Lakeland(LAKE) - 2025 Q3 - Quarterly Results

Fiscal Year 2025 Third Quarter Financial Results Overview Lakeland Industries reported record net sales of $45.8 million for Q3 FY2025, a 44.5% year-over-year increase, driven by a 245% surge in Fire Services products, despite a significant 97% decline in net income to $0.1 million Key Financial and Operational Highlights Lakeland Industries reported record net sales of $45.8 million for Q3 FY2025, a 44.5% year-over-year increase, driven by a 245% surge in Fire Services products. While gross profit grew 38.9% to $18.6 million, net income declined significantly by 97% to $0.1 million. Organic revenue grew 7.3%, and the company saw sales growth across all major geographic regions Q3 FY2025 vs Q3 FY2024 Financial Comparison ($ in millions) | Metric | Q3 FY'25 | Q3 FY'24 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $45.8 | $31.7 | $14.1 | 44.5% | | Gross Profit | $18.6 | $13.4 | $5.2 | 38.9% | | Gross Margin | 40.6% | 42.2% | - | -162 bps | | Net Income | $0.1 | $2.6 | ($2.5) | (97)% | | Adjusted EBITDA | $4.3 | $3.3 | $1.0 | 29.8% | | Adjusted EBITDA ex. FX | $4.7 | $4.5 | $0.2 | 4.9% | - Record net sales were primarily driven by a 245% increase in the Fire Services product line, which reached $19.3 million in the quarter[3][4] - Organic revenue, which excludes recent acquisitions, increased 7.3% to $34.0 million, attributed to growth in Latin America, a rebound in Asia, and strong shipments at Eagle[3] Revenue Growth by Region (YoY) | Region | Q3 FY'25 Revenue | YoY Growth | | :--- | :--- | :--- | | U.S. | $15.4 million | 2.0% | | LATAM | $5.0 million | 20% | | Europe | $14.4 million | 350% | | Asia | $3.6 million | 15.5% | Management Commentary Management attributed the strong Q3 performance to a significant increase in Fire Services sales, supported by both organic growth and recent acquisitions (LHD, Jolly, Pacific Helmets). They highlighted a rebound in U.S. sales, continued momentum in Latin America, Europe, and Asia, and the successful transition of a key channel partner. The company is confident in its full-year projections, expecting continued acceleration in its global Fire Services and industrial safety product lines - The CEO highlighted that the strong sales revenue was driven by a 245% year-over-year increase in Fire Services and continued global growth in key industrial products[7] - Recent acquisitions, including LHD, Jolly, and Pacific Helmets, contributed a combined $11.8 million in revenue during the quarter[8][12] - The transition of large North American channel partner accounts to the new industrial market representative, LineDrive, is progressing well, with orders rebounding as expected in Q3[9] - The CFO noted that while consolidated gross margin decreased due to acquisition-related effects, the organic gross margin improved by 2.0 percentage points to 44.2% due to pricing strength[22] Detailed Financial Analysis The company's Q3 FY2025 financial performance saw net sales increase significantly, but operating expenses and acquisition-related costs led to a sharp decline in net income and a shift to negative operating cash flow due to inventory build-up Third Quarter Financial Results Q3 FY2025 net sales rose 44.5% YoY to $45.8 million, with international sales comprising 66% of the total. Gross profit increased 38.9% to $18.6 million, but the gross margin declined from 42.2% to 40.6% due to lower margins from recent acquisitions. Operating expenses surged 82.3% due to acquisitions and non-recurring costs, causing operating profit to fall to $0.8 million from $3.6 million YoY. Consequently, net income plummeted to $0.1 million from $2.6 million in the prior year's quarter - Net sales increased 44.5% YoY to $45.8 million, with sales from recent acquisitions (LHD, Jolly, Pacific) contributing $11.4 million to the Fire Services product line[12] - International sales grew to 66% of total revenues ($30.4 million), up from 52% in the prior year, reflecting the impact of international acquisitions[13] - Consolidated gross margin decreased to 40.6% from 42.2% YoY, impacted by lower margins from LHD and Jolly, partially due to amortization of acquired inventory basis and higher freight costs. However, organic gross margin increased to 44.2%[14] - Operating expenses increased by 82.3% to $17.8 million, driven by inorganic growth, acquisition expenses, and non-recurring costs, leading to a decrease in operating profit to $0.8 million from $3.6 million YoY[15] - Net income was $0.1 million, or $0.01 per diluted share, a sharp decline from $2.6 million, or $0.34 per diluted share, in Q3 FY2024[16] Balance Sheet and Cash Position As of October 31, 2024, the company held $15.8 million in cash and cash equivalents, a decrease of $9.4 million from January 31, 2024. Working capital increased to $95.7 million. The cash decrease was primarily due to an inventory build-up to fulfill a significant backlog and anticipated Q4 sales, particularly for the newly acquired LHD Key Balance Sheet Items (as of Oct 31, 2024) | Metric | Oct 31, 2024 | Jan 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $15.8 million | $25.2 million | | Working capital | $95.7 million | $83.2 million | - The decrease in cash was attributed to a build-up of inventory required to deliver on the LHD backlog and prepare for Q4 sales orders at Jolly and ramping industrial orders[18][24] Cash Flow Analysis For the nine months ended October 31, 2024, net cash used in operating activities was $12.5 million, a significant shift from the $3.7 million provided in the same period last year. This change was driven by increased working capital needs, specifically a large inventory build-up for forecasted sales, with management expecting to recover this cash in the first half of fiscal 2026 - Net cash used in operating activities was $12.5 million for the first nine months of FY2025, compared to net cash provided of $3.7 million in the prior-year period[19] - The negative operating cash flow was driven by increases in working capital, primarily inventory build-up for anticipated sales increases in Q4 FY2025 and Q1 FY2026[19][24] - The company expects to recover the cash used for inventory build-up during the first half of fiscal 2026 as sales are completed and receivables are collected[19][24] FY 2025 Reaffirmed Guidance and Outlook Lakeland Industries has reaffirmed its full-year fiscal 2025 guidance. The company continues to expect revenue of at least $165 million and Adjusted EBITDA excluding foreign exchange impacts of at least $18 million. This guidance includes the contributions from the recent acquisitions of LHD, Jolly Scarpe, and Pacific Helmets Reaffirmed FY 2025 Guidance | Metric | Guidance | | :--- | :--- | | Revenue | At least $165 million | | Adjusted EBITDA excluding FX | At least $18 million | - The reaffirmed guidance is inclusive of the recent acquisitions of LHD, Jolly Scarpe, and Pacific Helmets[26][28][29] Appendix This section provides supplementary information including conference call details, definitions of non-GAAP financial measures, and detailed consolidated financial statements for the period Conference Call Information The company will host a conference call on December 5, 2024, at 4:30 p.m. Eastern Time to discuss the third-quarter fiscal year 2025 results. The press release provides dial-in numbers, a conference code, and a webcast link for participation. A replay will be available after the call Conference Call Details | Item | Detail | | :--- | :--- | | Date | Thursday, December 5, 2024 | | Time | 4:30 p.m. Eastern Time | | Dial-in | 1-877-407-9208 | | International Dial-in | 1-201-493-6784 | | Conference Code | 13750234 | Non-GAAP Financial Measures The company utilizes non-GAAP financial measures such as Adjusted EBITDA and Adjusted EBITDA excluding FX to supplement its GAAP financial statements. Management believes these metrics provide useful information for decision-making and period-to-period comparisons by excluding items not directly related to core business operations - The company uses non-GAAP measures including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA excluding FX, and Adjusted EBITDA excluding FX margin[33] - These measures are used for internal financial and operational decision-making and to evaluate period-to-period comparisons, as they exclude items not directly related to ongoing core business operations[33][39] Reconciliation of GAAP to Non-GAAP Results This section provides a detailed reconciliation of GAAP Net Income to non-GAAP Adjusted EBITDA and Adjusted EBITDA excluding FX for the three months ended October 31, 2024, compared to the same period in 2023. Key adjustments include adding back interest, taxes, depreciation, amortization, equity compensation, acquisition expenses, and other non-recurring costs Reconciliation of Net Income to Adjusted EBITDA ex. FX (Q3, $ in thousands) | Line Item | Q3 FY'25 | Q3 FY'24 | | :--- | :--- | :--- | | Net income | $86 | $2,618 | | Interest expense | $490 | $13 | | Taxes | $148 | $937 | | Depreciation and amortization | $1,226 | $577 | | EBITDA | $1,950 | $4,145 | | Equity compensation | $455 | $302 | | Acquisition expenses | $497 | - | | Severance and restructuring | $654 | $96 | | Other adjustments | $708 | ($1,258) | | Adjusted EBITDA | $4,264 | $3,285 | | Currency Fluctuation | $462 | $1,222 | | Adjusted EBITDA excluding FX | $4,726 | $4,507 | Consolidated Financial Statements This section contains the unaudited condensed consolidated financial statements for the three and nine months ended October 31, 2024, compared to the prior year. It includes the Statements of Operations, Balance Sheets, and Statements of Cash Flows Condensed Consolidated Statements of Operations For Q3 FY2025, net sales were $45.8 million, up from $31.7 million YoY. However, due to a significant rise in operating expenses to $17.8 million from $9.7 million, net income fell to $86 thousand from $2.6 million. Diluted EPS was $0.01 compared to $0.34 in the prior-year quarter Condensed Consolidated Statements of Operations (Three Months Ended Oct 31, $ in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net sales | $45,761 | $31,678 | | Gross profit | $18,560 | $13,361 | | Operating profit | $807 | $3,621 | | Net income | $86 | $2,618 | | Diluted EPS | $0.01 | $0.34 | Condensed Consolidated Balance Sheets As of October 31, 2024, total assets grew to $201.2 million from $153.7 million at January 31, 2024, driven by increases in inventories, goodwill, and intangible assets from acquisitions. Total liabilities also increased significantly to $76.5 million from $30.3 million, primarily due to a large increase in long-term loans payable Condensed Consolidated Balance Sheets (As of Oct 31, 2024 vs Jan 31, 2024, $ in thousands) | Metric | Oct 31, 2024 | Jan 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $15,839 | $25,222 | | Inventories | $72,721 | $51,250 | | Total current assets | $125,296 | $101,505 | | Total assets | $201,213 | $153,745 | | Total current liabilities | $29,636 | $18,346 | | Loans payable - long term | $31,051 | $731 | | Total liabilities | $76,525 | $30,294 | | Total stockholders' equity | $124,688 | $123,450 | Condensed Consolidated Statements of Cash Flows For the nine months ended October 31, 2024, net cash used in operating activities was $12.5 million. Investing activities used $25.4 million, mainly for acquisitions. Financing activities provided $28.3 million through new borrowings. This resulted in a net decrease in cash of $9.4 million, ending the period with $15.8 million in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (Nine Months Ended Oct 31, $ in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($12,494) | $7,733 | | Net cash (used in) investing activities | ($25,387) | ($3,015) | | Net cash provided by (used in) financing activities | $28,251 | ($1,845) | | Net decrease in cash and cash equivalents | ($9,383) | ($1,786) | | Cash and cash equivalents at end of period | $15,839 | $26,425 |