Q2 2025 Jerash Holdings (US) Inc Earnings Call
Speaker Change: Greetings. Welcome to Jerash Holdings fiscal 2025 second 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 turn the conference over to your host, Roger Pondel of Investor Relations.
Roger, you may begin.
Roger Pondel: Thank you, Paul, and good morning everyone. Welcome to Gerash Holdings fiscal 2025 second quarter conference call.
Roger Pondel: I'm Roger Pondel with Pondel Wilkinson, Gerash Holdings Investor Relations Firm. It will be my pleasure momentarily to introduce the company's Chairman and Chief Executive Officer.
Roger Pondel: Sam Choi, his chief financial officer, Gilbert Lee, and Eric Tang, who leads the company's operations in Jordan.
Roger Pondel: 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.
Such forward-looking statements are subject to numerous conditions.
many of which are beyond the company's control.
Roger Pondel: including those set forth in the risk factor section of the company's most recent Form 10-K.
Roger Pondel: 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.
Roger Pondel: Actual results could differ materially from those forward-looking statements and Girash Holdings undertakes no obligation to update any forward-looking statements except as required by law.
Speaker Change: And with that, it is my pleasure to turn the call over to Sam Choi. Sam?
Thank you, Roger.
Our second quarter solidified.
the positive momentum that began earlier in the fiscal year.
Revenue increased nearly 21% over last year's second quarter.
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Speaker Change: and I'm pleased to report that purchase orders for export shipments to our customers in the US and Europe have been steadily increasing.
Our factories are now fully booked.
through the first half of calendar year 2025.
Results for the quarter reflected that
the confidence that our global customers have working with Durex.
and highlight the competitive advantages.
We provide manufacturing in Jordan.
Speaker Change: which has friendly ties and free trade agreements with the U.S., the EU, and other countries.
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on the geopolitical front. Yet another positive note.
Speaker Change: export trade routes in the region return to a more normalized and stable state since mid-August.
This, in turn, is benefiting profitability.
Speaker Change: Gross margin for fiscal second quarter increased to 17.5% from 16.1% a year ago and from 11.3% in the preceding first quarter.
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We are encouraged by the positive momentum.
hopeful that stability in the operating environment will be sustained.
and that our focus will turn to growth.
Speaker Change: Attracting new and diversified global brands and producing a wider selection of garments.
Speaker Change: We continue to receive inquiries from major brands in the U.S. and Europe for pricing, followed by trial orders as more companies
seek manufacturing partners outside of Asia.
Speaker Change: in three countries that offer a cost-effective production environment with the capability to deliver high-quality finished products.
Thank you. Bye-bye.
with good visibility well into fiscal 2026.
Speaker Change: We are beginning to plan for a potential expansion of manufacturing capacity to support future growth.
Speaker Change: Eric Tang, who is in charge of our operations in Jordan, will share more about that shortly.
Speaker Change: and I will now turn the call over to him. Hi Eric.
Thank you, Sam.
Speaker Change: Despite the geopolitical instability and tension in many parts of the Middle East,
Speaker Change: Jordan remains stable and secure and the ports of Aqaba and Haifa are open and safe with added security checkpoints.
Speaker Change: We are fortunate that our customers continue to trust Garage as a reliable and responsible manufacturing partner for producing high-quality garments.
Speaker Change: Operationally, we are starting to realize the benefits of our initiative to diversify our customer base.
Today we are producing garments for more than 20 brands.
Speaker Change: And we are continuing to expand our product mix with new garment categories.
In response to an increasing number of export orders,
Speaker Change: We are now able to better plan for workflow and effectively utilize production capacity year-round.
Reducing Revenue Seasonality
Speaker Change: It is gratifying that all our manufacturing facilities are completely booked beyond the first half of the next calendar year.
Gerrard currently operates six production facilities and four warehouses.
employing a diverse workforce of approximately 6,000 people.
Our current annual production capacity is about 20 million pieces.
Speaker Change: As Sam mentioned, we are beginning to explore production capacity expansion and additional workforce as growth dictates.
Speaker Change: Our marketing efforts with our joint venture partner, Wusanda Apparel Group, are ongoing.
Speaker Change: and we have begun production for four global brands through this partnership.
Speaker Change: We anticipate further new business opportunities will emerge in the future.
Our optimism reflects opportunities on a number of fronts.
Speaker Change: including attracting new global brands based on Gerard's leadership position and strong industry reputation built over the past 20 plus years.
as well as the competitive advantages of operating in Jordan.
Speaker Change: With that, I will now turn the call over to Gilbert to discuss our financial results. Gilbert, please.
Gilbert Lee: Thank you, Eric. Revenue for our fiscal 2025 second quarter increased 20.6% to $40.2 million, from $33.4 million for the same quarter last year.
Gilbert Lee: The quarter's revenue reflected an increase in shipments to Girage's major U.S. customers and growth from new customers in other regions that the company onboarded during the past two years.
Gilbert Lee: Gross profit for the fiscal 2025 second quarter increased 31.4% to $7.1 million from $5.4 million in the same quarter last year.
Gross margin increased 140 basis points
Gilbert Lee: The expansion was primarily due to high production volumes, with increased orders that typically carry higher margins shift to U.S. customers.
Gilbert Lee: Operating expenses for the fiscal 2025 second quarter totaled $5.9 million, compared with $4.5 million in the same period last year.
Gilbert Lee: SG&A expenses were $5.4 million in this fiscal second quarter compared with $4.2 million in same quarter last year.
Gilbert Lee: And the increase was primarily due to higher export logistics costs to catch up with garment shipment schedules and higher shipping volume.
Gilbert Lee: Stock-based compensation expenses for the fiscal 2025 second quarter were $474,000 compared with $243,000 for the same quarter last year.
Gilbert Lee: Operating income increased to $1.1 million in the fiscal 2025 second quarter from $888,000 in the same period last year.
Gilbert Lee: Total audit expenses were $364,000 in the fiscal 2025 second quarter versus $167,000 in the same quarter last year.
The increase primarily reflected higher interest expenses.
Gilbert Lee: Net income in the fiscal 2025 second quarter increased 80.1% to $665,000 from $369,000.
Gilbert Lee: for the prior year quarter. Net income per diluted share for the fiscal 2025 second quarter increased.
Gilbert Lee: to increase to $0.05 from $0.03 in the same quarter last year.
Gilbert Lee: As of September 30th, 2024, GIRASH had cash and restricted cash of $17.9 million and net working capital of $35.2 million.
Inventory was $20.2 million and accounts receivable was $5.8 million.
Gilbert Lee: Net cash provided by operating activities was approximately $2.4 million for the six months ended September 30, 2024, compared with $8.2 million for the same period last year.
as Sam and Eric mentioned earlier.
Gilbert Lee: Purchase orders are coming in with larger quantities from our global customers beyond this fiscal year, and we are hopeful this more robust activity will continue.
Accordingly, we are increasing our guidance.
Gilbert Lee: with third quarter revenue now expected to increase by 35% to 38% from the prior year quarter and full year 2025 revenue anticipated growth by 30% to 35%.
Gilbert Lee: Our gross margin goal for the fiscal 2025 year is expected to be approximately 14 to 15 percent, subject to logistics, charges, and product mix.
Jurassic Board of Directors approved a regular quarterly dividend.
Gilbert Lee: of $0.05 per share on this coming stock, payable on November 29th, 2024 to stockholders of record as of November 22nd, 2024.
Speaker Change: We will now open up the call for questions, and I will turn the call back to the operator.
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.
Speaker Change: 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, please press star 1 on your phone at this time if you wish to ask a question.
And one moment, please, while we pull for questions.
Thank you for watching!
Speaker Change: Once again, that's star one if you wish to ask a question today.
Speaker Change: The first question is coming from Mark Argento from Lake Street. Mark, your line is live.
Good morning, guys.
Speaker Change: Just a couple quick questions here, and Eric, thanks for that additional color and kind of the, you know, what the scale and scope of the business looks like today.
Speaker Change: I mean, if we could, you know, kind of translate that into, you know, revenue opportunity for the platform currently at, like you said, the capacity is roughly 20 million pieces.
Speaker Change: Can you try to help us kind of, you know, put a revenue number against that, if that's kind of a fully productive...
Speaker Change: You know, if you have the facilities running on a relatively fully productive basis, is that, you know, is that $140 million, $150 million, $160 million in revenue? Could you maybe just peel the onion a little bit for us there? That would be helpful.
Thank you for watching!
Thank you for watching!
Well, right now, we're looking at our
Speaker Change: We're running at full capacity and we anticipate all the factories are going to be full until, well, right now we're booked until June or July of next calendar year, 2025.
So, um,
depending on the product mix and the
Speaker Change: because some customers we have, or most of the customers, we have FOB orders.
Speaker Change: and I think those are averaging maybe $15 to $20 a piece. Is that right, Eric?
Yeah, Attridge.
Speaker Change: average, right? And then some customers, especially when we don't have enough FOB orders, we will fill up the factories with CM orders.
Speaker Change: kind of make orders, and those are at a lower sale price.
Speaker Change: because we don't include the fabric cost in the sales. So those are averaging maybe $5 to $10 a piece.
Speaker Change: So it is hard to determine what the total scale is going to be.
Speaker Change: because of the mix. But at this point, we're looking, we're anticipating more FOB orders in the upcoming six months.
Speaker Change: comparing to previous years, because we're seeing a lot of our FOB customers.
placing orders and placing higher quantity orders.
Speaker Change: So that's why we anticipate the second half of the year is not going to be having significant seasonality versus our prior experience.
Speaker Change: So, our first six months, we came in at $81 million, I believe, and we think the second
Speaker Change: We're still going to be strong. Currently, we're looking at total year growth to be about 30 to 35 percent.
increase from last year.
Speaker Change: So, it's going to be close to between $155 million to $160 million. And we just...
Speaker Change: Yeah, so we're just going to stick with our projection of 30 to 35% growth.
Speaker Change: But we're looking at expansion because we need more capacity to satisfy the increasing demand.
Speaker Change: That's helpful, and that's exactly my follow-up question. On the expansion side, how many millions of pieces of additional production are you contemplating, and then what's the related up-front cost to bring that production online?
Speaker Change: Well, currently we're still analyzing the numbers and looking at all kinds of opportunities.
Speaker Change: One opportunity that we have been contemplating and actually planning is to utilize the piece of land that we have been owning for the past 45 years.
We have...
worked on building on it, a new factory.
Speaker Change: First, we try to build a warehouse so that we can utilize the land, but also not having to pay for warehouse rental. So that will save some.
manufacturing costs.
Speaker Change: But then we also looking at maybe build another level or build another story on top of the warehouse so that we can have space for new machinery, additional capacity.
Speaker Change: So, we're still working on a projection of how much we need.
Speaker Change: And at the same time, we're working on the three-year plan, gathering information from our sales and marketing team, our customers, and projecting the next...
two to three years growth.
Speaker Change: So once we get all those information in, then we will have a more solidified plan, both in terms of sales growth, earnings growth, and expansion needs. And at that time,
We will be more
we will be more prepared to answer the question about
Speaker Change: how much capacity we will need and what kind of project costs we're going to require to build a new factory.
Speaker Change: Now, at the same time, there might be other opportunities that come up. Maybe we can purchase or lease another building or other factories.
Speaker Change: We don't know. Just whatever comes across, then we will consider it.
Speaker Change: Do you think that's a 2025, calendar year 2025, opportunity to bring additional capacity on? Or are we out another year? How long would it take if you decided to build something?
Speaker Change: Is that a year plus or would that move a little more quickly?
Speaker Change: If we need to build something, it could be in multiple stages.
Speaker Change: So, like I said, if we start building a warehouse just using the land, it will take probably less than 12 months because
Speaker Change: Right now, while we are talking with the construction people, there are some kind of methods that
can shorten the required time if just building a warehouse.
Speaker Change: But if we need to build factories or production facilities, that might take longer. Maybe longer than a year, but definitely we will probably want to shorten that to less than two years.
Is that...
Is that what you think about Sam and Eric?
Speaker Change: Yes, I mean our expansion plans will be divided into stages.
Speaker Change: Maybe we will consider, in the first place, to build a warehouse together with one production floor. Okay, this is our initial training.
Speaker Change: But at the same time, already, we are increasing some capacity, I mean, in our own factory with our, I mean, internal, I mean, renovation.
Speaker Change: So, actually, we don't spend a lot of money because we still have some spaces, okay, in our existing facility, and we are already making...
Speaker Change: full utilization of that. And that we already increased maybe a 7 to 8 percent of our current capacity, means 1 million to 1.3 million. Okay, we already have increased it in our capacity.
Okay, while we are waiting for the big expansion plan.
Yeah.
Speaker Change: And I also want to add is that in our construction plan, we will make the foundation.
Thank you.
Speaker Change: capable of multiple stories, even though we may not build all the stories. I think it will sustain maybe five or six stories if we want to build on it, but we'll prepare the foundation to be able to to
Speaker Change: to bear that kind of building. But at the initial stage, we might just build one or two stories to start.
Speaker Change: That's super helpful. And then just one last one for me, kind of a bigger picture question. You know, just got done with the elections in the U.S. Obviously tariffs are a big, you know,
talking point politically you know the you know the
Speaker Change: you know, the Trump administration and kind of the historical tariffs that that administration has put forward.
Speaker Change: Is that a net positive for you in terms of, you know, additional tariffs on China and more, you know, product flow looking to move around and get out of China and potentially benefit from that, moving some of that to the U.S.?
Speaker Change: Jordan, maybe you just refresh us what, you know, historically you guys have seen in this prior administration.
Speaker Change: Yeah, we've been seeing this trend of getting out of China for three or four years now. But I think with the new administration, I think it will speed up the process.
Speaker Change: if the tariff rate is going to be heightened, especially from China.
But, you know...
Speaker Change: You can never replace completely the sourcing from China, but I think
Speaker Change: a lot or more of our customers will try to speed up that process.
So that that is a positive to us.
Speaker Change: Great. I appreciate the time and nice work working through the last year or two. I know it's been not easy for you guys, but nice job.
Thank you, Mark.
Yeah, thank you. Thank you
Speaker Change: Yeah, in fact, in terms of the growth of the business, I think...
Speaker Change: Besides a few customers being brought in from Busan Joint Venture, I think for Jurassic itself, there is currently at least five new customers.
Speaker Change: knocking on our door and give us trial orders. And it presents a very clear picture that most customers would like to place order to
duty-free or offshore country instead of China.
Yeah
Speaker Change: So, I mean, so we are quite optimistic about the order book, and as we just discussed, besides the warehouse, we may immediately have a plan.
Speaker Change: to build the factory and dormitory as well. So I think in this.
Speaker Change: In the next few months, we will have a final decision.
Speaker Change: Whether we should embark on the expansion plan or not, yeah, we'll let you know, yeah.
after we have a three-year plan.
Thank you.
Speaker Change: Thank you. And once again, it is Star 1. If you wish to ask a question today, please press Star 1 on your phone if you wish to ask a question. The next question is coming from Igor Novgorodtsev from Larus Capital. Igor, your line is live.
Igor Novgorodtsev: Hello, and thank you for taking my question. And first of all, congratulations. I'm very happy to see the signs of a real turnaround, both in the much-improved quarter results and...
for much stronger guidance.
Igor Novgorodtsev: So I know the situation has been very difficult last couple of years.
Speaker Change: So, I'm very, very happy and pleased to see it as a major investor. My question is... Thank you.
Yeah, you're welcome.
Speaker Change: My question is about your utilization of your cash. And I think it's been brought up a couple of times before, but my question is from this point of view, you've been incurring significant interest expenses, several hundred thousand every quarter, yet you have a significant.
Speaker Change: cash on hand. I do realize you have a complex corporate structure and not everything is so easy to transfer the cash but
Can you be...
Speaker Change: perhaps find a way to reduce your interest expense going forward because it looks like the rates will stay high for quite some time and maybe talk a little bit about the source of this interest expenses.
Speaker Change: Okay, yeah, we are going to really focus on trying to reduce costs.
Speaker Change: even as we increase sales or with a higher growth rate. However, in the past two quarters,
because of the
Speaker Change: The sudden increase in volume, in sales volume, we were in the need of more working capital.
Speaker Change: and we utilize something called the Supply Chain Financing Program, which is offered by two of our major customers, VF Corp. and also New Balance.
Speaker Change: What it does is allowing us to get paid by the customers, banks, but then we have to pay some form of interest.
Speaker Change: Now, the interest rate is not as high as the regular bank loans, but it is still according to or it is based on SOFA.
Speaker Change: So as the interest rate globally is higher than previously, at least than previous years,
So that's why we incur higher interest expenses.
Speaker Change: along with higher sales. But we are watching this very closely. Another source of interest expenses is on the credit line that we have with our bank. I think it's the DBS.
Speaker Change: And this credit line is not significant, but however, it is something that we use to pay for raw materials, sometimes with LCs and soaps.
We try not to use the crater line as much.
But our experience is
Speaker Change: From time to time, we have to use it. Otherwise, the banks are going to cut it because of...
Speaker Change: non-usage, but we're watching it very closely. We want to please the bank at the same time trying to save interest expenses.
Speaker Change: So I hope that answers your question, and we will try to watch it more closely and balance.
the way of using
Speaker Change: the loan using the financing program, as well as not having to spend too much on interest.
Speaker Change: Thank you, that's a very comprehensive answer. My other question, we already covered recent US election, but my other question is also geopolitical.
Recent turmoil in Bangladesh a few months ago
are basically a cool.
Speaker Change: of some sort. I know that Bangladesh is a major hub of garment manufacturing. Do you see any opportunity there? Are any companies looking to diversify from Bangladesh now that it seems to be just a much less stable company than it was perceived?
Thank you.
moving their sourcing from Bangladesh to Jordan
Thank you.
Speaker Change: launched in Jordan, and they already opened new factories and started production.
And Girard was also approached by...
Speaker Change: to discuss some business opportunity or cooperation together. But still, we did not go into any confirmed agreement.
But definitely, we have been approached by them.
Thank you.
by manufacturers.
Yeah, a manufacturer in Bangladesh.
Speaker Change: Okay, great to hear that actually it's a tremendous opportunity given how important Bangladesh is to your market.
Speaker Change: Thank you. I don't have any more questions. Thank you for your answers. Okay. Thank you.
Speaker Change: Thank you. Thank you. There were no other questions in queue at this time. I would now like to hand the call back to Sam Choi for closing remarks.
Sam Choi: Okay, thank you, Paul. And thanks to all of you for joining us today and for your continuous support. We look forward to speaking with you next quarter. Thank you.
Thank you for watching!
Thank you, everyone.
Speaker Change: Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
Thank you very much.
Thank you.