Lakeland(US:LAKE)2025-09-09 21:32Financial Data and Key Metrics Changes - The company achieved record net sales of $52.5 million, representing a 36% year-over-year increase, driven by a 113% increase in fire service products [3][4] - Adjusted EBITDA, excluding FX, was $5.1 million, an increase of $2.4 million or 90% compared to the same period last year [14][18] - Net income was $800,000 or $0.08 per share, compared to a net loss of $1.4 million or $0.19 per share for the same quarter last year [14][24] - Adjusted gross margin percentage decreased to 37.4% from 41.1% year-over-year, primarily due to lower acquired company gross margins and increased material costs [4][20] Business Line Data and Key Metrics Changes - Sales from fire service products increased by $13.6 million year-over-year, with contributions from Meridian and LHD Group [16][22] - Organic sales increased by $5 million or 14% over the prior year [15][19] - Adjusted gross profit for the second quarter was $19.6 million, an increase of 24% compared to the same period last year [16][18] Market Data and Key Metrics Changes - Domestic sales were $22.1 million, representing 42% of total revenues, while international sales were $30.4 million, accounting for 58% of total revenues [15][19] - U.S. revenue increased 78% year-over-year, while European revenue grew 113% [22][23] - Latin American operations experienced a $3.6 million decrease in sales due to delayed purchase decisions from tariff uncertainty [23] Company Strategy and Development Direction - The company aims to continue robust growth in fire services and industrial segments, focusing on acquisition synergies and increasing market share [3][4] - Strategic initiatives include streamlining operations and improving profitability through facility closures and cost reduction measures [7][8] - The company is actively pursuing M&A opportunities within the fire suit rental, decontamination, and services business [11][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating tariff uncertainties and emphasized a focus on operational efficiency and customer relationships [9][10] - The company adjusted its fiscal year 2026 outlook for adjusted EBITDA to the range of $20 to $24 million, expecting revenue near the lower end of $210 to $220 million [29][30] - Management anticipates steady expansion in EBITDA margins over the next three to five years, driven by improved efficiencies and disciplined pricing [30] Other Important Information - The company reported an increase in institutional holdings by 447,000 shares, or 6.2%, to 7,622,035 shares [8] - The recent sale of the Decatur facility for $6.1 million is expected to strengthen the balance sheet and support the M&A pipeline [7][24] Q&A Session Summary Question: Full-year guidance and back half implied numbers - Management indicated that the current EBITDA run rate may not be sustainable due to challenges in Latin America but expects growth in the U.S. and Europe [34][36] Question: Expectations for full-year organic growth - Management anticipates mid-teens organic growth, depending on the timing of fire service RFPs and large orders [38][39] Question: Update on M&A targets - Management is in discussions for several imminent deals, focusing on service-related acquisitions [40][41] Question: Gross profit margin and tariff impacts - Management noted that tariffs impacted margins by about 1.2 points and expects improvements in gross margin in the coming quarters [46][48] Question: Inventory levels and comfort - Management acknowledged high inventory levels and plans to optimize them over the next six months [49][52] Question: Changes in buying in Latin America - Management is starting to see movement in Latin America, with expectations for a substantial catch-up in the second half of the year [54][56] Question: Normalization of client perspective on tariffs - Management feels more comfortable navigating the uncertain environment and is optimistic about future operations [60][62]