Business Context and Reporting Period
Company: Jerash Holdings (US), Inc. (Ticker: JRSH)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Three months ended June 30, 2025
Business Overview: The Company is a holding company primarily engaged in the manufacturing and exporting of customized, ready-made sportswear and outerwear from facilities in Jordan. It operates as a single reportable segment. The Company is classified as a non-accelerated filer and a smaller reporting company.
Key Financial Metrics
| Metric | Q1 2026 (Ended June 30, 2025) | Q1 2025 (Ended June 30, 2024) |
|---|---|---|
| Revenue, Net | $39,629,308 | $40,935,716 |
| Gross Profit | $6,088,880 | $4,639,871 |
| Gross Margin | 15.4% | 11.3% |
| Operating Income | $958,996 | $(828,808) |
| Net Profit (Loss) | $323,630 | $(1,366,697) |
| Net Profit Attributable to Common Stockholders | $318,676 | $(1,345,216) |
| Earnings Per Share (Basic & Diluted) | $0.03 | $(0.11) |
| Cash and Restricted Cash (End of Period) | $7,501,624 | $12,973,872 |
| Net Cash Used in Operating Activities | $(6,478,515) | $(2,200,948) |
| Total Assets | $81,739,077 | $82,975,526 |
| Total Liabilities | $18,949,102 | $20,106,417 |
| Current Ratio | 2.84 | 2.75 |
| Credit Facilities Outstanding | $4,768,749 | $4,512,462 |
Material Changes vs. Prior Period
- Revenue: Decreased 3.2% to $39.6 million. The decline was primarily due to shipment delays caused by switching export routes from Haifa Port to Aqaba Port in Jordan to avoid disruptions in late June 2025.
- Gross Margin: Improved significantly from 11.3% to 15.4%. This was driven by lower import logistics costs due to the resumption of shipments via Aqaba Port and reduced overtime costs from better production planning.
- Profitability: The Company returned to profitability with a net profit of $323,630, compared to a net loss of $1.37 million in the prior year. This turnaround was aided by improved gross margins, reduced stock-based compensation ($222k vs $469k), and lower interest expenses.
- Cash Flow: Net cash used in operating activities increased to $6.5 million (from $2.2 million). This was largely due to a $6.9 million increase in accounts receivable as shipments were delayed into July, and a smaller decrease in inventory compared to the prior year.
- Geographic Sales: U.S. sales decreased 13% to $32.1 million due to port delays. Conversely, sales to China and Hong Kong increased 306% to $6.1 million, reflecting increased demand in those regions.
Guidance, Outlook, Risks, and Unusual Items
- Dividends: The Board declared a cash dividend of $0.05 per share on May 20, 2025, paid on June 6, 2025. A subsequent dividend of $0.05 per share was approved on August 8, 2025.
- Tariff Environment: The U.S. imposed a baseline 10% tariff on imports from Jordan effective April 5, 2025, with "reciprocal" tariffs of up to 20% announced but postponed. As of the filing date, the tariff rate was modified to 15%. While importers typically pay these tariffs, management notes potential impacts on customer demand.
- Geopolitical Risks: Operations in Jordan are subject to risks related to regional conflicts (Israel-Hamas, Israel-Iran). The Company has contingency plans to relocate production if ports are impacted and currently utilizes the Port of Jebel Ali in the UAE as an alternative route.
- Legal Contingency: The Company is involved in an appeal regarding a PPE customer dispute where a lower court ordered the Company to pay $653,000. Management believes the chance of loss is remote based on legal opinions and previous favorable verdicts, so no accrual was made.
- Internal Controls: Management concluded that internal controls over financial reporting were ineffective as of June 30, 2025, due to material weaknesses in IT general controls (privileged user access and review of user access). Remediation efforts are ongoing but require further validation.
- Joint Ventures: The Company approved the dissolution of its J&B joint venture, expected to complete in April 2027. It continues to develop a fabric facility in Jordan through the Jerash Newtech joint venture, with a planned investment of approximately $29.9 million.
Investor Verification Checklist
- Internal Control Remediation: Verify the timeline and progress of remediation for the material weaknesses in IT general controls, as these remain ineffective.
- Tariff Impact: Monitor the finalization of U.S. tariff rates on Jordanian imports and the Company's ability to pass costs to customers or maintain volume.
- Customer Concentration: Note that two customers accounted for 75% of revenue in Q1 2026 (63% and 12%). Verify the stability of these key relationships.
- Cash Conversion: Assess the timing of receivables collection given the significant increase in accounts receivable ($9.98M) relative to revenue, driven by port delays.
- Legal Outcome: Track the status of the PPE customer appeal, which could result in a $653,000 liability if the appeal is unsuccessful.