• Revenue: Increased 28.6% to $35.4 million from $27.5 million year-over-year.
• Gross Profit: Increased 20.6% to $5.4 million from $4.5 million year-over-year.
• Gross Margin: 15.2%, down from 16.2% in the previous year.
• Operating Expenses: Totaled $4.7 million, up from $4.1 million year-over-year.
• SG&A Expenses: $4.2 million, compared to $3.8 million in the previous year.
• Stock-Based Compensation: $474,000, up from $243,000 year-over-year.
• Operating Income: Increased 88.3% to $708,000 from $376,000 year-over-year.
• Net Income: $6,000, compared to $232,000 in the previous year.
• Cash and Restricted Cash: $14.8 million as of December 31, 2024.
• Net Working Capital: $34.8 million.
• Inventory: $19.1 million.
• Accounts Receivable: $7.2 million.
• Net Cash Used by Operating Activities: Approximately $581,000 for the nine months ended December 31, 2024.
• Dividend: $0.05 per share, payable on February 25, 2025.

• Warning! GuruFocus has detected 8 Warning Signs with JRSH.

Release Date: February 11, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Jerash Holdings (US) Inc (NASDAQ:JRSH) reported a 28.6% increase in revenue for the fiscal 2025 third quarter, reaching $35.4 million.
• The company is experiencing growing interest from international apparel companies, including well-recognized brands in Europe and the Persian Gulf region.
• Jerash Holdings is expanding its production capacity by 15% with the expansion of two existing manufacturing facilities, expected to be completed by June.
• The company is working with the Jordanian government to expand its facilities in Al-Hasa, potentially increasing production capacity by an additional 5% to 10% by the end of 2025.
• Jerash Holdings' factories are fully booked through August, indicating strong demand and a healthy order pipeline.

Negative Points

• Sales were impacted by congestion at Israel's Haifa port due to geopolitical turmoil, causing shipment delays and impacting revenue by approximately $6 million.
• Gross margin decreased to 15.2% in the fiscal 2025 third quarter from 16.2% in the same quarter last year, primarily due to higher logistics costs.
• Operating expenses increased to $4.7 million from $4.1 million in the same period last year, driven by higher export logistics costs.
• Net income for the fiscal 2025 third quarter was only $6,000, compared to $232,000 in the same quarter last year.
• The effective tax rate increased significantly to 98.6% for the fiscal 2025 third quarter, compared to 14.2% for the same period in fiscal 2024.

Q & A Highlights

Q: Given the recent discussions about tariffs, has this increased the number of conversations with potential customers, and how quickly can new capacity impact the business? A: Gilbert Lee, CFO: We are fully booked through August 2025, and new orders are in the pipeline. We are expanding our internal capacity, which will add 10% to 15% by June. Additionally, our Al-Hasa facility expansion will increase capacity by 5% to 10%. The tariff situation has accelerated interest from brands seeking tariff-free production, presenting significant opportunities for us.

Q: What is the typical conversion rate from a test order to a full production order for new customers? A: Gilbert Lee, CFO: The conversion rate is high, with most test orders leading to long-term orders. Eric Tang, Head of Operations: Historically, we have not failed to convert a trial order into bulk orders within six months.

Q: How is the demand from US consumers and apparel inventories affecting your business? A: Eric Tang, Head of Operations: Some customers are still absorbing high inventory levels, but 60% have cleared them and are placing new orders with us. The delayed shipments are part of our anticipated 50% to 53% growth in the fiscal fourth quarter.

Q: How has the improved logistics situation in the Middle East affected your operations and gross margins? A: Gilbert Lee, CFO: We are now receiving containers through the Red Sea, reducing costs compared to earlier quarters. Export logistics have normalized, which should positively impact gross margins. We aim for a 15% to 16% gross margin moving forward.

Q: Will you need to access credit markets to fund your long-term expansion plans? A: Gilbert Lee, CFO: We are considering various financing options, including debt and equity markets, to support our expansion plans. We have not yet decided on a specific approach but are open to a combination of funding sources.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.