Ladies and gentlemen, thank you for joining us for this Jerash Fiscal Year 2020 Results Conference Call. As a reminder, all participants are in a listen-only mode. But later you will have the opportunity to ask questions. To get started with opening remarks and introductions, I am pleased to turn the floor to Matt Kreps with Darrow Associates Investor Relations. Welcome, Matt.

Thank you, Jim. Good morning and welcome to the Jerash Holdings fiscal fourth quarter and full year 2020 results conference call. With me today is Sam Choi, our Chairman and Chief Executive Officer; Gilbert Lee, our Chief Financial Officer; and Eric Tang, who leads our operations in Jordon. Our results press release issued earlier today and an updated investor slide decks are available on our website www.jerashholdings.com. Today's call is being recorded and will be available for playback. All participants will be in a listen-only mode. [Operator Instructions]. The operator will provide a detailed reminder on the Q&A instructions once management has completed their prepared remarks. Before we begin, a quick reminder about forward-looking statements made during the course of this call. Statements made by Jerash management during the course of this conference call that are not historical facts are considered to be forward-looking statements subject to risks and uncertainties. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, will, guidance, outlook, indicate, suggest, forecast, target, growth, seek, goal, and other similar statements of expectation identify forward-looking statements. Forward-looking statements are subject to risks, uncertainties, and important factors that could cause actual results to differ materially from those reflected in the forward-looking statements. These risks and uncertainties are detailed in [Technical Difficulty] with the U.S. Securities and Exchange Commission. Participants on this call are cautioned not to place undue reliance on these forward-looking statements which reflect management's belief only as of the date hereof. The company undertakes no obligation to publicly release the results of any revision to those forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. I will now turn the call over to Sam. Please go ahead.

Hi. Thank you, Matt. Hello, everyone. I'm pleased to join all of you today for this call. Fiscal 2020 turned out to be a very strong year of growth for Jerash, with sales growing 9.5% to a record $93 million. Our take over a year was to diversify our customer base, with peak piece with more than 7% of our revenue from new customers, who are expected to further grow their business with Jerash in fiscal 2021. We also invested in additional capacity during fiscal 2020 acquiring the Paramount manufacturing asset for approximately $1 million. We estimate this increases our annual production capacity by more than 23% or 1.5 million pieces, which has been almost fully booked with new orders since we started this facility with our print workers. I'm very proud of our team's hard work and dedication to that process. We also opened up sewing workshop in Al-Hasa in Jordon through an exciting partnership with the Jordanian government. Jerash is a socially-oriented company dedicated to not only profitability for our stockholders, but also creating quality employment for people in Jordon, both permanent citizens and a group of workforce that comes to Jordon on multiyear work contracts. The Al-Hasa project was designed to create local jobs for Jordanian woman in an underserved rural area. These female-focused workshop is up and running with quick success. One of their first projects was sewing custom North Face garments sold in Europe to celebrate International Women's Day. These projects are particularly exciting to Jerash because they in-scope good business and also good social responsibility. Fiscal 2020 was not without these challenges, though, including the global COVID-19 pandemic that closed our facility in the last two weeks of the fourth quarter. The pandemic will have an impact on our fiscal 2021 but a number…

Thank you, Sam. Hello, everyone. I'm pleased to join all of you today to discuss our financial results. Our results demonstrate continued progress on our growth initiatives, although we were impacted by the global COVID pandemic for the last two weeks of the fourth quarter. Let's cover some of the details from our financials and business performance for a few minutes. Revenue in the fourth quarter of fiscal 2020, which ended March 31st, was $14.4 million, effectively flat year-over-year. We had to defer approximately $1.6 million in shipments scheduled late in the quarter when the Country of Jordan announced a shelter in place order in March to arrest the spread of COVID-19. I'm pleased to say that Jordan has handled the pandemic very well, and reopened using a number of well-developed measures to facilitate a return to business while continuing to protect workers and citizens. Jerash is fully reopened and using enhanced screening and hygiene measures for the continued protection of our workforce. Fourth quarter gross margins were expected to reflect the startup cost for our Al-Hasa workshop, a very exciting project as Sam mentioned. But the pandemic also had a significant margin impact due to the loss in productivity in the two weeks shutdown. As a result, gross margin was only 8.7% for the quarter. Operating expenses have declined though to $2 million for the quarter as compared with $2.8 million in the previous fourth quarter, resulting in a net loss of just $0.07 per share. For the full year, we were able to achieve most of our financial objectives even with the pandemic impact setting the stage for continued focus on operating improvements in the year ahead. Full year revenue was a record $93 million, reflective of the $1.6 million in fourth quarter orders that shifted into fiscal…

[Operator Instructions]. We'll take our first question from Mark Argento at Lake Street.

Hey, Sam, Hey, Gilbert. Just wanted to drill down a little bit more on, when you're talking with your customers, how are they shaping up kind of the demand equation. Obviously a lot of retail has been closed for quite a while in the U.S., and I'm assuming other parts of the world as well. Are you getting any indications on what their thinking is in terms of kind of inventory levels at retail? Will that impact longer term order patterns for the rest of this year? Any thoughts there would be helpful? Thanks.

Well, Mark, I will take that. We constantly -- or on a week to week basis, we communicate with our customers, on a continuous basis to -- because right now the situation is really fluid, even in the U.S., states are shutting down or after the reopening they're pausing. And so nobody really knows how and when everything is going back to normal. But indications from our customers have really -- I guess it's really because of our relationship with the customers, our long-term performance, our quality and delivery, on time delivery and low costs, our customers have largely reinstated their orders, from the -- for those orders that they have deferred or cancelled at the beginning. So we are kind of cautiously optimistic. But obviously we can’t predict what is going to happen in 2021 and neither can our customers. So to -- I guess that really doesn't answer your question, but we will continue to maintain communications with our customers, and they update us on a weekly basis. So right now we're looking at some decline in 2021. However, we are doing everything we can, and also we have some new customers. So we don't think that this is going to be a disaster. But however, we think 2021 is still going to be a pretty good year if everything gets back to normal with a reasonable timeframe. Sam, do you have anything to add?

Yes, and in fact for the coming year, based on the confirmed order from our over 10 customers, and also based on some of their conservative projections, I think we try at least at this moment -- at least we can have 80% I mean compared with fiscal 2020 in terms of top-line. And of course in the coming few months, the pandemic situation in U.S., in Europe is getting better, I think the reinstatement of the orders would be more encouraging, then we will try to meet -- try to catch I mean the top-line just like fiscal 2020. And also I would like to say I mean besides the garment we are making, in the last few months, in fact, we are also making some masks and recently we are also making some isolation gown or medical gown for the Jordan and also Israel countries. And we are also seeking the FDA approval for export of the isolating gown to the U.S. and Europe. If we are successful on that, then we expect that will contribute to the top-line in terms of sales of the isolation gown as well, yes.

And Sam, how quickly do you think you could get approval to start shipping products, some PPE products?

Okay. So Eric, can you talk about the process of particularly FDA approval?

Yes. Okay. So actually, we already started the process of getting various certification for our medical products. Okay, so we have applied -- okay first of all, the Jordan FDA approval. Okay, so the Jordan FDA approval, last month we already got the temporary approval that we can ship or export our medical products to all the Gulf countries, which is the Middle East countries. Okay, secondly, we are in the process of applying the CE which is a re-requisite for exporting our medical products for all the European countries. According to the latest report from the consultant company, independent company who is doing CE for us, it will take another one and a half months before we can get the official CE, which allow our products to be shipped out to European countries. And for the U.S. FDA, so actually we just started our process to apply for the USA FDA certification. So it will be quite a long procedure because U.S. FDA requirement is a little bit complicated and also very strict. We have already -- because of the COVID-19, the U.S. FDA cannot be able to send representatives to come for inspection of our factories in Jordan. Instead, they are asking Jordan FDA to visit the factory on behalf of the U.S. FDA. So they’ve already come to our factory for a couple of times for certain inspection. We have also I mean sent our products to the FDA for -- to the laboratory for testing. So we are still waiting for the results of the lab test. And then after all the results have been come out, we will get the registration for the U.S. FDA and we will have the registration number for JRSH. And it -- approximately it will take another two months before we can get all the certified approval if everything is going smoothly.

Great. And will that be even medical -- basically medical grade PPE then or what types of products will you guys manufacture?

About the medical products, okay, we are now producing or prepared to produce, we already started producing the surgical disposable face masks and then we are also producing now -- which is a fashionable washable face mask. Some of them we are producing for particular brand for our buyers and some we are producing for other customers according to their requirements. And also, we already started producing in our number five factory in Al-Hasa, the blue medical gown which is also for disposable purpose. Later, we are also planning to develop a couple of which is used by the operation room and also the reinforced blue medical gown which is a sterilized product, after we get all the certification. These are the products that we are producing now.

[Operator Instructions]. Next we'll hear from RHK Capital and the line of Todd Felte.

Hey, guys, congratulations on a great fiscal year. Just got a question on the PPE and mask. What are the margins going to be on that business compared to your garment business?

Okay, this is Eric. I'm calling from Jordan. Can I answer your questions?

Sure.

So approximately the profit margin for our medical products, okay. So, we have actually different profit margins for different kinds of medical products. And it depends on which country we are exporting. In the Gulf area, in the Middle East country, we already know about the market price of each kind of product, the face mask, the medical gown. And we are making it in order to compete with the local, our main factories, supplying to the Gulf area, our profit margins is about 10% to 15%. But we have checked the price, the market price in EU and also in U.S. If we can successfully get the CE and FDA approval and we can export our product to those -- to USA and also to EU, the profit margin is much higher than those we are supplying to the Gulf countries. The profit margin will be -- for all the products will be between 20% to 35%.

[Operator Instructions]. Next we'll hear from the line of John Morris at Davidson.

Hi. Thanks. So, following up on that last question, in the margins, Eric, that you're giving. Are those -- whether it was the Middle East or the U.S., are those higher than what your current average -- or not current but last year margins are? It sounds like they are significantly higher in the U.S., on the PPE.

Yes, yes.

Okay. Switching gears, I just wanted to -- I mean question for Gilbert, probably. Just a clarification. Given the volatility, and I think Sam was saying, like at this point, just clarify for me that you are thinking 2021 could be -- when he said 80%, does he mean sales down 20% from last year -- from last year full year? Just a clarification on that.

Yes, John. I mean, right now, to be honest, we really cannot have any solid basis to project what our 2021 top-line is going to be. I think Sam is kind of looking at all the existing customers, their orders and current cancellation or reinstatement of the orders that he estimates, maybe it would be down 20% from 2020. But that doesn’t include any new customers or any like PPE products that we are currently working on. So, I would say, the 20% reduction would be kind of like the worst case scenario.

Yes. Okay. Super helpful to give that context. I mean it's a little bit of kind of a smaller detail here just thinking about the June quarter. But just for a modeling -- I am just trying to kind of understand, could -- were you at all open, were factories open? I know you have the dormitory labor force in place. I'm wondering whether or not the June quarter still registered sales, were things open? Obviously it would be down significantly from the run rate seen in fourth quarter.

Yes the June quarter, which is ending already tomorrow, sales is definitely down. I don't have the numbers yet. We have been shipping -- actually we have been shipping in the June quarter. All the factories are fully resumed their operations, I think starting June 1 all the local workers were allowed to go back to work and -- but way before then, at the beginning of May, we have already got all the dormitory workers or the workers from -- well, Jordan was only shutdown to kind of like not having the local people traveling in and out of the industrial zone. So -- but most of our workers are in the industrial zone. So, we were able to produce even when the country was officially shutdown. So, we were producing -- in fact, we started producing back at the beginning of May with a limited number of workers. So, June quarter is not -- it's not too bad, but absolutely it had an impact because of the ….

Okay, that's very helpful, you talked about the cost controls, given the circumstances that you're putting into place. As you look out over the course of the year -- well, I'm wondering to what degree you're able to manage that SG&A. Can you give me some -- can you give us some feel for whether SG&A dollars year-over-year would actually be down or flat or up at a slower rate of growth, on for full year for 2021 in terms of kind of what you've been able to impact?

Well, we have custom headcounts, especially in the area of SG&A. So, I mean even though most of our headcounts are in production and manufacturing but we still have some laid-off in our administrative area. And I think the majority of our people who are remaining, they did have a temporary reduction in their salary. So I would think 2021 SG&A if not a reduction from 2020, it would be almost flat from 2020.

[Operator Instruction]. We'll take a question from David Schneider. Please go ahead, sir. Your line is open.

Thank you. In your online presentation, it suggests that you're still looking for additional capacity. So is that the correct interpretation?

Yes, David. Thank you for the question. We are definitely actively looking for additional capacity. But due to the COVID-19, we are kind of at the moment putting that on hold, just wanting to see how the top-line is coming back and how the demand from our existing customer as well as new customers are putting on us. So, I mean, obviously, it doesn't make sense to build new capacity when there's no sales. But we're currently still actively looking either through building on our existing facilities, on land properties that we have purchased as well as M&A opportunities. If there is good opportunities, some companies that have already existing customers or they are in a distress mode, that it will be a good deal for us, then we definitely will consider that.

This is Eric. Can I add something to the questions? Okay. So actually, because of the COVID-19 some of the existing factory, which is doing orders for some American brand, so some of them are already closed for a lot of reasons. So recently we have picked up one new customer because this customer, originally they place a lot of order to one factory in Jordan, but unfortunately this factory was close before two months. So now they are trying to talk to us for capacity, so asked us to provide I mean capacity to them for the rest of the year, and also for 2021. So I’ll just -- the name of the customer is American Eagle, I think we also made some announcement on this. So recently, we have already picked up one new order, the first order, which is 9,500 pieces of jacket from American Eagle, this is the first order we took from them. And they are still talking to us, asking for further capacity for the rest of the year. This is -- I mean, so Jerash may have some good opportunities even during the Corona-19, because of the shutdown of other facility in Jordan.

That’s a very good point, Eric.

Okay. Yeah, I think that’s all pointing – it is all a very good indication as this virus subsides in the world, definitely wants where you can produce. Also, the second question is on the geographic distribution end markets for you. It’s overwhelmingly United States. Do you see that changing over time?

Sam, do you want to take that?

Yes. I think, I wonder -- I mean phenomenally between USA and China relationship, in fact, there's quite some China-based factories or manufacturers, they would like to shift their order from China and Jordon. And some of them even talk to us, they would like to lock up some of our capacity for their orders to USA. Instead of producing in China, they would like to shift their production base from China to Jordan for their export to USA and also to Europe as well. So, we are discussing with them about that. Yes. So in the coming few months, on this year, we’ll ship some capacity for their orders as well. Yes.

[Operator Instructions]. And it appears we have no signals from our group. I'll turn it back to Mr. Matt Kreps for any additional or closing remarks.

Thank you, Jim. And thank you everyone participating on today's call. While 2020 produces a strong revenue and profit growth, Jerash remains focused on opportunities ahead in fiscal 2021. Jerash will be conducting multiple outreach and conference events in the coming months including the Sidoti Virtual Investor Conference tomorrow. If you have additional questions or like to arrange a meeting at an upcoming event including our event tomorrow, please contact me using the contact information on the bottom of our press release. Thank you for your participation and have a great rest of your day.