Jerash Holdings (US), Inc. Aktie

Greetings. Welcome to the Jerash Holdings Fiscal 2026 Fourth Quarter and Full Year Financial Results. [Operator Instructions] Please note, this conference is being recorded.

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

Thank you, operator. Good morning, everyone, and welcome to Jerash Holdings fiscal 2026 fourth quarter and full year conference call. I'm Roger Pondel with PondelWilkinson, Jerash Holdings Investor Relations firm. On the call today from the company are Chairman and Chief Executive Officer, Sam Choi, Chief Financial Officer; Gilbert Lee; and Eric Tang, who leads the company's operations in Jordan.

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 Factors 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 Jerash Holdings undertakes no obligation to update any forward-looking statements, except as required by law. And with that, it is my pleasure to turn the call over to Sam Choi. Sam?

Thank you, Roger. I'm pleased to report that the rest close of fiscal 2026 with outstanding fourth quarter performance and record revenue for the full year. This strong performance was driven by increasing demand from the company's long outstanding key customer. as well as growing contribution from newer customers, including Hansha Group in South Korea and other customers that have been acquired in recent years. Building on this momentum, the results reflected robust top line growth and a meaningful improvement in profitability. These gains were supported by enhanced production capabilities and operational efficiencies with increased automation and economies of scale, enabling a more balanced sales profile and improved margins throughout the year.

We are confident in our ability to sustain this progress and continue delivering solid performance. I'm pleased to report that the last shipments under HengsoO's initial large order for 3 million pairs of fill sauce were completed early in the fiscal fourth quarter. The products and in turn, were well received by HengsoO's largest customer, a U.S.-based multinational omnichannel retailer, reflecting Jerash's strong production quality and online delivery performance. We have since received 2 additional orders from HengsoO for the same end customer. We continue to cultivate relationship with additional global brands and strategic partners as part of our broader strategy to banked by both our customer base and product mix as well as to support more stable year-round production and reduced impact of seasonality on our business.

Together with our blended capacity expansion, this initiative position us to deliver a steady pipeline of profitable growth. As we scale, our team remains focused on further improving gross margins while maintaining Pistabrin operational execution and cost control. To support growing demand through our phase and capital devision expansion strategy. We have begun and waiting and expanding several manufacturing facilities and optimizing warehouse capacity, including a newly acquired building rather than concentrating our investment in a single flagship production complex.

The first phase of renovation is expected to increase production capacity by approximately 15% and at 700 workers by the end of calendar year 2026. The remaining expansion is scheduled for completion by end 2027, and is expected to contribute an additional 20% to 25% in production capacity.

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. Jordan continues to be recognized as 1 of the world's preferred manufacturing hubs, supported by its extensive network of free trade agreements. a highly scale and cost-competitive workforce and a strategic geographic location that provides stable access to major markets despite broader regional uncertainty. With both the Agbar and high support fully open and operating normally along with cooperation from customs and logistics partners, we were able to complete additional export shipments during the past quarter. Despite the seasonal impact typically associated with the most long Ramadan and it holiday period.

As just now Sam mentioned, we are encouraged by the positive feedback from hands and customers regarding Jurus production quality and delivery time line and have since received additional orders from Hansal for different styles. In addition, buyers from our key customers have placed large orders for our fiscal 2027 year. As a result, I'm happy to report that our facilities are now fully booked through December of 2026.

Turning to our expansion trends, we are increasing capacity in a controlled manner in phases while maintaining high production output. and we have begun adding production lines at 2 of our existing manufacturing facility. At the same time, we are converting our viewers acquired facility into a centralized warehouse to further optimize operational efficiency. By the end of calendar year 2026, we expect to have increased capacity by approximately 15%, supported, as Sam mentioned, by the addition of 700 new workers. The second phase of our expansion will provide converting to 1 facility that is currently functioning as a centralized setting department to a production factory by adding 500 new state of bot sowing machines and automation supported by approximately 1,100 additional workers.

We expect the second phase of expansion to contribute an additional 20% to 25% increase in capacity, good completion plan by mid-calendar year 2027. As we mentioned during the last conference call, our collaboration with the Jordan Ministry of Labor to develop additional facilities in Luton is proceeding well. Our first satellite factory established in partnership with the Ministry of Labor was in 2019. A second satellite factory just became operational in March 2026, and currently employing 130 local workers. We are planning to expand this site by additional growth which will increase our production capacity by approximately 5% and employ up to 250 local employees.

This project is targeted for completion by the end of fiscal year 2027. In addition, we continue to work closely with the Ministry of Labor on plans for first satellite factory, which is expected to create approximately 500 additional jobs in the surrounding community outside of sharing. which is about 1 hour away from Jordan first satellite factory in Hasa. Together, this initiative supports rats growth objectives. while also contributing to local employment and economic development. Our long-term strategy is focused on sustaining growth momentum with an objective of doubling our production capacity over the next few years as we broaden our customer base and enhance our product mix. By strategically optimizing capacity, we aim to deliver stronger, more predictable top line growth alongside improved margin performance and enhanced operating leverage throughout the year.

With that, I will turn the call over to Gilbert to discuss our financial results. Gilbert, please.

Thank you, Eric. Revenue for the fiscal 2026 fourth quarter grew 46.6% to $42.9 million from $29.3 million in the same quarter last year. The increase was primarily driven by increased export shipments to the company's long-standing key customers as well as orders from newer customers, including Hansol Group in South Korea, and others that we developed in recent years. Gross profit increased 40.4% to $7.4 million for the fiscal 2026 fourth quarter from $5.2 million in the same quarter last year. Gross margin for the quarter was 17.1% compared with 17.9% in the same period last year. Operating expenses were $5 million in the fiscal 2026 fourth quarter compared with $4.8 million in the same quarter last year. As a percentage of revenue, operating expenses fell by nearly 5 percentage points to 11.7% from 16.4% in the fourth quarter of fiscal 2025. This reduction reflects improved control over export logistics costs and lower stock-based compensation.

Operating income rose more than 5x to $2.3 million in the fiscal 2026 fourth quarter from $434,000 in the same quarter last year. Total other expenses in the fourth quarter were $399,000, including $383,000 in interest expenses compared with $254,000 in the same quarter a year earlier, which included $371,000 of interest expenses. Income tax expenses were $270,000 in the fiscal 2026 fourth quarter compared with $324,000 in the prior year quarter. Net income increased to $1.7 million or $0.12 per diluted share for the fiscal 2026 fourth quarter from a net loss of $144,000 or $0.01 per share for the same quarter last year. Comprehensive income attributable to the company's common stockholders advanced to $1.6 million in the fiscal 2026 fourth quarter from a comprehensive loss of $49,000 in the same quarter last year. While these were numerous -- there were numerous changes to tariffs during fiscal 2026 and additional changes are anticipated in future years, -- but since tariffs are mostly paid by the company's customers, the overall impact on Jerash's bottom line has not been material.

As of March 31, 2026, cash and restricted cash totaled $12.5 million and net working capital was $36.7 million. Inventory was $30 million and accounts receivable amounted to $5.7 million. Net cash provided by operating activities was approximately $2.5 million for the fiscal ended March 31, 2026, compared with $1.4 million in fiscal 2025 year. The increase was primarily attributable to net income of $33.6 million during fiscal 2026 compared with a net loss of $0.8 million during fiscal 2025, partially offset by higher accounts receivable, inventory and accrued expenses. On May 4, 2026, Jerash's Board of Directors approved a regular quarterly dividend of $0.05 per share on its common stock paid on May 21, 2026, to stockholders of record as of May 14, 2026. As both Sam and Eric said earlier, we are optimistic

about the future of Jerash. and remain committed to disciplined cost management and operating efficiency as we continue to execute our expansion plans and growth strategy.

Looking ahead for the near term, we expect revenue for the fiscal '27 first quarter to increase by 20% to 22% over the same quarter of last year. with a gross margin target for the fiscal '27 first quarter of 15% to 17%.

We will now open the call for questions, and I will turn the call back to the operator.

Certainly, at this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question for today is from Ryan Meyers with Lake Street Capital Markets.

Congrats on the solid progress in the strong quarter. first question for me. If we think about what you guys gave for the first quarter guidance and all the order flow that you're seeing through the rest of the year, how should we think about the potential growth rate on a full year basis. And as we proceed into the previous 3 quarters, just do you think that 20% to 22% growth is sustainable? I know you'll see some tougher comps in the second half of the year? Just how we should think about things directionally for the full year?

Well, actually, we haven't really projected that far out because as you know, we are pretty much limited the growth of our production and sales are pretty much limited by our capacity. As Eric mentioned, we are fully booked through December of 2026. And we could make some changes or there's still room for changes in our customer mix and product mix. So the overall number for fiscal '27 it is still uncertain. But there will definitely be growth. We will continue to do everything we could to maximize our capacity utilization and provide as much top line growth as possible and also at an optimized margin and profitability.

As we are expanding our capacity, we want to do it in a way that doesn't interrupt our normal operation. And so -- first quarter, we're pretty solid. We know what orders we have and what we're going to produce. But even second quarter, there are still some rooms for changes. So we really cannot project what the growth percentage for the full year is. But for the first quarter, we know we're going to be able to grow from 20% to 22% over the first quarter of fiscal '26.

Okay. Got it. And then just thinking about the facilities that you guys have booked through December 2026. How much of that is firm purchase orders from your customers or just customers forecasting or expecting production? How much of that is like 100% purchase order?

No, it's not 100% purchase order. Usually, our customers will project out 6 months to 9 months worth of what they need from our production facilities. And then we will do our pricing, we will do our sample development and I think it will be probably 30 to 60 days out, then we will receive the purchase order.

Sorry, Gilbert., Allow me to say 2 words. Okay. The reason why we say we are booked through the end of December production means we are planned according to what the customer's requirement because we received projection. and 80% already confirmed order and the balance -- the customer will confirm in the coming 1 or 2 months. According to our experience, okay, so for so many years running the production 99% -- okay, the customer will confirm the exact order, okay, 99%.

Your next question is from Mike Baker with D.A. Davidson.

So Hansol first order went well, I think you said 3 million units, and now that there's been 2 follow-up orders. Can you just order of magnitude, size, those fall-up orders was 3 million -- it wasn't a test per se, but as you prove your ability to deliver high quality on time, do the size of the additional orders increase.

Eric, what are the 2 follow-up orders from Hanson, what is the quality.

So the 2 confirmed order from Hansol. Okay. Firstly, 1 of the order is more or less the same like the growth short we have been doing last year. So this is more or less like a repeat order. But it is -- our quantity is around 3 million pieces, but it is only for season 1. The Hansol told me that we will have season 2, season 3 and season 4. Season 1 means starting the production from Ada August until next January. And that season 2, okay, we are receiving projection also for season 2, okay, but able to start in February and the season 3 and season 4 will continue.

The second order, which is another style, okay, which is the last quantity is around 1.3 million pieces, okay, also from Hensel. And apart from these 2 orders, we continue discussing with a lot of, I think, more 5 or 6 to order, of which we already go through all the pricing exercise, we are still waiting for the confirmation from the buyer. Okay. I am sure that's because the -- the envir may be little more consideration because previously that the situation in the middle year is not very comfortable for them. but they told us that if the buy or any piece agreement initial or, I mean, temporary or long-lasting one will be signed, they will immediately place more order to Jordan. As they consider Jordan is still most competitive manufacturing country base.

Understood. Great. And so any -- just 1 additional follow-up -- this is more -- are these more fashion sort of higher-margin goods? Or are they more basic goods, which I know coming out of lower margin?

Maybe Gilbert, you can answer.

No, you can answer. But basically, the Hensel orders, they are more basic, simple styles. However, we were able to produce them at a much more efficient way as well as within the benefit of economies of scale. So the margin of these hands of orders are actually very, very good.

So then can you -- 1 last 1 to remind us gross margins, the quarter you just reported were certainly higher than consensus, but were down, I think, about 90 basis points year-over-year. What was the drag?

You've been comparing to the fourth quarter of 2025, right?

Correct. Exactly.

I remember the sales for fiscal -- for fourth quarter 2025 was kind of low. There were some delays in shipping out in the fourth quarter for 2025. There were some conjection at the ports. So we weren't able to ship out everything we produced. Now, I think there were some mix issues. We basically ship out most of the orders that were with customers such as VF, with higher margin and we weren't able to produce a lot of the EM, what we call cut and make orders with lower margin.

So we pretty much concentrate on producing higher margin to produce and ship our higher-margin products in Q4 of 2025. And the impact from the Ramadan holiday and also the Eat holiday in Q4 of 2025 was more significant. But this year 2026 Q4, we were able to continue to produce. And because I think we pretty much learned from our past experience, how do you handle the disruption of the Ramadan.

So this year, I mean, we projected a lower sales for Q4 this year, just to anticipate that there will be disruptions or there will be a lower output from -- because of Ramadan and also if you remember, when we did the projection for Q4 of '26, the war just started in -- between Iran and the U.S. So we were kind of concerned and we're rather conservative in our ability to ship out because there could be port closing and all kinds of uncertainties.

So yes, fortunately, we were able to have a very high -- well, actually, this is a record high fourth quarter for us in Q4, and we were able to have a rather normal gross margin.

[Operator Instructions] We have reached the end of the question-and-answer session. And I will now turn the call over to Sam Choi for closing remarks.

Thank you, operator, and thanks to all of you for joining us today. We appreciate your ongoing support and interest in Jerash and we look forward to updating you on our progress in the year in the near future. Thank you very much.

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

Greetings, and welcome to the Jerash Holdings Fiscal 2026 Third Quarter Financial Results Call. [Operator Instructions] This conference is being recorded.

I will now turn the conference over to your host, Mr. Roger Pondel, Investor Relations. Sir, you may begin.

Thank you, operator, and hello, everyone. Good morning. Welcome to Jerash Holdings Fiscal 2026 Third Quarter Conference Call. I'm Roger Pondel with PondelWilkinson, Jerash 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 Factors 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 Jerash Holdings undertakes no obligation to update any forward-looking statements, except as required by law.

And with that behind us, it was my pleasure to turn the call over to Sam Choi. Sam?

Thank you, Roger. Jerash achieved sharply improved financial results across both 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, Hansoll Textile in Korea. Our collaboration with Hansoll is progressing well and delivering mutual benefits as we continue to work together on additional orders for its largest customers, a U.S.-based multinational omnichannel retail company. At the same time, our long-standing global brand customers are seeking to secure greater production capacity with Jerash.

Turning to our recent announcement made just last week. We are very excited about the acquisition of our 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 5-year growth strategy. We plan to establish these facilities at Jerash new flagship production complex through an additional investment of approximately $3 million in renovations and $2 million in advanced manufacturing equipment.

Renovation and anticipated to be completed before the end of 2026. Once fully operational, this strategic investment is expected to increase our manufacturing capacity for -- 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 the [indiscernible] 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 have 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 compression of renovation and before new equipment is installed, allowing us to ramp up operations 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 girls' short from Hansoll with shipments expected to be completed during the current fiscal quarter. At the same time, we are working closely with Hansoll and its largest customer on the second purchase order for a different style.

Buyers from major customers have submitted increased all the 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 2 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 Jerash 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 5 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 improved 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 fiscal 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 U.S. 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 $4.7 million in the same quarter last year. The increase was primarily due to higher sales volumes and increased recruitment 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 other expenses were $418,000 a 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 $0.00 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 $147,000 in the same quarter last year.

As of December 31, 2025, Jerash had cash and restricted cash totaled $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 9 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 9 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 3, 2026, Jerash's Board of Directors approved a regular quarterly dividend of $0.05 per share on its common 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.

[Operator Instructions] Our first question is coming from Mike Baker with D.A. Davidson.

Just real quick. A couple of 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? Where -- does that just come out of cash? Or do you borrow to fund that $5 million.

And then, I guess, secondly and related, where does the $2.8 million from the -- from the -- that's been financed for the Housing Bank. Where does that show up? Is that show up -- is that going to show up as debt on your balance sheet?

The first question about the $5 million 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 -- 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 applies for because the Housing Bank is going to apply the -- from the Central Bank which provides a subsidy on the interest rate, which we will get at 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 8 years, but we have a 1-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 8-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 of the principle a year later.

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

Yes. Approximately $8 million. Yes. Right.

Okay. Fair enough. If I could ask one more. The -- a little more detail, if you wouldn't mind on those other. I think you said 2 other facilities that you're thinking about. It sounds like they're smaller because it will increase capacity by 5% to 10%. But can you -- just a little bit more detail on the size of those facilities? And I guess, similarly, how those would be financed?

Yes. If you remember, A few years ago, we worked with the Department of the Ministry of Labor to start up a satellite factory in a rural area, which is about 1.5 hours 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 -- and 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 agreed to set up another 2 satellite factories in rural areas, not too far from our main industrial zone, maybe an hour or 2 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 the 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 the market. Does that answer your question?

Yes. Understood. Very clear.

And Eric, do you have anything to add?

Oh, also because we have this kind of satellite project, which helped the Jordanian government and to increase the job opportunities in the rural area. So this is the reason why Housing Bank can get for Jerash from the Central Bank, a subsidy of the interest rate in our -- in financing, a couple of millions of our machinery and renovation cost.

Our next question is coming from Ryan Meyers with Lake Street Capital Markets.

First one for me. So with the 40% capacity, that sounds like it will 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 renovation 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 season 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 will be able to be online this new facility, and that will increase our capacity up to our at least 40% once it's fully occupied and 2,500 workers brought in. So I think this whole process is probably going to take a year to 2 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 all that?

Well, this past quarter, we focused a lot on the high-volume orders that we're doing with Hansoll, and that turned out to be a really great enhancement to our efficiency because it is just very -- not that simple, but we don't have to change over the [ styles from styles ] and it's just 1 product that we just keep running. So it improved 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 a -- probably going back into working on more difficult styles, especially with our long-term customers and the volume will be lower and multiple styles. So we anticipate the margin will somewhat be lower than this current quarter. However, I think the -- we have been working on some efficiency improvements we have 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.

Our next question is coming from Igor Novgorodtsev with Lares Capital.

Congratulations on the very strong quarter. My first question is a couple -- several years ago, obviously, you had a great disruption [Technical Difficulty].

Apologies, sir. One moment please. Sorry, Igor. We have your line back, sir.

Okay. 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 U.S., Iran and Israel and not everybody is sure what's going to happen. What is your contingency plan? What is your going to do different this time now that is more anticipated?

Eric or Sam, do you want to take this one?

Yes, Eric, first, please. Yes.

So I think because we are closely monitoring the political situation here, so we are -- almost every month, we -- okay, as 1 of the biggest investor in Jordan, we also have meetings with the Ministry of Foreign Affairs to monitor the very sensitive political situation here, especially, okay, about the possibility of the occurrence of the 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 [ relaying ] this information to our major buyers.

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

And nowadays, currently, for the past 6 months, the Haifa port and the Aqaba port are working very efficiently and very stable, not like before. So we -- for the past 6 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. For our old customer such as VF and New Balance, they have supplier financing program that we could rely on to get early payments on the receivables. But new customers, and 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 having -- 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 alternatives.

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

Well, let me try to give you some 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 tariff situation, that is affecting everybody. So it's not just affecting our customers, it is affecting everyone else, even other suppliers, it is affecting our competitors. So the market is reacting to it. But the good thing is we are considered as a highly capable, and we deliver high-quality and very reliable manufacturer in Jordan. So sometimes, our customers, even though they try to put pressure on us, and -- but they know, we might be their only choice or but -- we might be one of their few choices if they want to have production 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 would 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.

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 enjoy 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 tariff. 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 customers in terms of the FOB price, but 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.

Our next question is coming from [ Barry Pasternak ], who is an investor.

Congrats on the 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 or 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 higher income. And in the past, our consolidated income was suffering because of some disruptions, because of -- as you know, the past 2 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 supportive income because of our global operations. So -- but that is behind us. So going forward, our effective tax rate 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 being worked on. So I think going 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%.

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 Jerash and look forward to speaking with you soon about our progress. Thank you very much.

Thank you.

Thank you. Ladies and gentlemen...

Thank you all for being here. Yes, thank you.

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

Good day, everyone, and welcome to the Jerash Holdings Fiscal 2026 Second Quarter Financial Results. [Operator Instructions]

It is now my pleasure to hand the floor over to your host, Roger Pondel, Investor Relations. Sir, the floor is yours.

Thank you very much, Matt. Good morning, everyone. Welcome to Jerash Holdings Fiscal 2026 second quarter conference call. I'm Roger Pondel with PondelWilkinson, Jerash Holdings Investor Relations firm.

On the call today from the company are Chairman and Chief Executive Officer, Sam Choi, Chief Financial Officer, Gilbert Lee; and Eric Tang, who leads the company's operations in Jordan.

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 Factors 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 Jerash Holdings undertakes no obligation to update any forward-looking statements except as required by law.

And with that behind us, I will turn the call over to Sam Choi. Sam?

Thank you, Roger. Despite ongoing trade uncertainties, we continue to experience robust and growing demand from our long-standing customers and newly established strategic partners. Jordan is increasingly recognized as a preferred manufacturing hub for global brands seeking to diversify their supply chains beyond Asia.

Apparel exports from Jordan to the United States and the current effective tariff raise of 15% remains significantly more favorable than other major sourcing countries, [indiscernible] range from 20% to more than 60%. In addition, Jordan maintains free trade agreements with other key markets, including the EU, U.K. and Canada. Furthermore, Jordan's labor framework which enables manufacturers to contract skill foreign workers further enhances our production quality and operational efficiency. This labor flexibility combined with favorable trade conditions reinforces Jerash position as an attractive strategic sourcing partner for global brands navigating ongoing economic shifts.

In late June, we successfully completed the expansion of our existing manufacturing facilities, increasing our production capacity by approximately 15%. This additional capacity was much needed to support growing demand from our global customers and strategic partners.

Looking ahead, we are receiving continued requests for even greater capacity, which has prompted us to initiate a long-term expansion plan. This brand includes evaluating potential acquisitions and developing our own land. This initiative is deciding to ensure that Jerash remains well positioned to meet evolving market demand and sustain our competitive edge in the global apparel industry.

As part of our ongoing strategy, we continue to successfully diversify both our customer base and product mix. These efforts was aimed at enhancing year-round production stability and reducing the impact of seasonality on our business. While we anticipate this changes will strengthen our long-term growth, we do expect a slightly lower average gross margin in the near term.

As order volumes for our expanded product offerings continue to scale in the coming years, our goal is to gradually improve gross profit margins to approximately 20%. We expect to achieve this full increased production automation and the benefits of economies of scale. During this important period of progress for the company, we remain vigilant about the potential impact of regional geopolitical uncertainties and involving tariff developments. These factors are being closely monitored as we advance our growth strategy to ensure resilience and long-term success.

With that, I will now turn the call over to Eric, who is in charge of our operations in Jordan.

Thank you, Sam. As we have noted previously, we believe the recent shift in U.S. tariff policy has accelerated the urgency with which businesses are looking to diversify their manufacturing footprint. And we are seeking ways to accommodate growing capacity demands. We have successfully completed shipping the initial phase of the major collaboration order of more than 3 million pairs of girls shorts from a strategic partnership with Hansoll Textile, a leading South Korea-based global apparel group that supplies a wide range of garments to major international retail and fashion brands.

Shipment of second phase is now scheduled to be completed by end of November. Production and shipments for the rest of the order are scheduled to continue through February of 2026. We are actively collaborating with both Hansoll and its customer, a leading U.S.-based multinational and omnichannel retail corporation to discuss additional synergies and further continued collaboration and growth together.

Shipping logistics in the region have returned to normal, both the Haifa and Aqaba ports are fully operational for shipping finished goods and receiving raw materials. We are optimistic that the nearly 2-year period of transportation challenges is behind us, allowing us to resume an interrupted logistics support for our global customers. We continue to receive new business inquiries and buyers from our major customers have submitted the increase over the projections for 2026.

We are currently awaiting confirmation of purchase orders to begin trending production schedules beyond our current capacity, which is fully booked through February. These new opportunities reinforce our growth outlook and validate our strategy, focusing on diversifying both our customer base and product mix. This approach enables us to optimize production capacity and drive stronger top line performance and margins throughout the year.

As Sam mentioned earlier, we are looking at different ways to expand our production capacity. The current collaboration expansion with the Jordanian Ministry of Labor to develop an extension adjacent to our existing facility in Al-Hasa is in progress. Upon completion, which is now expected in the second half of calendar year 2026 should add another 5% to 10% in total production capacity. Additionally, we are seeking other factory acquisition possibilities as well as development of our online. We look forward to keeping you updated on our progress.

With that, I will now turn the call over to Gilbert to discuss our financial results. Gilbert, please.

Thank you, Eric. Revenue for the fiscal 2026 second quarter grew 4.3% to $42 million compared to $40.2 million in the same quarter last year. The increase was primarily driven by higher shipment volumes to the company's U.S. customers supported by a more diversified customer base starting this fiscal year. Gross profit was $6.3 million for the fiscal 2026 second quarter compared with $7.1 million in the same quarter last year. Gross profit margin for the quarter declined to 15.0% from 17.5% in the same quarter last year, which benefited from catch-up production of some outerwear that carried higher margins originally scheduled for the first quarter of fiscal 2025. The decrease was primarily driven by the diversification of broader customer base and a shift in product mix which resulted in a lower average gross margin.

Operating expenses decreased to $5.2 million in the fiscal 2026 second quarter from $5.9 million in the same quarter last year. The decrease was primarily due to better control of export costs and lower stock-based compensation expenses. Operating income was $1.09 million in the fiscal 2026 second quarter slightly lower than $1.13 million in the same quarter last year.

Total other expenses were $456,000 in the fiscal 2026 second quarter compared with $364,000 in the same quarter last year, primarily reflecting the increase in financing needs to support business growth. Income tax expenses were $154,000 in the fiscal 2026 second quarter compared with $106,000 in the prior year quarter.

The effective tax rate increased to 24.3% for the 3 months ended September 30, 2025, compared with 13.7% in the same quarter last year. Net income was $479,000 or $0.04 per diluted share in the fiscal 2026 second quarter compared with $665,000 or $0.05 per diluted share in the same quarter last year.

Comprehensive income attributable to the company's common stockholders totaled $440,000 in the fiscal 2026 second quarter compared with $663,000 in the same quarter last year. As of September 30, 2025, Jerash had cash and restricted cash totaled $13.7 million and net working capital of $35.2 million. Inventory was $26.3 million and accounts receivable amounted to $5.8 million.

Net cash provided by operating activities was approximately $318,000 for the 6 months ended September 30, 2025, compared with cash provided by operating activities of approximately $2.4 million for the same period in fiscal 2025. The decrease in net cash provided by operating activities was primarily driven by an increase in accounts receivable as a larger volume of goods was shipped towards the end of September as well as advanced payments to suppliers for orders scheduled to be completed in the fiscal third quarter.

On November 7, 2025, Jerash's Board of Directors approved a regular quarterly dividend of $0.05 per share on its common stock, payable on November 26, 2025, to stockholders of record as of November 19. We are enthusiastic about our business prospects and performance ahead. As we look at the near term and implement our long-term expansion plans. At the same time, we're staying focused on cost controls, and enhancing operating efficiencies.

Looking ahead, we expect revenue for the fiscal 2026 third quarter to increase by 19% to 21% over the same quarter last year. And our gross margin for the fiscal 2026 third quarter is expected to be approximately 13% to 15%.

We will now open up the call for questions, and I will turn the call back to the operator.

[Operator Instructions] Your first question is coming from Ryan Meyers from Lake Street Capital.

First one for me. When we think about the revenue guide for the third quarter, is there any way you can break out how much of that is just coming from additional capacity that's come online versus how much of that is just increased order flow and demand?

We really don't break it down like that. I mean, our capacity overall has increased by about 10% to 15% over last fiscal year despite the expansion -- our internal expansion throughout the existing capacity by adding machineries and adding people. So that amounts to about 15% increase in capacity. And then the rest of them would be increase in demand, increase in orders during the third quarter -- I mean, third quarter year-to-year comparison. .

Okay. Makes sense. And then thinking about where the gross margins came in at and where you guys guided for the third quarter. I know you said earlier on in the prepared remarks that the goal is to improve the gross margins of the business to 20% or so. So can you just walk us through, I mean what needs to happen to get us from where we're at now through this 20% gross margin? And then maybe if you can put some sort of a time line or timetable on getting to those kind of 20% or so gross margins would be helpful.

Sam has indicated, in the near term, the gross margin we're going to be still at a relatively flat or lower comparing to what we have been before because we're taking on some new customers. Usually, when we take on new customers and the new styles and new ways of making those products will cause us to be a little bit less efficient. But at the same time, we are also working on automating many of our production processes, also implementing ERP system. But all this will take a while.

So it is a long-term goal that we get back to about 20% in gross margin, but it will take a few years. Our goal is to get back there with expansion, with increasing volume and just by economies of scale and eventually, probably after our 5-year plan, we will be able to gradually get back to about 20% gross margin.

Your next question is coming from Keegan Cox from D.A. Davidson.

Keegan on for Mike Baker. I just had a question on your -- I just had inventory or an inventory-related question. Inventory was up 30%. Is that year-over-year? Is that kind of a typical seasonal build? Like you usually work inventory down from 2Q to 3Q, at least from what I'm looking at. So if you can just give some context on that number, it would be great.

Well, the inventory is usually relatively higher in the -- at the first quarter. And then, yes, in second quarter, it will go down. But -- but this year is relatively -- it's kind of different because we're taking on a large volume customer, and we have to procure a lot more raw material to be ready for production during our traditionally slower season, which is the third quarter and the fourth quarter. But now we are fully booked, and we anticipate to have a lot more production utilizing a lot more raw material and supplies in the upcoming quarter.

Got it. And then just a follow-up on -- you talked about acquisitions or expansions in the press release and on the call so far. As you think about that, are you looking to acquire factories within Jordan? Or is there any possibility of expansion into other geographies?

As of now, our plan is more focusing on our Jordan manufacturing base.

Your next question is coming from Igor Novgorodtsev from Lares Capital.

So my first question is about your expansion. Maybe you can provide a little bit more details of who the customers for whom you're expanding? Or is the new customer mostly or these existing customers which you already have, which shifted the volume to Jordan or to your factories?

Well, we see increasing orders and increasing projections from our existing customers as well as new customers and potential new customers that are just coming here, coming to our company and ask for ways of collaboration. So our existing customers, as you know, North Face, New Balance, they are all increasing what they want to do in Georgia.

So on that end, we will try to continue to gradually grow with those existing legacy customers, but new customers like which is the Korean-based retail -- the Korean-based manufacturer that they just started doing business with us, but the potential is huge. Like Eric said, we just finished the first phase of the production of 3.7 million pieces of girl short, and we're getting -- we're still getting new orders from them.

So the increase or the expansion plan is really for all the existing customers, the new customers that we have onboarded in the past year or months as well as new customers that we're still working with. So the demand is definitely real and we're seeing it in the next few years. So that's why we now really focused on developing our long-term strategic growth plan. And we will make announcements about our growth plan in the upcoming months. But as of now, we're still in the development stage and once our Board approved it, then we will disclose that to everybody.

Also, if you can just give me a sort of snapshot of a pre-tariff versus post-tariff abroad. Obviously, a lot of things have changed in the United States. The customers, which are timing to you now, where are they coming from? So you just mentioned Asia, but what specific countries? Is it just China? Or this is also like Vietnam and if you can just give us some better idea where is that coming from? Where they're reducing their footprint and work to expand at your factories?

Well, we have new customers or Hanso, even though they're based in South Korea, they're supplying the U.S. So we're still producing in Jordan and shipping products to the U.S. That's why the advantage for us is because we have lower tariff rates for shipping to the U.S. comparing to manufacturers in China, in Asia. So that's why everyone is focusing on coming to Jordan. And at the same time, we are also growing our shipping to Europe because we have 0 tariff, 0 duty for shipping to the EU. So our business to Europe is also growing rapidly. .

Okay.

And Eric, you want to...

In fact, to our understanding, I mean, the customer would like to shift some of their orders from China or even India because the Indian tariffs, the reciprocal tariff to the U.S.A. has been increased substantially. So -- I mean, some orders according to our understanding were shifted from China and India. Yes. .

Okay. So my last question is about your Q4. Q4 traditionally has been a weak quarter for you because there's just not a lot of order so you took up on like local orders. So I understand that this Q4 is looking quite a bit different, better, basically. So you can just maybe tell me a little bit about -- I understand you provide the guidance, yes, for Q4, but maybe at least qualitatively how is Q4 going to be different from Q4 last couple of years.

Yes. This year is going to be different. I mean you're right, in the past, we are quite seasonal. And the first half of the year usually has a much higher sales than the second half. But this year, it's going to be quite similar second half of the year will be quite similar to the first half. It's not -- still not as high as the first half. But as Eric has indicated, with our capacity is fully booked through the end of February. And our year-end in March. So it's likely that will be still a pretty good quarter.

That concludes our Q&A session. I will now hand the conference back to CEO, Sam Choi for closing remarks. Please go ahead.

Thank you, operator. and thanks to all of you for joining us today. Our business is clearly moving in the right direction. We appreciate your continued support and interest in Jerash and look forward to speaking with you soon about our progress. Thank you all of you.

Thank you.

Thank you.

Thank you. This concludes today's event.

Thank you very much.

Greetings. Welcome to Jerash Holdings Fiscal 2026 First Quarter Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Roger Pondel, Investor Relations. Roger, you may begin.

Thank you, operator, and good morning, everyone, or afternoon, depending on where you are, and welcome to Jerash Holdings Fiscal 2026 First Quarter Conference Call. I'm Roger Pondel with PondelWilkinson, Jerash Holdings Investor Relations firm.

On the call today from the company are Chairman and Chief Executive Officer, Sam Choi; Chief Financial Officer, Gilbert Lee; and Eric Tang, who leads the company's operations in Jordan.

Before I turn the call over to Sam, I want to remind everyone 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 Factors 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 Jerash Holdings undertakes no obligation to update any forward-looking statements, except as required by law.

And with that, it is my pleasure to turn the call over to Sam Choi. Sam?

Thank you, Roger. Our fiscal first quarter performance reflects growing customer demand as companies continue to seek alternative manufacturing partners and diversify their supply chain away from China and Southeast Asia. Even with the most recently announced 15% U.S. tariff on products from Jordan, exporting from Jordan remains significantly more advantageous compared with most other countries, especially those in Asia with total effective tariff raise on apparel currently ranging from 20% to more than 60%.

We also made meaningful improvements in operating efficiency during the quarter. By optimizing our logistics and better production planning, we were able to reduce costs and significantly limit the need for overtime. Another key contributor to our positive performance was the return to routing raw materials imports through Aqaba port in Jordan. This shift allows shorter lead times and lower transportation costs, especially when compared to the alternative routes we had to use during the Red Sea shipping disruptions.

With strong FOB orders and improved cost efficiencies, we experienced a significant turnaround in our financial performance. Operating income climbed to nearly $1 million compared with a loss of more than $800,000 in the same quarter last year. Net income also turned positive, making a solid recovery from the net loss sustained in the prior year quarter.

I'm pleased to report that we have successfully completed production of the first phase of a major initial order from one of the largest U.S.-based multinational and omnichannel retailers through our strategic collaboration with Hansoll Textile, a leading global apparel group based in South Korea. With the success of this initial order, we remain focused on identifying and pursuing additional collaborations that create mutual value and help strengthen long-term partnership.

This is certainly an exciting time for Jerash. As we continue to see growing interest and increasing inquiries from global brands. At the same time, we are staying vigilant about the potential impacts of recently announced tariff changes and the ongoing geopolitical instability in the region as we continue to plan for additional expansion opportunities to support future growth.

I will now turn the call over to Eric Tang, who is in charge of our operations in Jordan. Eric?

Thank you, Sam. The first quarter was a particularly active and productive period for Jerash. As we continue to operate in what we believe is a positive and expanding business environment. We are seeing a steady increase in new business inquiries from global brands as well as other strategic collaboration opportunities, showing strong interest in our manufacturing capabilities and capacity. Additionally, the recent announcements regarding increased U.S. tariffs have accelerated the pace at which businesses are seeking to diversify their manufacturing base.

I am also pleased to share that the shipping logistics difficulty in the region for over one year is essentially behind us, and things have been largely back to normal since mid-July 2025. With Haifa port in Israel now fully operational again, along with returning to receive raw materials through Aqaba port, we are able to resume and maintain much more reliable shipping routes to support our global customers.

As Sam mentioned earlier, in August, we will complete production of the first phase of a major initial order placed through our collaboration with Hansoll. Shipments are scheduled to begin in September, continuing through February of 2026.

Additionally, we continue to work on sample orders and pricing exercise with several new products for other well-known brands in other regions outside of the U.S., where Jordan free trade agreement still stand and offer strategic advantages. These new business opportunities strengthen our growth outlook and strategy, which is focused on diversifying our customers and product mix to optimize production capacity and deliver better margins year-round.

The expansion of our existing manufacturing facilities in Amman was completed in June and we are now onboarding additional skilled workers from other countries to support an estimated 15% increase in production capacity. This added capacity is expected to begin contributing to Jerash performance starting in the second fiscal quarter, a much needed and timely expansion since our facilities are already fully booked through February 2026.

Separately, the other expansion project through collaboration with the Jordanian Ministry of Labor to develop an expansion adjacent to our existing facility in Al-Hasa is ongoing. We are still targeted from completion of that project in early calendar year 2026, and it should add another 5% to 10% in total production capacity.

With that, I now turn the call over to Gilbert to discuss our financial results. Gilbert, please.

Thank you, Eric. Revenue for the fiscal 2026 first quarter was $39.6 million compared with $40.9 million in the same quarter of last year. The slight decline was primarily caused by some customer shipments being redirected to Aqaba port in Jordan in order to avoid disruptions at Haifa port in Israel, which began in late June 2025 and delayed shipments on several orders.

Gross profit for the fiscal 2026 first quarter advanced 31.2% to $6.1 million from $4.6 million in the same quarter last year. Gross margin increased to 15.4% in the fiscal 2026 first quarter from 11.3% in the same quarter last year. The increase was primarily driven by improved logistics and production planning along with the resumption of import sea routes through Aqaba port, which provides shorter lead times and lower transportation costs.

Operating expenses totaled $5.1 million in the fiscal 2026 first quarter compared with $5.5 million in the same quarter last year. The decrease was primarily due to lower stock-based compensation expenses and lower cost on repair and maintenance.

Operating income increased meaningfully to $959,000 in the fiscal 2026 first quarter from an operating loss of $829,000 in the same period of last year. The improvement was mainly attributable to reduced import logistics costs for raw materials, lower overtime expense from improved logistics and production planning, lower stock-based compensation expenses and reduced spending on repair and maintenance.

Total other expenses were $307,000 in the fiscal 2026 first quarter compared with $426,000 in the same quarter last year, primarily reflecting lower interest rates and a decline in supply chain financing program usage.

Income tax expenses were $329,000 in the fiscal 2026 first quarter compared with $112,000 in the prior year quarter. We are in the process of consulting with international tax experts on developing global tax planning for achieving a more optimized tax structure.

Net income for the fiscal 2026 first quarter increased to $324,000 or $0.03 per diluted share from a net loss of $1.4 million or $0.11 per diluted share in the same quarter of last year.

Comprehensive profit attributable to the company's common stockholders totaled $328,000 in the fiscal 2026 first quarter versus a comprehensive loss of $1.3 million in the same period of last year.

As of June 30, 2025, Jerash had cash and restricted cash totaled $7.5 million and net working capital was $34.6 million. Inventory was $27.3 million and accounts receivable amounted to $10 million. Cash at the end of the quarter was lower because of substantially higher receivable balance as a result of delays and inventory shutdown at the Haifa port throughout the month of June, forcing accumulated orders to be rerouted to the port of Aqaba and shipped out in the final week of June. These receivables were all collected in July.

Net cash used by operating activities was approximately $6.5 million for the quarter ended June 30, 2025, compared with $2.2 million for the same quarter last year.

As Sam and Eric mentioned, our business remains solid with visible opportunities ahead. We are evaluating longer-term larger scale expansion plans for the coming year while remaining focused on driving growth and enhancing operational efficiency. On August 8, 2025, Jerash's Board of Directors approved a quarterly regular dividend of $0.05 per share on its common stock payable on August 29 to stockholders of record as of August 22. Looking ahead, we expect revenue for the fiscal 2026 second quarter to be approximately $40 million to $42 million, and our gross margin for the fiscal 2026 second quarter is expected to be approximately 15% to 16%.

We will now open up the call for questions, and I will return the call back to the operator.

[Operator Instructions] The first question today is coming from Michael Baker from D.A.Davidson.

A couple real quick here. First, on tariffs, and forgive me for losing track, it's been all over the place. But are there now tariffs being paid for products from Jordan? Historically, it was a tariff-free zone, but has it now been the 15% tariff put in place for Jordan?

Yes. Currently, it's 15%.

Okay. So the idea is more than it was when there was no tariff, but less than 20% to 60% from other Asian countries. That's the right way to think about it, correct?

Yes, that's correct.

Understood. Two more quick ones. You talked about some delays at the end of the quarter. So was there some -- can you quantify, was there a sales shift from the first quarter into the second quarter?

Yes. There were maybe a few orders that didn't get out at the end of June that was shifted to July, but it was not significant.

Okay. Last one for me. You just spoke, Gilbert, at the end there about evaluating longer-term expansion plans. So that's above and beyond the 5% to 10% increase for next year from expanding the building that you already have. Is that correct? And if so, could you go into a little bit more details of what those longer-term expansion plans could look like?

Well, basically, we have been talking about and we have been planning about a longer-term expansion, which involves building on the piece of land that we have owned for the past six to seven years. However, we're still being cautious, especially during this time where the conflict in the Middle East just ended and who knows when it is going to start again. Plus the tariff situation is still creating a lot of uncertainties. Even though we believe the demand of our capacity and Jordan's production, people shifting, the trend is going to continue and it's going to intensify. But just because of the uncertainty, we're kind of tabling the major expansion maybe to fiscal year 2027.

For 2026, I think we're going to try to focus on, number one, to bring in and train sufficient new workers to our existing facilities so that we can capitalize on the 10% to 15% increase in the capacity by adding machineries and adding people. And then on the second project of expanding our facility in Al-Hasa, which is in the desert, and we're in cooperation with the Jordanian government, the Ministry of Labor and the Royal Court and they're supporting us. And this is -- the investment on this expansion is not going to be a lot of money, and we could definitely finance it ourselves, but it will give us more capacity and also creating more employment opportunity for the local people in Al-Hasa. So this one and our internal expansion should keep us busy for this current fiscal year.

And then we'll look at the situation and then decide on when and how to expand on our piece of land, which is to build additional factory dormitory warehouses. So right now, we're actually studying the design, studying the architecture and because that will take some time to really decide on how to move forward.

The next question will be from Mark Argento from Lake Street.

Just drill down a little bit on some of the incremental order activity. I know you talked about the Hansoll relationship last quarter. Can you just maybe drill down a little bit further there? And how quickly could that scale up to be something meaningful?

Eric, do you want to answer this one?

Yes. Okay. For the past 6 months, we have numerous contact with Hansoll, which is one of the leading apparels in Korea. So after several rounds of negotiation, we have successfully obtained two orders from Hansoll. One is from the -- one is the [indiscernible] order, okay, which we are now producing as a trial order, okay? And the quantity is around 150,000 pieces. And the other big order, which we already secured, okay, is another order of 3.2 million pieces, which we are going to start this week. So currently, okay, we are very optimistic about our cooperation with Hansoll.

And Hansoll also send the team here in Jordan since two weeks ago to watching our production -- daily production every day. And another team of leaders from Hansoll is coming this weekend, to have a further discussion with us for how we are going to cooperate together in 2026. Okay, so we are very optimistic in the expansion of business with Hansoll.

That's helpful. I mean it seems like those are pretty chunky orders. I mean if things go well, can you -- the relationship progresses, the opportunity to expand and add some capacity, we think -- I would think that would make a tough plans, are you guys being just conservative in the expansion plans right now? Or do you see you could change gears pretty quickly and add the capacity and really jump-start growth?

Well, I'm Sam Choi. Maybe I answer this question. In fact, one of our biggest customer, they told us they will have a 5-year expansion plan for the top line, and they will play a strong emphasis in sourcing from Jordan. So I mean, to cope with this larger customer expansion plan, we will in line with them to expand our capacity.

But the solid plan, I mean, we will wait until the plan of our major customer, how to cope with them on a yearly basis to meet their 5-year expansion plan. So that will be one of our 3- to 5-year expansion plan. I do believe maybe within two to three months, we will formulate a 3- to 5-year expansion plan, then we'll tell all of you or the public about our expansion plan.

Great. It seems with all the tariffs and everything else going on and some of the relationships you guys have, the opportunity to expand that capacity is probably the best in a long time. I know you guys are conservative, obviously, but I just wanted to get your thoughts on that. So we'll look for more, more information going forward. In terms of -- I know you talked about the tax rate, you're working through that. What -- going forward, what are some options for you guys in terms of trying to make that a little bit more consistent?

Well, I think the effective tax rate in last year and also the first quarter of this year has been high, mainly because we make money, we have profits in our operating entities in Jordan and also in our Hong Kong entity. So we have to pay local taxes, but we don't have any income in our U.S. corporations and we cannot take advantage of the expenses that we have being a U.S. company.

So we -- and you know about the -- all the duty tax and tax. So that's making us kind of difficult because of our structure. So we're talking with tax experts, especially international tax experts to see if there are ways that we can kind of find the best way to organize our company structure and our tax structure so that we don't unnecessarily pay more tax than we are supposed to. But as the earnings of the consolidated company as the earnings improve, I think the effective tax rate will go down.

Got it. Okay. Just one last one. I know -- I think in the prepared remarks, you guys said you're booked up through February, and then you're going to be adding additional capacity of that additional capacity, 15% is coming online starting next quarter. I'm assuming that additional 15% is all booked up as well when you made that comment?

Yes. We have included the increase in capacity because it is gradually improving every month, gradually increasing every month starting from the end of June as we bring in additional workers. We don't expect the Al-Hasa expansion will come online before the end of this fiscal year. But the increasing capacity in our Amman facilities, we are projecting the gradual increase while we bring in workers and train them. So those are within the consideration of how we ramp up. And as we make the comment of all the facility, all the factories are fully booked.

Additional 15%, that kind of feathers in over a couple of quarters. It's not just one big stair step up 15%.

That's correct. Yes.

[Operator Instructions] The next question is coming from Igor Novgorodtsev from Lares Capital.

Thank you for saying my last name correctly. So I have a few questions. Let's get started with the currency. So my understanding is that Jordanian currency is pegged to U.S. dollar and dollar has weakened significantly this year. Could you just tell me, did it have any impact on your expenses, your salaries, your SG&A and how that plays out? And I'm talking about both the European delivery to your European clients and American clients. How does currency come into play?

We -- I believe all our invoicing or billings are in U.S. dollars. And U.S. dollar and Jordanian dollars, yes, they're closely related, they're paid. So in Jordan, we will pay in JOD, Jordanian dollars. So even if the U.S. dollar, whether it appreciates or depreciates, the impact to us is relatively minor.

Well, would it not help to sell more to Europe since the euro obviously appreciated and you're relatively -- but you are able to stay in dollars and expenses?

Will it help us to sell more to Europe?

Right.

I think we are already increasing our sales to Europe quite significantly as we have our timberland sales to EU and also acquiring new and the luxurious brands like in Italy and Hugo Boss in Germany. So I think we are gradually increasing our presence in Europe, but that has nothing to do with whether the currency fluctuation or not.

Okay. My other question is a little bit more clarification on tariffs, and I know that everybody is confused and while the situation seems to have stabilized in August, we don't know if it's the final. Could you just give a little bit of a more detailed breakdown of your overall tariff rate on apparel vis-a-vis other big apparel manufacturing countries such as Bangladesh, Indonesia and so on? Because I understand that you have -- Jordan has 15% tariff. They have like 19%, 20%, I think Vietnam, 25%, but they also pay other tariff on textile. So what's the overall rate of your tariff, which is at 15% versus their tariff?

Well, we know that our is 15% currently, but the Jordanian government is still in negotiation with the U.S. government to try to lower that. I think our target is to get it back down to 10% or maybe even more.

Comparing to other countries, especially countries in Southeast Asia or China, we are significantly lower in an advantage with them. And I think because of U.S. and Jordan, we have a longtime free trade agreement and the relationship between U.S. and Jordan are very steady and stable. So brands, global brands and retailers, their strategy is to try to stay away from the forever changing situation in Asia and get to somewhere like Jordan, that it is more stable, that is more favorable.

We also, to compare our situation with Egypt, which currently they have a 10% tariff. However, our goal is to get back down to 10% so that we are competitive with Egypt. However, Egypt, as everybody knows, is a much more difficult country to work with. their quality, their efficiency, work ethics. So customers would much more prefer to work with Jordan than to work with Egypt if our tariff rates are comparable.

Allow me to say a few words. Okay. Currently, okay, even though the tariff for Jordan is 15%, but compared to our main competitors, we are still very, very competitive. I would like to quote some examples. Our main competitors, like Bangladesh, the tariff is 20%. India is 50%. Cambodia is 19%. And then Pakistan is 19%. And Taiwan is 20%; Thailand 90%, and Vietnam is 20%, okay? These are the rate of the tariff from all our so-called competitors. So compared with that, Jordan is still very, very competitive.

So maybe I say a few words again. In fact, I mean, this now what we call this additional reciprocal tariff. And for our product because, I mean, for the cotton product from those exporting countries in Asia, they have to pay 16% to 18% when they export to U.S.A. And for polyester garment, they have to pay over 30% duty. But where because Jordan enjoyed the duty free, we don't need to pay any duty.

What the reciprocal tariffs mean is in additional to the polyester government, 30% for, for example, I mean, Vietnam, they have to pay 30% plus 20%. That means 50% import duty to the U.S. Whereas for Jordan, we only need to pay 15% because we enjoy the duty-free privilege since 2000, years. So it will be a big difference in terms of real tariff in addition to the reciprocal tariff. I don't know whether it's clear.

Perfect. Yes. This is exactly the information I was looking for because I want to see the overall effective tariff. So if anything, it seems to be the situation as it stands right now since April, actually, that's a little bit more favorable for you because now you also have a differentiation on a reciprocal tariff vis-a-vis your competing countries, which is like 4%, 5% higher in addition to what it was even before.

Yes, you are correct. Yes.

Excellent. My final question is about Busana. So I know that you have a joint venture. It's just been a little bit quiet lately. If you can just tell me if this is ongoing, if it's ramping up or it's steady? How is it doing?

In fact, in our last announcement, we terminated the joint venture.

Okay. I'm sorry, if I missed it.

Yes, because most of the customer, we can directly deal with. Yes.

Okay. But you still have those customers, you just don't need to do it through the joint venture.

You're right. Yes.

The next question is coming from [ Mike Distler from AMX ].

I'll be very fast. Congratulations on navigating a very difficult period. We always appreciate the level of transparency you have with your investors and shareholders and your continued return of capital, all of that.

The essence of my thing, basically, Mike, Mark and Igor got to the essence of my questions. The one thing I just was pointing out for you, Gilbert, in particular, regarding the global taxes and having been a 4-decade veteran in textiles and global textiles, the strategic allocation of the sourcing of your raw materials and then the intercompany transfers is where you should direct the folks, the accounting folks that you are dealing with because that is where I believe you will find you will uncover things that are completely legitimate that will allow you to -- allow the company, all of us to save some funds in those allocations for taxes. And that's it. I just -- I want to say thank you guys are killing it, and that's all. I just want to point that out to you. Sam, thank you, Eric.

Thank you. yes.

Yes. We appreciate everything you...

Can we talk offline and maybe I could ask you from your experience in terms of more strategically allocating our raw material because we -- besides looking at our international tax structure, we are also doing an intercompany or transfer pricing study with some experts. So if you could...

I've your number, Gilbert. Yes, I have your number. Okay. We'll do. That's all. I just want to tell you guys that you're really delivering on everything you've ever promised, and it's really exceptional to listen to the quality of your calls.

Okay.

Thank you. This does conclude today's Q&A session. I will now hand the call back to Sam Choi for closing remarks.

Okay. Thank you very much, operator. Thanks to all of you for joining us today. We are certainly in interesting times, definitely going in the right direction. We appreciate your continuous support and interest in Jerash, and we look forward to speaking with you next quarter. Thank you very much.

Thank you. Thanks.

Thank you, everyone.

Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Good morning, everyone. Welcome to Jerash Holdings Fiscal 2025 Fourth Quarter and Full Year Financial Results. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Roger Pondel, Investor Relations. Roger, the floor is yours.

Jenny, thank you so much. Good morning or afternoon, everyone, wherever you may be. I'm Roger Pondel, Jerash Holdings Investor Relations firm, and welcome to the 2025 Fourth Quarter Conference Call. On the call today from the company are Chairman and Chief Executive Officer, Sam Choi; Chief Financial Officer, Gilbert Lee; and Eric Tang, who leads the company's operations in Jordan.

Before I turn the call over to Sam, I want to remind all 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 Factors section of Jerash's most recent Form 10-K as filed with the Securities and Exchange Commission, copies of which are available on the SEC's website at www.sec.gov, along with other filings made with the SEC from time to time. Actual results could differ materially from these forward-looking statements, and Jerash Holdings undertakes no obligation to update any forward-looking statements, except of course, as required by law.

And with that, it is my pleasure to turn the call over to Sam Choi. Sam?

Thank you, Roger. We continue to see strong demand from our existing customers and a notable increase in new inquiries from brands and large apparel manufacturers seeking strategic collaboration. While this is an exciting time for Jerash on the business front, revenue remains affected by logistic disruptions at Isreal's driven by ongoing geopolitical instability in the region.

Our fiscal fourth quarter revenue increased by nearly 36%, yet results were lower than originally anticipated. We estimated approximately $3 million to $4 million of finished goods not shipped into early in the fiscal 2026 first quarter. To mitigate further shipping delays due to the recent bombing of the Haifa port, we are actively collaborating with our customers to re-route shipments through Jordan's port. As recently announced, the Jerash secured a major initial order for one of the largest U.S.-based multinational and omnichannel retail corporation through a strategic collaboration with  Hansoll Textile, a leading South Korea-based global apparel group that supplies a wide range of governments to major international retail and fashion brands. Production for the order, which marks one of the largest initial orders in Jerash's history is scheduled to begin in August with FOB delivery planned for the third and fourth quarter of 2026. Following this initial order, it is both our mutual intention to explore additional synergies and identify opportunities for continued growth and collaborations.

Amid ongoing tariff uncertainties, global brands are actively seeking manufacturing alternatives out of China and Southeast Asia to stay competitive in an increasingly dynamic trade environment. With long established operations in Jordan and our reputation for high quality, Jerash is well positioned to meet this growing demand, supported by the country's free trade agreements with the EU, U.K. and Canada as well as the favorable tariff treatment currently in place from the U.S.

Due to rising demand for our production capacity directly from global brands, we have decided to terminate the joint venture with Busana after more than 2 years of limited progress. The solution of the joint venture is expected to be done by April 2027, about fully completion of outstanding customer orders, collection of receivables and other methods. Our focus is now on further advancing the Jerash goal of diversifying our direct customer base and expanding our product mix to increase year around capacity utilization and reduced revenue seasonality.

I will now turn the call over to Eric Tang who is in charge of our operations in Jordan. Hi, Eric?

Thank you, Sam. Our factories are fully booked through the end of December, with growing order volume from our global brand customer. We are also working diligently to accommodate new business inquiries. We are excited very much about our strategic collaboration with Hanson and the initial large order plays for high-profile retail cooperation. With FOB orders, we are achieving better margins compared with traditional contract manufacturing through third parties that we often took on during Jordan's Jerash seasonally slower period in the second half of our fiscal year.

With the strategic collaboration in play, we are hopeful to continue developing additional synergies and identifying new opportunities for mutual growth. Additionally, we are working on sample orders and pricing for other well-known brands in regions like Europe and Persian Gulf. This new business opportunity further reinforce our growth strategy, which centers on expanding our customer base and product mix to more effectively balance production capacity throughout the year. To support our growth, we are pleased to announce the completion of expansion at our existing manufacturing facility in Oman, and we are now in the progress of onboarding additional foreign workers. The expansion are expected to increase our production capacity by approximately 15%, starting in the second fiscal year -- fiscal quarter.

Separately, we are actively collaborating with the Jordan Ministry of Labor to develop an extension adjacent to our existing factory in Haifa. This project is expected to get an additional 5% to 10% in overall production capacity, and it is currently targeted for completion in early calendar year 2026. We also are assessing longer-term larger-scale expansion plans to construct manufacturing, warehousing and accommodation facilities on the land that we purchased several years ago. The persistent regional geopolitical tension continue to cause delay in export shipment from Haifa port. However, Jordan remains a skilled and stable country with a full operational port. We are also exploring additional logistics channel to ensure reliable and timely deliveries.

With that, I will now turn the call over to Gilbert to discuss our financial results. Gilbert, please.

Thank you, Eric. Revenue for our fiscal 2025 fourth quarter increased by 35.6% to $29.3 million from $21.6 million in the same quarter last year. The quarter's revenue reflected an increase in shipments to Jerash's major U.S. customers. As Sam mentioned, due to congestions at Israel's Haifa port, which caused delays in shipments, revenue for the fiscal fourth quarter was impacted by approximately $3 million to $4 million.

Gross profit for the fiscal 2025 fourth quarter advanced nearly 250% and to $5.2 million from $1.5 million in the same quarter of last year. Gross margin increased to 17.9% in the fiscal 2025 fourth quarter from 7.0% in the same quarter last year. The increase was primarily driven by higher production and shipment volume, which lowered the unit cost of production and generated higher margins through economies of scale. Operating expenses for fiscal 2025 fourth quarter increased by $284,000 to $4.8 million. from $4.5 million in the same period last year. The higher costs included a 4.7% increase in SG&A expenses due to higher sales and an $83,000 increase in stock-based compensation.

Operating income was $434,000 for the fiscal 2025 fourth quarter compared with an operating loss of $3 million a year ago. Total other expenses in the fiscal 2025 fourth quarter was $254,000 compared with $134,000 for the same quarter last year. The increase was primarily attributable to higher interest expense from supply chain financing programs and short-term debt as a result of higher sales. Income tax expenses for fiscal 2025 fourth quarter were of approximately $324,000 compared with tax income of $16,000 in the same period in fiscal 2024. The effective tax rate was high due to some tax provision adjustments stand from prior year amended tax returns and increased subpar income as operating subsidiary in Jordan and Hong Kong. Certain nondeductible expenses were reinstated included interest expense limitations, stock-based compensation and entertainment expenses. We expect the effective tax rate to normalize going forward as consolidated income rises and adjustments are now behind us. We intend to consult international tax experts on improving our tax structure.

Net loss was reduced to $144,000 or $0.01 per share for the fiscal 2025 fourth quarter from a net loss of $3.1 million or $0.25 per share in the same period last year. As of March 31, 2025, Jerash had $15.1 million in cash and restricted cash and net working capital was $34.6 million. Inventory was $27.7 million and $3.1 million in accounts receivable. Net cash provided by operating activities was approximately $1.4 million for the fiscal year ended March 31, 2025, compared with $2.5 million for fiscal year 2024. As Sam and Eric mentioned, our business remains solid and continuous to grow, demonstrated by a record high revenue in fiscal 2025 of $146 million. Despite a $772,000 increase in stock-based compensation to $1.8 million in fiscal 2025 from fiscal 2024's $986,000, our operating income in fiscal year 2025 was $1.4 million compared with an operating loss of $665,000 in fiscal year 2024.

Looking ahead, we are focused on driving continued growth and operational efficiency. Revenue for the fiscal 2026 first quarter is expected to be approximately $38 million to $40 million, pending outbalanced shipping port conditions for the remainder of June. Our gross margin goal for the fiscal 2026 first quarter is expected to be approximately 15% to 16%. On May 20, 2020, Jerash's Board of Directors approved a regular quarterly dividend of $0.05 per share on its common stock, payable on June 6, 2025, to stockholders of record as of May 30, 2025.

We will now open up the call for questions, and I will turn the call back to the operator.

[Operator Instructions] Your first question is coming from Mark Argento.

Just a few quick ones here. Maybe can you help us understand or think about the incremental costs around having to move parts from Haifa to the Jordanian port. And I'm assuming, is that built into the gross margin expectations for Q1?

Well, actually, Mark, the cost to Aqaba for us is actually lower than transporting it to Haifa. If I remember the numbers right, I think each truck load traveling to Aqaba is about $1,200. And to Haifa is about $3,200. That is our cost because once we deliver to the port, the shipping cost -- shipping the container to its destination will be the cost for our customers. .

Got it. And I'm assuming that shipping costs for Aqaba is higher than Haifa for the customer, and that's why you guys are...

For that we don't really have visibility on the shipping costs for the customer, whether they ship from Aqaba or from Haifa. But I know, usually, they want to use Haifa because the lead time for shipping is shorter. I think it's about 1 week shorter. Am I right, Eric?

Yes, around 10 to 12 days shorter. And the lead time is more important than the customer, especially, this is on the course of Jerash. So they choose Haifa because the garments can arrive to New York, I think, at least 10 days earlier. But through Aqaba, of course, we always recommend in the beginning to go through Aqaba. They have been going through Agaba for many years already, okay? And we pay less in the logistic cost as because trucking we paid almost 30%, 40% less, okay? So now they have no choice because Haifa port has been, I mean, attacked, and Haifa was closed, they have to shift back to Aqaba, which is more beneficial to us on the cost side.

Okay. That's helpful. Just pivoting in terms of the timing of orders. I know in last quarter, we saw some shift from Q3 into Q4, and now we're seeing a little bit of shift from Q4 to Q1. You just talk about that dynamic a little bit. Have you seen any orders being canceled? Or is this really just a timing issue at this point?

No. It's just a timing issue. No order has been canceled. And it's just that there was some congestions toward the end of March that some containers did not reach the delivery point in Haifa. It was too many containers going through Haifa to be shipped out. So there were about $3 million to $4 million worth of merchandise or worth of sales that didn't get booked because it was not shown on the customer's system. We already shipped it out from our factory, but it didn't reach the customer's system. So they didn't recognize it as a receipt, the FCR was not issued. Once the FCR is the issued, it will be booked as sales.

Got it. And then last kind of question for me. Could you just talk a little bit more about the decision to dissolve the Busana JV? And then also maybe in conjunction with that, talk about this new opportunity with  Hansoll, in particular that you referenced in the press release?

Well, Sam, you want to talk about Busana decision?

Yes. In fact, up to 2 years of collaboration, the joint venture with Busana, we didn't see great events in the progress. And in fact, most of their referred customers by the joint venture, we can independently handle those customers. So it's on a mutual understanding basis then we terminate the joint venture. And in fact, some customers, they are actively, I mean, contacting us that we can do the business with them directly. So I mean, we expect there will be more and more direct business through ourselves instead of going through the joint venture.

And then in terms of the  Hansoll and the new customer, domestic customer you're talking about, maybe touch on who Hansel is and why that's important?

For  Hansoll, just to say something because  Hansoll is one of the largest importers in South Korea. So I think everyone knows this company. And they are actually the #1 supplier for Walmart order and Samsca. So actually, they want to -- they got the green light from Walmart and Samsca that they want to increase the business with  Hansoll, but they want Hansoll to go to duty-free countries, especially Jordan. So  Hansoll agree that, okay, they will come to Jordan, okay? And then it is Walmart who introduced Jerash to  Hansoll. Okay, so the question is, okay, Walmart said, according to the top management, they don't -- at this sensitive period, they don't want to increase one more additional vendor directly doing business for Walmart, Okay. Otherwise, Walmart will directly approach us. They won't -- they will give the expansion of the business to  Hansoll, and then want Hansoll will work together with Jerash. This is why we are coming in together. So last month, Sam, the Chairman and the Marketing Director, also visited  Hansoll and see the top management, including the CEO, and we have a very good discussion, and then they are very seriously considered to open more business, okay, with Jerash in 2026. Meanwhile, we already got the first confirmed order from them, and we already placed order to the supplier, okay? And it is around the first order is ready 3.2 million pieces short. And the total volume in U.S. dollars of the business is around USD 6.5 million. This is only the first quarter. They keep telling me for 2026, maybe each month we'll be getting okay, at least 0.5 million to 1 million pieces of order, okay? So we have to work out capacity ourselves, okay, and try to choose the good customer, and then that's why we also placed in the earnings call about our expansion on the -- some on the factory capacity. .

Our next question is coming from Mike Baker of D.A. Davidson.

Okay. Just to follow up on that last point, how -- can you quantify or at least give some qualitative color on the kind of conversations you're having with tariffs from China and other places, is that compelling more companies like presumably Walmart to look for other sources. And if you can sort of contextualize that or give any metrics or anything along those lines to give some color on how that tariff situation is impacting you either positively or negatively? .

Well, I think -- yes, you please. Okay. Ever since President Trump announced his tariff or what we call the liberation date, we have seen almost every existing customer or new customers, they're kind of having an urgency to try to find alternative suppliers. In the past few years, we have already seen a trend of people trying to get out of China, trying to get out of Asia into duty-free countries. But ever since Mr. Trump announced his metric of tariff increases and -- if you remember, Jordan was among some other countries were placed on the basic 10% tariff line, which is very competitive comparing to some other major, whether it's China or Southeast Asian countries. So buyers and brands they are approaching Jerash because this is just making the exodus out of Asia, a more urgency. And they want to have -- they want us to commit to more capacity. They want to start some inquiries and come to the factory to see some new customers. Actually, I was here a few weeks ago, and I've seen many customers actually people that I don't know of, they just came and visited us and tour our factory and wanted to start doing business. So after they toured the factory, they were very pleased and they wanted to send us some samples or send us some pricing exercise so that we can start doing some pricing. So I see this as a very good opportunity for us to even further diversify our customer base away from the major customers such as VF and New Balance. If you see our 2025 distribution of customers, you can see even though VF sales has still has increased, but the percentage has dropped and we have increased significantly some other customers' sales. So I think we are going to the right direction, and this tariff war is actually providing it more stimulus to get to that point. So right now, nobody knows what the final tariff rates are going to be. We have some indications from the Prime Minister of Jordan because they have been talking with U.S. department or representative of trade. And they I'm pretty sure that the rate is not going to be significant. Right now, we're thinking about maybe just keeping 10% or even lower. But that is already very competitive comparing with China, comparing with Vietnam and some other Southeast Asian countries. So I see the trend continue, and our capacity is really in need of some major increase. But we're considering who to partner with and what way to increase our capacity. So we are being conservative actually for fiscal year 2026. Just projecting that we will have a minor increase in our capacity and minor increase in sales. So that's why you can see in the first quarter, we are only projecting about, I think, 10% increase for the first quarter? No, actually, first quarter comparing to last year is a decrease by 4% because last year first quarter, we had $41 million in sales, and this year, it's only $39 million.

Yes, makes sense. But to follow up on that, the increased capacity, you talked about, well, you completed some expansion and talking about another 5% to 10% increase in existing facilities I'm curious about the longer-term idea of presumably opening more manufacturing facilities and warehousing on the land that you already own. Any any timing on when you would think about doing that? Or how likely that is to come to fruition?

Right now, our projection or our CapEx projection is it will not happen in year 2026. Because it is still a very unstable geopolitical situation here. And unless we can be sure that we will fill up that factory almost immediately, I think we're just going to hold off. But in the meantime, we will continue to do studies, we'll continue to talk to potential partners and also find ways of financing the expansion because we're talking about $20 million to $30 million in investment. So we need to find some way of financing it.

And our next question is coming from Igor Novgorodtsev of Capital.

To follow up on increase after the tariff in Jordan is expected to become much more competitive to Vietnam and other big manufacturing countries. Do you think it will positively affect the gross margin? Because I remember that during the highest demand it was COVID, or during COVID, you had margin close to 20%. Now your gross margin is more than 15%, 16%. What do you think is going to happen to your gross margin and you have a higher demand but limited capacity?

I believe the gross margin will definitely be improved because right now, we are switching more and more over to what we call FOB business. In the past, when our capacity was not fully utilized, especially during our slow season, which is the second fiscal year -- second half of the fiscal year, we tend to take on business that what we call CM business, cut and make business. So for those business, we're just doing more simple styles but higher volume because that is our -- in our industry, it is the summer season, okay? Our strength is in producing jackets, outerwear, those are more complicated styles that we can do the FOB business and gain more ASP and gain more margin. But now the situation has changed because we have more business than we can handle. So we will forgo some of the or the majority of the CM business and take on more FOB business. So naturally, that will improve our ASP, that will improve our gross margin percentage. But at the same time, the market is getting more and more competitive. Our buyers continue to put pressure on us to make us be more competitive in terms of pricing. So this -- overall, there are some offsetting, but I believe going forward, we will be able to maintain a pretty healthy gross margin. And with the  Hansoll business because it's high volume, while we will be able to gain a pretty significant or a pretty healthy gross margin, I think the efficiency will also help us to achieve a higher gross margin.

Okay. Following up on that, your press release says that you fully booked through December. So if you're fully booked, does it mean that you already know your gross margin for the rest of the year? Or this is still somewhat up in the year and also I believe you projected the gross margin for the next quarter, but can you project the gross margin for the rest of the year or at least through December or you don't know yet?

Well, we are fully booked through the rest of the year, but there could still be changes. I think, Eric, maybe you can add to this, how do we -- what kind of changes do we still anticipate that could affect the overall margin that we project.

Okay. It will be more or less the same actually. But usually, the plays to Jerash each year, 2x orders. Okay. So now they are giving us the -- I mean, another batch of order, which is a projection. Usually, the confirmed PO will be sent to us maybe 3 to 4 months before, I mean actual delivery, at least 4 months. So this is a projection. That's why, okay, can tell you, okay, up to the first quarter, what is our actual profit margin because it is already an actual order we have the already. But for I mean September onwards, okay, we still are waiting for the official FOB from the buyer, although more or less the same, okay? And there will be a little bit changes in sometimes the figure but the price usually will be the same. So this is the reason why until December, we cannot give you an actual profit margin percentage. But it will be more or less the same as we project

And may I say, I mean, because of the tariff issue, they're already a trend that some customers are moving their sourcing from China or Southeast Asia to Jordan. And through that transition, Jerash can feature more higher gross profit margin from those orders, brand name like Footjoy or even like Walmart, they're willing to place in duty-free country to secure their production and their supply, yes. And then -- so for that time of order, Jerash can pitch relatively higher margin and efficiency .

My other question is we obviously mentioned geopolitics several times during this call. And I understand that customers come to tour your factory and try samples and very interested. But how much do you think the persistent issues with Middle East political issues hold them back from working with your long term? Are they really concerned that something may be even worse than the year or it's not something that really comes into play.

Well, first, how the Middle East conflict will play out is anybody's guess. And so far, Jordan is still considered the most peaceful and the safest country within the Middle East, even though it's in between Israel and Iraq and Iran, but Jordan is able to stay out of the conflict. And the missiles are going around Jordan to -- for those two countries to hit each other. So -- and U.S. has the most interest in keeping Jordan to be a peaceful and safe place. Many countries, when they evacuate their citizens from Israel as they are doing right now, they actually move their citizens away from Israel into Jordan because they believe Jordan would be a safe haven for their citizens. Obviously, people cannot fly out of Israel. Tel Aviv is closed, shut down the airport. So they have to get to somewhere if they want to go back to their country. And the first choice is go to Jordan. And anyone who has visited Jordan, a lot of our new customers, once they came to Jordan, they would agree that this is a very safe and calm place. So unless they have never visited Jordan, they shouldn't have a concern of the safety and the continuity of doing business in Jordan.

Okay. I mean, that's great to hear. My last question is also on geopolitics is how are you getting your supplies? Because at some point of time, a year ago, you had trouble because of Houtis getting your suppliers obviously around Asia. Is that -- do they have alternative, you don't anticipate anything? Or how do you think about this because you don't know what may happen in a few weeks, with Houtis will start targeting the ships? Or how do you guys think about that?

Yes. learning from that experience, a year ago, which mainly the fourth quarter of fiscal 2024 and the first quarter of 2025. During the 6-month period was when we lost so much money because of this -- the supply chain issue. We couldn't get containers into Jordan. We try many different ways. Sometimes they even have to air freight some very urgent fabrics or supplies into Jordan. So that was what caused us to lost money in the fourth quarter of '24 in the first quarter of '25. So we learned the lesson from this. And now we have multiple alternatives of routes getting supplies and materials from Asia into Aqaba, into the port in Jordan. In addition to that, we have also strengthened our sourcing within the region, sourcing of fabrics and supplies in the countries like Turkey and Egypt so that it will shorten the lead time of getting supplies in comparing to relying on the sourcing -- relying on the supply chain from China or other Asian countries.

Well, we appear to have reached the end of our question-and-answer session. I will now hand back over to Sam for any closing comments. .

Thank you, Jenny. And thanks to all of you for joining us today. We are certainly in interesting times and appreciate your continued support. We look forward to speaking with you this quarter. Thank you very much. .

Thank you very much. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.