Jerash Holdings (US), Inc. (JRSH) on Q2 2023 Results - Earnings Call Transcript

Operator: Good morning, ladies and gentlemen, and welcome to the Jerash Holdings Fiscal 2023 Second Quarter Financial Results Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Roger Pondel, Investor Relations for Jerash Holdings. Sir, the floor is yours. Roger Pondel: Thank you very much, Ali and good morning everyone. Good evening, I guess, to some of you. We have a truly global call. Welcome to Jerash Holdings fiscal 2023 second quarter conference call. I am Roger Pondel with PondelWilkinson, Jerash’s Investor Relations firm. It will be my pleasure momentarily to introduce the company’s Chairman and Chief Executive Officer, Sam Choi; and as Chief Financial Officer, Gilbert Lee; and Eric Tang, who leads the company’s operations in Jordan. Before I turn the call over to Sam, I want to remind all listeners that today’s call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous conditions, many of which are beyond the company’s control, including those set forth in the Risk Factors section of Jerash Holdings most recent Form 10-K and Form 10-Q as filed with the Securities and Exchange Commission, copies of which are available on the SEC’s website at www.sec.gov, along with other company filings made with the SEC from time to time. Actual results could differ materially from these forward-looking statements, and Jerash Holdings undertakes no obligation to update any forward-looking statements, except as required by law. And with that, it is my pleasure to turn the call over to Sam Choi. Sam? Sam Choi: Thank you, Roger, and hello, everyone. General market conditions throughout the global retail sector continued to be impacted by inflationary pressure, higher interest rates and inventory levels, and we also are feeling the impact. Orders received during the current fiscal year from our major customers have generally been smaller. And with our product mix shift more to good lower average selling price compared with last fiscal year. Also, from a year-over-year comparative expenses, last year was unusually strong due to pent-up demand following the peak of the epidemic. Revenue for the fiscal 2023 second quarter was lower than originally expected by approximately $4 million due to shipment postponements as retailers sell through their excess inventories. Nevertheless, as I mentioned last quarter, we see fiscal 2023 to be both a transitional and opportunistic year for Jerash. We are making excellent progress with our initiative to expand and diversify our global brand customer base. Production for two of our newest customers, Timberland and Skechers already has begun an initial shipment to both are beginning in the current third quarter. Also, we are continuing to receive inquiries from other major group of brands, and we believe these prospective customers will play an important role for Jerash this year. We also are pursuing opportunities to gain visibility with high-profile customer brands in other segment of apparel manufacturing, which we believe will further diversify our customer base in the years to come. Just yesterday, we saw our memorandum of understanding for a joint venture company with Busana Apparel Group one of the world’s largest garment manufacturers and exporters with 30 manufacturing facilities in Indonesia and Ethiopia. Rosana is well known for its high-quality woven apparel production, specializing in technical garments, active sportswear and formalwear. We also are gaining visibility into the leisurewear and technical clothing segments from Busana customers that are expressing interest to geographically diversify and their production in Jordan, which has longstanding ‘23 export agreements with the U.S., EU and other countries. We will keep you apprised of our progress. I will now turn the call over to Eric Tang, who is based in Jordan and then Gilbert Lee will cover our financial results and discuss details of our approach to guidance for fiscal 2023 third quarter. Hi, Eric. Eric Tang: Thank you, Sam. Hello, everyone. With the challenging external retail environment, orders placed by our top global brand customers have been smaller, and the requested delivery schedules have been later than a year ago. But we continue to actively communicate and maintain excellent relationship with each of our existing customer. We believe current trends will continue through fiscal 2023 as retail and sell through the excess inventories and workflow economic and inflation recovery, which impacts both order fulfillment and delivery schedules. Fortunately, Jerash’s competitive advantage and visibility in the marketplace is enabling the company to continue to receive new production inquiries from premium brands as global brands trends continue to diversify supply chains away from Asia, especially China. On the new customer front, as Sam said, we launched production for Timberland and Skechers in the third quarter. We are pleased to be working with these well-known brands, although initial orders are for products generally lower margins and in relatively small quantities. Our first order from Timberland was shipped in late October. We also are working on test orders for two other VF brands and other additional leading global brand customers outside of the U.S. We are optimistic about diversifying our customer base, which we believe to be a healthy move for Jerash. And we are confident that over time, revenue from new global brands will grow in a meaningful way. Construction of a new dormitory for our multinational workforce is underway, but now delayed for a few months with the start of the rainy season. We plan to move approximately 1,500 of our multinational workers to this new dormitory during the first quarter of 2023. We will be saving approximately $500,000 in annual rental expense beginning next fiscal year. With that, I will turn the call to Gilbert to discuss our financial results and the fiscal 2023 outlook. Gilbert? Gilbert Lee: Thank you, Eric. Revenues for our fiscal 2023 second quarter, was $37.8 million compared with $45.7 million in the same quarter last year. Inflationary pressures along with higher interest rates and inventory levels are affecting retailers, which took a toll on our performance. Revenue also was impacted by approximately $4 million in customer shipment postponements. Gross margin was 18.3% in the fiscal 2020 second quarter compared with 22.1% in the same quarter last year. The decrease primarily was driven by the lower proportion of export orders that typically generate higher margins. Operating expenses totaled $4.3 million in the fiscal year 2023 second quarter compared with $4.5 million in the same quarter last year. SG&A expenses remained elevated at $4.3 million in the fiscal 2023 second quarter compared with $4.2 million in the same quarter last year. It was primarily due to our newly established Middle East and North Africa region sourcing team and expansion of our merchandising and sampling operations this year in Jordan. We have been receiving inquiries and positive feedback from customers for diversifying our material and supply sourcing to reduce the dependency on Asia as well as certain material lead times. This, in turn, will enable us to provide quicker responses to our customers as well as open new opportunities to attract additional global brands. We’re confident that our investments today in SG&A expenses will pay off considerably in the long run. Operating income amounted to $2.6 million in the fiscal ‘23 second quarter versus $5.6 million in the same period last year. Interest expenses were $164,000 in the fiscal ‘23 second quarter compared with 46,000 in the same quarter last year. Net income for the fiscal ‘23 second quarter was $1.8 million or $0.14 per share versus $4.4 million or $0.39 per share in the same period last year. Comprehensive income attributable to Jerash Holdings common shareholders totaled $1.6 million in the fiscal ‘23 second quarter, including a foreign currency translation loss of $216,000 versus comprehensive income attributed to Jerash Holdings common shareholder approximately $4.4 million in the same period last year. Jerash’s balance sheet and cash position remains strong, with cash of $23 million and net working capital of $47.5 million at September 30, 2022. Inventory was $36.4 million, and accounts receivable amounted to $4 million. Net cash provided by operating activities was $9.6 million for the 6 months ended September 30, 2022, compared with $10.2 million for the same period in fiscal 2022. The net change reflects working capital activity attributable to increases in inventory and accounts payable and a decrease in accounts receivable. We are taking a conservative approach to guidance given the inflationary environment that is affecting retail markets and consumer sentiment along with a product mix shift to apparel items with lower margins and lower ASPs. For the fiscal 2023 third quarter, revenue is expected to be in the range of $33 million to $35 million compared with $36.8 million last year. We also are expecting margins to be lower at 16% to 18% on average for the full year. As Sam and Eric pointed out, we view fiscal 2023 to be transitional and opportunistic for Jerash. Since last year, we were unable to accommodate new customer orders when capacity demands from our top global customers were as such exceptionally high levels. We continue to focus on growing our customer base and pursuing other opportunities to enhance our competitive advantage, product capabilities and offerings. We will continue to closely monitor developments over the next few months and plan to provide an update on our next call. On November 4, our Board of Directors approved a regular quarterly dividend of $0.05 per share, payable November 28 to stockholders of record as of November 18, 2022. On June 13, 2022, Jerash’s Board authorized a $3 million share repurchase program. The share repurchase program will be in effect through March 31, 2023. To date, approximately 105,000 shares have been repurchased at an average price of approximately $5.20 per share and we will remain active in the market in the months ahead. With that, we will now open up the call for questions. Operator, may we have the first question, please? Operator: Thank you. [Operator Instructions] Our first question is coming from Michael Baker with D.A. Davidson. Sir, please go ahead. Operator: Thank you. Our next question is coming from Mark Argento with Lake Street. Please go ahead. Operator: Thank you. Our next question is coming from Aaron Grey with Alliance Global Partners. Please go ahead. Operator: Thank you. At this time, there are no more questions in queue. So I will hand it back to Mr. Choi and management team for any closing comments. Sorry. We have one question that’s come in. Sorry, it’s from Rommel Dionisio with Aegis Capital. Sir, please go ahead. Operator: Thank you. I would now like to hand the call back to Mr. Sam Choi for closing comments. Thank you. Sam Choi: Thank you, operator and thanks again to all of you for joining us today. Our prospects remain healthy. As we transverse the current challenging environment, we very much appreciate your support and interest in our company. Please have a safe and healthy holiday season and we look forward to speaking with you again soon. Thank you everyone. Eric Tang: Thank you. Gilbert Lee: Thank you. Operator: Thank you, ladies and gentlemen and this does conclude today’s conference call. You may disconnect your lines at this time and have a wonderful day. And we thank you for your participation.
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Jerash Holdings (JRSH) Earnings Report Highlights

  • Earnings Per Share (EPS) of approximately -$0.00047, surpassing the estimated EPS of -$0.03.
  • Actual revenue of approximately $35.38 million, slightly below the estimated revenue of $35.4 million.
  • Negative price-to-earnings (P/E) ratio of approximately -12.08, indicating current losses but a strong liquidity position with a current ratio of 3.13.

Jerash Holdings (NASDAQ:JRSH) is a company that specializes in manufacturing and exporting custom sportswear and outerwear for major global brands. On February 11, 2025, JRSH reported its earnings before the market opened, revealing an EPS of approximately -$0.00047, which was better than the estimated EPS of -$0.03. However, JRSH's actual revenue was approximately $35.38 million, slightly below the estimated revenue of $35.4 million.

During the Q3 2025 earnings conference call, CEO Sam Choi and CFO Gilbert Lee discussed the financial performance. Despite a nearly 30% increase in revenue for the quarter, the results fell short of expectations due to congestion at Israel's Haifa port, which delayed shipments worth $3.8 million until early in the fiscal fourth quarter.

JRSH's financial metrics reveal some challenges. The company has a negative price-to-earnings (P/E) ratio of approximately -12.08, indicating current losses. Its price-to-sales ratio is 0.33, meaning the stock is valued at 33 cents for every dollar of sales. The enterprise value to sales ratio is 0.24, suggesting a total valuation of 24 cents for every dollar of sales.

The company's financial health is further highlighted by its earnings yield of -8.28%, indicating financial difficulties. However, JRSH has a low debt-to-equity ratio of 0.01, showing minimal reliance on debt. Additionally, the company maintains a strong liquidity position with a current ratio of 3.13, indicating it has more than three times the current assets compared to its current liabilities.

Jerash Holdings (JRSH) Earnings Report Highlights

  • Earnings Per Share (EPS) of approximately -$0.00047, surpassing the estimated EPS of -$0.03.
  • Actual revenue of approximately $35.38 million, slightly below the estimated revenue of $35.4 million.
  • Negative price-to-earnings (P/E) ratio of approximately -12.08, indicating current losses but a strong liquidity position with a current ratio of 3.13.

Jerash Holdings (NASDAQ:JRSH) is a company that specializes in manufacturing and exporting custom sportswear and outerwear for major global brands. On February 11, 2025, JRSH reported its earnings before the market opened, revealing an EPS of approximately -$0.00047, which was better than the estimated EPS of -$0.03. However, JRSH's actual revenue was approximately $35.38 million, slightly below the estimated revenue of $35.4 million.

During the Q3 2025 earnings conference call, CEO Sam Choi and CFO Gilbert Lee discussed the financial performance. Despite a nearly 30% increase in revenue for the quarter, the results fell short of expectations due to congestion at Israel's Haifa port, which delayed shipments worth $3.8 million until early in the fiscal fourth quarter.

JRSH's financial metrics reveal some challenges. The company has a negative price-to-earnings (P/E) ratio of approximately -12.08, indicating current losses. Its price-to-sales ratio is 0.33, meaning the stock is valued at 33 cents for every dollar of sales. The enterprise value to sales ratio is 0.24, suggesting a total valuation of 24 cents for every dollar of sales.

The company's financial health is further highlighted by its earnings yield of -8.28%, indicating financial difficulties. However, JRSH has a low debt-to-equity ratio of 0.01, showing minimal reliance on debt. Additionally, the company maintains a strong liquidity position with a current ratio of 3.13, indicating it has more than three times the current assets compared to its current liabilities.