Lakeland(LAKE) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved record net sales of $46.7 million, representing a 29% year-over-year increase driven by a 100% increase in fire services products [4][14] - Consolidated gross margin decreased to 33.5% from 44.6% for the comparable period [15][18] - Net loss was$ 3.9 million or $0.41 per share compared to net income of$ 1.7 million or $0.22 per share for the same period last year [16][20] - Adjusted EBITDA excluding FX was$ 600,000, a decrease of $3.2 million or 84% compared to the prior year [20][24] Business Line Data and Key Metrics Changes - Fire services segment grew by 100% year-over-year, contributing$ 10.5 million to the revenue increase [16][26] - Organic revenue increased by $600,000 or 2% to$ 36.9 million, with strong growth in the U.S. and Europe, partially offset by declines in Latin America and Canada [17][26] - U.S. net sales increased 42% year-over-year to $22.5 million, while European sales increased 102% to$ 12.1 million [5][26] Market Data and Key Metrics Changes - Organic fire services business in the U.S. grew by $1 million or 32% year-over-year, while the U.S. industrial organic business grew by$ 1.1 million or 9.7% [17] - Latin American operations saw a 12% decrease in sales year-over-year, while sales in Asia increased by 15% [25][68] Company Strategy and Development Direction - The company is focused on accelerating growth within the fragmented $2 billion fire protection sector and enhancing operational efficiencies [4][12] - A new company-wide SAP ERP system is being implemented to modernize and consolidate systems [7] - The company maintains a robust M&A pipeline and is engaged in active discussions to explore new opportunities for further consolidating the fire market [12][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating tariff uncertainties and expects sequential growth in gross margins and adjusted EBITDA in the second quarter [12][30] - The company anticipates revenue between$ 210 million to $220 million for the fiscal year, trending towards the lower end of previously issued adjusted EBITDA guidance [30][33] - Management highlighted the importance of customer relationships and operational efficiency as key focus areas [8][32] Other Important Information - Capital expenditures for the quarter were$ 1.2 million, primarily related to the new ERP system [6][28] - Inventory increased to $85.8 million due to tariff mitigation strategies and preparation for forecasted sales increases [8][29] Q&A Session Summary Question: Can you provide more details on the impact of purchase variance and amortization on gross margins? - The total increase to manufacturing costs was close to$ 3 million impacting adjusted EBITDA, with purchase variance estimated to have a 2-3 margin point impact [40][41] Question: What are the expectations for operating expenses moving forward? - Travel expenses were up significantly in Q1 but are expected to taper off, with additional measures in place to identify $4 million in cost savings [46][52] Question: How is the head-to-toe strategy progressing? - The company is seeing greater engagement and opportunities, particularly with larger clients, and is focused on bundling products for comprehensive offerings [55][60]