Jerash Holdings (US), Inc.

Greetings and welcome to the Jurash Holdings Fiscal 2026 Third Quarter Financial Results Call. At this time, all participants are on a listen-only mode, and the question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Roger Pondell, Investor Relations. Sir, you may begin.

Thank you, Operator, and hello, everyone. Good morning. Welcome to Jurasch Holdings Fiscal 2026 Third Quarter Conference Call. I'm Roger Pondell with Pondell Wilkinson, Jurasch Holdings Investor Relations firm. On the call today from the company are Chairman and Chief Executive Officer Sam Choi, Chief Financial Officer Gilbert Lee, Eric Tang, who leads the company's operations in Jordan, and Ringo Ng, the company's head of marketing. 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 factor 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, and Jurasch Holdings undertakes no obligation to update any forward-looking statements except as required by law. And with that behind us, it is my pleasure to turn the call over to Sam Choi. Sam?

Thank you, Roger. Jurasch achieved sharply improved financial results across both the top line and bottom lines for the fiscal third quarter. The performance reflected continued growing demand from our long-standing global customers, complemented by initial large orders placed in June from our new strategic partner, Hensel Textile, in Korea. Our collaboration with Hensel is progressing well and delivering mutual benefits as we continue to work together on additional orders for its largest customers, a US-based multinational omni-channel retail company. At the same time, our long-standing global brand customers are seeking to secure greater production capacity with Durange. Turning to our recent announcement just last week, we are very excited about the acquisition of a 184,000-square-foot manufacturing building and land in Amman, Jordan, from the Housing Bank for Trade and Finance. This transaction represents an important milestone as we advance the company's next five-year growth strategy. We plan to establish these facilities at Jerez's new flagship production complex through an additional investment of approximately $3 million in renovations and $2 million in advanced manufacturing equipment. Renovations are anticipated to be completed before the end of 2026. Once fully operational, this strategic investment is expected to increase our manufacturing capacity by at least 40%. This expansion will meaningfully enhance our ability to support growing demand from existing customers while positioning the company to pursue new business opportunities. Since the new physical capacity and advanced technological capabilities allow us to scale responsibly while maintaining the quality and reliability our customers expect. As part of our ongoing strategy, we continue to diversify both our customer base and product mix, which supports more stable year-round production and reduces the impact of seasonality of business. These initiatives, combined with our planned capacity expansion, position us to accommodate growing order volumes across new and expanded product offerings. As we scale, we remain focused on driving further improvements in gross margins while maintaining operational and cost control discipline. With that, I will now turn the call over to Eric Tang, who is in charge of our operations in Jordan. Eric?

Thank you, Sam. As we mentioned during our last quarterly call, the recent shift in tariff policy has heightened the urgency for many global brands to diversify their manufacturing footprint, and many are turning to Jordan. Jordan today is being recognized as one of the world's preferred manufacturing hubs. Accordingly, since mid-2025, In response to rising capacity requirements from our customers, we have been actively pursuing opportunities to expand our production capacity. Hence, we are very thrilled with the opportunity to acquire the bank-owned manufacturing building and land, as Sam mentioned. We expect to begin renovations immediately with completion currently anticipated before the end of 2026. Once operational, the new facility is expected to gradually employ up to approximately 2,500 workers. As demand and order volumes increase, recruiting efforts will begin ahead of the completion of renovations and before new equipment is installed. allowing us to ramp up operation quickly and efficiently once the facility comes online. We are now completing production of the final phase of the initial order of 3 million pieces of gold shot from Hansel, with shipment expected to be completed during the current fiscal quarter. At the same time, we are working closely with Hansel and its largest customer, on the second purchase order for a different style. Buyers from major customers have submitted increased order projections for calendar year 2026. And we also are continuing to see new inquiries from global brands and other strategic partners. Our facilities are now fully booked through July, with customers' commitments coming in for the rest of the calendar year soon. We are looking at different ways to expand our production capacity. Currently, we are collaborating with the Jordan Ministry of Labor to develop additional facilities in two rural towns, supporting both our growth objectives and local employment opportunities. We expect this project to be completed within fiscal 2027. Once finished, these new facilities are expected to add an additional 5% to 10% to our total production capacity. This additional production capacity will enable Jiraj to expand existing customer relationships while capturing new growth opportunities. Our long-term strategy is to more than double our current production capacity in the next five years. while continuing to focus on diversifying both our customer base and product mix. Through capacity optimization, our goal is to drive stronger, more consistent top-line growth and improve margins throughout the year. With that, I will now turn the call over to Gilbert to discuss our financial results. Gilbert.

Thank you, Eric. Revenue for the Cisco 2026 third quarter grew 18% to $41.8 million from $35.4 million in the same quarter last year. The increase was primarily driven by higher shipment volumes to the company's major export markets, including the US and a new customer in Korea. Gross profit increased 31% to $7 million for the fiscal 2026 third quarter, from $5.4 million in the same quarter last year. Gross profit margin for the quarter improved to 16.9% from 15.2% in the same period last year, primarily driven by a favorable product mix from new customers and the benefits of economies of scale. Operating expenses totaled $5.1 million in the fiscal 2026 third quarter, compared with $44.7 million in the same quarter last year. The increase was primarily due to higher sales volumes and increased requisition costs and partially offset by lower stock-based compensation. Operating income nearly tripled to $1.9 million in the fiscal 2026 third quarter from $708,000 in the same quarter last year. Total audit expenses were $418,000 in the fiscal 2026 third quarter compared with $252,000 in the same quarter last year. The increase was primarily due to the increase in financing needs to support business growth and exchange losses. Income tax expenses were $368,000 in the fiscal 2026 third quarter compared with $450,000 in the prior year quarter. Net income rose to $1.2 million, or $0.09 per diluted share, for the fiscal 2026 third quarter from $6,000 or $0 per diluted share for the same quarter last year. Comprehensive income attributable to the company's common stockholders advanced to $1.2 million for the third quarter from a comprehensive loss of $147 147,000 in the same quarter last year.

Excuse me.

As of December 31st, 2025, garage had cash and restricted cash total of $13.2 million and net working capital was $36.4 million. Inventory was $26 million, and accounts receivable amounted to $7.8 million. Net cash used in operating activities was approximately $3.5 million for the nine months ended December 31, 2025, compared with $581,000 for the same period in fiscal 2025. The increase in net cash used in operating activities was primarily driven by higher receivables during the first nine months, along with a smaller reduction in inventory from the beginning of the year, partially offset by improved net income and modest increase in prepaid expenses and advances to suppliers. On February 3rd, 2026, Gerash's Board of Directors approved a regular quarterly dividend of $0.05 per share on its coming stock, payable on February 20, 2026, to stockholders of record as of February 13. As both Sam and Eric noted earlier, we are optimistic about our future prospects and performance ahead. we remain focused on cost controls and improving operating efficiency as we implement and execute our long-term expansion strategy. Looking ahead, we expect revenue for the fiscal 2026 fourth quarter to increase by 23 to 26% over the same quarter last year. And our gross margin target for the fiscal 2026 fourth quarter is 14% to 16%. We want to note that the Ramadan holiday this year falls at the end of March, whereas last year it occurred in early April. Depending on production and shipping schedules, some shipments may experience delay into the following quarter. We will now open up the call for questions. and I will turn the call back to the operator.

Thank you. Ladies and gentlemen, at this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. And you may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is coming from Mike Baker with DA Davidson. Your line is live.

Thanks, guys. Just real quick, a couple questions on how these expansions impact your income statement and balance sheet. So I guess first, how do you finance the $5 million needed for renovations? Does that just come out of cash or... or do you borrow to fund that $5 million? And then, I guess, secondly, and related, where does the $2.8 million that's been financed from the housing bank, where does that show up? Is that going to show up as debt on your balance sheet? Thanks.

Thank you, Mike. The first question about a $5 million loan that we estimated cost for renovation as well as equipment installation. The total is $5 million, which includes the renovation, which is $2 million, and also the renovation is $3 million, and the equipment is $2 million. This $5 million is going to be financed by the housing bank also, but it is separately at apply for because the housing bank is going to apply from the central bank, which provides a subsidy on the interest rate, which we will get a lower than market interest rate for this $5 million loan. And this will show up on our balance sheet as long-term debt. I think the repayment is eight years, but we have a one-year grace period. In other words, we don't have to pay back the principal until February of 2027. Now, the $2.8 million for the building and the land is going to be a mortgage by the housing bank, and that is also an eight-year loan. The interest rate, I believe, is 8%, and also there will be a grace period. So the first year we only have to pay quarterly interest, but then it will start repayment of the principal a year later.

Okay, that makes sense. So total then it's going to be, so that's going to show up on the balance sheet debt mortgage. So total is going to be $7.8 million showing up.

Yeah, approximately $7.8 million. Yeah, right. Okay.

Fair enough. If I could ask one more, a little more detail, if you wouldn't mind, on those other... I think you said two other facilities that you're thinking about. It sounds like they're smaller because it'll increase capacity by 5% to 10%, but can you... Yeah, just a little bit more detail on the size of those facilities and, I guess, similarly, you know, how those would be financed.

Yeah, if you remember... A few years ago, we worked with the Department of or the Ministry of Labor to start up a satellite factory in a rural area, which is about one and a half hour outside of Amman. And that has been quite successful. Now, this is mainly to help the Department of Labor to promote business in rural area and also to create job opportunities for those areas that have high unemployment rates. So by working with the Department of Labor, they will work with us, cooperate with us to give us the privilege or the permits to import foreign workers, which we depend on because those are skillful workers and we import a lot of those and we accommodate them in our industrial city and that has been working out very well for us. So just to, as a win-win cooperation with the Jordanian government, we agree to set up another two satellite factories in rural areas, not too far from our main industrial zone, maybe an hour or two hours away, but that will allow us to hire more local workers, which will keep the Ministry of Labor happy and continue to cooperate with us when we need their help. But our goal is to utilize those to train up our local workers as well as to work on some not so complicated garment styles and improve our overall efficiency. So I think overall this is going to be a cost savings to us because those local workers, they don't need to take a long commute And we, of course, we provide them transportation, and that will help us save our transportation costs. So those are smaller scale kind of factories, just like the one that we started a few years ago. And the amount of capacity that they will bring is not going to be like one of the main factories that we have in Amman. Does that answer your question?

Yes, thank you. Understood. Very clear.

And Eric, do you have anything to add?

Oh, also because we have this kind of satellite project which helps the Jordanian government to increase the job opportunities in the rural area. So this is the reason why housing bank can get for garage from the central bank a subsidy of the interest rate in financing a couple of millions of our machinery and renovation costs.

Yeah, that's right. Got it.

Thank you. Our next question is coming from Ryan Myers with Lake Street Capital Markets. Your line is live.

Hey, guys. Thanks for taking my questions. First one for me, so with the 40% capacity, that sounds like it'll come online towards the end of this year into next year. Just curious, how quickly will you guys be able to ramp that up? How much of that is new versus existing business? How much visibility do you have into that? Just as we should think about how you're going to be able to kind of start recognizing revenue through that facility. Just the details there would be helpful.

Well, I think we anticipate the renovations to be finished by the end of this calendar year. So by the end of 2026. And like Eric said, we will start recruiting for new workers and start training them before the renovation is complete and before the equipments are installed. So we're going to take the slower seasons to kind of integrate the new workers and also the new capacity into our production. So hopefully by the end of this fiscal year or the beginning of next, by the end of this calendar year or the beginning of 2027, we'll be able to be online this new facility. and that will increase our capacity up to or at least 40% once it is fully occupied and 2,500 workers brought in. So I think this whole process is probably going to take a year to two years to complete.

Okay, got it. That's helpful. And then just thinking about gross margins for the quarter came in pretty healthy. Can you just walk us through how much of that was the higher overall product mix or just economies of scale and then maybe how we should think about gross margins going forward and kind of where that balances out at?

Well, this past quarter, we focused a lot on the high volume orders that we're doing with Hansel. And that turned out to be a really great enhancement to our efficiency because it is just very simple, not that simple, but we don't have to change over the styles from styles. And it's just one product that we just keep running. So it improves our efficiency a lot. and also the economies of scale because we utilize our full capacity. And overall, the per unit cost definitely, especially the fixed cost per unit, will go down. So that turns out to be improving our margin. Going forward, we're kind of probably going back into... working on more difficult styles, especially with, uh, our long-term customers and the volume will be lower and multiple styles. So we anticipate the, the margin will somewhat, uh, be lower than this current quarter. However, I think the, we have been working on, uh, some efficiency improvements. In some of our facilities, we have installed hanger systems to help the efficiency, and we're looking at other kinds of technological improvements to help us reduce the overall cost in manufacturing, but to be more automated in our factory and also in our warehouses. So I think the improvement will come. And our new facility, the new building that we bought, we're going to install the state-of-the-art equipment and utilize more automation. So this one is going to help us in controlling our costs and improving the output. Got it.

Thanks for taking my questions. Thank you.

Thank you. Our next question is coming from Igor Novgorodsev with Larry's Capital. Your line is live.

Good morning, and thank you for taking my questions. Congratulations on a very strong quarter. Thank you.

My first question is a couple, several years ago, obviously, you had a great disruption because Apologies, sir. One moment, please. One moment, please.

Sorry, Igor, we have your line back, sir.

OK, sorry, I'll start my question again. So. Last couple of years, you had great disruption because of the war in Gaza. So now the situation is up in the air again between, you know, U.S., Iran, and, you know, Israel, and not everybody is sure what's going to happen. What is your contingency plan? What is you're going to do different this time now that it's more anticipated?

Eric or Sam, do you want to take this one? Yeah, Eric first, please. Yeah.

So I think because we are closely monitoring the political situation here, so almost every month, as one of the biggest investors in Jordan, we also have meetings with the Ministry of Foreign Affairs to monitor the very sensitive political situation here, especially about... the possibility of the occurrence of a war in Iran. But still now, okay, according to the latest information, everything is still very stable in the region. And, okay, we don't know whether the war will happen. But even though it has happened, we have been assured, our government has been assured that Jordan, it will not affect Jordan. Jordan will be still the most safest haven. in the region of the Middle East. Okay, we are closely monitoring the situation and we are closely also related this information to our major buyers.

Okay, I was more concerned about the delivery and closure of the HIFO port and so on. So basically you had a real issue shipping stuff in and shipping stuff out. So I assume that you have the contingency plan now because we don't know just how it's going to go.

And nowadays, currently, for the past six months, the Hypha port and the Aga port are working very efficiently and very stable, not like before. So we, for the past six months, okay, so we don't encounter any obstacle in the delivery of our export container. Okay.

My other question is, I see that your expansion... and purchase is going to be financed with debt, and I understand that the rates are quite attractive, but you still have quite a bit of cash on your balance sheet, which doesn't quite earn anything close to 8% that you're going to be paying on your debt.

What are you planning to do with cash?

Well, Larry, actually, we have been utilizing our cash... more extensively in the past year or so. Because of our growth in business and some of the new customers, for our old customers, such as VF and New Balance, they have supplier financing programs that we can rely on to get early payments on the receivables. But new customers, we have to use more cash to finance our purchasing and also our operating expenses. But once we get used to dealing with these new major customers, I think the cash flow will be much easier. And right now, we're working with some banks, some local banks, to finance the receivables, finance the LC that our customers are providing us. So cash flow is fine. It's just that we might have to take on a little bit more short-term debt And for the expansion, we will have to take on some long-term debt. But it's okay. I think for the time being, we will rely on debt to finance our growth, our working capital growth, and also our expansion. But once we reach a more comfortable level, we will consider other financing options alternatives.

Okay. My last question is about the health of your still largest customers, VF Corp. Obviously, they had a lot of turmoil the last few years. How are they doing? Do you still experience a lot of pricing pressure from them? And maybe you can talk a little bit about your relations with them.

Well,

Let me try to give you a big picture, but then Eric and Sam could add to it. I think we do experience some pricing pressure from our customers, but I think that is because of the terrorist situation that is affecting everybody. So it's not just affecting our customers. It is affecting everyone else, even other suppliers. It's affecting our competitors. So the market is reacting to it. But the good thing is we are considered as a highly capable we deliver high quality and very reliable manufacturer in Jordan. So sometimes our customers, even though they try to put pressure on us, but they know we might be their only choice or we might be one of their few choices if they want to have productions in Jordan. So there's always a power or going back and forth between our customers and us. But I think overall we strike a balance and we will continue to do business and If it doesn't make sense, then nobody will do business. Okay? I think overall, as long as we provide competitive pricing and good quality and good service, everybody will be in good shape.

Okay. Thank you.

Okay.

Go ahead, Cesar. Okay. So I would like to add a few points as well in terms of the pricing pressure from customers. First of all, I mean, the tariff situation in Jordan compared with other countries in the world, I mean, except Egypt, they enjoy 10% receivable tariff, but Jordan enjoys 15% will be amongst the lowest among all other countries. In addition to the basic duty-free, I mean, privilege. That's one point. Other point is, I mean, yes, the customer will give pressure on the FOB price because of the tariffs. But, I mean, of the total garment breakdown, cost breakdown, I mean, trims and fabric, they also will give some room for us in terms of pricing. So, I mean, although we got pressure from customer in terms of the FOB price, other costs like fabric and trims, they also will lower the price. So, I mean, that will counterbalance the overall reduction in pricing pressure from customers.

Okay. Thank you very much. And again, congratulations on an excellent quarter. Thank you. Thank you.

Thank you. Our next question is coming from Barry Pasternak, who is an investor. Your line is live.

Hey, guys. Thanks for taking my call. Grads on a quarter. It looks like your tax rate was 24% for the quarter, which was lower than recent quarters. As I recall on a previous call, you mentioned that you were working with a tax consulting firm on tax strategy. Could you talk about whether any progress has been made on that front and how you're thinking about whether that's part of the reason for the lower tax rate this quarter and how you're thinking about the tax rate going forward.

Well, the effective tax rate was lower this quarter primarily because we have high income and in the past our consolidated income was was suffering because of some disruptions because of, as you know, the past two years have not been good. But we still have to pay taxes. So that kind of hit our effective tax rate. Plus, we had to make some adjustments for the subpar F income. because of our global operations. But that is behind us. So going forward, our effective tax rates should be normalized. And yes, we have engaged a tax consultant to help us do some tax planning to see where we could save some tax expenses. But that is still... that is still being worked on. So I think in the future, we will try and utilize some better planning so that our effective tax rate will improve.

Okay, great. Would 24% or, let's say, under 30% going forward, or what would be the estimate for the effective book tax rate?

Right now, I think we're projecting between 25% to 30%. Okay.

All right. Thanks very much.

Thank you. Ladies and gentlemen, this does conclude today's question and answer session. So I would like to turn the call back over to Mr. Choi for any closing remarks.

Thank you very much, operator. So thanks to all of you for joining us today. We appreciate your continued support and interest in Juresh and look forward to speaking with you soon about our progress. Thank you very much. Thank you.

Thank you. Ladies and gentlemen.

Thank you. Thank you.

This does conclude today's conference and you may disconnect your lines at this time. And we thank you for your participation.