected to be filed on November 12, 2024 on both the EDGAR and SEDAR+ systems and posted on the Company’s website at https://gatossilver.com.

Los Gatos Joint Venture

¹ See Non-GAAP Financial Measures below.
² Totals may not add up due to rounding.
³ Silver equivalent production for 2024 is calculated using prices of $23/oz silver, $1.20/lb zinc, $0.90/lb lead and $1,800/oz gold to “convert” zinc, lead and gold production contained in concentrate to “equivalent” silver ounces (contained metal, multiplied by price, divided by silver price). For 2023, silver equivalent production was calculated using prices of $22/oz silver, $1.20/lb zinc, $0.90/lb lead and $1,700/oz gold. For comparative purposes, the calculated silver equivalent production for the three and nine months ended September, 2023 would be 3.41 million ounces and 10.30 million ounces, respectively, using price assumptions for 2024.
⁴ Realized prices include the impact of final settlement adjustments from prior period sales.

Gatos Silver, Inc.

¹ See Non-GAAP Financial Measures below.
² Totals may not add up due to rounding.

Financial Results Webcast and Conference Call

Investors and analysts are invited to attend the financial results webcast and conference call as follows:

Date: Tuesday, November 12, 2024
Time: 11:00 a.m. ET
Listen-Only Webcast: https://events.q4inc.com/attendee/627122313
Direct Event Registration Link (for Analysts only): https://registrations.events/direct/Q4I98433625
An archive of the webcast will be available on the Company’s website at: https://gatossilver.com within 24 hours.

About Gatos Silver

Gatos Silver is a silver dominant exploration, development and production company that discovered a new silver and zinc-rich mineral district in southern Chihuahua State, Mexico. As a 70% owner of the Los Gatos Joint Venture (“LGJV”), the Company is primarily focused on operating the Cerro Los Gatos mine and on growth and development of the Los Gatos district. The LGJV includes approximately 103,000 hectares of mineral rights, representing a highly prospective and under-explored district with numerous silver-zinc-lead epithermal mineralized zones identified as priority targets.

On September 5, 2024, Gatos Silver and First Majestic Silver Corp. (“First Majestic”) announced that they entered into a definitive merger agreement pursuant to which First Majestic will acquire all of the issued and outstanding common shares of Gatos Silver (the “Merger”). The proposed Merger would consolidate three world-class, producing silver mining districts in Mexico to create a leading intermediate primary silver producer. Information relating to the proposed Merger can be found at the Company’s website at www.gatossilver.com.

Qualified Person

Scientific and technical disclosure in this press release was approved by Anthony (Tony) Scott, P.Geo., Senior Vice President of Corporate Development and Technical Services of Gatos Silver who is a “Qualified Person” as defined in S-K 1300 and NI 43-101.

Non-GAAP Financial Measures

We use certain measures that are not defined by GAAP to evaluate various aspects of our business. These non-GAAP financial measures are intended to provide additional information only and do not have any standardized meaning prescribed by GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP.

Cash Costs and All-In Sustaining Costs
Cash costs and all-in sustaining costs (“AISC”) are non-GAAP measures. AISC was calculated based on guidance provided by the World Gold Council (“WGC”). WGC is not a regulatory industry organization and does not have the authority to develop accounting standards for disclosure requirements. Other mining companies may calculate AISC differently as a result of differences in underlying accounting principles and policies applied, as well as definitional differences of sustaining versus expansionary (i.e. non-sustaining) capital expenditures based upon each company’s internal policies. Current GAAP measures used in the mining industry, such as cost of sales, do not capture all of the expenditures incurred to discover, develop and sustain production. Therefore, we believe that cash costs and AISC are non-GAAP measures that provide additional information to management, investors and analysts that aid in the understanding of the economics of the Company’s operations and performance compared to other producers and provides investors visibility by better defining the total costs associated with production.

Cash costs include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, treatment and refining costs, general and administrative costs, royalties and mining production taxes. AISC includes total production cash costs incurred at the LGJV’s mining operations plus sustaining capital expenditures. The Company believes this measure represents the total sustainable costs of producing silver from current operations and provides additional information of the LGJV’s operational performance and ability to generate cash flows. As the measure seeks to reflect the full cost of silver production from current operations, new project and expansionary capital at current operations are not included. Certain cash expenditures such as exploration, new project spending, tax payments, dividends, and financing costs are not included.

Adjusted Net Income

Management uses adjusted net income, which exclude costs associated with the strategic review resulting in the proposed Merger with First Majestic, to evaluate the Company’s operating performance. The Company believes the use of adjusted net income reflects the underlying performance of our business and allows investors and analysts to compare the results of the Company to our historical results and to similar results of other mining companies. Management’s determination of the components of adjusted net income are evaluated periodically and is based, in part, on a review of non-GAAP financial measures used by mining industry analysts.

EBITDA

Management uses EBITDA to evaluate the Company’s operating performance, to plan and forecast its operations, and assess leverage levels and liquidity measures. EBITDA is defined as net income adjusted for interest expense, interest income, income tax expense and depreciation, depletion and amortization expense. The Company believes the use of EBITDA reflects the underlying operating performance of our core business and allows investors and analysts to compare results of the Company to similar results of other mining companies. EBITDA does not represent, and should not be considered an alternative to, net income or cash flow from operations as determined under GAAP. Other companies may calculate EBITDA differently and those calculations may not be comparable to our presentation.

Adjusted EBITDA

Management uses adjusted EBITDA to evaluate the Company’s ongoing operating performance, without the impact of costs associated with the strategic review resulting in the proposed Merger with First Majestic. The Company believes the use of adjusted EBITDA reflects the underlying operating performance of our core business and allows investors and analysts to compare the results of the Company to our historical results and to similar results of other mining companies. Adjusted EBITDA does not represent, and should not be considered an alternative to, net income or cash flow from operations as determined under GAAP. Other companies may calculate adjusted EBITDA differently and those calculations may not be comparable to our presentation.

Free Cash Flow

Management uses free cash flow as a non-GAAP measure to analyze cash flows generated from operations. Free cash flow is cash provided by (used in) operating activities less cash flow from investing activities as presented on the consolidated statements of cash flows. The Company believes free cash flow is also useful as one of the bases for comparing the Company’s performance with its competitors. Although free cash flow and similar measures are frequently used as measures of cash flows generated from operations by other companies, the Company’s calculation of free cash flow is not necessarily comparable to such other similarly titled captions of other companies.

Reconciliation of GAAP to non-GAAP measures

The table below presents a reconciliation between the most comparable GAAP measure of the LGJV’s expenses to the non-GAAP measures of (i) cash costs, (ii) cash costs, net of by-product credits, (iii) co-product AISC and (iv) by-product AISC for our operations.

¹ Exploration costs are not related to current operations.
² Represent reductions on customer invoices and included in sales of the LGJV combined statement of operations and income.
³ Sustaining capital excludes resource development drilling costs related to resource development drilling of the CLG deposit.
⁴ By-product credits reflect realized metal prices of zinc, lead and gold for the applicable period, which includes any final settlement adjustments from prior periods.
⁵ Silver equivalents utilize the average realized prices during the nine months ended September 30, 2024, of $27.09/oz silver, $1.30/lb zinc, $0.92/lb lead, $2,162/oz gold and $3.72/lb copper and the average realized prices during the three months ended September 30, 2024, of $29.62/oz silver, $1.26/lb zinc, $0.93/lb lead and $2,362/oz gold and $3.28/lb copper. Silver equivalents utilize the average realized prices during the nine months ended September 30, 2023, of $25.08/oz silver, $1.10/lb zinc, $0.98/lb lead and $1,828/oz gold and the average realized prices during the three months ended September 30, 2023, of $24.24/oz silver, $0.89/lb zinc, $0.97/lb lead and $1,885/oz gold. The average realized prices are determined based on revenue inclusive of final settlements.

The following table provides a breakdown of cash flows used by investing activities of the LGJV and a reconciliation of sustaining capital and resource development drilling to that measure:

The table below reconciles adjusted net income and adjusted net income per share (basic and diluted), which are non-GAAP measures to net income and net income per share (basic and diluted), respectively, for the Company:

The table below reconciles EBITDA and adjusted EBITDA, which are non-GAAP measures, to net income for the Company:

The table below reconciles EBITDA, a non-GAAP measure, to the LGJV’s net income:

The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to cash provided by operating activities for the Company, which the Company believes to be the GAAP financial measure most directly comparable to free cash flow.

The following table sets forth a reconciliation of free cash flow, a non-GAAP financial measure, to cash provided by operating activities for the LGJV.

Please see Appendix A for the unaudited condensed consolidated balance sheets of the Company and the LGJV as of September 30, 2024 and December 31, 2023, the related unaudited condensed consolidated statements of income and comprehensive income of the Company, the unaudited combined statements of operations and comprehensive income of the LGJV for the three and nine months ended September 30, 2024 and 2023, and the unaudited statements of cash flows for the nine months ended September 30, 2024 and 2023.

Forward-Looking Statements
This press release contains statements that constitute “forward looking information” and “forward-looking statements” within the meaning of U.S. and Canadian securities laws. All statements other than statements of historical facts contained in this press release, including statements regarding our updated LOM plan, 2024 revised guidance and the expected timing, benefits, impacts, and completion of the proposed Merger with First Majestic, are forward-looking statements. Forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements, and such other risks and uncertainties described in our filings with the U.S. Securities and Exchange Commission and Canadian securities commissions. Gatos Silver expressly disclaims any obligation or undertaking to update the forward-looking statements contained in this press release to reflect any change in its expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law. No assurance can be given that such future results will be achieved. Forward-looking statements speak only as of the date of this press release.

Investors and Media Contact

André van Niekerk
Chief Financial Officer
investors@gatossilver.com
(604) 424 0984

APPENDIX A
GATOS SILVER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

GATOS SILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)

GATOS SILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

LOS GATOS JOINT VENTURE
COMBINED BALANCE SHEETS
(UNAUDITED)

LOS GATOS JOINT VENTURE
COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)

LOS GATOS JOINT VENTURE
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)

PALM BEACH GARDENS, Fla., Nov. 11, 2024 (GLOBE NEWSWIRE) — Great Elm Group, Inc. (“we,” “our,” “GEG,” “Great Elm,” or “the Company”), GEG, an alternative asset manager, today announced financial results for its fiscal first quarter ended September 30, 2024.

Fiscal First Quarter 2025 and Recent Highlights

• GEG’s fee-paying assets under management (“FPAUM”) and assets under management (“AUM”) totaled approximately $559 million and $782 million, respectively.
  • FPAUM and AUM growth of 24% and 22%, respectively, compared to the prior year period.
• GEG’s Pro forma FPAUM¹ and AUM¹ totaled approximately $545 million and $741 million, respectively.
  • Pro forma FPAUM¹ and AUM¹ growth of 21% and 16%, respectively, compared to the prior year period.
• Total revenue for the first quarter grew 21% to $4.0 million, compared to $3.3 million for the prior-year period.
  • Growth in revenue was primarily driven by the Monomoy BTS property sale and increased Great Elm Capital Corp. (“GECC”) management fees due to growth in FPAUM.
  • Great Elm collected incentive fees from GECC totaling $0.9 million for the three months ended September 30, 2024.
• Net income from continuing operations was $3.0 million for the first quarter, compared to $2.8 million in the prior-year period.
  • Net income in the quarter reflects the reversal of approximately $3.5 million in previously recorded unrealized losses related to the Company’s investments in special purpose vehicles (“SPVs”).
• Adjusted EBITDA for the first quarter of was $1.3 million, compared to $1.7 million in the prior-year period.
• GEG’s Board of Directors authorized an additional $10 million of stock repurchases, doubling the size of the $10 million previously approved stock repurchase program.
  • Through November 8, 2024, Great Elm has repurchased approximately 2.5 million shares for $4.6 million, an average price of $1.85 per share, through its share repurchase program.
  • Book value per share was $2.22 as of September 30, 2024.
• As of September 30, 2024, GEG had approximately $52 million² of cash and marketable securities on its balance sheet to support growth initiatives across its alternative asset management platform.

Management Commentary

Jason Reese, Chief Executive Officer of the Company, stated, “We had a solid start to fiscal 2025, as we continued to expand our assets under management, grew our fee revenue through earned incentive fees from GECC and increased management fees across our credit and real estate businesses. Moreover, the Monomoy Build-to-Suit pipeline remains strong, and we continue to broaden our tenant relationships.”

“Additionally, as the Great Elm Credit Income Fund marks its first anniversary, our strong returns and now-established track record position us well to attract capital and further scale the platform. We also increased our stock repurchase capacity up to $20 million from $10 million initially, and utilized the program to repurchase shares at a meaningful discount to book value. Looking ahead, we remain focused on executing on our strategic priorities: growing our core credit and real estate platforms, pursuing compelling investment opportunities and leveraging our strong balance sheet to maximize shareholder value.”

GEG Managed Vehicle Highlights

• GECC reported record total investment income in the quarter and was active in managing its capital structure.
  • In July, GECC utilized its shelf to issue $22.0 million of 8.50% Notes due 2029 in a registered direct offering to an institutional investor.
  • GECC issued $41.4 million of 8.125% Notes due 2029, utilizing the proceeds and cash on hand to redeem $45.3 million of notes scheduled to mature in January 2025, leaving no maturities until June 2026.
  • GECC reported $11.7 million of total investment income, a record and the highest cash income in its history.
• Monomoy BTS and Monomoy REIT continued to execute on positive momentum from the prior quarter.
  • Monomoy BTS completed construction of its first build-to-suit property in October 2024, following the property sale in June 2024, and ended the quarter with a strong pipeline in its Construction Management business.
  • Monomoy REIT monetized approximately $7.1 million of real estate at a gain and enhanced its lease position.
• Great Elm Credit Income Fund (“GECIF”) delivered a strong return on invested capital of over 11%, net of fees, through September 30, 2024, since its inception in November 2023.³

Discussion of Financial Results for the Fiscal First Quarter Ended September 30, 2024

GEG reported total revenue of $4.0 million, up 21% from $3.3 million in the prior-year period.

GEG recorded net income from continuing operations of $3.0 million, compared to $2.8 million in the prior year period. Net income in the quarter reflects the reversal of approximately $3.5 million in previously recorded unrealized losses related to the Company’s investments in SPVs, resulting in an aggregate net unrealized loss since inception of ($0.3) million on the Company’s investments in SPVs.

GEG recorded Adjusted EBITDA of $1.3 million, compared to $1.7 million in the prior-year period.

Stock Repurchase Program

GEG’s Board of Directors approved an incremental stock repurchase program under which GEG is authorized to repurchase an additional $10 million in the aggregate of its outstanding common stock in the open market. This approval brings the total buyback authorization up to $20 million. As of November 8, 2024, the Company has repurchased approximately 2.5 million shares for $4.6 million under this program.

Fiscal 2025 First Quarter Conference Call & Webcast Information

About Great Elm Group, Inc.

Great Elm Group, Inc. GEG is a publicly-traded, alternative asset manager focused on growing a scalable and diversified portfolio of long-duration and permanent capital vehicles across credit, real estate, specialty finance, and other alternative strategies. Great Elm Group, Inc. and its subsidiaries currently manage Great Elm Capital Corp., a publicly-traded business development company, and Monomoy Properties REIT, LLC, an industrial-focused real estate investment trust, in addition to other investments. Great Elm Group, Inc.’s website can be found at www.greatelmgroup.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Statements in this press release that are “forward-looking” statements, including statements regarding expected growth, profitability, acquisition opportunities and outlook involve risks and uncertainties that may individually or collectively impact the matters described herein. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made and represent Great Elm’s assumptions and expectations in light of currently available information. These statements involve risks, variables and uncertainties, and Great Elm’s actual performance results may differ from those projected, and any such differences may be material. For information on certain factors that could cause actual events or results to differ materially from Great Elm’s expectations, please see Great Elm’s filings with the Securities and Exchange Commission (“SEC”), including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Additional information relating to Great Elm’s financial position and results of operations is also contained in Great Elm’s annual and quarterly reports filed with the SEC and available for download at its website www.greatelmgroup.com or at the SEC website www.sec.gov.

Non-GAAP Financial Measures

The SEC has adopted rules to regulate the use in filings with the SEC, and in public disclosures, of financial measures that are not in accordance with US GAAP, such as adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”). Adjusted EBITDA is derived from methodologies other than in accordance with US GAAP. Great Elm believes that Adjusted EBITDA is an important measure for investors to use in evaluating Great Elm’s businesses. In addition, Great Elm’s management reviews Adjusted EBITDA as they evaluate acquisition opportunities.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it either in isolation from, or as a substitute for, analyzing Great Elm’s results as reported under US GAAP. Non-GAAP financial measures reported by Great Elm may not be comparable to similarly titled amounts reported by other companies.

Included in the financial tables below is a reconciliation of Adjusted EBITDA to the most directly comparable US GAAP financial measure, net income from continuing operations.

Endnotes
¹ Pro forma FPAUM incorporates net proceeds from $5.4 million of GECC 8.125% Notes due 2029 issued in October as well as the redemption in October of $45.3 million of GECC 6.75% Notes due January 2025.
² Cash and marketable securities include approximately $40 thousand of restricted cash.
³ Assumes invested at inception on November 1, 2023, and remained invested throughout the succeeding eleven months, net of fees and expenses. Performance results should not be regarded as final until audited financial statements are issued covering the period shown. Past performance is no guarantee of future results. This press release does not constitute an offer to sell or a solicitation of an offer to buy interests in any investment vehicle managed by Great Elm or its affiliates. Any such offer or solicitation will only be made pursuant to the applicable offering documents for such investment vehicle.

Media & Investor Contact:
Investor Relations
geginvestorrelations@greatelmcap.com

Great Elm Group, Inc.
Condensed Consolidated Balance Sheets (unaudited)
Dollar amounts in thousands (except per share data)

Great Elm Group, Inc.
Condensed Consolidated Statements of Operations (unaudited)
Amounts in thousands (except per share data)

Great Elm Group, Inc.
Reconciliation from Net Income from Continuing Operations to Adjusted EBITDA
Dollar amounts in thousands

(1) Adjusted EBITDA for prior periods has been adjusted to include dividend income earned during such periods consistent with the methodology for September 30, 2024.

EAST HANOVER, N.J., Nov. 11, 2024 /PRNewswire/ — FGI Industries Ltd. FGI (“FGI” or the “Company”), a leading global supplier of kitchen and bath products, today announced results for the third quarter 2024.

THIRD QUARTER 2024 HIGHLIGHTS
(As compared to the third quarter of 2023)

• Total revenue of $36.1 million, +20.6% y/y
• Gross profit of $9.3 million, +18.9% y/y
• Gross margin of 25.8%, -40 bps y/y
• Operating loss of ($0.1) million and net loss attributable to shareholders of ($0.6) million
• Adjusted operating income of $0.1 million
• Adjusted net loss attributable to shareholders of ($0.1) million

MANAGEMENT COMMENTARY

Dave Bruce, President and CEO of FGI, stated, “FGI reported total revenue of $36.1 million in the quarter, representing a year-over-year increase of 20.6%. Gross profit was a record $9.3 million, reflecting growth of 18.9% compared to the prior year. The gross margin was 25.8%, a decline of 40 basis points compared to the third quarter of 2023 due, in part, to a higher mix of Sanitaryware and Bath Furniture and higher freight costs in the Bath Furniture and Covered Bridge segments. The industry outlook remains relatively flat overall with our customers forecasting minimal growth in 2024 but FGI’s strategic investments in our brands, products and channels strategy is bearing fruit driving revenue growth well above the overall market. FGI’s third quarter revenue increased significantly compared to the third quarter 2023 due to growth across all our businesses and geographies. Revenue grew 21%, 9% and 39% in the quarter for the US, Canada and Europe markets, respectively. Sanitaryware and Bath Furniture reversed year-over-year declines in the second quarter and grew 3% and 64%, respectively, in the third quarter. Shower Systems revenue increased 45% year-over-year as demand trends remained steady and sales of both existing and new products drove growth. Our Covered Bridge custom cabinet segment continues to show strong growth increasing 93% over the prior year period.” Bruce continued, “We are excited about our new product introductions and continue to invest in our brands and our future growth initiatives in our core businesses.”

Perry Lin, Chief Financial Officer of FGI, commented, “Even as total revenue increased 20.6% year-over-year, operating expenses increased 27.6% year-over-year to $9.4 million. The increase in operating expenses was due primarily to investing for future growth in our kitchen cabinet business, which includes Covered Bridge and Isla Porter, and investing in distribution for our Canada business. FGI ended the third quarter with total available liquidity of $16.3 million. We believe the best use of our capital is for internal investment and this will remain our priority in the near term.”

THIRD QUARTER 2024 RESULTS

Revenue totaled $36.1 million during the third quarter of 2024, an increase of 20.6% compared to the prior-year period due to growth across all our businesses and geographies. 

• Sanitaryware revenue was $21.5 million during the third quarter of 2024, up from $20.7 million in the prior-year period.
   
• Bath Furniture revenue was $4.2 million during the third quarter of 2024, an increase from revenue of $2.5 million in the prior-year period. Our shift to market-aligned program pricing and design outpaced our sales expectations.
   
• Shower Systems revenue was $7.1 million during the third quarter of 2024, up from $4.9 million last year. Demand trends remain positive, further supported by our new customer programs.
   
• Other revenue, primarily from Kitchen Cabinets, was $3.3 million during the third quarter, up from $1.7 million in the prior year, driven by continued strong dealer and customer expansion across the US.

Gross profit was $9.3 million during the third quarter of 2024, an increase of 18.9% compared to last year, driven by growth in our higher margin products. Gross profit margin decreased to 25.8% during the third quarter of 2024, down 40 basis points from the prior-year period. 

Operating loss was ($0.1) million during the third quarter of 2024, down from operating income of $0.5 million in the prior-year period. Operating loss during the third quarter of 2024 included non-recurring expenses of $0.1 million for business expansion expense and accruals for non-recurring IPO- related stock-based compensation. Excluding these items, adjusted operating income was 0.1 million during the third quarter. The decline in operating income and adjusted operating income from the prior year was a result of an increase in personnel costs, marketing and promotion expenses, warehouse expenses, and operating expenses tied to growth initiatives, as the Company continues to invest in its BPC growth strategy. As a result, operating margin and adjusted operating margin were (0.2%) and 0.2% during the third quarter, respectively, down from 1.6% and 2.0% in the same period last year.

The Company reported GAAP net loss attributable to shareholders of ($0.6) million, or ($0.06) per diluted share during the third quarter of 2024, versus net income of $0.4 million, or $0.04 per diluted share, in the same period last year. Net loss for the third quarter of 2024 included after-tax expenses of $0.1 million related to business expansion expense and accruals for non-recurring IPO- related stock-based compensation. Net loss for the third quarter of 2023 included after-tax expense of $0.1 million related to business expansion expense and non-recurring IPO- related compensation. Excluding these items, adjusted net loss attributable to shareholders for the third quarter of 2024 was ($0.1) million, or ($0.01) per diluted share, versus adjusted net income attributable to shareholders of $0.6 million, or $0.06 per diluted share, for the same period last year. 

FINANCIAL RESOURCES AND LIQUIDITY

As of September 30, 2024, the Company had $3.0 million of cash and cash equivalents, total debt of $12.5 million and $13.3 million of availability under its credit facilities net of letters of credit. Total liquidity was $16.3 million at September 30, 2024.

FINANCIAL GUIDANCE

The Company revises its fiscal 2024 guidance as follows:

• Revised total revenue of $127-131 million, up from the previous estimate of $115-128 million.
• Revised total adjusted operating income of ($1.0) to $0.0 million, down from the previous estimate of $2.8 to $3.8 million.
• Revised total adjusted net income of ($1.0) to $0.0 million, compared to the prior estimate of $1.2 to $2.0 million.

Note that Total Adjusted Operating Income excludes certain non-recurring items and Total Adjusted Net Income excludes certain non-recurring extraordinary items and includes an adjustment for minority interest.

THIRD QUARTER CONFERENCE CALL

FGI will conduct a conference call on Tuesday, November 12 at 9:00 am Eastern Time to discuss the quarterly results.

A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of the Company’s corporate website at https://investor.fgi-industries.com.  To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time to register and download and install any necessary audio software.

To participate in the live teleconference:

To listen to a replay of the teleconference, which will be available through November 26, 2024:

ABOUT FGI INDUSTRIES

FGI Industries Ltd. FGI is a leading global supplier of kitchen and bath products. For over 30 years, we have built an industry-wide reputation for product innovation, quality, and excellent customer service. We are currently focused on the following product categories: sanitaryware (primarily toilets, sinks, pedestals, and toilet seats), bath furniture (vanities, mirrors and cabinets), shower systems, customer kitchen cabinetry and other accessory items. These products are sold primarily for repair and remodel activity and, to a lesser extent, new home or commercial construction. We sell our products through numerous partners, including mass retail centers, wholesale and commercial distributors, online retailers and specialty stores.

Non-GAAP Measures

In addition to the measures presented in our consolidated financial statements, we use the following non-GAAP measures to evaluate our business, measure our performance, identify trends affecting our business and assist us in making strategic decisions. Our non-GAAP measures are: Adjusted Operating Income, Adjusted Operating Margins and Adjusted Net Income. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). They are supplemental financial measures of our performance only, and should not be considered substitutes for net income, income from operations or any other measure derived in accordance with GAAP and may not be comparable to similarly titled measures reported by other entities. We define Adjusted Operating Income as GAAP income from operations excluding the impact of certain non-recurring expenses, including non-recurring compensation expenses related to our IPO, unusual litigation and business expansion expense. We define Adjusted Net Income as GAAP net income excluding the tax-effected impact of certain non-recurring expenses and income such as unusual litigation fees and non-recurring compensation expenses related to our IPO. We define Adjusted Operating Margins as adjusted income from operations divided by revenue.

We use these non-GAAP measures, along with U.S. GAAP measures, to evaluate our business, measure our financial performance and profitability and our ability to manage expenses, after adjusting for certain one-time expenses, identify trends affecting our business and assist us in making strategic decisions. We believe these non-GAAP measures, when reviewed in conjunction with U.S. GAAP financial measures, and not in isolation or as substitutes for analysis of our results of operations under U.S. GAAP, are useful to investors as they are widely used measures of performance and the adjustments we make to these non-GAAP measures provide investors further insight into our profitability and additional perspectives in comparing our performance over time on a consistent basis. With respect to the Company’s expectations of its future performance, the Company’s reconciliations of full year 2024 Adjusted Operating Income and 2024 Adjusted Net Income are not available, as the Company is unable to quantify certain amounts to the degree of precision that would be required in the relevant GAAP measures without unreasonable effort.

FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as “anticipate,” “expect,” “could,” “may,” “intend,” “plan”, “see” and “believe,” among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements regarding FGI’s guidance, the Company’s growth strategies, outlook and potential acquisition activity, the macroeconomic instability and its associated impact on the national and global economy and the residential repair and remodel market, the company’s planned product launches and new customer partnerships, the effect of supply chain disruptions and freight costs and estimates of customer de-stock and timing of market recoveries. These forward-looking statements are based on currently available operating, financial, economic and other information, and are subject to a number of risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. A variety of factors, many of which are beyond our control, could cause actual future results or events to differ materially from those projected in the forward-looking statements in this release. For a full description of the risks and uncertainties which could cause actual results to differ from our forward-looking statements, please refer to FGI’s periodic filings with the Securities & Exchange Commission including those described as “Risk Factors” in FGI’s annual report on Form 10-K for the year ended December 31, 2023, and in quarterly reports on Form 10-Q filed thereafter. FGI does not undertake any obligation to update forward-looking statements whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Non-GAAP Measures

The following table reconciles (Loss) Income from Operations to Adjusted Operating (Loss) Income and Adjusted Operating Margins, as well as (Loss) Income Before Income Taxes to Adjusted Net (Loss) Income for the periods presented.

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SOURCE FGI Industries Ltd.