Jerash Holdings (US), Inc. (JRSH) on Q3 2022 Results - Earnings Call Transcript

Company Representatives: Sam Choi - Chairman, Chief Executive Officer Gilbert Lee - Chief Financial Officer Eric Tang - Head of Operations, Jordan Roger Pondel - Investor Relations, PondelWilkinson Operator: Good morning ladies and gentlemen and welcome to the Jerash Holdings' Fiscal 2022 Third Quarter Financial Results. At this time all participants have been placed on a listen-only mode. It is now my pleasure to turn the floor over to your host, Roger Pondel. Sir, the floor is yours. Roger Pondel: Thank you, operator. Good morning, everyone, and welcome to Jerash Holdings, fiscal 2022 third quarter conference call. I'm Roger Pondel with PondelWilkinson, Jerash Holdings' Investor Relations Firm. It will be my pleasure momentarily to introduce the company's Chairman and Chief Executive Officer, Sam Choi, along with its 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 today that this 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 factor 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 and Jerash Holdings undertakes no obligation to update any forward-looking statements, except as required by law. And with that, I will turn the call over to Sam Choi. Sam. Sam Choi: Alright, thank you Roger and hello everyone! Our fiscal 2022 third quarter results again demonstrate excellent progress. Revenue was at a record high for any third quarter in our history, reflecting robust shipments to our largest customers as a result of strong demand and our expanded manufacturing capacities. Gross profit also significantly improved for the third quarter, primarily because of our higher revenue and gross profit margin performance. Our gross margin expanded to 19%, reflecting increased shipment volumes along with increased orders from higher margin branded products. I'm happy to report that the strong momentum is continuing into our fourth fiscal quarter and well into fiscal 2023. Orders received year-to-date indicate that we believe we will lead to a revenue run rate for fiscal 2022 that exceed our prior record. As a result, we have increased our revenue outlook for the fourth quarter and we already are looking to work a record setting fiscal 2023, which was past April. During the past quarter we completed the acquisition of operator of a 71,000 square foot manufacturing facility in Amman of Jordan. Our agreement to acquire the related physical premises is expected to close prior to this fiscal year end. Eric, will provide more details in a moment. Our business outlook remakes strong, accordingly to accommodate for expected growth ahead we are continuing to explore plans to further increase capacity, both in our existing facilities, as well as looking into other means of adding capacity possibly, building new facilities and/or through leasing and acquisition. I'll now turn the call over to Eric Tang, who is based in Jordan, and then Gilbert Lee will cover our financial results. Hi Eric! Eric Tang: Thank you, Sam, and hello everyone. Our factories in Jordan remain extremely busy. Order volumes were up substantially in the fiscal third quarter from our top global brand customers. These are orders with higher average selling prices and margins than we experienced in the year ago period. And there's more good news to come with capacity completely booked through the end of July 2022. As Sam mentioned, we recently completed the acquisition of a new manufacturing facility in Jordan. We took over operations of the facility in August, including approximately 500 employees and the dormitory. The integration has gone extremely smoothly. Production from this new liaised facility continues to progress well, and the facility is now fully transitioned to manufacturing products for our customers. It is expected to enable Jerash to produce approximately 2.5 million to 3.5 million additional garments per year, adding approximately 20% to the annual capacity. We continue to train our employees and enhanced efficiency from this facility, to further expand our capacity for new customer orders and new production categories. Construction of a new dormitory for our multi-national workforce also is progressing very well, and is expected to be completed by the third quarter of the calendar year 2022. The high quality living space with comfort designs and the highest safety measures will help position us for growth and further our ESG goals. Among the other key benefits Jerash provides to its employees in Jordan, are the free healthcare and transportation. During the height of the pandemic in 2020 we established a government approved hospital clinic in Amman with full time doctors and nurses to care for our sick workers when hospitals in Jordan were at that time fully on full capacity. In July 2021, we worked closely with Jordan Ministry of Health to complete COVID-19 inoculations for all employees. Just last week we started working again with the Jordan Ministry of Health to offer booster shots to our workers, a first in the apparel industry here in Jordan. With that, I will turn the call to Gilbert to discuss our financial results and the fiscal 2022 and 2023 outlook. Gilbert please. Gilbert Lee : Thank you, Eric. Revenue for our fiscal 2022 third quarter rose substantially to $37 million from $21 million in the same period last year, an increase of 78% and the third quarter record. The increase was primarily due to higher shipments to our largest customers and stronger demand, as well as increased capacity. Gross margin expanded 710 basis points to 18.8% in the fiscal 2022 third quarter, compared with 11.7% in the same quarter last year. Gross margin expansion in the quarter reflected higher proportion of export sales to our global brand customers in the U.S., which typically carry higher profit margins, as well as increased production and sales volumes. Operating expenses totaled $4.6 million in this fiscal 2022 third quarter, compared with $2.4 million in the same period last year. The increase was primarily due to increased head count, after completing the acquisition of MK Garments. An increase in stock based compensation and recruitment for new migrant workers, as well as higher shipping costs that were in proportion with the increased sales volumes. Operating income for our most recent third quarter rose to $2.3 million from $48,000 in the same period last year. Net income increased to $1.7 million or $0.13 per diluted share in the third quarter, from $94,000 or $0.01 per diluted share a year ago. Jerash’s balance sheet and cash position remains strong, with cash of $34 million and net working capital of $58 million at December 31, 2021. Inventory was $21 million and accounts receivable was $8 million. As you know early in the quarter, we completed a public offering of common stock with net proceeds of $6.3 million which we expect to use for working capital and expansion plans. Net cash provided by operating activities was $4 million in the fiscal 2022 third quarter compared with $2 million in the same period last year. The change was primarily due to higher profit and working capital capacity. We expect the business to continue to generate cash from operating activities, and we have good access to supply chain financing programs with our major customers, and an untapped $3 million line of credit. In terms of our fiscal 2022 fourth quarter outlook, we are increasing revenue guidance to be in the range of $29 million to $31 million as strong demand continues and our capacity further expands. Based on current order flow and orders already received, we also anticipate that fiscal 2023 revenue will reach a new record. Recent orders continue to reflect better product mix from our top global brand customers, which are expected to support gross margins in the high teens for the fiscal 2022 fourth quarter. I would also like to remind you that operating expenses are expected to be higher in fiscal 2023, reflecting our growth in certain impacts on the pandemic recovery. We also anticipate stock based compensation to be at a higher level for the rest of fiscal 2022 and into fiscal 2023 compared to fiscal 2021. As mentioned last quarter, while customer orders remain strong, potential risks from supply chain issues that some of our customers are facing still linger and could affect the timing of shipments in the near term. We're taking a cautious and conservative approach and will continue to closely monitor developments over the next few months. We expect to provide an update on our next call. In addition our Board of Directors approved a regular quarterly dividend of $0.05 per share to our common stockholders on February 22, 2022 to stockholders of record as of February 5, 2022. With that, we'll now open up the call for questions. Operator, may we have the first question please. Operator: Certainly. [Operator Instructions]. Your first question is coming from Mike Baker from D.A. Davidson. Your line is live. Operator: Thank you. Your next question is coming from Mark Argento from Lake Street Capital. Your line is live. A - Sam Choi: Well, thank you Mark. I think you have seen or we have seen in the past few years that more and more global brand customers have been shifting their production, have been shipping their sourcing away from Asia, particularly China, and we are getting a lot of the enquires from new customers and pressure for increasing capacity for existing customers in the past few years. Now of course the pandemic hit in 2020 and kind of got everybody spooked, but as soon as the pandemic kind of released a little bit and all the orders came back and now this year is just a really robust year, and that was also fueled by the logistic issues, the supply chain issues and the lead time coming out from Asia, out from China and some of the southeast Asian countries are also getting hit by the pandemic, causing the factories to be shut down and not able to deliver on time to some of these global customers, so. And I also heard that a lot of the even smaller customers, they are trying to balance and they are trying to migrate some of the production out of China. So this is underlying trend that everybody is getting afraid of putting all their eggs in China and moving their production, as these balancing or diversifying their sourcing and – yeah, so we'll continue to see this and that's why we're increasing our capacity, hoping to take advantage of this trend. A - Sam Choi: Well, we're fortunate this year that the higher margin product mix and the exports to U.S. FOB orders are significantly higher or have increased this year, so allowing us to have a pretty good margin and good product performance. But as capacity increases and as we absorb the new customers, usually we will have to take a hit on the margin. Orders will be smaller at the beginning, we have to spend a lot of time and effort in developing samples and the efficiency will be hurt a little bit. But after we take on those new customers, everything will get back to a more normal level. Of course as capacity is limited, we have the luxury to choose what products or what customers we want produce for first and we will try to manage that and keep a very reasonable margin for customers or new customers who are demanding lower margins. Obviously we will tend to not do business with them or do smaller portions of business with them, and… So, but as our sales volume increase, I would imagine that we will have to take on some of the lower margin business as well. A - Sam Choi: Thank you. Operator: Thank you. Your next question is coming from Rommel Dionisio from Aegis Capital. Your line is live. A - Sam Choi: Yes, we definitely see pressure on the fabric side and I also like to let you know that we have already started sourcing fabrics in the Middle Eastern region. The lead time which is the most critical factor for sourcing fabrics, especially for our global brand customers, the long lead time for getting fabrics from Asia, particularly all along we have been sourcing fabrics from China, Taiwan, Korea, Vietnam and because of the pandemic, the lead time has been extended from those countries, and some of those countries actually have shut down for a period of time. So it added pressure to us, number one on the lead time and also on the costs, because the shipping cost has increased tremendously. I'm sure you heard, coming out of Asia, especially to North America, but even shipping from Asia to Jordan to the Middle East, the cost has increased quite a bit. Now, of course we are able to pass on the increased fabric cost and the transportation cost to our customers, because they understand it. Sometimes they even have to air ship some of the fabric or some of the supplies to us just to meet the deadline. So last quarter we began sourcing some of the fabrics and materials from the Middle Eastern region. We went to Turkey and to Egypt and we have some success. Right now we're working on a project with Timberland, where the fabric is sourced from Turkey. Now the price of those fabrics are not going to be as low as from China. But the advantage is the lead time is much more – it's much shortened from shipping from Turkey to Jordan, comparing to when shipping from China, as well as the shipping costs would be lower. So overall I think the raw material costs will be slightly higher, but the advantage is that we can get the products, we can get the materials much faster. Operator: Thank you. Your next question is coming from Barry Posternak. Your line is live. A - Sam Choi: COVID impact on our employees and our… A - Sam Choi: Yeah, we were also the first one that got all our employees fully vaccinated with two shots back in I think July and August. A - Sam Choi: For winter season orders, whether they are placing orders early for this coming winter season? Eric… [Cross Talk] A - Eric Tang: Actually when we started in October okay, so we hardly to make the factory breakeven, because it is a new start in October and November. But after November okay, we are already in the profitable situation because all our workers are already very accustomed and familiar with the styles we are producing in other factories. Operator: Thank you. Your next question is coming from Mike Baker from D.A. Davidson. Your line is live. Operator: Thank you. Your next question is coming from Joe [inaudible]. Your line is live. Operator: Thank you. Your next question is coming from Mike Disler [Ph]. Operator: Thank you. There are no further questions in the queue. I will now hand the conference back to Mr. Sam Choi, CEO for closing remarks. Please go ahead. Sam Choi: Thank you, operator. And thanks again to all of you for joining us today. We appreciate your support and interest in our company and look forward to speaking with you again on our fiscal 2022 fourth quarter call. Thank you everyone. Gilbert Lee: Thanks. Thank you. Operator: Thank you, ladies and gentlemen. This conclude today's event. You may disconnect at this time and have a wonderful day! 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.