Q4 2020 Jerash Holdings (US) Inc Earnings Call
Ladies gentlemen, thank you for joining us for this giraffe fiscal year once each one.
As a reminder, all parts of our not only mode. But later you will have the opportunity to ask questions to get it started with opening remarks that introductions I'm pleased to turn the floor to match craps with Darrow Associates Investor Relations welcome Matt.
Thank you Jim Good morning, and welcome to the dress Holdings' fiscal fourth quarter full year 2020 results Conference call with me today is Sam choice, our chairman and Chief Executive Officer, Gilbert Lee, Our Chief Financial Officer.
I can't really their operations in Georgia.
Results press release issued earlier today, and an updated investor slide decks are available on our website www dot your rational these dot com.
Today's call is being recorded and will be available for playback all participants will be in unless the only met should you need assistance. Please see our conference specialist by pressing the star keep followed by zero.
Pretty old provided detailed reminder of the Q in a instructions must manager has completed their prepared remarks.
Before we begin a quick reminder, about forward looking statements made during the course of this call.
Statements made by Giraffes management during the course of this conference call, they're not historical facts are considered to be forward looking statements subject to risks and uncertainties.
Securities Litigation Reform Act 1995 provided the safe Harbor for such forward looking statements. The words believe expect anticipate estimate will guidance outlook indicate suggest forecast target growth.
The goal and other similar statements of expectation identify forward looking statements.
Forward looking statements are subject to risks uncertainties and important factors could cause actual results could differ materially from that is reflected in the forward looking statements.
These risks and uncertainties are detailed.
[music].
With the U.S. Securities Exchange Commission.
Participants on this call are cautioned not to place undue reliance and these forward looking statements reflect management's belief only as of today here out the company undertakes no obligation publicly released the results of any revision to its forward looking statement.
[noise], which maybe matrix like events or circumstances. After the date hereof or to reflect the occurrence of unanticipated events I'll now turn the call over to Sam. Please go ahead.
Hi, Thank you Matt.
Hello, everyone.
I'm pleased to John Oh, you today, well these coal.
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Thank you Sam.
Hi, everyone Yep.
I'm pleased to join all of you today to discuss financial results.
Oh results demonstrate continued progress on outgrowth initiatives.
Though we were impacted by the global Cobot pandemic for the last two weeks of the fourth quarter.
Let's cover some of the details from a financial and business perform in sport feel minutes.
Revenue in the fourth quarter up this call. The 2020, which ended March 31st was $14.4 million.
Actively flat year over year.
We had to do for approximately $1.6 million in shipments scheduled late in the quarter when the country, It's Jordan and announced eight shelter in place order in the March to arrest the spread of Cobot 19.
I'm pleased to say that Jordan has handled it depends when making very well and we opened using a number well developed batches to facilitate a return to business, while continuing to protect workers and citizen.
Josh it's fully reopened.
And using enhanced screening and hygiene matches for their continued protection of our workforce.
Fourth quarter gross margins were expected to reflect the startup cost for al has a workshop.
Very exciting project as Sam mentioned.
But depending also had a significant margin impact due to the loss in productivity and a two week shutdown.
As a result was margin was only 8.7% for the quarter.
Operating expenses have declined.
Q2 million dollars for the quarter as compared with 2.8 million in the previous fourth quarter.
Just one thing in Atlanta, Nos, I've, just seven cents per share.
For the full year.
We were able to achieve most oh financial objectives, even with the Pandemics impact setting the stage for continued focus on operating improvements in the year ahead.
Full year revenue, what they record $93 million leaf practice, but the 1.6 million in fourth quarter orders that shifted into fiscal 2021.
This was an increase of 9.5% year over year.
Well included more than 7% of revenue from new customers.
An increase to utilization up how factory during the fiscal second half, which is walnuts season, Gom introduction and was previously and to use it under utilized.
With the factory expansion efforts in the past year.
We can now produce more than 8 million pieces per year, a 23% increase.
We believe we're actually able to scale volumes about this number without current facilities, but continue to focus on capacity expansion and adding new dormitory facilities for workforce in the near future.
Well, it's not just for the year was 19.3 per cent compared with 22.1% in the prior year.
<unk> leap 110 basis points off the full year decline was due to the pandemic closures in March.
And the remainder due to higher production volumes in the second half at lower margins.
And the startup costs at our new production centers.
We continue to focus on balancing margin, but overall production and profitability.
Operating expenses for the year, where a $10.3 million.
Down 17% year over year.
Operating income for the year was $7.6 million, an increase of 20% from 2019.
GAAP net income for the year was $6.5 million.
57 cents per diluted share.
Compared with 45 cents in 2019.
During the year, we paid out dividends quarterly at an annualized rate up 20 cents per share to come in stock shareholders.
Our balance sheets remained very strong.
Cash and restricted cash on March 31st.
At $26.9 million.
Inventory was 22.6 million, an A.R. was 5.3 million.
We have working capital in excess of $48 million ESOP March 31st.
We continue to expect the business to generate cash flow from operations on an annualized basis.
We also have untapped lines of credit available for up to an aggregate of $26 million.
In fiscal 2020, we have begun to invest in additional expansion for the future.
Including $2.3 million, we invested into the purchase of the Paramount manufacturing assets.
And more recently land properties to further expand production facilities and workers sanatorium as part of our multi year facility expansion pilot.
I wanted to talk about fuel arda aspects of our business as well.
We have seen some volatility around orders as customers seek to adjust to new sales patterns in response to the covance pinned down it.
Initially this caused some orders to push out reduced volumes.
Then we'd quest cancellation.
Since then we have seen the reopening assets unfold.
And consumers adapts to new ways of shopping while so-so distancing or even some areas to be trending more or less normal business at the reopenings have progressed.
As a result, many of those orders have been reinstated.
At this time, we're not yet ready to provide an outlook for 2021.
Until we have greater clarity on orders.
What we remain focused on both masonite thing that revenue and calling controlling costs.
To that and we have taken a number of steps to reduce costs through Oh organization.
We mentioned the addition of new customers over the course of 2020 accounting for 7.2% of revenue and helping further diversify revenue concentration.
This is an ongoing effort in 2021.
Say large strategic suppliers, who those global brands.
Bringing on a new customer tends to be a long closets <unk> rash.
Including sample orders and initial smaller volume orders, then securing larger orders.
However, most of our customers tend to be loyal and find the value of our high quality Oakwood and duties we cost advantageous.
We're also adding products specific to current neat.
During the 10 Downing added we quest off the Jordanian government, we produced some T P supplies.
Since then we have produced and shipped masks to a new U.S. customer.
We are in the process of exploring the opportunity of exporting our manufacturing medical PB east to the U.S. and Europe, and we should have a clear oh look in the coming quarters.
These new categories, a good opportunities what your ass and we continued to build on now capabilities.
In summary.
Your ass produced a solid you have growth in both revenue and profitability bar stock holders in fiscal 2020.
At 57 cents per share in gap, yes.
We believe it's just a valuable and exciting business and the price with opportunities for further growth.
While there will certainly be impacts from the pandemic this year.
Oh, well positioned to balance sheets with no debt.
Provides ample resources to fund continue expansion of our business.
Through both organic and strategic opportunities.
We look forward to the year ahead and thank you for your continued interest injure ash.
We now welcome your questions.
Ladies and gentlemen, joining today on the phones, if you would like to ask a question or any clarification on anything covered in today's meeting simply press star and one on your telephone keypad pressing star and one will place your line into acute and we will take your questions. One at a time once again, ladies and gentleman that is star and wonder if you'd like to ask your question also a friendly reminder, that if you're.
Joining us this morning honest speakerphone. Please return to your handset prior to pressing star and wanting to be certain that your signal does reach our equipment.
Well take our first question for Mark Argento at Lake Street.
Hey, Samit Gilbert.
Wanted to drill down a little bit more on.
When you're talking with your customers you know how are they.
The demand equation.
A lot of retail has been close for quite awhile, I mean do us.
And I'm sitting in other parts of the world as well and getting any indications on what they're thinking as in terms of gotta inventory levels at retail will that impact.
Term order patterns for the rest of this year, but any thoughts.
Yes.
Yes.
Yep.
You bet you want to say, yes.
Sam you want to answer that.
Well.
Mark I can blame that style.
We constantly or.
On a week to week basis, we communicate with customers.
On a continuous basis to because right now the situation, it's really fluid.
Even in the U.S. States I I'm.
Shutting down or after the reopening there that Paul thing and so nobody really knows.
How and when everything is going back to normal but.
Indications from our customers have really I guess is really because of our relationship with the customers our long term.
Performance, our quality and delivery.
Delivery on on time delivery.
And low cost customers have largely reinstated the orders.
From the.
For those orders that they have differ or cans. So at the beginning so we are.
Kind of cautiously.
Optimistic, but obviously, we can't predict.
What is going to happen in 2021 and need to Ken our customers.
So.
Two I guess that really doesn't answer your question, but we will continue to maintain communications with our customers and they update us on a weekly basis. So right now we're looking at.
Some decline.
In 2021, however, we.
We we are doing everything we can and also we have some new customers. So we don't think that a this is going to be a disaster Ah, but however, we thing.
2021 is still going to be a a pretty good year.
If everything.
Yes back to normal.
With a reasonable timeframe.
Maybe I didn't have anything to add.
Right.
Yeah and.
But forthcoming yeah.
On the firm order from all over and the merger.
And also brings on some the circuit protection.
I think.
We try at least at this moment.
At least we can have.
And I mean compared with fiscal two two old intent on top line and of course.
In the coming few months.
Or the <unk> damase situation in U.S. in Europe.
Getting better I think.
Reinstatement no the older.
The more encouraging sand.
Try to meet.
To try to cat I.
I mean the.
Topline.
Life is go to tool.
And also I would like to see I mean, besides the common making in the last few months <unk>. We're also making some mosque.
Recent Oh, we're also making some isolation gone well medical gone.
For the Jordan and also it's real countries.
And we are also seeking the FTC approval.
Oh, I cities and the U.S. and the euro.
If we're successful on that then be bad Cedrik contribution to the top line.
Them. So that's all I citizen gone well yeah.
Thanks, Sam I'll quickly.
Approval to start shipping products.
The PPG products.
Okay. So Eric I know, it's all about talking that's all.
Yeah, Hi, <unk>.
Yeah, Okay. So a actually we already start that at the process of getting where he has certification for our medical product. Okay. So oh, we have upright okay first of all the Jordan FTC approval.
Okay. So.
The Jordan FTC approval, Okay last month, we have already cut the 10 three approval that we tend to ship <unk>, okay to our medical product to all the Gulf countries, which it seems like it's the middle East country. Okay. Secondly, okay. We are in the process.
Applying to see which is a real the requisite for exporting medical part that so all the European countries.
According to the latest report reports from the South in company Independent company, who is doing to see for US It would take another one in the house month before we can get the official <unk>, okay, which allow products to be shipped out to a European country.
And for the U.S.F.D.A., Okay. So I'm actually we just thought that out process, okay to apply for the U.S.A.. Okay. F.D.A. certification. So it will be a quite a I mean long procedure, because U.S. ft. A requirement this and if I look at becomes.
Okay that [noise] and also very strict okay. We have already okay, because often called <unk> 19, okay. The U.S.F.D.A. cannot be able to send representative to come for inspection of our factory.
Jordan is that okay. They are asking Jordan S.P.A., Okay tool, okay with the fact free on behalf of the U.S.P.A. So our they already come to our factory for a couple of times for certain inspection B S. Also I mean.
Second our products to you or to the F.D.A. fall out there that bar chief what testing. So we're still waiting for the risks out off the lab tests.
Then up after all the resell has been a come out okay. We will get a registration for the U.S. ft, and we will have to registration number for <unk> sake.
It's a problem, but it would pick and that the two months before we can get older certified approval, if everything is going smoothly.
Right, well that will that be run medical.
Medical grade.
<unk> <unk> or what types of products, you, where you guys get.
How about the medical products. Okay. We are now producing all prepared to produce okay.
Yeah, Yeah, where they thought that probably the only thing that's such a coat disposable face mosque, okay and that we are also pro dealer thing out of which is the fashionable washable placemark. Okay. Some of them, we're producing for a pick up.
Brad fall out bias and some we have probably the only thing for other customers. Okay [noise].
According to that requirement and also okay. We already started producing in Iowa number five factory in a hostile okay them Broom, Mexico God, Okay, which is also for the sub disposable purpose.
Okay. That's how we are also pending food to develop the couple all which is used by the operation Rome and also to reinforce that broom ethical cloud, which if I start or ice product.
After we get all it is difficult Acacia okay. They saw the products we are producing now.
Oh, that's exciting thanks, guys and good luck.
Thank you very much once again, ladies and gentlemen, and audience that is star in one if you would like to ask in life question over your telephone line and remember to return to your handset to be sure that your signal does reach our equipment.
Next we'll hear from our HK capital and the line of Todd felt.
Hi, guys. Congratulations on a great fiscal year, just had a question on the P. P and masks what are the margins going to be on that business compared to your a government business.
Okay. So.
Eric Okay, I'm, calling from Jordan kept I'd say the cannot answer your questions.
Sure and it could show up.
Thank you for the okay.
Somebody does the profit margin for medical product, Okay. So we have actually.
Differing profit margin for different kinds of medical products, Okay, and it depends on okay.
Country react spotty, okay in the Gulf area in the Middle East country, we already know about the market price of each kind of call. It that the face mask the medical gone to come up Okay, and so we are making it in order to compete booked at low coal I mean factories, okay supply into <unk> to the Gulf area, Okay, I'll probably that much.
And it's about a 10% to 15% okay, okay, but okay, we have chat.
The price the market pricing E U and also in U.S.. Okay. If we can successfully get to see and a ft approval. Okay.
We catch what I'll, probably have to those two USA and also to <unk>. The profit margin is much higher okay that goes to be a supply into the Gulf countries [laughter] profit margin. If it will be for all the products will be between 20% to 45%.
Thank you.
Thank you.
And once again, ladies and gentleman that is star and one if you would like to ask your question or need clarification on anything covered in today's update we'll take just a few moments to give everyone a chance to signal us.
Again, ladies and gentlemen that is star and one.
Next we'll hear from the line of John Morris <unk> Davidson.
Hi, Thanks.
So following up on that last question I'm seeing the margins Eric that you're giving.
Are those a weather was the middle east or the U.S. are those higher than what your current average or not current but as of last year.
Margins are it sounds like they are significantly higher in the U.S.
Yeah, Yeah <unk>, okay. Okay.
Switching gears I just wanted to I think question for Gilbert probably just a clarification.
Given the volatility and I think Sam was saying like at this point just clarify for me that you were thinking 2021 could be when he said, 80% to see mean or you know sales are down 20% from last year from from a last year full year, just a clarification.
On that.
Yes, John.
I mean, right now to be honest, we really cannot.
Cannot have any.
Solid.
Phases to Jack.
What our 2021 top line is going to be I think right. Sam is kind of looking at all the existing customers.
Their orders and re occurring cancellation or reinstatement of the orders that he asked me maybe it would be down 20% from right was appointed.
But that doesn't include any any new customers.
Oh, it any like the P. products that we're at that we're currently working on so I would say the 20% reduction would be kind of like the bar.
The the worst case scenario.
Yeah, Okay Super helpful to give that context.
I mean, it's it's a little bit of kind of its smaller detail here just thinking about the June quarter, but just for modeling purposes, I'm just trying to kind of understand could you know we're we're.
Where are you at all open were factories open I know you had the dormitory.
Labor force in place I'm wondering whether or not the June quarter.
Still register sales you know were worth things open obviously, it would be down significantly.
From the run rate seen in fourth quarter.
Yeah, the June quarter, which is a [laughter] ending already yeah, yeah Aro.
Sales is definitely down yeah, I don't have the numbers, yes, yeah.
I have been shipping actually would have been shipping in the June quarter.
Yeah, all the factories are fully be soon the operations.
I think starting from June one well.
We all the local workers were allowed to to go back to work and <unk>, but a way before then.
At the beginning of May we didn't have already got oh, they dormitory workers or the <unk>.
Workers from.
Well, Jordan was only shut down or to kind of like.
Not having the local people traveling in the now up industrial zone, so, but most of our workers.
In the industrial zone, So we were able to produce.
Even when the when the country was hoping usually shut down.
So okay. Good we work with using in fact, we started producing back at the beginning of May.
A limited number of workers. So June corridor is it's not.
It's not too bad.
But oh okay.
It had an impact.
Right because of this deal and then because yeah.
Yeah, Okay, that's very helpful.
The.
You're talking about the a cost controls given the circumstances.
That you're you're putting into place.
As you look out over the course of the year I'm wondering to what degree you're able to.
Manage that S. DNA can you give me some can you give us some feel for whether SGN $8 year over year would actually be down or flat or up at a slower rate of growth.
On a on a year for 2021 in terms of kind of what you've been able to.
And back.
Well, we has we have cut some headcounts.
Especially in the area up a asked DNA.
So I mean, even though most of our headcount in production and manufacturing, but we did.
I have some that have some laid off and.
[laughter] you know I'm industry just.
Area and.
I think the majority of our people, who Oh, a remaining they did have a temporary reduction in a in their salary.
So I would think a 2021 SGN Nate.
It's not a.
If not a reduction from 2020 it would be at the most flat from 20.
Hi, I'm talking 20.
Okay.
Okay great.
Thank you very much good luck going forward and <unk>.
Thank you. Thank you John.
And gentlemen will allow another few moments for everyone in the audience to have a chance to signal us with star and one if you would like to ask your question.
And again, ladies and gentlemen be sure that Youve returned to your handset if joining today on a speakerphone.
Well take a question from David Schneider. Please go ahead, Sir your line is open.
Thank you here online presentation. It suggests that you're still looking for additional capacity.
So.
Is that correct interpretation.
Yes, David Thank you for the question. We are definitely are actively looking for additional capacity.
Due to the covert 19.
We are kind of.
At the moment.
Putting that on hold or just wanting to see how the the top line is coming back and how the demands from our existing customer as well as new customers are putting on us. So I mean, it obviously doesn't make sense.
To build new capacity when there is no sales.
But where we're currently still actively looking either through a.
Building on our existing facilities on prop then properties that we have purchased.
Yes, well S. A M&A opportunities if there is a good opportunities or some companies that have already existing customers or are they they are in a in a distressed smoke.
Though it will be a good deal for US then we definitely will will consider that.
Okay.
Eric <unk> something cool with your questions. Okay. So I'm actually okay Oh.
Because of the current high teens, okay. Some of the existing factory, which is doing orders for some American Brad though some of them are already the coast. Okay fall.
For a lot to freeze it.
So recently, we have picked up a wasn't a new customer huh, okay. Because it's got them Oh, you know they pays a lot of older to one factory in Jordan, but unfortunately, okay. This factory was close before too much.
So now okay. They are trying to talk to us full capacity to offset to a pro white.
In capacity to them for the rest of the a and also for 2000 and tried to one so after separately the name of the customer is the American Eagle. Okay. I think we also make some announcement on this.
So recently, it's okay, we have already pick up one.
Do you or that the first of all that we would just $10 9500 piece itself a jacket from American Eagle. This is the first Oh, though we beat up from them and they are still talking to US. Okay thing fall further capacity for the rest of the yeah.
A this is I mean, oh, so garage may have some opportunities okay. Even during the current that's life nitin because of the shutdown of the facility in Jordan.
Okay.
So that's a very good going there.
Yeah, Yeah, that's all pointing it's all a very good indication that there's this virus huh.
Subsided a world.
Definitely once where you can produce oh, sorry. The second question is on the geographic distribution end markets for you overwhelmingly United State.
Do you see that are changing over time.
Sam do you want to take that.
Yes, I'm seeing a one.
I mean, a nominal <unk> between the U.S.A. into China.
Relationship.
Okay, that's quite some.
On the basis sexually well manufacture a stabilized the shape their older.
China Gordon.
And some of that even talk to us they will likely lump sum <unk> capacity.
All the the U.S.A. <unk> using China stabilizes.
From China to Jordan for day spots, the USAID and also to Europe as well.
So we are discussing with them about that yeah. So in the coming through month.
Well I mean, yeah, we will be shipped some.
I see.
Oil does as well yeah.
Yes.
Okay. That's all thank you.
Thank you. Thank you there.
And ladies and gentlemen, another opportunity to press star and one if you would like to ask your life question over your telephone line to our leadership team.
Well take just a few seconds to give everyone a chance to signal with star in one.
<unk>.
And it appears we have no signals from our group I'll turn it back to Mr., Matt craps for any additional or closing remarks.
Thank you Jim and thank you everyone participating on today's call well 2020 produced a strong revenue and profit growth dress remains focused on opportunities ahead in fiscal 2021.
The rest will be conducting multiple outreach copper conference events in the coming months, including the so Sidoti virtual Investor Conference Tomorrow. If you have additional questions or like to arrange a meeting at an upcoming events, including our events Tomorrow. Please contact me using the contact information on the bottom of our press release.
Thank you for your participation and have a great rest of your day.
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