Jerash Holdings(JRSH) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for the fiscal 2026 third quarter grew 18% to $41.8 million from $35.4 million in the same quarter last year, driven by higher shipment volumes to major export markets, including the U.S. and a new customer in Korea [9][10] - Gross profit increased 31% to $7 million for the fiscal 2026 third quarter from $5.4 million in the same quarter last year, with gross profit margin improving to 16.9% from 15.2% [10] - Operating income nearly tripled to $1.9 million in the fiscal 2026 third quarter from $708,000 in the same quarter last year [10] - Net income rose to $1.2 million or $0.09 per diluted share for the fiscal 2026 third quarter from $6,000 or $0.00 per diluted share for the same quarter last year [10] Business Line Data and Key Metrics Changes - The company is expanding its manufacturing capacity by acquiring a 184,000 sq ft manufacturing building in Amman, Jordan, with an investment of approximately $5 million for renovations and equipment [4][5] - The new facility is expected to increase manufacturing capacity by at least 40% and employ up to approximately 2,500 workers [7][9] - The company is also developing additional facilities in two rural towns, expected to add an additional 5%-10% to total production capacity [8] Market Data and Key Metrics Changes - Buyers from major customers have submitted increased order projections for calendar year 2026, with facilities fully booked through July [8] - The company is recognized as one of the world's preferred manufacturing hubs, particularly in response to shifts in tariff policy [6][7] Company Strategy and Development Direction - The company aims to diversify its customer base and product mix to support stable year-round production and reduce seasonality impacts [5][9] - Long-term strategy includes more than doubling current production capacities in the next five years while focusing on operational efficiency and cost control [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future prospects, expecting revenue for the fiscal 2026 fourth quarter to increase by 23%-26% over the same quarter last year [13] - The company is closely monitoring the political situation in the region and has contingency plans in place to ensure stability in operations [41][43] Other Important Information - The effective tax rate for the quarter was lower at 24%, attributed to higher income and adjustments for global operations [58][59] - The company plans to utilize cash more extensively for growth and working capital needs, while also considering debt financing for expansion [45] Q&A Session Summary Question: How will the expansions impact the income statement and balance sheet? - The $5 million needed for renovations will be financed by the Housing Bank, showing up as long-term debt on the balance sheet [15][16] Question: Can you provide details on the new facilities? - The new satellite factories will help create job opportunities in rural areas and are expected to improve overall efficiency [21][22] Question: How quickly will the new capacity ramp up? - Renovations are anticipated to be completed by the end of 2026, with a gradual ramp-up of operations [29] Question: What are the expectations for gross margins going forward? - Margins may decrease as the company returns to more complex styles, but efficiency improvements are expected to help maintain margins [30][31] Question: What is the contingency plan regarding political instability? - The company is monitoring the political situation closely and has been assured that Jordan will remain stable [41][42] Question: What are the plans for cash on the balance sheet? - The company plans to utilize cash for growth and working capital, while also considering debt financing for expansion [45] Question: How is the relationship with major customers like VF Corp? - There is pricing pressure from customers due to tariffs, but the company maintains strong relationships by providing high-quality manufacturing [47][48]