Jerash Holdings(US:JRSH)2025-11-12 15:00Financial Data and Key Metrics Changes - Revenue for Q2 2026 increased by 4.3% to $42 million compared to $40.2 million in Q2 2025, driven by higher shipment volumes to U.S. customers [12] - Gross profit was $6.3 million, down from $7.1 million in the same quarter last year, with gross profit margin declining to 15.0% from 17.5% [12] - Operating expenses decreased to $5.2 million from $5.9 million in the same quarter last year, primarily due to better control of export costs [13] - Net income was $479,000 or $0.04 per diluted share, compared to $665,000 or $0.05 per diluted share in the same quarter last year [14] - Cash and restricted cash totaled $13.7 million, with net working capital of $35.2 million as of September 30, 2025 [14] Business Line Data and Key Metrics Changes - The company successfully completed the expansion of manufacturing facilities, increasing production capacity by approximately 15% to support growing demand [6] - The initial phase of a major collaboration order of over three million pairs of girls' shorts was shipped, with the second phase scheduled for completion by the end of November [9] Market Data and Key Metrics Changes - Apparel exports from Jordan to the U.S. remain favorable with a current effective tariff rate of 15%, compared to rates of 20% to over 60% from other sourcing countries [5] - Jordan's free trade agreements with key markets, including the E.U., U.K., and Canada, enhance its attractiveness as a manufacturing hub [5] Company Strategy and Development Direction - The company is focusing on diversifying its customer base and product mix to enhance year-round production stability and reduce seasonality impacts [6] - A long-term expansion plan is being initiated, which includes evaluating potential acquisitions and developing land to meet evolving market demand [6] - The goal is to gradually improve gross margins to approximately 20% through increased production automation and economies of scale [7] Management's Comments on Operating Environment and Future Outlook - Management anticipates a slightly lower average gross margin in the near term due to new customer acquisitions and product mix shifts [7] - The company expects revenue for Q3 2026 to increase by 19% to 21% over the same quarter last year, with gross margin expected to be approximately 13% to 15% [15][16] Other Important Information - The board of directors approved a regular quarterly dividend of $0.05 per share, payable on November 26, 2025 [15] - The company is closely monitoring regional geopolitical uncertainties and evolving tariff regulations as it advances its growth strategy [7] Q&A Session Summary Question: Revenue guidance for the third quarter breakdown - The company does not break down revenue guidance by capacity increase versus demand increase, but overall capacity has increased by about 10% to 15% [18] Question: Path to achieving 20% gross margin - Achieving a 20% gross margin will take a few years, with improvements expected through expansion, increasing volume, and economies of scale [20][21] Question: Context on inventory increase - Inventory is up 30% year-over-year due to taking on a large volume customer and procuring more raw materials for production during traditionally slower seasons [28][29] Question: Expansion plans and customer details - Expansion is driven by increasing orders from both existing and new customers, including major brands like North Face and New Balance [33][35] Question: Shift in customer orders post-tariff changes - Customers are shifting orders from countries like China and India to Jordan due to lower tariff rates, with significant growth in shipping to Europe as well [37][41] Question: Q4 outlook compared to previous years - Q4 is expected to be better than previous years, with capacity fully booked through February and a more stable demand outlook [43]