Jerash Holdings (US) Q2 2027 Earnings Call Transcript

Jerash Holdings (US) (NASDAQ:JRSH) reported second-quarter financial results on Tuesday. The transcript from the company’s second-quarter earnings call has been provided below.

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Summary

Jerash Holdings (US) reported a 19.8% increase in revenue to $50.3 million for the fiscal 2027 second quarter, driven by higher shipments to major U.S. customers.

Gross profit increased by 45.4% to $9.1 million, with gross margin expanding by 320 basis points to 18.2%, attributed to efficiency gains and strategic raw material purchases.

The company is fully booked through June 2027, with strong incoming orders and plans to expand capacity through renovations and new factory construction by September 2027.

Operational highlights include completion of product development for a significant winter jacket order and trial orders for a large garment conglomerate and an iconic American brand.

Net income rose 4.5 times to $2.2 million, with an effective tax rate reduced to 15.7% due to a tax concession in Jordan.

Future guidance estimates third-quarter revenue between $49 million and $51 million, with gross margins expected to range between 16% to 17%.

Full Transcript

OPERATOR

Good morning and welcome to Jerash Holdings (US) Fiscal 2027 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. If you wish to join the queue to ask a question at any time, you can press star one. Should you wish to remove yourself from the queue, press star two. It is now my pleasure to turn the floor over to your host, Roger Pondell, Investor Relations.

The floor is yours.

Roger Pondell (Investor Relations)

Thank you, operator. Good morning, everyone, and good afternoon to some of you, and welcome to Jerash Holdings (US) fiscal 2027 second quarter conference call. I’m Roger Pondell with PondelWilkinson, Jerash Holdings (US) investor relations firm. On the call today from the company are Chief Executive Officer Choi Lin Hung, 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. 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. Forward-looking statements, except as required by law. And with that, it is my pleasure to turn the call over to Sam Choi. Sam,

Choi Lin Hung (Chief Executive Officer)

Thank you, Roger. We delivered meaningful growth in both revenue and profitability for the fiscal second quarter, even as logistics challenges across the Middle East weigh 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 operational 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 access 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 significant competitive advantage for Jerash and for our customers.

Turning to demand and capacity, I’m 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 third satellite factories, supported by the Jordanian government, to 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 uncertainties 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 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.

Eric Tang (Head of Jordan Operations)

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 reinforced 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 partnerships, and drive sustainable long-term growth.

On the business front, we continue to receive additional orders from Hansel. Our strategic partner is in Korea and has recently completed product development for a 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 garment conglomerate, and also 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 of 2027. We are actively pursuing opportunities to expand production capacity, including our previously announced plans to add production lines at two 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 recently acquired facility into a smart warehouse and cutting operation while also adding production lines.

This phase includes 500 new state-of-the-art sewing machines, additional automation, and the hiring of approximately 1,100 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 facility capacity in rural communities and create approximately 500 new local jobs. Since the start of 2027 on April 1, 2026, our Jordan operations have hired over 1,300 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 minimal delay, transportation costs 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 a global apparel market.

And 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 K Lee (Chief Financial Officer)

Thank you, Eric. Just want to make a minor correction. When Eric said that we were hiring approximately 11,000 foreign workers, I’d like to correct that it was actually 1,100. Okay, all right. Revenue for the fiscal 2027 second quarter grew 19.8% to $50.3 million from $42.0 million in the same quarter last year. The increase primarily reflected higher shipments to our major U.S. customer and others whose orders are primarily for the U.S. Gross profit increased 45.4% to $9.1 million for the fiscal 2027 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 U.S. customers that typically generate stronger margins, as well as improved efficiency gains from automation, advance purchases of raw materials, and tighter controls on wastage allowances. Operating expenses totaled $6.1 million in the fiscal 2027 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 2027 second quarter increased nearly three times to $3.1 million from $1.1 million in the same quarter last year. And total other expenses were $506,000 for the fiscal 2027 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 costs under the company’s customer supply chain financing programs from increased shipment volumes. Income tax expenses were $402,000 in the fiscal 2027 second quarter, compared with $154,000 in the same quarter last year. The effective tax rate decreased to 15.7% in the second quarter of fiscal 2027, 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 2020. Net income for the fiscal 2027 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 2027 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 six 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 2027 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 logistics costs for raw materials brought for production for the next two quarters, and a 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 star one. 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 star one on your phone at this time to join the queue to ask a question. Please hold a moment while we poll for questions. First question from Ryan Mayers at Lake 3 Capital.

Please go ahead.

Ryan Mayers (Analyst)

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

Gilbert K Lee (Chief Financial Officer)

Well, it is hard to distinguish how much impact 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, by 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, when the contract expires, they have to go back home, and we have to bring in replacements, new replacements. So those new workers will take a while, maybe two or three months, to get up to speed, so that will have some negative impacts on our productivity and efficiency. But at the same time, we’re trying very hard to improve the overall efficiency on all our manufacturing facilities.

And another very important factor is 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 Mayers (Analyst)

Okay, it makes sense. And then with the facilities booked through June of 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 K Lee (Chief Financial Officer)

Well, first of all, correct me if I’m wrong, Eric. I believe when we say that our facilities are, or our capacities are, fully booked through June of 2027, I believe all these are already orders that were confirmed up to this point. And basically we keep customers’ orders, 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 two, those will become confirmed orders.

Ryan Mayers (Analyst)

Okay, got it. Congrats on the great work and thanks for taking my questions.

Gilbert K Lee (Chief Financial Officer)

Thank you. Eric, do you have anything to add to this question about new orders, new customers?

Eric Tang (Head of Jordan Operations)

Yes, yes, I have a little bit to add. Is okay. What we mean by the factory booked through June 2027 means we have all confirmed orders allocated to all the production lines, and all our production lines will be working at full capacity, 100%, until the end of June 2027. Of course, we keep receiving projection orders from customers. At the same time, there are also very solid orders from customers which require us to deliver before June 2027, for which we don’t have capacity.

We are now also discussing with those customers, trying to ask them to revise the delivery schedule to the next quarter so that we can accommodate also these orders from the customers. So this is what I want to add.

Gilbert K Lee (Chief Financial Officer)

Thank you.

OPERATOR

Thank you. Next question comes from Mike Baker with DA Davidson. Please, go ahead.

Mike Baker (Analyst)

Okay, thanks, guys. I wanted to ask about the capacity expansion. I think you, if I’m sort of hearing it correctly, there are sort of three things that you’re doing. You’re adding lines to existing facilities, then there’s another project where you’re 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?

Choi Lin Hung (Chief Executive Officer)

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 kind of ease the pressure from our existing and new customers who want immediate—or immediate meaning the next six months or nine 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 one is to—yes, we purchased a facility earlier this year, I think it was in January or February of 2026, which didn’t 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’re going to focus on first developing the production lines and then worry about the centralized warehouse later.

So that’s right now what our focus is and try to get that facility up and running, which is still going to be somewhere in next fiscal year. And so that is the second project, and the third one, like you said, is the addition of satellite factories with the cooperation and working together with the government of Jordan, the Ministry of Labor—sorry—and the Royal Court. So those will add more capacity, but those are what we’re working on right now. And one facility or one factory is already in operation, and then the other one 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 three that we have been talking about. But then we’re still actively looking for other ways to add capacity outside of these three projects, and yeah, you are correct.

Eric Tang (Head of Jordan Operations)

Yes, Sam, I may try to add one more point to increase our capacity. Maybe three months later we will try a new project to work in one of our factories for two shifts. That will be one of our trial projects. That means making use of the existing facilities, we are working on two shifts to minimize the capex but to increase the capacity as well. Yeah, that will be another way to increase our capacity.

Mike Baker (Analyst)

Got it. Thank you, Sam. Thank you. Two more quick ones here. Well, maybe not quick ones, but I did want to—it sounded like you talked about at least two sort of trial production lines or orders that you’re working with or develop—I think product development that you talked about. Talked about one with Hansel for a jacket, I think you said, and then another one with another customer. 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?

Gilbert K Lee (Chief Financial Officer)

Well, without naming names, I think we pretty much know who the end customer is. But in terms of what quantify or the significance of these two projects—yeah, there are two. One is with Hansel and the other one is with another large potential strategic partner. So I would let Eric talk about these two trial orders or developments. Eric, can you articulate on this?

Eric Tang (Head of Jordan Operations)

Yes, thank you, Gilbert, as well. I think we previously already reported a couple of times that we are working very closely with Hansel, which is one of the biggest apparel groups in Korea. So we are working very successfully, and we have already delivered a few orders for them with significant figures. At the same time, in the beginning of this year, we also started discussion with another very big apparel—also based in Korea—which is much bigger than Hansel.

So after several discussions, we got two trial orders from them, and we already started this month. So the two trial orders will be expected to be completed in December. If everything goes well, we are expecting from this another big vendor a significant amount of business for 2027.

Gilbert K Lee (Chief Financial Officer)

Can you give approximately how many pieces for these two orders?

Eric Tang (Head of Jordan Operations)

For these two orders, each order is—the quantity is around 40,000 pieces. Forty thousand, which sums up to 80,000 pieces.

Gilbert K Lee (Chief Financial Officer)

And the one with Hansel,

Eric Tang (Head of Jordan Operations)

We have just secured a very big order with them, of which the order quantity is 5.35 million pieces.

Mike Baker (Analyst)

Okay. And presumably this is all above and beyond—well, the trial orders, that’s above and beyond what you’ve talked about in terms of capacity being full through June 2027. This would go after that, presumably,

Eric Tang (Head of Jordan Operations)

Yeah, all these projected orders—already told the customers that we are booked through June 2027. All the new orders or new projects coming, they understand that we will be able to accommodate them after June 2027.

Mike Baker (Analyst)

Got it. One 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 K Lee (Chief Financial Officer)

Yeah. The tax rate, the tax concession from the Jordan government or the Jordan Tax Authority is—I wouldn’t say permanent, but it is as long as—until they change it, as far as we can see.

Mike Baker (Analyst)

Yep. Makes sense. Okay, awesome. Thank you.

OPERATOR

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

Choi Lin Hung (Chief Executive Officer)

Okay, thank you, operator. Thank you, all of you, for joining us today. We appreciate your ongoing support and interest in Jerash Holdings (US) and look forward to updating you on our progress in the near future. Thank you very much.

OPERATOR

Thank you. 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.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.