Q1 2025 Jerash Holdings (US) Inc Earnings Call
Speaker Change: And with that, thanks for watching, and we'll see you in the next video!
Operator: Greetings, and welcome to the Jerash Holdings Fiscal 2025 First Quarter Financial Results Conference 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 on your telephone keypad. Please note this conference is being recorded. I will now hand the conference over to your host, Roger Pondel, Investor Relations for Jerash Holdings. You may begin. Thank you, Holly.
Speaker Change: Greetings. Welcome to the GIRASH Holdings Fiscal 2025 First Quarter Financial Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.
Roger Pondel: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now hand the conference over to your host, Roger Pondel, Investor Relations for Girash Holdings. You may begin.
Roger Pondel: Thank you, Holly, and good morning, everyone. Welcome to Jerash Holdings' Fiscal 25 first quarter and full year conference call. I'm Roger Pondel with Pondel Wilkinson, Jerash Holdings Investor Relations Firm. It will be my pleasure momentarily to introduce the company's Chairman and Chief Executive Officer, Sam Choi, 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 our listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Roger Pondel: Thank you, Holly, and good morning, everyone. Welcome to GIRASH Holdings Fiscal 25 first quarter and full year conference call.
Roger Pondel: I'm Roger Pondel with Pondel Wilkinson, Gerash Holdings Investor Relations Firm.
Speaker Change: It will be my pleasure momentarily to introduce the company's Chairman and Chief Executive Officer, Sam Choi, its Chief Financial Officer, Gilbert Lee, and Eric Tang, who leads the company's operations in Jordan.
Roger Pondel: 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 Factors section of the company's most recent Form 10-K, as filed with the Securities and Exchange Commission, and 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.
Speaker Change: Before I turn the call over to Sam, I want to remind our listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Speaker Change: Such forward-looking statements are subject to numerous conditions.
Speaker Change: many of which are beyond the company's control.
Speaker Change: including those set forth in the risk factors section.
Speaker Change: of the company's most recent Form 10-K.
Speaker Change: as filed with the Securities and Exchange Commission and copies of which are available on the SEC's website.
Speaker Change: at www.scc.gov, along with other company filings made with the SEC from time to time.
Girash Holdings: Actual results could differ materially from these forward-looking statements and Girash Holdings undertakes no obligation to update any forward-looking statements
Roger Pondel: And with that, it is my pleasure to turn the call over to Sam Choi. Okay, Sam?
Girash Holdings: accept as required by law. And with that, it is my pleasure to turn the call over to Sam Choi. Sam?
Sam Choi: Revenue for the first quarter of fiscal 2025 increased nearly 18% over last year's first quarter, attendee, and our time is time, and I'm pleased to report that we continue to receive an increasing number of purchase orders for export shipments to global customers in the U.S. and Europe. Gross margin was affected again by the ongoing turmoil in the rest of the world, which continues to disrupt ocean trade routes and drove up Ocean Freightway, and indenture We also incurred additional manufacturing costs associated with challenges in production scheduling and catch-up deliveries to our customers due to delays carrying over from last quarter primarily related to the logistics issue. Nevertheless, gross margin for the first quarter improved by more than 400 business points over the preceding quarter ended March 31.
Sam Choi: Thank you, Roger. Revenue for first quarter of fiscal 2025 increased nearly 18% over last year's first quarter, attaining an all-time high.
Speaker Change: and I'm pleased to report that we are continuing to receive an increasing number of purchase orders for export shipments to global customers in the US and Europe.
Speaker Change: Gross margin was affected again by the ongoing turmoil in the Red Sea.
Speaker Change: which continued to disrupt ocean trade routes
Inden Chokin: and Inden Chokin.
Inden Chokin: We also incurred additional manufacturing costs associated with challenges in production scheduling and catch-up deliveries to our customers due to delays carrying over from last quarter primarily related to the logistic issues.
Inden Chokin: Nevertheless, gross margin for the first quarter improved by more than 400 business points over the preceding quarter ended March 31.
Sam Choi: Although some of the higher costs are continuing into the second quarter of fiscal 2025, we anticipate a return to a more stable operating environment in the second half of this fiscal year. To help address the logistics situation, we are seeking to add more vendors from Turkey and Egypt to source raw materials, which should help alleviate some related costs and shorten transportation time. All in all, we are encouraged by the positive momentum as we proceed into fiscal 2025.
Inden Chokin: Although some of the higher costs continue into the second quarter in fiscal 2025, we anticipate a return to a more stable operating environment in the second half of this fiscal year.
Inden Chokin: To help address the logistic situation, we are seeking to add more vendors from Turkey and Egypt to source raw materials, which should help alleviate some related costs and shorten transportation time.
Inden Chokin: All in all, we are encouraged by the positive momentum.
Sam Choi: Purchase orders from our long-term group of customers are coming in at a pace we have not seen in the past two years. As well, we are receiving additional trial orders from other major brands through ProSema Apparel Group, our joint venture partner.
Inden Chokin: as we proceed into fiscal 2025.
Inden Chokin: Purchase orders from our long-term group of customers are coming in at a pace we have not seen in the past two years.
Inden Chokin: As well, we are receiving additional trial orders from other major brands through ProSena Apparel Group, our joint venture partner.
Sam Choi: Our initiative and strategy of diversifying our customer base is paying off. We believe it gives you positions as well for growth as the economic environment. We are grateful that business and day-to-day life in Jordan remain stable and safe. However, due to the uncertainty in the surrounding country. Contingency plans have been put in place to ensure minimal disruption to our operations in the event of an escalating political situation in the region. Eric Tang, who is in charge of our operations in Georgia, will share more about that shortly. And I'll now turn the call over to him. Hi Eric.
Inden Chokin: Our initiative and strategy of diversifying our customer base is paying off.
Inden Chokin: We believe it will position us well for growth.
Inden Chokin: as the economic environment improves.
Inden Chokin: We are grateful that business and day-to-day life in Jordan remains stable and safe.
Inden Chokin: However, due to the uncertainty in the surrounding countries,
Inden Chokin: Contingency plans have been put in place to ensure minimal disruption to our operations in the event of an escalating political situation in the region.
Inden Chokin: Eric Tang, who is in charge of our operations in Georgia, will share more about that shortly.
Inden Chokin: And I'll now turn the call over to him. Hi, Eric.
Eric Tang: As we mentioned during the last process call, the supply chain disruption affected our ability to receive an adequate supply of materials from Asia, which in turn delayed production. Approximately 16 to 18 percent of orders from last quarter were delayed and shipped in the fiscal 2025 first quarter. To catch up on delivery schedules to our customers, we had to ramp up production with overtime. And in some cases, we had to airflight certain shipments, incurring significant added costs.
Eric Tang: Thank you, Sam. As we mentioned during the last process call, the supply chain disruption affected our ability to receive adequate supply of materials from Asia, which in turn delayed production.
Speaker Change: Approximately 16 to 18 percent of orders from last quarter were delayed and shipped in the fiscal 2025 first quarter.
Speaker Change: To catch up on delivery schedules to our customers, we had to ramp up production with overtime and in some cases, we had to air flight certain shipments, incurring significant added cost.
Eric Tang: We expect overtime to moderate starting in mid-August, and hopefully, no additional air shipments going forward. Despite the unstable environment in the Middle East, our customers continue to have confidence in Jerash to be their trusted, responsive, and responsible manufacturing partner. Thus far into our new fiscal year, we are experiencing good growth.
Speaker Change: We expect overtime to moderate starting in mid-August, and hopefully no additional airflight shipments going forward.
Speaker Change: Despite the unstable environment in the Middle East, our customers continue to have confidence in Garage to be their trusted, responsive, and responsible manufacturing partner.
Speaker Change: Thus far into our new fiscal year, we are experiencing good growth.
Eric Tang: Our manufacturing facilities are all operating at full capacity, with orders fully booked well into December 2024. Currently, we are experiencing in... from major customers following a period of constraints at the retail level.
Speaker Change: Our manufacturing facilities are all operating at full capacity, with orders fully booked well into December 24.
Speaker Change: Currently, we are experiencing in...
Speaker Change: is from major customers.
Speaker Change: following a period of constraint at the retail level.
Speaker Change: Thumbnail
Speaker Change: ...sufficing our customer base, and we are delighted that we are starting to realize the benefits of this strategy.
Eric Tang: Thank you very much. Today, we are producing garments for a number of new branded customers, and we are continuing to expand our product mix with new product categories. Our objective remains to balance production capacity utilization throughout the year to minimize revenue seasonality.
Speaker Change: Today, we are producing garments to a number of new branded customers.
Speaker Change: And we are continuing to expand our product mix with new product categories.
Speaker Change: Our objective remains on balancing production capacity utilization throughout the year to minimize revenue seasonality.
Eric Tang: Marketing efforts for Closernet Apparel Group are continuing, and we are receiving additional trial orders from four global brands through this joint venture. We expect additional new business opportunities will arrive in the future. Orders from our two European-based high-end apparel brands, including Armani, are steadily increasing. And we are receiving additional trial orders for Marnie's Other Premium Clothing line. We are excited about the new products and look forward to expanding the brand further, which we anticipate will enhance our market.
Speaker Change: Marketing efforts for Closene Apparel Group are continuing and we are receiving additional trial orders from four global brands through this joint venture.
Speaker Change: We expect additional new business opportunities will arrive in the future.
Speaker Change: Orders from our two European-based high-end apparel brands, including Armani, are steadily increasing.
Speaker Change: And we are receiving additional trial orders for Amani's other premium clothing lines.
Speaker Change: We are excited about the new products and look forward to expanding the brand further, which we anticipate will enhance our margins.
Eric Tang: As Sam mentioned before, contingency plans are in place with our partners in Indonesia and other locations to minimize disruptions to our operations in the event of an escalated flare-up in the region. We have discussed such plans with our customers as well. I will now turn the call over to Gilbert to discuss our financial results. Gilbert, please.
Speaker Change: As Sam mentioned before, contingency plans are in place with our partners in Indonesia and other locations to minimize disruptions to our operations in the event of an escalated flare-up in the region.
Speaker Change: We have discussed such plans with our customers as well.
Speaker Change: I will now turn the call over to Gilbert to discuss our financial results. Gilbert, please.
Gilbert Lee: Revenue for our fiscal 2025 first quarter increased 17.8% to $40.9 million, from $34.7 million for the same quarter last year. This record first quarter revenue reflected an increase in shipments to Jerash major U.S. customers and growth with new customers in other regions that the company onboarded during the past two years.
Gilbert Lee: Thank you, Eric.
Gilbert Lee: Revenue for our fiscal 2025 first quarter increased 17.8% to $40.9 million from $34.7 million for the same quarter last year.
Gilbert Lee: This record first quarter revenue
Girash Holdings: to GIRASH major U.S. customers and growth with new customers in other regions that the company on-boarded during the past two years.
Gilbert Lee: It also included approximately three to four million dollars of orders that were delayed from the previous quarter due to reasons mentioned earlier by Sam and Eric. Gross profit was $4.6 million for the fiscal 2025 first quarter, compared with $5.6 million in the same quarter last year. Gross margin decreased to 11.3% from 16.0% in the same period last year, primarily due to higher raw material import costs caused by the Red Sea shipping disruption, as well as additional manufacturing costs associated with catching up on delivery schedules to customers.
Girash Holdings: It also included approximately $3 to $4 million of orders.
Speaker Change: that were delayed from the previous quarter due to reasons mentioned earlier by Sam and Eric.
Speaker Change: Gross profit was $4.6 million for the fiscal 2025 first quarter, compared with $5.6 million in the same quarter last year.
Speaker Change: Growth margin decreased to 11.3% from 16.0% in the same period last year, primarily due to the higher raw material import costs.
Speaker Change: caused by the Red Sea shipping disruption, as well as additional manufacturing costs associated with catching up on delivery schedules to customers.
Gilbert Lee: The increased logistics and labor costs had a combined negative impact of 440 basis points on gross margin in this quarter. Operating expenses for the fiscal 2025 first quarter were $5.5 million, compared with $4.5 million for the same quarter last year. SG&A expenses increased 18% to $5.0 million in this first quarter, compared with $4.2 million in the same quarter last year. This increase included an additional air freight cost of approximately $300,000 to make up delivery shortages to customers. Stock-based compensation expenses for the fiscal 2025 first quarter were $469,000 compared with $241,000 for the same quarter last year. Other increases in operating expenses included higher sampling support costs and payroll expenses.
Speaker Change: The increased logistics and labor costs had a combined negative impact of 440 basis points on gross margin in this quarter.
Speaker Change: Operating expenses for the fiscal 2025 first quarter was $5.5 million compared with $4.5 million for the same quarter last year.
Speaker Change: SG&A expenses increased 18% to $5.0 million in this first quarter, compared with 4.2 million in the same quarter last year.
Speaker Change: This increase included an additional air freight cost of approximately $300,000 to catch up deliveries to customers.
Speaker Change: Stock-based compensation expenses for the fiscal 2025 first quarter were $469,000 compared with $241,000 for the same quarter last year.
Speaker Change: Other increases in operating expenses.
Speaker Change: included higher sampling support cost
Gilbert Lee: Operating loss total $829,000 in the fiscal 2025 first quarter versus operating income of $1.1 million in the same period last year. Total audit expenses were $426,000 in the fiscal 2025 first quarter compared with $299,000 in the same quarter last year. The increase primarily reflected higher interest expenses from the Supply Chain Financing Program of certain major customers. Net loss was $1.4 million, or $0.11 per share, in the fiscal 2025 first quarter compared with net income of $495,000, or $0.04 per share, in the same period last year, as of June 30th, 2024.
Speaker Change: Operating loss total $829,000 in the fiscal 2025 first quarter versus operating income of $1.1 million in the same period last year.
Speaker Change: Total honor expenses were $426,000 in the fiscal 2025 first quarter, compared with $299,000 in the same quarter last year.
Speaker Change: The increase primarily reflected higher interest expenses from the supply chain financing program of certain major customers.
Speaker Change: Net loss was $1.4 million or $0.11 per share.
Speaker Change: in the fiscal 2025 first quarter compared with net income of $495,000 or $0.04 per share in the same period last year.
Gilbert Lee: Jerash had cash and restricted cash of $13 million, and net working capital of $34.5 million. Inventory was $20.7 million, and accounts receivable was $9.4 million. Netcast used in operating activities was approximately $2.2 million for the quarter ended June 30, 2024, compared with net cash provided by operating activities of $25,000 for the same period last year. As Sam and Eric mentioned earlier, we see ordering patterns increasing with larger quantities into fiscal 2025, and factories are fully booked through December.
Speaker Change: as of June 30th, 2024.
Speaker Change: Gerash had cash and restricted cash of $13 million and net working capital of $34.5 million.
Speaker Change: Inventory was $20.7 million in accounts receivables.
Speaker Change: was 9.4 million.
Speaker Change: Netcast used in operating activities.
Speaker Change: was approximately $2.2 million for the quarter ended June 30, 2024, compared with net cash provided by operating activities.
Speaker Change: of $25,000 for the same period last year.
Speaker Change: As Sam and Eric mentioned earlier,
Speaker Change: We see ordering patterns increasing with larger quantities into fiscal 2025.
Gilbert Lee: Revenue for the second quarter is expected to increase by 11% to 13% from the prior year quarter, and full year 2025 revenue is anticipated to grow by 20 to 25 percent. Our gross margin goal for the 2025 fiscal year is expected to be approximately 12% to 14%, subject to logistics and shipping charges and product on August 5th, 2024. The Jerash Board of Directors approved a regular quarterly dividend of $0.05 per share on its Cummins stock, payable on August 23, 2024 to stockholders of record as of August 16, 2024. With that, we will now open up the call for questions, and I will turn the call back to the operator. Thank you.
Speaker Change: and factories are fully booked through December.
Speaker Change: Revenue for the second quarter is expected to increase by 11-13% from the prior year quarter.
Speaker Change: and full year 2025 revenue.
Speaker Change: is anticipated to grow by 20 to 25 percent.
Speaker Change: Our gross margin goal
Speaker Change: for the 2025 fiscal year is expected to be approximately 12 to 14 percent.
Speaker Change: subject to logistics and shipping charges and product mix.
Speaker Change: on August 5th, 2024.
Speaker Change: The Rush Board of Directors approved a regular quarterly dividend of five cents per share on this coming stock.
Speaker Change: payable on August 23, 2024 to stockholders of record as of August 16, 2024.
Speaker Change: With that, we will now open up the call for questions, and I will turn the call back to the operator.
Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.
Speaker Change: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that is star 1 to ask a question. One moment, please, while we poll for questions.
Operator: Once again, that is star number one to ask a question. One moment, please, while we poll for questions. Your first question for today is from Mark Argento with Lake Street. Yeah, hi, good morning guys.
Speaker Change: [inaudible]
Speaker Change: Your first question for today is from Mark Argento with Lake Street.
Mark Argento: The first question I had was on the revenue guidance. It looks like you took it up fairly meaningfully from 15 to 18% for the full year now to 20 to 25%. Was there a couple specific new wins in there? You know, break that apart a little bit for us to understand where all that additional revenue is coming from.
Speaker Change: Good morning, guys. First question I had was on the revenue guidance. It looks like you – I just want to make sure I understand this right. It looks like you –
Mark Argento: took it up fairly meaningfully from 15-18% for the full year now to 20-25%. Was there a couple specific new wins in there? Or maybe you could, you know, break that apart a little bit for us, understand where all that additional revenue is coming from.
Gilbert Lee: Our revenue increased. For this fiscal year, it's going to be more in the second half of the year versus.. versus the last fiscal year. As you remember, our seasonality is always going to be more heavy in the first half, and then the second half when we're producing more of the summer or summer weather clothing, the revenue will be somewhat lower. But this year, in the first quarter, we already achieved a record quarter for the first quarter, and the second quarter continues coming in strong.
Speaker Change: Well, thank you, Mike. Our revenue increased.
Speaker Change: for this fiscal year is going to be
Speaker Change: more on the second half of the year versus
Speaker Change: versus the last fiscal year. As you remember, our seasonality is always going to be more heavy on the first half, and then the second half when we're producing more of the summer or summer weather clothing.
Speaker Change: the revenue will be somewhat lower. But this year, the first quarter, first quarter we already achieved a record quarter for the first quarter. And second quarter is continued coming in strong.
Gilbert Lee: But we're anticipating that the third and the fourth quarter will be almost on par with the first half of the year because we see strong orders coming in, especially now that we're actually fully booked through the third quarter, through December of 2024. And orders are still coming in for the spring, for the quarter on or our last fiscal quarter, which is January to March of 2025. So even though those orders are not confirmed or booked yet, we see the strength of the turnaround.
Speaker Change: but we're anticipating that the third and the fourth quarter to be almost on par with the first half of the year.
Speaker Change: because we see strong...
Speaker Change: orders coming in, especially now that we're actually fully booked through the third quarter, through December of 2024. And orders are still coming in for the spring, for the quarter
Speaker Change: or not.
Speaker Change: or our last fiscal quarter, which is January to March of 2025.
Speaker Change: So even though those orders are not confirmed or booked yet, but we see the strength of the turnaround. So we forecast the second half to be almost as high as the first half of this year.
Gilbert Lee: So we forecast the second half to be almost as high as the first half of this year. So we will see a much higher percentage of growth in the second half, compared to last year's second. Does that make sense? That means in the first two quarters, we're seeing growth in the teens, but then in the second half of the year, we're seeing stronger growth comparatively.
Speaker Change: So we will see a much higher percentage growth in the second half.
Speaker Change: comparing to last year's second half.
Speaker Change: Does that make sense? That means in the first two quarters we're seeing
Speaker Change: growth in the teens, but then the second half of the year we're seeing stronger growth comparatively.
Gilbert Lee: And do you attribute that to, are those, you know, kind of catch-up orders with existing customers, or is that the kind of new customers coming on and incrementally adding to the order flow?
Speaker Change: and do you attribute that are those you know kind of catch-up orders with existing customers or is that kind of new new customers coming on and incrementally adding to the order flow?
Gilbert Lee: It's more the latter. It's more new customers coming in that we're anticipating. Especially in the past couple of years, we did a lot of trial orders and sampling, and those customers are now starting to place regular orders, and they indicated that they would increase their ordering. But the first half is more for catching up. So up until now, up until August, we're still trying to get rid of some of the back orders that were delayed in the, well, spring.
Speaker Change: It's more the latter. It's more new customers coming in that we're anticipating that.
Speaker Change: Especially in the past couple of years, we did a lot of trial orders, sampling, and those customers are now starting to place regular orders and they indicated that they will increase their ordering.
Speaker Change: but the first half is more for catching up.
Speaker Change: So up until now, up until August, we're still trying to get rid of some of the back orders.
Speaker Change: that was delayed in the, well, in the spring.
Mark Argento: The gross margin came in below what we were looking for in the quarter. We obviously knew that, and we were still trying to play a little bit of catch-up on the supply chain disruptions, adding to the expense there. Do you feel like you guys have your hands on that now? What kind of gross margin expectations do you have? You know, do you have for Q2 and then, I think, the full year, maybe bump that down a little bit, I'm guessing that, you know, from what happened in Q1 or from the Q1 results. But, you know, should we see sequential improvement, you know, and do you guys fully have your hands around, you know, the supply chain issues at this point?
Speaker Change: The gross margin came in below what we were looking for in the quarter. We obviously knew that.
Speaker Change: We're still trying to play a little bit of catch up in the supply chain disruptions, adding to the expense there. Do you feel like you guys have your hands around that now? What kind of gross margin expectations?
Speaker Change: you know do you have for Q2 and then I think the full year you maybe bump that down a little bit I'm guessing that's
Speaker Change: you know, from what happened in Q1 or from the Q1 results, but, you know, should we see sequential improvement, you know, and do you guys fully have your hands around, you know, the supply chain issues at this point?
Gilbert Lee: Well, we are seeing that, obviously, first quarter and second quarter, we're still having pretty significant higher manufacturing costs because of labor costs and also because of the inbound freight that we have to pay higher for on bringing in the raw materials. But we're looking at, maybe after August, the situation will become stabilized. And also, we're implementing a lot of cost-cutting and cost-reduction kind of projects to lower our overhead, lower even SG&A.
Speaker Change: Well, we are seeing that, well, obviously first quarter and second quarter, we're still having pretty significant higher manufacturing costs because
Speaker Change: of labor costs and also because of the inbound freight that we have to pay higher on bringing in the raw materials. But we're looking at maybe after August,
Speaker Change: the situation will become stabilized. And also we're implementing a...
Speaker Change: a lot of cost cutting and cost reduction kind of projects to lower our overhead, lower our, even the SG&A, we're trying to reduce costs. But,
Gilbert Lee: We're trying to reduce costs, but, hopefully, I think the second half of the year, even though it is still not going to be in the high teens, but it will stabilize. It's not going to be like the first and second quarters.
Speaker Change: hopefully, I think the second half of the year, even though
Speaker Change: It is still not going to be high teens, but it will stabilize. It's not going to be like the first and second quarter.
Mark Argento: And then last question, you know: are there any provisions where you can work with your customers where they bear some of the incremental expense if you're air freighting or, you know, because of disruptions? I mean, you know, it feels a little unfair that you guys end up having to take the brunt of all of that relative to, you know, some of your customers who might be able to share in some of that expense. Are you sharing in those expenses, or is there any kind of provision for you guys to be able to be made whole on some of that?
Speaker Change: Last question, is there any provisions where you can work with your customers where they bear some of the incremental expense if you're air freighting or because of disruptions?
Speaker Change: It feels a little unfair that you guys end up having to take the brunt of all of that relative to, you know, some of your customers who might be able to share in some of that expense. Are you sharing in those expenses or is there any kind of provision for you guys to be able to be made whole on some of that?
Gilbert Lee: Well, each order that we have with our customers, they will, they will compensate, they understand our situation. And, in most cases, they will add a little bit on the margin that they allow us to have.
Speaker Change: Well, each order that we have with our customers.
Speaker Change: they will
Speaker Change: they will compensate, they understand our situation and in most cases, they will add a little bit on the margin that they allow us to have.
Gilbert Lee: But they wouldn't directly compensate for the additional costs that we incurred, especially on inbound freight. Those are situations that nobody anticipated, but they will understand that we're paying more, and they will also allow us, as much as possible, not to have to air freight the shipments to them if they can if they can accept a longer delivery time. So just to answer your question, there's no direct compensation for contingent additional costs for Manufacturing, but for the orders going forward, they will allow for a little bit of catching up.
Speaker Change: But they wouldn't directly compensate for the additional costs that we incurred, especially on inbound freight. Those are the situations that nobody anticipated.
Speaker Change: but they will understand that we're paying more and they will also allow us...
Speaker Change: as much as possible, not having to air freight the shipments to them if they can accept a longer delivery time.
Speaker Change: So, just to answer your question, there's no direct compensation for
Speaker Change: contingent additional cost.
Speaker Change: for manufacturing, but for the orders going forward, they will allow for a little bit of catching up margin.
Gilbert Lee: And maybe... Yeah, regarding the inbound flight charges, some of our major customers are willing to absorb some of, I mean, for the future order, or, in fact, what might mean future order even in the last several months, when we call our FOP price to them, we let them know our increased inbound flight charges. And some major customers are willing to, willing to absorb some of the increase in inbound flight charges already. Yeah, that's helpful. One last one, Gilbert.
Brandon: Brandon? Yeah, maybe.
Brandon: Yeah, maybe regarding the inbound freight charges.
Brandon: Some of our major customers, they are willing to absorb.
Brandon: some of the future orders. In fact, what might mean future orders even in the last several months when we call our FOP price to them.
Brandon: We let them know our increased inbound flight charges and some major customers, they're willing to willing to absorb some of the increase of the inbound flight charges already.
Mark Argento: On supply chain financing, are you guys actively utilizing that? Where are you in terms of..., you know, leaning in on that? I know historically that's been kind of expensive.
Speaker Change: Yeah, that's helpful.
Gilbert Lee: One last one, Gilbert, on the supply chain financing, are you guys actively utilizing that? Where are you in terms of...
Speaker Change: you know, leaning in on that. I know historically that's been kind of expensive.
Gilbert Lee: Yeah, especially when the interest rate is still pretty high and that financing cost is tied to SOFR. So we try not to use it as much as we can, but as orders and as sales increase, sometimes we just have to tap into that and to make sure that we have enough cash flow to purchase raw materials, pay for freight, and so on. So yeah, the interest expenses were a little bit high in the last quarter, but we're watching them every time to make sure that we don't incur too many unnecessary interest costs.
Speaker Change: Yeah, especially when the interest rate is still pretty high and that financing cost is tied to SOFR.
Speaker Change: So we try not to use it as much as we can, but as the ordering and as the sales increase,
Speaker Change: sometimes we just have to tap into that and to make sure that we have enough cash flow to to purchase raw material to
Speaker Change: to pay for freight and so on. So yeah, the interest expenses were a little bit high in the last quarter, but we're watching it every time and make sure that we don't incur too much unnecessary interest costs.
Mark Argento: Appreciate the color guys, good luck.
Speaker Change: Appreciate the color guys, good luck.
Speaker Change: Cheer!
Operator: Once again, if you would like to ask a question, please press star 1.
Speaker Change: Thank you.
Speaker Change: Once again, if you would like to ask a question, please press star 1.
Speaker Change: [inaudible]
Speaker Change: [inaudible]
Unnamed Speaker: [inaudible] I don't know. I don't know. [inaudible]