Q4 2021 Jerash Holdings (US) Inc Earnings Call
[music].
Greetings and welcome to the rash holdings fiscal 2020, 1 fourth quarter and full year results call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad. Please.
Please note and this conference is being recorded.
At this time on that I'll turn the conference over to Roger Pinedale and find out Washington Mr.
Mr find out and you may now begin.
And thanks, very much operator, and good morning, everyone and welcome to Drash Holdings fiscal 'twenty 'twenty, 1 fourth quarter and full year conference call I'm, Roger Pond L with PON, Joe Wilkinson Weird Rash holdings, New Investor Relations firm.
We are very happy to be aboard and look forward to meeting with you and.
And and speaking with you over the coming months.
It will be my pleasure momentarily to introduce the company's chairman and Chief Executive Officer, Sam Troy.
Its chief Financial Officer of Gilbert Lee and Eric Chang, who leads the company's operations and Jordan.
Before I turn the call over to Sam I want.
And to remind you that today's 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 and the risks.
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 any forward looking statements and your Ash 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 CEO Sam choice Sam.
Thank you Roger and Hello to everyone.
Our fiscal 2 O..2 1 for Wassa was solved demonstrated excellent progress and that will be comfortably on the COVID-19 pandemic.
As we look for in our third quarter earnings call.
But to see at.
And at least a 30% increase in fourth quarter Russell deal.
And so on all those connected and appeal.
And you can see in today's press release, we exceeded this goal.
And so forth, what sort of rough and Nielsen queries and theory, 65% year over year.
Our mix of products improved substantially as well.
Leading to gross margin and the high teens and the fourth quarter.
As a result of our strong fourth quarter performance, we achieved a full recovery from last year's second half with full year revenue of 19 million excuse me now at 2.5 million pocket for the year.
Moreover, our robust momentum is continuing thus far into fiscal 2122.
Orders for the first 9 months of the year, leading to a rough on day, 1 rates in that period.
Our prior record.
This will keep us on track to achieve guidance. So 100 median and 102 million in revenue in fiscal 2 O 2.2.
We continue to advance plans to increase capacity and all.
Facilities and secure additional capacity to meet our customers' needs both by building new facilities, and possibly some new leases and acquisitions.
And we'll keep you apprised of that progress.
As previously announced we also anticipate starting construction later this year.
Additional facility on a parcel that we purchased in 2 O 1.9.
I'll now turn the call over to Eric Chen, who use space and Jordan and.
And then to give but D. Who's based in New York, We will cover our financial and stuffs.
Right.
Okay.
Thank you for them and Hello, everyone.
I'm, leading the operation and Jordan.
Our factories and Jordan are extremely busy.
And we continue to add capacity as quickly as we can in order to meet the demand of our bias.
As Sam noted order volumes are up substantially and customers have returned to a more typical ordering patents.
Our revenue has continued to be more evenly distributed throughout the year, which as we have mentioned before it was spun off our long term goals.
As anticipated our product mix improved in the fourth quarter.
Moving to orders with higher average selling prices and margin and stand and be so earlier in the fiscal year.
As we told you last quarter some shipments for a major brand customers were shifted into the fourth quarter.
Which lifted both revenue and gross margin in the period compared with last year.
And as Sam noted earlier this possible momentum is continuing into fiscal 2022.
Capacity is come Treaty book through the end of January based on orders for a mile for largest global brand customers alone.
Bookings remain heavily weighted towards jackets, and other outerwear products that have a highest E. S. P a margin.
Well, we continue to plan for adding field true capacity to keep up with demand.
Also recently announced the construction of a high quality living space for all expanding multinational workforce as well as trends to start construction later this year on our fifth manufacturing plant with additional housing capacity.
We plan to construct a start of the art ecologically friendly building with the highest safety and comfort decides that they will have positioned us for growth and for the hour, yes Chico's.
With that I will turn the call to Gil, but Lee to discuss our financial results and fiscal 2022 outlook Goodbye.
Thank you, Eric and good morning, everyone.
Our fiscal 2021 fourth quarter revenue rose substantially to $24 million from 14 million and the same period last year.
Which is an increase of nearly 65 per cent.
As Sam noted revenue exceeded the guidance we previously provided.
And what's driven by higher shipments in the quarter.
As well as a shift and the timing of certain shipments from the third quarter into the fourth that was related to the COVID-19 pandemic.
And as you may recall, our revenue in the fourth quarter of last year was negatively impacted by the pandemic due to a full national shut down in March 2020.
Okay.
Gross margin exceeded our guidance as well coming in at 19, 6% and our fiscal 2020, 1 and fourth quarter compared with 8.7% and the same period last year.
Gross margin enhancement and the quarter with flex and then food makes our products with higher sales of jackets and outerwear products.
And that's the margin and last year's fourth quarter also was negatively impacted by the pandemic.
And.
Operating expenses totaled $3.5 million and the physical and through 2020, 1 fourth quarter compared with $2 million and the same period last year.
The increase primarily reflected head count additions.
Catch up and repair and maintenance work on our facilities and dormitory to support growth and the new fiscal year.
Hi on logistics costs that stemmed from the pandemic and a 1 time and company wide bonus base.
Basically getting the company ready for returning to a more normalized operations.
Operating income was $1.2 million and the physical 2021 fourth quarter compared with an operating loss of $735000 and the same period last year.
Comprehensive income attributable to jazz common stockholders was 656000 or 6 cents per share in the fourth quarter and compare it with a net loss of 740000 or 7 cents per share and the same period last year.
For the full 2020, 1 fiscal year revenue totaled $90 million, which exceeded our outlook.
Gross margin in fiscal 'twenty 'twenty, 1 was down 160 basis points to 17, 7%.
Gain primarily due to pandemic effects.
Fiscal 2020.1 include a higher proportion of local orders that typically carry lower margins.
And we also experienced a loss and productivity because up to April 2020 national shutdown in Jordan.
Operating expenses were $11 million and in fiscal 2020.1.
Slightly higher year over year.
Operating income for the year was $5 million compared with 8 million in fiscal 2020.
Comprehensive income attributable to jazz come and stockholders was $4 million or <unk> 37 cents per share in fiscal 2020.1.
Compared with $6 million or <unk>, 57 cents per share and fiscal 2020.
During fiscal 2020, 1 we paid dividends of 20 cents per share to all come and stockholders.
Our balance sheet remains strong with cash and restricted cash of $23 million and.
And net working capital of 15 million and at the <unk> at March 31.2021.
Inventory was $25 million and accounts receivable was $12 million.
Receivable collections remain excellent and consistent with no customer issues.
Net cash used in operating activities was $1 million and physical and 2021 compared with net cash provided by operating activities of $7 million and the same period last year.
The net change reflects working capital activity.
We continue to expect the business to generate cash from operating activities on an annualized basis.
We also have untapped lines of credit available for up to an aggregate amount of $26 million.
In terms of our fiscal 2020.2 outlook.
We expect revenue to be in the range of $100 million to $102 million for the year.
Demand continues to indicate that we could produce revenue at or near record levels and the first 3 quarters of the year.
With all this heavily weighted toward high margin jackets and outerwear products.
We expect this pattern to support gross margins and the high teens for the full fiscal year.
Our fiscal 2021 fourth quarter results reps.
Represent a strong finish to a challenging year.
Customer ordering patterns are returning to a more typical level.
And they hire a S T and margin profile.
And our facilities are fully booked through January of 2020.2.
And we continue to work on adding more capacity.
This robust momentum is leading to what we believe will be a record year for the company.
We look forward to keeping you apprised of our progress as the year unfolds.
And with that we will now open up the call for questions.
Thank you and at this time, we'll be conducting a question and answer session.
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Yes.
Thank you.
First question is coming from the line of Mark Argento with Lake Street capital.
Please proceed with your question.
Hey, guys. Congrats on a strong a strong and of the year or under your fiscal year and nice bounce back here and post pandemic.
A couple of questions.
On the guidance for 2020 to be under 100 to 102 million and revenue is that basically running the facilities at full capacity or is.
Was that 90% capacity, maybe just talk about you know the upside potential for that number relative to capacity utilization.
Well, we are fully booked through the first 3 quarters after a year and.
And.
And it's almost at 100 per se and capacity and we're adding additional capacity as we speak by adding additional production lines and all.
Existing facilities, however that would only give us.
Just a certain amount of additional capacity, but at the same time, we are looking and.
Considering.
Additional space.
Spaces additional facilities to add capacity. So this projection on this guidance really is looking at and <unk>.
Pretty much at all and limit and that's we have additional.
Acquisitions on leasing additional space and Jordan.
Yeah.
Right and.
And the additional capacity that you're talking about bringing on line and bad what when could you see a material increase and capacity is that.
And in early 2020.3 fiscal 'twenty, 3 and a year from now or how long does it take to spin up additional capacity.
Well were building a new facility.
And that construction will start towards the end of this year right now, we're finalizing the engineering designs and and the architectures.
On that particular building.
And so with that particular project will not provide.
Bye.
New capacity until maybe a year and half on 2 year or 2 years.
After after we start.
So we're actively looking for existing facilities that we can either lease or purchase and Jordan. So that we can immediately get additional capacity to satisfy the growing demand.
Right and and.
In terms of additional capacity have you brought on additional capacity over the last couple of years or is that.
And that stayed fairly static.
Yes in AR and the latter part of 'twenty and 19, I'm talking about the calendar year.
And we purchase our force factory and Jordan, which is the the Paramount factory.
So that had some substantial increase and capacity for us.
That's how we brought our capacity and now up to 12 million pieces.
And we also added a.
On a satellite workshop.
And are in the different city, and Jordan, which is about 1 and half hour sell for them on and that facility and we now have 3 and to workers and their.
And we are making.
We're making more products in that facility and there that's peso. They also have some more room to grow.
Got it and then just churning and maybe for Gilbert over working out some expenses.
You talked to gross margin kind of high teens on the.
Opex side or operating expenses mhm.
Mentioned in the quarter Opex was a little bit higher because you know doing some resets and bonuses and getting.
Ready for kind of growth in 2020.2.
Do you anticipate that normalizes to levels that look more like you know kind of run rate you know 2019 levels on a quarterly basis, maybe walk us through what you're thinking on the operating expense side of the ledger.
Ledger.
Well on the SG&A.
Where we're actually anticipating it.
And it's slightly higher SG&A, because we have already added some head counts so.
And so some of the G&A cost will be higher.
To handle the growing demand.
Taking care of their sales and marketing.
And also looking at higher shipments on a high volume of.
Shipments.
Uh huh.
And the selling cost selling expense and include the logistics costs that.
That we have to send the products and the finished products to the ports now the overseas shipments will both of them will be handled by our customers. So that's not part of our expenses, but we do have to ship the products to depart from our factory. So we.
And we put in some additional costs and net.
And what I'm looking at.
On the SG&A.
We'll be around.
Let's see.
Yeah.
SG&A, we're looking at around.
Yeah.
$12 million to $13 million for this upcoming fiscal year.
Yeah.
Got it and then for for the on and operating income basis.
And there's a page and I was just going to be I think you guys did roughly $6 million and operating income excuse me, 6% operating income margins in 2020.1.
And that was down from roughly 8% in 2020 do you get a bounce back in 2022 on and operating income level.
Or is it still kind of a little bit of a reinvestment and you're a bounce back here or what are your thoughts on that bottom line number.
Well margin is going to be better.
Because oh hi.
Hi, a portion a higher proportion of the off the jacket and.
Outerwear.
So margin and we will see an improvement on probably about 1 percentage point comparing.
Comparing to 2021.
And SG&A, even though that.
Has some increase.
But I think the on.
Operating income level, what would improve.
Got it.
And last 1 for me, Yeah, Sam and as you're thinking about allocating capital obviously your balance sheet supports and being able to get more aggressive on the growth side, probably played a little conservative with the pandemic how aggressive do you guys.
Do you guys want to be here in terms of growing the business given that it seems like for the most part you guys have been fully booked for quite a while now and.
I've been lacking capacity, what you know what can you do to remedy that is there.
Willingness to get more aggressive on the M&A side, obviously, and you're you're constructing additional facilities as well, but just any thoughts there would be really helpful. Thanks.
Okay.
Yes in for.
I mean, besides beauty are all factually I think the fastest way, we don't consider us to acquire some small factory.
Emitting and.
<unk> capacity to meet the customer demand. So that is 1 of the way yeah. We will we will we will seriously consider yeah mhm.
Thank you.
Yep.
Thank you Mike.
Our next question comes from the line of Rommel and I feel I'm.
I'm sorry. Please go ahead.
Our next question is from Rommel Dionisio with aegis capital.
Oh, yes. Good morning, Thanks for taking my question.
I Wonder if I could just walk through the impacts of and <unk>.
Pandemic on labor and.
Are you restricted from bringing workers from other countries, Bangladesh and others into Jordan because of the pandemic and as a result are you are you hiring more domestic labor or is that not really as much of an issue.
And maybe.
And so okay. So let me answer this question, Okay, because I'm taking care of for the operations. So all along and we are bringing migrant workers from India, Bangladesh. These kinds of countries to draw that okay. So this is a major part of our work force okay.
And at the beginning of the pet that May put the situation in India and Bangladesh is still under control. It. We are still open are 2.
And 2 over for bringing our workers from Bangladesh, and India to come and okay to Jordan to work.
But this year okay. Starting this year I think it is April something like this okay. The situation in India, and but I can get that she's getting worst okay, and then nearly all of the countries and the web.
L band day coming off.
Workers or people from that country, So and Jordan, Okay. The Ministry of Labor also bad and they are coming off work you walk away from these 2 countries okay.
And <unk>.
Absolutely we have for apply for and they'll walk us okay coming to work for us from these 2 countries.
In order to meet Oh.
Our expansion requirements, Okay and in order to solve the problem. Okay. We are already hiring more local workers and.
And also particularly where we are looking forward to hiring more experienced a theory and I've read for cheese operators to replace those workers from Bangladesh, and India, who cannot be able to come to work and Jordan.
Okay. The situation now in India, and Brexit has I think is improving and starting last week okay.
Lisa for them for banks attach and coming to Jordan is open already reopened and I can say, okay. So starting a few days ago, we have new workers from Bangladesh coming to work in a factory again, we are still looking for what's the situation in India going are improving and hopefully.
Okay, maybe in July Jordan and will be opened for Indian people to come again to work okay.
Okay. That's very helpful and maybe a follow up to that I know in terms of your capacity expansion plans, you're also thinking about in the past and extending maybe and China and I. Just wanted to say same question and he knows there's we do hear about some puts and some recent lockdowns in certain regions, but I guess some of those are being lifted and how is that going and.
And factors that may have been impacting your plans to expand production capacity in China, or where does that is that not really been as much of an issue. Thank you.
I can say, so far there's no obstruction or problem and now Oh.
Dmitry I mean that is a simple rule.
A century and in <unk>.
And part of China, and Guangdong Province, So Bob no negative impact on our operation.
Okay. That's very helpful. Thank you very much and congratulations on the quarter. Thanks.
Thank you alright, thank you Ramon and Hugh.
Yeah.
Yeah.
Our next question is from Barry Pasternak Pasternak private Investor. Please go with your questions.
Hi, guys. Congrats on the quarter I was wondering if the book it looks like the book tax rate was about 40% could you talk about why it was so high and also.
What do you expect the if you could talk about what you expect to book and cash tax rate for look like and the current fiscal year.
Yeah.
On the tax rate.
Really what's.
There was some catch up or some true up and the Jordanian taxes.
That relates back to 2.
2018 and 2019.
And Jordanian pass rate actually went up quite significantly in the past 2 years.
So we went back on to the government.
And went back and and NAV are you on that some additional taxes.
So and and even in the fiscal year 2021.
And the attach rate and Jordan.
<unk> from I think 14%.
From 11% and 14% so there is a pretty.
Steep hike and the test range.
That's why the effective tax rate looks higher this year.
But we anticipate this will.
Kind of level out.
And.
So this this year is just a 1 time adjustment.
So what what would be what would the cash and book tax rates look like for the current fiscal year.
Can you comment on that.
And if current fiscal year, we anticipate the cash rate to be around 16 to 17 per se.
Yeah.
Okay, great and for the apartments that are gonna be constructed for employees when is that projected to begin that construction.
We have already begun doing construction in the month of April.
And.
At the end of April actually and.
We anticipate construction to complete.
In the middle of 2022.
Okay, Great and last question, what I was there a change and investor relation firm.
Why was there a change and Investor relations for.
Hum.
Right well you know what.
So recent change too.
Yeah.
Are we just wanted to have a change and see if.
We can learn something new and.
Just.
Try to and attract more investors and.
And and grow our company be more transparent and and.
Communicated with all investors with the capital market more effectively.
Okay.
Okay.
I see okay, great. Thanks very much.
Thank you thank.
Thank you for calling.
Thank you.
The next question is for Mike just Lewis and M&A Holdings. Please proceed with your question.
Yes, good morning, gentlemen, and good morning.
How are Ya man and Erica and good afternoon, I guess for you.
Yeah, No I, just I don't have much to say I, just try and tell you congratulations and thank you.
The only thing and yogurt as you know we spoke earlier this year just yeah quickly.
The only thing I was going to point out here first off it's great that you were able to give bonuses out for folks and that's great. I appreciate the transparency, Eric you're always terrific and Gilbert as are you.
Sam you're in charge so congratulations.
The investment and training, which is the Costco model and I just wanted to point out I I realize that you you. All know this for the world doesn't and that would be your new IR firm, which you're engaged.
Getting on their horses, as well and I wish them luck I hope, they're fully engaged but the reality is the cost come out of the way his lips, let's get our people fully engaged me all the workers pay them well take care of them, which you all do and that investment and training fosters a you know permanent fee in and.
And your worker base and quality control is an automatic because it's taught on day, 1 and not by some Q C person at the end of the line and I just wanted to point out that that is part of the reason why you know garage holdings has excelled beyond most of their folks and the problem businesses.
No go for it I've been in this business for many decades.
That's it I just wanted to say, thank you and continue the great work.
You know I'll I'll speak to you privately Gilbert if need be but probably won't and and.
That's it just just somebody wanted I just wanted to 2 to 4 and a little bit and make sure. The and you know Roger Pinedale gets on his horse in the works and find out what it isn't and thank you all for 2 and such a great job through this horrible mess that we've lived through the last 2 years okay.
Thank you for call. Thank you so much yeah, okay and for the reminder.
Definitely understand how important it is to teach.
And to treat our employees treat out work as well and and others the strength of giraffes, and our operations and Jordan.
Net debt we are the really.
The most sought after menu.
Manufacturer and Jordan by many of the global brands.
Thank you.
At this time I'll turn the floor back to Mr. Sam Joy for closing remarks.
Oh, Okay. Yeah. Thank you operator, and thanks again for everyone for joining us today and for your support and interest and a company. We look forward to speaking with you again soon on our first quarter earnings call. Thank you very much.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Yeah.