Lakeland Industries (LAKE) 9 Dec 222023 Q3 Earnings call transcript

Good day, and welcome to the Lakeland Industries Fiscal 2023 Third 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 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 in 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 of are the call, financial EBITDA in with call you and today’s our we would to directly your earnings Reconciliation yours. At discuss measures including the measures During is of discussed EBITDA. comparable each this most will call, I introduce U.S. GAAP, GAAP floor this statements Executive non-GAAP Roberson. this like determined not for presented derived that adjusted in to the Chief accordance financial our Officer, to measure host time, is Industries’ Mr. release. Lakeland Charlie on Roberson,

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

in quarter another $XX.X of saw Lakeland you sales of and sequential this XX.X%. a afternoon’s release, of with gross margin net million press delivered As improvement

our volume XX%. Our sequential of revenue to and threshold primarily growth driven our gross target continues was long-term exceed margin

proud of the hold pressured, macroeconomic to continuation remain continued growth industrial industrial seen on markets markets have European trends we’re respectively in zero with our is demand regions. and in energy global we’ve we profitability of along revenue as have in heavily and back headwinds potential a delivered, markets fiscal true sustained XXXX these While as our This year-to-date. particularly Asian costs, inflation policies, rising tolerance weigh COVID

some manufacturer other working specifically mitigated recognizes by to opportunity aggressively believe from to While will somewhat these the transference it in the is world as India half to of industrial regions China we first of next anticipate these and that India. industrial year, geographic manufacturing we will replace attract conditions the through China. to the continue be has regions, activity a decline

initiatives our more global India with our market the that enhance there. Despite economic presence manufacturing our goal efforts increasing continued our well detail, and human ongoing responding allocation These structure to and bottom between sales been include these conditions. growth cut through cost and regardless Allen as place focused across headwinds, stabilize but team Lakeland successful have I and as industrial model. and in for are this touch in technical rationalizations, results targeted these our We accelerating accelerating in of by or will has flow organization positioning on leveraging on we of the complexities operating our and efforts India manufacturing continue note resource our would line broader we remain our to growth assets. in

putting and ensure As are our results I I place that we period this and indicated about we the remain our results strategic success quarter, foundational about our changes proud today in achieving of which for performance near-term our last reiterate to long-term quarter, in goals.

focused continue while to our overall we and satisfied mostly to terms of environment note in adapt short outperform near-term results back continue not recognize term. our industry headwinds revenue the the we short we’re must importantly, that with However, term on holding are macroeconomic in we related our targets. react the in and remaining to that growth the growth, long-term Though it’s achieving

will in the strategy. maintaining next the end weaker responsiveness. and few to us a finished originally for Allen of reliability our quality, investments quarters align customer up a our markets enable focusing few remarks coming past levels proactively, minutes. these quarters little in will capital strategy levels in provide but more selectively additional strategy overall to we our current better accelerate invested detail with serve overall but prepared unchanged, demand on free and remains a the in we’ve several in globe, of inventory reduction certain goods and to demand than anticipated, This growth For the across inventory market look high the in-process overseas on to in with to level his customers over

enhances strategy to more quarter step acquisition in provider, I’d cyclicality time our a achieving pursuit of Technical week flame-resistant fireman’s to global earlier an flash this U.K. of Eagle markets. fire effectively. importance addition based and for to the In Last is product to to we execute We our of regard, protective emphasized and announced minutes This our gear targets. the Eagle sustainable, Lakeland’s our this shift garments important greatest discussing a Products, which positioning The results critical and turnout to step while that platform the a an continuing accelerating and above-market arc acquisition of and European, as long-term growth growth at offering, Historically a potential, high-performance and Asian represents back like the end. applications of subsequent overall our particularly North and East our Lakeland quarter’s expands been profile. firefighting growth acquisition Middle to relates Eagle’s Turning the our with present the performance American lines, long-term the high we strategy. market. sales. margin of it mixture few speaking, to global outside spend has sales important in long-term product reach environment overall revenue opportunity This announced of same margin reducing

be said, as set driven From that place facilities. Lakeland intends this certified Lakeland funnel and but new a gear over wins flexible global for anticipated offerings opportunities growth We Eagle’s result to geographic FR to recent does as are continue exclusively firefighting and industrial stay contract currently on will garments. for by bear believe growth its served, important of forward. Eagle’s across design beginning new have core in does increase for to in Lakeland increase significant chain are growth we some team, and we sales products, geographic With has further certified significantly products, these wins contract that a important on currently regions and term to CE in and a an shift that other with and served this geographic believe, specialists, the region acquisition expected drive management products this sets. number team sales contract our in-house This well growth order Eagle. and of standpoint, a Asia developed year revenue high-value and well skill has Lakeland’s European fills quality presence important forward that production a going manufacturers, meet gaps focused which manufacturing parts going the product CE to Africa. has of development these supply stage expected Middle several of current footprint, to not in and in expertise is In to Eagle by near ahead, calendar in potential. markets for serviced international, of manufacturing East could Eagle this sales the is of Eagle the strategic offering, utilize owned short, positioned future our of XXXX strategy. can our and mixture as backlog and in product time now is Eagles to as East Eagle the same their a in markets From brought in standpoint, portion terms healthy relationships Eagle wins Looking Middle

but we growth that this fiscal the on in XXXX. business our approximately our high fully million line integrate the we not assumed we and teams, to cash from additional and an of benefit revenue top proprietary base, could this in generation, business to designs. as expect We as of are over a and time has transaction, are Eagle excited models diverse We customer $XX.X potential innovative Lakeland’s contracts acquired emerge sales product design a product bottom and all-cash in be have which importantly, any multiyear the beginning time. for degree of early free accretive many flow results about

integration to we’re want and Eagle at deal. potential is I our Lakeland into to the in results. and for that excited to the closing higher-growth, welcome more for earlier, also future. expand to pass in execute the here team work company’s about to the have of like our provide onto this crucial on of to operations to into all team sharing this team forward see my a the I’ll Lakeland, goal financial call higher-margin I markets, of As thank and the insight is part the to as I’m this will platform a more and accelerate our business recently we the Allen. step you and excited mentioned team I’d that opportunity, journey. future. Lakeland Eagle look now very to their Allen

sales Domestic XX% consolidated which in international currency era post-pandemic total basis impacted of growth of product the market total or good On XX% and Lakeland XXXX, continues of the of profitability our everyone. million towards while diversity, approximately a of revenues. XX% geographic pleased revenues. of total of sales from million and a $XX.X are $XX.X our last million as quarter sales Latin challenged, million. compared of net benefit Thanks, million the were the fiscal continued international revenues million $XX.X compares geographic revenue a were accelerated or $XX fiscal revenues total revenues American with negatively and in Domestic in quarter by domestic another afternoon sales Similar of and sales $XX.X industrial to the portfolio, or On XXXX, to our revenue markets sales million million, financial efficiency. for still has performance of were on or consolidated and $X.X quarter to sales quarter, European operational of U.S. the international focus XX% fiscal fluctuations Charlie the deliver and quarter strong were fiscal shift XX% strength second third basis, XX% third to $XX.X total and end and total strong or XXXX or were sequential XXXX, This $XX.X was

quarter, year In disposables the terms the period for revenues ago the represented in quarter. XX% of for to product XX% of compared mix total

year quarter, second commoditized, towards a quarter, product net compared third higher of products fiscal XX.X% XX.X% for specific non-disposable was strategy ago. a a XXXX Gross we and shift XXXX As this percentage value, for as last and XX.X% aggressively result is the with more markets. as fiscal our sales in profit less quarter discussed the margin of our higher to mix

quarter, reported the product million million our third million an QX, $X.X as and XXXX operating XXXX freight quarter margin direct increase compared from container in sales. rates profit improved During $X.X in and the pricing power, in mix QX, year. $X.X benefited lowering last and to gross of Lakeland in

prior severance Yuan, $XXX,XXX Chinese of QX, last of also during currency admin year. $X.X from per quarter loss X% totaled and year. $XXX,XXX enhancement as XXXX, period. our and million $X.X continued XX.X% infrastructure. share associated the adjustments. result, year Operating $XXX,XXX. X.X% our and to XXXX third nine our XX.X% million a of also with $X and quarter respectively. principally loss million XX, XXXX, margin $X.X million to quarter basic compared months $XXX,XXX. primarily quarter the for due a and expenses and manufacturing or $X for XXXX third compared the EBITDA $X.XX included was staffing share Adjusted expenses related increased third to and for or XXXX million $X.XX last down for IT fiscal fluctuations, third period. for period. ended were quarter $X.X from and purchases in the million and for per basic the diluted $X.XX expansion million impacted fiscal $X.XX increased sales X.X% in Operating the Year-to-date, year EBITDA net for delivered was up million, diluted the to prior India for income $X.X Mexico, Capital the diluted in $X.X per QX, expenditures fiscal was XXXX in share XXX,XXX, second and Vietnam Lakeland capital compares and XXXX compared the expenditures This million October income operating with expenses which in $X.X basic by global quarter with the As quarter. quarter, or $XXX,XXX a XX.X% for for share negatively EBITDA year profit and third the quarter second fiscal was quarter approximately the three of of per last for expenses Operating to prior relate margins the of were facilities of the Adjusted

CapEx for approximately expect investments. make full to the We as fiscal year be continue $X these we million to

at The from equivalents $XX.X to up end credit company the million facilities. continued million. no and Moving cash Lakeland has to ended quarter bank approximately to the have available sheet, $XX the debt with and quarter of balance cash of the

over share XXXX authorization. repurchase authorized million fiscal third overall $XXX,XXX of the program, the an in the new $X of approximately current remaining to our or program exemplifies and approving company for XXX,XXX commitment an quarter’s this increase $X.X potential Subsequent repurchased of repurchase This again, approximately growth value. Board under exhaustion Lakeland’s During of end, its just the shares upon program quarter, going will confidence effective leaves program shareholder the This common the forward. program. under stock capacity the million to optimizing additional become existing Directors showcases our in company’s and

we are at expected to levels, this stock As decreasing, pace than broader earlier industry inventory levels slower relates it year. albeit a

remain levels Given elevated in channel than expected global state. an inventory of the slower normalization inventory,

level additional begun will into XXXX. and remained of proactively is Not our up this into to, align inventory alluded significant and as quarter-over-quarter, better these this reduce In of higher-growth current stock up investments free as products terms flat made capital demand levels portion to with a markets to this levels commitment level, a Lakeland’s for heading of our have inventory disposables. levels only of and strategy we but shifting inventory fiscal our growth reflection Charlie is

at While gross inventory confident targeted be and will will our this disposable to conditions, above able to margins be XX%. levers levels, target plan profit able orderly efforts be certain to remain be our maintain implement consolidated of may or these We highly that recoverable. still market reduce global current and given we pricing used

on Now, as the our strategic update made I’d an our to initiatives progress like key relates global manufacturing to provide on it operations.

build be current facility. high-value in build-out This in room quarter of we During and the facility the our Vietnam It focus new clean Monterrey, this our and facility our automations facilities. exist capabilities second realignment facility in This in continue the not quarter continued in incorporate our out do year mid-fiscal China will also portfolio. strategic plan we that products will processes in to should modern in Mexico. manufacturing Also our operational ‘XX. a initiated our on

our pleased Eagle manufacturers discussed, initiatives, to and this proprietary a of were Charlie and the as Additionally, of Eagle products part utilizes Products as to contract we announce week. already Technical their currently strategic Operationally, acquisition source EBITDA is to sales for our enhancement highly Their leveraged with EBITDA and office year to and margins is back support Lakeland for a utilizes stated three aligned administration. significant Lakeland. to five margin a current overall aspirations

questions. our future, John turn this As are to we we to manufacturing line existing service for profitability. developing look overview, will utilize a for over to I’d increased to to the and the that enhancement which With to path margin like now open opportunities business, capabilities the migration provide call

coming Thank from you. [Operator question Please Instructions] is Craig Alex with First Furman Hallum. proceed.

wondering India. years business positioning give your very like quite us how offset currently India Thanks of there much growth you’re I an update of you’re in next opportunity in guys! could if what couple next was years for couple sounds quarters? on the of the that question. be in opportunity Hey perhaps big for you could some if and It an macro-related next of India over for the my the can seeing is taking an over and be weakness to couple

of kind then the market. let Allen. This you jump I’ll into Charlie the Alex! size is start with know I’ll off Hey and

is India currently, facility for So midsized kind us. a of

operations market. under in the American and it the markets India employees just market addition to serves in have European and the We domestic XXX manufacturing there the

India the in we the table, as Eagle in there. domestic so to term opportunity see primarily operations market we and enhance our to see near the we where portfolio And an the bring the is growth

and some the all disposables of believe current difficult is largely state their their meaning because and of the developing state, is less Alex, we’ll lines, acquisition service It’s product NFPA have lighter to gear do India Industrially, gear. as small Yes there. and revenue, conflict relatively of Eagle yes The is TE We it’s airports size a to and XX% about preferred with gear of they as gear. sell and there, products use of and NFPA because which The a than [ph] that prefer a percentage want new a expensive firefighting far that’s sell NFPA total utilize. fire weight country. right. Lakeland’s CE bureaucracy

facilitate is So that we going of is the to import in economic I zone think would the there help acquisition manufacturing our special to there economically. us. add of foreign half raw materials also a

acquisition, a you I meaningful as like Okay, then Eagle long this if recall, about continued I on out balance that helpful. there be you as this real wanted And first it downturn? you that mean the that’s at targets nice during M&A other bolted here really sheet and deal seems the have is to good could looking Are do you’re here, thinking know to. can there

of Yes, the the opportunities present. may economic we’re aware conditions that

are a out our won’t cash a we approach over of more inventory. rule as it’s M&A, capital. to options use priority I of right but balanced out other now We focused on not pulled any

You situation largely changes, that’s to driven. know our going and opportunity be

really much. Thank very you that’s Okay, helpful.

[Operator Instructions].

like now I’d floor turn closing Roberson back Charlie the for Okay, remarks. to to

XXXX joining for good and out and day! today’s We a for forward you growth the all beyond. Thank look strong year preparing us have company to in you Thank closing for and in calendar call. a year

does call. conclude you, and conference This Thank ladies today’s gentlemen.

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