Executive Summary

Q2 FY26 net sales rose 36% year-over-year to a record $52.5 million, driven by a 113% surge in Fire Services revenue (49% of total), while gross margin improved sequentially by 240 bps to 35.9% .
Adjusted EBITDA excluding FX improved to $5.1 million (9.6% margin), up sharply from Q1, as operating expenses declined sequentially by $1.0 million; GAAP diluted EPS was $0.08 versus a loss in the prior year .
Management lowered FY26 Adjusted EBITDA excluding FX guidance to $20–$24 million and indicated FY26 revenue would be near the lower end of $210–$220 million due to tariff uncertainty and LATAM weakness .
Operational actions (Decatur sale-leaseback, UK/AR facility closures) and inventory optimization are intended to strengthen margins and cash flow in 2H FY26; dividend of $0.03 per share paid in August .
Near-term stock narrative hinges on tariff trajectory and execution on inventory reduction, with offsets from robust Fire Services momentum and cost reductions .

What Went Well and What Went Wrong

What Went Well

Record revenue with strong Fire Services mix: “the Lakeland team delivered record… net sales growth of 36%… led by a 113% increase in Fire Services revenue” .
Sequential margin and EBITDA improvement: adjusted EBITDA excluding FX reached $5.1 million and margin rose to 9.6%, aided by lower purchase price variance and OpEx initiatives .
Strategic actions to strengthen balance sheet and efficiency: $6.1 million Decatur sale-leaseback; closures of Hull warehouse and Quitman, AR facility; targeted inventory optimization underway .

What Went Wrong

Tariffs and mix headwinds compressed YoY margins: consolidated gross margin fell to 35.9% vs. 39.6% in Q2 FY25 due to tariffs, supply chain costs, and amortization of inventory step-ups .
LATAM softness and tender delays: LATAM sales declined to $4.3 million (-42% YoY) amid tariff/currency-related purchasing delays; Eagle and LHD Germany faced delayed funding for tenders .
Elevated inventory and cash usage: inventories increased to $90.2 million; net cash used in operating activities was $9.7 million in 1H FY26; management acknowledged inventories are high and outlined reduction plans .

Financial Results

Metric	Q2 2025	Q1 2026	Q2 2026
Revenue ($USD Millions)	$38.5	$46.7	$52.5
Gross Profit ($USD Millions)	$15.2	$15.6	$18.8
Gross Margin %	39.6%	33.5%	35.9%
Adjusted EBITDA ex FX ($USD Millions)	$2.7	$0.6	$5.1
Adjusted EBITDA ex FX Margin %	6.9%	1.3%	9.6%
Diluted EPS ($USD)	($0.19)	($0.41)	$0.08

Segment and geography highlights (Q2 2026 vs. Q2 2025):

Segment/Region	Q2 2025	Q2 2026	YoY Change
Fire Services Revenue ($USD Millions)	$12.0	$25.6	+113%
Fire Services Mix (%)	31% [inferred from $12.0/$38.5]	49%	+18 pts
U.S. Net Sales ($USD Millions)	$12.4	$22.1	+78%
Europe Net Sales ($USD Millions)	$7.1	$15.1	+113%
LATAM Net Sales ($USD Millions)	$7.4	$4.3	-42%
Asia Net Sales ($USD Millions)	$3.5	$3.7	+6%

KPI snapshot:

KPI	Q1 2026	Q2 2026
Cash and Cash Equivalents ($USD Millions)	$18.6	$17.7
Working Capital ($USD Millions)	~$104.4	~$106.9
Inventories ($USD Millions)	$85.8	$90.2
Revolver Borrowings ($USD Millions)	$19.8	$24.9

Notes: Management also disclosed a $3.577 million lease impairment and a $5.215 million income tax benefit impacting GAAP results in Q2 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Millions)	FY 2026	$210–$220	$210–$220 (near lower end)	Maintained; leaning lower
Adjusted EBITDA excluding FX ($USD Millions)	FY 2026	$24–$29	$20–$24	Lowered

Earnings Call Themes & Trends

Topic	Q4 2025 (prior)	Q1 2026 (prior)	Q2 2026 (current)	Trend
Tariffs & gross margin	Tariff mitigation (inventory build, production shifts to MX/VN/alt regions); organic gross margin strong; acquisition margins lag	Full impact in Q1; purchase price variance drove margin pressure; expecting reversal and sequential improvement	Tariffs shaved ~1.2 margin points; sequential margin improvement from reduced purchase variance; price increases catching up	Improving sequentially; uncertainty persists
Inventory management	Built ahead of tariffs; acknowledged elevated levels	Inventory at $85.8M; targeted reductions; MX/VN production options	Inventory $90.2M; management aims to drive down over 6 months; focus areas: U.S. critical environment, Jolly, LHD AU, Veridian	Active reduction plan
Fire Services tenders & product launches	FDIC launches; LHD backlog catch-up; pipeline robust	Expect Jolly boot order; tender timing creates lumpiness; aiming mid-high teens LT EBITDA margins	Tender activity expected to restart late FY26/early FY27; U.K./EMEA tenders, US rollout of Pacific Halo Flex helmets	Near-term delays; medium-term catalysts
Cost reductions & ERP	Lean Six Sigma program; ERP rollout; targeted synergies	Identified ~$4M cost savings; begin realizing 2H FY26	$1.1M run-rate realized; targeting $4M cash savings; $3M additional annualized savings 2H FY26	Executing; accelerating
M&A pipeline (services)	Decontamination/rental/services targeted; smaller recurring revenue deals	Active conversations; strong pipeline	One or two deals expected in coming months per CEO; focus on recurring services	Potential near-term announcements

Management Commentary

“Against a continued uncertain global tariff environment, the Lakeland team delivered record fiscal second quarter 2026 net sales… led by a 113% increase in Fire Services revenue” — Jim Jenkins .
“Our second quarter consolidated gross margin decreased to 35.9% due to increased tariffs and supply chain expenses… On a sequential basis, consolidated gross margin increased 240 basis points…” — Roger Shannon .
“Given the ongoing uncertainty with the global tariff environment, we are adjusting our fiscal year 2026 outlook… Adjusted EBITDA excluding FX to the $20–$24 million range and expect fiscal year 2026 revenue to be near the lower of the $210–$220 million range.” — Roger Shannon .
“We are going to optimize our inventory, and we’re going to drive them down over the course of the next six months… I want that inventory turned into cash as quickly as I possibly can.” — Jim Jenkins .
“Tariffs… during this past quarter [impacted] about 1.2 margin points… benefit of the price increases is starting to balance out” — Jim Jenkins .

Q&A Highlights

Guidance trajectory and back-half run rate: LATAM softness drove reset; management expects RFP activity and LATAM to pick up in H2 but not fully offset 1H shortfall .
Gross margin/tariff impact: ~1.2 margin-point Q2 impact; purchase price variance reversal supporting sequential improvement; targeting closer to 40% in back half (not full-year) .
Inventory levels and reduction plans: Management views inventory as high; prioritized actions in high performance, LHD AU, Jolly; aiming reduction toward ~$80 million .
M&A cadence: Several service-focused deals are “beyond conversations,” with one or two expected to close in coming months; strategic push for recurring revenue .
Regional demand: LATAM showing some movement; shipment delays to be caught up in 2H; continued momentum in U.S. and Europe .

Estimates Context

Results versus S&P Global Wall Street consensus (Q2 FY26):

Metric	Actual	Consensus	Delta
Revenue ($USD)	$52,496,000	$54,585,750*	Miss (~$2.09M)
GAAP Diluted EPS ($USD)	$0.08	$0.0825* (Primary EPS)	In-line

Notes:

EBITDA comparisons are not shown due to definitional differences (company emphasizes Adjusted EBITDA excluding FX, while consensus “EBITDA” may not be comparable) .
Values with asterisks retrieved from S&P Global.

Implication: Revenue slightly below consensus; EPS essentially in line; guidance reset suggests estimates for FY26 EBITDA and revenue may need to drift lower toward the updated ranges .

Key Takeaways for Investors

Fire Services is the growth engine (49% mix in Q2), driving record revenue despite tariff headwinds; sustained tender activity in late FY26–early FY27 is a medium-term catalyst .
Near-term margin trajectory improving as price actions catch up to tariffs and purchase variance normalizes; watch sequential gross margin and adjusted EBITDA excluding FX progression in Q3 .
Guidance reset (EBITDA ex FX to $20–$24M; revenue near low end) and LATAM recovery timing are the main estimate and stock narrative drivers .
Inventory reduction is a priority; execution should support cash flow improvement and working capital normalization through 2H FY26 .
Balance sheet bolstered by Decatur sale-leaseback and cost actions; continued dividend signals capital discipline amid integration and optimization .
M&A focus shifting to recurring services (decontamination/rental), potentially adding defensiveness and margin quality; anticipate deal announcements near term .
Cross-check definitions when evaluating EBITDA and EPS beats/misses; company’s non-GAAP measures (Adjusted EBITDA ex FX) differ from many consensus frameworks .

Appendix: Additional Data Points and Clarifications

Domestic vs. international mix Q2 FY26: U.S. $22.1M (42%), international $30.4M (58%) .
Non-GAAP impacts: $0.4M amortization of inventory step-up; $3.577M lease impairment in Monterrey; equity compensation and ERP costs included in reconciliation tables .
Regional data reconciliation: Press release lists LATAM net sales $4.3M in Q2; CFO referenced combined LATAM+Mexico sales declining to $5.4M from $9.1M, clarifying Mexico’s contribution to regional softness .

LAKELAND INDUSTRIES INC (LAKE)·Q2 2026 Earnings Summary