Q3 2025 Jerash Holdings (US) Inc Earnings Call
Good morning. Welcome to Jirash Holdings Fiscal 2025 third quarter financial results.
Speaker Change: At this time all participants are in a listen-only mode and if anyone should require the operator assistance during this conference please press star zero on your phone keypad.
Speaker Change: Please note this conference is being recorded. I will now turn the conference over to your host, Roger Pondel, Investor Relations of Girash Holdings. The floor is yours.
Thank you. Bye.
Speaker Change: Thank you, Jenny. Good morning, everyone, and welcome to Girash Holdings Fiscal 2025 third quarter conference call. I'm Roger Pondel with Pondel Wilkinson, Girash Holdings Investor Relations Firm. On the call today from the company are Chairman and Chief Executive Officer Sam Choi.
Chief Financial Officer Gilbert Lee.
Speaker Change: Eric Tang, who leads the company's operations in Jordan, and Ringo Ng, head of marketing.
Speaker Change: Before I turn the call over to Sam, I want to mention...
Speaker Change: will remind our listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
including those set forth in the risk factors section.
Speaker Change: of GIRASH's most recent form, 10-K, is 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.
Speaker Change: Actual results could differ materially from these forward-looking statements and Gerash Holdings undertakes no obligation to update any forward-looking statements.
Speaker Change: except, of course, as required by law. And with that, it's my pleasure to turn the call over to Sam Choi. Sam?
Thank you, Roger. Our business is continuing to gain traction.
Sam Choi: With increasing inquiries from new and existing customers, they are looking to add manufacturing partners in territory countries such as Jordan.
Sam Choi: Our fiscal third quarter revenue increased by nearly 30%, yet results were lower than originally anticipated.
Sam Choi: Cells were impacted by congestion at Israel Haifa port due to further geopolitical turmoil in the region, which caused long delays in shipment.
Sam Choi: We estimated that close to 6 million of Finnish schools were not shifted until early in the fiscal fourth quarters.
Sam Choi: improved, and ocean containers are being shipped in a more timely manner.
Sam Choi: We are hopeful that stability in our operating environment will continue, and we are eager to resume our focus on growth.
Sam Choi: On the new business front, we are encouraged by growing interest from international apparel companies, including well-recognized brands in Europe and the Persian Gulf region.
Sam Choi: This supports Durex's goal of diversifying our customer base and expanding product mix.
Our optimism further reflects new possibilities in today's environment.
Sam Choi: based on the competitive advantage for companies doing business in Jordan combined with Duresh's long history and reputation for quality built over the past 20 plus years in the industry
Sam Choi: We do believe we are in an excellent position to capture greater opportunities in the years ahead.
Sam Choi: To support anticipated growth, we recently started expanding two of our existing manufacturing facilities.
Sam Choi: with expectations of being completed by June of this year. The expansions will increase our production capacity by 15%.
Sam Choi: Separately, we are actively working with the Jordanian government to expand our existing facilities in Al-Hassan.
Sam Choi: which by the end of this calendar year could add an additional 5 to 10% of production capacity. And we also are assessing long-term larger scale expansion plans.
Speaker Change: Eric Tang, who is in charge of our operation in Jordan, will share more about that shortly. And I will now turn the call over to him. Eric?
Thank you, Sam.
Jordan remains secure and stable as a country.
Speaker Change: But the broader geopolitical situation in the region has impacted our business since October 2023, especially with regard to both import and export shipping logistics.
Speaker Change: During the past quarter, we again experienced export shipping delays of up to four weeks at the Haifa Port.
Speaker Change: By late January, however, the port congestion had much improved. And today, conditions are essentially back to normal, and ocean containers are being shipped without undue delay.
Speaker Change: I'm also happy to report that our factories are fully booked through August this year.
And orders from our global brand customers are increasing steadily.
Speaker Change: We are receiving a growing number of new business inquiries, in part because of the tariff-free advantage of exporting to the US, EU, and other countries from Jordan.
Sam Choi: As Sam mentioned, we are hearing from both existing customers as well as prospects from international apparel companies.
Sam Choi: Currently, we are working on sample orders and pricing for several well-known brands in Europe and the Persian Gulf region.
along with leading manufacturers in Asia.
Thank you. Thank you. Thank you.
Sam Choi: This is all positive news, but as a reminder, securing large orders from high-profile global brands takes time.
Sam Choi: We are confident that Gerrard's history and reputation for developing and producing quality garments will ensure trust among new customers.
and position us as a reliable and responsible manufacturing partner.
Sam Choi: Now, I'd like now to provide a few details on our expansion plans to accommodate the growth that we see ahead.
Sam Choi: In addition to the current expansion underway at two of our existing primary manufacturing facilities,
Sam Choi: That would add 15% of production capacity by mid-year. We are working closely with the Jordanian Ministry of Labour to finalise a land grant adjacent to our existing facility in Al-Hasa.
Sam Choi: This operation began as a joint venture project between DIRAGE and Jordan Ministry of Labour in 2018 to create employment opportunities for women in remote areas.
Sam Choi: We are planning to enlarge the facility in Ahasa to double its size and increase local hiring of women from 450 to 800.
Sam Choi: According to our current plan, upon completion of this project by the end of 2025, production capacity is expected to increase by another 5 to 10 percent.
Sam Choi: We also are assessing longer-term, larger-scale expansion plans to construct manufacturing, warehousing, and housing facilities on land that we purchased several years ago.
Sam Choi: At this point, we have commenced engineering site studies to review various options.
Gilbert: With that, I will now turn the call over to Gilbert to discuss our financial results.
Thank you, Eric.
Gilbert: Revenue for our fiscal 2025 third quarter increased 28.6% to $35.4 million from $27.5 million for the same quarter last year.
Gilbert: The quarter's revenue reflected an increase in shipments to Jurassic's major U.S. customers.
Sam Choi: As Sam mentioned, due to congestion at Israel's hyperport, which caused the delays in shipments, revenue for the quarter was impacted by approximately $6 million.
Sam Choi: We estimated $3.8 million of finished apparel was kept at the port, along with incurring more than $100,000 of port storage fees.
Sam Choi: Additionally, we held back another $2 million of finished products in our warehouse for the same reason.
Sam Choi: Gross profit for the fiscal 2025 third quarter increased 20.6% to $5.4 million from $4.5 million in the same quarter last year.
compared with 16.2% in the same quarter last year.
Sam Choi: The decrease was primarily driven by higher logistics costs arising from the geopolitical turmoil in the Middle East region.
Sam Choi: Operating expenses for the fiscal 2025 third quarter total $4.7 million, compared with $4.1 million in the same period last year.
Sam Choi: FG&A expenses were $4.2 million in its fiscal third quarter compared with $3.8 million in the same quarter last year.
The increase was primarily due to higher export logistics costs.
Sam Choi: Stock-based compensation expenses for the fiscal 2025 third quarter were $474,000 compared with $243,000 for the same quarter last year.
Sam Choi: Operating income increased 88.3 percent to $708,000 in the fiscal 2025 third quarter from $376,000 in the same quarter last year.
Sam Choi: Total audit expenses were $252,000 in the fiscal 2025 third quarter, compared with $105,000 in the same quarter a year ago.
Sam Choi: The increase was primarily due to higher interest expenses from supply chain financing programs provided by the two major customers.
Sam Choi: Income tax expenses for the fiscal 2025 third quarter were approximately $450,000 compared with $39,000 for the same period in fiscal 2024. The increase was mainly due to a prior year tax provision adjustment.
of approximately 274,000.
Sam Choi: The effective tax rate amounted to 98.6% for the fiscal 2025 third quarter, compared with 14.2% for the same period in fiscal 2024.
Sam Choi: Net income was $6,000 in the fiscal 2025 third quarter, or zero per share, versus $232,000, or two cents per diluted share, in the same quarter last year.
Sam Choi: As of December 31st, 2024, Girage had $14.8 million in cash and restricted cash, and net working capital was $34.8 million.
Inventory was $19.1 million and $7.2 million in accounts receivable.
NETCache used by operating activities.
Sam Choi: was approximately $581,000 for the nine months ended December 31, 2024, compared with net cash provided by operating activities of $7.9 million for the same period last year.
Speaker Change: As Sam and Eric mentioned, we are optimistic about GIRASH's growing business and our factories are fully booked through August.
Speaker Change: Revenue for the fiscal 2025 fourth quarter is expected to increase by 50 to 53 percent from the prior year quarter.
Speaker Change: Revenue for the fiscal 2026 first quarter is expected to be in line with the fiscal 2025 first quarter.
Speaker Change: which was the record and included $3 to $4 million in delayed shipments from the fiscal 2024 fourth quarter.
Speaker Change: Our gross margin goal for the fiscal 2025 fourth quarter is expected to be approximately 15 to 16 percent, subject to logistics and shipping charges and product mix.
Speaker Change: On February 5, 2025, Jurassic's Board of Directors approved a regular quarterly dividend of $0.05 per share on incoming stock payable on February 25, 2025, to stockholders of record as of February 18, 2025.
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 very much. We will now be conducting our question and answer session. If you would like to ask a question, please press star 1 on your phone keypad now. A confirmation tone will indicate that your line is in the queue.
Speaker Change: You may press star 2 if you would like to remove your question from the queue. For any participants using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment whilst we poll for questions.
Speaker Change: Thank you. Your first question is coming from Mark Argento of Lake Street. Mark, your line is live.
Mark Argento: Hey, good morning guys. A quick question given all the talk about this morning. Can you guys hear me all right?
Yeah.
Mark Argento: Given all the talk about tariffs recently with the new administration, has that benefited or increased the number of conversations you're having? It sounds like it has, but maybe you could help quantify that.
Mark Argento: And then, you know, maybe talk a little bit about the timing of the new capacity coming on and how quickly you can see that impact the business.
Well, as we said,
Mark Argento: at the call. We are already fully booked through the summer, through the end of August.
for this calendar year, actually, 2025.
Mark Argento: And new orders are still in the pipeline, and we anticipate that
Mark Argento: The growth opportunities that we have in this fourth quarter, as well as the 2026 fiscal year, are all going to be limited by how fast we can grow our capacity.
Mark Argento: And we're already expanding our internal capacity at the existing facilities.
Mark Argento: And that will add 10 to 15% after we expand the facility, adding more lines.
Mark Argento: And we anticipate that to be finished by June. Is it by June? By June. Yeah, by the end of June. So, which is very quick. And then the other project that we're working on is to expand our
Satellite Factory in El Paso.
which, uh...
Mark Argento: And we will add more workers from 450 people to 800 people. And even though that is a smaller facility, so the overall increasing capacity is we are looking at maybe 5 to 10 percent.
I mean, comparing to the overall capacity.
But the longer term,
Mark Argento: increase will come from, you know, that piece of land that we have had for over five years now. And we are doing engineering study, looking at different options on how to how to build and what kind of cost.
either of them.
We anticipate more and more brands and
Mark Argento: buyers are going to, well, it has already started maybe four to five years ago that people are
Mark Argento: looking for production and manufacturing facilities in the tariff-free countries, but now it is just getting more urgent.
So...
That is a great opportunity for us.
Mark Argento: Yeah, that makes sense. Just another quick follow-up in terms of...
Mark Argento: If you run kind of a test order for a customer, what's the typical conversion rate from test run to a more of a full production run? Is it 50%, 25%, 75%? Maybe you could help us better understand that kind of sales cycle conversion rate.
I'm sorry, what conversion rate are you referring to?
New customer test, new customer full production.
Speaker Change: Typically a customer gives you a test order, Gilbert, typically a customer gives you a test order before they give you a full production order. And I'm just wondering, you convert 100% of the time, or 50% of the time, what's your conversion? Oh, so you mean the... From test to full production.
from a test order to a full-blown order.
Speaker Change: Eric said the timing is going to take a long time. It's going to take at least nine months to convert, but the conversion rate
Speaker Change: that you are looking for, I think the rate is pretty high. Once we start a test order, in most cases,
Speaker Change: I don't know how many percent, but in most cases, the customer will
will issue a
the long-term orders from us.
Speaker Change: Yeah. According to my past year experience with Clarage, I'm Eric. So once the customer process of a trial order, okay, maybe after six months, okay, they will process the bulk quantity orders. We have never failed any customer for the past 10 years.
Great. Appreciate the call. Good luck, guys. Thank you.
Okay, thank you. Thanks, Mark.
Speaker Change: Your next question is coming from Michael Baker of DA Davidson. Michael, your line is live.
Michael Baker: Great. Thanks. I'm just wondering, outside of the increased demand that you're seeing just because of tariffs and people wanting to...
Michael Baker: you know, get out of Asia. Any comment on what you're seeing?
in terms of
Michael Baker: Demand as relates to the US consumer and apparel inventories and buying it seems to be that inventory apparel inventories We're starting to tick up a little bit consumer spending has been good What are you hearing from your customers in terms of you know overall apparel demand?
Speaker Change: Eric, have you heard any comments from customers about the demand on the products, on the apparel overall in the market? Yeah, I have a lot of response from different kinds of customers.
Speaker Change: Some of the customers say they're still, I mean, trying to absorb.
Speaker Change: the high-level infantries. But 60% of the customers told us that most of the infantries they already absorbed during the past two years, they are going to place new orders to Girage. This is what I heard from the buyers.
Speaker Change: Great. And the delayed shipments, the six million, when does that flow through the P&L? Does that come in in the fiscal fourth quarter? Is that part of that growth plan of 50 to 53 percent?
Speaker Change: Yeah, that's part of the 56-53% growth. The fourth quarter, those unshipped...
apparel products. Most of them were shipped in January already.
Speaker Change: So, but with those delayed shipments, that's how we anticipate that the growth is going to be 50 to 53 percent.
estimate
Speaker Change: that we have right now, but we're still kind of, uh...
Speaker Change: being conservative due to, even though the situation in the Middle East
Speaker Change: It's kind of calming down, the ceasefire, we don't know whether it's going to hold or not. But it seems like it's heading to the right direction. But there's still a lot of uncertainty that we're looking at. And then, usually, the fourth quarter...
Speaker Change: It's a slow quarter for us, especially in March, it's Ramadan, and last year
Speaker Change: Last fiscal year, in 2024, we spent a lot of money trying to catch up the production to ship out the products.
to our customers.
Speaker Change: In order for Ramadan, they don't want to work, so we have to motivate them to work and offer them overtime. This year, we want to control our cost. And even though our customers, we're going to work with our customers.
to really
Speaker Change: So, that's why we forecast a lower fourth quarter, but it is still a pretty healthy growth from last year.
That makes perfect sense.
Speaker Change: If I could follow up on that then, understanding that overtime issue as well as some of the costs incurred at the port, that $100,000, first of all, was that incurred in the third quarter? But really the larger question is how should we think about the SG&A costs?
Speaker Change: Going forward, you know that sort of low four million dollars a good run rate
Speaker Change: Yeah, the low $4 million would be a good run rate. I mean, SG&A, a lot of it depends on the sales volume, the sales revenue.
and we incurred a significant amount in the first quarter.
Speaker Change: because we had to air freight some of the shipments due to the delay of production because of the raw material containers didn't get into Jordan. If you remember the Red Sea crisis.
Speaker Change: So, we're trying to control our cost as much as we could, but it is still higher than what it was before.
But a low four would be a good estimate.
Understood. Perfect. Thank you.
Speaker Change: Thank you. Thank you very much. Your next question is coming from Igor Novgorodtsev of Laird's Capital. Igor, your line is live.
Igor Novgorodtsev: Hello and thank you for taking my question. So you mentioned the situation in January now with the ceasefire and much better situation in the Middle East has remarkably improved.
Igor Novgorodtsev: Could you just break it down a little bit more in detail, especially in terms of the logistics of getting things through the Red Sea? Are you getting them now through the Red Sea? And also, how this improved logistics would impact your gross margins?
Igor Novgorodtsev: which if I recall correctly were as high as 19% during COVID.
So maybe just, not necessarily quantitative, but at least qualitative.
Well, we are getting containers.
through the Red Sea.
Igor Novgorodtsev: before the Red Sea was blocked because of the blockage. But now we are getting our importing raw material containers through the Red Sea to Jordan.
Igor Novgorodtsev: But we do have to pay slightly higher container shipment costs, but not as high as the first two quarters. Thank you.
Igor Novgorodtsev: We are doing a very diligent job in controlling our costs.
And that is reflected in the gross margin.
And then on the export side.
Igor Novgorodtsev: We had to pay, let's say, $100,000 in the third quarter because of the port storage fee, because there are containers that were stuck at the port for four weeks.
Igor Novgorodtsev: So, we incur additional cost in there, but now it is getting back to normal. So, the exporting part of it is going to be much improved in this quarter, in the fourth quarter, as well as the past quarter.
the first quarter of 2026.
Does that answer your question?
Speaker Change: yeah and maybe just not to push it too hard but what would you consider your like normalized good gross margin for your like the BGS Q2 and Q3
Q2 and Q3 of 2025.
Speaker Change: Yeah, just in general, even if you don't provide the guidance, what kind of growth margins would you consider be happy and you say this is my normalized growth margins, because you had them very high during the COVID, obviously, because it was a huge demand. And then there was an issue of oversupply, so they fell drastically.
Speaker Change: So now, are they normalizing now? What would be your target gross margin? But you would say, okay, this is a gross margin given our competition and the market pricing that we'd be happy with.
Speaker Change: Well, we anticipate this fiscal year, 2025, the year we will end up around 15 to 16 percent. And going forward, we still would
tried to target
somewhere between 15 to 16 percent because
Speaker Change: Let me tell you why, because we are bringing in a lot of new customers and new products.
on an FOB basis, and because of new customers.
Speaker Change: The margin at the beginning is usually not that good, because there's a lot of sampling. There's a lot of inefficiency, trying to learn.
Speaker Change: When the volume is low, but the styles are many, it is hard to...
Speaker Change: we still want to play the gross margin in around 15 to 16 percent.
Speaker Change: Okay, my other question is about your joint venture with Busana. How's it going? Could you just tell us a little bit more details about it?
Thank you.
Well the Bluesina, um...
Speaker Change: joint venture it is still we're still working on that and the growth is relatively flat but
That was because...
Speaker Change: There were turmoils in the region last year, or in the past 12 months.
and some of the new buyers, new customers.
Speaker Change: people like Macy, like Brooks Brothers, they are kind of cautious. They send us test orders, trial orders.
Speaker Change: But we finished it and they are satisfied, but we're still waiting for them to really jump into the high volume bulk orders.
Speaker Change: I see that Busan make a lot of products and like traditional textile manufacturing countries such as apparel manufacturing countries such as Indonesia and Vietnam and Bangladesh
Speaker Change: do have tariffs on U.S., if U.S. enacts reciprocal tariffs, or what do you expect that they might consider moving some of their factories and the joint venture to Jordan?
Is that a potential play?
Eric Tang: I'm Eric. I can answer your question. Busana has a lot of customers.
Eric Tang: Okay, I'm dealing with different kinds of pricing and also different kinds of stuff. They have manufacturing bases in Indonesia.
Eric Tang: also in Africa, and also a joint venture in Jordan, and Bangladesh also recently. I think nine months ago they started another joint venture in Bangladesh.
Eric Tang: But that doesn't affect us because usually the customer, okay, they would try to tailor make those higher FOB where you order.
Eric Tang: Okay, which the buyers can enjoy more tariff savings, they will place the order to Jordan. While for the low-end products, maybe they don't need too much duty savings, they will place in Bangladesh.
Eric Tang: So for Bosena, we are working with them like with orders like from buyers like Hugo Boss, like Brooks Brothers. These are the high-end customers and high FOB where you order.
Eric Tang: Okay, thank you. That's interesting to know. Thank you. I don't have any more questions. Thank you.
Mike Disler: Thank you very much. Your next question is coming from Mike Disler of AMX Holt.
Mike, your line is live.
Thank you.
Speaker Change: Yes, good day gentlemen This question is how y'all doing? This question is for Gilbert. No disrespect Sam or Eric
Speaker Change: I was just wondering if you anticipate that you would have to tap the credit markets to fund that longer-term, large-scale expansion plan that you're planning with the property you already have.
Thank you for watching!
We did consider having the theft market. Actually,
Maybe, uh...
Speaker Change: Maybe 12 months ago, we were talking to the World Bank.
Speaker Change: and looking at maybe borrowing some money through the World Bank. And right now, we're open to any financing opportunities. Maybe we can go to the equity market.
Speaker Change: support our expansion plan, especially the larger scale expansion. But right now, we haven't really decided which way to go. Maybe it's a combination of both.
Speaker Change: I know that you're maintaining your dividends has been a fairly high priority since inception, since you went public, and I suspect it will remain so only because it provides a floor for the stock price, among other reasons.
Speaker Change: So, in the grand scheme of things, that really is important, but the reality of just figuring out the prudent way to approach the markets, the credit markets now, for that long-term build-out sounds like you're on the right track. So, thank you very much for the update.
Thank you. Thank you. Yes, be well, guys.
Sam Choi: Thank you very much. I will now hand back over to Sam as we have reached the end of our question and answer session. Over to you.
Sam Choi: Okay, thank you, Jenny. 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 very much.
Speaker Change: Thank you. Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.