Jerash Holdings (JRSH) Q2 2027 Earnings Call Transcript

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DATE

Tuesday, Nov. 10, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Sam Choi
• Chief Financial Officer - Gilbert Kwong-Yiu Lee
• Operations Lead in Jordan - Eric Tang
• Investor Relations - Roger Pondel

TAKEAWAYS

• Revenue -- $50.3 million, representing 19.8% growth driven by higher shipments to major U.S. customers.
• Gross Profit -- $9.1 million, an increase of 45.4% compared with $6.3 million in the prior-year period.
• Gross Margin -- 18.2%, expanding 320 basis points due to automation efficiency, strategic raw material purchases, and tighter controls on wastage.
• Operating Income -- $3.1 million, increasing nearly threefold from $1.1 million in the second quarter of the previous year.
• Net Income -- $2.2 million, advancing 4.5 times from the $479,000 reported in the prior-year period.
• Diluted EPS -- $0.16, compared with $0.04 in the second quarter of fiscal 2026.
• Production Capacity -- Fully booked through June 2027, as incoming orders from existing and prospective customers remain strong.
• Short-term Capacity Expansion -- 8% expected increase by December 2026, through the addition of production lines at two existing manufacturing facilities.
• Long-term Capacity Expansion -- 15% to 20% projected increase by September 2027, following renovations at a recently acquired facility and construction of a third satellite factory.
• Winter Jacket Order -- 5.35 million pieces secured through strategic partner Hansol, with production potentially beginning in fiscal 2028.
• Trial Orders -- 80,000 pieces across two trial orders for an iconic American apparel brand, with potential for significant future business if performance meets expectations.
• Workforce Growth -- 1,300 local and foreign workers hired since April 1, 2026, to support expansion and replace completed contracts.
• Effective Tax Rate -- 15.7%, down from 24.3% due to a Jordanian tax concession lowering the corporate rate from 20% to 10%.
• Third Quarter Revenue Guidance -- $49 million to $51 million, representing projected growth of 17% to 22% year over year.
• Third Quarter Gross Margin Guidance -- 16% to 17%, reflecting the impact of higher import logistics costs for raw materials.
• Cash Position -- $16.9 million in cash, cash equivalents, and restricted cash as of Sept. 30, 2026.
• Operating Cash Flow -- $7.5 million for the first six months of fiscal 2027, compared with $318,000 in the previous year.
• Net Working Capital -- $40.6 million as of the end of the second quarter.
• Inventory -- $23.3 million as of Sept. 30, 2026, representing a decrease from $30.0 million as of March 31, 2026.
• Dividend -- $0.05 per share, approved for payment on Nov. 23, 2026, to stockholders of record as of Nov. 16, 2026.

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RISKS

• Sam Choi stated, "Over the past several months, regional shipping disruptions and ongoing uncertainty have driven up transportation costs for imported materials," noting that these logistics challenges continue to weigh on the operating environment.
• Gilbert Kwong-Yiu Lee warned that the time required to train new workers, which can take two to three months, can have a "negative impact on our productivity and efficiency."

SUMMARY

Jerash Holdings (US), Inc. (NASDAQ:JRSH) reported fiscal second quarter results that management attributed to increased shipment volumes to major U.S. customers and operational efficiency gains from automation. The company reported that its production capacity is fully committed through June 2027, prompting strategic initiatives to expand throughput via facility renovations and shift additions. Management stated that logistics challenges in the Middle East continue to elevate transportation costs for imported materials, which influenced the financial outlook for the upcoming period. Strategic partnerships with Korean apparel groups and a tax concession in Jordan provided additional support to profitability and volume growth during the quarter.

• The company plans a pilot program for a two-shift rotation in one factory to increase capacity while minimizing capital expenditure.
• Management is converting a recently acquired facility into a smart warehouse and centralized cutting department, which will include 500 new sewing machines.
• A second large Korean apparel vendor has initiated discussions and provided two trial orders totaling 80,000 pieces.
• Sam Choi stated, "Our production facilities are fully booked through June 2027."
• The Jordanian government is supporting the construction of a third satellite factory in rural communities to create approximately 500 local jobs.
• Eric Tang noted that the company expects to increase overall production capacity by approximately 8% by December through the addition of lines at existing facilities.

INDUSTRY GLOSSARY

• Hansol: A major Korean apparel group that serves as a strategic partner for Jerash.
• Satellite factory: A smaller production unit located in rural communities, often supported by government initiatives to create local employment.
• Smart warehouse: A facility utilizing automation and advanced technology for inventory management and logistics efficiency.
• Wastage allowances: The permitted amount of material lost or scrapped during the manufacturing process.
• U.S.-Jordan Free Trade Agreement: An agreement providing duty-free and tariff-free access for apparel and textile exports from Jordan to the United States.

Full Conference Call Transcript

Operator: Good morning, and welcome to Holdings Fiscal 27 Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. And we will open up the floor for your questions after the presentation. You can press 1. Should you wish to remove yourself from the queue, press 2. It is now my pleasure to turn the floor over to your host, Roger Pondel, Investor Relations. The floor is yours.

Roger Pondel: Thank you, operator. Good morning. everyone, and good afternoon to some of you, and welcome to Jerash Holdings Fiscal 27 Second Quarter Conference Call. I am Roger Pondel with PondelWilkinson, Jerash Holdings Investor Relations firm. On the call today from the company are chief executive officer, Sam Choi chief financial officer, Gilbert Kwong-Yiu 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 2000.

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 may differ materially from these forward looking statements and Jerash Holdings undertakes no obligation to update any forward looking statements except as required by law. With that, it is my pleasure to turn the call over to Sam Choi. Sam?

Lin Hung Choi: Thank you, Roger. We deliver meaningful growth in both revenue and profitability for the fiscal second quarter. Even as logistics challenges across the Middle East weighs on the operating environment. Over the past several months, regional shipping disruptions and ongoing uncertainty have driven up transportation costs for imported materials. Making our results all the more significant. Despite these external pressures, revenue grew by nearly 20%. And gross margin expanded by 320 basis points. Compared with the prior year quarter. We improved margins by strategically purchasing raw materials early. Maintaining disciplined cost controls, reducing waste, and enhancing operation efficiency through automation initiatives. The quarter's results underscore the resilience of our Jordan based manufacturing platform. And the advantages it offers.

Including duty and tariff free assets for apparel and textile exports to the United States Europe, and other key markets. Just as important, we continue to deliver reliably and on time in a challenging environment. All of this remains a competitive advantage for Jerash and for our customers. Turning to demand and capacity. I am happy to report that our production facilities are fully booked. Through June 2027. And incoming orders remain strong. We are actively looking for ways to expand capacity to support continued growth and pursue new business opportunities. We expect the renovations at our most recently acquired facility and construction of our satellite factories, supported by the Jordanian government, Will be completed by September 2027.

The additional capacity will help us meet increasing customer demand and support our long term growth objectives. Despite ongoing geopolitical and regional conflicts, we have continued to navigate effectively while maintaining our commitment to operational excellence and execution of our growth strategy. We believe Jordan's favorable trade environment will continue to support our growth and our future growth. open new opportunities with customers and strategic partners, and strengthen our ability to create long term value. For our customers and shareholders. With that, I will now turn the call over to Eric Tang who is in charge of our operations in Jordan. Hi, Eric.

Eric Tang: Thank you, Sam. Customer interest continues to build. With increasing order volumes and new inquiries from both existing and prospective customers. Following the July announcement of the U.S.-Jordan trade agreement, which reinforce the benefits of the 2001 free trade agreement. Including duty free access for Jordanian apparel and textile exports. Jerash is uniquely positioned to leverage these advantages to attract new business. Deepen customer partnership, and drive sustainable long term growth. On the business front, we continue to receive additional orders from Hansol. Our strategic partner in Korea, and has recently completed product development for potentially significant winter jacket order for its customer. With production, that could begin at the start of our fiscal 2028 year.

We have completed product development with another strategic partner. A large government conglomerate and are now producing an initial trial order for an iconic American Apparel and lifestyle brand. If the trial order meets expectations, it could lead to additional orders and further enhance our growth momentum. As Sam mentioned earlier, our facilities are fully booked through June 2027. We are actively pursuing opportunities to expand production capacity including our previously announced plans to add production lines at 2 existing manufacturing facilities. Upon completion of the project by December, we expect to increase our overall production capacity by approximately 8%. Another expansion project involves converting our most recent acquired facility into a smart warehouse and cutting operation.

While also adding production lines. This phrase includes 500 new state of the art sewing machines, additional automation, and the hiring of approximately 1100 foreign workers. We now expect to complete this phase by September 2027. Increasing production capacity by another 15% to 20% Our partnership with the Jordanian Ministry of Labor continues to deepen. As we move forward with construction of a third satellite factory, that will expand the capacity in rural communities. And create approximately 500 new local jobs. Since the start of fiscal 2027 on April 1, 2026, our Jordan operation have hired over 1300 local and foreign workers. Including a number of replacement workers, following the completion of their contract terms.

As we continue to hire and train new workers, we expect productivity to improve as they gain experience. We also plan to add shifts as needed to meet consumer demand. At the same time, we continue to manage near term logistic challenges related to the ongoing conflict in the Middle East. While operations at the Haifa and Aqaba ports have returned to near-normal levels, with minimum delay, transportation cost, remain elevated. Our team remains optimistic about the opportunities ahead. Jordan's favorable trade environment and our long standing reputation for quality, reliability, and service. Continue to enhance our competitive position in the global apparel market.

As mentioned, we are strategically expanding our production capacity and operational infrastructure to meet rising demand from existing and new customers. With that, I will turn the call over to Gilbert to discuss our financial results. Gilbert, please.

Gilbert Kwong-Yiu Lee: Thank you, Eric. Just want to make a minor correction. When Eric said that we were hiring approximately 1.1 thousand-- 1100. Okay? Alright. Revenue for the fiscal 27 second quarter grew 19.8% to $50.3 million from $42 million in the same quarter last year. The increase primarily reflected higher shipments to our major US customer and others whose orders are primarily for the U.S. Gross profit increased 45.4% to $9.1 million for the fiscal 27 second quarter from $6.3 million in the same quarter last year. And gross margin for the quarter increased 320 basis points to 18.2% compared with 15.0% in the same period last year.

The improvement was primarily driven by higher shipments to US customers that typically generate stronger margins. As well as improved efficiency gains from automation advanced purchases of raw materials, and tighter controls on wastage allowances. Operating expenses totaled $6.1 million in the fiscal 27 second quarter compared with $5.2 million in the same quarter last year. The increase was primarily attributable to higher sales volume as well as increased headcounts and related expenses. Operating income for the fiscal 27 second quarter increased nearly threefold to $3.1 million from $1.1 million in the same quarter last year. And total other expenses were $500,000 for the fiscal 27 second quarter. Compared with $456,000. In the same quarter last year.

The increase was primarily attributable to higher interest expense on the mortgage loan used to purchase our new facility in early 2026. As well as higher cost under the company's customer supply chain financing programs. From increased shipment volumes. Income tax expenses were $402,000 in the fiscal 27 second quarter compared with $154,000 in the same quarter last year. The effective tax rate decreased to 15.7% in the same quarter of fiscal 27. Compared with 24.3% in the prior year period. Primarily due to a tax concession in Jordan that lowered the corporate income tax rate from 20% to 10% effective October 2025.

Net income for the fiscal 27 second quarter advanced 4.5 times the prior year level. reaching $2.2 million or $0.16 per diluted share compared with $479,000 or $0.04 per diluted share. In the same quarter last year. Comprehensive income attributable to the company's common stockholders advanced to $2.2 million in the fiscal 27 second quarter from $444,000 in the same period last year. As of September 30, 2026, cash, cash equivalents, and restricted cash totaled $16.9 million. And net working capital was $40.6 million. Inventory was $23.3 million and accounts receivable amounted to $4.3 million. Net cash provided by operating activities was $7.5 million for the 6 months ended September 30. Compared with $318,000 in the same period last year.

On November 5, 2026, Jerash's board of directors approved a regular quarterly dividend of $0.05 per share on its common stock. Payable on November 23, 2026 to stockholders of record as of November 16, 2026. As Sam and Eric noted earlier, we are optimistic about the company's future growth. As we focus on improving operational efficiency adapting to current market conditions and executing on our expansion plans. Looking ahead for the fiscal 27 third quarter, ending December 31, 2026 we expect revenue of approximately $49 million to $51 million. Gross margin is expected to range between 16% to 17%.

Reflecting higher import logistic cost for raw materials bought for production for the next 2 quarters and the temporary impact of onboarding new employees. I will now turn the call back to the operator as we open the call for questions.

Operator: Thank you. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press 1. We do ask if listening on speakerphone today please pick up your handset while asking your question to provide optimal sound quality. Once again, please press 1 on your phone at this time to join the queue to ask a question. Please hold a moment while we poll for questions. Our next question from Ryan Meyers from Lake Street Capital Markets.

Ryan Meyers: Hey, guys. Thanks for taking my question. First 1 for me, just on the gross margin during the quarter. How much of that was kind of permanent efficiency improvements versus how much of that was raw material purchases? Just walk us through and break down strong gross margin during the quarter. And how much of that stuff will continue going into the future?

Gilbert Kwong-Yiu Lee: Well, it is hard to distinguish how much impact was on the quarter's gross margin was due to permanent operational efficiency, or how much is due to purchasing of raw material ahead of time, But I think overall, our long term gross margin will gradually improve, which is our goal. We are working on a number of areas. Operational efficiency, productivity, trying to minimize the impact of increasing logistics cost as well as policy or procedures. To reduce the wastage And there are some other headwinds that we are facing. So we have to bring in new workers. As we grow.

And some of the existing workers continue to when the contract expires, they have to go back home and we will have to bring in replacements new replacements. So those new workers will take a while, 2 or 3 months to get up to speed. So that will have some negative impact on our productivity and efficiency. But at the same time, we are trying very hard to improve the overall efficiency on all our manufacturing facilities. And another very important factor is that the customer mix and the product mix, so that changes from quarter to quarter and from year to year.

So it is really difficult to pinpoint which improvement is which especially when you compare to a year ago.

Ryan Meyers: Okay. It makes sense. And then with the facilities booked through June 2027, how much of that represents purchase orders that you guys already have versus customers projecting out that far thinking about what their products are going to look like, And then maybe what else are you guys seeing? And are you seeing an acceleration from new customers?

Gilbert Kwong-Yiu Lee: Well, first of all, correct me if I am wrong. Eric. I believe when we say that our facilities are or our capacities are fully booked through June 2027, I believe all these are already orders that were confirmed. Up to this point. And basically Yes. We received customer's order. Right. So there are still. Thank you, Eric. So there are still orders that keep coming in and that we are anticipating. For the second half of the calendar year 2027. That we are working on product development, sampling, pricing exercises, So all those demands keep coming in and I think within the next month or 2, those will become confirmed orders.

Ryan Meyers: Okay. Got it. Congrats on the great work and for taking my questions.

Gilbert Kwong-Yiu Lee: Thank you. Eric, do you have anything to add to this question? About new orders, new customers?

Eric Tang: Yeah. Yes. Yes. I have a little bit to add is that what we mean by the factory. Okay. booked through June 2027. Means we have all confirmed order. Allocated to all the production lines and all our production line will be working on full capacity 100%, okay, until the end of June 2027. Of course, we are keeping receiving projected orders from customer. At the same time, they are also very solid orders from customers, which require us To deliver I mean, before June 2037, of which we do not have capacity. We are now also discussing with those customer trying to I mean, ask them to revise the delivery schedule to the next quarter.

So that we can accommodate these orders from the customer. So this is what I want to add. Thank you.

Lin Hung Choi: Thank you.

Operator: Next question comes from Mike Baker with D.A. Davidson. Please go ahead.

Mike Baker: Okay. Thanks, guys. I wanted to ask about the capacity expansion. I think you if I am sort of hearing it correctly, there are sort of 3 things that you are doing. You are adding lines, to existing facilities, You are. Then there is a. Another project where you are just sort of redoing the whole facility. And then thirdly, a new satellite, factory. Is that right? Am I articulating that correctly? And then the second part of my question is you kept talking about adding even more capacity Are you looking to add more capacity even above and beyond those existing projects that you specifically outlined?

Gilbert Kwong-Yiu Lee: Yeah. Mike, thank you for asking the question. You are correct. On your articulation of our expansion projects at this point. Adding additional machines or additional production lines in our existing facilities, that will give us a little bit of additional capacity. Just to just to kind of ease the pressure from our existing and new customers who want immediate or. Well, immediately, meaning the next 6 months or 9 months. Demand. So that is kind of ongoing. All the time. We try to squeeze more production lines, more machines in our existing facilities by better improvement of layouts and so on. And then the second 1 is to yes, we purchased a facility earlier this year.

I think it was in January or February 2026, which did not show up, on our current fiscal year. It was actually in our last fiscal year, of 2026. So that facility we have been working on designing and well, first, we wanted to set up a centralized smart warehouse and also a centralized cutting department in that facility plus some production lines But now as we see more pressing demands, of, production, from our customers. Now we are going to focus on first, developing the production lines. And then worry about the centralized warehouse later.

So that is right now, what our focus is and try to get that facility up and running which still going to be somewhere in next fiscal year. And so that is the second project. And the third 1, like you said, is the addition of rest. Satellite factories with the cooperation and working together with the government after the of Jordan the labor. The Ministry of Labor Sorry. And the World Court So those will those will add more capacity But yeah, those what we are working on right now, And 1 facility or 1 factory is already in operation. And then the other 1 we have to build a building.

And that should be completed also somewhere in year 2027. I mean, calendar year 2027. So those are the 3 that we have been talking about But then we are still actively looking for other ways to add capacity. Outside of these 3 projects. And yeah, you are correct. Yes.

Lin Hung Choi: I am Sam. I may I may try to add 1 more point to increase our capacity. We will. Maybe 3 months later, we will try a new project is to working in 1 of our factory for 2 shifts. That will be 1 of our trial project. That means making use of the existing facilities We are working on 2 shifts. So to minimize the CapEx, but to increase capacity as well. Yeah. That will be another way to increase our capacity.

Mike Baker: Got it. Yeah. that is great. Thank you, sir. Thank you. 2 more quick ones here. Well, maybe not quick ones. But I did wanna. Yeah. It sounded like you talked about at least 2 sort of trial, production lines or orders that you are working with or develop. I think product development that you talked about, 1 with Hansol for a jacket, think, think you said, and then another 1 with a. With another customer. Can, you know, any way to sort of quantify the size of those? Or what kind of visibility assuming that those come to fruition what kind of visibility does that give you in terms of overall top line growth from those kinds of orders?

Lin Hung Choi: Well, without naming names, I think we pretty much know who the end customer is. But in terms of what the quantify or the significance of these 2 projects. Yeah. There are 2. 1 is with Hansol, and the other 1 is with another large potent Thank you, Gilbert.

Eric Tang: As well, I think we previously already reported couple of times that we are working very closely with Hansol, which is, 1 of the biggest I mean, apparel group in Korea. So we are working very successfully, and we have already delivered a few orders for them move for a significant figures. At the same time, okay, in the beginning of this year, we also started discussions with another very big apparel, which is also based in Korea, which is much bigger than Hansol. So after several discussion, we got 2 trial orders from them. Okay. And we already started this month. So it is that the 2 trial orders will be expecting to complete it in December.

If everything goes well, and we are expecting. Okay. From this, I mean, another big vendor, okay, a significant amount of business for 2027.

Mike Baker: And, can you give an approximately how many pieces for these 2 orders?

Eric Tang: For these 2 order, that each order is the quant is around 40,000 pieces. 40,000 which sums up to 80,000 pieces.

Mike Baker: Mhmm. And the 1 with Hansol?

Eric Tang: Hansol. Well, Hansel, we have just secure a very big order with them, okay, of which the order quantity is 5.35 million pieces.

Mike Baker: And presumably, this is all above and beyond. Well, the. Or the trial orders, that is above and beyond the, you know, what you have talked about in terms of capacity being full through June 2027. This would go after that, presumably.

Eric Tang: Yes. All of these projected orders-- I mean, Already told the customers that we are booked through already June 2027. All the new orders or new projects coming So they understand that we will be able to accommodate them after June 2027.

Mike Baker: Got it. 1 more real quick. Just a boring question on the tax rate. That new tax rate, so is that a permanent change? So can we in our models, think about 15% going forward?

Gilbert Kwong-Yiu Lee: Yes, the tax rate, the tax concession. From the Jordan government or the Jordan tax authority is I would not say permanent, but it is as long as until they change it. As far as we can see. Yep.

Mike Baker: Makes sense. Okay. Awesome. Thank you.

Lin Hung Choi: Thank you.

Operator: Thank you. At this time, I will turn the call back over to Sam Choi, CEO, for closing comments.

Lin Hung Choi: Thank you, operator, and thank you all for joining us today. We appreciate your ongoing support and interest in Jerash. And look forward to updating you on our progress in the near future. Thank you very much. Thank you.

Operator: This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Gilbert Kwong-Yiu Lee: Thank you very much. Thank you, everyone. Thank you. Thank you.

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