Jerash Reports Record Third Quarter with $18.7 Million in Revenue

ROCHESTER, NY / ACCESSWIRE / February 8, 2019 / Jerash Holdings (US), Inc. (NASDAQ: JRSH) (the ''Company'' or ''Jerash''), a producer of high-quality textile goods for leading global brands, today reported results for its fiscal third quarter 2019, ended December 31, 2018, including record third quarter revenue of $18.7 million. The Company also updated its full-year revenue forecast to a minimum of $82 million, compared with its prior revenue outlook of $80 million to $82 million, reflecting the Company's expectation of record second half revenue results.

Fiscal Third Quarter 2019 and Recent Highlights:

• Revenue increased 61.8% year-over-year to a fiscal third quarter record $18.7 million, and 16.6% year-over-year to $70.5 million through the first nine months of fiscal 2019;
• Generated quarterly gross profit of $3.2 million, or 17.1%, reflecting a strategic program to seize market share and a rush order for a significant existing customer that reduced gross margin in the quarter;
• Maintained gross margin of 23.0% year-to-date including the mix impact of increased second half production volumes;
• Reported quarterly GAAP net income of $1.6 million, or $0.14 per diluted share, and $5.3 million, or $0.47 per diluted share, year-to-date;
• Reported adjusted EBITDA ⁽¹⁾ of $11.1 million, or $0.97 per diluted share, through the first nine months of fiscal 2019;
• Generated cash flow from operations of $2.7 million for the quarter, and $11.5 million through the first nine months of fiscal 2019;
• Maintained cash, cash equivalents and restricted cash of $30.4 million, or $2.68 per diluted share;
• Announced an agreement to expand capacity by more than 1.5 million pieces, increasing total capacity to more than 8.0 million pieces per year, beginning in April 2019, at an expected cost of approximately $1 million in initial investment;
• Announced new orders for 800,000 pieces to launch production in the new factory facilities; and
• Announced a quarterly dividend payment of $0.05 per share commensurate with the Company's dividend policy.

Management Commentary

Sam Choi, Chairman and Chief Executive Officer, stated: ''We are excited to report solid financial results through the first nine months of fiscal 2019, including a 62% increase in third-quarter revenue to a record $18.7 million and continued profitability. Year-to-date, we have generated $70.5 million in revenue, $5.3 million in net income, $11.1 million in adjusted EBITDA and generated more than $11.5 million in cash flow from operations. We also recently announced the entry into an agreement to acquire 1.5 million pieces of additional capacity and new customer contracts for 800,000 pieces to fuel further growth in fiscal 2020, beginning in April. Those new contracts are in addition to indications of increased order volume from current customers in fiscal 2020. We believe this puts Jerash on a clear path to not only record second half fiscal 2019 revenue, but also record fiscal 2020 revenue as we continue to increase capacity to meet rising customer demand.

''Given the strong third quarter results and our outlook for continued year-over-year revenue growth in the fiscal fourth quarter, we are raising our full-year revenue outlook to a minimum of $82 million in fiscal 2019, another record for the Company.

''The one challenging aspect to our record third quarter was gross margin, although we have maintained our year-to-date gross margin at 23.0%. Quarterly gross margin temporarily declined as part of a strategic decision to seize market share in warm weather pants through a one-time discount program. We also accepted an urgent order from an existing significant customer that required additional cost to fulfill on short notice, resulting in single-digit gross margins on that order. We expect gross margin to return to a more normative range in the fiscal fourth quarter.

''In addition to ramping our revenue and volumes, I am particularly excited about our agreement to expand capacity adding at least 1.5 million pieces of additional annual capacity to support further revenue growth in fiscal 2020. This factory is adjacent to our current Jordanian facilities, providing for efficient oversight and integration with our existing facilities. Since agreeing to take over the lease for this facility and purchase its capital equipment, we have been working closely with the government of Jordan to assume its existing certifications and worker programs. We expect an orderly and efficient transition and an expected start to production in April 2019. This is important as we have secured two additional customer orders totaling 800,000 pieces to commence production in this facility beginning in April. We also see early indications from existing customers for notable year-over-year growth in order volumes in fiscal 2020.

''Finally, we continue to evaluate opportunistic entry into complementary businesses, including geographic expansion and new production capabilities desired by our customers. We maintain strict internal requirements for value add, as evidenced by our recent Jordanian factory expansion, but we believe that our patience and rigor will be rewarded with opportunities that provide the best possible returns.''

Fiscal 2019 Third Quarter Financial Results

Jerash reported record third quarter revenue of $18.7 million for the fiscal quarter ended December 31, 2018, a 61.8% increase from $11.5 million in the prior year fiscal third quarter. Revenue reflected continued increased demand from customers seeking the benefits of Jerash's high-quality production capabilities and tariff-free shipments to the United States and European Union, as well as a ramping up of warm season production and multiple customer orders to seize market share. As previously announced, the Company continues to anticipate record fiscal second half business activity.

Operating expenses were $2.2 million for the fiscal third quarter, compared with $1.6 million in the prior year fiscal third quarter. The increase in ongoing operating expenses reflects increased headcount to support revenue growth and public company operating costs. Jerash expects operating expenses to remain approximately stable in its legacy business and scale commensurate to the addition of manufacturing capacity as its fourth factory is expected to come online in fiscal 2020, beginning April 1, 2019.

GAAP net income was $1.6 million in the third quarter of fiscal 2019, compared with net income of $2.2 million in the prior year fiscal third quarter. The decrease was primarily due to the shift in gross margin due to a strategic decision to take market share, order mix and acceptance of a one-time urgent order with an existing customer that generated unusually low margins in order to meet the customer's required timeframe.

Jerash reported adjusted EBITDA of $1.4 million compared with adjusted EBITDA of $2.5 million in the prior year fiscal third quarter. Adjusted EBITDA in the current year third quarter was reduced by a favorable $600,000 in income tax reserves due to clarification of the impacts of the US Tax Cuts and Jobs Act. The prior year fiscal third quarter had zero stock-based compensation and income tax expense. A reconciliation of non-GAAP financial measures to GAAP financial measures can be found in Appendix A.

Diluted shares outstanding were 11.4 million in the current quarter and 9.7 million in the prior year fiscal third quarter.

Fiscal 2019 Year to Date Financial Results

Through the first nine months of fiscal 2019, Jerash reported revenue of $70.5 million, compared with $60.4 million in the prior fiscal year nine months, an increase of 16.6%. Gross margin in fiscal 2019 was 23.0%, compared with 26.2% in fiscal 2018. GAAP net income through the first nine months of fiscal 2019 was $5.3 million, or $0.47 per diluted share, compared with $11.4 million, or $1.18 per diluted share through the first nine months of fiscal 2018. Results for fiscal 2019 include charges of $3.4 million in non-cash stock-based compensation expense and $1.3 million in income tax reserves, compared with $117,000 and zero, respectively, in the prior fiscal year. Taking these differences into account, adjusted EBITDA for the first nine months of fiscal 2019 was $11.1 million, or $0.97 per diluted share, compared with $12.4 million, or $1.28 per diluted share in fiscal 2018. Diluted shares outstanding were 11.4 million in the current year nine months and 9.7 million in the prior year comparable period.

A reconciliation of GAAP to non-GAAP measures is provided in the tables accompanying this release.

Cash Flow and Balance Sheet

During the fiscal third quarter, Jerash generated $2.7 million in cash flow from operations. Cash and restricted cash at December 31, 2018 was $30.4 million in the aggregate, or $2.68 per diluted share, compared with $12.2 million at March 31, 2018. As of December 31, 2018, inventory was $12.1 million and accounts receivable $13.1 million.

Outlook

Jerash updated its full-year revenue outlook to a minimum $82 million, reflecting expected year-over-year order growth in the fiscal fourth quarter. The company expects consolidated gross margins in the range of 23% to 24% for the full year, reflecting lower fiscal third quarter gross margin and anticipated fiscal fourth quarter gross margin.

Conference Call

The Company will conduct a conference call and webcast to review its fiscal third quarter 2019 results on Friday, February 8, 2018 at 10:30 a.m. ET. Interested parties in the United States can access the call by dialing 888-428-7458; interested parties outside the United States can access the call by dialing +1-862-298-0702. Callers should dial in at least 5 minutes prior to the call start time. A live and archived webcast will be available online in the investor relations section of Jerash's website at www.jerashholdings.com. A replay of the conference call will be available until February 15, by calling 877-481-4010 from the United States or +1-919-882-2331 from outside the United States and entering conference ID number 42611.

About Jerash Holdings (US), Inc.

Jerash Holdings (US), Inc. (Nasdaq: JRSH) is a manufacturer utilized by many well-known brands and retailers, such as Walmart, Costco, Sears, Hanes, Columbia, Land's End, VF Corporation (which owns brands such as The North Face, Nautica, Timberland, Wrangler, Lee, Jansport, etc.), and Philip-Van Heusen (which owns brands such as Calvin Klein, Tommy Hilfiger, IZOD, Speedo, etc.). Its production facilities are made up of three factory units and two warehouses and currently employ approximately 2,900 people. The total annual capacity at its facilities is approximately 6.5 million pieces. Additional information is available at http://www.jerashholdings.com.

Non-GAAP Financial Information

This news release contains disclosure regarding adjusted net income and adjusted EBITDA, which are determined by methods other than in accordance with U.S. generally accepted accounting principles (''GAAP''). Adjusted net income provides supplemental information that may help investors analyze our net income without regard to the effects of one-time stock-based compensation and a one-time income tax reserve, while adjusted EBITDA may help investors analyze our net income without regard to the effect of one-time stock-based compensation and before the effect of interest expenses, income taxes, and depreciation and amortization. Non-GAAP financial measures have inherent limitations and are not uniformly applied by issuers. Therefore, these non-GAAP financial measures should not be considered in isolation, or as substitutes for comparable measures prepared in accordance with GAAP. The comparable GAAP financial measures and reconciliation to the comparable GAAP financial measures can be found in Appendix A to this document.

Forward Looking Statements

This news release contains forward-looking statements that involve risks and uncertainties, which may cause actual results to differ materially from the statements made. When used in this document, the words ''may,'' ''would,'' ''could,'' ''will,'' ''intend,'' ''plan,'' ''anticipate,'' ''believe,'' ''estimate,'' ''expect,'' ''outlook,'' ''forecast,'' ''guidance,'' ''indication'' and similar expressions are intended to identify forward-looking statements. Such statements reflect Jerash's current views with respect to future events and are subject to such risks and uncertainties. Many factors could cause actual results to differ materially from the statements made, including those risks described from time to time in filings made by Jerash with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated or expected. Statements contained in this news release regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Jerash does not intend and does not assume any obligation to update these forward-looking statements, other than as required by law.

Contact:

Richard J. Shaw, Chief Financial Officer
(315) 727-6791
[email protected]

Matt Kreps, Darrow Associates Investor Relations
(214) 597-8200
[email protected]

JERASH HOLDINGS (US), INC.,
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

JERASH HOLDINGS (US), INC.,
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

APPENDIX A – Reconciliation of Non-GAAP Financial Measures
JERASH HOLDINGS (US), INC.,
SUBSIDIARIES AND AFFILIATE
RECONCILIATION OF ADJUSTED EBITDA AND PER SHARE AMOUNTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

SOURCE: Jerash Holdings (US), Inc.