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01/11 03:09
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reflects a positive outlook with record high revenue and reduced net loss. The Q&A reveals cost-effective logistics and a promising partnership with Hansoll, which is expected to boost business. Despite geopolitical challenges, the company is well-prepared with alternative supply routes. While management was vague on gross margin projections, the overall sentiment from analysts is positive, especially with the strategic shift to higher-margin business models. The stock price is likely to increase by 2% to 8% over the next two weeks.
Revenue Revenue for our fiscal 2025 fourth quarter increased by 35.6% to $29.3 million from $21.6 million in the same quarter last year. The quarter's revenue reflected an increase in shipments to Jerash's major U.S. customers. However, due to congestions at Israel's Haifa Port, which caused delays in shipments, revenue for the fiscal fourth quarter was impacted by approximately $3 million to $4 million.
Gross Profit Gross profit for the fiscal 2025 fourth quarter advanced nearly 250% to $5.2 million from $1.5 million in the same quarter of last year. Gross margin increased to 17.9% in the fiscal 2025 fourth quarter from 7.0% in the same quarter last year. The increase was primarily driven by higher production and shipment volume, which lowered the unit cost of production and generated higher margins through economies of scale.
Operating Expenses Operating expenses for fiscal 2025 fourth quarter increased by $284,000 to $4.8 million from $4.5 million in the same period last year. The higher costs included a 4.7% increase in SG&A expenses due to higher sales and an $83,000 increase in stock-based compensation.
Operating Income Operating income was $434,000 for the fiscal 2025 fourth quarter compared with an operating loss of $3 million a year ago.
Total Other Expenses Total other expenses in the fiscal 2025 fourth quarter was $254,000 compared with $134,000 for the same quarter last year. The increase was primarily attributable to higher interest expense from supply chain financing programs and short-term debt as a result of higher sales.
Income Tax Expenses Income tax expenses for fiscal 2025 fourth quarter were approximately $324,000 compared with tax income of $16,000 in the same period in fiscal 2024. The effective tax rate was high due to some tax provision adjustments stemmed from prior year amended tax returns and increase in foreign tax income at operating subsidiaries in Jordan and Hong Kong. Certain nondeductible expenses were reinstated included interest expense limitations, stock-based compensation and entertainment expenses.
Net Loss Net loss was reduced to $144,000 or $0.01 per share for the fiscal 2025 fourth quarter from a net loss of $3.1 million or $0.25 per share in the same period last year.
Cash and Restricted Cash As of March 31, 2025, Jerash had $15.1 million in cash and restricted cash and net working capital was $34.6 million.
Inventory and Accounts Receivable Inventory was $27.7 million and $3.1 million in accounts receivable.
Net Cash Provided by Operating Activities Net cash provided by operating activities was approximately $1.4 million for the fiscal year ended March 31, 2025, compared with $2.5 million for fiscal year 2024.
Full Year Revenue Record high revenue in fiscal 2025 of $146 million.
Operating Income (Full Year) Operating income in fiscal year 2025 was $1.4 million compared with an operating loss of $665,000 in fiscal year 2024.
Strategic Collaboration with Hansoll Textile: Jerash secured a major initial order for one of the largest U.S.-based multinational and omnichannel retail corporations through a strategic collaboration with Hansoll Textile. Production for the order is scheduled to begin in August with FOB delivery planned for Q3 and Q4 of 2025.
Expansion in Oman and Al-Hasa: Completed expansion at the existing manufacturing facility in Oman, increasing production capacity by approximately 15% starting in Q2 of fiscal 2026. Collaborating with the Jordan Ministry of Labor to develop an extension adjacent to the existing factory in Al-Hasa, expected to add 5%-10% in production capacity by early 2026.
Mitigation of Shipping Delays: To address shipping delays caused by disruptions at Israel's Haifa Port, Jerash is rerouting shipments through Jordan's Aqaba Port and exploring additional logistics channels.
Improved Gross Margin: Gross margin increased to 17.9% in Q4 fiscal 2025 from 7.0% in the same quarter last year, driven by higher production and shipment volume, which lowered unit costs and generated higher margins through economies of scale.
Termination of Joint Venture with Busana: Jerash decided to terminate the joint venture with Busana due to limited progress over two years. The dissolution is expected to be completed by April 2027, allowing Jerash to focus on diversifying its direct customer base and expanding its product mix.
Geopolitical Instability: Logistic disruptions at Israel's Haifa Port due to ongoing geopolitical instability in the region have delayed shipments, impacting revenue by approximately $3 million to $4 million in the fiscal fourth quarter. Persistent regional tensions continue to cause delays in export shipments.
Shipping and Logistics Challenges: To mitigate shipping delays caused by the bombing of Haifa Port, the company is rerouting shipments through Jordan's Aqaba Port. However, this adds complexity and potential costs to logistics operations.
Joint Venture Termination: The company decided to terminate its joint venture with Busana due to limited progress over two years. This could pose risks related to the transition and completion of outstanding customer orders, receivables, and other matters by April 2027.
Economic and Tariff Uncertainties: Global brands are seeking manufacturing alternatives due to ongoing tariff uncertainties and dynamic trade environments. This creates both opportunities and risks for the company as it navigates these changes.
Operational Expansion Risks: The company is expanding its manufacturing facilities in Oman and Al-Hasa, which involves onboarding additional foreign workers and collaborating with the Jordan Ministry of Labor. These expansions carry risks related to project delays, cost overruns, and integration challenges.
Supply Chain Financing Costs: Higher interest expenses from supply chain financing programs and short-term debt have increased total other expenses, impacting financial performance.
Tax Structure and Compliance: The company faced a high effective tax rate due to prior year tax provision adjustments and nondeductible expenses. While efforts are being made to consult international tax experts, this remains a potential risk area.
Strategic Collaboration with Hansoll Textile: Jerash secured a major initial order for one of the largest U.S.-based multinational and omnichannel retail corporations through a strategic collaboration with Hansoll Textile. Production for the order is scheduled to begin in August with FOB delivery planned for the third and fourth quarters of 2025. Following this initial order, both parties intend to explore additional synergies and opportunities for continued growth.
Expansion of Manufacturing Capacity: Jerash completed the expansion of its existing manufacturing facility in Oman, which is expected to increase production capacity by approximately 15% starting in the second fiscal quarter. Additionally, the company is collaborating with the Jordan Ministry of Labor to develop an extension adjacent to its existing factory in Al-Hasa, targeting an additional 5% to 10% production capacity by early 2026. Longer-term plans include constructing manufacturing, warehousing, and accommodation facilities on previously purchased land.
Termination of Joint Venture with Busana: Jerash decided to terminate its joint venture with Busana due to limited progress over two years. The dissolution is expected to be completed by April 2027, allowing the company to focus on diversifying its direct customer base and expanding its product mix.
Revenue Guidance for Fiscal 2026 Q1: Revenue for the fiscal 2026 first quarter is expected to be approximately $38 million to $40 million, pending outbound shipping port conditions for the remainder of June.
Gross Margin Guidance for Fiscal 2026 Q1: Gross margin for the fiscal 2026 first quarter is expected to be approximately 15% to 16%.
Future Growth Strategy: Jerash aims to diversify its customer base and expand its product mix to increase year-round capacity utilization and reduce revenue seasonality. The company is also working on sample orders and pricing for well-known brands in Europe and the Persian Gulf.
Dividend Declaration: On May 20, 2025, Jerash's Board of Directors approved a regular quarterly dividend of $0.05 per share on its common stock, payable on June 6, 2025, to stockholders of record as of May 30, 2025.
The earnings call presents mixed signals: a decline in gross profit and net income, but a positive outlook on new customer acquisition and capacity expansion. The Q&A reveals some uncertainty, with management avoiding specific timelines for improved margins. The lack of clear guidance on revenue growth sources and long-term margin goals tempers optimism. Despite some positive developments, such as increased orders and strategic partnerships, the financial performance and guidance uncertainties suggest a neutral outlook for the stock price over the next two weeks.
The earnings call summary and Q&A session indicate a positive outlook. Strong financial performance with improved operating income and net income, along with strategic collaborations like the Hansoll partnership, suggest growth potential. The company's expansion plans, despite some uncertainties, are aligned with customer needs and market opportunities. The tariff advantage and plans to optimize tax structure further support a positive sentiment. Although there are concerns about the timeline for expansion and tax optimization, the overall sentiment remains positive, likely resulting in a 2% to 8% stock price increase.
The earnings call reflects a positive outlook with record high revenue and reduced net loss. The Q&A reveals cost-effective logistics and a promising partnership with Hansoll, which is expected to boost business. Despite geopolitical challenges, the company is well-prepared with alternative supply routes. While management was vague on gross margin projections, the overall sentiment from analysts is positive, especially with the strategic shift to higher-margin business models. The stock price is likely to increase by 2% to 8% over the next two weeks.
The earnings call presents a mixed picture: strong revenue growth and optimistic future guidance are counterbalanced by challenges such as supply chain delays and increased costs impacting margins. The Q&A reveals potential opportunities in tariff-free production but also highlights uncertainties in expansion financing and logistics. The lack of a share repurchase program and marginal dividend further contribute to a neutral outlook. The overall sentiment is balanced with positive growth prospects but tempered by operational and financial risks, suggesting a neutral stock price movement over the next two weeks.
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