Jerash Holdings (US), Inc. Stock

Good day, everyone. Welcome to the Jerash Holdings Fiscal 2027 First Quarter Financial Results. [Operator Instructions]. It is now my pleasure to turn the floor over to your host, Roger Pondel, Investor Relations. The floor is yours.

Thanks so much, operator. Good morning, everyone. Welcome to Jerash Holdings Fiscal 2027 First Quarter Conference Call. I'm Roger Pondel with PondelWilkinson, Jerash Holdings Investor Relations firm.

On the call today from the company are Chief Executive Officer, Sam Choi; Chief Financial Officer, Gilbert Lee; and Eric Tang, who leads the company's operations in Jordan. Also Ringo Ing, the company's Head of Marketing, will be on the call for the Q&A session.

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. We are pleased to report another quarter of acceptable financial performance, highlighted by record revenue, improved gross margins and a significant increase in profitability. These strong results reflect the continued advantages of our Jordan-based manufacturing platform. combined with disciplined execution on delivery, quality and operational efficiency. Fiscal first quarter revenue reached a record level of more than $15 million, representing growth of nearly 27% compared with the prior year period.

We are pleased to see increased order volumes from our 2 largest U.S. customers, along with continued contributions from the company's strategic partner, Hanson Group in Korea. As customer demand continues to grow, we are expanding our production capacity in a disciplined manner while maintaining the quality, reliability and service standards our customers expect. The strong momentum in our business reinforces our confidence in Jerash' ability to scale efficiently and deliver sustainable growth.

In addition to our operational achievements, we are encouraged by recent trade developments that further strengthen our competitive position in the marketplace. The newly announced duty-free access for Jordanian apparel and textile exports to the U.S. is a meaningful advantage for Jerash and reinforces our standing as a preferred manufacturing source for leading global brands and retailers. We believe this favorable trade environment will support future growth, create opportunities to attract new customers and strategic partners and enhance our ability to deliver long-term value for our customers and shareholders.

While our outlook remains positive, we are closely monitoring geopolitical developments in the Middle East that could affect near-term regional market conditions, including export logistics and transportation costs for raw materials sourced from Asia. Although these factors may create periodic challenges, we believe our strong customer relationships operational flexibility and growing attractiveness in the marketplace position us well to navigate a dynamic environment and continue supporting our customers' needs effectively.

We remain focused on executing our growth strategy, investing in capacity and capabilities and leveraging the unique advantages of our manufacturing platform. With an expanded customer base, product mix and favorable trade conditions. We believe Jerash is well positioned to capitalize on emerging opportunities in the years ahead. 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. We had a very active fiscal first quarter. driven by increased production for our two largest customers and new store orders placed by Hanson. We continue to actively respond to a growing volume of inquiries, particularly following the recent U.S. Jordan trade agreement announced in July. By reinforcing the benefits of the original 2013 trade agreements with 0 duty for Jordanian apparel and textile exports. The new agreement further enhanced Jordan attractiveness as a sourcing hub for the U.S. market. As one of the country's leading apparel manufacturer, Jerash is uniquely positioned to capitalize on this favorable trade environment and convert new opportunities into long-term customer relationships.

We are pleased to have received additional orders from Hanson, including expanded product categories and higher unit sales price. Additional product development through another large government conglomerate is progressing towards its final stage with order placements for a well-known global brand anticipated in the near term. If completed as anticipated, these orders could further support our growth momentum in fiscal 2027. Turning to our previously announced expansion plans.

We are on target to add approximately 15% of production capacity by the end of calendar year 2026. Expanding two of our existing manufacturing facilities with additional production lines and 500 additional workers. The next stage of our expansion involved repurposing our most recently acquired facility into a smart warehouse and cutting operation while also adding production lines.

As part of this expansion, we are converting the facilities that currently serve as our warehouse and checking department for additional production. These initiatives are expected to enhance our operating capability with 500 new state-of-the-art sewing machines and automation, supported by approximately 1,100 additional workers. The second phase is expected to increase capacity by approximately 20% to 25%, with completion targeted for around mid-calendar year 2027. Our partnership with the Jordanian Ministry of Labor to add capacity in rural community continue to move forward.

Our second satellite factory which opened in March 2026, now supports 130 local jobs. We are currently expanding the site with additional floors. A project expected to increase overall production capacity by approximately 5% and bring employment at the facility to as many as 250 local workers. We expect this expansion to be completed by the end of fiscal year 2027. In addition, we continue to work closely with the Ministry of Labor on plans for a third satellite factory to create approximately 500 additional jobs in the surrounding community reaching about 1 hour away from Jerash' first satellite operation in Al Hasa.

Together, these initiatives support Jerash' growth objectives while also contributing to local employment and economic development. At the same time, we are managing through near-term logistic challenges related to the ongoing conflict in the Middle East. Export shipments out of Haifa Ports are experiencing periodic delays and the cost of transporting imported raw materials from Asia has increased since the conflict resumed in July. While this condition may increase some timing and cost pressure, we are working closely with our customers and suppliers and give production flexibility to mitigate disruptions and maintain reliable delivery schedules.

Overall, we see growth opportunities ahead. Our strategic capacity expansion plans, combined with Jordan's competitive trade advantages and our reputation for quality and reliability continue to enhance our position in the global apparel supply chain. 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 2027 first quarter grew 26.7% to $50.2 million compared with $39.6 million in the same quarter last year. The increase was primarily driven by higher shipments to the two major U.S. customers as well as continued U.S. contributions from the company's strategic partner in Korea. Gross profit increased 35.7% and to $8.3 million for the fiscal 2027 first quarter from $6.1 million in the same quarter last year. Gross margin for the quarter increased 100 basis points to 16.4% compared with 15.4% 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.

Operating expenses totaled $5.6 million in the fiscal 2027 first quarter compared with $5.1 million in the same quarter last year. The increase was primarily attributable to higher sales volume as well as increased head count and related expenses. Operating income rose up 174% to $2.6 million in fiscal 2027 first quarter from $959,000 in the same period last year. Total other expenses were $546,000 in the fiscal 2027 first quarter compared with $307,000 in the same quarter last year. The increase was mainly due to higher interest expenses from supply chain financing programs used by 2 major customers as well as letter of credit for raw material purchases to support growing business from Hansoll. Income tax expenses were $404,000 in the fiscal 2027 first quarter compared with $329,000 in the prior year quarter. Net income advanced more than fivefold to $1.7 million or $0.13 per diluted share in the fiscal 2027 first quarter compared with $324,000 or $0.03 per diluted share in the same quarter last year. Comprehensive income attributable to the company's common stockholders advanced to $1.7 million in the fiscal 2027 first quarter compared with $328,000 in the same period last year.

As of June 30, 2026, cash, cash equivalents and restricted cash totaled $14.5 million, and net working capital was $38.1 million. Inventory was $26.6 million, and accounts receivable amounted to $5.9 million. Net cash provided by operating activities was $2.5 million for the 3 months ended June 30, 2026 compared with net cash used in operating activities of $6.5 million in the same period last year. on August 7, 2026 Jerash' Board of Directors approved a regular quarterly dividend of $0.05 per share on its common stock, payable on August 24, 2026 to stockholders of record as of August 17. As Sam and Eric noted earlier, we remain optimistic about the company's future as we continue to focus on cost management and operating efficiencies, navigating current market conditions.

Looking immediately ahead, we expect revenue for the fiscal 2027 second quarter to be approximately $49 million to $51 million. Subject to logistics, efficiency amid geopolitical uncertainties. Gross margin target for the fiscal 2027 second quarter is expected to be approximately 14% to 15%. And taking into consideration the increased transportation costs for raw material imports. I will turn the call back to the operator as we open the call for questions.

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

Congrats on another strong quarter here. I was just wondering if you could start. So with the announcement of the Duty-free access, have you seen any inbound orders from potentially new customers? And then secondly, what sort of capacity would you guys need to bring online? And at what point potentially do you think you could do that should new orders come through with this new update to the Duty Free.

Yes, Ryan. We definitely have seen increased inquiries and actually purchase orders. after the announcement of the free trade or the duty free. Eric, do you want to mention a couple of the new opportunity after the announcement Yes. After the announcement of the -- I mean, new tariff system applied to Jordan, which is 0 duty. So for the old customers, okay, like we have with our biggest customer, okay?

So we received the projection for the coming season, which compared with last season is around 15% more than last year. So and at the same time, we also received some more inquiries from imported -- new importers from the U.S., and all importers also receive more inquiry for order placement. So I think we are also -- Jordan has now become the most competitive manufacturing hub. This is the reason why we get so many inquiries when we expect the orders will be coming shortly and on -- compared with last year, it will be increased significantly.

Also just to bring -- this is Ringo. Maybe I add 1 more about the new customer. Actually, I just take a business trip back to New York and just come back. and we have successfully opened a few new customer like Urban Outfitters that's a very big potential customer. We just opened that this year, we forecast for the first year already 5 million is the $5 million order business. And we're still waiting for another 3 brands like Lee, Wrangler and Reebok. And since they know Jordan is a 0 duty, they know our price will be very competitive. So we have a lot of requirements and also even north phase, they want us to do something new like the D Jacket which is the value is very high and padding jacket, all these new opportunities is coming.

Got it. No, that's great to hear. And then with some of those new opportunities. Can you maybe just talk about the product mix there and maybe the potential for gross margins largely in the second half of the year to maybe kind of rebound to above 15%, maybe back towards 16, 17, just the potential for gross margin expansion as maybe the product mix changes a little bit with some of these new orders.

Well, Ryan, we definitely would try to achieve a higher gross margin by working hard on improving our efficiency as well as our sourcing. But as we all know, once we acquire a new customer, there will be a period of time that we that we will experience a little bit of lower margin until we get ramped up and get to a better efficiency with new customers and new products. So we'll continue to diversify our customer base and continue to diversify our product mix.

Like Ringo said, we have opportunities to get some new customers and try on some new products, which has a higher ASP and higher gross margin. But at the beginning, I wouldn't say that we will be able to achieve a high gross margin, especially the gross margin is facing 2 separate forces. One is we will, at one hand, improve our productivity and efficiency and try to achieve a higher gross margin. and work on higher ASP products. However, at this point, we are also facing some uncertainties in terms of increasing raw material costs due to the logistics interruption. By -- in the area of importing raw materials and supplies from Asia. Because of the regional conflict of the transportation issues. So we will monitor the situation and we will try our best to come up with alternatives and control our costs.

[Operator Instructions]. There appear to be no further questions in queue. I would now like to turn the floor back over to CEO, 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 look forward to updating you on our progress in the near future. Thank you very much.

Thank you, everyone. 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.

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.