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Thank you, Sam. Jordan remains secure and stable as a country. But the broader geopolitical situation in the region has impacted our business since October 2023. Especially with regard to both import and export shipping logistics. During the past quarter, we again experienced export shipping delays of up to 4 weeks at the Haifa port.
By late January, however, the port congestion had much improved. And today, conditions are essentially back to normal. And ocean containers are being shipped without undue delay. I'm also happy to report that our factories are fully booked through August this year. And orders from our global brand customers are increasing steadily.
We are receiving a growing number of new business inquiries, in part because of the tariff-free advantage of exporting to the US, EU, and other countries from Jordan. As Sam mentioned, we are hearing from both existing customers, as well as prospects from international apparel companies.
Currently, we are working on sample orders and pricing for several well-known brands in Europe and the Persian Gulf region. Along with leading manufacturers in Asia. This is all positive news, but as a reminder, securing large orders from high profile global brands takes time.
We are confident that Jerash's history and reputation for developing and producing quality garments will ensure trust among new customers. And position us as a reliable and responsible manufacturing partner. Now, I'd like now to provide a few details on our expansion plans to accommodate the growth that we see ahead.
In addition to the current expansion underway at two of our existing primary manufacturing facility, that would add 15% of production capacity by midyear, we are working closely with the Jordanian Ministry of Labor to finalize a land grant adjacent to our existing facility in Al-Hasa
This operation began as a joint venture project between Jerash and Jordan Ministry of Labor in 2018 to create employment opportunities for women in remote areas. Where unemployment rates were as high as 70%. We are planning to enlarge the facility in the Hasa to double its size and increase local hiring of women from 450 to 800.
According to our current plan, upon completion of this project, by the end of 2025, production capacity is expected to increase by another 5% to 10%. We also are assessing longer term, larger scale expansion plans to construct manufacturing, warehousing, and housing facilities on land that we purchased several years ago.
At this point, we have commenced engineering science studies to re review various options. With that, I will now turn the call over to Gilbert to discuss our financial results.

Gilbert Lee

Thank you, Eric. Revenue for our fiscal 2025 third quarter increased 28.6% to $35.4 million from $27.5 million for the same quarter last year. The quarter's revenue reflected an increase in shipments to Jerash's major US customers. As Sam mentioned, due to congestion at Israel's Haifa port, which caused the delays in shipments, revenue for the quarter was impacted by approximately $6 million.
We estimated $3.8 million of finished apparel was kept at the port, along with incurring more than $100,000 of port storage fee. Additionally, we held back another $2 million of finished product in our warehouse for the same reason. Gross profit for the fiscal 2025 third quarter increased 20.6% to $5.4 million from $4.5 million in the same quarter last year.
Gross margin was 15.2% in the fiscal 2025 third quarter. Compared with 16.2% in the same quarter last year. The decrease was primarily driven by higher logistics costs arising from the geopolitical turmoil in the Middle East region.
Operating expenses for the fiscal 2025, third quarter total $4.7 million compared with $4.1 million in the same period last year. SG&A expenses were $4.2 million in its physical third quarter compared with the $3.8 million in the same quarter last year. The increase was primarily due to higher export logistics costs.
Stock-based compensation expenses for the fiscal 2025 third quarter were $474,000 compared with $243,000 for the same quarter last year. Operating income increased at 88.3% to $708,000 in the fiscal 2025 third quarter from $376,000 in the same quarter last year.
Total other expenses were $252,000 in the fiscal 2025 third quarter compared with $105,000 in the same quarter a year ago. The increase was primarily due to higher interest expenses from supply chain financing programs provided by the two major customers.
Income tax expenses for the fiscal 2025 third quarter were approximately $450,000 compared with $39,000 for the same period in fiscal 2024. The increase was mainly due to a prior year tax provision adjustment of approximately $274,000.
The effective tax rate amounted to 98.6% for the fiscal 2025 third quarter compared with 14.2% for the same period in fiscal 2024. Net income was $6000 in the fiscal 2025 third quarter or zero per share, versus $232,000 or $0.02 per diluted share in the same quarter last year.
As of December 31, 2024, Jerash had $14.8 million in cash and restricted cash, and net networking capital was $34.8 million. Inventory was $19.1 million and $7.2 million in accounts receivable. Net cash used by operating activities was approximately $581,000 for the nine months ended December 31, 2024, compared with net cash provided by operating activities of $7.9 million for the same period last year.
As Sam and Eric mentioned, we are optimistic about Jerash growing business, and our factories are fully booked through August. Revenue for the fiscal 2025 fourth quarter is expected to increase by 50% to 53% from the prior year quarter.
Revenue for the fiscal 2026 first quarter is expected to be in line with the fiscal 2025 first quarter, which was a record and included $3 million to $4 million in delayed shipments from the fiscal 2024 fourth quarter. Our gross margin goal for the fiscal 2025 fourth quarter is expected to be approximately 15% to 16%, subject to logistics and shipping charges and product mix.
On February 5, 2025, Jerash's board of directors approved a regular quarterly dividend of $0.05 per share on its common stock payable on February 25, 2025, to stockholders of record as of February 18, 2025. We will now open up the call for questions, and I will return the call back to the operator.

Question and Answer Session

Operator

Thank you very much. We will now be conducting our question-and-answer session. (Operator Instructions)
Thank you. Your first question is coming from Mark Argento of Lake Street. Mark, your line is live.

Hey, good morning, guys. Just a quick question. Given all the, talk about this morning, can you guys hear me alright?

Gilbert Lee

Yeah.

Yeah, given all the talk about tariffs, recently with the new administration, could you, has that benefited or increased the number of conversations you're having? It sounds like it has, but maybe you could help quantify that and then, maybe talk a little bit about the timing of the new capacity coming on, and, you know how quickly you can see that, impact the business.

Gilbert Lee

Well, as we said, a At the call, we are already fully booked through the summer, through the end of August for this fiscal for this calendar year, actually 2025. And new orders are still in the pipeline, and we anticipate that the growth opportunities that we have in the in this fourth quarter as well as the 2026 fiscal year. Are all going to be limited by how fast we can grow our capacity.
And we are already expanding our internal capacity at the existing facilities, and that will add 10% to 15% after we after we expand the facility, adding more lines, and we anticipate that to be finished by June. yeah, by the end of June. So, which is very quick.
And then the other project that we're working on is to expand our satellite factory in Al-Hasa, which we will add more workers from 450 to 800 people. And even though that is a smaller facility, so the overall increasing capacity is we are looking at maybe 5% to 10%. I mean, comparing to the to the overall capacity.
So those two are very realistic. And but the longer-term increase will come from, that piece of land that we have had for over 5 years now, and we are doing engineering study looking at different options on how to build and what kind of cost. So once that is done and once, we make a decision on what to do, then we will be able to quantify the increasing capacity and the timing of it.
But as of now, because of the tariff situation getting really heated up. We anticipate more and more brands and buyers are going to, well, it has already started maybe 4 to 5 years ago that people are looking for production and manufacturing facilities in the tariff free countries, but now it is just getting more urgent and so That is a great opportunity for us.

Yeah, that's, makes sense. Just another quick follow up in terms of, if you run kind of a test order for a customer, what's the typical conversion rate from test run to, more of a full production run? Is it 50%, 25%, 75%? It could help us better understand that kind of sales cycle conversion rate.

Gilbert Lee

I'm sorry, what conversion rate are you are you referring to?

New customer test to new customer full production.

Gilbert Lee

New customer test and.

Typically a customer gives you a test order. Gilbert, typically a customer gives you a test order before they give you a full production order. And I'm just wondering, you convert 100% of the time or 50% of the time? What's your conversion to winning a customer from test the full production.

Gilbert Lee

From a test order to a full-blown order. The timing, well, Eric said the timing is going to take a long time. It's going to take at least nine months to convert, but the conversion rate that you're looking for, I think the rate is pretty high. Once we start a test order, most, in most cases, I don't know how many percent, but in most cases, the customer will issue the long-term orders from us.

Yeah. According to my past experience with Jerash, I'm Eric. So, once the customer praises for a trial order, okay, maybe after six months, okay, they will praise the bulk quantity orders. We have never failed any customer for the past 10 years.

Great, appreciate the additional caller. Good luck, guys thank you.

Gilbert Lee

Okay, thank you. Thanks, Mark.

Operator

Your next question is coming from Michael Baker of D.A. Davidson. Michael, your line is live.

Great, thanks. I'm just wondering outside of the increased demand that you're seeing just because of tariffs and people wanting to get out of Asia, any comment on what you're seeing in terms of demand as it relates to the US consumer and apparel inventories and buying it seems to be that inventory apparel inventories are starting to [tick] up a little bit. Consumer spending has been good. What are you hearing from your customers in terms of, overall apparel demand?

Gilbert Lee

Eric, have you heard any comments from customers about the demand on the products on the apparel overall in the market?

Yeah, I have a lot of response from different kinds of customers. Some of the customers say they're still, I mean, trying to absorb the High level of infantries, but 60% of the customers told us that most of the infantries they already absorbed during the past two years. They are going to place the new orders to Jerash. This is what I heard from the buyers.

Right, and the, delayed shipments, the $6 million, when does that flow through the P&L? Is that, does that come in in the fiscal fourth quarter? Is that part of that, growth plan of 50% to 53%?

Gilbert Lee

Yeah, that's part of the [56], 53% growth. The fourth quarter those and shift apparel products, most of them were shipped in January already. So, but with those delayed shipments, we, that's how we anticipate that the growth is going to be 50% to 53%.
It is still a relatively conservative estimate that we have right now, but we we're still kind of being conservative due to, even though the situation in the Middle East is kind of calming down the ceasefire. We don't know whether it's going to hold or not, but it seems like it's heading to the right direction, but we, there's still a lot of uncertainties that we that we're looking at. And then usually the fourth quarter is a slow quarter for us, especially in March, it's Ramadan and last year.
Last fiscal year in 2024, we spent a lot of money trying to catch up the production to ship out the products to our customers. So, we spent like close to a million dollars in overtime because in Ramadan, if you want people to work, because normally they will work a full shift or work like eight or nine hours, but in order for Ramadan, they don't want to work, so we have to motivate them to work and offer them over time.
This year we want to control our cost and even though our customers, we're going to work with our customers to really Plan out our production so that we don't incur too much overtime labour cost and still be able to meet our customers' delivery time. So that's why we forecast a lower fourth quarter, but it is still a pretty healthy growth from last year.

That makes perfect sense. If I could follow up on that, then, understanding that overtime issue as well as some of the costs incurred at the port, that $100,000 first of all, was that incurred in the third quarter, but really the larger question is how should we think about the SG&A costs going forward, is that sort of low $4 million a good run rate?

Gilbert Lee

Yeah, the low $4 million dollar would be a good one right. I mean, SG&A, a lot of it depends on the sales volume, the sales revenue. And we incur significant amount in the first quarter because we have to air freight some of the some of the shipments due to the delay of production because of the raw material containers didn't get into Jordan. If you remember the Red Sea crisis.
So, we're trying to control our cost as much as we could, but it is still higher than what it was before. But a low four would be a good estimate.

Understood perfect thank you.

Operator

Thank you very much. Your next question is coming from Igor Novgorodtsev of Lares Capital. Igor, your line is live.

Hello and thank you for taking my question. So, you mentioned the situation in January now with the ceasefire and much better situation in the Middle East has remarkably improved. Could you just break it down a little bit more in detail, especially in terms of the logistics of getting things through the Red Sea?
Are you getting them now through the Red Sea? And also, how this improved logistics, would impact your gross margins, which, if I recall correctly, were as high as 19%, during COVID. So maybe just not necessarily quantitative but at least quantitative.

Gilbert Lee

Well, we are getting containers through the Red Sea, before the Red Sea was blocked because of the blockage and but now we are getting our importing raw material containers through the Red Sea to Jordan, but we do have to pay slightly higher container shipment cost, but not as high as the first two quarters.
So, we are doing a very diligent job in controlling our costs. So, and that is reflected in the gross margin. And then on the export side, we had to pay, let's say $100,000 in the in the third quarter because of the port storage fee, because the containers that were stuck at the port for four weeks, so we incur additional cost in there, but now it is getting back to normal, so the exporting part of it.
It's going to be much improved in the, in this quarter, in the fourth quarter, as well as the first quarter of 2026. Does that answer your question?

Yeah, and maybe just not to push it too hard, but what would you consider your like normalized good gross margin for your like the [BS] Q2 and Q3?

Gilbert Lee

Q2 and Q3 of 2025?

Yeah, just in general, even if you don't provide the guidance, what kind of growth margins would you consider to be happy and you say this is my normalized, growth margins because you had them very high, during the COVID, obviously because there was a huge demand, and then there was an issue of oversupply so they fell drastically.
So now as a normalizing now what would be your like target gross margin where you would say, okay, this is a gross margin giving our competition and the market pricing that would be happy with.

Gilbert Lee

Well, we anticipate this fiscal year, the 2025, the year we will end up around 15% to 16%. And going forward, we still would try to target. Somewhere between 15% to 16% because let me tell you why, because we are we are bringing in a lot of new customers and new products on FOB basis and because of new customers, The margin at the beginning is usually not that good, because there's a lot of sampling, there's a lot of inefficiency, trying to learn and so.
When the volume is low, but the styles are many, it is hard to have a very efficient production. But once the volume gets up, gets ramped up, then we will be able to realize a better margin. So, we anticipate that 2026. We still want to play the gross margin in around 15% to 16%.

Okay. My other question is about your joint venture with Busana. How's it going? Could you just tell us a little bit more, details about it?

Gilbert Lee

Well, the Busana, joint venture, it is still, we're still working on that, and the growth is relatively flat, but that was because there were turmoil in the region last year or in the past 12 months, and some of the new buyers, new customers, people like Macy, like Brooks Brothers, they are kind of cautious. They send us test order, trial orders, but we finished it, and they are satisfied, but we're still waiting for them to really jump into the high-volume bulk orders.

I see. Does Busana make a lot of products and like traditional, textile manufacturing countries such as apparel manufacturing countries such as, Indonesia and Vietnam and Bangladesh which do have tariffs on US if US enacts reciprocal tariffs, or what do they, what do they, do you expect that they might consider moving some of their factories in the joint venture to Jordan? Is that a potential play?

So, I might, I'm Eric, I can ask you this question because Busana have a lot of customers. Okay, and dealing with different kinds of pricing and also different kind of stuff. They have manufacturing bases in Indonesia, also in in Africa, and also a joint venture in Jordan and Bangladesh also recently.
I think nine months ago, they started another joint venture in Bangladesh, but that's what doesn't affect us because usually the customer, okay, they would try to tailor make those higher FOB where you order, okay, which Buyers can enjoy more tariff savings. They will place the order to Jordan.
While for the low-end products, maybe they don't need too much duty savings, they will place in Bangladesh. So, for Busana, we are working with them like orders like from buyers like Hugo Boss, like Brooks Brothers. These are the high-end customers as high FOB orders.

Okay, thank you. That's interesting to know.

Thank you

I don't have any more questions thank you.

Operator

Thank you very much. Your next question is coming from Mike Distler of AMX Holdings. Mike, your line is live.

Yes, good day, gentlemen. How are you all doing? This question is for Gilbert, no disrespect, Sam, or Eric. I was just wondering if you anticipate that you would have to tap the credit markets to fund that longer-term, large-scale expansion plan that you're planning with the property you already have.

Gilbert Lee

We did consider helping the debt market, actually maybe 12 months ago we were talking to the World Bank and looking at maybe borrowing some money through the World Bank and we're right now we're open to any financing opportunities. Maybe we can go to the equity market.
And maybe we'll borrow some money, but we definitely need to raise some capital to support our expansion plan, especially the largest scale expansion. But right now, we haven't really decided which way to go. Maybe it's a combination of both.

Right, sounds prudent. I suspect, and you need not comment. I suspect that the Jordanian commissioner of Labor will be part of that plan based on the ownership responsibilities. And towards that, I know that you're maintaining your dividends been a fairly high priority. A since inception, since you went public, and I suspect it will remain so only because it provides a floor for the stock price, among other reasons.
So, in the grand scheme of things that really is important, but the reality of just figuring out the prudent way to approach the markets, the credit markets now for that long term build out sounds like you're on the right track. So, thank you very much for the update.

Gilbert Lee

Thank you.

Thank You. All right, yes, be well, guys.

Operator

Thank you very much. I will now hand back over to Sam as we have reached the end of our question-and-answer session over to you.

Lin Hung Choi

Okay, thank you, Jenny, and thanks to all of you for joining us today and for your continuous support. We look forward to speaking with you next quarter. Thank you very much.

Operator

Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Lin Hung Choi

Thank you very much.

Gilbert Lee

Thank you very much. Have a good day.