Lakeland Industries (LAKE) 8 Sep 222023 Q2 Earnings call transcript

Good day, and welcome to the Lakeland Industries Fiscal 2023 Second Quarter Financial Results Conference Call. All lines have been placed on a listen-only mode and the floor will be opened 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 management's expectations for a future performance that constitute forward-looking statements under federal securities laws. Any such forward-looking statements reflect management’s expectations based upon currently available information 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 or implied by such forward-looking statements. to or revise of developments obligation to forward-looking this no events reflect after undertake update any or statements call. We the date

from non-GAAP are non-GAAP call, financial EBITDA, this with in the for of adjusted to GAAP directly today's I we our introduce earnings the EBITDA to most discuss measures A including At measures Industries' During margin reconciliation this Chief and and each will U.S. GAAP, on statements host income. presented determined not call this Executive Roberson. measure you release. derived is floor that EBITDA, Officer, comparable the in net yours. accordance time, Lakeland your discussed financial like would our Charlie is to Roberson, Mr. call, of

Good and I'm Financial Officer, all for operator. by Chief you, you afternoon, Operating joining. Lakeland's thank Allen and today joined Thank Dillard.

year-over-year of gross another highlighted you by release, Lakeland As delivered and growth afternoon's press in sequential improvement saw of XX.X%. revenue quarter and this quarter-over-quarter margin a

to million, by continue up second for are manufacturing profile compared and profitability our to our execute sequentially X.X% last was we quarter strategic and which continue maintain to quarter $XX.X second our as year. revenue. designed the grow increased performance Revenue the volumes up driven initiatives, on X.X% We to

are our margins term our we of Importantly, profit of in quarter as XX%, evidence had the continued the strong target business threshold long that era. is another margin above we profitability gross post-COVID with which grow further sustainable

growth that held trends. the satisfied, of to over milestones during we quarter, are back potential the results, performance our macroeconomic recognizing industry and relative developing proud we're despite overall headwinds our our revenue While not achieved

likely These chain present markets and end to European challenges least at weakening are be Asian economic to and our headwinds the the sales disruptions have where segment. ‘XX. Industrial impacted significant supply costs of COVID rising by Our labor lockdowns particularly extend been in shortages through fiscal performance painful within and that environment, economic continues energy

on market is ability the respond term. end, short-term this provide China cross point, channel fire, are operating been our we has While on and with the implementation it to targets. are we a consistent confident XX from product of In delay path anticipate been of inventory deliver to the across this to To remain goals. long July. to partners slower or our high certain that in technical global flooding garments and indications focused With prudent these lockdowns that market. in Concurrent information increased administrative financial a with expediting the There term in by global environment and and assets increasing and operating expected U.S. in regional in of to which the for will these our shift pace impacted markets from in human of margin anticipated expenses this has the to will exception these XX maintain sector, we demand strategic operating our bringing segments distribution deliveries is beginning to the reduced the believe opportunity events we long with to lines. The stemming accelerating of the at development, our activity present burdened garment long provide to on environment. near oil believe industrial that currents tell the term still be we our recession calendar tightening from also lockdowns potential These transportation from are have days area supply both U.S. levels than focus added and the U.S. term industrial to performance expense general benefit navigating forward year. complexities, albeit we achieve ranging disposable from more our sales Clearly, excess. critical us of manufactured signs at growth that high environment we greatest margin Allen remarks. and segment market and beginning channel still originally markets stable we we received with gas for on manufacturing that these said sales and are growth initiatives, is the recovery At are issues his effort the associated of the U.S. by disposable to more with rates and

a Our current demand floods. Lakeland and to lead capitalize times longer levels these place increased respond to due in inventory solid to position on

of balance ability fiscal the to appear deliver economic the the growth impact and softening Lakeland to while team's further confident be to conditions in our Looking I'm the and industry year, in near-term, core markets. may our in

the to particularly over Additionally, initiatives, of results. provide sales into insight Allen? make should progress on to and now various long and enhance as the strategic capabilities continue Allen manufacturing, I'll our run. operational the more force investment and pass Allen we our in more to the in described our company's financial strengthening will operations which detail, only call

Thanks, Charlie, everyone. and afternoon, good

and of XX% Lakeland Domestic On and or results of pandemic total compares metrics of of $XX.X the quarter progress first for in the sustainable era. basis As $XX.X second the the sales total million of were consolidated were net of revenues. financial total revenues the sales million to This with or in a XX% total in million or quarter of reflect sales profitability $XX.X sequential XXXX. million. key were continue of $XX.X of domestic quarter or fiscal sales sales international Charlie XX% as highlighted international our fiscal make XXXX, $XX.X post million the second profile XX%

$XXX,XXX. revenue or a for reflected a our period by second the in year XX% the On XXXX Europe were the and negatively and coupled of approximately with domestic in quarter total both The geographic fiscal fluctuations environment America. million fiscal XXXX, of Latin compared to basis, U.S. compared $XX.X ago were quarter sales million to impacted strong sales consolidated in While softening revenues. international demand revenues $XX.X revenues XX% shift or total currency

of terms of year for we disposables particularly a mix total saw a by ago in mix In margin standpoint in period. compared the year to products, growth for was quarter. The from quarter XX% product shift shift as revenues in period XX% the represented positive non-disposable margin XX% of quarter, for which XX% driven versus total the our the reached higher ago the chemical, revenues

signaling all broader channel to our towards inventory As is stock domestic showing normalization. progress inventory levels, customers, it data decreasing relates levels industry across

as certain also in from that chain is become well with larger shifting orders our containers direct China, We more increased with customers, seeing for to are suppliers. acute are more which material the have taken reliable as COVID-related as raw suppliers customers our orders headwinds place lockdowns other recent have further supply their global that evidence

Importantly, complicated customers strategy proactive supply Lakeland’s the has raw while global chain to as inventory us build finished maintaining navigate and finished a material needed. ability environment positioned to to goods deliver both to

quarter quarters. of XX.X% fiscal for ago. the was to distribution in diminish inventory predominantly over and next Gross a second We first the sales XX.X% few year fiscal channel, quarter profit up XX.X% XXXX net made expect is over of a products continue as percentage disposable compared for which to XXXX the to levels the stock as

benefited gross our our from disposable quarter, container larger were the increase in from During customers, business as an decreased. several direct margin U.S. even of revenues

quarter the million reported million We second last profit cost. in to year. transportation XXXX as QX the million quarter $X.X $X.X second Lakeland realize also of operating XXXX began benefits $X.X lower compared to of and

expenditures normal per ensure per $X.XX and Operating com increased delivered As of income QX share a net diluted managing currency we on and negatively long and to yuan. $X.XX and basic mindful and during to debt such to last goals. up compares and or year. run but $X.X the the rent per share travel $X.XX Operating controllable non-GAAP due share expenses were $X.XX and the million per was our $X.XX operating also show per QX basic diluted impacted in X.X% path rate, and down $XXX,XXX from administrative as invest in aggressive for Chinese share Lakeland by quarter ‘XX $X.XX in XXXX are technology bad the the trade diluted to expenses quarter. XX.X% per primarily targeted prior This or result, of million are to from provision. We our term second margin operations, basic second period. our operating or for a margins fluctuations certain in expenses X.X% related quarter, the for opportunistically a $X and above in year

this for its evaluation flexibility a investment operations and prioritizing XX-Q Lakeland an our our in both reassessed considered long currently quarter, across to its capital term strategies resources repatriate the requirements during was assessment Board cash of of balance China. As the and capital million held The global disclosed in $XX updated approved plan due approximately in our strategies, filing, our Chinese to footprint.

million result this we deferred a of quarter. recorded As and the taxes tax withholding planned repatriation, discrete $X a provision in second

of flexibility this an primarily relate ended significantly for facilities for respectively. Vietnam action in had the capital purchases $XXX,XXX Capital were the India, expenditures enhancement infrastructure allocation capital office. months $XXX,XXX for relates Mexico, manufacturing new our more our global to this impact three net allow and IT corporate XXXX July as XX, While and plans. future and and income Year-to-date, our will to our capital our six headquarters quarter, on expenditures it

for We $X and to expect these investments we capital approximately million Vietnam. be continue full year expenditures to fiscal the in make as Mexico

balance capital XX, million compared XX, Moving $XXX.X XXXX. XXXX January million to sheet. $XXX.X the July at to at was Working

million July of Our end to year XX XXXX. million at compared $XX.X balance was $XX.X cash the the fiscal at

we inventory most the we with build part quarter, added of million raw of of quarter, the $X discussed our inventory management materials. as last representing During strategy

supply is such earlier, already developing Charlie chain finished demand manufacturing the flooding persisted U.S. stock access challenges and to materials for have lead lines. inventory and our supply discussed address I regional available surge adequate raw program and adequate have ensure intended as to to times, capacity have and to events an free we customer alluded of decrease As product

flatten While be in this time, have levels half goals begin essentially we we this times to inventory fiscal significant. lead are see to to for our continue reached declining year. and second expect the we At benefiting from cost, stocking transportation

at We facilities. and available end credit continue to have from of to $XX up debt we million quarter the the bank no have

repurchased fiscal XXXX. the company July the approximately million authorization current common program. have stock now of under XX, the as $X.X repurchase second We XXXX XXX,XXX under or During million just remaining over quarter, $X.X of its shares

to initiatives. strategic like key an on our I'd made the progress provide Now update on

our cleanroom quarter, operations our facilities and in During sales with the began our our on technology build operations in finalized in of Vietnam second manufacturing progress manufacturing make the we developed on for expanding out to quarter. Mexico, focus to continue deployments a plans

year, the resource reallocation in including continued recovery focus of strategy important delayed our balance fiscal undertaken of lines. of headwinds industrial rationalization macroeconomic and gas, of the and to Looking and on our the because a product brand has markets, of most higher our team to of some exercise support oil value

commoditization believe is managers example, For as has for inputs, issues With ongoing increased as selection industrial no the Disposables disposable of the Market and purchasing we COVID-XX chain supply cost that price. for segment. longer rapidly important accelerated

overview, mix well continued to channels minimize term are product that value for product objectives focus towards growth from not free operator shift are and of distribution In we specific margin fiscal and over we of turn and call ambitions moving doing This will call second revenue value, as to commoditized up away products as resources the high more open higher half to our these believe the line can on long non-disposable support the margin lines additional disposables our higher aggressively this like to resistant. With shift headwind recession markets. year. and that to top questions. goals so, suffer over to do more we stock our in the less Given from economic I'd

[Operator floor Craig-Hallum. from Fuhrman is question the from Instructions] Alex for gentlemen, now Certainly, is coming open ladies and Your questions. first

Your line is live.

mentioned mentioned of negative foreign for out a Hey. impact I how a is starting But have about everyone there bit Are Thanks the competitive? economic And my given users in that of impacting to question. know any more perspective, there of conversation specifically inelastic changed pricing? the stronger know I different where bit a that a emerging stronger you the quarter. or a little given is you think you Are your out headwinds Wanted demand I overseas? a demand? higher that guess that to taking just from product emerge? Has ask disposables bunch lot dollar. particular your to areas becoming Are get pass dollar kind cost called through translation I such with picture some that chunk the bigger products meaningful end business currency markets you little demand second lines priced there you're able of in where more is markets. particular are

of Just curious currency given a markets substantial shift? operate, in a you the lot that it's pretty

Hey, Alex. got a This some jump of haven't that Allen. then really and Charlie that part I'll currency directly. we the first perspective, impact on has From seen comments demand is there. question

the part, local priced we're For in most in the markets. currency larger those

where markets were dollar some sales denominated U.S. have We on the front. smaller

he demand. know like that materially seen comments So Charlie's make. to the for some haven't part, would most affect got we I

U.S. our thing so are the North given of in America is the their to and largest the still markets position I'd from we're right other current good in headwind the the of and one point least currency But to product Well, And immediate now, the in driver is that matters price lead satisfy less than availability. Europe economic conditions, the seeing times outside Canada, that is like where demand overseas. a at we're more the there. China, a that's make of

kind little predictable, your from more of moving some I on and going the is and that the time on a kind away a be. disposables of kind thinking you should business or the value declining of single-digits you part to disposables the low here in That's or single in such big maybe be mix And we of business? your are margin of the I double-digits couple to substantial could talked function rest disposables it you about growing that step focusing to maybe items be more want given imagine really ask Okay. part I really that portfolio years the of direction where more over both your and and mean, higher then of higher this move call bit the to helpful. about here? it tweak about the a the take of about the if next strategy business could

where level that's our gross that and over Consequently, gross strategy our takes is years. lines. of higher in to margin, targets this that be is recognition product that of our Alex, born exacerbated. the I there's trade-off margin profitability think focus a a trade-off most revenue maintain reason going that for the given transition disposables new targets. the The place on is market To that specifically is end the

sales we higher that assets all. are focus impact can really dedicating we're We not can so doing greatly at dollars more that What talking abandoning in human fewer at quickly when margin about our they growth generate revenue is when get to market. it we market can can to up leverage than where the in they given eat them end -- disposables we than they a more disposables that as revenue there's the through problem trade-off growth. very try the The our or address

the So on products. the reason that's higher for focus margin

that there there? of as that I confidence focusing of little and Are the sense the you're people market think now you Okay. line. shed And given being disposables, are what bird worse, business the Can well strong kind most segments little of is on lot and for headlines of you you with. you that lines could That's for better and business with like visibility around demand helpful. flu, our all to familiar things especially any a a these that's think, Can that the your your be the just would served insight very going disposables, us helpful. segment I COVID be high of refresh of higher margin give of the aren't associate are as then business think you Ebola on bit can I just that the a a that really remind memory product kind investors us gives bit, of or on

we're abandoning disposables. again, Well, not

and product a one and market, environment is critical of subset the our high sterile which applications. that's In fact, cleanrooms disposables is value lines pharmaceutical of

the not altogether. or were trying dependence Allen's market that that we're is will listening to impact that believe QX future on impact albeit that higher grow and given a strategy know bigger didn't is that shift -- fruit. This abandoning do I we're quarters the overnight. greater forward to a starting you the is product post-COVID or we've we that the future, been price I of seen of QX we So has The to a does happen of we're if been our we've on pursuing would We've What work revenue accelerated going in think what's part that to products this has year between for and already And our two profitability, market commoditization for. in accountable shift is to reduce quarters. it value is we value become and bear we'll want market reduce been QX percentage consider to a it's a higher just our comments, disposables reason that true greater see do that in our just year that and that now, over to apparent and QX dependence lines. be got going with

Thank makes you a very lot sense. That of Okay. much.

Yeah, sir. you. Thank

will concludes you. Robertson [Operator session. ahead. Q&A Please closing now Charlie to our Instructions] hand back conference for the That I Thank you. go Thank remarks.

QX our wish success with our today's many and our a wonderful day. sharing to you look on forward shareholders. customers, to members, our and I'd the you us Lakeland Have joining thank also Thank in partners team near future. We you great call. for distribution a all like

Thank you, event. and This today's gentlemen. ladies concludes

for wonderful You at this have day. you a participation. may disconnect Thank your time and