Jerash Holdings (US) (JRSH) 13 Feb 232023 Q3 Earnings call transcript

Greetings. Welcome to Jerash Holdings’ fiscal 2023 third quarter financial results conference call.

At this time, all participants are in a listen-only mode. A 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. is conference this note being recorded. Please

now Roger Pondel, will turn Holdings. the host, your to over Investor conference I Relations Jerash for

You may begin.

Eric Holdings’ Gilbert pleasure PondelWilkinson, Executive his Jerash who Thank Welcome company’s investor and relations Tang, conference good Chief and will Holdings’ Lee, introduce I’m fiscal be Chief operations the It Jerash Chairman my call. with you Choi, quarter to the XXXX Financial Officer, Jordan. Pondel morning Roger and Sam firm. Officer, third momentarily Operator, leads to in everyone. company’s

Securities filed Jerash filings made as forward-looking SEC’s Form the website are obligation set of want Litigation required differ Actual company could the along recent other XX-K SEC the Securities turn and with except copies call update to the and statements no forth section of many the at subject those meaning listeners those on beyond I may call remind most today’s as Factors statements Form materially Private forward-looking the results www.sec.gov, with with Reform Before statements numerous which and available Commission, from Holdings company’s XX-Q in over time conditions, Act are to I that undertakes control, are within time. Risk company’s including of which to of to Sam, include XXXX. the from the of to statements the forward-looking Exchange any law. forward-looking our by Such

it’s Sam over to Choi. my Sam? the that, pleasure call With turn to

hello everyone. Thank and you Roger,

conditions navigate [indiscernible] to company’s market quarter sector. challenging fiscal performance third Our the continued ability demonstrated through

supplementary be to team facilities brand as with diversify progress fiscal was global to in smaller adding full for compared production customers. our our Accordingly, fiscal initiatives to we and base product on Although orders we Jerash last for our while made third other received and from major XXXX achieved at by quarter keep record customers year able Nevertheless, transitional our capacity Jordan year, running continued our mix. a see revenue. continue we customer to opportunistic

we conference orders call, which group last customers. from brand Skechers, to of the are ramp Since production successful newer have Timberland on up and begun

announced apparel well test initial the high end runs first to brand March. European-based were previously begin received shipments end our for of with Additionally, at

venture their anticipate Our Asia early We U.S., launching plans brand to a longstanding expressed in giving Apparel serve Southeast to Jordan, of group other new with have year, well. to form production fiscal Busana are and from joint agreements the EU Group countries. customers venture proceeding additional that in which shifting our has opportunities Busana’s interest the Jerash with duty-free

and well are sportswear into technical and production woven garments, visibility technical for active we its [Indiscernible] quality segments. wear. known gaining athleisure clothing in Additionally, wear the apparel is high formal

Eric, over impacted I earthquakes. and Before thoughts to based is our were who the that Turkey/Syria want that in all the call prayers out the turn families Jordan, say of devastating I to recent by to go

then discuss I Eric over results. quarter’s and about will the talk operations, to now to will our call Gilbert financial the Tang turn

Thank you everyone. Sam. Hello

orders economic through challenging to continue and retailers inflation top As placed have with global smaller while customers retail the environment, Sam brand work mentioned, by recovery. been our

more expect months. these to for continue trends several We

improve. During this going needs time, and as our we better forward are customers’ relationships understand actively maintaining conditions excellent communicating to market

as other brand supply global Fortunately, diversify remain continue China. to to Asia, away from receive premium inquiries brands trends we from chains especially

our brand began soon. to the and end customer Skechers European-based the orders initial and start quarter, shipments in for first additional with introduced both. for On high the Timberland production front, shipped new current production apparel are recently quarter third scheduling we In for and initial we

Also, initial orders for runs Please quantities inquiries several are months. relatively customer with generally new in premium margins start. typically that new lower keep test to customer and mind take in small brands

to time customers this booked in by facilities and the staff products U.S. full adding fully major frame, supplementary other our able maintain for our we our buyers are than During production of

capacity venture some also are up gear the factories of that our expanding Busana mentioned our for with to at We earlier. Sam joint

not from Lastly, by and please be fabric that Africa other and sourcing note of our Middle impacted North is partners East earthquakes. the continuing materials the in new and to is expected

XXXX will outlook. With Gilbert to financial the and discuss call the to that, Gilbert, turn I our results please? fiscal

Eric. you Thank

our margin was that typically generate the same $XX.X The higher to the third year. third increase customers million decrease quarter XX.X% due lower quarter the record lower products. from primarily XXXX supplementary quarter of XXXX proportion increased $XX fiscal XX.X% mainly sales XX% to with to The margin export gross two in was in orders in same in driven for last The year. outside by major to Revenue U.S. compared with million period of last the a the customers the was fiscal U.S. margins.

SG&A $X.X totaled same with expenses quarter same income third quarter, mainly $X.X million in period totaled million XXXX $X.X SG&A, of compared million XXXX quarter, the Operating $X.X the of stock-based Operating versus last year’s $XXX,XXX. and fiscal fiscal last in expenses including million in expenses the from third the year. essentially in amount third compensation

in third were ago. the year Interest versus fiscal $XXX,XXX were compared XXXX quarter $XXX,XXX with expenses in same a $XX,XXX last year. expenses other $XX,XXX Total quarter the

for $X.X quarter or or attributable Comprehensive XXXX same to year. year. the $XXX,XXX recent share income million versus last the Holdings last diluted Net $X.XX in Jerash share $X.XX the quarter common totaled $X.X per versus million income fiscal period third third per most $XXX,XXX stockholders diluted in was

million net suppliers strong million million. payable net million by to and and $XX.X attributable $XX.X Inventory cash decreases expenses. at and remain increases XXXX capital for of net the accounts offset million activities was $XX.X million by sheet December $XX.X income, operating reduced in XX, was balance months The receivable XXXX. provided cash of advances capital reflects compared Net amounted accounts $X.X prior working and to to December in accrued ended working cash nine smaller year. with the XX, in change with position activities partially Jerash’s $X.X

conservative approach We to conditions. general are inflationary continue economic still weaker take markets recovering to given that from retail the pressures guidance and a

For million fourth compared quarter, expected to $XX be revenue the of to is range $XX.X million the million in $XX with current year. last

are to We be range full goal XX% to maintaining our for fiscal the of year margin in the XX%.

to other continue We and offerings. customer on opportunities growing and to our advantage focus competitive base our pursuing enhance

to XXXX navigate company’s highest experienced fiscal challenging in which the the the can rate as proud to growth able full year history. and that business XXXX, fiscal are essentially through environment the for We level in we of achieve this we be same did

ready of strategy joint at accommodate allow from our as existing expanding from some and facilities full maintaining Our as capacity some in will to space be now us our fiscal XXXX proposed newer growth anticipated long venture. to well and term production of customers,

closely monitor over We few months to progress and update continue the an will next developments next call. will provide our the on on

our directors share February of XX, quarterly record X, $X.XX XX February dividend of February to a payable per approved XXXX. On board of as stockholders of

repurchase our March The an been $X.XX of share XXX,XXX fiscal the approximately the XXXX. program on XXXX. quarter, share authorized price program at June average end approximately third in As per by board of expires shares XX, repurchased under have the of

questions. may With question, first Operator, we please? have that, the we will call the now for open up

be [Operator we answer will time, At instructions] a conducting question session. and this

today question Mike is first Davidson. Your Baker from for DA coming at

Okay, questions. A thanks. hi guys, couple

customers, sporting the Can in situation your than months big state like U.S. retailers VF ago customers ago? you the customers was better of Corp, some many or the worse so of the three as it and your the situation was goods talk Some versus customers? actually three inventory decelerating apparel your of growing, months but the about Under Armor, maybe big it larger is larger, in Columbia, not inventory expected, for the larger what not is getting have would U.S., the

Eric, want you to this? do take

Yes. That’s in that absorb I growth more inventory not some sales, I too Balance. level have new months some are is, are sales, are they too that is the talked so them. the acceptable the latest they until level they down and to like still but months, think, reduce information Corp placing past level to This fact the many and growth our trying inventory. still optimistic couple of the they my also the New coming despite recorded the buyers. is in safe of trying the orders to saying in get still to major which there not why are a from is They and they about VF buyers, to several of

a so XXXX - growth. I Okay, in mentioned Gilbert on growth think that, thanks, word used the you had maybe as follow-up

grow a gives confidence? Can next right guidance us now, you’re confidence understanding Now tell giving that will but level you expresses of not you you what that that XXXX year.

our fall cautious with already planning start winter Well, customers right would half in mean, New very Balance, new a because for for first us. for the in in existing year issuing Normally, and filled to have orders so the now, like up and they they normal of next have the capacity on. season now we year, TNF our fiscal are season, by we’re--I the being

say, fiscal year, fiscal being XXXX That’s providing still for which they on-board than have are room premium are next the that starting. year we’re some waiting year high we’re such brand, in know them. who still with and some previous, European past our half, we to we or they are not so cannot quality as when efforts guidance this cautious is However, comfortable this new all very the orders in already the confident the breathing are fiscal smaller why customers, first but but order their on we

certified came so our people all approved us pretty shipments start the producing, We will the actually our have already have and everything, passed begin they quality or factory soon. factories to to

joint Busana we MOU, about past developing signed agreed Also, upon, in very that news we together. agreement, that later, and we the we and we a final signed. talk venture we’re with is but are start been anticipate some will this be very, changes will be the over quarter then progressing signed just with working good maybe we we’ll have everything on, is working wording joint so venture in and the the Last basically our joint making very so currently--I venture and joint well agreement soon will the quarter, anticipate venture but mean,

help to already we U.S. Busana, in they doing next and so to marketing. going their are to orders the They’re Jerash, to they’re to will all in very customers start the and started have that of going level those us couple same of the weeks move additional have confident business Jerash, they venture even move may represent will coming opportunity fact to from This going the not us substantial our maintaining forward. we with growth, is though customers. the Jerash the maybe joint joint help impact this from or venture existing

of are All cautious, at why That’s currently, you fiscal we’re growth. It level of the maybe but we we year that will cannot say first coming. is this year, depends we new we looking can on of the half next point. being--we’re confident at of the a are business that maintain business, the timing bit guidance but same optimistic little the give I in the

understand you related sales I XX%. to just you for anywhere gross my quarter. that. Okay, for just a would XX% the it the XX% much? maybe is know, two math, line, kept gross XX%, you guidance which the guidance on your backs full help you the could least, a at I little and you could, bit grew but fourth implied--well, little tighten the into that XX% fourth for Why fourth why up line to tighten reverse down Then year because, at one were profit questions quarter the margin, bit quarter between so to given, $XX on you’ve million, sales so that. more basically, gross margin One, The number, quarter could fourth if it that if

try let and Sure, me explain.

margin That’s of XX.X% to why primarily understand in we all, year to basically our the low. compared the in orders third year-to-year third of in previous the but very orders, record third orders from quarter, third reduction XX.X% the quarter. a supplemented was is for the so why Sales that gross and parties, dropped quarter, that’s quarter-to-quarter--I down lack quarter, margin lot, but major to that First increased margin because quarter the for was of orders third or revenues, local that XX% dropped by customers. mean, third because we had

bit Now quarter of fourth little a would a picture. different be

we so less We the to FOB gross margin do are XX% doing of quarter, to Balance, a compared of to the of us current going XX%. up is more year will between Face but or going full be are year. and will of North order go last XX%, quarter give proportion dollar sales but the to we the lower around That down higher margin amount the orders, terms fourth back New that are in to this in, percentage to

release, press for that the guidance XX% to the but guidance In understood. you’re the it though, gross full Okay, quarter? sales XX% margin, good is also fourth saying on year

the That’s quarter, fourth exactly. also for

very Thank okay. Understood, you much.

Your is Argento next at question Mark from Lake coming Street.

Yes, morning guys. hi. Good

out P&L margins, your or Just a you relationship. once bit a about maybe start talk It of will think talked of a it, you will little booking the you better follow-up last be flow gross still the accretive when revenue? it you understanding the this deal, details. you the of some through to on how sound know about working When I the can Busana economics quarter you about like were have agreement.

agreement two or venture company and by is to the a shareholders up The XX%. will formed Hong venture Busana we be Apparel company Group. the until separate Jerash set the joint company wait other will we is to just a Jerash Kong. joint one and registered, be in partners: XX% own Well, Holdings going It’s is This company. just is signed. need own that already will Busana is two new

to then We how the Busana, profits, will will to gross consolidate will our Busana’s margin, sales consolidated. that’s all go and profit revenue, and flow the so XX%

prepared think production about it Can what Eric, looking stand bit now in relationship. capacity a in or you remarks are adding Great, that mentioned capacity little that [indiscernible] you you add? guys was the capacity Then I expanding that’s and for helpful. talk terms you’re to right of where

Eric?

Gilbert, should I question? answer this

expansion. Yes, about please, capacity

Okay.

continue of are expecting July, full with coming run capacity capacity, also at the capacity that to I our September am will be--we orders. Busana will until we running in Regarding current October until at maybe full to and we the

with and duty For is all from buyer there Busana, in Jordan. and country, Busana from Asia, by venture buyers is--the continuous. because issues, saving okay, why August, we the selection is to they to is the the orders because starting duty-free will July will the so is between us the the Asia are we expecting inflow move the factories of out Jordan reason and located because be then joint orders requested of maybe it are the a

we have I think inject we made company. for into capacity, the by going--already lines in-house in-house that if we explained four mean, by Busana, July. they expansion production to announcement so are we are also extra expecting more venture our is For increase Jerash--I the started capacity, of This the in Jerash One, can capacity that joint the end orders

adding adding a onto you’re could So you’re and facilities give existing those, us how taking just on maybe more the or you color capacity? little

Yes, building-- the

For the existing--yes, please?

The we-- building, actually

for the--yes? mean, I

building, believe added also, one factory, floor I about to we particular so that basically capacity it horizontally we our machinery an think more For increase the was will then so the more building by and adding more for adding adding existing people. by expanded XX% that more--of and will--I expansion expansion, course the estimated added we

And by expect to is July, that you done that already? complete or be

Right, yes.

be it. it We’re will on still We working done by July. anticipate

we started this think in we--I XXXX. Earlier,

just get and the are almost we right it of the time conditions, kind we’re Just but really done. not now pushing market to because of earlier, taking done

up this be into anticipate by put We’re and just finishing could use we July.

capex is required to of terms follow-up one perspective? the nominal, are in what from expansion, it you relatively the a do or just And thinking capital

million think million. or For $X.X capex, above $X I just slightly million, this $X.X is the

Great, thanks guys.

Your Grey question from is today Partners. at coming Alliance Aaron Global for next

thank Hi, good and questions. for morning, the you

that can larger just question sounds some going it’s orders? that given for to that going not the is one-time to a it get had in that get revenue to First just to be like a for and you due just where just me, in smaller so under-utilization maybe to having with continue July terms to guys have is help not local you. thing way It to you’re the of you next the supplemental to went sales even you quarter, function more the were the at utilization, margins, understand you the us maybe need was for lower quarter, full clients Thank why September, a that lower have some more revenue, do full capacity going forward? guys a potential from maybe margin, going

lower is the want running our Aaron. Sure and is local we orders all third to because of Yes, orders substantial capacity. just amount quarter this utilizing at margin, there this that for and keep a

all, of because around, our those reduce and turns we we factories when off fixed more we to costs want when have, workers allocate can that or our market First need or absorb the don’t turns lay we around. the more also of then workers the business

even customers and are in out and that keep so people into cut These we very bone have us send business everybody supplementary before to with that’s to don’t on-boarding, Unlike they Jordan, is the this laying back even and so and their other Everybody suffering, we’re growth, already of those and staff, we’re come off about some have is the to talking many people, we we our done to new have went factories future that want lot in decided joint of we we so the we are venture, a why out busy, smaller about business a in factories we of for talking we and reduced happy business. business. strategy brought prepare to because are want Jordan, for went even business.

we busy largest proportion the quarter. customers are as with New kind these this Balance like be [indiscernible] we’re not or the then to is our CM orders. Now current and of customers, But orders, to up of to the also. in in quarter of busy to Face, is going quarter will to quarter, going actually orders, high The the of capacity, amount The need first kind the XXXX, accept April which quite supplementary June it’s North for and business of we we going use existing we this two this these be current quarter, producing XXXX, in reduce, call as we the if what QX to,

the that business, sales. mix of and margin also mix and the gross top all the of affect line the orders, the the It’s will

your answer that question? Does

can you in actually That if the particularly at up new current was the with months, some those ramp continue turning you athleisure or along next orders, an the kind are as potentially really you’ve on well whether Timberland, us now, you full how the up that, these well, for and legacy into progress ones at helpful. some for of advance does. to and customers, scenario capacity full It then give ones not and potentially up you’re lines of to couple and back as ramped around also you. update and Then these ramp of larger and of you - Skechers, turns brands. largest with as a that new Thank then when business then two the those flipside your as just the the and of bigger maybe of timing

think year maybe The that and brands these Hugo shipping for Boss March, are--correct we’re we to ramp-up is first the start think first a me all, I now - if wrong, we quoting we Boss Eric, ago, almost correct? going of have--I mean, started in I Hugo orders of new I’m

- Exactly correct. yes,

ramp-up Hugo few the and orders, will long us Busana. bring customer new to of there then Boss is first will and period, ramp-up--yes, styles, a a also I they continue And after time test think just be the

quite Busana. will But Busana came Busana technical Boss, areas and though about to venture fact, part a do year when Hugo bit they business with we joint ago of to a even first helped assisted with a the on-board Boss on Hugo of In the be doing us Boss contacted lot Hugo and Hugo but how eventually, we business start Boss. in us

the has capacity is Boss, it will be--the about are lot been know, of will to to but Hugo there them onboard be sure their with sampling, time, could standards. course that I other take a it coming all be in, and that with Busana manpower, premium come also optimistic, for will the the It our of very Busana don’t to they time year. and make up quality so do and we by timing working those optimistic be tricky. could and feel do Besides assisting test, our will us, brands to but this cautiously has do

very great. Okay, I’ll jump in and much queue. Thank the you back

Thanks.

Capital. coming Your Rommel next Dionisio with question from Aegis for today is

had the on good local prior is morning. you customer going East. then partners just shift margins. I Thank Yes, a parts in there from what resulting additional and to but initiatives know additional upon moving this sourcing obviously you is could a from mix if outlook I quarters, expand you in the in impact Middle wonder touched in a fabric are But the gross in you. your forward? those quarter, gross source the initiative in shift margin, for beneficial your partners have--does do have local

Yes, I now, both I sourcing remember region and than we sure. from year December when Africa - purchasing ago and Turkey to already Egypt. fabrics and was the But East started Turkey in a first probably it sourcing are Middle efforts. to Egypt more We the North start went

long think shutdowns it’s a especially term. the also Timberland much there were dependency too, the lot For especially products. Egypt, during giving on is pandemic that--besides Asia In more of sourcing, I Timberland and I it’s China, I Turkey, but think think strategic and the interruptions, us it for primarily more less fabric

the customers. wouldn’t Timberland, getting it doing to the up we soon. not least customer, at going to Timberland new other to helped opportunities us this other then MENA so potential region and be without really or opens in customers business, source, think I That European

Asia higher, the prices big most supplies we time not from and shipping raw mean, is of cost the the inventory benefit and from carry the save to material raw we quicker China, from East us, for the The so a on. comparing the the however Middle have comparing freight not are important biggest costs, East. is be--may inventory--I are--the have so because shortening thing may is the fabrics for the difference don’t to and That turnaround to material logistics and much shipping the Middle

But base. yes, more but cons, and are there to are for pros cons, there customer than it and up pros lot more grow I opens a our opportunities think us

and as competitive you’ve you Okay, for within mentioned some labor that perspective? a think Jordan, Thanks. a your I just of everyday from domestic follow-up, on workers causing affecting labor that sort any it’s Are base? is a to sort your that of operations how Jordan. or impact difficult Is in situation source your able of factories more

take opportunities? question local you want to Eric, sourcing maybe some this about do workers,

the Jerash now situation, just it so it reduced of who already of because to small especially factories is order of factory number to workers is that closing shift also Yes, for will mentioned they workers, some very it easy easy to some become big one down factories, the local from source and more the another. the

of finish to them opportunities For back the shutting they but contract there to country, they Jordan for the is need come their the to factory foreign workers, down, more and chances, Jerash. mean, more work for can--I in go to is if course

very much. you thank Great,

and It go workers, are cost our to the big experienced. new find are workers, they that’s our or as existing import why whether and reason out is a operations with very you much familiar hold local if we workers on because want Yes, they to to possible workers. it’s want as

thank Okay, you.

you. Thank

remarks. will We have answer Choi over Sam turn call reached closing the end to session, and I of and the question our for now

you Thank Operator.

the prospects continuing our speaking of you We initiatives. appreciate you. to with and We strategic progress Jerash’s are forward optimistic about support. Thank look and soon again your

your this This disconnect concludes you you at and Thank your participation. conference today’s time. for lines may