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LAKELAND INDUSTRIES INC (LAKE)·Q3 2025 Earnings Summary

Executive Summary

  • Record net sales of $45.8M (+44.5% YoY) with Fire Services up 245% YoY to $19.3M; organic revenue rose 7.3% to $34.0M; management reaffirmed FY25 revenue of at least $165M and Adjusted EBITDA ex FX of at least $18M .
  • Gross margin compressed to 40.6% (-162 bps YoY) and operating margin fell to 1.8%, reflecting acquired inventory step-up amortization and inbound freight; organic gross margin improved 200 bps to 44.2%, and management expects a significant Q4 margin lift from releasing “profit in ending inventory” .
  • International mix expanded to 66% of revenue; Europe was $14.4M (+350% YoY), LATAM $5.0M (+20%), Asia $3.6M (+15.5%), while U.S. was $15.4M (+2% YoY, +25% QoQ) as LineDrive transition momentum improved .
  • Near-term catalysts: shipping 80–90% of LHD’s multiyear backlog in Q4, expected margin release of ending inventory profits, and continued Fire Services acceleration across key markets; management tone confident on FY targets .
  • Wall Street consensus (S&P Global) was unavailable at retrieval; estimates comparison could not be performed. Expect models to revisit revenue/mix and margin trajectory given Fire outperformance and planned Q4 margin release (S&P Global consensus data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Robust topline: net sales reached a record $45.8M (+44.5% YoY) driven by Fire Services (+245% YoY), with organic revenue +7.3% .
  • Organic margin strength: organic gross margin rose to 44.2% (+200 bps YoY), reflecting pricing strength in U.S./LATAM and improved mix; CFO reiterated confidence in FY25 targets .
  • Strategic execution: “Our head-to-toe fire offering…with a highly competitive delivery speed…is a disruptive differentiator,” and management sees potential to be a top-3 competitor globally in turnout gear .

What Went Wrong

  • Margin dilution from acquisitions: consolidated gross margin declined to 40.6% due to lower margins at LHD/Jolly and amortization of acquired inventory step-up plus higher inbound freight ahead of Q4 sales .
  • Elevated OpEx: operating expenses rose to $17.8M (+82.3% YoY) on inorganic growth, acquisition/non-recurring costs, and higher SG&A, compressing operating margin to 1.8% from 11.4% YoY .
  • EPS/Net income pressure: net income was $0.1M (EPS $0.01) vs $2.6M (EPS $0.34) YoY, as profit release from ending inventory did not occur in Q3; release is expected in Q4 .

Financial Results

Quarterly Progression

MetricQ1 2025Q2 2025Q3 2025
Net Sales ($USD Millions)$36.3 $38.5 $45.8
Gross Margin %44.6% 39.6% 40.6%
Operating Margin %6.1% -4.1% 1.8%
Net Income ($USD Millions)$1.653 -$1.376 $0.086
Diluted EPS ($USD)$0.22 -$0.19 $0.01
Adjusted EBITDA ($USD Millions)$3.85 $1.82 $4.26
Adjusted EBITDA ex FX ($USD Millions)N/A$2.66 $4.73

Current Quarter vs Prior Periods and Street

MetricQ3 2024Q2 2025Q3 2025Consensus (Q3 2025)
Net Sales ($USD Millions)$31.7 $38.5 $45.8 N/A (S&P Global unavailable)
Gross Margin %42.2% 39.6% 40.6% N/A (S&P Global unavailable)
Operating Margin %11.4% -4.1% 1.8% N/A (S&P Global unavailable)
Net Income ($USD Millions)$2.618 -$1.376 $0.086 N/A (S&P Global unavailable)
Diluted EPS ($USD)$0.34 -$0.19 $0.01 N/A (S&P Global unavailable)
Adjusted EBITDA ex FX ($USD Millions)$4.51 $2.66 $4.73 N/A (S&P Global unavailable)

Segment/Product Mix and Geography

CategoryQ2 2025 MixQ3 2025 Mix
Fire Services (% of revenue)31% 42%
Disposables32% 27%
Chemicals20% 11%
Other Industrial (FR/AR, High Performance, High Vis)17% 19%
Geography (Q3 2025)Revenue ($USD Millions)YoY Change
U.S.$15.4 +2%
LATAM$5.0 +20%
Europe (incl. Eagle, Jolly, LHD)$14.4 +350%
Asia$3.6 +15.5%
Fire Services RevenueQ3 2024Q3 2025YoY
$USD Millions$5.6 $19.3 +245%

KPIs

KPIQ3 2025Context
Organic Revenue ($USD Millions)$34.0 +7.3% YoY
Organic Gross Margin %44.2% +200 bps YoY
Adjusted EBITDA ex FX Margin %10.3% vs 14.2% LY
Cash & Equivalents ($USD Millions)$15.8 Down $9.4M since Jan 31 due to inventory build
Inventory ($USD Millions)$72.7 Up for Q4/LHD shipments
Long-term Debt ($USD Millions)$31.1 Reflects LHD acquisition and repayments
Working Capital ($USD Millions)~$95.7 Increased $12.5M since Jan 31
TTM Revenue ($USD Millions)$151.8 +19% YoY
TTM Adjusted EBITDA ex FX ($USD Millions)$14.7 +3.4% YoY
Dividend per share$0.03 (paid Nov 22) Quarterly program

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$160M–$170M (Q2) At least $165M (Q3) Maintained midpoint; converted to floor
Adjusted EBITDA ex FXFY 2025$18M–$21.5M (Q2) At least $18M (Q3) Lowered (removed upper end)
DividendQuarterly$0.03 (Q2 paid Aug 22) $0.03 (paid Nov 22) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Fire Services acceleration+92% YoY Fire in Q1; building head-to-to-toe portfolio via Jolly/Pacific; raising FY25 guidance 34% Fire growth; shipment delays at Jolly/Eagle to late Q3/Q4; LHD onboarding +245% YoY Fire; Europe +350% YoY; backlog shipments begin; confidence in becoming top-3 Accelerating
Profit in ending inventoryNot highlighted-3.4 pts GM hit; expected reversal in 2H No release in Q3; significant Q4 release expected to lift margins Improving next quarter
LineDrive transitionAnnounced strategic partnership post-Q1 Slower-than-expected rollout; pipeline building Rebound in U.S. revenue; weekly discipline; momentum improving Improving
LATAM/AsiaStrong double-digit organic growth in Americas; Asia soft LATAM robust; China improving LATAM +20% YoY; Asia double-digit growth; new leadership Broad-based growth
LHD integration/backlogAnnounced transaction plans Suppliers reinstating credit; Hong Kong contract increase; ramping Germany 80–90% of backlog to ship in Q4; new GM hire in Germany Execution advancing
Services offering (decon)LHD Care highlighted Noted opportunitiesLATAM decon services business case; services a priority for FY26 Early buildout

Management Commentary

  • “Our head-to-toe fire offering…coupled with a highly competitive delivery speed to customers, is a disruptive differentiator…we believe we are positioned to take market share.” — CEO Jim Jenkins .
  • “Adjusted EBITDA excluding FX was $4.7M…ahead of our internal forecast…we expect to release a significant portion of the [profit in ending inventory] reserve in the fourth quarter, which should enhance margins and profitability.” — CFO Roger Shannon .
  • “Organic gross margins increased by 200 basis points to 44.2%…driven by pricing strength in the U.S. and LATAM.” — CFO Roger Shannon .
  • “We are reaffirming expectations for fiscal year ’25 revenue of at least $165M…adjusted EBITDA, excluding FX, to be at least $18M.” — CEO Jim Jenkins .
  • “We expect 80% to 90% of [LHD’s] backlog to ship before the end of our fiscal year.” — CFO Roger Shannon .

Q&A Highlights

  • Path to EBITDA floor: No Q3 release of ending inventory profit; management expects a “significant” Q4 release to boost margins and support EBITDA at least $18M target .
  • Acquisition accounting noise: Management emphasized temporary accounting impacts (inventory step-up, ending inventory profit deferral) normalizing over time .
  • Channel transition: LineDrive momentum improving with disciplined weekly cadence; U.S. revenue rebounded QoQ (+25%) .
  • U.S. turnout gear expansion: Actively pursuing opportunities to get bigger domestically in turnout gear market .
  • LHD operational turn: Restarted production; leadership hire (Klaus Hawerkamp) to drive Germany; 80–90% backlog shipment expected in Q4 .

Estimates Context

  • S&P Global consensus estimates for Q3 FY2025 revenue and EPS were unavailable at time of retrieval; a direct Street beat/miss assessment cannot be provided (S&P Global consensus data unavailable).
  • Given outsized Fire growth and expected Q4 margin release, models may adjust revenue/mix assumptions higher and consider a near-term margin inflection supported by backlog shipments and ending-inventory profit release .

Key Takeaways for Investors

  • Fire-driven inflection: Fire Services at 42% of mix and +245% YoY highlight structural shift; management sees disruptive advantages in lead times and full portfolio breadth .
  • Margin setup favors Q4: Organic gross margin +200 bps YoY and anticipated release of ending inventory profits in Q4 point to margin expansion ahead .
  • Backlog as catalyst: Shipping 80–90% LHD backlog in Q4 should lift revenue, reduce inventory, and convert to cash collections, aiding working capital and leverage optics .
  • Guidance durability: FY25 revenue floor raised to ≥$165M and EBITDA ex FX floor ≥$18M; watch for execution on backlog and freight normalization to support delivery .
  • Channel normalization: LineDrive transition is gaining traction; U.S. revenue rebounded QoQ, underpinning industrial sales recovery into FY26 .
  • Regional diversification: Europe surge (+350% YoY), LATAM (+20%), Asia (+15.5%) reduces dependence on U.S.; balanced growth supports resilience .
  • Risk monitor: Acquisition integration and accounting impacts (inventory step-up, ending inventory profit timing) can swing margins intra-quarter; Q4 release is pivotal for validation .