JRSH - Earnings call transcript Q1 2023 | Jerash Holdings (US), Inc.

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Operator

Good day, and welcome to Jerash Holdings Fiscal 2023 First Quarter Financial Results. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host Roger Pondel, Investor Relations for Jerash Holdings. Sir, the floor is yours.

Roger Pondel

Thank you, operator. welcome Holdings and Quarter XXXX everyone, Call. Conference morning, to Fiscal Jerash First Good with Holdings’ PondelWilkinson, Pondel Roger I'm Jerash Investor firm. Relations and be and Lee; will leads the Choi; my to Chief Chief Chairman its momentarily Sam Executive in Officer, Eric company's Tang, It Financial Officer, operations to pleasure the company's Gilbert introduce Jordan. who Securities include want Litigation of today that everyone before turn call the remind XXXX. meaning of I Act the over call Reform to forward-looking may But the within Private to Sam, I statements the are Such which forward-looking and XX-K the company's other the along available at www.sec.gov, control, set are XX-Q many statements to filings the from company website subject on to Form in are Exchange including filed as Form conditions, numerous forth the which Risk Securities of of SEC's recent company's with with Factors with section time. and beyond time the made the SEC of Commission, copies most those materially statements. results from Actual these differ forward-looking could to Jerash required Holdings undertakes no update any law. by statements as except forward-looking obligation And it is Choi. the Sam to that, to pleasure over call turn my with Sam?

Sam Choi

Thank you, And Walter. hello, everyone.

a XXXX advantage global reflected first quarter and reputation attract Holdings the to quality fiscal garment in brand Jordan Jerash customers. top new manufacturer Our as again competitive

report are million. quarter revenue achieved We of to that key happy $XX.X company the record first

mix a and customer XXXX and of are fiscal the order throughout continue and as retailers enabling then environment, neck such we the economic feeling also opportunistic business impact. lower we to towards and expanding see the quantities average Receiving command levels, and diversifying generally As Jerash world perspective, purchase a prices, crew goal inventory face shirts. to pressure be headwinds, Despite products transitional inflationary its higher operation base. challenging selling shorts, pullover smaller year order that including shift from however,

orders of to of growing initial women's apparel quarter. the in our fiscal [indiscernible], we As And have our previously to in structures produce high-profile third quarter. announced, roster global with these earlier brands polos

well, European-based and customer Jerash apparel European-based orders for other first test new hopeful Additionally, to are our visible enable we brands progressing be among more brands. that are this high-end apparel will

We record XXXX, with plenty COVID approach momentarily, discuss leave demand conservative those guidance, questions. the with experienced reopenings. which a are and particularly to we fiscal high Gilbert comparison for post in of taking will our details time will

financial now the Tang, turn will who then over and I Eric Jordan; First, our stays to results. call Gilbert will in Eric? cover

Eric Tang

Hello, you, everyone. Thank Sam.

has our the challenging external brand global economic downturn customers particularly received for generally-anticipated fleece compared last jacket top orders by With been environment year. placed the and smaller, orders by retailers, recent with

through to recovery, and work and continue delivery shipment existing schedules. our and through and believe fiscal through We this XXXX the communicate both sell the which will excess orders their inventories to customers would impact trend reconfirm continue We retailers schedules. with as inflation all proactively economic fulfillment

Fortunately, advantage and us new busy. customers competitive is Jerash's attract ability to keeping

country free Our especially duty supply manufacturing December as trend a from booked XXXX. Asia, diversify global fully continues to Jordan. to more such stable through remains chains The China, capacity essential away and

good As will brand several inquiries received us news, allow premium from further base. our have production new we customer diversify customers. to which

are initial other will in production Besides and we VF quarter, of margin for customer third Timberland, process and the for start quantities. we new in the there Timberland brands smaller although bringing lower X onboard. the that On front, Sketchers are products orders are

further as position by of to our comfort us safety to X,XXX of plan time, are as highly our is ESG approximately will energy-efficient on in operation conserve move this the and are electricity multinational improving mentioned, designs the new help global high-quality, optimistic to our As a of We water will that, measures next meaningful and and customers, to future end grow on brands usage. workforce dormitory The XXXX. over living with goals new our workers space completed well be new these for for way. end The efficiencies confident Sam with at working schedule we about new growth dormitory month. we multinational

we talks country. will very Jordan to discuss employer the UN to we on call factories with turn Nations work the to Lastly, XXXX are financial an With into outlook. trusted add serving hosting the Government refugees our Gilbert, our and to results additional I as help to at efforts, XXX CRM our focus responsibility a United settle please. the fiscal XXX new Gilbert that, to social and in as to refugees continue

Gilbert Lee

the Thank XXXX reflecting Revenue in in million to bases $X.X in last fiscal XX.X% Garments increase points The was year. totaled same versus XXXX XX% XX.X% primarily expanded due year. the of fiscal MK Garments, expenses integration an million for from last quarter in acquisition and, $XX.X higher $XX.X the period Operating margin the million improvements customers. the XXX lesser from to first local a limited approximately $X.X first XXXX our the from headcount same fiscal million migraine for to production recruitment travel basis our stock-based of you, quarter to new to and first margin from after Eric. have related recruitment cost average X quarter worker period for since lower $XXX,XXX associated products the October workers COVID Gross of XXXX same MK restrictions last expenses period to of compensation sold foreign year, past for in scale years. extent, increase the expenses in and larger rose

tax our global sourcing material to to in material Jordan, quicker inquiries and as facilitate will customer response well our sorting Africa, and was $XXX,XXX balance and June cash $XX.X and sample operations $XXX,XXX past Asia increase as few Inventory well be lead East Jordan in XX, decreases receivable. over fiscal quarter merchandising XXXX supply dependency activities period of with merchandising compared will the the the Jordan net Jerash's our compared the $XXX,XXX used we period as Middle the XXXX. reduce diversify was in our the in sampling months. $X.X a accounts first move same North established strategic capital as This strengthening us enable our to have shorten to we income million region MENA expanded operating that U.S. expense the strong last higher rate with as million approximately addition, tax compared in quarter million, activities, saving for offset or SG&A accounts up Jordan year. in $X.X cash receivable working due last inventory European-based in same $XX.X time. market Through and open to in China team to presence. well as and with fiscal the expenses first In to development remained and was million able More last near recent EU term, customers increase with to run. Net off This will part pay long opportunities position approximately the cash sheet working quarter Net anticipate primarily to first we considerably amounted in income other $XX expense on capital brand net customers in and $XX.X the of and next calendar tax rent million the with $X.X in in per and for Income higher share dormitory entities versus $X.X $XX quarter in $X.X million The million, million Operating million. reflecting $X.XX year. with in annual change million reflects year. first year, period income totaled $X.XX per period same used was the in be share fiscal last purposes. most for or with in the geometry year. XXXX fiscal cannot and the in expenses new same XXXX in starting

and the environment and are our consumer a that is guidance taking to approach ASP. lower apparel along product given items mentioned, mix Sam sentiment, inflationary markets affecting conservative As lower we with shift with to a retail margins

outlook fiscal to $XX.X be second expected quarter to million revenue in the Our $XX last of compared with $XX range year. XXXX million million is

to be expecting the year. also are on average lower margin to for XX% full XX% We to

to now reasonably continuing are be when customers While capacity global as and fiscal orders as production top Jerash shift. year, from for last healthy, said, volume orders XXXX smaller customer customer customer to growing for growth customer focus That XXXX, in improve for remains the new placing were orders. fiscal unable customers our full on we demands level. we to our the and considering transitional will moderate accommodate mix such purchase added product new the expand were we productivity and that view exceptionally we are anticipate opportunistic Again, total be order our to revenue high base

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

mean on confidence the To and stockholders the future $X of our which market price August may to With Holdings, of shares program, have active average first August Board June a as August approved XX, Directors Reflecting per a of million to -- share Board XX Board in the regular dividend Jerash of XX, stockholders the of management's on of and authorized common XXXX, share I sorry. $X.XX quarterly call ahead. Operator, we for repurchase approximately through XXXX. XX at long-term up in be that, date, March XX, Our share, please? repurchased the the effect question, now an months per the will XX,XXX have we been remain in in we $X.XX will open will questions. record

Operator

Davidson. D.A. Instructions] coming is Michael from Baker [Operator question First from

Michael Baker

questions year cadence through couple in quarterly of XX%. said sort me. expect a to then went for Back said had sales and around A you you June, early of -- full

sales seems fair to year XX% your term than growth growth You just Moderate full the less sales the that moderate said, I me. year. was, characterization sales for Is think for outlook? a

Gilbert Lee

quarter But quarter we're that you comparing be year in only be there half. second now grew at able as hopes to come than lower back second We stronger know, looking at full to XXXX. anticipate first XXXX year. in half, be to basically Well, right But we of flat right quarter. the second looking first will of are to slightly the we now, last the the the XX%

inflationary. existing quarter projections have fourth with going to orders lot with will together global then -- last Looking the in year, be our market the because that there and war in at whole of customers, with Europe the the a the we're are about fiscal we from not and the being uncertainties fourth situation, already and this going and even guide really third then but the on our year

on working with our is customers, new then it but just very say, difficult hard bring more So and we to we're few may board a new customers.

So say this time at upcoming going be going that year time, this very clear. we're -- is to this not to just for

Michael Baker

Okay.

wrong. a few little just cautious than a So if does It bit sound months correct outlook I'm me more a ago. of

to apparel in able than if working the a follow-up, the slowdown. in glut know sign of me know Is Let that. Any see if similar, any at some X I'm months that's through this as But wondering -- glut through it there's was that the about I'm better you've are ago? retailers wrong that? progress kind U.S., working of in that and worse, been we inventory all? causing

Gilbert Lee

we Right are ago. building X comparing are little capacity. additional now, to And bit last capacity. an than is to capacity, it opportunity worse it what But we is more to we seeing utilize do months have our us, year, is a and

use we the to trying X. have So bring bring that to or that to new absorb in year to we want and customers onboard past been

us. a is opportunity it So good for

Michael Baker

feels you I could. ago. you able December. silver reading if that's in haven't December, than One been wrong? book Am about were capacity, Again, other much that I a full the full out I talked Yes, to more months little lining capacity interpreting capacity Or negative saying good definitely words, In through No, me. that, a the sure. quarter, is am -- into through you too more last still X situation. to any that

Gilbert Lee

confident that capacity December. running we at full Well, be still right will now, we're through

ASP extra and we more will that bring However, fulfill customers to We're the capacity change, lower from any local orders local the margins. orders, -- to mix with mix use going with want mean and to are workers will change. product lower in I

anything So our we the will guide up it's changing, but to capacity, keep just current all going at because in terms the beyond but use are yes, and the That's to that quarter full running of this we're suffer. why capacity we're speed. ASP not will things margin volume, going

Michael Baker

point, maybe more, remind guess, Understood. And us. I question, one just

the typically -- from new and do for little more terms lower an build in because over of an using advantage So come historically, businesses is this having margins, lower opportunity as to what a seeing -- opportunity, take so capacity customers. of which you're new now. runs a with on But little believe that those and bit that's time, bit

that low that this margin, come grows. way you time, the opportunity? but businesses, over into to Is about right run think low Now

Gilbert Lee

absolutely. Yes,

we our orders ASP months, Just run sending lower then and were to in the for New mix, when first how they to And products, were Balance time, our brought X instance, years that X and ago, family, us smaller. their at margin just to learn lower X had we to to products.

a past that -- now year margin at took and been margin hit. New we're the are growing time, our improving making And So they very Balance -- but X. or the over strongly, with has

Operator

question next from Argento the is coming Mark Lake And from Street.

Mark Argento

questions. couple quick And a yes, just of

the of -- COVID, Any lot around now, get on of cyclically well. M&A given as which But on period sure thoughts off, bit that inventory would. than your for in ups to opportunities I and to in away think work a you, it channel feeling term kind and probably the trend when you're macro seems out want through, itself is it a out towards I'm post about create substantial permanent soft your sure right on experiencing capacity capacity, little more the venues longer one downs now. strategy probably an kind you think just opportunity longer Asia particular, glove right like little sticks i.e., in First some to I thoughts that competitors obviously, there. cyclical just a market, opportunity this Jordan add to But having of I'm of the the just moving pinch the It up again? from manufacturing bit other feelling a the cranking does

Gilbert Lee

Mark. right, XXX% You're

running they that factories, know other running me the people capacity, or feeling factories capacity. we Jordan of none same. and factories a -- except from that down are some at ago competitors well, full called they XX% some at days are in few And the even full us, Our are Eric

we So feeling M&A everybody some there better. new the is we'll that jump have, to some the in that brings year on like the because we they're would even last did cash, And already customers. that that with pain. have do of and if we is it one doing MK, If opportunity similar for customers definitely the be business

especially Jordan have the in are Eric, or any opportunity open Sam, to to region. we for So yes, M&A, add this? you to in the anything MENA do

Eric Tang

I agree saying. what say are with totally I'd Yes, you

Okay.

XX Although facing, problem approached all XX%, I Jerash. and need to about down as matter they of in orders factories XX% a are cutting fact, I of mean apparels They was mean, the by support more also from I buyers than XX, the Jordan.

faced problem order. also same X In the fact, X major reduced also or Jerash our customers the -- our of that

is Jerash okay, Okay. But other time, always we same capacity, okay, vacant when are the Jerash understand at that brands -- top immediate has priority.

capacity, might we not and doing. our although that as orders fulfill all are the have we good approach is, profit as . jacket they end and reasonable we So that a profit margin, them the be maybe successfully fill December. by the and capacity of some the can up took up like us But to then we from margin

Sam Choi

for government be Sam coming here well as from X as not strength product. the free Jordan. they, There Jerash as will Choi think source because duty our well customer, like outlook be or as is may Yes, opportunity some quality just And past, in didn't And branding year country economic duty we any X as discussed. well. the in good the I free

name. would reputable name, seriously hope past I -- believe consider can Jordan we business much them. opportunistic brand And and and be those political, countries. very have And a I normal than with They have Jordan very some from unstable to discussion some in source instead of didn't mean to do they do margin will their I other trends So with we -- higher customers. now some source brand the positive fact, in reputable

I cetera, with rest et captures our will procedures cetera, the we of world. the So their specialty fiscal from can quarter can offices the margin in we of of et then them customer business first XXXX -- Yes. in we higher XXXX, with maybe have -- after diversify certification, and or start hope more

Gilbert Lee

Sam. in we we I stress in focused lead right, North Africa sourcing. of Jordan. a together Hong Middle But that put you're put the and Kong thing team like region. now East have team and from we just place really is our one -- Actually, from sourcing in to to have terms China Jordan really Yes, have team and in would been source we sourcing that on the in sourcing MENA Previously, Asia

will already and we a to that give give development merchandising our new new materials do have we So because that sourcing in them. strengthened to any to And opportunity and also the development addition, the competitive us to is are significant product of brands sample work And advantage Egypt, and have started pricing forward. Jordan. right do from in with from us there customers, lot any we our Turkey, a capability with going going

So with very I just going be X, new bringing these customers. in to in successful we're believe

Mark Argento

helpful. That's

guys mention housekeeping refresh some for in buy the that you stock just Did did -- one quarter? me? Just Gilbert, Can you back item. you

Gilbert Lee

repurchase our back started in July. program We Yes. think I Yes.

July. in think I we buying started

we And purchased of because But have period. we will file buying shares. begin so we quiet far, soon as XX,XXX XX-Q, as have Well, the again. about stop we to the

Operator

& is Peter question from from Sidoti coming the Company. And Sidoti next

Peter Sidoti

Just one quick question.

For see using going How do generating the the cash flow rest cash? do yourself the see to you cash, year, the you of year?

Gilbert Lee

situation. flow, will year, at operating least be rest We flow careful this upcoming always will the cash be the profitable. with for we anticipate we well, we cash of fiscal and generate our -- Well, very sufficient

sufficient always and facilities, and faster, will now working financing credit them the they with pay any with if have need time we we we're we X largest the program cash customers that So faster. -- have that us

some have I million the to buy that We're about Kong, we Now spend for money MK $X we is still capital Hong deal. land that about them factory. office and million. on -- close building going have the do buying, the in think is the say, to owe to out and that $X.X the let's And we building

the dormitory finish So just we -- also have those X the and are well, construction. up to

quite a of So spending have in we cash than upcoming we anticipate of other year. I for think should that, sufficient expansion. do But bit capital terms money flow this

Peter Sidoti

in you're sorry, building you for million purchasing a I'm Hong said? Kong $X

Gilbert Lee

It's entire COVID, for how just years. many not rent. has the office the past want an have I guess, the It's of But order to we that after been know price estate I building. save in space dropped, and to also the, advantage don't real take we using the

So purchase the that's why Board the to decided property.

Operator

a Abdin], investor. question next private coming [Yazan is The from

Unidentified Analyst

just headcount of is highlight one saw operating recurring? a I question expenses acquisition some I you onetime like the from and mentioned that be that. that expenses. increased quick that have the MK this in increase due and will what is other along you Can to regarding the with out part of what expense

Gilbert Lee

I expense think more -- overseas bringing the more is Well, on workers. the onetime

like COVID headcount we're X,XXX, a just to ago people. stopped, think I and since X,XXX, was X,XXX close now year when our

So over that X,XXX brought I Eric? Is think this in year, workers. accurate, we about

Eric Tang

right. you're yes, Yes,

Gilbert Lee

Yes.

X,XXX money. a lot in workers of bringing So takes

apply the to for have We visas.

from get Government. to Jordanian have permits We the

have We in. to them fly

and XXX MK XXX has the room factory -- to we go and, up to I XXX. also think is and now So it workers, up absorbed it to

we're growth at much because just our in at this is this HR-related reduce so year. looking looking all coming recruiting within to SG&A probably ways we're So But onetime. expenses not

replacing just We bring to the for they being. we're are want have start And to being, as workers bringing go -- have time workers not in, and back. if additional foreign going to whose permits still the to them time workers that workers. we're as in are constantly, those there on there going because, when So to, are contracts up hold we for to but well

SG&A item affect - SG&A the the the workers much we're which cost volume through freight, in to margin. year, of increased a outbound compensation, is over it, that separate increase $X spend just last over up. that of much of the So the really sold least, in sold more not but also is cost, on part And million. know, the also, the of the includes past And over has to that And cost you Yes. while because not attrition, goods has increased products freight, sales well, ports, line And the the money gone for recruiting. stock-based going the doesn't there that the in prices the sales, and line But shipping as as year. terms reduce goods headcount. are comparing at just oil of has to selling

gone So those Yes. costs has also. transportation up

Unidentified Analyst

So million. increase the out for the -- so operating expenses $X.X was the of year-over-year about

If compensation, stock-based exclude that the you leaves about $XXX,XXX.

how do So that is you onetime? of much think

Gilbert Lee

don't guess. in but of front would my is be I $XXX,XXX will onetime, I that the $XXX,XXX believe me, detail have or about

Unidentified Analyst

Okay. acquisition you it's $X And Hong to How rent Like how mentioned the spend in will of that? are for savings acquisition? in million. much office Kong, come much of with regards the paying about out so the you

Gilbert Lee

for much Hong Kong office. we're I don't rent how remember paying the exactly

year. $XXX,XXX a like I think Is that Sam? right, it's

Sam Choi

Okay.

why expenses been some have spent on using been I mean that. purchased decoration we reason, the is, fact, In that the we property has with

our around U.S. So existing year. the office, purchase the month, XX the to decoration years, $XX,XXX of brand around over close be From the taking will increase be that. $XXX,XXX new rent. more it landlord, definitely, -- for that close the out to per office per of XX it's is will we own depreciation of expenses will with U.S with XX the into property office, move the And account also, to of in

long, so will that's in to the calculation, will we below into situation, XX be be office be margin I COVID use will bit. the into mean Yes, the if and is because some a account after depreciation the we purchased believe also increasing. there why savings depreciation the definitely, So office years price, for value sticking that. XX property And we And fact, Yes. taking for the property. the

So why we purchased that's that.

purchase in we of after profit is little a terms loss it impact, saving. mean I of and there So bit

Operator

the question Wu, Private Michael And who’s coming a from next also is Investor.

Unidentified Analyst

the -- about is orders. question your jacket First

So the on just on amount reduced jacket, order that? and that that, could you incurred color on give more me

Gilbert Lee

Eric, can in one, the you answer this orders? jacket reduction

Eric Tang

Okay.

Our major customer is jacket XXX,XXX giving around pieces. monthly us a

Okay.

relayed okay, mean, already now XXX,XXX they XXX,XXX message we because pieces month. I the pieces excess So this just of a that reduced, to have around inventory.

So that of means why we we the past the during end have are to find through replacement booked our December. of order and capacity, in doing still capacity. weakened order so couple still successfully months, to we through fill And up have that's our booked

Unidentified Analyst

for So which to this like reduction? a up whole a this year? the month for Is is for quarter monthly, is just Like you? that then

Eric Tang

indicated extra Year. XXX,XXX Actually, and this it the situation, during depends when the XXX,XXX the especially resume New pieces. that Christmas or on during buyers But will they year, sale the market the

-- us So us. they keep they as posted will to

Unidentified Analyst

Okay. Balance you North what sales Great. quarter? on Can New Face the just and clarify is this

Eric Tang

Gilbert, right? this, you have

Gilbert Lee

No, no, no.

Eric Tang

The percentage, right?

Unidentified Analyst

you the amount. quarter mean I had million $XX like or that. year, $XX -- dollar Yes, million, last Last something

Gilbert Lee

Well, $X.X million. North New million, Face is about is quarter $XX Balance and this about

Operator

time closing Choi have back for hand we I and the for questions to you, remarks. like that's today. Thank Sam would to all the now call

Sam Choi

And operator. for to thanks you, Okay. Thank today. joining all us of you again

in much. second interest Our XXXX look on again fiscal we quarter soon speaking call. you support We as forward healthy your our remain and current our we transverse company, prospects Thank with the to you and environment. very appreciate

Operator

you, does Thank gentlemen. today's conference. and This conclude ladies

a disconnect You may lines for your time, and Thank wonderful day. your this have at participation. you

Sam Choi

Thank you very much.

Gilbert Lee

Thank you.

Jerash Holdings (US) (JRSH) 11 Aug 222023 Q1 Earnings call transcript