Jerash Holdings (US), Inc. (JRSH) Earnings

Management highlights

- Overall Financial and Strategic Performance: The company achieved record full-year fiscal 2026 revenue and strong fourth quarter performance, driven by growing demand from long-standing key customers and increasing contributions from newer customers including South Korea-based Hansel Group. Gains were supported by improved production capabilities, increased automation, economies of scale, and a more balanced sales mix that drove improved profitability. The core strategic priority is to diversify the customer base and product mix, support stable year-round production, and deliver consistent profitable growth, while focusing on expanding gross margins through disciplined cost control and operational execution. - Customer Development: The company completed the final shipments of Hansel Group's initial 3 million pair order for women's shorts early in the fourth quarter; the order received strong positive feedback from Hansel's end customer, a large U.S. multinational omnichannel retailer. The company has since received two additional confirmed orders from Hansel for the same end customer, with additional pipeline orders in discussion. - Capacity Expansion Strategy: The company is pursuing a phased, distributed capital expansion strategy (rather than investing in a single large flagship facility) to avoid disrupting ongoing operations. The first expansion phase is on track to complete by the end of calendar 2026, and will add 15% production capacity and 700 new workers. The second phase will complete by the end of calendar 2027, adding an additional 20-25% production capacity. Long-term, the company targets doubling total production capacity over the next several years. - Jordan Operations Update: Jordan's manufacturing sector benefits from favorable free trade agreements, a skilled cost-competitive workforce, and strategic geographic access to major markets, despite broader regional uncertainty. All ports operated normally in the quarter, allowing the company to complete extra shipments despite the typical seasonal disruption from Ramadan and Eid holidays. As of the call, all production facilities are fully booked through December 2026. The company's partnership with the Jordan Ministry of Labor to develop rural satellite factories is progressing: a second satellite factory became operational in March 2026 with 130 local workers, and will be expanded to add 5% total capacity and 250 total employees by the end of fiscal 2027. Planning for a third satellite factory is underway, which will add approximately 500 new local jobs. The company is also converting a recently acquired facility into a centralized warehouse to improve operational efficiency. - Capital Return: The board of directors approved a $0.05 per share regular quarterly dividend, paid May 21, 2026.

Guidance

- For fiscal 2027 first quarter, management expects year-over-year revenue growth of 20% to 22%, with a targeted gross margin of 15% to 17%. - Management does not provide full-year fiscal 2027 revenue growth guidance, noting that growth is constrained by current production capacity, order visibility beyond the first quarter is limited, and the company prioritizes phased expansion that avoids disrupting ongoing operations. Management confirms that full-year fiscal 2027 growth is expected, and the company will maximize capacity utilization to deliver as much top-line growth as possible at optimized margins.

Segment performance

The company reports consolidated financial results only, with no separate product segment breakdown provided in the transcript. For the full fiscal 2026 ended March 31, 2026, net income was $3.6 million, compared to a net loss of $0.8 million in fiscal 2025. For fiscal 2026 fourth quarter: total revenue grew 46.6% year-over-year to $42.9 million (from $29.3 million YoY); gross profit increased 40.4% YoY to $7.4 million (from $5.2 million YoY), with gross margin of 17.1% (down from 17.9% YoY); operating expenses were $5.0 million (up from $4.8 million YoY), equal to 11.7% of total revenue (down from 16.4% YoY); operating income grew over 500% YoY to $2.3 million (from $434,000 YoY); net income was $1.7 million ($0.12 per diluted share), compared to a net loss of $144,000 ($0.01 per diluted share) YoY; net cash provided by operating activities for the full fiscal year was approximately $2.5 million, up from $1.4 million in fiscal 2025.

Risks & headwinds

- Broader regional geopolitical uncertainty in the Middle East creates operational and shipping uncertainty, and has caused some potential customers to delay order confirmation amid security concerns. - Seasonal operational disruption from the Ramadan and Eid holiday period can impact quarterly production output, though the company has improved its ability to plan for and mitigate this impact. - Port congestion and potential port closures related to regional conflict can disrupt shipping and revenue recognition. - Tariff changes are expected to continue in future years, though management notes the majority of tariffs are paid by customers, and the impact on Jerash's profitability has not been material to date. - Order backlog through December 2026 is not 100% comprised of confirmed purchase orders; 20% of planned production is still pending customer confirmation, though management notes historical data shows 99% of projected orders are ultimately confirmed.

Analyst Q&A

• Q: Analyst Ryan Myers asked if 20-22% first quarter growth is sustainable for the full fiscal 2027 year, given tougher year-over-year comparables in the second half. /

  A: Management stated growth is limited by current production capacity, and the company is fully booked through December 2026. No full-year growth projection is provided, as the company prioritizes phased expansion that avoids disrupting existing operations. Management confirmed full-year growth is expected, and the company will maximize capacity utilization to deliver as much top-line growth as possible at optimal margins.

• Q: Myers followed up asking what share of production booked through December 2026 is confirmed firm purchase orders versus customer projections. /

  A: Management clarified that 80% of planned production through December 2026 is already confirmed orders, with the remaining 20% pending confirmation over the next one to two months. Based on multi-year operating experience, management expects 99% of projected orders will ultimately be confirmed.

• Q: Analyst Mike Baker asked for the magnitude of the two follow-up Hansel orders, and whether order sizes have increased following successful completion of the initial 3 million unit order. /

  A: Management confirmed one follow-up order is a repeat of the initial women's shorts program for ~3 million units for season one, with additional seasons projected after that. The second follow-up is for a different style, totaling ~1.3 million units. There are hundreds of additional potential orders in the pipeline that have completed pricing, pending customer confirmation.

• Q: Baker asked what drove the 90 basis point year-over-year gross margin decline in the fourth quarter. /

  A: Management explained that the year-ago quarter (Q4 2025) had an unusually high margin because port congestion delayed shipments of lower-margin goods, leaving only higher-margin products shipped and recognized that quarter. Additionally, the 2025 Ramadan holiday disruption was more significant than planned in 2026, and management entered Q4 2026 with conservative projections amid Iranian-U.S. geopolitical tensions. The 17.1% gross margin in Q4 2026 reflects normal operating conditions for the quarter.