DENVER, Colo. (247marketnews.com) -- FGI Industries (NASDAQ:FGI) is showing signs of a meaningful financial reset after reporting second-quarter 2026 results that combined modest revenue growth with a much stronger improvement in profitability. Revenue increased 2.9% year over year to $31.9 million, but gross profit jumped 22.5% to $10.7 million, pushing gross margin to 33.4% from 28.1% a year earlier. Operating income swung to $1.4 million from an $0.8 million operating loss, while net income attributable to shareholders reached $1.3 million, or $0.65 per diluted share, compared with a $1.2 million net loss, or $0.64 per share, in the prior-year quarter.
The biggest takeaway may be the margin expansion. FGI's 530-basis-point improvement in gross margin suggests the company is doing more than simply selling slightly more product. Operating expenses declined 2.9% to $9.3 million, primarily because of lower selling and distribution costs and warehouse optimization. Sanitaryware revenue increased to $19.1 million from $18.1 million, while shower systems climbed to $6.0 million from $5.2 million. Those gains helped offset declines in bath furniture, down to $3.5 million from $4.1 million, and other revenue, primarily kitchen cabinets, which fell to $3.2 million from $3.5 million.
Geographically, the numbers reveal both an opportunity and a challenge. U.S. revenue surged 20.3%, helped by recovery from the tariff-affected prior-year period and recently launched programs. At the same time, Canadian revenue declined 24.5% and European revenue fell 21.0%, reflecting softer demand. FGI says it continues to broaden geographic sourcing as tariff uncertainty persists, while its Brands, Products and Channels strategy is driving new products and market expansion. Covered Bridge has expanded its geographic footprint and dealer count, Isla Porter is building relationships within the premium design community, and FGI continues adding dealers in India. The company also says it received IEEPA recoveries during the quarter that partially offset costs not passed through to customers.
That leaves FGI with a potentially interesting setup heading into the second half of the year. Management reaffirmed 2026 guidance calling for revenue of $134 million to $141 million, adjusted operating income of $0.7 million to $2.5 million and adjusted net income ranging from a $0.3 million loss to $1.1 million of profit. Liquidity remains an important consideration: FGI ended June with $4.4 million of cash, $13.0 million of total debt and $3.4 million of availability under its credit facilities, for total liquidity of $7.9 million. The company says it intends to prioritize internal investment in customers, products, manufacturing capabilities and geographic expansion.
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