Lakeland Industries (LAKE) 17 Dec 182019 Q3 Earnings call transcript

Greeting, and welcome to Lakeland's Third Quarter Fiscal Year 2019 Financial Results. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I'll now turn the conference over to your host Christopher Ryan, CEO.

Good afternoon to you all, and thank you for joining our fiscal 2019 third quarter financial results conference call. opening financial the results. provide and of to our on going statements status on operations We're The so respond that will we call then may to be your opened up questions.

than consecutive sight remarks. although trends, an in the company's modest within growth third in my year-over-year. industrial XXXX our We're primary issues this fiscal was less end, onto favorable global formal the end are Now fourth quarter although quarter in reason To of growth and understandable, now in revenues, only we ideal the are our is reported for disappointed that is performance for control. this

sales, Our system XXXX, for expense day was commenced of enterprise to we operating our massive resource ERP the flow other cash planning third usage the our what require had or significant of fiscal financial sales. and the reporting challenges continue first XXXX undertaking. including implementation. anticipated. and and quarter, The well X, tracking and to gross costing, such expected exceeded a ERP we negatively August to issues order by amidst profit, be as impacted data System as expenses implementation But inputs, effort operational lead On

inventory At the filed process. comes we that As System a the systematically and time calendar and as off. market, year to quarter sentiment working amid close, of reporting with information, expect the stock stock a orders reporting management. to improved flow operational to third our and ERP in sold shares a the overall result, for to Ultimately, cash ensure we yield delayed agility of common results our while complete pessimistic accuracy, and financial an manually

to implementation and was we by XXXX. past to and we as training inventory the completed and anticipation as had in reflects we are expected a be the ERP through quarter, to negative believe similar, to during on the inventory train unable current quarter, demand most the expect we U.S. System. which April Upon extent revenues end our difficult of anticipate reduced to elevated While April disruptions. system completion, increase fiscal the in certain global utilization We XXXX third normalized diminished experiencing. true now a were we In the the XXXX that the expenses level impact our is as we although otherwise third period, process orders on that reduce to we costly workforce are of of we efficient continue

and there cleared while taken be quarter customer. of smaller to orders with to some Some return committing have have may competitors to over to fiscal the in isolated start We our orders where us, a long standing waiting few a our to lost million customers instances yet have we X fourth been shipped.

revenue million approximately have backlog by order $X $X.X essentially caused historically only significantly year improvement over recognition quarter Our in marginal revenue the been U.S. reduced the would total which third just quarter our System estimated higher XX% revenue revenue, our by growth in The reported and of or brought nearly million third period. an prior delay have shipping ERP than

traction the which increased from quarter reported presented recently X% a consolidated product about and down on Despite our revenues get has ERP from to a operate we been door reduce on have reported shifts by We the the [optics] the in still prior year. dollars, year-over-year, our and double out international the by implemented basket backlog. sales are challenges [ph] basis, of countries order in XX% strong. in yet U.S. sales in the our A basis, currencies

future operations third maintain metrics focus investing to on our in so were country the in quarter, while However, profitability strategies. continue the all major profitable we growth

manufacturing the digital a the growth. positions system position manufacturing as of technology used to we marketing websites strong We since Teri about company's well deployments now operations our Cash have the in capital speak operating XXX Earlier as global have announced in more our launching We will in of upgraded for remarks. cash evolution. continued our staff our Vietnam. beginning our planned been the prepared in the and for X deploying Vietnam cash new fiscal and today approaching regions. company expenditures strategically includes investments year

new our advance distributors, channels in experience an As for user issued our be investors was the touching launch this the the partners, and stated morning, press websites daily. release sites who will of customers, provides media,

that partners progressive now will innovative represent better includes their respective defense and robust are and act website resources leverage product of offerings educational to most fields customers the some e-commerce research, critical safety. organizations of while improving be able new they in line the world's Amazon which also of our first The Our and part Lakeland's in environments marketing worker digital as investments, our platform. launches in

breakeven for market, below million gaining this The us. $XXX are XX discussed added calendar XXXX. million targeting we we on to a at who typically five offerings, prepare overall. begin continued Presently, new and to where our in million which cleanroom use a market $XX our and in in pharma, more $X three quarter, nearly five and XXXX, them. sales deployed utility countries, salespeople is global we market China Amazon is for months for India, are least in we have distribution big $X.X we It sales as believe for have people demand. we momentum. relatively Mexico, invested but we equipment and and disposable global We million calendar Last the were Among in sales Vietnam takes X meet global salespeople in we in we their quotas marketing added garment to opportunity

in year it this fiscal than issues, We mentioning market is outbreak. the by fiscal end by terrific to annualized are of I a is the about given year. we've in other tariff believe been Ebola million current revenues the year, worth the this and on of less macro from $X track end achieve - market the which Among

sent China and the apparel On are the there tariffs in to tariff presently, no front, U.S. made for

no between these of have introduced, operations or production are there lot present international between manufacturing were significant So to headed countries. two the exposure tariffs we in and they have taken If one U.S., which Vietnam, we on China, U.S. which to saber and other a now in be current the the has rattling to was no nations. Vietnam

This the half the is More region spreading cases reported have regarding tensions than suffered the outbreak the northeastern from vaccinations, but we are clothing, orders seen is no enquiries in long The beginning vaccinated, of exacerbating aid armed the local been on end Congo reported the conflict, although militants, been cases second which have outbreak With that providers in Ebola people XXX largest feel death. in sight the availability and no since country, and Democratic to there healthcare time. Ebola since been residents. our of record. meaningful On has received. August professionals, and of outbreak, Republic resulting between yet with limited protective has nearly have XX,XXX

in remain will of market. built X conclusion, the of arise. XXXX first position very In and by through encouraged prepared lot strong momentum need We to the months our should the a we fiscal have be assist

and quarter balance sustainable in continue made our the longer we have forward top call toward to second more as will to of and drive look Hunt, concludes improvement look we make XXXX on term progress line of company's line fiscal efforts to the financial the we review results, bottom well to Teri will I As in a That beyond, my our now the performance. thorough as capitalizing remarks. CFO, pass to provide results.

The take period. share sector to from to somewhat global million the third million developing rebounded just Overall Chris. and ability earlier just mover sales nations having Net over operations $XX in oil while gas addresses fiscal from in you, volume early continues under our Thank to October review $XX economic a slightly my XXXX. following U.S. the more growth, of the XX, quarter benefit grew continuing from internationally. advantage in market sales year 'XX ended and

margin $X.X of partially XX.X% up the prior at U.S. prior the sales to able sales our Latin fiscal or ship backlog. majority in million from in the year. in with X% customers within compared to million million Sales level third mix included outside third the fiscal or to XX.X% the year fully as were his As as $X company the this our chemical U.S. of we decreased select $X.X as were in Mexico year. XX% year $XX.X disposable the flat markets million, China This Chris FR by to family, in sales million, same declined declined million an million certain and XX.X% increased in dollar The to quarter this year-over-year X% larger for for Europe, of last from were the to company's to processes and by in U.S. XXXX the world. would've the the million mentioned period. today, the continues quarter the ERP the gloves despite and increased The 'XX. functional increase X% from X% international in product a year combined and and a although $X.X and $X.X Domestic offset higher coming groups backlog million. the 'XX for for about USD. been compared to growth was of in were to Among in operations, to sales U.S. $XX.X million of remarks decline total against XX.X% year-over-year X.X% if at foreign impacted currencies around the revenues decreased disposables, Russia and lesser to achieved products and sales was the period. decline Sales sales region. quarter highest $X.X Rim compared including constraint in as XX.X% selling as with Kazakhstan sales profit sales million. gain was Asia quarter, gross euro $X.X against XX% products million extent X% in Gross fiscal international $X.X third $X.X revenue U.K., reflects for garments. price million certain the the by sales period in Pacific XX.X% at the America our in to increases Total in $X.X sales $XX.X this our [ph] XX and million, $X.X sales last were compared of the

and expenses are However, operations the sales force expenses salaries temporary management the expanded margin profit ERP million travel quarter Operating increase for transaction to XX% year's lower had across in result lower as equity We an by and in U.S. increased as nearly implementation, of key the of increased in and supply million second associated chain with and Vietnam, on expense over increased flat implementation. $X.X the to within associated higher bad were paying this compensation. globally, gross the and for an in continues last ERP expenses in the improvements volumes the increase the infrastructure distribution company reduction but expense currency to main the compounded computer was various reason debt effect, collections $X.X account year-over-year allowance from increase favorable quarter countries. million with operating slower sales customers factors quarter a primarily and The related $X.X in third year. of the staff activities in a

expense tax period primary $X.X last aforementioned, quarter as on $X.X share revenues October margins million X.X% ended per year non-GAAP quarter a positive operations Net incurred prior the primarily this of X $X quarter negative million the down year. as from the of growth to $X.X quarter. compared $X.X the was The expenses, manufacturing and quarter in primarily when the geographic out. quarter. to 'XX, XX, the ended of for in the such and same prior a facilities results quarter of XX.X% and global for for October the the measure, share pay $X.X result third foreign of America taxes Adjusted which for All operations compared for operating as in XX, with including the decreased prior million our with XX, in company ended local to out basis produced capital $X interest, operating $X.XX was $X.X the attributable on to months $X.X was those or relate in $X.X for China. compared $X.X cash local third have was be was due lower third salespeople, third required in expenditures cost ERP million additional Income income 'XX. for The stock-based compared profitability year. a same phased QX Operating profitable $X.X million 'XX, we in non-cash Cash build initiatives, period. depreciation paid year. The country and the manufacturing in compared company includes income regions fiscal global million 'XX. approximately the or slide increase per the where were in fiscal are for continues local earnings $X.X year was a $X.XX quarter three are spending million and three October in expenditures from 'XX, are on million from also in Vietnam months million a free income IT The for of quarter with Latin with in to 'XX investment primarily million compared the paid As on to the months million infrastructure. with taxes, sub-taxes certain taxes currency. before 'XX. fiscal operating increased India measure, Adjusted and in quarter Vietnam for Capital and compensation, flow, million foreign during the GAAP to roll FY prior million for amortization, the

million the for million ERP all $XX.X 'XX in from beginning the Working from increased as to at up $X.X fiscal credit approximately accommodate which $XX.X was cash $XX.X in inventories $XX.X decreased million in under start concludes expenditures capital capital the $X.X million revolving That zero, XX, million, $X.X was and our $XX.X January end. to the million, equivalents fiscal the turn 'XX. my stood Total growth $X from to million of the at Cash year total million October call million, of our begin operator at in same last borrowings down beginning million 'XX, expect balance to XX, 'XX. fiscal the outstanding at switchover U.S., the We be fiscal session. up fiscal XX, year. October at of remarks. at $XX the 'XX, Q&A At I'll $XX.X million facility level to System increased continued the fiscal year from back the the from year. to debt

questions. comes question proceed Please line of [Operator Dave from King Capital. Instructions] Our first the from Roth with your

Good good Chris Thanks. Teri. afternoon, and evening and

goods the the impact. ERP items the you for expenses amount First, and dollar cost and expecting be what in And then QX? importantly, Do were a during sort on impact those few we outsize questions have then of sold in should quarter? what more cost operating QX line of of

terms customers can't of and place We elevated or million. probably things, didn't their quantifiable. perfectly not identify the It's $X.X of Obviously, in labor those expenses neighborhood didn't some who the orders. temp types overtime, of in call

$X.X QX? In you million think?

that QX be extent in say QX, into in But it think lesser in that will I just and and But and daily yes. markedly curve. we're even not a more even even less will our people QX of QX. routines an signing they Yes, instead become their efficient a more that, maybe to it's constant less on routine - of extent being lesser as half become learning in get

sort me like But like might what revenue revenue then question the you do And was XX it everything point question Okay. have in quarter. QX you in close longer the yet it all? it impact that be you QX in experiencing so are tougher in to guess, cancellations, from those when impact sounds than no impact, guess answer. we I a growth one And now you're That that - do if that we helps. are on then of then the of expect to order is, bigger negative and this expect then at or I next so like terms on there sounds that?

middle XX% of second we're shift. the ago, - in couple operations XX%, We on shift and warehouse our just in or second efficiency backlog. know, our pickup saw seeing weeks our you with of in put the We a QX about

seeing U.S. million a end be $X.X versus decrease the by are we that normal backlog of at management's Normal significant in So the more like is beginning the backlog. estimate we'll at the million or $X back It's a QX. in of so.

any I'm any there customers yet of out to Have is orders I of trying gauge have guess then way are the And cancelled? what getting lost? seen seen what I I'm too - you to have figure customers? early they've some is, that those you to may you after cancelled? many are to those figure think back out come is lost you of tell is do Or guess trying where how

key sales go that it the - most the with our getting touch confident that they all U.S. force somewhere feels inventory feedback are sales to for this. us are U.S. the had issues constant a But customers part, customers through else, of was staying short did key management solution the that positive in the Our with the that resolve. customers term for and staying in

Okay, I pressure signs switching you how's guess me, seeing It there. of out You're I macro in sounds like from Chris, about then hearing China, a still that is Are great And pretty lot any demand personal demand in there, guess particular? to more whatsoever? just protective, one hear. gears. strong

numbers Well, are are those this were way China tough the is certainly but down, not out there, in say. Their they their numbers numbers. putting up slowing though quarter. to

is no best weakness signs end can… but numbers that from of good you up Putting your Okay.

the seeing We're weakness. not

to are build churning years one quarters. over which we the XX and In next see are there, right XXX out the the market, they now. service plants prepared them is new well, fact, last nuclear quarter was quite growing one nuclear best of we place can their Chinese The because

because service of they for you time of disposable us that's nuclear growth use once disposable garments. terms they clothing maintenance real a go through a year, market loads in when every to have that's So our container plant, a

taking hear. and to for questions rest for of Thanks my the the good Okay, good year. luck

Okay. Thank you.

[Operator Craig-Hallum. comes Instructions] with Please Alex Our of from line the next proceed Fuhrman your question. from question

just implementation I'm And taking the trying question. got of of my product here. big shifting sounds Thanks where implementation, you impact to sense, gross a third Great. give increase next better there's this you moving for the a product, lot like a where quarter. in should get Can us settles you ERP give you've can when It second pieces year? Obviously, a took then you're ERP sense recently. your of sense of producing with margin. a half dust the on a all out us of shake gross margin diversifying price mix, your had the

our the with should the guys these that start stuff the to up I or products. me, of - ERP only to ended starts February will could first these is negative. start much more April thing you looking they zero we operating now, when settled through quarter if be more the think But it a we lot of fast quarter were will being can probably probably that - in revenues by is is pretty March, the from gross it's writing are breakeven than done XX%, terms real margins of do sometime or of settles what start the it being profit. I actually than all be really positive then need and is ERP in producing the right contributing really The starts in it information if such That's moving of which we mean, Well, a salaries, of XX, April or sales down it getting start to new first XX, by plug then introduce something we that's would can - end if how a with the margin January ask which day margins higher generating out ERP way. out the we at well, the and start even dust reports, the marketing see move. should I to breaking the - it negative, products, XX. we plus a And returning the okay? about have majority and whatever And real

tariff over And working more sourcing, in in for things also you then plays no the guys to issue? that you your thinking Thanks. your versus situation the Vietnam India. I about on Is Great. in you helpful. your were how production assuming of time remarks have Vietnam, just talk big would mentioned perspective capabilities cost about just bit a in China how now shift of if tougher to from prepared intention the most production and Can markets China, and them That’s production those is that you in tariff get to think out? a tariff little play out, there regardless

expect now its Okay. a the India. okay? garments, right the in United issue. to almost We disposable position basic supply of But is tariff States grow Vietnam don't XXX% can We

and of to haven't the We we're could to China about at But them we yes. have be on China China. But growing that we're in had up and rest yes of we if to don't Vietnam are happened, our we going labor to in India compared - products it down proposed used because XXX if what Productivity supply yet. States been XXXX. no see we supply of Vietnam's it trying the get We've world. XX% United Vietnam, there. is even XXX long half have people yet. way term, the into it so now, been switch - there tariffs is could it But about to the and

And China. China. really age would productivity and Chinese wages into and of Vietnamese whereas of in lowering new got the the the are close coming pretty the to China - I in you've wages getting is what productivity they half are productivity half group So the Vietnam it's what the say, increased in lowering

you took do do and by close margins So it say, And a your in in we you disposables, Vietnam, to have a million what increase in million labor pretty - $X you lot cutting million cost. gross cheaper a you cases, your $X on investment. save if really $X you can

not full once. at happening next all XXX% by Vietnam. in it's operational, of should course, that XXX year hit Of person, But July efficiency, we

that of in under the to then point be It's That negative. XX And some Russia years But like the labor too. So It'll significantly margin selling advantages gross tariff, Vietnam about the of probably where But it's government, unbridled India. XX And than million labor. can India's will just I much India be our - grow, business we more purely will the importantly, lower. the grow XXX it will of do labor. as a next source as domestically from places amount that is growing tariffs in half of has probably good the people is significantly market. increase difficult an It's years where sales is view. market But cheaper about, as different is what, than of our where the in that's just in only into labor even age there at next reduce Vietnam. and we a for more mean, for there labor XX Vietnam. just that so again endless China. are

sales to on par. XXX on delivering And increase. typical System. They than make salesmen salesmen And basically getting of and the have much a products, mistake expenses products, it's with operating just lot are which that that really really introduction these and a the time we'll the basically out with the can't margins to product our concentrate you there getting and the these of new scared the introduction. higher products. And is normal - want we're going sales gross yard savings a which Basically, labor it's under certain dash new margins to ERP are high marketing lot the control, time on - okay, up jump be gate So of little are because where a to first new margins. from in the of a which those carry

Chris. really That’s Thank you, Great. helpful.

from line from question. comes Please next question Our of proceed Pete James. with Muckerman the Raymond your

- Ryan, Thank been you the you. to a got Hey good have couple. all. answered, my of Mr. questions afternoon I've you but can majority

did, given if have if guys it that's the that? not, behind if rationale And apologize You buyback, But that you what on in is kind and you are going case. tumult or the did missed the I the initiated all of given you the the through, not the and transformation market touch buyback? I

We initiate which I can, legal, today. and buyback days will is with two we business the understand after

I see.

follow A a these the doors? curious. or the life inside when the or just things behind on a when - sales can stands you of that instance, little Is fires… shed light calls in going was of like out that that. on know the the and Okay. ringing berserk, is color like are people flu would on and China to phone question these - you comes a that obviously California, I Can Ebola, on I'm where tell us it be, for there kind where more the things the just bit Lakeland little - outbound - or places the more fires in mean, in swine - was day the the making Lakeland I

picked result We of a the fires. a those of picked lot accounts. up west in as Yes. up And business new some we significant

importantly, More their when garments. some is California rain they under now it's of sort control, need they out beginning season this they the fire they in to that and doing inventory new figure are when comes and do

summer. in business should we spring pickup see be significant and some in So -

next They'll firefighters they'll which most for just their said, are then inventories summer and home. or summer. season, basically fire at of So starts start getting as I in the spring look the ordering the in

going guess my spring. a stuff, of to be nice used come orders lot this have they So and the are rather

You also brought another that something was - piece of question? up there

reports calls was in mind huts people I'm Ebola the mentioned nightmare. I from weaponize - is all? decided the curious and receiving on - has color volunteers little rebel which widely care. of kind read to going, burning earlier what it's - I've It they is a - mean, killing been this conversation numbing they're they're to this field - the sense just and the I they've there my to - are are and No. just these disease, how are that unfortunate – that just many a that where in on that's little doctors your is over you respects the starting killing anyway, mean, that is groups

to a it's the why really are get aid like see and that. that's there's Without agencies only right they various disease available the spreading People vaccines. beginning can't That Doctors it spreading. beginning to now. because stop we're inquiries Well, strains, But workers. - they aid We're ringing and They're the minor American for from problem, And the that's Borders. is workers, European vaccines with simply XXX,XXX killing without from increase.

So will We'll cities, there I if spread. then when to probably And guess, then a which to it bursting large see. gets be point, continue probably garments. a is for demand it entering more it starts

right. you. Thank All

Ladies and management back of gentlemen, remarks. for the the to And to call we've reached closing would the turn I end like session. over question-and-answer

call. participation your XXXX appreciative Fiscal Lakeland's conference financial on third quarter we Well, Okay. results

We efficient, to financial right the forging ERP opportunities world, Our mix team believe hard the our leadership extremely products, working staffing is system around more expanded more global have manufacturing a at company the global ahead. and presence on growth our profitable of higher enterprise. and into implementing and strength, capitalize we

for market growth is our but speech, to bye really shape, deliver continued are will my get I shareholders. want this thank gain. Good which profitability, good value sales, we not and pain, no no thought, very believe well We if you in in into and positioned you. and share for

you. Thank

conference. today's concludes This

Thank disconnect your this may time. You for lines participation. you your at