Lakeland Industries Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gerry Sweeney - ROTH MKM - Analyst : Good morning, afternoon, evening as per where you guys are, but thanks for taking the call, Jim and Roger. I wanted to start on the revenue side. Obviously, it sounds as though we'll just see 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 miss came from -- I'll call it LineDrive 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 LineDrive? James Jenkins - Lakeland Industries Inc - Executive Chairman of the Board, Acting President and Chief Executive Officer I'm going to give that one to Roger.

Question: Gerry Sweeney - ROTH MKM - Analyst : Got it. Very good, Roger. James Jenkins - Lakeland Industries Inc - Executive Chairman of the Board, Acting President and Chief Executive Officer Jerry, look, we -- as the relationship develops for LineDrive, we're starting to get more visibility to their pipeline approach and the way they work their pipeline. And we are -- our team having weekly meetings with them. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 4:00PM, LAKE.OQ - Q2 2025 Lakeland Industries Inc Earnings Call Roger and I and our sales leaders are having, you know, check-ins. I have a monthly call with the LineDrive's CEO. And then we have 90 days sort of look back. So we're kind of laser focused at this point on ensuring that that LineDrive relationship meets our expectations. And they have every reason to want to beat them as well. I mean, they don't make money if they don't grow this thing. So I think we're all rowing in the same direction right now. And I think, as Roger said, 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.

Question: Gerry Sweeney - ROTH MKM - Analyst : Okay, that's fair. Switching gears just maybe go to Roger as well gross margins. Just want to understand, there's probably a couple different buckets here. We had some impact from integration with some, I think, the profits -- inventory and quarter profits, which are probably the least understanding. And then new there's another bucket, which is probably the few -- where there are future opportunities, but optimization. But just want to understand how gross margins maybe qualitatively rebound over 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 on

Question: Gerry Sweeney - ROTH MKM - Analyst : Got it. So that sort of gets to the point of my question on the gross margin 3.96% (sic ¡ see slide 12, "39.6%") The inventory -- that happens every quarter, but there was this and that abnormally large. So it certainly impacted the gross margin. How long we also get less gross profit dollars because revenues were down because of the sales. But that makes sense. And last question, I know these are probably shorter questions, but longer answers. Yeah, the one thing that caught me, well, the $2.4 million in acquired will say, SG&A or operating expenses from some of the acquired companies. Is that permanent or is some of that going to be transitionary as you integrate some of these companies in? And how do we look at that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 4:00PM, LAKE.OQ - Q2 2025 Lakeland Industries Inc Earnings Call

Question: Gerry Sweeney - ROTH MKM - Analyst : No, that's fair. Listen, I'd rather have the infrastructure in place to drive sales than the others. The question was probably more around just understanding the model and progression and center. But I totally understand. So I'll jump back in line. Thanks, guys.

Question: Matthew Galinko - Maxim Group - Analyst : Thanks for taking my questions. Can you maybe talk about the pipeline with LH -- I guess the backlog with LHD? Is it safe to assume you can convert that or is there attrition that you sort of expect to come, get peeled off from competitors or how do you keep that going? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 4:00PM, LAKE.OQ - Q2 2025 Lakeland Industries Inc Earnings Call James Jenkins - Lakeland Industries Inc - Executive Chairman of the Board, Acting President and Chief Executive Officer 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 they got cut off from suppliers and that slowed things down. But the competitive environment in Germany is such that the delivery issues that our competitors are facing as well. So I wanted to sort of -- that's sort of one issue that we were all surprised about how -- was necessarily unique to us. There are some. We are looking hard at those our backlog opportunities, and we want to make sure that we're not building something that suddenly somebody already decided to go -- walk away and do something else with. But by and large, we're not finding that. So what we're trying to do now and because we're getting better delivery terms and we're getting discounts on purchases that where we're delivering cash, we're addressing things like what's the margin look like when you don't order was made over a year ago when prices may have gone up. So we have that delicate 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 perhaps purchasing something, COD and getting a discount as opposed to being on COD prior to our arrival in our balance sheet. So we're whittling down that. We're aggressively going after it. We are utilizing the gentleman that we acquired the Eagle from, turned out to be very good talent pickup for us. And he is spending considerable time with our friends at LHD to work that backlog down. I hope that answers your question.

Question: Matthew Galinko - Maxim Group - Analyst : Got it. Terrific. And I guess on the subject of Europe, it sounds like you see opportunities in Europe. I know you are in capturing now. What kind of levers can you pull to kind of go after that a little bit more effectively? James Jenkins - Lakeland Industries Inc - Executive Chairman of the Board, Acting President and Chief Executive Officer So I'll say that, on the industrial side, which is where we -- our legacy business in Europe is primarily that industrial business. We almost exclusively relied on our channel partners, our distributors. 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 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'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, it's really, you know, pre-paying end user engagement. And 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 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 4:00PM, LAKE.OQ - Q2 2025 Lakeland Industries Inc Earnings Call opportunities that we see are a sort of a different sales style from engaging with the end user, along with our channel partner to sort be the industry expert when it comes to selling the industrial side of the business. And it could 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. And then, of course, on the fire end, with Eagle and with LSD and Jolly, and there's obviously opportunities for growth in Europe there.

Question: Matthew Galinko - Maxim Group - Analyst : Got it. Thanks. And I guess my final question is around the opportunity to take the service maintenance business from LHD and kind of expand the concept in North America or elsewhere. I think you touched on it in the prepared remarks, but I'm curious now that you've had the business for a few weeks, do you expect to do it organically or inorganically? And kind of what do you stepped up from that expansion opportunity through the back half of the year? James Jenkins - Lakeland Industries Inc - Executive Chairman of the Board, Acting President and Chief Executive Officer So I am actually in Sydney, I met the largest trade show in Australia, the fire tradeshow in Australia in fact. And I spent considerable time with our friends at LHD. I got a tour of the Sydney facility, and it is impressive. And I was so excited about. I was sending videos to Roger and the team. This is scalable. I spent some time with my Chief Revenue Officer who has some experience on this in his prior life. This is a something that we would look at both organic and inorganic opportunities. I know for a fact that our friends in Latin America, they're trying to do this. And we've already put them in touch with the LHD folks and I would expect a dialogue there in the short term. I don't think -- these are not -- you don't just add water and proof that happens, right? It's going to take a little bit of time. But it clearly isn't on our radar. And it is a, you know for me -- I view 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 girls are not inhaling carcinogens on a regular basis. And the easiest way to do that is the consistent cleaning of the garments. And so you're going to see that in all of 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 and some pretty interesting markets. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 4:00PM, LAKE.OQ - Q2 2025 Lakeland Industries Inc Earnings Call

Question: Matthew Galinko - Maxim Group - Analyst : Got it. Just a quick follow-up on that. You mentioned are early innings on that, I guess globally. But can you maybe touch on just what proportion of the fire equipment TAM is currently entering those sorts of contracts. Your best guess of kind of what the penetration of that opportunity is today. James Jenkins - Lakeland Industries Inc - Executive Chairman of the Board, Acting President and Chief Executive Officer I couldn't. Look, there's millions of suites 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. And we've really only got our baby toe in the water right now. 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 wading into the water here over the course of next 12 months in other markets.