Julong Holding Limited (NASDAQ: JLHL) reported a divergence between top-line growth and profitability in its unaudited financial results for the six months ended March 31, 2026. The company logged US$18.019 million in revenue, up 21.6% from US$14.08 million in the same period of fiscal year 2025. However, net income remained largely flat, increasing by just 0.8% to US$1.69 million, as margin compression offset the revenue expansion.

The growth was primarily driven by its core engineering solutions business, where contracts under execution rose to 322 from 226 in the prior year period. Revenue from engineering solutions for intelligent projects increased by 22.9% to US$17.435 million. Additionally, the company saw early-stage momentum in the sale of equipment and materials for intelligent systems, with revenue climbing to US$50 thousand from US$1 thousand in the same period last year.

Financial Highlights

Margin Pressure and Operating Expenses

While gross profit increased by 16.4% to US$2.820 million, the gross margin contracted to 15.7% from 16.4% in the prior year, primarily due to changes in revenue mix. Cost of revenues rose by 22.7% to US$15.199 million, outpacing the revenue growth rate.

Operating expenses surged by 91.9% to US$864 thousand (RMB5.96 million), driven mainly by an increase in service fees of RMB2.06 million. This sharp rise in operating costs constrained operating income, which fell slightly to US$1.956 million from US$1.974 million in the same period last year.

Balance Sheet and Cash Flow Signals

As of March 31, 2026, Julong Holding held cash and cash equivalents of US$6.265 million (RMB43.2 million), down from US$9.02 million as of September 30, 2025. This decline reflects significant cash outflows from operations, with net cash used in operating activities totaling US$2.585 million for the six-month period.

Key balance sheet movements include:

• Unbilled receivables increased to US$44.05 million from US$35.10 million, indicating growing work-in-progress or delayed billing cycles.
• Accounts receivable decreased to US$1.18 million from US$2.15 million, suggesting improved collection on billed amounts despite the rise in unbilled items.
• Total current liabilities rose to US$46.16 million from US$39.20 million, partly due to higher accrued expenses.

What the Numbers Show

The data reveals a clear decoupling of revenue growth and profit expansion. While the company successfully scaled its project pipeline (contracts up 42%), the incremental revenue did not yield proportional net income growth. The 91.9% surge in operating expenses, particularly service fees, absorbed most of the gross profit gain. Furthermore, the contraction in gross margin suggests that the new mix of projects may carry lower inherent profitability or higher direct costs compared to the prior year period. Investors should monitor whether the company can control operating leverage as it scales its international footprint and domestic execution capacity.

Julong Holding Limited has appointed Mr. Shengshan Sun as an independent director to its board, effective June 9, 2026. The appointment strengthens the company's governance structure as Mr. Sun also joins the audit committee, the nominating and corporate governance committee, and the compensation committee. The changes follow the resignation of Ms. Jinying Wang from the audit committee, which was also effective June 9, 2026. Ms. Wang's resignation was not related to any disagreement with the company regarding its operations, policies, or practices.

Mr. Sun brings extensive experience in law and academia to the Board. He currently serves as the standing director and head of the academics department at the Dalian Criminal Law Research Association, positions he has held since October 2020. Previously, he served as an associate professor and head of the law department at Dalian University from September 1991 to October 2020. His career also includes roles at Northeastern University and memberships in various legal research associations.

Board Composition

Following these changes, the Board of Julong Holding Limited is comprised of five members. The composition includes two executive directors and three independent directors.

Committee Structure

The company has also updated the membership of its key board committees. All three committees now include the newly appointed independent director.

Audit Committee

• Members: Ms. Yuling Bai, Mr. Zhaobo Liu, Mr. Shengshan Sun
• Chair: Ms. Yuling Bai

Nominating and Corporate Governance Committee

• Members: Ms. Yuling Bai, Mr. Zhaobo Liu, Mr. Shengshan Sun
• Chair: Mr. Zhaobo Liu

Compensation Committee

• Members: Ms. Yuling Bai, Mr. Zhaobo Liu, Mr. Shengshan Sun
• Chair: Ms. Yuling Bai

Mr. Jiaqi Hu, Chairman and Chief Executive Officer of Julong, expressed gratitude to Ms. Wang for her service and welcomed Mr. Sun, highlighting his legal and academic background as a valuable addition to the board's governance expertise.