Q1 2026 Lakeland Industries Inc Earnings Call
Good day and welcome to the Lake one fire and safety fiscal first quarter 2026 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 may make statements relating to our goals and objectives for future operations financial and business trends business prospects and expectations for future performance constitute forward looking statements under federal Securities Law.
Any such forward looking statements reflect management expectations based upon currently available information and are not guidelines are and are not guarantees of future performance and involve certain risks and uncertainties that are more fully described in our SEC filings.
Our actual results performance or achievements may differ materially from those expressed expressed in or implied by such forward looking statements under takes no obligation to update or revise any forward looking statements to reflect events or developments. After the date of this call.
On this call. We will also discuss financial measures derived from our financial statements that are not determined in accordance with U S GAAP, including adjusted EBITA, Excluding FX and adjusted EBITA, Excluding FX margin organic sales organic gross margin organic SG&A operating expenses and adjusted <unk>.
Operating expenses.
A reconciliation of each of the non-GAAP measures discussed on this call to the most directly comparable GAAP measures.
As presented in our earnings release.
The press release detailing these results crossed the wire. This afternoon and is available in the Investor Relations section of our company's website.
<unk> Dot Lakeland dotcom.
Speaker Change: At this time I would like to introduce your host for this call Lakeland fire and safety President Chief Executive Officer.
Speaker Change: Executive Chairman, Jim Jenkins, and Chief Finance Officer, and Secretary Roger Shannon.
Speaker Change: Mr. Jenkins the floor is yours.
Jim Jenkins: Thank you operator, and good afternoon, everyone.
Speaker Change: Thank you for joining us today to discuss the results of our fiscal 2026 first quarter ended April 32025.
Speaker Change: We continue to build on the momentum from our physical 2025 revenue growth in the first quarter of 2026, as we focus on accelerating growth within the fragmented 2 billion dollar fire protection sector, the largest global markets.
Speaker Change: Roger will go over the financials in more detail shortly so I'll provide you with a brief overview.
Speaker Change: We achieved record net sales of $46 7 million.
Speaker Change: [noise], representing a 29% year over year increase driven by a 100% increase in fire services products and the ongoing momentum from our recent acquisitions in the U S.
Speaker Change: Net sales increased 42% year over year to $22 5 million, including organic U S growth of $2 1 million or 15% and in Europe, Our net sales increased 102% year over year to $12 1 million.
Speaker Change: Gross profit as a percentage of net sales decreased to 33, 5% from 44, 6% for the comparable period.
Speaker Change: A year ago period robust growth in our organic and acquisition driven fire services vertical in the U S market was partially offset by weakness in Canada, and Latin America, where margins are typically above our corporate average. Additionally, as expected lower gross margins from our recent acquisitions, including the impact of purchase accounting.
Speaker Change: Continuing to reduce corporate gross margins adjusted.
Speaker Change: EBITDA excluding FX.
Speaker Change: Point 6 million, which was a decrease of $3 2 million compared with $3 8 million for the comparable year ago period.
Speaker Change: SG&A as reported increased $6 3 million from the first quarter of fiscal 2025, well or well organic cash SG&A increased year over year by $1 million, mostly driven by labor costs and outbound freight.
Speaker Change: Capital expenditures of $1 2 million principally related to.
Speaker Change: Capital investment in our new enterprise resource planning system.
Speaker Change: In December we began implementing a new company wide ERP system, which will enhance modernize and consolidate our disc brake companywide systems go for further support our growth and profitability.
Speaker Change: The first quarter reflected the full impact of tariff uncertainty and associated mitigation strategies, we have employed to build inventory our diversified manufacturing footprint makes us well equipped to adapt to shifting trade dynamics and minimize potential disruptions.
Speaker Change: This flipped flexibility enables us to maintain stability across our supply chain and production practices, even in the face of uncertainty.
Speaker Change: Even so we did see lower sales in Canada, and a delay in expected sales in Latin America, two of our higher margin geographies due to the tariff uncertainty.
Speaker Change: Our focus remains on straight thing customer relationships.
Speaker Change: Driving operational efficiency and maintaining sound financial stewardship.
Speaker Change: Our positioning within two relatively recession resistant sectors industrial inspire continues to provide us with a solid foundation.
Speaker Change: We are not entirely insulated from the uncertainty surrounding global tariff developments, but we are navigating this period with clear priorities thoughtful planning and strong confidence in our long term outlook to mitigate the effects of potential imposed tariffs net inventories increased by $3 1 million totaling $85 8 million as of April 32020.
Speaker Change: Five.
Speaker Change: To comment further on our tariff mitigation measures in North America, we employ cross certification.
Speaker Change: Lakeland, Mexico produced Fireeye turnout gear.
Speaker Change: Iridium for production in the U S already in turn out gear is currently manufactured in the U S.
Speaker Change: These facilities have the capacity to manufacture Lakeland brand of turnout gear, our Mexico facility. It's also becoming certified to produce viridian turned out here for the Canadian Latam markets. We have shared compliance center NFPA 1970 between our Mexico facility and viridian with technical documentation to facilitate cross production initiatives.
Speaker Change: Important to note that over 90% of our Mexico produced products, which fall under the provisions of the U S. N C. A trade agreement are exempt from additional tariffs.
Speaker Change: In Asia, we are exploring other lower tariff reasons for manufacturing industrial products, well communicated expected price increases or surcharges to channel partners for products made in Vietnam, and China. We are continuing to assess the possibility of manufacturing disposable products at our newly acquired U S manufacturing facilities or other lakeland facilities worldwide.
Speaker Change: We believe that we do not have a material risk of retaliatory tariffs from foreign entities as we manufacture only a limited set of products in the U S for non U S countries.
Speaker Change: Only a limited range of China produced products are imported into the U S.
Speaker Change: We also believe that garment manufacturing is not the primary focus of the administration's tariff policies.
Speaker Change: Our revenue was close to our internal expectations terrorist did cause regional delays in the industrial space with additional factors affecting revenue, including currency issues as well as the production issues and product offering updates at Pacific helmets.
Speaker Change: The tariff related delays were most apparent in Canada, and Latin America, although our outlook for these regions remains positive.
Speaker Change: We believe momentum in these markets will rebound once the uncertainty around tariffs to sites. Additionally, we continue to believe that a significant jolly fire boots order originally anticipated for shipping in Q2 of fiscal 'twenty five is still likely to materialize well timing remains subject to the Italian government's final procurement steps, we remain encouraged by ongoing engagement.
Speaker Change: Customers reaffirmed intend to proceed.
Speaker Change: As such we anticipate sequential gross growth and gross margins and adjusted EBITDA.
Speaker Change: Putting the impact of that FX in the second quarter aided by the improving global tariff environment and reduction in necessary mitigation strategies.
Speaker Change: Looking ahead into the remainder of fiscal year 2026, we remained focused on growing revenue in our fire services and industrial verticals implementing operating and manufacturing efficiencies to achieve higher margins significantly reducing operating expenses, while continuing to navigate tariff uncertainties. We are also continuing to execute on our strategic.
Speaker Change: The acquisition strategy.
Speaker Change: Realizing cross selling and operational synergies to accelerate growth while pursuing additional opportunities.
Speaker Change: In the fire suit rental decontamination and services business.
Speaker Change: We maintain a robust M&A pipeline and are in active conversations to explore new opportunities for further consolidating the fragmented fire market utilizing our strong balance sheet to support this acquisition strategy.
Speaker Change: With the four recently completed acquisitions, which added product line extension extensions innovative new products and expanded our global footprint. We are strongly positioned to grow our global head to toe fire portfolio and to generate long term value for our shareholders with that I'd like to pass the call to Roger to cover our financial results.
Roger Shannon: Thank you, Jim and Hello, everyone.
Roger Shannon: I'll provide a quick overview of our fiscal 2026 first quarter financials before diving into the details.
Roger Shannon: Revenue for the quarter grew $10 $4 million year over year to a record $46 $7 million, an increase of 29% compared to the first quarter fiscal 2025.
Roger Shannon: Consolidated gross margin decreased to 33, 5% from 44, 6% for the first quarter of fiscal 2025.
Roger Shannon: Operating expenses increased by $6 3 million or 45% from 14 million to $20 3 million in the first quarter of fiscal 2026, primarily due to inorganic growth acquisition expenses and higher organic operating expenses.
Roger Shannon: Net loss was $3 $9 million or <unk> 41 cents per basic share and diluted earnings per share for the first quarter of fiscal 2026 compared to net income.
Roger Shannon: At $1.7 million or 22 cents per basic and diluted earnings per share for the first quarter of fiscal 2025.
Roger Shannon: Adjusted EBITDA excluding FX.
Roger Shannon: <unk> <unk> $6 billion for the quarter.
Roger Shannon: Cash and cash equivalents were $18 6 million on April 32025, compared to $17 5 million on January 31 2025.
Roger Shannon: Looking at our first fiscal quarter of 2026, the increase in net sales was driven by 100% growth in the fire services segment.
Roger Shannon: Or a $10.5 million increase year over year.
Roger Shannon: Sales from our recent acquisitions accounted for $9 9 million of the increase while organic sales increased $600000 or 2% over the prior year.
Roger Shannon: Organic revenue increased $600000 or 2% to $36 $9 million.
Roger Shannon: Compared to $36 $3 million from the first quarter fiscal 2025 due to strong growth in the U S and Europe, partially offset by weakness in Latin America and Canada.
Roger Shannon: Within our important U S market, our organic fire services business grew $1 million or 32% year over year, and our U S. Industrial organic business grew $1.1 billion or nine 7%.
Roger Shannon: Gross profit for the first quarter of fiscal 2026 was $15 6 billion a decrease of <unk>.
Roger Shannon: $6 billion or 4% compared to $16 2 million for the first quarter of fiscal 2025.
Roger Shannon: The gross margin percentage decreased in the first quarter of fiscal 2026 due to a shift in the geographic revenue mix.
Roger Shannon: Bandwidth as expected lower margins in our acquired businesses, primarily due to the impacts of purchase accounting and higher manufacturing and freight costs.
Roger Shannon: Margins in the acquired businesses were impacted by the amortization of the write up in inventory as part of purchase accounting.
Roger Shannon: Our organic gross margin percentage decreased to 35, 9% from 44, 6% in the first quarter of fiscal 2026, primarily due to lower sales in our higher margin Latin American and Canadian markets.
Roger Shannon: As well as the impact of material price variance allocations.
Roger Shannon: Due to systems limitations, all of our purchase price variances compared to standard cost were reflected in cost of goods sold rather than partially capitalized into inventory.
Roger Shannon: We expect this impact to reverse in future quarters.
Roger Shannon: Operating expenses increased by $6 3 million or 45% from $14 million for the first quarter of fiscal 2025 to 20.
Roger Shannon: $23 million for the first quarter of fiscal 2026.
Roger Shannon: Operating expenses increased due to the acquisitions of Meridian in L. H D, which added $3 million to operating expenses as well as severance costs litigation expenses and selling expenses.
Roger Shannon: Adjusted operating expenses increased by $3 $3 million, primarily due to the operating expenses of acquired companies.
Roger Shannon: Operating loss was $4 6 million for the first quarter of fiscal 2026 compared to an operating profit of $2 2 million for the first quarter of fiscal 2025.
Roger Shannon: Primarily due to the aforementioned impacts.
Roger Shannon: Operating margins were negative nine 9% for the first quarter of fiscal 2020 compared to six 1% for the first quarter of fiscal 2025.
Roger Shannon: Net loss was $3 9 million or 41 cents earnings per of earnings per diluted share for the first quarter fiscal 2026 compared to net income of $1 7 billion or 22 cents of earnings per diluted share for the first quarter of fiscal 2025.
Roger Shannon: Adjusted EBITDA, excluding FX for the first quarter of fiscal year, 2026 was $6 million, a decrease of $3 $2 billion or 84% compared with $3 8 million.
Roger Shannon: For the first quarter of fiscal 2025.
Roger Shannon: The decrease was primarily driven by the previously mentioned materials purchased bearings as well as higher organic SG&A in year over year increase in profit and in the inventory, resulting from our tariff related inventory build during the quarter.
Roger Shannon: As of quarter end total profit and ending inventory was $1 $3 million.
Roger Shannon: Revenue for the trailing 12 months ended April 32025 was 177 $6 billion, an increase of $45 3 million or 34%.
Roger Shannon: Versus the Q1 fiscal 2025, TTM revenue of $132 3 million.
Roger Shannon: With our recent fire services acquisitions supporting liquids continued growth.
Roger Shannon: Trailing 12 month adjusted EBITDA, excluding the impacts of FX was $14 1 million compared to $16 5 million for the prior quarter's trailing 12 months.
Roger Shannon: The shortfall was the direct result of the revenue falling in key high margin regions. The impact the purchase variance described previously higher than expected SG&A expenses, including increased travel and trade show participation as.
Roger Shannon: As well as commission and incremental cost operating cost associated with the Meridian acquisition.
Roger Shannon: Considering that we completed four major acquisitions in the past 12 months, the full integration and implementation, which does take some time.
Roger Shannon: We believe those benefits will begin translating into even greater improved financial performance that will be recognized in coming quarters.
Roger Shannon: Gross margin percentage decreased in the first quarter of fiscal 2026 due to geographic revenue mix, coupled with lower margins in our acquired businesses higher manufacturing and freight costs.
Roger Shannon: Margins in the acquired businesses were impacted by the amortization of the inventory write up as part of purchase accounting.
Roger Shannon: Organic gross margin percentage decreased to 35, 9% from 44, 6% for the first quarter of fiscal 2026, primarily due to lower sales in our higher margin Latin American and Canadian markets and the material price variance allocations.
Roger Shannon: As we migrate to new systems, we expect to seamlessly insurer that purchase variances are properly identified and accounted for in alignment with inventory capitalization standards.
Roger Shannon: Mary effect to this variance relates to the timing of expense recognition rather than underlying operational performance and has introduced short term volatility into our gross margin reported.
Roger Shannon: We anticipate a corresponding improvement in gross margins in future quarters as this timing difference normalizes.
Roger Shannon: Adjusted EBITDA, excluding FX for the first quarter of fiscal 2026 was <unk> $6 million, a decrease of $3 $2 million or 84% compared with $3 $8 million for the first quarter of fiscal 2025.
Roger Shannon: The decrease was driven by this purchase variance for the full amount was expense through Cogs instead of being partially capitalized.
Roger Shannon: As I noted on the prior slide the $3 $2 million decrease in adjusted EBITDA. Excluding FX was driven by materials purchased variants, which will be reversed in subsequent quarters.
Roger Shannon: We anticipate sequential growth in gross margin and adjusted EBITDA, excluding FX in the second quarter.
Roger Shannon: Reviewing our performance for the first quarter, our most recent acquisition Meridian contributed $4 $4 million in revenue during the quarter.
Roger Shannon: Revenues for Eagle Pacific Helmets, Jolly LHC NBD totaled $15 6 billion.
Roger Shannon: We expect these to accelerate as we fulfill open orders and capitalize on cross selling opportunities, including Jollies substantial fire orders that were previously delayed to the first half of fiscal 2026.
Roger Shannon: Looking at our organic business, our Latin American operations decreased 12% in sales year over year due mainly to shipment timing.
Roger Shannon: And the previously mentioned impact of tariffs.
Roger Shannon: In Asia. However, we saw sales increased 15% year over year.
Roger Shannon: We're very excited about the new sales leadership that we have put in place in Asia.
Roger Shannon: We're encouraged by the growth, we're seeing in both China, and the new Asian markets outside of China.
Roger Shannon: Our European revenue include the Eagle Jolly and our recently acquired <unk> business grew by $6 1 million or 102% to $12 1 million.
Roger Shannon: We continue to see very good sales opportunities in Europe and are committed to its growth trajectory.
Roger Shannon: Our U S revenue increased 42% to $22 $5 million driven by continued growth in Lakeland fire services business as well as a $1 1 million or 10% increase in our U S industrials business.
Roger Shannon: Regarding product mix for the first quarter, our fire services business grew $10 5 million or a 100% versus the same period last year and.
Roger Shannon: And represents 45% of total revenue driven by our recent LH D acquisition.
Roger Shannon: For quarter of Viridian sales and organic gains in the U S.
Roger Shannon: And from Eagle as we start to see gains from our hedging strategy.
Roger Shannon: For our industrial product lines disposables represented 28% of revenue for the quarter.
Roger Shannon: Our chemicals represented 13%.
Roger Shannon: The remainder of our industrial products, including Fr High performance and how it is accounted for 14% of sales.
Roger Shannon: Now turning to the balance sheet.
Roger Shannon: Lakeland ended the quarter with cash and cash equivalents of approximately $18 $6 million in long term debt of $24 $7 million.
Roger Shannon: This compares to $17 5 million in cash and $16 4 million long term debt as of January 31, 2020.
Roger Shannon: Five.
Roger Shannon: As of April 32025, we had borrowings of $19 $8 million outstanding under the revolving credit facility.
Roger Shannon: With an additional $20 2 million of available credit under the loan agreement.
Roger Shannon: We were in compliance with all credit facility covenants.
Roger Shannon: Net cash used in operating activities was $4 8 million in the three months ended April 32025, compared to net cash provided $300000 in the three months ended.
Roger Shannon: April 32020 for the.
Roger Shannon: The increase was driven by a net loss of $3 $9 million.
Roger Shannon: An increase in working capital of $3 million offset by noncash charges of $2 $1 billion.
Roger Shannon: Capital expenditures were $1 $2 million for the three months ended April 32025, primarily related to capital investment in our new ERP system.
Roger Shannon: At the end of Q1 inventory was $85 8 billion up from $82 7 million at the end of Q4 of fiscal year 2025, due to inventory buildup in preparation for the forecasted increase in sales in the first half of fiscal 2026, the delayed shipment of a <unk>.
Roger Shannon: Large boot order from Jolly and tariff mitigation initiatives.
Roger Shannon: Inventory of acquired companies totaled $15 million.
Roger Shannon: Year over year, we saw an increase in our organic inventory of $14 $8 million versus the quarter ended April 32024.
Roger Shannon: Organic finished goods were $37 $2 million in the first quarter of fiscal 2026 nine.
Roger Shannon: $9 $4 billion year over year, and up $700000 quarter over quarter.
Roger Shannon: Organic raw materials for $32 $2 million in first quarter of fiscal 2026 up $4 9 million year over year, and up $1 2 million quarter over quarter.
Roger Shannon: Okay.
Roger Shannon: Despite margin pressure in Q1, we remain confident in our fiscal year outlook, including expected revenue between $210 million to $220 million.
Roger Shannon: Due to lower margins and higher operating expenses in the first quarter, we are trending towards the lower end of our previously issued FY 2026, adjusted EBITDA, excluding FX guidance of $24 million to $29 million.
Roger Shannon: This reflects near term order delays and uncertainty related to tariffs.
Roger Shannon: Looking further ahead, we believe our cost discipline acquisition strategy and operational improvements will position the company for accelerated growth over the next three to four years.
Roger Shannon: With that overview I'd like to turn the call back over to Jim before we begin taking questions.
Jim Jenkins: Thank you Roger in conclusion, we continued to demonstrate strong net sales growth driven by 100% year over year increase in our fire services and strong growth in both the U S and in Europe, a 42% at 102% respectively.
Roger Shannon: Our near term strategy is focused on growing topline revenue and our fire services and industrial verticals and implementing operating and manufacturing efficiencies to achieve higher margins, while navigating the ongoing environment surrounding tariff uncertainties long term our strategy is to grow both our fire services and industrial PPE verticals with our strategically located <unk>.
Roger Shannon: Any owned capital light model, focusing on operating and manufacturing efficiencies to achieve higher margins with positioning to grow faster than the market served our acquisition pipeline remains strong and we are engaged engaged in active discussions aligned with our growth strategy.
Roger Shannon: We maintain a fortified balance sheet from our $46 million oversubscribed capital raise in January and have identified up to $4 million in cash savings, excluding the meridian consolidation with.
Roger Shannon: With our expectation of continued top line revenue growth and our fire services and industrial verticals combined with operating and manufacturing efficiencies. We are maintaining our fiscal year 2026 guidance range for revenue of $210 million to $220 million and adjusted EBITDA, Excluding FX and the lower end of our range of 24 million to 29.
Roger Shannon: Yeah.
Roger Shannon: As we look toward the future. We are confident that our continued focus on cost discipline targeted acquisitions and operational enhancements will serve as key growth drivers over the next three to four years as we scale, we anticipate steady expansion in EBIT margins moving into the mid to high teens range over the next three to five years driven by improved efficiencies.
Roger Shannon: A stronger product mix and disciplined pricing execution across the platform.
Roger Shannon: With that we will now open the call for questions operator.
Roger Shannon: Okay.
Roger Shannon: Thank you well now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad copper.
Roger Shannon: Confirmation tone will indicate your line is in the question queue. You May press star two if you'd 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.
Roger Shannon: One moment, please while we poll for questions.
Operator: Our first question is from Gerry Sweeney with Roth capital partners.
Gerry Sweeney: Good afternoon, Jim and Roger Thanks for taking my call.
Operator: Sure.
Speaker Change: A lot of information out there I had a few.
Speaker Change: Few questions I wanted to dig into.
Speaker Change: A couple of areas I mean, specifically around gross margins a couple of different things moving there but.
Speaker Change: I think he talked about purchase variance in amortization bright up in some of the.
Operator: Products sold and that May reverse itself over time.
Operator: Could you give a little bit more details to how much of a headwind that was this quarter and what we how the next couple of quarters are going to develop and.
Operator: When do we see sort of the net benefit coming through.
Operator: Yes, no. Thanks, Bill reversal side, yes, yes.
Speaker Change: Yes, Sir.
Operator: No problem.
Operator: As is.
Operator: You likely saw on the graph, we were talking about the bar chart that the impact to EBITDA.
Operator: The total increase to manufacturing cost was close to.
Speaker Change: Yes, $3 million impact too.
Speaker Change: Adjusted EBITDA than we think.
Speaker Change: You know a fairly significant part of that relates to.
Speaker Change: You have full flow through.
Speaker Change: The purchase variance into Cogs, rather than being capitalized into inventory to get assistance related issue as we related is just not possible at <unk>.
Speaker Change: Detailed product by product level, two to break that out at the level that is required for Q4 auditors for financial statements.
Speaker Change: And similarly on the.
Speaker Change: The purchase accounting.
Speaker Change: We're in early days of purchase accounting with Meridian.
Speaker Change: We're still kind of still going through that now.
Speaker Change: The good news on that one is they tend to have.
Speaker Change: Fairly light in finished goods because it is at the made to order.
Speaker Change: And we're coming at Tennant toward the end of.
Speaker Change: The purchase accounting impact on.
Speaker Change: Anjali and so you could imagine would be at about halfway through with LHC, we're kind of about halfway to the middle.
Speaker Change: So.
Speaker Change: So kind of as a as I think about that thinking about the numbers I think the impact was.
Speaker Change: Somewhere in the.
Speaker Change: <unk>.
Speaker Change: $500000 range or about.
Speaker Change: About a 1% impact to gross margins.
Speaker Change: That is separate from the.
Speaker Change: The purchase accounting purchase accounting it was about a 1% impact to gross margins and like I said, we've got about eight months left on <unk>.
Speaker Change: <unk> and we're about halfway through LDH D. The.
Speaker Change: The impact from the cost areas.
Speaker Change: Words, you expect larger than that.
Speaker Change: Yes.
Speaker Change: Two to three margin points I would estimate and.
Speaker Change: In addition to that as I mentioned in the notes.
Speaker Change: Well it has not been as large as it had been in some quarters, we did have.
Speaker Change: A slight headwind again in the property and ending inventory compared to last quarter, where we had a big reversal in <unk>.
Speaker Change: It relates to getting to a build of inventory as part of our tariff mitigation strategies.
Speaker Change: Got it Gary Gary Thats. The good news is that is it on the on that purchase variance that should reverse in Q2 and Q3 as inventories sold through.
Speaker Change: So, we'll see sort of a natural lift that we're thinking that.
Speaker Change: The purchase accounting, we're still working our way through that.
Speaker Change: Got you, but part of that.
Speaker Change: Headwind, which you built the inventory in.
Speaker Change: For future sales.
Speaker Change: Cost some of the issues got it yes, correct correct.
Speaker Change: What about on the Opex side, So SG&A was or operating costs were $20 billion plus I think that was probably higher than a lot of people had modeled on the street.
Speaker Change: Again, a lot of numbers being thrown around here so.
Speaker Change: Anything in there that is one time or we can adjust I saw some adjustments at the end but.
Speaker Change: Didn't have time to go through with a fine tooth comb, but maybe help me where SG&A can kind of.
Speaker Change: Fallout.
Speaker Change: Yes, a few things our travel expenses were.
Speaker Change: Considerably with tier one and we expect those too.
Speaker Change: The back off pretty simply we had the FDIC fire show in.
Speaker Change: The first quarter.
Speaker Change: And quite frankly, there was just.
Speaker Change: Significant amount of travel by the executive team really all around the world as we were.
Speaker Change: Business the different acquisition sites manufacturing sites.
Speaker Change: And.
Speaker Change: That's not necessarily what's going to taper off but we've put some additional measures in place and that's part of.
Speaker Change: That $4 million in costs that we've identified that we're focusing on potential cost cutting.
Speaker Change: Other things that.
Speaker Change: We're up in the quarter.
Speaker Change:
Speaker Change: G&A labor.
Speaker Change: Up a bit year over year again kind of getting the right people in the right places.
Speaker Change: <unk> freight freight number was up.
Speaker Change: Quite a bit related to again inventory movements related to tariff strategies, we would kind of expect that to sell.
Speaker Change: More normalized going forward.
Terry: Yes Terry.
Terry: Yes, Roger if I could.
Terry: Add on the freight.
Terry: There was sort of a window.
Terry: When there was a loosening on the tariffs that that there was a buildup of freight demand and the freight costs came in abnormally high for that period of time, we're working through that now on the procurement front.
Terry: To reduce that for us in the coming quarters, and we've got a strategy to do that and frankly. There is also just going to be at a natural lowering of that as this starts to normalize.
Terry: Got it I think just last Friday, we had.
Terry: We had.
Terry: Increases from the acquired company Opex, having just closed on two of those where we're kind of going through that.
Terry: As we speak as part of as part of the integration.
Terry: Rationalization process. So that's that's really starting to ramp up.
Terry: So that will kind of be ongoing over the next couple of quarters.
Terry: Okay.
Terry: You've identified $4 million in sort of cost out I think that does that come from the opex side or is that a mix of copper.
Terry: Opex and cost control.
Terry: That is for the Opex.
Terry: That's the Opex.
Terry: That said.
Terry: The SG&A discipline, I think optimizing procurement streamlining overhead.
Terry: And then consolidating some of our acquired companies.
Speaker Change: Got it some of it is just natural.
Speaker Change: Consolidation.
Speaker Change: One last question I'll jump back in line.
Speaker Change: When I turn it over to the cost side, obviously fire those opportunities for you can you.
Speaker Change: You, maybe give us a little detail how things have gone on growth was up obviously.
Speaker Change: Highlighted that some of it was certainly for acquisition, but really interested in sort of maybe the head to toe strategy bundling what are we seeing on that front and just opportunities as we move forward.
Speaker Change: Oh, I'll start and Roger you can you can jump in but I mean.
Speaker Change: No.
Speaker Change: Sure.
Speaker Change: We've got much greater engagement with our customers, we're seeing a lot more opportunities.
Speaker Change: We're seeing opportunities with some of the larger places that we wouldn't have expected too.
Speaker Change: And I think Thats, primarily as a result of.
Speaker Change: Sort of a focus that we that we adopted from our meridian acquisition with their glove strategy of ingredient sales.
Speaker Change: You don't want to be bothered with that the real hassle, sometimes of a major metro market selling gloves into that market is the easiest thing to do and gloves firefighters use gloves.
Speaker Change: And as a matter of a few months taken they can burn through them and I need another pair and the viridian glob. It's obviously something that is very well regarded in the marketplace.
Speaker Change: I think I'd mentioned, they've got Dallas.
Speaker Change: That customer L. A fire department as a customer so.
Speaker Change: Theres, some theres, some big opportunities and even some of you might think could be.
Speaker Change: Sorry about.
Speaker Change: Lower cost commodity type products. So that is going very well, we brought in a new leader into specific elements and with Barry Phillips has strong product management skill set.
Speaker Change: I am expecting to see some real growth out of that we are seeing real opportunities and a lot of different spaces all over the world.
Speaker Change: Just just closed.
Speaker Change: Opportunity and with the.
Speaker Change: The Korean fire Department, nothing nothing huge but thats, obviously, a nice market for us and one that we haven't really been terribly active in.
Speaker Change: So yes, there is that there is a there's a lot of steps being taken.
Speaker Change: As we start pruning.
Speaker Change: The opportunities and being a little bit more laser focused on those.
Speaker Change: Specific helmet being one of them.
Speaker Change: Obviously LH D. We've got.
Speaker Change: No no surprise to us when we took over the backlog that we had and some of that customer issues that we had to attend to we're seeing some.
Speaker Change: Some lift with that.
Speaker Change: And then in our own our own name named brand.
Speaker Change: Lakeland, we're seeing.
Speaker Change: Significant opportunities. Unfortunately, just a couple of really cool once we can't talk about dairy but.
Speaker Change: Because we had to have it let us talk about them, yet, but we're hoping that in the coming weeks, we've been able to make some announcements about some some pretty cool developments where.
Speaker Change: We've gotten some wins.
Speaker Change: And there is developments.
Speaker Change: All wrapped around that sort of head to toe whether gloves given.
Speaker Change: They are absolutely I had to tell their head to toe and they're partnering with you might you might see an opportunity where we have a specific element of iridium turnout gear.
Speaker Change: And even if iridium boot.
Speaker Change: And already in clubs or or.
Speaker Change: Lakeland turn out gear in viridian glass so.
Speaker Change: The use of the portfolio is something that we've got several arrows in our quiver.
Speaker Change: Greater engagement with our customers more targeted focus on channel partners.
Speaker Change: And then Roger and his team with the deal desk.
Speaker Change: Sort of sort of an operational real time visibility for regions to see.
Speaker Change: Where we might be have some flexibility in margin is what we're putting together a full head to toe offerings.
Speaker Change: Okay got you, Okay, and what's the one thing I would tell you about those.
Speaker Change: One thing I would point out that debt.
Speaker Change: As creating possibly some timing within the current year is as an evolution of another NFPA standard 1970, 19 said one so there is.
Speaker Change: There is that change is going to be happening later this year. So.
Speaker Change: Yes, we had anecdotally I think we've been seeing some hold off on.
Speaker Change: <unk> in the U S kind of waiting until.
Speaker Change: The new standard does come out later this year, it's not it didn't go negative.
Speaker Change: But I think anecdotally we've been hearing that there is some desire to hold off I know were in viridian facilities.
Speaker Change: We're gearing up in lot of cases, it's a matter of kind of getting inventory staged up into the point that the.
Speaker Change: Labor will goes in and we don't want to put the.
Speaker Change: 1970 label and when it needs to be labeled $19 71, so really it's kind of a matter of managing that inventory tightly of what's going to be sold under the current standard university to be prepared for the new standard.
Speaker Change: So I hear you that we are we are driving hard to get those certifications and it's really a backup right now the backlog is the net is that U L, which is a certifying body.
Roger Shannon: But we've got to Roger's point, you want to be the one that you want to get that certification and be an early mover on that because.
Speaker Change: It's sort of like I liken it to the new model a car if you come out and and.
Speaker Change: In August do you want to buy your 2026 do you want to buy a 2025 model and you know the 2026 that are coming out in October you might wait so we want to make sure that we've got that lined up and that certification ready so that when the firefighters as what im looking for the 1970 certification not the old one.
Speaker Change: We have it ready to go so we've got our products in front of UL.
Speaker Change: To get those certifications as a function of hearing from them.
Speaker Change: Got it okay I appreciate it thanks guys.
Speaker Change: Yeah.
Speaker Change: Our next question is from Mike <unk> with D. A davidson.
Speaker Change: Yes, hi, good afternoon. Good afternoon, hi, Thanks for taking my question.
Speaker Change: If I read everything correctly I heard your comments.
Speaker Change: The kind of buy online organic growth in the quarter I think it was 2% if I'm mistaken correctly.
Speaker Change: But can you update your update us on your expectations for organic growth for the full year.
Speaker Change: Is it still.
Speaker Change: High single digits or has that changed at all.
Speaker Change: It is and you're like I mentioned in the call. We saw we saw a really strong organic growth in the U S almost 10% growth.
Speaker Change: In our industrial product.
Speaker Change: Well as in our fire products, where we saw the drop off as you mentioned the comments was in Latam, where we had a 12%.
Speaker Change: Year over year decrease in Canada. So those are two higher margin countries to start with so right off the bat.
Speaker Change: While they were both down.
Speaker Change: Excuse me that also impacted the gross margin.
Speaker Change: As a company because they were they tend to be higher gross margin.
Speaker Change: So you would have two.
Speaker Change: 2% across the company.
Speaker Change: Kind of given the headwinds we saw in Canada and then.
Speaker Change: And especially in the Tam was very encouraging very encouraging to see.
Speaker Change: The growth returning to the U S.
Speaker Change: And like we said in the prepared remarks, we're also very enthusiastic about the results and the turnaround we're seeing in our Asian market.
Speaker Change: Okay.
Speaker Change: And then to reach that full year goal and really your overall your overall revenue growth for the year.
Speaker Change: Do you need to have that Jolly order, that's been kind of hung up here shifts during the year or is that kind of a bonus on top of what you've already thinking you could be getting.
Speaker Change: Look I'm actually going to meet with the Italian government next week.
Speaker Change: Wanted to thank them for their relationship because it's been a long standing relationship and to better understand the timing of the delivery of that.
Speaker Change: Engaging with them for.
Speaker Change: For the last.
Speaker Change: Several months all indications are positive I think I may have said this on the last call but.
Speaker Change: The issue isn't with anything related to Jolly the entire procurement procurement division of the Ministry of interior and Italy. They were under investigation. So they've moved people out and moved new people in and it was sort of a corruption investigation.
Speaker Change: So youre dealing with a whole subset of new individuals' within the procurement space.
Speaker Change: The senior official whom I'm going to meet with next week.
Speaker Change: We remain very optimistic there is no indication that any of the about the quality of the food or any I mean, we've been they've been a long standing traditional customer. It's just a function of we're not dealing with a whole new subset of people within the government all of whom have communicated to us their satisfaction with the product. It's a function right now of dealing with intern.
Speaker Change: Sort of politics that is an important component of our.
Speaker Change: Go forward forecast, but I have every confidence in our ability to be able to have that materialized.
Speaker Change: Okay perfect.
Speaker Change: And maybe lastly, just on the cadence of how the rest of the year is going to play out when EBITDA perspective, and some of the accounting.
Speaker Change: Machinations that happened here in the first quarter.
Speaker Change: Does it.
Speaker Change: Completely reverse in <unk> or is there some kind of a gradual rollout was going to happen for the rest of the year with kind of what was lost here at this game for the rest of the year.
Speaker Change: Yes, we really we already had it you're kind of increasing quarter over quarter.
Speaker Change: Part of it will be the.
Speaker Change: Kind of seeing the impact of that.
Speaker Change: The material purchase price variance versus the standard starting to work itself out and that's a matter of kind of working through that inventory.
Speaker Change: Part of it will be kind of picking up the momentum.
Speaker Change: Cost containment and cost cutting efforts that we have and then of course kind of see in the.
Speaker Change: The timing of the Latam Canadian in an ongoing U S.
Speaker Change: Organic shipment skew accelerating so I.
Speaker Change: I would I would discourage putting it all into the second quarter, we already had it kind of increasing quarter over quarter, but we do expect an improvement in the second quarter.
Speaker Change: Okay I appreciate the commentary I'll leave it there. Thank you.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: Our next question is from Mark Smith with Lake Street capital markets.
Speaker Change: Hi, guys first off just want to look at the balance sheet, a little bit here on inventories. So just kind of your comfort level with where inventories are.
Speaker Change: Maybe it's even needs to be more build as we think about tariff mitigation.
Speaker Change:
Speaker Change: Uh huh.
Speaker Change: Speaking for myself I don't.
Speaker Change: Really believe that there is a kind of overwhelming increase for for more build you know I think we positioned ourselves well for the inventory that we bring in from China, which is primarily the clean room, we've talked about that.
Speaker Change: Previous quarter of how we had begun or sorry at our year end call.
Speaker Change: Todd.
Speaker Change: Several weeks ago about how we begin staging building that.
Speaker Change: On the inventory from Vietnam.
Speaker Change: Believe there will continue to be kind of progress toward a deal with that country. I know the administration has said that theyre not.
Speaker Change: It's not a matter of clothing shirts that they're concerned about bringing that back to the U S. So we do expect that environment to improve and likely will settle at around the 10% level for for Vietnam. So we kind of got our handle got our arms around that.
Speaker Change: And those conversations with the.
Speaker Change: Customers is that's being passed along.
Speaker Change: Yes, I guess the wildcard at this point.
Speaker Change: What's going to happen with the EU of course, our Jolly boots are made in.
Speaker Change: In Romania, we are.
Speaker Change: It's still expecting that NFPA, North American fire to be rolled out in early fall of this year into the U S market.
Speaker Change: As.
Speaker Change: Certainly been slower than we originally expected, but expect that an early call.
Speaker Change: And we really don't see anything big concern from the.
Speaker Change: Specific in New Zealand, so we'd expect that to probably stated 8% range as well.
Speaker Change: So I would like to see the inventory start to work down.
Speaker Change: That's what that's where I am Roger.
Speaker Change: We've got we've obviously made the strategic purchase or when we brought in strategically.
Speaker Change: <unk>.
Speaker Change: That critical environment piece.
Speaker Change: We will continue to drive that down.
Speaker Change: I know, we've got several opportunities in the pipeline and I'm very confident about.
Speaker Change: And that I think are going to help us win of that down.
Speaker Change: Over the course of the coming quarters. So.
Speaker Change: And then of course, we fired up our Vietnam.
Speaker Change: Clean room capacity, so that we're not we're no longer reliant on.
Speaker Change: China for that critical.
Speaker Change: Critical environment piece.
Speaker Change: Okay.
Speaker Change: Next I wanted to dig back into gross margin a little bit just kind of looking at the Bar chart. You guys have in your presentation here manufacturing costs being kind of the biggest headwind obviously a lot of things happening there, but I'm curious if you can just kind of breakout just okay.
Speaker Change: Call it organic kind of headwinds there.
Speaker Change: Labor increased cost of materials.
Speaker Change: What's kind of hurting there and what you can do that.
Speaker Change: Kind of help fix that a little bit and including price increases and what you maybe have done or looking at as far as price.
Speaker Change: Yes.
Speaker Change: Part of it is this.
Speaker Change: Kind of the systems.
Speaker Change: Systems challenge of the.
Speaker Change: The primary and so what we mean by that is we use under our current system we.
Speaker Change: We use a standard costing system and with the kind of with the tariff situation, we've been adding more vendors I think theres been a fairly large increase the number of suppliers and vendors and theirs.
Speaker Change: Standards not necessarily set up on those.
Speaker Change: There's various kicks out because.
Speaker Change: Are challenged and tenant.
Speaker Change: Accurately identify between what goes in cards or get us inventory is pretty much all flow through Cogs. So that's.
Speaker Change: That's part of it.
Speaker Change: We mentioned in gross margins the purchase accounting was about.
Speaker Change: Was about.
Speaker Change: One margin.
Speaker Change: Margin point.
Speaker Change: Property into your inventory.
Speaker Change: Year over year impact was about one margin point, but what I would add to that is like I said in prepared comments, we've got about $1 3 billion.
Speaker Change: And profit and unique inventory so there was a.
Speaker Change: Q1 of last year was a.
Speaker Change: I believe the suit.
Speaker Change: 200000 health is 300000 hurt this time, so about half a million dollar swing year over year.
Speaker Change: But we did see a large increase or decrease coming out of that build last year, but we are monitoring that quarter to quarter.
Speaker Change: And.
Speaker Change: Do you have $1 3 million the property inventory that will.
Speaker Change: We're still kind of flushed through.
Speaker Change: And then the other part as you kind of really digging in and the acquired company gross margins and Thats something that is.
Speaker Change: It really started up in earnest.
Speaker Change: We're having conversations about opportunities with meridian to improve their margin we've talked about that.
Speaker Change: Our new managing director at Pacific Theres, certainly been some challenges with manufacturing and with Opex at specifics that <unk> been on the job about.
Speaker Change: Five weeks and Theyre coming in next week for kind of a preliminary readout.
Speaker Change: With us and there is some there's others as well with <unk>.
Speaker Change: <unk>, we're still not where we need to do from a gross margin perspective.
Speaker Change: And production efficiency in the factory. So all those are initiatives that are underway.
Speaker Change: Okay.
Speaker Change: My last question, just digging a little deeper on the <unk>.
Speaker Change: SG&A here I'm curious as we look at the breakdown that you guys gave on kind of organic cash SG&A.
Speaker Change: It's just up a little bit year over year I'm curious about the inorganic cash SG&A. It seems like these acquired companies are pretty clean.
Speaker Change: But are there opportunities to cut at all or to get more efficiencies within SG&A on some of these acquired compete their apps.
Speaker Change: There absolutely is I mean.
Speaker Change: <unk>, Arkansas today at one of them already in form of Iridium facilities now our facility, where they manufacturer gloves and I've spent the entire day with the team.
Speaker Change: Our North American global VP of manufacturing looking into efficiencies within the plant and there are several that we can achieve in addition, we're looking at we've talked about this before consolidating <unk> into two operations, probably shorter term and then three.
Speaker Change: One longer term so.
Speaker Change: There are some opportunities here too.
Speaker Change: Squeeze some significant savings out over the short term medium term and long term.
Speaker Change: Great. Thank you.
Speaker Change: This concludes the question and answer session I would now like to turn the call over to Mr. Jenkins for his closing remarks.
Mr. Jenkins: Thank you operator, thank you all for joining us for today's call and thank you to our customers and distributor partners worldwide for trusting us with your lives and safety Lakeland continues to be well positioned for long term growth.
Speaker Change: If you're unable to answer any of your questions. Today. Please reach out to our IR firm MZ group, who will be more than happy to assist and for those of you attending the upcoming Roth London Conference June 24th through the 26, we look forward to seeing you there.
Speaker Change: Okay.
Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.