JRSH Q2 FY2027 earnings call transcript, November 10, 2026

Good morning and welcome to JRASH Holdings Fiscal 2020. 7 Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode and we will open up the floor for your questions after the presentation. If you wish to join the queue to ask a question at any time, you can press star 1. Should you wish to remove yourself from the queue, press star 2. It is now my pleasure to turn the floor over to your host, Roger Prundell, Investor Relations.

Oh, it's yours.

Thank you, Operator.

Good morning, everyone, and good afternoon to some of you, and welcome to JRASH Holdings Fiscal 2027 Second Quarter Conference Call. I'm Roger Prundell with Prundell-Wilkinson, JRASH Holdings Investor Relations Firm. On the call today from the company, our 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 meeting 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 factor 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 JRASH 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.

Hi, Eric.

Thank you, Eric.

Just want to make a minor correction. When Eric said that we were hiring approximately 11,000 foreign workers, I like to correct that. It was actually 1,100. Okay. All right. Revenue for the... The fiscal 2027 second quarter grew 19.8% to $50.3 million from $42 million in the same quarter last year. The increase primarily reflected highest shipments to our major U.S. customer and others whose orders are primarily for the U.S. Gross profit increased 45.4% to $9.1 million for the fiscal 2027 second quarter from $6.3 million in the same quarter last year. And gross margin for the quarter increased 320 basis points to 18.2% compared with 15% in the same period last year. The improvement was primarily driven by higher shipments to U.S. customers that typically generate stronger margins, as well as improved efficiency gains from automation, advanced purchases of raw materials, and tighter controls on wastage allowances. Operating expenses totaled $6.1 million in the fiscal 2027 second quarter, compared with $5.2 million in the same quarter last year. The increase was primarily attributable to higher sales volume, as well as increased headcounts and related expenses.

For the fiscal 2027 second quarter increased nearly three times to $3.1 million from $1.1 million in the same quarter last year. And total audit expenses were $506,000 for the fiscal 2027 second quarter, compared with $456,000 in the same quarter. The increase was primarily attributable to higher interest expense on the mortgage loan used to purchase our new facility in early 2026, as well as higher costs under the company's customer supply chain financing programs from increased shipment volumes. Income tax expenses were $402,000 in the fiscal 2027 second quarter, compared with $154,000 in the same quarter last year. The effective test rate decreased to 15.7% in the second quarter of fiscal 2027, compared with 24.3% in the prior year period, primarily due to a tax concession. In Jordan, that lowered the corporate income tax rate from 20% to 10% effective October 2025. Net income for the fiscal 2027 second quarter advanced 4.5 times the prior year level, reaching $2.2 million or 16 cents. Per diluted share, compared with $479,000 or 4 cents per diluted share in the same quarter last year. Comprehensive income attributable to the company's common stockholders advanced to $2.2 million in the fiscal 2027 second quarter from 4.5 times the prior year level.

$444,000 in the same period last year. As of September 30th, 2026, cash, cash declines and restricted cash totaled $16.9 million and net working capital was $40.6 million. Inventory was $20. $3.3 million and accounts receivable amounted to $4.3 million. Net cash provided by operating activities was $7.5 million for the six months end of September 30th, compared with $318,000 in the same period last year. On November 5th... In 2026, JRASH's Board of Directors approved a regular quarterly dividend of $0.05 per share on its common stock, payable on November 23rd, 2026, to stockholders of record as of November 16th, 2026. As Sam and Eric noted earlier... We are optimistic about the company's future growth as we focus on improving operational efficiency, adapting to current market conditions, and executing on our expansion plans. Looking ahead for the fiscal 2027 third quarter, ending December 31st, 2026, we expect revenue of approximately... $49 million to $51 million. Growth margin is expected to range between 16% to 17%, reflecting higher import logistic costs for raw materials brought for productions for the next two quarters, and the temporary impact of onboarding new employees.

I will now turn the call back to the operator as we open the call for questions.

Thank you. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star 1. We do ask if listening on speakerphone today, please pick up your handset while asking your question to provide optimal sound quality. Once again, please press star 1. on your phone at this time to join the queue to ask a question. Please hold a moment while we pull for questions. First question from Ryan Mayers at Lake Street Capital. Please go ahead.

Hey, guys.

Thanks for taking my question.

First one for me, just on the gross margin during the quarter, you know, how much of that was kind of permanent efficiency improvement versus how much of that was raw material purchases? Kind of walk us through and break down the strong gross margin during the quarter and how much of that stuff will continue going into the future?

Well, it is hard to distinguish how much impact was on the quarter's gross margin was due to... ...permanent operational efficiency or how much is due to purchasing of raw material ahead of time. But I think overall, our long-term gross margin will gradually... ...improve, which is our goal, by working on a number of areas. Operational efficiency, productivity, trying to minimize the impact of increasing logistics costs, as well as policy or procedures to reduce the weigh stage. So, and there are some other headwinds that we are facing. So, we have to bring in new workers as we grow. And some of the existing workers continue to, when the contract expires, they have to go back home. And we'll have to bring in replacements, new replacements. So, those new workers will take a while, maybe two or three months to get up to speed. So, that will have some negative impact on our productivity and efficiency. But at the same time, we're trying very hard to improve the overall efficiency on all our manufacturing facilities. And... Another very important factor is that the customer makes and the product makes. So, that changes from quarter to quarter and from year to year. So, it's really difficult to pinpoint which improvement is which, especially when you compare to a year ago.

Okay. It makes sense. And then, with the facilities booked through June of 2027, you know, how much of that represents purchase orders that you guys already have versus customers projecting out that far, thinking about what their products are going to look like? And then, maybe what else are you guys seeing? Seeing an acceleration from new customers.

Well, first of all, correct me if I'm wrong, Eric. I believe when we say that our facilities or our capacities are fully booked through June of 2027, I believe all these are already orders that were confirmed up to this point.

And basically, we receive customers' orders. Right. So there are still, thank you, Eric. So there are still orders that keep coming in and that we are anticipating for the second half of the calendar year 2027 that we are working on product development, sampling, pricing. So all those demands keep coming in. And I think within the next month or two, those will become confirmed orders.

Okay. Got it. Congrats on the great work and thanks for taking my questions. Thank you. Eric, do you have anything to... to add to this question about new orders, new customers? Yes. Yes. I have a little bit to add this. Okay. What we mean by the factory, okay, book through June 2027 means we have all confirmed order allocated to all the production lines and all our production lines will be working on full capacity 100%. Okay. Until the end of June 2027. Of course, we are keep receiving projection orders. Okay. From customer. At the same time, they are also very solid orders from customer. Okay. Which require us. Okay. To deliver. I mean, before June 2027. Of which we don't have capacity. We are now also discussing with those customers. Trying to, I mean, ask them to revise the delivery schedule to the next quarter. So that we can accommodate also these orders from the customer. So this is what I want to add. Thank you.

Thank you. Next question comes from Mike Baker with DA Davidson. Please go ahead.

Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day.

Thank you for your participation.

Thank you very much.

Thank you, everyone. Thank you. Thank you.