Greetings. Welcome to the Jirash Holdings Fiscal 2021 Fourth Quarter and Full Year Results Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded.
At this time, I will now turn the conference over to Roger Pondell with Pondell Wilkinson. Mr. Bonduel, you may now begin.
Thanks very much, operator, and good morning, everyone, and welcome to Jerash Holdings Fiscal 2021 4th Quarter and Full Year Conference Call. I'm Roger Pondell with Pondell Wilkinson. We are Jerash Holdings' new Investor Relations firm. We are very happy to be aboard and look forward to meeting with you and speaking with you over the coming months. It will be my pleasure momentarily to introduce the company's Chairman and Chief Executive Officer, Sam Choi its Chief Financial Officer, Gilbert Lee and Eric Tang, who leads the company's Before I turn the call over to Sam, I want to remind you 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 The company's most recent Form 10 ks and Form 10 Q has filed with the Securities and Exchange Commission, copies of which are available on the SEC's website at www.sec.gov, along with other company's filings made with the SEC from time to time. Actual results could differ materially from any forward looking statements, And Jurash 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 CEO, Sam Choi. Sam?
Thank you, Roger, and hello to everyone. Our fiscal 2021 4th quarter results Demonstrated excellent progress in our recovery from the COVID-nineteen pandemic. As we noted in our 3rd quarter Earnings call, we expect to see at least a 38% increase in 4th quarter revenue Based on orders connected in the period, as you can see in today's press release, we exceeded this rate of growth With actual 4th quarter revenues increasing nearly 65% year over year, Our mix of products improved substantially as well, leading to gross margin in the high teens in the 4th quarter. As a result of our strong 4 quarter performance, we achieved a full recovery from last year's second half With full year revenue of $19,000,000 exceeding our $85,000,000 target for the year. Moreover, our robust momentum is continuing thus far into fiscal 2022, With orders for the 1st 9 months of the year leading to a revenue run rate in that period that would exceed our prior record, This will keep us on track to achieve guidance of $100,000,000 $102,000,000 in revenue in fiscal 2022.
We continue to advance plans to increase capacity in our existing facilities and secure additional capacity to meet our customers' needs, both by building new facilities and possibly through leases and acquisitions. We will keep you apprised of that progress. As previously announced, we also anticipate starting construction later this year of an additional facility On a parcel that we purchased in 2019, I'll now turn the call over to Eric Tan,
Okay. Thank you, Sam, and hello, everyone. I'm leading the operation in Jordan. Our factories in Jordan are extremely busy and we continue to add capacity as quickly as we can in order to meet the demand of our buyers. As Sam noted, order volumes are up substantially and customers have returned to more typical ordering patterns.
Our revenue has continued to be more evenly distributed throughout the year, which as we have mentioned before It's one of our long term goals. As anticipated, our product mix improved in the 4th quarter, Leading to orders with higher average selling prices and margins than we saw earlier in the fiscal year. As we told you last quarter, some shipments for major brand customers were shifted into the 4th quarter, Which lifted both revenue and gross margin in the period compared with last year. And as Sam noted earlier, this possible momentum is continuing into fiscal 2022. Capacity is completely booked through the end of January based on orders from our 4 largest global brand customers alone.
Bookings remain heavily weighted to watch jacket and other outerwear products that have highest ASP and margins. While we continue to plan for adding future capacity to keep up with demand, we also recently announced the construction of a high quality Living space for our expanding multinational workforce as well as plans to start construction later this year on our 5th Manufacturing plant with additional housing capacity. We plan to construct a start of the art, Ecologically friendly building with the higher safety and comfort designs that will have positioned us for growth and further our ESG growth. With that, I will turn the call to Gilbert Li to discuss our financial results and fiscal 2022 outlook. Gilbert?
Thank you, Eric, and good morning, everyone. Our fiscal 2021 Q4 revenue rose Substantially to $24,000,000 from $14,000,000 in the same period last year, Which is an increase of nearly 65%. As Sam noted, revenue exceeded the guidance we previously provided. Growth was driven by higher shipments in the quarter as well as a shift in the timing of certain shipments from the Q3 into the 4th That was related to the COVID-nineteen pandemic. And as you may recall, our revenue in the Q4 of last It was negatively impacted by the pandemic due to a full national shutdown in March 2020.
Gross margin exceeded our guidance as well, coming in at 19.6% In the fiscal 2021 Q4 compared with 8.7% in the same period last year, Gross margin enhancement in the quarter reflects an improved mix of products with higher sales of jackets And other outerwear products. Gross margin in last year's Q4 also was negatively impacted by the pandemic. Operating expenses totaled $3,500,000 in the fiscal 2021 4th quarter compared with $2,000,000 in the same period last year. The increase primarily reflected headcount additions, Catch up repair and maintenance work on the facilities and dormitory to support growth in the new fiscal year, higher logistics costs That stemmed from the pandemic and a one time company wide bonus, basically getting the company ready for returning to a more normalized operations. Operating income was $1,200,000 In the fiscal 2021 Q4 compared with an operating loss of $735,000 in the same period last year, Comprehensive income attributable to Jiraj common stockholders was 656,000 or $0.06 per share in the 4th quarter compared with a net loss of $740,000 or $0.07 per share In the same period last year, for the full 2021 fiscal year, revenue totaled $90,000,000 which exceeded our outlook.
Gross margin in fiscal 2021 was down 160 basis points to 17.7%, again primarily due to pandemic effects. Fiscal 2021 included higher proportion of local orders that typically carry lower margins, And we also experienced a loss in productivity because of the April 2020 national shutdown in Jordan. Operating expenses were $11,000,000 in fiscal 2021, slightly higher year over year. Operating income for the year was $5,000,000 compared with $8,000,000 in fiscal 2020. Comprehensive income attributable to Jirav's common stockholders was $4,000,000 or $0.37 per share in fiscal 2021 compared with $6,000,000 or $0.57 per share in fiscal 2020.
During fiscal 2021, we paid dividends of $0.20 per share to our common stockholders. Our balance sheet remains strong With cash and restricted cash of $23,000,000 and net working capital of 15,000,000 At March 31, 2021, inventory was $25,000,000 and accounts receivable was 12,000,000 Receivable collections remain excellent and consistent with no customer issues. Net cash used in operating activities was $1,000,000 in fiscal 2021 Compared with net cash provided by operating activities of $7,000,000 in the same period last year, The net change reflects working capital activity. We continue to expect the business to generate cash From operating activities on an annualized basis, we also have untapped lines of credit available for up to an aggregate amount of $26,000,000 In terms of our fiscal 2022 outlook, we expect revenue to be in the range of $100,000,000 to $102,000,000 for the year. Demand continues to indicate That we could produce revenue at or near record levels in the 1st 3 quarters of the year, with orders heavily weighted toward High Margin Jackets and Other Outerwear Products.
We expect this pattern to support gross margins in the high teens for the full Our fiscal 2021 Q4 results represent a strong finish to a challenging year. Customer ordering patterns are returning to a more typical level with a higher ASP and margin profile. Our facilities are fully booked through January of 2022 and we continue to work on adding more capacity. This robust momentum is leading to what we believe will be a record year for the company. We look forward to keeping you apprised of our progress as the year unfolds.
And with that, we will now open up
One moment please while we poll for questions. Thank you. Our first question is coming from the line of Mark Argento with Lake Street Capital. Please proceed with your questions.
Hey, guys. Congrats on a strong end of the year or end of your fiscal year, a nice bounce back here post pandemic. So a couple questions. The guidance for 2022, the $100,000,000 to $102,000,000 in revenue, is that basically running the facilities at full capacity or is that 90 Percent capacity, maybe just talk about the upside potential of that number relative to the capacity utilization.
Well, we are fully booked through the 1st 3 quarters of the year and It is almost at 100% capacity and we are adding additional capacity as we speak By adding additional production lines in our existing facilities, however, that would only give us Just a certain amount of additional capacity. But at the same time, we are looking and Considering additional spaces, additional facilities to add capacity. So this projection or this guidance really is looking at pretty much at our limit Unless we have additional acquisitions or leasing additional space in Jordan.
Great. And the additional capacity that you're talking about bringing online, is that When could you see a material increase in capacity? Is that early 2023, Fiscal 'twenty three in a year from now or how long does it take to spin up additional capacity?
Well, we're building a new facility And that construction will start toward the end of this year. Right now, we're finalizing the engineering designs and the architectures of that particular building. So that particular project will not provide New capacity until maybe a year and a half or 2 years after we start. So we're actively looking for existing facilities that we can either lease or purchase In Jordan, so that we can immediately get additional capacity to satisfy the growing demand.
Great. And in terms of additional capacity, have you brought on additional capacity over the last couple of years? Or has that been Has that stayed fairly static?
Yes. In the latter part of 2019, I'm talking about the calendar year, We purchased our 4th factory in Jordan, which is the Paramount factory. So that had Some substantial increase in capacity for us. That's how we brought our capacity now up to 12,000,000 pieces. And we also added a satellite workshop in a different city in Jordan, We're just about 1.5 hours south of Amman.
And that facility, we now have 300 workers in there And we are making more products in that facility. And that facility also has some more room to grow. Got
it. And then just turning maybe for Gilbert over Looking at the some of the expenses, you talked to gross margins, kind of high teens. On the OpEx side or operating expense side, I think you had mentioned in the quarter OpEx was a little bit higher because Doing some resets of bonuses and getting ready for kind of growth in 2022. Do you anticipate that normalizes to Levels that look more like
kind of
run rate 2019 levels on a quarterly basis, maybe Walk us through what you're thinking on the operating expense side of the ledger.
Well, on the SG and A, We're actually anticipating a slightly higher SG and A because we have already added some headcounts. So some of the G and A costs will be higher to handle the growing demand, Taking care of the sales and marketing and also looking at higher shipments or higher volume Of shipments, the in the selling costs, selling expense, it include The logistics cost that we have to send the products, send the finished products To the ports, now the overseas shipments, both of them will be handled by our customers. So that's not part of our expenses. But we do have to ship the products to the port from our factory. So we put in some additional costs in that.
What I'm looking at on the SG and A will be around, Let's see. SG and A, are looking at around $12,000,000 to $13,000,000 for this upcoming fiscal year.
Got it. And then for the on an operating income basis, Do you anticipate is this going to be I think you guys did roughly $6,000,000 in operating income or excuse me, 6 Percent operating income margins in 2021, that was down from roughly 8% in 2020. Do you get a bounce back in 2022 on an operating income level, or is this still kind of a little bit of a reinvestment year, a bounce back year? What are your thoughts on Bottom line number.
Well, margin is going to be better Because of higher proportion of the jacket And outerwear. So margin, we'll see an improvement of probably about 1 percentage point Comparing to 2021, and SG and A, even though that has some increase, But I think the operating income level would improve.
Got it. All right. And then last one for me. Sam, as you're thinking about allocating capital, obviously, your balance sheet supports being able to Get more aggressive on the growth side, probably played it a little conservative with the pandemic. How aggressive Do you guys want to be here in terms of growing the business given that it seems like for the most part you guys have been fully booked for quite a while now and I've been lacking capacity.
What can you do to remedy that? Is there willingness to get more aggressive on the M and A side? Obviously, You're constructing additional facilities as well, but just any thoughts there would be really helpful. Thanks.
Yes. In fact, I mean, besides building our own factory, I think the fastest way We will consider to acquire some small factory that will immediately increase our capacity to meet the customer demand. So that is one of the way we will seriously consider. Yes.
Our next question comes from the line of Rommel Dioncio. I'm sorry, please go ahead. Our next question is from Rommel Dioncio with Aegis Capital.
Yes, good morning. Thanks for taking my question. I wonder if I could just walk through the impacts of The pandemic on labor, are you restricted from bringing workers from other countries, Bangladesh and others, Into Jordan because of the pandemic and as a result, are you hiring more domestic labor? Is that not really as much of an issue? Thanks.
Maybe Eric. Eric,
okay, let me answer this question, okay, because I'm taking care of the operations. So all along, we are bringing migrant workers from India, Bangladesh, these kind of countries to Jordan. Okay. So this is a major part of our workforce. Okay.
At the beginning of the pandemic, the situation in India and Bangladesh is still under control. We are still open To open for bringing workers from Bangladesh and India to come in, okay, to Jordan to work. But this year, okay, starting this year, I think it's April, something like this. Okay, the situation In India and Bangladesh is getting worse. Okay, nearly all the countries in the world ban the coming of Workers or people from that countries.
So in Jordan, okay, the Ministry of Labor also bans the coming of new workers from these two countries. Okay. Actually, we have applied for new workers, Okay. Coming to work for us from these two countries, okay, in order to meet our expansion requirements, Okay. And in order to solve the problem, okay, we are already hiring more local workers And also particularly, we are looking forward to hiring more experienced Syrian refugees operators To replace those workers from Bangladesh and India who cannot be able to come to work in Jordan.
Okay. The situation now in India and Bank Attash, I think, is improving. And starting last week, okay, the visa For Bangladesh coming to Jordan is open already, reopened, I can say. Okay, so starting a few days ago, we have new workers from Bangladesh Coming to work in our factory again. We are still looking forward to the situation in India going improving.
And hopefully, okay, maybe in July, Jordan will be opened for Indian people to come again to work cooking.
Okay. That's very helpful. And maybe a follow-up to that. I know in terms of your capacity expansion plans, you were also thinking about in the past Expanding maybe in China. And I just wondered same question.
There's we do hear about some recent lockdowns in certain regions, But I guess some of those are being lifted now. Has that been a factor that may have been impacting your plans to Production capacity in China or does that has that not really been as much of an issue? Thank you.
I can say so far there's no obstruction or problem In our in the major I mean, there is a sample room factory in southern part of China So far, no negative impact on our operation.
Yes. Okay. That's very helpful. Thank you very much and congratulations on the quarter.
Thank you very much.
Thank you very much.
Thank you.
Our next question is from Barry Pasternak, Private Investor, please go ahead with your questions.
Hi, guys. Congrats on the quarter. I was wondering the book it looked like the book tax rate was about 40%. Could you talk about why it was so high and also What you expect the if you could talk about what you expect the book and cash tax rate to look like in the current fiscal year?
The tax rate actually was There was some catch up or some true up in the Jordanian taxes that relates back to 2018 2019, Jordanian test rate actually went up Quite significantly in the past 2 years. So we went back or the government went back And Navi, on some additional taxes. So and even in the fiscal year 2021, The test rate in Jordan increased from, I think, from 14% no, from 11% to 14%. So there is a pretty steep hike in the test rate. That's why the effective test rate looks Higher this year, but we anticipate this will kind of level out.
And So this year is just a one time adjustment.
So what would the cash and book tax rate look like for the current fiscal year? Can you comment on that?
In the current fiscal year, we anticipate the cash rate to be around 16% to 17%.
Okay, great. And for the apartments that are going to be constructed for employees, when is that projected to begin that
We have already begun the construction in the month of April, At the end of April, actually, and we anticipate the construction to complete In the middle of 2022.
Okay, great. And last question, why was there a change in Investor Relations firm?
Why was there a change in the Investor Relations firm? Right. There
was a recent change to
Yes.
We just want to have a change and see if we can learn something new and just Try to attract more investors and grow our company, be more transparent and Communicate with our investors, with the capital market more effectively.
Thank you. The next question is from Mike Dessler with M and X Holdings. Please proceed with your question.
Yes. Good morning, gentlemen.
Good morning.
How are you? Eric, good afternoon, I guess, to you.
Good afternoon.
I just I don't have much to say. I just want to tell you congratulations.
Thank you.
The only thing and Gilbert, as you know, we spoke earlier this year. Just quickly, the only thing I was going to point out to you, first off, it's great that you were able to give bonuses out to folks and that's great. Appreciate the transparency. Eric, you're always terrific and Gilbert, as are you. Sam, you're in charge, so congratulations.
The investment in training, which is the Costco model, I just wanted to point out, I realize that you all know this, The world doesn't and that would be your new IR firm, which you engaged, getting on their courses as well and I wish them luck. I hope they're fully engaged. But the reality is the Costco model is let's get our people fully engaged, meaning all the workers, pay them well, take care of them, which you all do. And that investment in training fosters, permanency in your worker base And quality control is an automatic because it's taught on day 1 and not by some QC person at the end of the line. And I just want to point out that, that is part of the reason why Gerash Holdings has excelled beyond Most other folks in the apparel business, as you know, Gilbert, I've been in this business for many decades.
So that's it. I just want to say thank you and continue the great work. I'll speak to you privately, Gilbert, if need be, but probably won't. And that's it. I just wanted to toot the horn a little bit and make sure that Roger Pindell gets on his horse, Wilksen, And thank you all for doing such a great job through this horrible mess that we've lived through the last 2 years, okay?
Yes.
Thank you for calling.
Thank you so much. Yes, thank you for the reminder. We definitely understand how important it is To treat our employees, treat our workers well. And that is the strength of Jiraj, our operations in Jordan, That we are the really the most sought after manufacturer in Jordan by Many of the global brands. Thank you.
At this time, I'll turn the floor back to Mr. Sam Choi for closing remarks.
Okay. Yes, thank you, operator. And thanks again to everyone for joining us today and for your support and interest in our company. We look forward to speaking with you again soon on our first