Lakeland Industries, Inc.

Good day and welcome to the Lakeland Industries Fiscal 2025 Second Quarter Financial Results Conference Call. All lines have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. During today's call, we will make statements relating to our goals and objectives for future operations, financial and business trends, business prospects, and management's expectations for future performance that constitute forward-looking statements under federal securities laws. Any such forward-looking statements reflect management expectations based upon currently available information and are not guarantees of future performance and involve certain risks and uncertainties that are more fully described in our SEC filings. Our actual results, performance, or achievements may differ materially from those expressed in or implied by such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call. On this call, we will also discuss financial measures derived from our financial statements that are not determined in accordance with U.S. GAAP, including adjusted EBITDA, excluding FX, and adjusted EBITDA excluding FX margin. A reconciliation of each of the non-GAAP measures discussed on this call to the most directly comparable GAAP measure is presented in our earnings release. At this time, I would like to introduce you to your host for this call, Lakeland Industries President, Chief Executive Officer, and Executive Chairman, Jim Jenkins. Mr. Jenkins, the floor is yours.

Thank you, operator. Good morning, everyone. Thank you for joining us today to discuss our fiscal 2025 second quarter results, which ended on July 31, 2024. We appreciate your continued interest in Lakeland Industries. I always want to begin our calls by thanking our customers and distributor partners worldwide for trusting us with your lives and safety. Our customers are heroes, and we never take that trust for granted. Finally, I want to thank our Lakeland team, members across the company for their continued commitment and enthusiasm to as we further delivered on our strategic initiatives this quarter. Lakeland continued to experience significant growth and change during this quarter, and I appreciate the hard work from our dedicated team as we continue to execute our growth strategies. As previously announced, we closed on the LHD acquisition in early July. LHD is a leading provider of firefighter turnout gear, accessories, and personal protective equipment, cleaning, repair, and maintenance, with an annual revenue of approximately $27 million USD. This strategic move enhances our global fire services offerings and footprint and continues our small, strategic, and quick SSQ growth strategy. LAC Group increases Lakeland's ability to serve firefighters in Germany and Australia, two of the largest fire markets in the world, and the Hong Kong region with an expanded range of high-quality and rescue gear, as well as care and maintenance services. LAC's product range includes structural, wildland, and industrial fire and rescue gear, technical rescue equipment, and stationware, and it complements Lake Lakeland's existing fire service offerings. LAC Care provides a holistic approach to protecting clothing maintenance, including laundry services repairs, a software app for tracking the progress of those services, and sample production. As the global focus on firefighter health and safety increases, this offering further protects firefighters from environmental contaminants and helps ensure the longevity and effectiveness of firefighting gear while also introducing an attractive recurring revenue stream that Lakeland plans to leverage and expand. Along with our Pacific Helmets and Jolly acquisitions, LHD allows Lakeland to offer our head-to-toe fire offering to a larger geographic audience. As we have discussed previously, this acquisition reflects our commitment to executing and accelerating the pace of our SSQ M&A strategy. We still have an attractive and robust SSQ acquisitions pipeline, and we will continue to search for opportunities that further position Lakeland to execute our growth strategies and invest strategically to broaden and diversify Lakeland's range of products and markets. I trust everyone has had the opportunity to review the press release and Q2 earnings deck we published last evening. I encourage you to follow along in the earnings presentation as Roger and I review our results. Our earnings presentation gives me the opportunity to introduce Lakeland's fire and safety. This exciting new corporate and brand identity reflects our evolution as a company and reinforces our dedication to provide comprehensive, innovative solutions for the first responder and worker safety sectors. Lakeland Fire and Safety will integrate our existing portfolio of outstanding brands, including Eagle, Pacific, Jolly, and LHD, as well as any future acquisition creating a consolidated safety solution for fire customers. Reviewing our performance, it's clear that while we saw significant revenue growth overall, we encountered some challenges in the second quarter that impacted our results. Nonetheless, we believe that our earnings shortfall for the quarter was a matter of timing and integration, both with our new North American industrial products market representative and newly acquired companies, and we remain confident in our full-year projections. While we remain very optimistic about our relationship with our new North American industrial product market representative, Lion Drive, the transition during the quarter of coverage for certain large North American channel partner accounts resulted in some slippage in Q2 orders. LineDrive continues to build pipeline opportunities with national accounts, and we believe these sales will accelerate in the second half of the year. Additionally, delays in the shipment of fire orders from Jolly and Eagle affected our second quarter revenue. We expect these substantial orders to ship in the third and fourth quarters. Pacific Helmets had a solid sales quarter as we continue integrating their products into Lakeland's sales channels. I'm pleased to report that LAC Germany has resumed manufacturing, and we remain very optimistic about their growth opportunities. Turnout gear production at LHD's German entity had flowed to a trickle due to a lack of liquidity under the previous ownership, and a multi-year backlog was created as a result. Beginning with and even leading up to our acquisition, suppliers resumed LHD credit terms and discounts based on Lakeland's financial strength. We have added new production capacity and are focused on working down the significant backlog by the end of our fiscal year. LHD's Australian operations, including its service business, remain strong. And we remain optimistic that we can leverage and replicate their outstanding service and care model in other parts of the world. We also recently learned that LAC Hong Kong procured a renewal with the Hong Kong Fire Department with committed contract revenue increasing from $3.5 million to $5.3 million U.S. from September 24 to September 25. Looking at our organic business, we were again very encouraged by the growth in our Latin American operations with a 63% increase of sales year over year. LATAM now represents close to 20% of Lakeland's total sales, and they continue to grow. Our outstanding LATAM team is continually identifying and capitalizing on new market opportunities, and we expect further growth in that region. Our LATAM team is having tremendous success growing our woven products. We are working to expand our fire services offering in LATAM. We expect to introduce new industrial products from the Lakeland portfolio into that region going forward. We've also recently put our Mexican sales operation under our LATAM management team, and we are optimistic that they can replicate their success in that country. Even so, our Q2 sales in Mexico were up 58% year over year. We also saw double-digit sales growth year over year in Canada, Asia, India, and the rest of the world. We are very excited about the new sales leadership we have put in place in Asia, and we are encouraged by growth we are seeing both in China and the new Asian markets outside of China. While our US sales were affected by the sales coverage transition that I discussed earlier, our European sales also remain soft in the quarter. We are taking concrete and immediate steps to improve our industrial sales offerings, selling efforts, and customer service in Europe. We see very good sales opportunities in Europe, and we are committed to returning that region to a growth trajectory. From a product perspective, our fire service business continues to grow with a 34% increase year over year. This solid performance was driven by our recent acquisitions and the increased demand in this segment. Our industrials product lines grew 2.4 million, or 10% over the same period last year, led by our woven products, particularly in LATAM, as mentioned earlier. Disposable products declined 2% year over year, and chemical product sales were flat, due primarily to the line drive transition and weakness in Europe, partially offset by growth in Asia, Canada, Mexico, and our rest of world markets. Disposables represented 32% of revenue for the quarter, while fire grew to 31% and chemicals increased to 20%. The remainder of our industrial products, including FRAR high-performance and high-vis, accounted for 17% of sales. Our FRAR high-performance products declined 7% year over year, and high-vis declined 23%. Before turning the call over to Roger, I want to take this opportunity to acknowledge the outstanding work of our two new sales executives and welcome a new member of the executive team. Barry Phillips, our Chief Revenue Officer, and Cameron Stokes, VP of Global Industrial Sales, have now been in place for two months, and they're having an immediate impact across our organization. Barry brings a wealth of experience in the fire services industry, having led sales, marketing, and product development across leading manufacturing and distribution companies, as well as serving on regulatory and advisory boards. Cameron Stokes is a highly accomplished industrial sales professional, having worked for 12 years in industrial sales leadership roles at Ansell, as well as other leading organizations. Both bring a passion for engaging the end-user customer and a commitment to grow and excellence. I'm also pleased to welcome Laurel Yartz to Lakeland's executive team as our new Chief Human Resources Officer. Laurel brings over 30 years of experience in global human resources leadership, primarily in Fortune 500 and private equity companies. Her extensive background includes senior strategic roles leading cultural and business transformation. As our CHRO, Laurel will be responsible for enhancing Lakeland's people strategy and fostering a culture focused on growth, innovation, flawless execution, customer satisfaction, and continuous improvement. Her proven track record of aligning talent to the operational, commercial, and functional vision of the business in the spirit of developing teams and driving revenue growth will be crucial as Lakeland continues to execute on its global fire services and industrial safety growth strategies. So to summarize, after a strong start in Q1 of fiscal 2025, we saw a slowdown in our organic sales in Q2, which impacted our profitability. We remain confident in our growth strategy and expanding market opportunities in fire services and industrial safety products. Our commitment remains unwavering, and I'm excited about the remainder of this fiscal year. So with that, I'd like to pass it over to Roger to cover our financial results and provide an outlook for the rest of the year.

Thanks, Jim, and hello, everyone.