Q2 2025 Lakeland Industries Inc Earnings Call
Speaker Change: 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.
Operator: 2nd 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 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 that 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.
Speaker Change: 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.
Speaker Change: Any such forward-looking statements reflect management expectations based upon currently available information, they are not guarantees of future performance and involves certain risks and uncertainties that are morefully described in our SEC filings.
Speaker Change: Our actual results performance or achievements may differ materially from those expressed in or implied by such forward-looking statements.
Operator: We undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call.
Speaker Change: We undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call.
Operator: On this call, we will also discuss financial measures derived from our financial statements that are not determined in accordance with US GAAP, including adjusted EBDA, excluding FX, and adjusted EBDA, 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.
Speaker Change: On this call, we will also discuss financial measures derived from our financial statements that are not determined in accordance with US gap, including adjusted EBDA, excluding FX and adjusted EBDA, excluding FX margin.
Speaker Change: A reconciliation of each of the non-gap measures discussed on this call to the most directly comparable gap measure is presented in our earnings release.
Operator: 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.
Speaker Change: 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's yours. Thank you, operator. Good morning, everyone.
Jim Jenkins: Thank you, operator.
Jim Jenkins: 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, our 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 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.
Speaker Change: 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 and link on industries.
Speaker Change: 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.
Speaker Change: Finally, I want to thank our Lakeland team members across the company for their continued commitment and enthusiasm 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.
Jim Jenkins: 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 SFQ growth strategy. LHD 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.
Speaker Change: It's previously announced we closed on the LAC acquisition in early July.
Speaker Change: LAC 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.
Speaker Change: USD. This strategic move in half is our global fire services offerings and footprint. And continues our small strategic and quick SFQ growth strategy.
Speaker Change: L.A. Seed Group increases the lake visibility to serve firefighters in Germany and Australia, two of the largest fire markets in the world. In the Hong Kong region, we've expanded range of high quality and rescue gear as well as care and maintenance services.
Jim Jenkins: LHD's product ranges include structural wildland and industrial fire and rescue gear, technical rescue equipment, and stationware and complements Lake Lakeland's existing fire service offerings. LHD Care provides a holistic approach to protecting clothing maintenance, including laundry services, repairs, a software app attracting 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 Elements and Jolly Acquisitions, LHD allows Lakeland to offer our head-to-toe fire offering to a larger geographic audience.
Speaker Change: LAC's product range includes structural wild land and industrial fire and rescue gear, technical rescue equipment and stationware, and a compliments Lake Lakeland's existing fire service offerings.
Speaker Change: L.A. ski 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.
Speaker Change: As the global focus on firefighter helping 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 plants the leverage in expand.
Speaker Change: One with our Pacific Helmets and Jolly Acquisitions, LHC allows Lakeland to offer our head to toe, fire offering, to 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.
Jim Jenkins: 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 who has had the opportunity to review the press release and Q2 earnings deck we published last evening. I encourage you to follow along in earning's presentation as Roger and I review our results.
Speaker Change: We still have an attractive and robust SFQ acquisitions pipeline and we will continue to search for opportunities that further position Lakeland to execute our gross strategies and invest strategically to broaden and diversify Lakeland's range of products and markets.
Speaker Change: 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 earning presentation as Roger and I review our results. Our earnings presentation gives me the opportunity to introduce Lakeland Fire and Safety.
Jim Jenkins: Our earnings presentation gives me the opportunity to introduce Lakeland 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 about standing 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 is clear that while we saw significant revenue growth overall, we encountered some challenges in the second quarter that impacted our results.
Speaker Change: The exciting new corporate and brand identities reflects our evolution as a company and reinforces our dedication to provide comprehensive innovative solutions for the first responder and workers safety sectors.
Speaker Change: Lakeland Fire and Safety will integrate our existing portfolio of outstanding brands, including Eagle, Pacific, Jolly, and LAC, as well as any future acquisition creating a consolidated safety solution for fire customers.
Speaker Change: 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.
Jim Jenkins: 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, Line Drive, the transition during the quarter of coverage for certain large North American channel partner accounts resulted in some slippage in Q2 orders. Line Drive continues to build pipeline opportunities with national accounts, and we believe these sales will accelerate in the second half of the year.
Speaker Change: Well, 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 the slippage in Q2 orders.
Speaker Change: Lines Ride continues to build pipeline opportunities with national accounts and we believe these sales will accelerate in a second half of the year. Additionally, delays in the shipment of fire orders from Jolly and Eagle affected our second quarter-revening. We expect these substantial orders to ship in the third and fourth quarters.
Jim Jenkins: 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 in the Lakeland Sucales channels. I'm pleased for a report that LAC Germany has resumed manufacturing, and we remain very optimistic about their growth opportunities. Turn out to your production at LAC'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.
Speaker Change: Pacific helmet had a solid sales quarter as we continued integrating their products in the Lakeland and Succeeds channels. I'm pleased to report that L.A.C. Germany has resumed manufacturing and we remain very optimistic about their growth opportunities.
Speaker Change: Turn out your production at LAC's German entity, and slow 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 LAC credit terms in discounts based on Lakeland's financial strength.
Jim Jenkins: Beginning with an even leading up to our acquisitions, suppliers resumed LAC credit terms and discounts based on Lakeland's financial strength. We have added new production capacity and are focused on working down on the significant backlogs by the end of our fiscal year. LHBs are Australian operations, including its service business, remain strong and we remain optimistic that we can leverage and replicate their outstanding service and care mile in other parts of the world. We also recently learned that LAC Hong Kong secured a renewal with the Hong Kong Fire Department, with committed contract revenue increasing from 3.5 million to 5.3 million US from September 24 to September 25.
Speaker Change: We have added new production capacity and our focus on working down on the significant backlog by the end of our fiscal year.
Speaker Change: LHD's Australian operations, including its service business, remains strong. And we remain optimistic that we can leverage and replicate their outstanding service and care model in other parts of the world.
Speaker Change: We also recently learned that LAC Hong Kong, which was a new Hong Kong fire department, with committed contact revenue increasing from 3.5 million to 5.3 million US from September 24 to September 25.
Jim Jenkins: We are 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 offer offering in LATAM. We expect to introduce new industrial products from the Lakeland portfolio into that region going forward.
Speaker Change: Looking at our organic business, we were again very encouraged by the growth in our Latin American operations.
Speaker Change: with a 63% increase of sales year over year. Latteham now represents close to 20% of lakeland's total sales and they continue to grow. Our outstanding Latteham team is continually identifying and capitalizing on new market opportunities and we expect further growth in that region.
Speaker Change: Our Latin team is having tremendous success going on our woven products. We are working to expand our fire services offer offering in Latin. We expect to introduce new industrial products from the Lakeland Portfolio into that region going forward.
Jim Jenkins: We've also recently put our Mexican sales operations under our LATAM management team, and we are optimistic that they can replicate their success in that country. Even sell our Q2 sales in Mexico up 58% year over year. We also saw double-digit sales growth year over year in Canada, Asia, India, and 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 the 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 remained soft in the quarter.
Speaker Change: We've also recently put our Mexican sales operation under our Latin management team and we are optimistic that they can replicate their success in that country.
Speaker Change: Even so, our Q2 sales in Mexico up 58% year over year. We also saw double-digit sales growth year over year in Canada, Asia, India, and rest in the world.
Speaker Change: 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.
Speaker Change: Well, our US sales were affected by the sales coverage transition that I discussed earlier. Our European sales also made soft in the quarter. We are taking time-create and immediate steps to improve our industrial sales offerings, selling efforts and customer service in Europe.
Jim Jenkins: 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 projectory.
Speaker Change: We see very good sales opportunities in Europe, and we are committed to returning that region to a growth projectory.
Jim Jenkins: 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 industrial 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. The disposable products decline 2% year over year, and chemical products sales reflect, due primarily to the line drive transition and weakness in Europe, partially offset by growth in Asia, Canada, Mexico, and our rest of the world markets. Disposables represented 32% of the revenue for the quarter, while fire grew to 31%, and chemicals increased to 20%.
Speaker Change: 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 increased demand in this segment.
Speaker Change: Our industrial product lines grew 2.4 million, or 10% over the same period last year.
Speaker Change: Led by our woven products, particularly in the past year, as mentioned earlier. The disposable products decline 2% year over year, and chemical products sales are flat, due primarily to the line-dried transition, and weakness in your partially offset by growth in Asia, Canada, Mexico, and our rest of world markets.
Speaker Change: is responsible to represent a 32% of the revenues for the quarter, while fire grew to 31% and chemicals increased to 20%. The remainder of our industrial products, including FRAR, AR, high performance and high-biz accounts at for 17% of sales.
Jim Jenkins: The remainder of our industrial products including FRAR high performance and high-biz accounts for 17% of sales. Our FRAR high performance products decline 7% year over year, and high-biz decline 23%.
Speaker Change: RFR AR High Performance Products, Decline 7% year over year, and High Days Decline 23%.
Jim Jenkins: 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 are having 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 goals and ANSEL, as well as other leading organizations.
Speaker Change: 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.
Speaker Change: Barry Phillips, our Chief Revenue Officer and Cameron Stokes, VP of Global Industrial Fails.
Barry Phillips: Now I'm going to place the two months, and they're having 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.
Speaker Change: And we're so excited to hear the highly recommend highly accomplished industrial sales professional, having worked for 12 years in industrial sales leadership goals and an answer as well as other leading organizations.
Jim Jenkins: Both bring a passion for engaging the end user customer and a commitment to grow and excellence.
Speaker Change: Both bring a passing for engaging the end user customer and a commitment to grow and excellence. I'm also pleased to welcome Laurel Yarks, the Lakeland 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.
Jim Jenkins: I'm also pleased to welcome Laurel Yards, the Lakeland 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 cup. Productions. Gerard's 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 a mining talent to the operational, commercial, and functional vision of the business in the spirit of developing teens and driving revenue growth will be crucial as Lakeland continues to execute on its global file fire services and industrial safety growth strategies.
Speaker Change: Kurt Spencer background includes senior strategic roles leading cultural and business transformation.
Speaker Change: and ZRCHRO, Laurel will be responsible for enhancing Lakeland's people's strategy.
Speaker Change: and fostering a culture focused on growth, innovation, flawless execution, customer satisfaction and continuous improvement.
Speaker Change: Her proven track record of a mining talent to the operational commercial and functional vision of the business in the spirit of developing teams and driving revenue roller will be crucial as Lakeland continues to execute on its global file fire services and industrial safety growth strategies.
Jim Jenkins: So to summarize, after a strong start in Q1 of physical 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 the fiscal year.
Speaker Change: So, to summarize, after a strong start in Q1 of fiscal 2025, we saw a slow down in our organic sales issue too, which impacted our profitability. We remain confident in our growth strategy and expanding market opportunities and fire services on industrial safety products.
Jim Jenkins: 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.
Speaker Change: Our commitment remains unwavering, and I'm excited about the remainder of the statistical use. So with that, I'd like to pass over to Roger to cover our financial results and provide an outlook for the rest of the year.
Roger Shannon: Thanks, Jim, and hello, everyone. Looking at our second quarter of 2025, Lakeland delivered sales of $38.5 million, compared to $33.1 million for the second quarter last year. Organic revenue comprised 85% of our total sales, and 15% of our Q2 revenue came from our recent acquisitions, including one month of sales from LHD Group. On a trailing 12-month basis, Lakeland's TTM revenue as of Q2 of fiscal 2025 is $137.7 million. This is an increase of $18.6 million or 16% versus the Q2 of fiscal 2024 TTM revenue total of $19.2 million. Year-over-year organic sales decreased by $300,000 in Q2, impacted by slightly lower sales in the U.S.
Speaker Change: Thanks for watching!
Speaker Change: James.
Roger: Thanks, Jim, until the day everyone.
Roger: Looking at our second quarter.
Speaker Change: But 2025, Lakeland delivered sales of $38.5 million compared to $33.1 million for the second quarter last year.
Speaker Change: Organic revenue comprised 85% of our total sales, and 15% of our Q2 revenue came from our recent acquisitions, including one month of sales from LAXD Group.
Speaker Change: On a trailing 12 month basis, lengthens GTM revenue as of Q2 of fiscal 2025 is $137.7 million.
Speaker Change: This is an increase of $18.6 million, or 16% versus the Q2 of fiscal 2024, TTM revenue total of $19.2 million.
Speaker Change: You're over year, organic sales decreased by $300,000 in Q2.
Roger Shannon: and ongoing weakness in European markets, offset by continued robust growth in Latin America, which increased 63% compared to the second fiscal quarter of Fiscal Year 2024. We were also encouraged to see double-digit growth in Canada, Mexico, Asia, India, and our Rest of World markets. Lakeland's domestic sales were $12.4 million, or 32% of total revenues, and international sales were $26.1 million, or 68% of total revenues. This compares with domestic sales of $15.2 million, or 46% of the total, and international sales of $17.8 million, or 54% of total in the second quarter of fiscal 2024. Regarding product mix for the second quarter, our fire services business grew by $3 million, or 34% versus the same period last year, as we start to see gains from our head-to-toe strategy.
Speaker Change: Impacted by slightly lower sales in the U.S. and ongoing weakness in European markets, offset by continued robust growth in Latin America, which increased 63% compared the second fiscal quarter of fiscal year 2024.
Speaker Change: We were also encouraged to see double-digit growth in Canada, Mexico, Asia, India, and our rest of the world markets.
Speaker Change: Elections domestic sales for $12.4 million or $32% of total revenues and international sales for $26.1 million or $68% of total revenues.
Speaker Change: This compares with domestic sales of 15.2 million dollars or 46% of the total, and international sales of 17.8 million dollars or 54% of the total, in the second quarter of fiscal 2024.
Speaker Change: We're guarding product mix for the second quarter. Our fire service is business grew by $3 million or 34% versus the same period last year, as we start to see gains from our head to toe strategy.
Roger Shannon: Our industrial product lines grew $2.4 million, or 10%, over the same period last year, led by our woven products, particularly in Latin America. The disposable decline 2% year-over-year in chemical products were flat due primarily to the line drive transition, as Jim discussed.
Speaker Change: Our industrial product lines grew 2.4 million dollars or 10% over the same period last year. Led by our woven products, particularly in Latin America.
Speaker Change: The disposable decline 2% year over year in chemical products were flat due primarily to the overdraft transition is Jim discussed.
Roger Shannon: West. We are seeing significant growth in the woven product category, driven by outstanding performances in Latin America. The spokespots represented 32% of revenue for the quarter, while fire grew to 31%, and chemicals increased to 20% of our revenue. The remainder of our industrial products, including FRAR half-performance and Havis, accounted for the remaining 17% of sales. Recorded gross profit was $15.2 million for the second quarter of fiscal year 2025, an increase of $1 million or 7% compared to $14.2 million in the second quarter of fiscal 2024. Our recorded gross profit is a percentage of net sales, with 39.6% for the second quarter of fiscal 2025, compared to 42.9% for the second quarter of fiscal 2024.
Speaker Change: We are seeing significant growth in the woven product category driven by outstanding performances in Latin America.
Speaker Change: Disposables represented 32% of revenue for the quarter, while fire group to 31% in chemicals increased to 20% of our revenue.
Speaker Change: The remainder of our industrial products, including FRA, R.A.R. Performance in Haviz, accounted for the remaining 17% of sales.
Speaker Change: Reported gross profit was $15.2 million for the second quarter of fiscal year 2025, and increased at $1 million or $7 per cent, compared to $14.2 million in the second quarter of fiscal 2024.
Speaker Change: Our recording grows profit is a percentage of net sales with 39.6% for the second quarter of fiscal 2025. Compared to 42.9% for the second quarter of fiscal 2024.
Roger Shannon: Gross profit was negatively affected by 3.8% from the integration of newly acquired companies, including a 0.9% impact from the amortization of acquired assets relating to the purchase accounting step-up of acquired inventory at Jolly and LHD, and by 3.4% due to the impact of profit in the inventory, partially offset by higher organic gross profit, as we show in slide 8. While our operating expenses increased to $16.8 million for the quarter, $2.4 million of the increase was SG&A from our newly acquired companies, and $2.6 million of the increase was due to acquisition-related expenses, non-cash expenses, including higher depreciation and amortization, from purchase accounting for acquired companies, non-recurring expenses, including restructuring, and Argentina-related FX expenses.
Speaker Change: Rose Profit was negatively affected by 3.8% from the integration of newly acquired companies.
Speaker Change: Including a point 9% impact from the amortization of acquired assets.
Speaker Change: Relating to the purchasing step-up to required inventory at Jolly and LHD. And by 3.4% due to the impact of profit in the inventory, partially offset by higher organic gross profit, as we show in slide 8.
Speaker Change: While our operating expenses increased to $16.8 million for the quarter, 2.4 million of the increase was SGA from our newly acquired companies, and 2.6 million dollars of the increase was due to acquisition-related expenses.
Speaker Change: Non-Cash expenses, including higher depreciation and amortization from purchase accounting for acquired companies.
Speaker Change: Non-recurrenting expenses, including restructuring, and Argentina-related effects expenses.
Roger Shannon: The increase in organic SG&A operating expenses was due primarily to professional fees.
Speaker Change: The increase in organic SG&A operating expenses was due primarily to professional fees.
Roger Shannon: Lately reported an operating loss of $1.6 million for the second quarter of fiscal 2024. Operating margins were negative 4.1% for the second fiscal quarter, down from 11.3% for the second fiscal quarter of last year. The decrease in operating income is due to the previously mentioned margin issues and the increases in operating expenses. Tax impact for the quarter was a benefit of $420,000, resulting in an effective tax rate of 23%. Lately reported a net loss of $1.4 million, or 19 cents per basic and diluted share, compared to net income of $2.5 million, or 33 cents per basic share and 32 cents per diluted share last year.
Lakeston: Lakeston reported an operating loss of $1.6 million for the same quarter fiscal year 2025. Compared to an operating profit of $3.7 million for the same quarter fiscal 2024.
Lakeston: Operating margins from negative 4.1% to the second fiscal quarter, down from 11.3% to the second fiscal quarter of last year.
Lakeston: The decrease in operating income is due the previously mentioned margin issues and the increases in operating expenses.
Lakeston: Tax Impact for the corner was a benefit of $420,000 resulting in an effective tax rate of 23%.
Speaker Change: Blakely reported a net loss of $1.4 million or 19 cents per basic and diluted chair. Compared to net income of $2.5 million or 33 cents per basic chair and 32 cents per diluted chair last year.
Roger Shannon: Adjusted EBITDAI excluding FX for the second quarter of fiscal 2025 was $2.7 million for an adjusted EBITDAI excluding FX margin of 6.9%. This compares to $4.7 million or a margin of 14.3% for the second quarter of fiscal 2024.
Speaker Change: A just to dividize excluding FX for the second quarter of fiscal 2025 was $2.7 million.
Speaker Change: for an ingestative of dogs, including FX Margin, is 6.9%.
Speaker Change: This compares to $4.7 million or a margin of $14.3% to the same port of fiscal 2024.
Roger Shannon: River. As shown on slide 8, the decrease in adjusted EBITDA, excluding FX, was driven by the previous we mentioned profit in any inventory. Our manufacturing costs associated with the inventory bill increased SG&A. Adjusted EBITDA from our acquisitions were lower than our expectations due to slipages. What are expected to improve in the second half of the year? Also, as we explained in our earnings press release, the profit in ending inventory that affected our gross profit and gross margins in the quarter is expected to reverse and be a benefit in the second half of the year once that inventory is shipped.
Speaker Change: the Journal of Flight 8, the decrease in adjusted e-vidite, excluding effects.
Speaker Change: was driven by the previously mentioned profit in any inventory. Our manufacturing costs associated with the inventory build and increased SGA.
Speaker Change: Adjusted even though, for more acquisitions, we're lower than our expectations to the slipages, slipages, what are expected to improve in the second half of the year.
Speaker Change: Also, as we explained in our earnings press release.
Speaker Change: The prophet and ending inventory that affected our gross profit and gross margins in the quarter is expected to reverse and be a benefit in the second half of year once that inventory is shipped.
Roger Shannon: On a trailing 12-month basis, Lakeland's TTM adjusted EBITDA, excluding the impacts of FX, as of Q2 of fiscal 2025, is $14.5 million. This is an increase of $1.3 million, or 10% versus the Q2 FY24 TTM adjusted EBITDA, excluding FX, which totaled $13.2 million.
Speaker Change: On a trading 12-month basis, Lincoln's TTM ingested even though excluding the impacts of FX as of Q2 of fiscal 2025 is $14.5 million.
Speaker Change: This is an increase of $1.3 million or 10% versus the Q2 FY2024 TTM adjusted to the die-sitting effects.
Roger Shannon: Now turning to the balance sheet. Lakeland ended the quarter with cash and cash equivalents of approximately $24.9 million, and long-term debt was $29.5 million. This compares to $28.4 million in cash and $13 million in long-term debt as of April 30, 2024. The decreasing cash was due primarily to debt repayments during the quarter, and the net increase in our long-term debt was mainly related to the acquisition of LHD Group in July, partially offset our repayments on our credit facility. At the end of Q2, inventory was $67.2 million, up from $56.1 million at the end of Q1 FY25.
Speaker Change: which total 13.2 million dollars.
Speaker Change: Now turning to the ballachie.
Speaker Change: Lakeland into the quarter with cash and cash and privilege of approximately $24.9 million. And long-term bet was $29.5 million.
Speaker Change: This compares to $28.4 million in cash and $13 million in long-term debt as of April 30, 2024.
Speaker Change: The decreasing cash was due primarily to debt repayments during the quarter.
Speaker Change: and the net increase in our long-term debt was mainly related to the acquisition of LXD Group in July, partially offset having payments on our credit facility.
Speaker Change: at the end of Q2, inventory was $67.2 million, up from $56.1 million at the end of Q1, FY25.
Roger Shannon: Primarily due to LHD, Jolly, Eagle, and organic sales that are expected to ship in the second half of this current fiscal year. Year over year, we saw a reduction in our organic inventory at $5 million versus the quarter-ended July 31, 2023. Capital expenditures for the three months ending July 31, 2024, were $600,000. We still expect FY25 capital expenditures to be in the range of $2 to $3 million as we develop additional in-house fire service, manufacturing capacity, and replace existing equipment in the ordinary course of operations. The monitoring expansion, which we discussed last quarter, remains on pause as we continue to assess whether related damage to our least building.
Speaker Change: primarily due to LHD Jolly Eagle and organic sales that are expected to shift in the second half of this current fiscal year.
Roberson: Roberson. You're over year. We saw a reduction in our organic inventory of $5 million. First is the court-rendered July 31, 2023.
Roberson: Capital expenditures for the three months in July 31, 2024 were $600,000.
Roberson: We still expect FWI-25 FWI expenditure being the range of $2 to $3 million as we develop additional in-house fire service, manufacturing capacity and replace existing equipment in the ordinary course of operations.
Roberson: The Monterey expansion, which we discussed last quarter, remains on pause as we continue to assess whether related damage to our lease building.
Roger Shannon: Looking ahead to the rest of Fiscal 2025. Based on our existing backlog and our outlook for the remainder of the year, we are maintaining guidance for our 2025 fiscal year. We've noticed that these expectations include the announced Jolly Boots, Pacific Elements, and LHD Group acquisitions. We remain confident in our global sales platforms and earning ability for the second half of the year, and we are reaffirming expectations for fiscal year 2025 revenue in the range of $160 to $177 million. dollars. Additionally, we reaffirm our expectations for FY25 adjusted EBITDA, excluding FX, to be between $18 million and $21.5 million.
Roberson: Looking ahead to the rest of the school in 2025.
Roberson: Based on our existing backlog, in our outlook for the remainder of the year, we are maintaining guidance for our 25 fiscal year.
Speaker Change: We know that these expectations include the announced Jolly Boots, Pacific Helmets, and LXD group acquisitions.
Speaker Change: We remain confident in our global sales platforms and earning ability for the second half of the year and we are reaffirming expectations for fiscal year 2025 revenue in the range of 160 to $170 million.
Operator: 2nd 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 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 that are not guarantees of future performance and involves certain risks and uncertainties that are more fully described in our SEC filings.
Speaker Change: Additionally, we re-affirm our expectations for FY25 and just for the EBITDA excluding ethics.
Speaker Change: to be between $18 million in 21.5 million dollars.
Jim Jenkins: With that overview, I would like to turn the call back over to Jim before we start taking questions. Thank you, Roger. I'll conclude by saying that our strategy and focus has not changed. Prospects for both our industrial and our businesses are bright. The value proposition between these two business models continues to be unique and resonates in the market. We continue to expect high single-digit organic growth, and the sales pipeline continues to strengthen. We expect the impact of the timing of our sales will reflect stronger second half sales and growth profit margins. We're making progress on our operational improvements and expect to see productivity improvements in the third quarter.
Speaker Change: with that overview. I would like to turn the call back over to Jim before we start taking questions.
Roger: Thank you, Roger
Jim Jenkins: I'll conclude by saying that our strategy in focus has not changed.
Jim Jenkins: Crossfix for both our industrial and fire businesses are bright.
Jim Jenkins: The value proposition between these two business models continues to be unique and resonates in the market.
Speaker Change: We continue to expect high single digits organic growth and the sales pipeline continues to strengthen.
Operator: 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 US gap including adjusted EBITDA, excluding FX and adjusted EBITDA, excluding FX margin.
Speaker Change: We expect impact of the timing of our sales, we reflect stronger second half sales in gross profit margins.
Speaker Change: We're making progress on our operational improvements and expect to see productivity improvements in the third quarter.
Jim Jenkins: Our operations team is also focused on productivity improvements in the short term and parallel to our longer term multi-year effort across the organization. We still believe and expect significant margin leverage as operational initiatives progress and our period-ending inventory is sold off. We continue to work on improving the effectiveness and efficiency in our processes, databases, and systems as we look to eliminate redundancy and improve our analytics. Over the longer term, we expect to be even more competitive to take market share and improve our scalability, predictability, and profitability. In other words, we plan to drive a better business model.
Speaker Change: Our operations team is also focused on putty-kiving improvements in the short-term and parallel to our longer-term multi-year effort across your organization.
Speaker Change: We still believe an expect significant margin leverage as operational initiatives progress in our period ending inventory is sold off.
Speaker Change: We continue to work on improving the effectiveness and efficiency in our processes, databases, and systems as we look to eliminate the redundancy and improve our analytics.
Speaker: A reconciliation of each of the non-GAP measures discussed on this call to the most directly comparable gap measure is presented in our earnings release.
Speaker Change: Over the longer term, we've expected to be even more competitive to take market share in a pre-work scalability, predictability and profitability. In other words, we plan to drive a better business model.
Jim Jenkins: 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.
Jim Jenkins: Acquisitions remain an integral part of our growth plan, and we expect to continue growing our M&A pipeline and methodically pursuing our SSQ M&A strategy.
Speaker Change: Acquisitions remain an integral part of our road plan, and we expect to continue growing our M&A pipeline and methodically pursuing our SSQ M&A strategy.
Jim Jenkins: 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 as we further delivered on our strategic initiatives this quarter.
Operator: With that, we will now open the call for questions, operators. Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.
Speaker Change: with that we will now open the call for questions operator.
Speaker Change: Certainly, at this time, we will be conducting a question and answer session.
Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using Speak Requipment, and maybe necessary to pick up your handset before pressing the star keys, one moment please while we pull for questions.
Jim Jenkins: 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 SFQ growth strategy.
Jerry Sweeney: Your first question for today is from Jerry Sweeney with Roast Capital. Good morning, afternoon, evening. That's for where you guys are, but thanks for telling us all, Jim and Roger.
Speaker Change: [inaudible]
Speaker Change: Here's your first question for today is from Jerry Swinney with Ross Capital.
Speaker Change: Good morning, afternoon, evening, that's where you guys are, but thanks for taking a roll. Jim and Roger. Thank you.
Roger Shannon: I want to start on the revenue side. Obviously, it sounds as though we'll just say core-based revenues doing, we don't really well, as you said, high single digits going forward, but it also sounds like some of this impact on the revenue mess came from the, I call it line drive friction, as you sort of transition into that relationship. Is there any way you can sort of segment out how much revenue was impacted by the transition to some of the sales over the line drive?
Jerry Swinney: I want to start on the revenue side. Obviously, it sounds as though we'll just say core-based revenues doing reasonably well as you said high single digits going forward. But it also sounds like some of this impact on the revenue myth came from the, I'll call it line drive.
Jim Jenkins: LHD group increases Lakeland's ability to serve firefighters in Germany and Australia to 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. LHD's product ranges include structural wildland and industrial fire and rescue gear, technical rescue equipment and stationware and compliments Lakeland's existing fire service offerings. LHD care provides a holistic approach to protecting clothing maintenance, including laundry services repairs, a software app attracting the progress of those services and sample production.
Speaker Change: Fraction as you sort of transition into that relationship. Is there any way you can sort of segment out how much revenue was impacted by the transition to some of the sales over to line drive?
Roger Shannon: I'm going to give that one to Roger. Yeah, Jerry, we did the first quarter end review with line drive go methodically account by account looking, you know, so we know exactly, you know, which counts were... Unchanged in which were affected. I can't get into an account by account basis. But we did have the appropriate people in the call and looked at the individual ones and kind of know how that unfolded. You know, I guess it's not surprising, you know, when you have, you know, that 33 or so large national accounts transition and we had a team on our side that was now redeploying more toward in user engagement in the fly drive reaching on headquarters team, you know, starts to take over.
Speaker Change: I'm going to give that one to Roger
Roger: Yeah, we, Jerry, we did, as we did the first quarter in review with line drive, go and then, logically, account by account, looking, you know, so we know exactly, you know, which counts were,
Jim Jenkins: 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 remedy screen that Lakeland plans to leverage and expand. Along with our Pacific Elements 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.
Speaker Change: Unchanged and which were affected. I'm not sure I can't get into an account-based as sure. But we did have the appropriate people in the call and looked at the individual ones. You know, kind of know them.
Speaker Change: and the hell bad unfolded.
Speaker Change: I guess it's not surprising when you have.
Speaker Change: You know, that's 33 years old, Lawrence National Accounts transition and we had a...
Speaker Change: A team on our side that you was now redeploying more toward in user engagement in the blind drive reaching on headquarters team you know starts to take over that there would be some friction in that and that is you know that's certainly what we saw.
Jim Jenkins: 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 who has had the opportunity to review the press release and Q2 earnings deck we published last evening. I encourage you to follow along in earning's presentation as Roger and I review our results.
Roger Shannon: That there would be some friction in that, and that is, you know, that's certainly what we saw. You know, as we look at the USA, sales USA operations, you know, we were down about 2.8 million year over year for Q2. So, you know, so we think, you know, we think that is the bulk of it having to do with, you know, with that transition with that friction. Of course, there, you know, there are other aspects; you know, the timing of oil and gas turnaround is unpredictable. Sometimes it's a big headwind. Sometimes it can be a tailwind.
Speaker Change: You know, as we look at the USA Stales, USA Operations.
Speaker Change: You know, we were down about 2.8 million year over year for Q2.
Jim Jenkins: Our earnings presentation gives me the opportunity to introduce Lakeland Fire and Safety. This exciting new corporate and brand identity reflects our evolutionary 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 about standing brands including Eagle, Pacific, Jolly, and LHD, as well as any future acquisition creating a consolidated safety solution for fire customers.
Speaker Change: So, you know, so we think that is the bulk of it having to do with, you know, with that transition and with that friction course there, you know, their other aspects, you know, the timing of oil and gas turn around is unpredictable sometimes it's a big headwind, sometimes it can be a tailwind.
Jim Jenkins: You know, but we, you know, we are very full is still on taking market share on kind of further developing our value proposition in the US market. So, you know, I'll add it's. So, it's glad, right. I'm so, you know, we, we, like I said in our guidance, we do still expect that to give pickup in second half a year.
Speaker Change: But we are very bullish still on taking market share on further developing our value proposition in the US market. So, I'll add it to you.
Jim Jenkins: Reviewing our performance is 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, LineDrive, the transition during the quarter of coverage for certain large North American channel partner accounts resulted in some slippage and Q2 orders.
Speaker Change: Tonight, play, Roger.
Speaker Change: I'm so, you know, we, like I said in our guidance, we do still expect that to give pick-up in second half a year.
Jim Jenkins: Very good. Yeah, Jerry, look, we, you know, as, you know, as the relationship develops with Line Drive, you know, we're starting to get more visibility to, you know, their pipeline approach and the way they work their pipeline. And we are, you know, we're, you know, our teams having weekly meetings with them. Roger and I and our sales leaders are having, you know, check-ins. I have a monthly call with the Line Drive CEO. And then we have a 90, 90-day sort of look back. So we're kind of laser focused on at this point on ensuring that that line drive relationship meets our expectations, and they have every reason to want to meet them as well.
Speaker Change: Sorry, good at you.
Speaker Change: Chair, this week we...
Speaker Change: As the relationship develops with wine drive, we're starting to get more visibility to their pipeline approach and the way they work their pipeline.
Speaker Change: and we are, you know, our teams having weekly meetings with them.
Jim Jenkins: LineDrive continues to build pipeline opportunities with national accounts and we believe these sales will accelerate in a 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 Helmet had a solid sales quarter as we continue integrating their products in the Lakelands and Sales channels. I'm pleased for a report that LAC Germany has resumed manufacturing and we remain very optimistic about their growth opportunities.
Speaker Change: and our sales leaders are having, you know, checkings. I have a monthly call with the line drive CEO and then we have a 90, 90 day sort of look back. So we're kind of laser focused at this point on ensuring that that...
Speaker Change: That lion driver relationship meets our expectations and they have every reason to want to meet them as well I mean they don't make money if they don't grow this thing so I think we're all on the rowing in the same direction right now and I think it's Roger said
Jerry Sweeney: I mean, they don't make money if they don't grow this thing. So, I think we're all on the road in the same direction right now. And I think, as Roger said, you know, maybe started off a little clunky. And maybe we should have expected that. But at the end of the day, we're very confident in that relationship, where it's going. Yeah, I mean, that's fair. I mean, I personally probably should have expected some lumpiness and transitions like that, especially with larger accounts, right. But Jim, you kind of touched upon it on the pipeline. You know, as you look at the pipeline, their sales process, you, I think it was about 33 accounts.
Jim Jenkins: Turn out to your production at LAC 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 an even leading up to our acquisition, suppliers resumed LAC credit terms and discounts based on Lakelands financial strength. We have added new production capacity and are focused on working down on the significant backlogs by the end of our fiscal year.
Roger: You know, maybe start it off a little clunky and maybe we should have expected that, but at the end of the day we're very confident in that relationship and where it's going.
Speaker Change: Yeah, I mean, that's fair. I mean, I personally probably should have expected some lumpiness in transitions like a special with larger accounts, right?
Speaker Change: But, Jim, you kind of touched upon it on the pipeline. You know, as you look at the pipeline, their sales process, you know, I think it was about 33 accounts. They took over plus, I think there's maybe some others.
Jim Jenkins: LHDs are Australian operations including its service business remain strong and we remain optimistic that we can leverage and replicate their outstanding service and care mile in other parts of the world. We also recently learned that LAC Hong Kong secured a renewal with Hong Kong million U.S, from September 24th to September 25th.
Jim Jenkins: They took over plus. I think there's maybe some others, you know, what does that building pipeline look like versus maybe what you were doing in sales previously? Well, there's a couple of things. Yeah, well, I don't want to get into the specifics of the pipeline because obviously pipeline management is something that, you know, can be a little nuanced, right. But, but I will, I will say that the approach we're taking right now to that to our pipelines, both with Line Drive and within our sales organization. I believe, as a robust process, one that was, you know, obviously different given the two sales professionals that we brought in.
Speaker Change: What does that building pipeline look like versus maybe what you were doing in sales previous?
Speaker Change: Well, there's a couple of changes.
Speaker Change: Well, I don't want to get into the specifics of the pipeline because obviously pipeline management is something that, you know, can be a little nuance, right?
Jim Jenkins: We're 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. Latin now represents close to 20% of Lakeland's total sales and they continue to grow. Our outstanding Latin team is continually identifying and capitalizing on new market opportunities and we expect further growth in that region. Our Latin team is having tremendous success growing our woven products.
Speaker Change: But I will say that the approach we're taking right now to our pipelines both with line drive and within our sales organization.
Speaker Change: I believe it's a 8th of...
Speaker Change: and a robust process.
Speaker Change: One that was obviously different, given the two sales professionals that we brought in.
Jim Jenkins: And with attention to, you know, more interaction with end users, which, you know, when, when traditionally, you're used to sort of channel partners giving you information, that information sometimes is not as accurate as it might be from a traditional sort of engagement with an end user. And we're starting to pivot to that. And the more we engage with our end users, the better we feel about the pipeline. And we're in the early stages of doing that. Obviously, line drive has visibility to some end users as well between their relationships with the channel, their own channel partners, and our channel partners and end users.
Jim Jenkins: We are working to expand our fire services offer offering in Latin. We expect to introduce new industrial products from the Lakeland portfolio into that region going forward. We've also recently put our Mexican sales operations under our Latin management team and we are optimistic that they can replicate their success in that country. Even sell our Q2 sales in Mexico up 58% year over year. We also saw double digit sales growth year over year in Canada, Asia, India and 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.
Speaker Change: and with attention to more interaction with end users, when traditional years used to sort of channel partners giving you information, then information sometimes is not as accurate as it might be from a traditional sort of engagement with an end user.
Speaker Change: and we're starting to pivot to that and...
Speaker Change: The more we engage with our end users, the better we feel about the pipeline.
Speaker Change: and we're in the early stages of doing that.
Speaker Change: Obviously, line drive has visibility to some end users as well between their relationships with the channel, their own channel partners, and our channel partners.
Jim Jenkins: So it's, you know, it's a lot of art versus science a lot of ways, but I will tell you that I'm feeling a lot more confident about how that pipeline is being generated as opposed to the way it was being done about six or nine months ago.
Speaker Change: and end user. So it's a lot of art versus science a lot of ways, but I will tell you that I'm feeling a lot more confident about how that pipeline is being generated as opposed to what the way it was being done about six or nine months ago.
Jim Jenkins: While our US sales were affected by the sales coverage transition that I discussed earlier, our European sales also remained 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.
Operator: Okay, let's share.
Jerry Sweeney: Switching gears, this may go to Roger as well. You know, close margins. Just one understand.
Speaker Change: OK, that's her. Switching gears, this may go to Roger's well, you know, close margins.
Roger Shannon: There's probably a couple different buckets here. We had some impact from integration with some, I think, the profits, or inventory and the quarter profit, which I'm probably least understanding. And then there's another bucket, which is probably where the raw future opportunities, but optimization. But just want to understand, you know, how gross margins may be qualitatively rebounded in the next couple of quarters. I mean, some of this sounds like I'm not sure the purchase accounting kicks back in or the inventory side. And I just, I think it would be helpful for everyone just to understand.
Speaker Change: Just one other standard, there's probably a couple different buckets here. We had some impact from integration with some, I think, the profits or inventory and the quarter profit, which I'm probably at least.
Jim Jenkins: This solid performance was driven by our recent acquisitions and the increased demand in this segment. Our industrial product lines grew 2.4 million or 10% over the same period last year, led by our woven products, particularly in Latin as mentioned earlier. The disposable products decline 2% year over year and chemical products sales reflect 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.
Speaker Change: and then you, there's another bucket which is probably a few with a raw future opportunities, but optimization. But just want to understand, you know, how gross margins.
Speaker Change: and maybe qualitatively rebound of the next couple quarters. I mean, some of this sounds like...
Speaker Change #122: I'm not sure the person is accounting kicks back in or the inventory side and I just
Jim Jenkins: Disposables represented 32% of the 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-biz accounts for 17% of sales. Our FRAR high-performance products decline 7% year over year and high-biz decline 23%.
Roger Shannon: On an apples, apples, the apples, faces, and what happened in the quarter as well as maybe what the reallance looks like. Sure. I have to explain that. And you write it is, it gets into a lot of the gap and accounting weeds that it is an important concept, you know, to understand the profit and the inventory because it affects us pretty much every quarter. And it can be a benefit, as we've seen in past quarters, and it can be a headman, as we've seen in past quarters. I'd like to first start off by, you know, mentioning that, you know, as we point out on slide eight of our presentation, we actually got a 4.4% margin uplift from our organic sales mix.
Speaker Change: I think it would be helpful for everyone just to understand you on apples, the apple spaces, and what happened in the quarters as well as maybe go.
Speaker Change: and what we about and what we about and what we about and what we about.
Speaker Change: Well, I'd have to explain that and you write it is a gets into a lot of the gap that accounting weeds that it is an important concept, you would understand the profit and the inventory because it it.
Jim Jenkins: 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 are having 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.
Speaker Change: Infections pretty much every quarter.
Speaker Change: and it can be a benefit as we've seen in past quarters and it can be a headband as we've seen in past quarters. I like to first start off by mentioning that we point out on a slightly different presentation. I actually got a 4.4% margin of lips.
Roger Shannon: And that's just very promising to see. So, you know, we are continuing to make manufacturing efficiencies and improvements and be able to maintain price on organic. So, you're really looking at two things. The acquired company gross margin, including the purchase accounting.
Speaker Change: from our organic sales mix, and that's just very promising to see, so, you know, we are continuing to make manufacturing efficiencies and improvements and being able to maintain price on organic.
Jim Jenkins: Cameron Stokes is a highly accomplished industrial sales professional having worked for 12 years in industrial sales leadership goals and ANSLE, as well as other leading organizations. Both bring a passion for engaging the end user customer in a commitment to grow and excellence. I'm also pleased to welcome Laurel Yards, the Lakeland executive team, as our new chiefs human resources officer. Laurel brings over 30 years of experience in global human resources leadership, primarily in Fortune 500 and Private Equity Cup, for extensive background includes senior strategic roles leading cultural and business transformation.
Speaker Change: So you're really looking at two things. The acquired company grows margin, you're including the purchase accounting.
Roger Shannon: And I want to go off on my rant here, although it takes all I can to hold it back. But the way, you know, the way purchase accounting works is when you acquire a company and we're going to see a lot of this with our acquisitions. As you pay X amount for a company, and then we have to record that on our financials, and the process of how you record it is you do, you kind of read measure, you kind of read value, all the assets you've acquired up to market value. Which, you know, so if you could, you know, you could theoretically have cat X equipment that's been fully depreciated.
Jim Jenkins: As our CHRO, Laurel will be responsible for enhancing Lakeland's people strategy and fostering a culture focused on growth, innovation, wallet execution, customer satisfaction, and continuous improvement. Her proven track record of a mining talent to the operational, commercial, and functional vision of the business and the spirit of developing teens and riding revenue growth will be crucial as Lakeland continues to execute on its global file fire services and industrial safety growth strategies.
Speaker Change: and I won't go off on my rant here, although it takes all I can to hold that back, but the way the way purchase accounting works is when you acquire a company and we're going to see a lot of this with their acquisitions as you.
Speaker Change: You pay X amount for a company and then we have to record that on our financials and the process of how you record it is you do. You kind of read the measure, you kind of read that, you all the assets you acquired up to market value, which.
Speaker Change: You know, so you could, you know, you could theoretically have capex, equipment that's been fully depreciated.
Roger Shannon: It still has value; you kind of reestablish the value and start to depreciate some clock over. Where this affected our gross margins in this quarter was that the acquired companies, and particularly Jolly, had raw material, sorry, had finished goods inventory at the time we acquired them. So, if you think about that, the raw, the finished goods inventory is written up to their value, which is what we're going to sell it for, which means that we get zero. Yeah, so, so what has to happen? And we always talk about, you know, kind of needing one year to flush out the noise from purchases, but, you know, that inventory, as that inventory turns, there's essentially no gross margin from it.
Speaker Change: is still has value, you kind of reestablish the value and start to depreciation clock over. Where this affected our gross margins in this quarter was that the acquired companies, in particularly jolly, had.
Jim Jenkins: So to summarize, after a strong start in Q1 of physical 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 the physical years.
Speaker Change: Rob, sorry, I finished goods inventory.
Speaker Change: at the time we acquired them. So, if you think about that, we're all the finished as inventors written up to their value.
Roger Shannon: 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. Looking at our second quarter, the 2025 Lakeland delivered sales of $38.5 million compared to $33.1 million for the second quarter last year. Organic revenue comprised 85% of our total sales and 15% of our Q2 revenue came from our recent acquisitions including one month of sales from LHD Group.
Speaker Change: which is what we're going to sell it for, which means that we get zero. It's March, and we're okay, that's where we sell it.
Speaker Change: Yeah, so so what has to happen and we always talk about you kind of needing one year to flush out the noise from purchases, but you know that inventory as that inventory turns there's essentially no gross margin from it.
Roger Shannon: And again, I don't, I'm sorry, I don't agree with that. You know, that creates more visibility for the user and understanding that. I think it creates more confusion, but, so we had, you know, we certainly had that. We did, you know, we have communicated, I think, pretty clearly that the acquired gross margins. of these entities, particularly the ones that don't have their own manufacturing, are going to be lower because of that manufacturing profit. So we expected some lower growth margin, but it was certainly impacted by purchase accounting. It was also affected by other things such as the summer shutdown.
Speaker Change: and again, I don't agree with that.
Speaker Change: You know, that creates more visibility for the user and understanding that, that he creates more confusion, but so we had, you know, we certainly had that, we did, you know, we have to be able to think pretty clearly that the acquired gross margins.
Roger Shannon: On a trailing 12 month basis, Lakeland's TTM revenue as a Q2 of physical 2025 is $137.7 million. This is an increase of 18.6 million dollars or 16% versus the Q2 of physical 2024 TTM revenue total of $119.2 million. Year over year, organic sales decreased by $300,000 in Q2, impacted by slightly lower sales in the US and ongoing weakness in European markets offset by continued robust growth in Latin America which increased 63% compared to the second physical quarter of the fiscal year 2024.
Speaker Change: of these entities, particularly the ones that don't have their own manufacturing are going to be lower because of that manufacturing profit. So we expected...
Speaker Change: from Lowergross margin, but it was certainly impacted by purchase accounting and it was also.
Roger Shannon: So we acquired LHD in July, which is the month that goes on vacation. So that had some effect. So that was 3.8 margin points of headwind. And then the profit in any inventory, I mean, I look at this as a positive, really. So that's 3.4 margin points. So if you take the 39.6 and add that 3.4 back to it, you're at 43 right there. The way that 3.4 happens is we've got, the company has really two sets of operations. We have sales entities, and we have manufacturing entities. Manufacturing, when they produce product, there is margin built into that.
Speaker Change: Effected by other things such as the Shump Summer shutdown, so we acquired LHD in July, which is the month that your view is on vacation. So that had some effect.
Speaker Change: So that was 3.8 margin points ahead and then the profit and in the inventory. I look at this as a positive, really.
Roger Shannon: We were also encouraged to see double-digit growth in Canada, Mexico, Asia, India and our rest of world markets. Lakeland's domestic sales were $12.4 million or 32% of total revenues and international sales were $26.1 million or 68% of total revenues. This compares with the domestic sales of $15.2 million or 46% of total and international sales of $17.8 million or 54% of total in the second quarter of physical 2024. Regarding product mix for the second quarter, our fire services business grew by $3 million or 34% versus the same period last year as we start to see gains from our head to toe strategy.
Speaker Change: So that's 3.4 margin points. So if you take the 39.6 and add that 3.4 back to it, you're at 43 right there. The way that 3.4 happens is we've got the company hedged.
Speaker Change: really two sets of operations. We have sales entities and we have manufacturing.
Speaker Change: Manufacturing when they produce product, there is margin built into that. So when manufacturing, I mean, the liquid manufacturing energy shows it to a sales entity, they have profit.
Roger Shannon: So when manufacturing, when the liquid manufacturing entities sells it to a sales entity, they have profit that they would recognize. But, as a company in consolidation, we can't recognize it until it's sold to the customer. So that kind of gets hung up. So the good news there is, we talked about we built a good deal of inventory. Some of the sales have slipped, but we expect to ship that product in the second half. So that 3.4 essentially reverses when that inventory is sold and then becomes a benefit.
Speaker Change: that they would recognize, but as a company in consolidation, we can't recognize it until it's sold to the customer. So that kind of gets hung up.
Speaker Change: So the good news there is, you know, we talked about we built a good deal of inventory, some of the sales are slipped, but those we expect to ship that product in the second half so that 3.4 essentially reverses.
Roger Shannon: Our industrial product lines grew $2.4 million or 10% over the same period last year, led by our woven products particularly in Latin America. Disposables declined 2% year over year and chemical products were flat due primarily to the line drive transition as Jim discussed.
Jerry Sweeney: So again, I hope that's not too much detail, but I think it's important to understand that we have it about every quarter, not always this large, because it was a large build, especially at Jolly for an order and for the equal. This going to have second half orders. Got it. So that sort of gets to the point in my question; the gross margin is 3.96. The inventory, that happens every quarter, but there was an abnormally large one. So it certainly impacted the gross margin. Along with, we always get less gross profit dollars because revenues were down because the sales, but that makes sense.
Speaker Change #100: Wynn that inventory is sold and becomes a benefit. So I can hope that's not too much detail but I think it's important to understand. No, I think we have to be done.
Speaker Change #100: Yeah, sorry, good.
Roger Shannon: West. We are seeing significant growth in the woven product category driven by outstanding performances in Latin America. Disposables represented 32% of revenue for the quarter while fire grew to 31% and chemicals increased to 20% of our revenue. The remainder of our industrial products including FRAR half-performance and Havis accounted for the remaining 17% of sales. Recorded gross profit was $15.2 million for the second quarter of physical year 2025 and increased at $1 million or 7% compared to $14.2 million in the second quarter of physical 2024.
Speaker Change #101: But we have that. We have it about every quarter, not always this large, because it was a large build, especially it.
Speaker Change #102: Jolly, for an order in for evil, this is going to have second half orders.
Speaker Change #102: So that's what I guess would point in my co-shape.
Speaker Change #102: Gross March 3.96, the inventory, that happens every quarter, but there was an abnormally large one, so it's certainly impacted the gross margin. You know, along with...
Speaker Change #102: and we all kicked less close profit dollars because revenues were down.
Jerry Sweeney: The last question: I know these are probably shorter questions, but longer answers.
Speaker Change #103: because of the sales. That's right, so. But that makes sense.
Speaker Change #104: Last question, I know these are probably shorter questions but longer answers. The one thing I call middlewood, well, I don't know if I'll tell you about it, but the 2.4 million in acquired, we'll say SGA or operating expenses from some of the acquired companies.
Roger Shannon: The one thing that caught me, well, I don't know if I'll have to write, but the 2.4 million in acquired, we'll say, SG&A or operating expenses from some of the acquired companies. Is that permanent or some of that going to be transitionary as you integrate some of these companies and how do we look at that? Yeah, I think we are certainly scrubbing that to work that down. So LHD, we have identified; we've just had it a month or so. We've identified certain SGNA costs that we don't think are necessary. I think we explained before, when we value acquisitions, we don't really build in a big takeout or stripping of costs because, more often than not, we bring, you know, we may need to add some sales or add some resources, but we see some things there on the jolly side, kind of same thing, you know, jolly has a new manufacturing entity that's, you know, relatively new that they had just kind of stood up before we acquired them.
Roger Shannon: Our recorded gross profit is a percentage of net sales with 39.6% for the second quarter of physical 2025 compared to 42.9% for the second quarter of physical 2024. Gross profit was negatively affected by 3.8% from the integration of newly acquired companies including a 0.9% impact from the amortization of acquired assets relating to the purchase occurring step-up for acquired inventory at jolly and LHD and by 3.4% due to the impact of profit in the inventory partially offset by higher organic gross profit as we show in slide 8.
Speaker Change #105: Is that permanent or some of that going to be transition areas as you integrate some of these companies?
Speaker Change #105: and how do we, how do we look at that?
Speaker Change #105: Yeah, I think we're certainly...
Speaker Change #106: you know, scrubbing that to work that down. So, LHD.
Speaker Change #107: We have identified, you know, we just had it a month or so, we've identified.
Speaker Change #108: You know, certain estating costs that we don't think are necessary, I think we can really explain before who we value acquisitions.
Roger Shannon: While our operating expenses increased to $16.8 million for the quarter, 2.4 million of the increase was SGDA from newly acquired companies and $2.6 million of the increase was due to acquisition-related expenses, non-cash expenses including higher depreciation and amortization from purchase accounting for acquired companies, non-recurring expenses including restructuring and Argentina-related FX expenses. The increase in organic SGNA operating expenses was due primarily to professional fees. Lakeland reported an operating loss of $1.6 million for the second quarter of physical year 2025 compared to an operating profit of $3.7 million for the second quarter of fiscal 2024.
Speaker Change #108: really building a big takeout or stripping of costs because more often than not, you know, we bring.
Speaker Change #108: and we need to add some sales or add some resources, but we see some things there on the jolly side, kind of same thing, jolly heads.
Speaker Change #109: and a new manufacturing entity that's real to the view that they had just kind of stood up before we acquired them in addition to the Italian operation. So we're looking forward to making those more efficient.
Jim Jenkins: In addition to the Italian operation, so we're looking for ways to make those more efficient. and then same thing with, you know, same thing with Pacific. A part of that, SGNA, was, you know, these integration marketing efforts. We've had these teams traveling, like all around the world, to the Pacific people and jolly people training our Vitam teams, training our U.S. teams, U.S. teams going to trade and sales shows and their markets. So, you know, we have seen an increase in selling expense as we work to get these integrated. Yeah, I mean, Gerard, some of this is an investment in the people that we have.
Speaker Change #109: and in same thing with specific.
Speaker Change #109: But a part of that SGA was, you know, these integration marketing efforts, we've had these teams traveling like all around the world too. You know, the specific people and jolly people training our Latam teams, training our US teams.
Roger Shannon: Operating margins were negative 4.1% for the second physical quarter down from 11.3% for the second physical quarter of last year. The decrease in operating income is due to the previously mentioned margin issues and the increases in operating expenses. Tax impact for the quarter was a benefit of $420,000 resulting in an effective tax rate of 23%. Lakeland reported a net loss of $1.4 million or 19 cents per basic and diluted share compared to net income of $2.5 million or 33 cents per basic share in 32 cents per diluted share last year.
Speaker Change #110: U.S. teams going to trade and sales shows in their market. So we have seen an increase in selling expense as we work to get these integrated.
Jim Jenkins: Some of it to Roger's point is we have some low-hanging fruit we can fix. But I mean, I'm talking to you from Sydney, Australia. So my, you know, the Chief Revenue Officer is in Argentina right now. So, we're, you know, we're trying to, we're growing this thing and there will be some expense associated with that. But we are, I mean, Roger's got guys heading out to Romania shortly to sort of work through those things as well. So, I would expect, you know, obviously, sales fixes everything, but there are some expenses here that we're looking at to drive down.
Speaker Change #111: Yeah, I mean, gerious, some of this is an investment in the people that we have, some of it to Roger's point is we have some low hanging fruit we can fix
Speaker Change #112: But I mean, I'm talking to you from Sydney, Australia, so my, you know, keep revenue officer is in Argentina right now. So we're, you know, we're trying to, we're growing this thing and there will be some expensive associated with that.
Speaker Change #112: But we are, I mean, Roger's got guys heading out to Romania shortly to sort of work through those things as well. So, I would expect, you know, obviously sales, sales, fixes everything, but there are some expenses here that we're looking at to drive down.
Roger Shannon: Adjusted EBDI excluding FX for the second quarter of physical 2025 was $2.7 million or an adjusted EBDI excluding FX margin of 6.9%. This compares to $4.7 million or a margin of 14 3.3% for the second quarter of fiscal 2024.
Jerry Sweeney: No, that's fair. Listen, I'd rather have the infrastructure in place to drive sales than the other. This is, the question was probably more, right, just understanding the model and, you know, progression, etc. Sure. But I totally understand. So, I'll jump back in line, and, but thanks, guys. Thank you, Aaron. Thank you.
Speaker Change #113: Now, that's fair. Listen, I'd rather have the infrastructure in place to dry sales than the other businesses.
Roger Shannon: River. As shown on slide 8, the decrease in adjusted EBITDA, excluding FX, was driven by the previous we mentioned profit in any inventory. Our manufacturing costs associated with the inventory bill increased SG&A. Adjusted EBITDA from our acquisitions were lower than our expectations due to slipages, what are expected to improve in the second half of the year. Also, as we explained in our earnings press release, the profit in ending inventory that affected our gross profit and gross margins in the quarter is expected to reverse and be a benefit in the second half of the year once that inventory is shipped.
Speaker Change #113: The question was probably more, just understanding the model and you know...
Speaker Change #114: Gretchen, et cetera, so... Sure. But, totally understand.
Speaker Change #115: So I'll jump back in line and...
Speaker Change #116: but thanks guys thank you very much.
Matthew Galanko: Your next question for today is from Matthew Galanco with Maxim Group. Hi Matt. Hey. Hey, thanks for taking my questions.
Speaker Change #117: Thank you.
Speaker Change #117: Your next question for today is from Matthew Glanko with Maxim Groot.
Speaker Change #118: and that he got to see it. Thanks for taking my questions.
Matthew Galanko: Can you maybe talk about the pipeline with LHD? I guess the back line with LHD, is it safe to assume you can convert that all, or is there a tradition that you sort of expect to kind of get peeled off from competitors or, you know, how do you expect that to go? So, I guess, I guess what Roger and I and actually the entire executive team were surprised to learn was that this backlog issue is not necessarily unique to LHD; although obviously the business was not managed terribly well and, you know, they got cut off from suppliers and that slowed things down.
Matthew Glanko: Can you maybe talk about the pipeline with LH?
Speaker Change #120: I guess the back line with LHD, is it safe to assume you can convert that all or is there a tradition that you sort of expect to kind of get peel off from competitors or you know, how do you still go? So I guess I guess what Roger and I and actually the entire executive team were surprised to learn.
Roger Shannon: On a trending 12-month basis, Lakeland's TTM adjusted EBITDA, excluding the impacts of FX, as of Q2, of fiscal 2025, is $14.5 million. This is an increase of $1.3 million, or 10% versus the Q2 FY24 TTM adjusted EBITDA, excluding FX, which totaled $13.2 million.
Speaker Change #121: was that this backlog issue is not necessarily unique to LHD, although obviously the business was not managed terribly well and you know they got cut off from suppliers and that's what things down. But the competitive environment in Germany is such that the delivery there are delivery issues that our competitors are facing as well.
Jim Jenkins: But the competitive environment in Germany is such that the delivery; there are delivery issues that our competitors are facing as well. So, so there's, I want to sort of that sort of one issue that we were all surprised about how, you know, we were, it was not necessarily unique to us, you know, that there are some, you know, we are looking hard at those backlog opportunities and we want to make sure that, you know, we're not building something for something that somebody already decided to go walk away and do something else with. But by and large, we're not finding that.
Speaker Change #121: So I wanted to sort of that sort of one issue that we were all surprised about how, you know, we were not necessarily unique to us. You know, there are some, you know, we are looking hard at those.
Roger Shannon: Now turning to the balance sheet. Lakeland ended the quarter with cash and cash equivalent to the approximately $24.9 million and long-term debt was $29.5 million. This compares to $28.4 million in cash and $13 million in long-term debt as of April 30, 2024. The decreasing cash was due primarily to debt repayments during the quarter, and the net increase in our long-term debt was mainly related to the acquisition of LHD Group in July, partially offset our repayments on our credit facility.
Speaker Change #122: Baclogg opportunities, and we want to make sure that we're not building something for something that somebody already decided to go walk away and do something else with, but by and large we're not finding that.
Roger Shannon: So what we're trying to do now, and, you know, because we're getting better delivery terms and we're getting discounts on purchases, you know, where we're delivering cash, you know, we're addressing things like what's the margin look like when, you know, an order was made, you know, over a year ago when prices may have gone up. So we have that delicate, tight, tight wire sort of walk with our customers, but we're finding ways to capture that margin, as I said in other ways, by, you know, perhaps purchasing something, you know, COD and getting a discount as opposed to being on COD prior to our arrival and our balance sheet.
Speaker Change #124: So what we're trying to do now and you know because we're getting better delivery terms and we're getting discounts on purchases
Speaker Change #124: and we're delivering cash. We're addressing things like what's the margin looked like when order was made over a year ago, when prices may have gone up. So we have that delicate.
Roger Shannon: At the end of Q2, inventory was $67.2 million up from $56.1 million at the end of Q1 FY25, primarily due to LHD, Jolly, Eagle, and Organic sales that are expected to ship in the second half of this current fiscal year. Year over year, we saw a reduction in our organic inventory at $5 million versus the quarter-ended July 31, 2023. Capital expenditures for the three months ending July 31, 2024 were $600,000. We still expect FY25 capital expenditures to be in the range of $2 to $3 million as we develop additional in-house fire service, manufacturing capacity, and replace existing equipment in the ordinary course of operations. The monitoring expansion, which we discussed last quarter, remains on pause as we continue to assess whether related damage to our lease building.
Speaker Change #124: Tight, tight wire sort of walk.
Speaker Change #124: with our customers, but we're finding ways to capture that margin as I said in other ways by, you know.
Speaker Change #124: Perhaps purchasing something, you know, COD and getting a discount as opposed to being on COD prior to our arrival in our balance sheet. So we're, we're, we're, we're, we're, we're winning down that. We're aggressively going after it.
Roger Shannon: So we're, we're, we're, we're winnowing down that; we're aggressively going after it. You know, we are utilizing the gentleman that we acquired the eagle from; you know, it turned out to be a very good talent pickup for us, and he's spending considerable time with our friends at LHD to work that backlog down. I would just add that of the LHD revenue that we mentioned in the call, you know, Germany over the last year has only been about 8 million out of the bulk of the stream. Currently, he's coming from Australia. We have the turnout years as well as the services.
Speaker Change #125: We are utilizing the gentleman that we acquired the eagle from, you know, turned out to be a very good talent pick up for us. And he's spending considerable time with our friends at LHD to work that backlog down.
Speaker Change #126: I was just at the LHD revenue that we mentioned in the call.
Speaker Change #126: In Germany, over the last year has only been about 8 million out of the bulk of the street currently is coming from Australia. You have to turn out gears where else the services are so.
Roger Shannon: Looking ahead to the rest of fiscal 2025, based on our existing backlog and our outlook for the remainder of the year, we are maintaining guidance for our 2025 fiscal year. We've noticed that these expectations include the announced Jolly Boots, Pacific Elements, and LHD group acquisitions. We remain confident in our global sales platforms and earning ability for the second half of the year, and we are reaffirming expectations for fiscal year 2025 revenue in the range of $160 to $170 million, dollars. Additionally, we reaffirm our expectations for FY25 adjusted EBITDA, excluding FX, to be between $18 million in $21.5 million.
Roger Shannon: So we see very significant upside in Germany because, like we said, like Jim said, other competitors are having, you know, the same delivery lead time issues. So we were working to bring on additional capacity as well as, you know, in housing, some capacity for, you know, for the Asian markets into our China facility.
Speaker Change #126: So we see very significant upside in Germany, because like we said, like Jim said, other competitors are having the same.
Speaker Change #127: Delivery, lead time issues. So we're working to bring home additional capacity.
Speaker Change #127: as well as enhancing some capacity for the Asian markets into our China facility.
Matthew Galanko: So, you know, we think there's, we think there's a lot of upside. You know, I've said before that if we just double the German, I'm going to be disappointed with that because I think there's significant upside in the country. Got it. Terrific.
Speaker Change #128: We think there's a lot of upside, you know, I've said before that if we just double the term and I'm going to be disappointed with that because there's significant upside in the country.
Jim Jenkins: And I guess on the subject of Europe, you know, it sounds like you see opportunities in Europe that, you know, if you aren't capturing now, what kind of levers can you pull to kind of go after that a little bit more effectively? So I'll say that on the industrial land, which is where we are, legacy business in Europe is primarily that industrial business. We almost exclusively relied on our channel partners, on our distributors, and we actually have some very solid distributor relationships, particularly in the Benelux areas. One of our larger distributors in that market has recently merged with the French entity, and, you know, that has resulted to be believed in some potential opportunity for us to expand our market share in Europe.
Speaker Change #128: and I guess on the subject of Europe, you know, it sounds like you see opportunities in Europe that you are in capturing now. What kind of levers can you pull to kind of go after that a little bit more effectively?
Jim Jenkins: With that overview, I would like to turn the call back over to Jim before we start taking questions. Thank you, Roger.
Jim Jenkins: I'll conclude by saying that our strategy and focus has not changed. Prospects for both our industrial and fire businesses are bright. The value proposition between these two business models continues to be unique and resonates in the market. We continue to expect high single, digit, organic growth and the sales pipeline continues to strengthen. We expect impact of the timing of our sales will reflect stronger second half sales and growth profit margins. We're making progress on our operational improvements and expect to see productivity improvements in the third quarter.
Speaker Change #129: So I'll say that on the industrial end, which is where we are legacy business in Europe is primarily that industrial business
Speaker Change #130: We almost exclusively relied on our channel partners on our distributors.
Speaker Change #131: and we actually have some very solid distributor relationships, particularly in the Benelux.
Speaker Change #132: and one of our larger distributors in that market are recently merged with the French entity and that has resulted. We believe in some potential opportunity for us.
Jim Jenkins: So on the channel partner side, we got one, you know, one sort of real significant opportunity with a channel partner to drive that. The other is that our new industrial sales leader, Cameron Stokes, is really, you know, preaching, you know, end user engagement, and, you know, the entire executive team spent some considerable time about a week in Europe about a month ago in Poland with our European industrial sales team. And so the opportunities that we see are it's sort of a different sales style engaging with the end user, along with our channel partner, to sort of be the industry expert when it comes to selling the industrial side of the business.
Jim Jenkins: Our operational esteem is also focused on productivity improvements in the short-term and parallel to our longer-term multi-year effort across the organization. We still believe and expect significant margin leverage as operational initiatives progress and our period ending inventory is sold off. We continue to work on improving the effectiveness and efficiency in our processes, databases and systems as we look to eliminate redundancy and improve our analytics. Over the longer term, we expect to be even more competitive to take market share and improve our scalability, predictability and profitability. In other words, we plan to drive a better business model. Acquisitions remain an integral part of our growth plan and we expect to continue growing our M&A pipeline and methodically pursuing our SSQ M&A strategy.
Speaker Change #132: to expand our market share in Europe. So on the channel partner side, we've got one sort of real significant opportunity with a channel partner to drive that. The other is that our new industrial sales leader Cameron Stokes.
Speaker Change #133: It's really, you know, preaching, you know, end user engagement and, you know, the entire executive team spent some considerable time by week in Europe, by a month ago, in Poland, with our European industrial sales team.
Speaker Change #133: The opportunities that we see are a sort of a different sales style engaging with the end user along with our channel partner to sort of be the industry expert.
Jim Jenkins: And, you know, it's going to take a little bit of time, I think, to do that. But, you know, I think we're starting to get the right people in place. We're certainly getting the right attitude.
Speaker Change #134: when it comes to selling the industrial side of the business. It's going to take a little bit of time, I think, to do that. But I think we're starting to get the right people in place, we're certainly getting the right attitude.
Operator: With that, we will now open the call for questions operator. Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speak equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please while we pull for questions.
Jim Jenkins: And then, of course, on the fire end with, with Eagle and with LAC and Jolly, you know, there's obviously opportunities for growth in Europe there.
Speaker Change #135: and then of course on the fire end with Eagle and with LAC and Jolly, you know, there's obviously opportunities for growth in Europe there.
Roger Shannon: Yeah, I'd add one additional thing that we're doing there. And this is going on as we speak. We're addressing both some, you know, customer service delivery time challenges as well as cost challenges. So, and led by our operations group, we are revamping how we do warehousing logistics and distribution to, because significantly cut down on delivery time. And in the sales team, like Jim said, is, you know, what we want to do is kind of translate the approach and model that we have in Latam into Europe. And I know our sales folks are working hard. We get that message across and not just a message, but the training approach and then having the right products that we can deliver quickly, you know, to get to the customer.
Speaker Change #136: I'd add one of this little thing that we're doing there, and this is going on as we speak.
Speaker Change #137: We're addressing both some customer service, delivery time challenges as well as cost challenges. So we can let our operations group we are.
Gerard Sweeney: Your first question for today is from Jerry Sweeney with Roast Capital. Good morning, afternoon evening. That's for where you guys are, but thanks for taking for Jim and Roger.
Speaker Change #138: Reampamping, how we do warehousing logistics and distribution to you because significantly cut down on delivery time. And in the sales team, when Jim said, and what we want to do is kind of...
Jim Jenkins: I want to start on the revenue side. It sounds as though we'll just say core base revenues doing reasonably well, as you said, high single digits going forward, but it also sounds like some of this impact on the revenue mess came from the line drive friction as you sort of transition into that relationship. Is there any way you can sort of segment out how much revenue was impacted by the transition to some of the sales over the line drive?
Speaker Change #139: Translate the approach and model that we have in Latam into Europe and I don't know our sales folks are.
Speaker Change #140: Worked hard to get that message across and not just a message but the training approach and then have in the right products that we can deliver quickly.
Matthew Galanko: So, you know, so like we said, I think there is opportunity, particularly with Kimberly Clark selling their PPE business to Ansel. I think that creates some displacement. We're getting that feedback already from our sales teams, and we're going to work that hard as well as make it very easy to work with Lakeland. You know, those in terms of delivery, lead times, product availability, and customer service. Got it. Thanks.
Speaker Change #140: to get to the customer.
Speaker Change #140: So you know what we said, I think there is opportunity particularly with Kimberly Clark's cell in the air.
Speaker Change #141: PBE business to answer. I think that creates some displacement. We're getting that feedback already from out of.
Jim Jenkins: I'm going to give that one to Roger. Yeah, Jerry, we did, as we did the first quarter in, reviewed with line drive, go methodically account by account, looking so we know exactly which accounts were. Unchanged, in which we're affected. I can't get into an account basis, but we did have the appropriate people in the call and looked at the individual ones and kind of know how that unfolded. I guess it's not surprising when you have that 33 or so large national accounts transition, and we had a team on our side that was now redeploying more toward end user engagement in the blind drive, reaching on headquarters teams, you know, starts to take over, that there would be some friction in that, and that is, you know, that's certainly what we saw.
Speaker Change #141: from our sales teams and we're going to work that hard as well as make it very easy to work with like them. You know, those terms is delivery, lead times, product availability and customer service.
Jim Jenkins: I guess my final question is around the opportunity to take the service maintenance business from LHD and kind of expand the concept into North America or elsewhere. I think you touched on it in the prepared remarks, but I'm curious now that you've, you know, had the business for a few weeks. What, you expect to do it organically or energetically. And kind of what do you expect from that opportunity through the back half of the year.
Speaker Change #141: Got it, thanks. I guess my final question is around...
Speaker Change #141: and the opportunity to take the service maintenance business from LHD and expand the concept in the North America or...
Speaker Change #141: Elsewhere, I think you touched on it in the prepared remarks, but
Speaker Change #141: I'm curious now that you've, you know, had a business for a few weeks, but um...
Speaker Change #141: No.
Speaker Change #142: But do you expect to do it organically or energetically and what do you expect from that extension opportunity through the back half of the year?
Jim Jenkins: So that I am actually in Sydney. I met the largest trade show in Australia, the fire trade show in Australia, a fact. And I spent considerable time with our friends at LHD. I got a tour of the Sydney facility. And it is; it is impressive. And, you know, I was so excited about it was sending, you know, videos to Roger and the team. This is, this is scalable. You know, I spent some time with my Chief Revenue Officer who has some experience on this and is prior to prior life. This is, this is something that we would, we would look at both organic and inorganic opportunities.
Speaker Change #143: So Matt, I'm actually in Sydney. I met the largest trade show in Australia, the Fire Trade Show in Australia. In fact, I spent considerable time with our friends at LHD. I got a tour of the Sydney facility, and it is impressive.
Jim Jenkins: You know, as we look at the USA sales, USA operations, you know, we were down about 2.8 million year over year for Q2. So, you know, so we think that is the bulk of it having to do with that transition and with that friction. Of course, there are other aspects, you know, the timing of oil and gas turn around is unpredictable. Sometimes it's a big headwind, sometimes it can be a tailwind.
Speaker Change #144: and I was excited about it, I was sending videos to Roger and the team.
Speaker Change #145: This is scalable, you know, I spent some time with my chief revenue officer who has some experience on this and is prior to prior life. This is something that we would look at both organic and inorganic opportunities.
Jim Jenkins: You know, I know for a fact that our friends in Latin America, and they're trying to do this. And we've already put them in touch with the LHD folks. And I would expect, you know, a dialogue there in the short term. I don't think, you know, these are not, you know, you don't just add water and proof that happens, right. It's going to take a little bit of time. But it clearly is on our radar. And it is a, you know, for me, I do this as a significant opportunity in a space that's going to grow by virtue of the fact that that is the way that fire is trending these days and that we have to decontaminate these suits.
Speaker Change #146: I know for fact that our friends in Latin America and they're trying to do this and we've already put them in touch.
Speaker Change #147: with the LAC folks and I would expect, you know, a dialogue there in the short term. I don't think, you know, these are not, you know, you don't just add water and tools that happens, right? It's going to take a little bit of time.
Jim Jenkins: You know, but we, you know, we are very bullish still on taking market share on kind of further developing our value proposition in the US market. So, like you said in our guidance, we do still expect that to give pickup in a second half a year. Very good, Jim. Yeah, Jerry, look, we, you know, as, you know, as the relationship develops with line drive, you know, we're starting to get more visibility to, you know, their pipeline approach and the way they work their pipeline.
Speaker Change #147: but it clearly is on our radar and it is a, you know, for me, I do this as a significant opportunity in a space.
Speaker Change #147: That's going to grow by virtue of the fact that that is the way that fire is trending these days and that we have to be contaminate these suits so these guys are not.
Jim Jenkins: So these guys are not inhaling, guys and gals, not inhaling carcinogens on a, on a regular basis. And the easiest way to do that is the consistent cleaning of the garment. And so you're going to see that in all the markets all over the world. And it's still very early in the game on that. And we believe we've got an edge in some pretty, pretty interesting markets. It might also work on the software because it's that the software that LHD Australia has, which we also believe is scalable and deployable. Was kind of really a, we do about the services that this was a really pleasant surprise as we, you know, as you dug into it.
Speaker Change #148: and Helen, guys and gals, not in Helen, Carlson and Jen's on a regular basis. The easiest way to do that is the...
Speaker Change #149: Consistent cleaning of the garment.
Jim Jenkins: And we are, you know, we're, you know, our teams having weekly meetings with them. Roger and I and our sales leaders are having, you know, checkings, I have a monthly call with the line drive CEO. And then we have a 90, 90 day sort of look back. So we're kind of laser focused on at this point on ensuring that that line drive relationship meets our expectations. And they have every reason to want to meet them as well.
Speaker Change #149: and so you're going to see that in all of the markets all over the world and it's still very early.
Speaker Change #150: In the game on that, and we believe we've got an edge and some pretty interesting markets.
Speaker Change #151: Hi, my name is I'm the software, because it's that software that LSD Australia has, which we also believe is scalable and deployable was.
Speaker Change #151: was kind of really, we do about the services that this was a really pleasant surprise as you dug into it.
Jim Jenkins: I mean, they don't make money if they don't grow this thing. So, I think we're all on the road in the same direction right now. And I think as Roger said, you know, maybe started off a little clunky and maybe we should have expected that. But at the end of the day, we're very confident in that relationship and where it's going. Yeah, I mean, that's fair. I mean, I personally probably should have expected some lumpiness and transitions like that, especially with larger accounts, right.
Jim Jenkins: Yeah, I mean, there's that; that's another opportunity to monetize. And it's one that I think is probably a little bit longer term, you know, 12 to 18 months before we get our arms fully around that. But right now it is a total differentiator for LHD within the Australian market. And, you know, we want to be able to roll that out in other markets.
Speaker Change #151: Yeah, I mean, there's a, that's another opportunity to monetize
Speaker Change #152: and it's one that I think is probably a little bit longer term, you know, 12 to 18 months before we get our arms fully around that. But right now, it is a difficult differentiator for LHD within the Australian market and, you know, we want to be able to roll that out in other markets.
Jim Jenkins: But Jim, you kind of touched upon it on the pipeline. You know, as you look at the pipeline, their sales process. You know, you, I think it was about 33 accounts. They took over plus. I think there's, yeah, there may be some others. You know, what does that building pipeline look like versus maybe what you were doing in sales previously? Well, there's a couple of phases. Well, I don't want to get into the specifics of the pipeline because obviously pipeline management is something that, you know, can be a little nuanced, right.
Matthew Galanko: Got it. Just quick follow up on that. You mentioned more early innings on that, I guess, globally, but can you maybe touch on just, you know, what proportion of the fire equipment am is currently kind of entering those sorts of contracts. You know, your best guess of, kind of what the penetration of that opportunity is today. I couldn't, I couldn't, I couldn't look at, you know, there's, there's millions of suits all over the world that got to get cleaned. Each firefighter generally within those markets has two sets of those suits. So I, I am not in a position at this point, man, to give you an actual number, but it is significant.
Speaker Change #152: got it just quick follow-up on that. You know, you mentioned more early inings on that, I guess, globally, but you maybe touch on just, you know, what proportion of the fire equipment, and it's currently kind of...
Speaker Change #153: and during those sorts of contracts, you know, your best guess. So kind of what the penetration of that opportunity is today. I couldn't, I could look, you know, there's millions of suits all over the world that got a good clean. Each firecriter generally within those markets has...
Jim Jenkins: But, but I will, I will say that the approach we're taking right now to that to our pipelines both would line drive within our sales organization. I believe as a robust process, one that was, you know, obviously different given the two sales professionals that we brought in. And with attention to, you know, more interaction with end users, which, you know, when, when, when traditionally you're used to sort of channel partners giving you information, that information sometimes is not as accurate as it might be from a traditional sort of engagement with an end user.
Speaker Change #153: 2 sets of those suits.
Speaker Change #154: So I'm not in the position at this point meant to give you an actual number, but it is significant and we've really only got our baby toe in the water right now.
Jim Jenkins: And we've really only got our baby toe in the water right now. And, you know, I, you know, obviously we're going to do this smartly and methodically, but we'll do it with urgency. And I would expect that we would, we would be waiting into the water here over the course of the next 12 months in, in other markets.
Speaker Change #155: I obviously were going to do this smartly and methodically, but we'll do it with urgency. I would expect that we would be waiting into the water here over the course of the next 12 months in other markets.
Operator: Thanks.
Operator: Once again, if you would like to ask a question, please press star one.
Speaker Change #155: Once again, if you would like to ask a question, please press star 1.
Jim Jenkins: And we're starting to pivot to that. And the more we engage with our end users, the better we feel about the pipeline. And we're in the early stages of doing that. Obviously, line drive has visibility to some end users as well between their relationships with the channel, their own channel partners and our channel partners and end users. So it's, you know, it's a lot of art versus science a lot of ways, but I will tell you that I'm feeling a lot more confident about how that pipeline is being generated as opposed to the way it was being done about six or nine months ago. [inaudible] Okay, let's share.
Speaker Change #155: [inaudible]
Speaker Change #155: [inaudible]
Operator: At this time, there are no other questions in Q.
Speaker Change #156: At this time, there are no other questions in queue.
Jim Jenkins: Thank you, operator. Thank you all for joining us on today's call. We appreciate your continued interest in Lakeland with the forward of building on the strong momentum Lakeland has and sharing our successes with you in physical 2025.
Speaker Change #157: Thank you, operator. Thank you all for joining us on today's call. We appreciate your continued interest in Lakeland. With its forward to building on the strong momentum Lakeland has and sharing our successes with you in fiscal 2025. Have a great day.
Operator: Have a great day. Thank you.
Roger Shannon: Switching gears, this may go to Roger as well, you know, close margins. Just one understand, there's probably a couple different buckets here. We had some impact from integration with some, I think, the profits, or inventory end of quarter profit, which I'm probably the least understanding. And then you, there's another bucket which is probably the future of opportunities, but optimization. But just want to understand how gross margins may be qualitatively rebounded in the next couple quarters.
Operator: This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. Thank you for your participants.
Roger Shannon: I mean, some of this sounds like, I'm not sure the purchase accounting kicks back in, or the inventory side. And I just, I think it would be helpful for everyone just to understand, on an apples, the apples basis, and what happened in the quarter as well as maybe what rebound, what happened, explain that. And you write, it is a, it gets into, you know, a lot of the gap that accounting weeds, that it, you know, it is an important concept, you know, to understand the profit in the inventory because it, it, it affects us pretty much every quarter.
Roger Shannon: And it can be a benefit as we've seen in past quarters, and it can be a headman as we've, as we've seen in past quarters. I'd like to first start off by, you know, mentioning that, you know, as we point out on slide eight of our presentation, we actually got a 4.4% margin uplift from our organic sales mix. And that's just very promising to see. So, you know, we are continuing to make manufacturing efficiencies and improvements, and being able to maintain price on organic.
Roger Shannon: So, you're really looking at two things. The, you know, the acquired company gross margin, including the purchase accounting. And I want to go off on my rant here, although it takes all I can to hold it back. But the way, you know, the way purchase accounting works is when you acquire a company, and we're going to see a lot of this with our, with our acquisitions, as you, you pay X amount for a company, and then we have to record that on our financials and the process of how you record it is you do, you, you kind of reap measure, you kind of revalue all the assets you've acquired up to market value, which, you know, so if you could, you know, you could theoretically have cat X equipment that have been fully depreciated, it still has value, you kind of reestablish the value and start to depreciate some clock over.
Roger Shannon: Where this affected our gross margins in this quarter was that the acquired companies, and particularly jolly, had raw material, sorry, at the finish goods inventory, at the time we acquired them. So, if you think about that, the raw, the finished goods inventory is written up to their value, which is what we're going to sell it for, which means that we get zero margin. Okay, that's why we sell that product. Yeah, so, so what has to happen, and we always talk about, you know, kind of needing one year to flush out the noise from purchases, but, you know, that inventory, as that inventory turns, there's essentially no gross margin from it.
Roger Shannon: And again, I don't, I'm sorry, I don't agree with that, you know, that creates more visibility for the user and understanding that. I mean, it creates more confusion, but so we had, you know, we certainly had that. We did, you know, we have communicated, I think, pretty clearly, that the acquired gross margins, of these entities, particularly the ones that don't have their own manufacturing, are going to be lower because of that manufacturing profit.
Roger Shannon: So we expected some lower gross margin, but it was certainly impacted by purchase accounting, and it was also affected by other things such as the summer shutdown. So we acquired LHD in July, which is the month that goes on vacation. So that had some effect. So that was 3.8 margin points of headwind, and then the profit in any inventory. I mean, I look at this as a positive, really. So that's 3.4 margin points.
Roger Shannon: So if you take the 39.6 and add that 3.4 back to it, you're at 43 right there. The way that 3.4 happens is we've got the company has really two sets of operations. We have sales entities, and we have manufacturing entities. Manufacturing when they produce product, there is margin built into that. So when manufacturing, I mean, liquid manufacturing entities sells it to a sales entity. They have profit that they would recognize.
Roger Shannon: But as a company in consolidation, we can't recognize it until it's sold to the customer. So that kind of gets hung up. So the good news there is, we talked about we built a good deal of inventory. Some of the sales have slipped, but those we expect to ship that product in the second half. So that 3.4 essentially reverses when that inventory is sold and then becomes a benefit. So again, I hope that's not too much detail.
Roger Shannon: I think it's important to understand that we have that we have that we have it about every quarter. Not always this large because it was a large build, especially at jolly for an order and for evil. This going to have second half orders. Got it. So that sort of gets to the point in my question. The gross margin is 3.96. The inventory, that happens every quarter, but there was an abnormally large one.
Roger Shannon: So it certainly impacted the gross margin. Along with, we always get less gross profit dollars because revenues were down because the sales. That's right. But that makes sense. Last question. I know these are probably shorter questions, but longer answers. The one thing that caught me, well, I don't know if I'll have to write a comment. But the 2.4 million in acquired will say SGNA or operating expenses from some of the acquired companies.
Roger Shannon: Is that permanent or some of that going to be transitionary as you integrate some of these companies? And how do we, how do we look at that? Yeah, I think we are certainly. And, you know, scrubbing that to work that down. So LHD. We have, we have identified, you know, we just, we've just had it a month or so. We've identified. You know, certain SGNA costs that we don't think are necessary.
Roger Shannon: I think we, you know, we explained before who we value acquisitions. We don't really build in a big takeout or stripping of costs because more often than not, you know, we bring. We need to add some sales or add some resources, but we see some things there on the jolly side kind of same thing. You know, jolly has a new manufacturing entity that's, you know, relative to you that they had just kind of stood up before we acquired them.
Roger Shannon: And in addition to the, the Italian operation, so we're looking for ways to make those more efficient, and then same thing with, you know, same thing with Pacific. A part of that, SGNA, was, you know, these integration marketing efforts. We've had these teams traveling, like all around the world to, you know, the Pacific people and jolly people, training our Vitam teams, training our US teams, US teams going to trade and sales shows in their markets.
Roger Shannon: So, you know, so we have seen, you know, an increase in selling expense as we work to get these integrated. Yeah, I mean, Jerry, some of this is an investment in the people that we have. Some of it to Roger's point of some, we have some low hanging fruit we can fix, but I mean, I'm talking to you from Sydney, Australia, so my, my, you know, the Chief Revenue Officer is in, is in Argentina right now.
Roger Shannon: So we're, you know, we're trying to, we're growing this thing and there will be some expense associated with that. But we are, I mean, Roger's got guys heading out to Romania shortly to sort of work through those things as well. So I would expect, you know, obviously sales, sales fixes everything, but there are some expenses here that we're looking at to drive down. No, that's fair. Listen, I'd rather have the infrastructure in place to drive sales than the other.
Roger Shannon: This is, the question was probably more, right, just understanding the model and, you know, progression, etc. Sure. But I totally understand. So I'll jump back in, in line, and, but thanks, guys. Thank you, Jerry. Thank you.
Matthew Galinko: Your next question for today is from Matthew Galenco with Maxim Group. Hey, thanks for taking my questions. Can you maybe talk about the pipeline with LHD? I guess the back line with LHD is it safe to assume you can convert that all, or is there a tradition that you sort of expect to kind of get peeled off from competitors or, you know, how do you expect that to go? So I guess, I guess what Roger and I and actually the entire executive team were surprised to learn was that this backlog issue is not necessarily unique to LHD, although obviously the business was not managed terribly well, and, you know, they got cut off from suppliers and that slowed things down.
Matthew Galinko: But the competitive environment in Germany is such that the delivery, there are delivery issues that our competitors are facing as well. So, so there's, I wanted to sort of that sort of one issue that we were all surprised about how, you know, we were not necessarily unique to us, you know, there are some, you know, we are looking hard at those backlog opportunities, and we want to make sure that, you know, we're not building something for something that somebody already decided to go walk away and do something else with, but by and large, we're not finding that.
Matthew Galinko: So what we're trying to do now, and, you know, because we're getting better delivery terms and we're getting discounts on purchases, you know, where we're delivering cash, you know, we're addressing things like what's the margin look like when, you know, in order was made, you know, over a year ago, when prices may have gone up. So we have that delicate, tight, tight wire to sort of walk with our customers, but we're finding ways to capture that margin, as I said, in other ways by, you know, you know, perhaps purchasing something, you know, COD and getting a discount as opposed to being on COD prior to our arrival and our balance sheet.
Matthew Galinko: So we're, we're, we're, we're, we're, we're, we're, we're, we're, we're, we are utilizing the gentleman that we, we acquired the eagle from, you know, turned out to be a very good talent pickup for us, and he's spending considerable time with our friends at LHD to work that backlog down. I would just add that of the LHD revenue that we mentioned in the call, Germany over the last year has only been about 8 million out of the bulk of the stream.
Matthew Galinko: Currently, he's coming from Australia. We have the turnout years as well as the services. So we see very significant upside in Germany because like we said, like Jim said, other competitors are having the same delivery lead time issues. So we're working to bring on additional capacity as well as in housing some capacity for the Asian markets into our China facility. So we think there's a lot of upside, you know, I've said before that if we just double the German, I'm going to be disappointed with that because I think there's significant upside in the country.
Matthew Galinko: Got it. Terrific. And I guess on the subject of Europe, you know, it sounds like you see opportunities in Europe that, you know, if you aren't capturing now, what kind of levers can you pull to to kind of go after that a little bit more effectively? So I'll say that on the industrial land, which is where we are legacy business in Europe is primarily that industrial business. We almost exclusively relied on our channel partners, on our distributors.
Matthew Galinko: And we actually have some very solid distributor relationships, particularly in the Benelux areas. And one of our larger distributors in that market recently merged with the French entity. And, you know, that has resulted we believe in some potential opportunity for us to expand our market share in Europe. So on the channel partner side, we got one, you know, one sort of real significant opportunity with a channel partner to drive that. The other is that our new industrial sales leader, Cameron Stokes, is really, you know, preaching, you know, end user engagement.
Matthew Galinko: And, you know, the entire executive team spent some considerable time about a week in Europe about a month ago in Poland with our European industrial sales team. And so the opportunities that we see are sort of a different sales style engaging with the end user along with our channel partner to sort of be the industry expert when it comes to selling the industrial side of the business. And, you know, it's going to take a little bit of time, I think, to do that.
Matthew Galinko: But, you know, I think we're starting to get the right people in place. We're certainly getting the right attitude. And then, of course, on the fire end with, with Eagle and with LAC and Jolly, you know, there's obviously opportunities for growth in Europe there. Yeah, I'd add one additional thing that we're doing there. And this is going on as we speak, is, you know, we've, we're addressing both some, you know, customer service delivery time challenges, as well as cost challenges.
Matthew Galinko: So, and led by our operations group, we are revamping how we do warehousing logistics and distribution to have significantly cut down on delivery time. And in the sales team, like Jim said, is what we want to do is kind of Translate the approach and model that we have in Latam into Europe, and I know our sales folks are working hard. We get that message across, and not just a message, but the training the approach, and then having the right products that we can deliver quickly to get to the customer.
Matthew Galinko: So, you know, like we said, I think there is opportunity, particularly with Kimberly Clark selling their PPE business to Ansel. I think that creates some displacement. We're getting that feedback already from our sales teams, and we're going to work that hard, as well as make it very easy to work with Lakeland, you know, those in terms of delivery, lead times, product availability, and customer service. Got it. Thanks. I guess my final question is around the opportunity to take the service maintenance business from LHD, and kind of expand the concept into North America or elsewhere.
Matthew Galinko: I think you touched on it in the prepare remarks, but I'm curious now that you've, you know, had the business for a few weeks, what, no, but do you expect to do it organically or and kind of what do you expect from that extension opportunity through the back half of the year?
Jim Jenkins: So, Matt, I'm actually in Sydney. I'm at the largest trade show in Australia, the fire trade show in Australia, AFAC, and I spent considerable time with our friends at LHD. I got a tour of the Sydney facility, and it is impressive. And, you know, I was so excited about it. I was sending, you know, videos to Roger and the team. This is scalable. You know, I spent some time with my chief revenue officer who has some experience on this and is prior to prior life.
Jim Jenkins: This is something that we would look at both organic and inorganic opportunities. You know, I know for a fact that our friends in Latin America and they're trying to do this, and we've already put them in touch with the LHD folks. And I would expect, you know, a dialogue there in the short term. I don't think, you know, these are not, you know, you don't just add water and proof that happens, right?
Jim Jenkins: It's going to take a little bit of time. But it clearly is in on our radar. And it is a, you know, for me, I do this as a significant opportunity in a space that's going to grow by virtue of the fact that that is the way that fire is trending these days, and that we have to decontaminate these suits. So these guys are not inhaling guys and gals, not inhaling carcinogens on a regular basis.
Jim Jenkins: And the easiest way to do that is the consistent cleaning of the garment. And so you're going to see that in all the markets all over the world. And it's still very early in the game on that. And we believe we've got an edge in some pretty, pretty interesting markets. If anything, I don't know which I saw in the software because it's that the software that LHD Australia has, which we also believe is scalable and deployable was kind of really, we do about the services that this was a really pleasant surprise as we, you know, as you dug into it.
Jim Jenkins: Yeah, I mean, there's a, that's another opportunity to monetize. And it's one that I think is probably a little bit longer term, you know, 12 to 18 months before we get our arms fully around that. But right now it is a total differentiator for LHD within the Australian market. And, you know, we want to be able to roll that out in other markets. James Jenkins. Got to just quick follow up on that.
Jim Jenkins: You mentioned more early innings on that, I guess, globally, but can you maybe touch on just what proportion of the fire equipment and tam is currently entering those sorts of contracts, your best guess of what the penetration of that opportunity is today. I couldn't, I could look, there's millions of suits all over the world that got to get cleaned. Each firefighter generally within those markets has two sets of those suits. So, I am not in a position at this point, Matt, to give you an actual number, but it is significant.
Jim Jenkins: And we've really only got our baby toe in the water right now. And, you know, I, you know, obviously we're going to do this smartly and methodically, but we'll do it with urgency. And I would expect that we would be waiting into the water here over the course of the next 12 months in other markets. Thanks. Once again, if you would like to ask a question, please press star one. At this time, there are no other questions in Q.
Jim Jenkins: Thank you, operator. Thank you all for joining us on today's call. We appreciate your continued interest in Lakeland. We look forward to building on the strong momentum Lakeland has and sharing our successes with you in fiscal 2025. Have a great day. Thank you. This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day.
Operator: Thank you for your participation.