Jerash Holdings (US), Inc. (JRSH) on Q1 2023 Results - Earnings Call Transcript

Operator: Good day, and welcome to Jerash Holdings Fiscal 2023 First Quarter Financial Results. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation. 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, operator. Good morning, everyone, and welcome to Jerash Holdings Fiscal 2023 First Quarter Conference Call. I'm Roger Pondel with PondelWilkinson, Jerash Holdings’ Investor Relations firm. It will be my pleasure to momentarily to introduce the company's Chairman and Chief Executive Officer, Sam Choi; its Chief Financial Officer, Gilbert Lee; and Eric Tang, who leads the company's operations in Jordan. But before I turn the call over to Sam, I want to remind everyone today that the 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 the company's 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. 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, Walter. And hello, everyone. Our fiscal 2023 first quarter again reflected Jerash Holdings reputation as the top quality garment manufacturer in Jordan and a competitive advantage to attract new global brand customers. We are happy to report that the company achieved key record first quarter revenue of $33.4 million. As retailers throughout the world face headwinds, including inflationary pressure and higher inventory levels, we are also feeling the impact. Receiving smaller purchase order quantities and then order mix shift towards products that command generally lower average selling prices, such as shorts, crew neck and pullover shirts. Despite the challenging economic environment, however, we see fiscal 2023 to be a transitional and opportunistic year from a business operation perspective, enabling Jerash to continue its goal of diversifying and expanding customer base. As previously announced, [indiscernible], with structures to our growing roster of high-profile global apparel brands earlier in the quarter. And we have to produce these initial orders of women's polos in our fiscal third quarter. Additionally, test orders for our first European-based high-end apparel brands are progressing well, and we are hopeful that this new customer will enable Jerash to be more visible among other European-based apparel brands. We are taking a conservative approach to our guidance, particularly in comparison with fiscal 2022, which experienced record high demand with the post COVID reopenings. Gilbert will discuss those details momentarily, and we will leave plenty of time for questions. First, I will now turn the call over to Eric Tang, who stays in Jordan; and then Gilbert will cover our financial results. Eric? Eric Tang: Thank you, Sam. Hello, everyone. With the challenging external environment and the generally-anticipated economic downturn by retailers, recent orders placed by our top global brand customers has been smaller, particularly for fleece jacket compared with orders received last year. We continue to proactively communicate with our existing customers to reconfirm their orders and shipment schedules. We believe this trend will continue through fiscal 2023 as retailers sell through the excess inventories and work through economic and inflation recovery, which would impact both all the fulfillment and delivery schedules. Fortunately, Jerash's competitive advantage and ability to attract new customers is keeping us busy. Our manufacturing capacity remains essential fully booked through December 2022. The global trend continues to diversify supply chains away from Asia, especially China, to a more stable and duty free country such as Jordan. As good news, we have received production inquiries from several new premium brand customers. which will allow us to further diversify our customer base. On the new customer front, we will start production for Timberland and Sketchers in the third quarter, although initial orders are for lower margin products and smaller quantities. Besides Timberland, there are 2 other VF brands that we are in the process of bringing onboard. As Sam mentioned, we are optimistic about working with our new customers, and we are confident that, over time, these new global brands will grow in a meaningful way. The new dormitory for our multinational workforce is on schedule to be completed by the end of next month. The high-quality, energy-efficient living space with comfort designs and highly safety measures will help position us for future growth as well as further our ESG goals on improving operation efficiencies to conserve electricity and water usage. We plan to move approximately 1,500 of our multinational workers to this new dormitory at the end of 2022. Lastly, we are in talks with the United Nations and Jordan Government to add an additional 100 to 150 CRM refugees to work at our factories as we continue to focus on our social responsibility efforts, serving as a very UN trusted employer to help refugees settle into the new hosting country. With that, I will turn the call to Gilbert to discuss our financial results and the fiscal 2023 outlook. Gilbert, please. Gilbert Lee: Thank you, Eric. Revenue for our fiscal 2023 first quarter rose 12% to $33.4 million from $29.9 million in the same period last year. Gross margin expanded 100 basis points to 19.8% for the fiscal 2023 first quarter from 18.8% in the same period last year, reflecting lower average cost bases from larger production scale after integration of MK Garments in October 2021 and, to a lesser extent, margin improvements for products sold to local customers. Operating expenses totaled $4.4 million in the fiscal 2023 first quarter versus $3.3 million in the same period last year. The increase was primarily due to higher headcount from the acquisition of MK Garments, an increase of approximately $294,000 in stock-based compensation and expenses related to recruitment of new migraine workers and the associated travel expenses since COVID restrictions have limited our foreign worker recruitment for the past 2 years. In addition, we have established our Middle East and North Africa, the MENA region sorting team and expanded our merchandising and sampling operations in Jordan over the past few months. This strategic move will enable us to diversify our material and supply sourcing to reduce the dependency in Asia as well as to shorten material lead time. Through strengthening our merchandising and sample development in Jordan, we will be able to facilitate quicker response to customer inquiries and open up opportunities to other European-based customers as well as global brand customers with EU market presence. This increase in SG&A expense will pay off considerably in the long run. More near term, we anticipate saving approximately $0.5 million in annual rent expense with the new dormitory geometry starting next calendar year. Operating income totaled $2.2 million in the fiscal 2023 first quarter versus $2.3 million in the same period last year. Income tax expenses for the most recent fiscal first quarter was $560,000 compared with $418,000 in the same period last year, with the increase in part reflecting a higher tax rate in Jordan as well as higher expenses in our China and U.S. entities that cannot be used to offset income in Jordan for tax purposes. Net income for the fiscal 2023 first quarter was $1.7 million or $0.14 per share compared with $1.9 million or $0.17 per share in the same period last year. Jerash's balance sheet and cash position remained strong with cash of $21.5 million, and net working capital of $55.6 million on June 30, 2022. Inventory was $29 million, and accounts receivable amounted to $11 million. Net cash used in operating activities was approximately $473,000 in fiscal 2023 first quarter compared with $11.5 million in the same period last year. The net change reflects working capital activities, primarily due to the decreases in inventory and accounts receivable. As Sam mentioned, we are taking a conservative approach to our 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 ASP. Our fiscal 2023 second quarter revenue outlook is expected to be in the range of $41 million to $43 million compared with $45.7 million last year. We are also expecting margin to be lower to 16% to 18% on average for the full year. While customer order volume in total remains healthy, we anticipate that revenue growth will be moderate for the full fiscal 2023, considering customers are placing smaller purchase orders and the product mix shift. Again, we view fiscal 2023 to be transitional and opportunistic for Jerash as last year, we were unable to accommodate new customer orders when capacity demands from our top global customers were as such exceptionally high level. That said, we are now continuing to focus on growing our customer base to expand our production and improve productivity for the reasonably added new customer orders. We will continue to closely monitor developments over the next few months and plan to provide an update on our next call. Our Board of Directors approved a regular quarterly dividend of $0.05 per share to our common stockholders on August 24 to stockholders of record as of August 27 -- I mean August 17, sorry. Reflecting the Board and management's confidence in the long-term future of Jerash Holdings, on June 13, 2022, the Board authorized a $3 million share repurchase program, which will be in effect through March 31, 2023. To date, approximately 23,557 shares have been repurchased at an average price of $5.76 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: [Operator Instructions] First question is coming from Michael Baker from D.A. Davidson. Operator: And the next question is coming from Mark Argento from Lake Street. Operator: And the next question is coming from Peter Sidoti from Sidoti & Company. Operator: The next question is coming from [Yazan Abdin], a private investor. Operator: And the next question is coming from Michael Wu, who’s also a Private Investor. Operator: Thank you, and that's all the time we have for questions today. I would now like to hand the call back to Sam Choi for closing remarks. Sam Choi : Okay. Thank you, operator. And thanks again to all of you for joining us today. Our prospects remain healthy as we transverse the current environment. We appreciate your support and interest in our company, and we look forward to speaking with you again soon on our fiscal 2023 second quarter call. Thank you very much. Operator: Thank you, ladies and gentlemen. This does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation. Sam Choi : Thank you very much. Gilbert Lee : Thank you.
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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.