Jerash Holdings (US), Inc. (JRSH) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong revenue growth projections, strategic collaborations, and a significant production capacity expansion, which are positive indicators. Despite some concerns about potential geopolitical tensions and reliance on debt financing, the company's strategic measures, such as automation and partnerships, are likely to drive future growth. The Q&A session highlighted stable relationships with key customers and effective cost management, further supporting a positive outlook. Although margins may face pressure, the overall sentiment remains optimistic, suggesting a potential stock price increase in the short term.
Key Financial Performance
Revenue $41.8 million, an 18% increase year-over-year, primarily driven by higher shipment volumes to major export markets, including the U.S., and a new customer in Korea.
Gross Profit $7 million, a 31% increase year-over-year, driven by a favorable product mix from new customers and the benefits of economies of scale.
Gross Profit Margin 16.9%, up from 15.2% in the same period last year, due to a favorable product mix and economies of scale.
Operating Expenses $5.1 million, up from $4.7 million in the same quarter last year, primarily due to higher sales volumes and increased recruitment costs, partially offset by lower stock-based compensation.
Operating Income $1.9 million, nearly tripled from $708,000 in the same quarter last year, reflecting improved operational performance.
Total Other Expenses $418,000, up from $252,000 in the same quarter last year, primarily due to increased financing needs and exchange losses.
Income Tax Expenses $368,000, down from $450,000 in the prior year quarter.
Net Income $1.2 million or $0.09 per diluted share, up from $6,000 or $0.00 per diluted share in the same quarter last year, reflecting improved profitability.
Comprehensive Income $1.2 million, up from a comprehensive loss of $147,000 in the same quarter last year, indicating overall financial improvement.
Cash and Restricted Cash $13.2 million as of December 31, 2025.
Net Working Capital $36.4 million as of December 31, 2025.
Inventory $26 million as of December 31, 2025.
Accounts Receivable $7.8 million as of December 31, 2025.
Net Cash Used in Operating Activities $3.5 million for the 9 months ended December 31, 2025, compared with $581,000 for the same period in fiscal 2025, primarily driven by higher receivables and a smaller reduction in inventory, partially offset by improved net income and modest increases in prepaid expenses and advances to suppliers.
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Operating Highlights
Collaboration with Hansoll Textile: Initial large orders placed in June from Hansoll Textile in Korea, progressing well with additional orders for its largest customers.
Diversification of product mix: Efforts to diversify product mix to support stable year-round production and reduce seasonality impact.
Acquisition of manufacturing building in Jordan: Acquired a 184,000 square foot manufacturing building and land in Amman, Jordan, with plans for $3 million in renovations and $2 million in advanced manufacturing equipment to increase capacity by 40%.
Expansion in rural Jordan: Collaborating with Jordan Ministry of Labor to develop facilities in rural towns, expected to add 5%-10% production capacity by fiscal 2027.
Improved financial performance: Revenue grew 18% to $41.8 million, gross profit increased 31% to $7 million, and operating income nearly tripled to $1.9 million in Q3 FY2026.
Capacity optimization: Facilities fully booked through July 2026, with plans to double production capacity in the next 5 years.
Long-term growth strategy: Focus on diversifying customer base and product mix, scaling responsibly, and improving gross margins.
Positioning Jordan as a manufacturing hub: Leveraging Jordan's recognition as a preferred manufacturing hub to attract global brands and strategic partners.
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Risk or Challenges
Tariff Policy Changes: Recent shifts in tariff policy have increased the urgency for global brands to diversify their manufacturing footprint, which could create operational challenges for Jerash as it adapts to these changes.
Expansion and Renovation Risks: The company plans to invest $3 million in renovations and $2 million in advanced manufacturing equipment for a new facility in Jordan, with completion expected by 2026. Delays or cost overruns in this project could impact financial performance and operational timelines.
Recruitment Challenges: The new facility is expected to employ up to 2,500 workers. Recruiting and training such a large workforce in a timely manner could pose challenges, especially in a competitive labor market.
Seasonality and Production Capacity: While efforts are being made to reduce seasonality impacts, the company’s production facilities are fully booked through July, which may limit its ability to accommodate unexpected demand or new customer orders.
Increased Financing Costs: Total other expenses increased due to higher financing needs to support business growth, which could strain financial resources if not managed effectively.
Cash Flow Constraints: Net cash used in operating activities increased significantly, driven by higher receivables and smaller reductions in inventory, which could affect liquidity and operational flexibility.
Shipping and Holiday Delays: The Ramadan holiday at the end of March may cause delays in production and shipping schedules, potentially impacting revenue recognition and customer satisfaction.
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Guidance & Outlook
Revenue Growth: Revenue for the fiscal 2026 fourth quarter is expected to increase by 23% to 26% over the same quarter last year.
Gross Margin: Gross margin target for the fiscal 2026 fourth quarter is 14% to 16%.
Manufacturing Expansion: The company plans to complete renovations of a newly acquired manufacturing facility in Amman, Jordan, by the end of 2026. This facility is expected to increase manufacturing capacity by at least 40% and employ up to 2,500 workers.
Production Capacity: Additional facilities in two rural towns in Jordan are expected to be completed within fiscal 2027, adding 5% to 10% to total production capacity. The long-term strategy aims to more than double current production capacity in the next 5 years.
Customer Demand: Buyers from major customers have submitted increased order projections for calendar year 2026. Facilities are fully booked through July 2026, with commitments for the rest of the year expected soon.
Strategic Diversification: The company continues to diversify its customer base and product mix to support stable year-round production and reduce seasonality impacts.
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Shareholder Return Plan
Dividend Announcement: On February 3, 2026, Jerash's Board of Directors approved a regular quarterly dividend of $0.05 per share on its common stock, payable on February 20, 2026, to stockholders of record as of February 13.
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Key Q&A
Q:How will the $5 million needed for renovations be financed, and where will the $2.8 million from the Housing Bank show up on the balance sheet?
A:The $5 million for renovations and equipment installation will be financed by the Housing Bank through a loan with a subsidized interest rate from the Central Bank. This will appear as long-term debt on the balance sheet, with an 8-year repayment term and a 1-year grace period. The $2.8 million for the building and land will also be a mortgage by the Housing Bank, with an 8% interest rate and a similar 8-year term with a grace period.
Q:What is the total amount of debt that will show up on the balance sheet for these projects?
A:The total debt will be approximately $8 million, including the $5 million for renovations and equipment and the $2.8 million for the building and land.
Q:Can you provide more details on the two additional facilities being planned, including their size and financing?
A:The two additional facilities are smaller satellite factories in rural areas, aimed at increasing capacity by 5%-10%. These factories are part of a collaboration with the Department of Labor to promote rural employment and will be financed similarly to the previous satellite factory. They will focus on training local workers and handling less complex garment styles, which will improve efficiency and reduce transportation costs.
Q:How quickly will the 40% capacity increase come online, and how will it impact revenue?
A:The renovation is expected to be completed by the end of 2026, with recruitment and training of workers starting beforehand. The new facility should be operational by the end of 2026 or early 2027, with full capacity reached in 1-2 years. This will add 40% capacity and 2,500 workers, gradually contributing to revenue.
Q:What factors contributed to the healthy gross margins this quarter, and what is the outlook for gross margins going forward?
A:The healthy gross margins were due to high-volume orders from Hansoll, which improved efficiency and reduced per-unit costs. Going forward, margins may decrease as the company shifts to more complex styles with lower volumes. However, efficiency improvements, automation, and state-of-the-art equipment in the new facility are expected to help control costs and improve output.
Q:What is the contingency plan for potential disruptions due to geopolitical tensions in the region?
A:The company is closely monitoring the political situation and maintains regular communication with the Ministry of Foreign Affairs. Jordan is considered a safe haven in the region, and the company has been assured that operations will not be affected. Ports like Haifa and Aqaba have been stable and efficient in the past six months, mitigating concerns about shipping disruptions.
Q:Why is the company financing its expansion with debt despite having cash on the balance sheet?
A:The company is using cash for growth in business and operating expenses, especially with new customers. Financing expansion with debt is seen as a temporary measure, with plans to consider other financing alternatives once operations stabilize.
Q:How is the company managing pricing pressure from its largest customer, VF Corp, and what is the state of their relationship?
A:The company experiences pricing pressure due to tariffs but remains competitive due to its high-quality and reliable production in Jordan. The relationship with VF Corp is stable, with both parties balancing pricing and operational needs. Jordan's tariff advantages and cost adjustments in fabric and trims help mitigate pricing pressure.
Q:What progress has been made on tax strategy, and what is the expected effective tax rate going forward?
A:The effective tax rate was lower this quarter due to higher income and adjustments for global operations. The company is working with a tax consultant to improve tax planning. The projected effective tax rate is between 25%-30% going forward.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the question about contingency plans for potential disruptions due to geopolitical tensions. While they assured that Jordan is stable and ports are functioning efficiently, they did not provide specific contingency measures or detailed plans for handling potential disruptions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Amman Housing
Bank Trade
Buyers projection
Choi Chief
Conference PondelWilkinson
Finance transaction
Hansoll benefit
Hansoll shipment
Housing Bank
Inc hello
Korea collaboration
Labor facility
Mr Investor
Ng Head
Officer Choi
Renovation end
Ringo Ng
SEC law
Sir result
Textile Korea
Trade Finance
Treasurer result
ability demand
acquisition foot
announcement week
bank manufacturing
base product
building land
capacity expansion
customer base
demand order
equipment
facility production
investment
manufacturing building
order volume
renovation
JRSH Transcript
Jerash Holdings (US), Inc. (JRSH) Q3 2026 Earnings Call Transcript
Positive2-9
The earnings call reveals strong revenue growth projections, strategic collaborations, and a significant production capacity expansion, which are positive indicators. Despite some concerns about potential geopolitical tensions and reliance on debt financing, the company's strategic measures, such as automation and partnerships, are likely to drive future growth. The Q&A session highlighted stable relationships with key customers and effective cost management, further supporting a positive outlook. Although margins may face pressure, the overall sentiment remains optimistic, suggesting a potential stock price increase in the short term.
Jerash Holdings (US), Inc. (JRSH) Q2 2026 Earnings Call Transcript
Unknown11-12
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.
Jerash Holdings (US), Inc. (JRSH) Q1 2026 Earnings Call Transcript
Positive8-12
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.
Jerash Holdings (US), Inc. (JRSH) Q4 2025 Earnings Call Transcript
Positive6-23
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.
JRSH Report
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