Lakeland Industries, Inc. (NASDAQ:LAKE) Q1 2026 Earnings Call Transcript

Lakeland Industries, Inc. (NASDAQ:LAKE) Q1 2026 Earnings Call Transcript June 10, 2025

Operator: Good day, and welcome to the Lakeland Fire and Safety Fiscal First Quarter 2026 Financial Results Conference Call. [Operator Instructions] 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 expectations based upon currently available information and are not guidelines 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.

We undertake no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call. On this call, we will also discuss financial measures derived from our financial statements that are not determined in accordance with U.S. GAAP, including adjusted EBITDA, excluding FX and adjusted EBITDA, excluding FX margin, organic sales, organic gross margin, organic SG&A, operating expenses and adjusted operating expenses. A reconciliation of each of the non-GAAP measures discussed on this call to the most directly comparable GAAP measures is presented in our earnings release. A press release detailing these results crossed the wire this afternoon and is available in the Investor Relations section of our company’s website, ir.lakeland.com.

At this time, I would like to introduce your host for this call, Lakeland Fire and Safety’s President, Chief Executive Officer and Executive Chairman, Jim Jenkins; and Chief Financial Officer and Secretary, Roger Shannon. Mr. Jenkins, the floor is yours.

James M. Jenkins: Thank you, operator, and good afternoon, everyone. Thank you for joining us today to discuss the results of our fiscal 2026 first quarter ended April 30, 2025. We continue to build on the momentum from our fiscal 2025 revenue growth in the first quarter of 2026 as we focus on accelerating growth within the fragmented $2 billion fire protection sector in the largest global markets. Roger will go over the financials in more detail shortly, so I will provide you with a brief overview. We achieved record net sales of $46.7 million, representing a 29% year-over-year increase driven by a 100% increase in fire services products and the ongoing momentum from our recent acquisitions. In the U.S., our net sales increased 42% year-over-year to $22.5 million, including organic U.S. growth of $2.1 million or 15%.

And in Europe, our net sales increased 102% year-over-year to $12.1 million. Gross profit as a percentage of net sales decreased to 33.5% from 44.6% for the comparable period — year ago period. Robust growth in our organic and acquisition-driven fire services vertical in the U.S. market was partially offset by weakness in Canada and Latin America, where margins are typically above our corporate average. Additionally, as expected, lower gross margins from our recent acquisitions, including the impact of purchase accounting, continue to reduce corporate gross margins. Adjusted EBITDA, excluding FX, was $0.6 million, which was a decrease of $3.2 million compared with $3.8 million for the comparable year ago period. SG&A as reported increased $6.3 million from the first quarter of fiscal 2025, while organic cash SG&A increased year-over-year by $1 million, mostly driven by labor costs and outbound freight.

Capital expenditures of $1.2 million principally related to capital investment in our new enterprise resource planning system. In December, we began implementing a new company-wide SAP ERP system, which will enhance, modernize and consolidate our disparate company-wide systems to further support our growth and profitability. The first quarter reflected the full impact of tariff uncertainty and the associated mitigation strategies we have employed to build inventory. Our diversified manufacturing footprint makes us well equipped to adapt to shifting trade dynamics and minimize potential disruptions. This flexibility enables us to maintain stability across our supply chain and production processes even in the face of uncertainty. Even so, we did see lower sales in Canada and a delay in expected sales in Latin America, 2 of our higher-margin geographies due to the tariff uncertainty.

Our focus remains on strengthening customer relationships, driving operational efficiency and maintaining sound financial stewardship. Our positioning within 2 relatively recession-resistant sectors, industrial and fire continues to provide us with a solid foundation. We are not entirely insulated from the uncertainties surrounding global tariff developments, but we are navigating this period with clear priorities, thoughtful planning and strong confidence in our long-term outlook. To mitigate the effects of potential imposed tariffs, net inventories increased by $3.1 million, totaling $85.8 million as of April 30, 2025. To comment further on our tariff mitigation measures, in North America, we employ cross-certification of Lakeland’s Mexico produced fire turnout gear by Veridian for production in the U.S. All Veridian turnout gear is currently manufactured in the U.S., and these facilities have the capacity to manufacture Lakeland branded turnout gear.

Our Mexico facility is also becoming certified to produce Veridian turnout gear for the Canadian and LatAm markets. We have shared compliance under NFPA 1970 between our Mexico facility and Veridian with technical documentation to facilitate cross-production initiatives. It’s important to note that over 90% of our Mexico produced products, which fall under the provisions of the USMCA trade agreement are exempt from additional tariffs. In Asia, we are exploring other lower tariff regions for manufacturing industrial products while communicating expected price increases or surcharges to channel partners for products made in Vietnam and China. We are continuing to assess the possibility of manufacturing disposable products at our newly acquired U.S. manufacturing facilities or at other Lakeland facilities worldwide.

We believe that we do not have a material risk of retaliatory tariffs from foreign entities as we manufacture only a limited set of products in the U.S. for non-U.S. countries and only a limited range of China-produced products are imported into the U.S. We also believe that garment manufacturing is not the primary focus of the administration’s tariff policies. While our revenue was close to our internal expectations, tariffs did cause regional delays in the industrial space with additional factors affecting revenue, including currency issues as well as the production issues and product offering updates at Pacific Helmets. The tariff-related delays were most apparent in Canada and Latin America, although our outlook for these regions remains positive.

We believe momentum in these markets will rebound once uncertainty around tariffs subsides. Additionally, we continue to believe that a significant Jolly fire boots order originally anticipated for shipment in Q2 of fiscal ’25 is still likely to materialize. While timing remains subject to the Italian government’s final procurement steps, we remain encouraged by ongoing engagement and the customers’ reaffirmed intent to proceed. As such, we anticipate sequential growth in gross margins and adjusted EBITDA, excluding the impact of FX in the second quarter, aided by the improving global tariff environment and reduction in necessary mitigation strategies. Looking ahead into the remainder of fiscal year 2026, we remain focused on growing revenue in our fire services and industrial verticals, implementing operating and manufacturing efficiencies to achieve higher margins, significantly reducing operating expenses and continuing to navigate tariff uncertainties.

We are also continuing to execute on our strategic acquisition strategy by realizing cross-selling and operational synergies to accelerate growth while pursuing additional opportunities in the fire suit rental decontamination and services business. We maintain a robust M&A pipeline and are in active conversations to explore new opportunities for further consolidating the fragmented fire market, utilizing our strong balance sheet to support this acquisition strategy. With the 4 recently completed acquisitions, which added product line extensions, innovative new products and expanded our global footprint, we are strongly positioned to grow our global head-to-toe fire portfolio and to generate long-term value for our shareholders. With that, I’d like to pass the call to Roger to cover our financial results.

Roger D. Shannon: Thank you, Jim, and hello, everyone. I’ll provide a quick overview of our fiscal 2026 first quarter financials before diving into the details. Revenue for the quarter grew $10.4 million year-over-year to a record $46.7 million, an increase of 29% compared to the first quarter of fiscal 2025. Consolidated gross margin decreased to 33.5% from 44.6% for the first quarter of fiscal 2025. Operating expenses increased by $6.3 million or 45% from $14 million to $20.3 million in the first quarter of fiscal 2026, primarily due to inorganic growth, acquisition expenses and higher organic operating expenses. Net loss was $3.9 million or $0.41 per basic share and diluted earnings per share for the first quarter of fiscal 2026 compared to net income of $1.7 million or $0.22 per basic and diluted earnings per share for the first quarter of fiscal 2025.

Adjusted EBITDA, excluding FX, was $0.6 million for the quarter. Cash and cash equivalents were $18.6 million on April 30, 2025, compared to $17.5 million on January 31, 2025. Looking at our first fiscal quarter of 2026, the increase in net sales was driven by 100% growth in the Fire Services segment or a $10.5 million increase year-over-year. Sales from our recent acquisitions accounted for $9.9 million of the increase, while organic sales increased $600,000 or 2% over the prior year. Organic revenue increased $600,000 or 2% to $36.9 million compared to $36.3 million for the first quarter of fiscal 2025 due to strong growth in the U.S. and Europe, partially offset by weakness in Latin America and Canada. Within our important U.S. market, our organic fire services business grew $1 million or 32% year-over-year, and our U.S. industrial organic business grew $1.1 million or 9.7%.

Gross profit for the first quarter of fiscal 2026 was $15.6 million, a decrease of $0.6 million or 4% compared to $16.2 million for the first quarter of fiscal 2025. The gross margin percentage decreased in the first quarter of fiscal 2026 due to a shift in the geographic revenue mix, combined with, as expected, lower margins in our acquired businesses, primarily due to the impacts of purchase accounting and higher manufacturing and freight costs. Margins in the acquired businesses were impacted by the amortization of the write-up in inventory as part of purchase accounting. Our organic gross margin percentage decreased to 35.9% from 44.6% in the first quarter of fiscal 2026, primarily due to lower sales in our higher-margin Latin American and Canadian markets as well as the impact of material price variance allocations.

Due to systems limitations, all of our purchase price variances compared to standard costs were reflected in cost of goods sold rather than partially capitalized into inventory. We expect this impact to reverse in future quarters. Operating expenses increased by $6.3 million or 45% from $14 million for the first quarter of fiscal 2025, $20.3 million for the first quarter of fiscal 2026. Operating expenses increased due to the acquisitions of Veridian and LHD, which added $3 million to operating expenses as well as severance costs, litigation expenses and selling expenses. Adjusted operating expenses increased by $3.3 million, primarily due to the operating expenses of acquired companies. Operating loss was $4.6 million for the first quarter of fiscal 2026 compared to an operating profit of $2.2 million for the first quarter of fiscal 2025, primarily due to the aforementioned impacts.

Operating margins were negative 9.9% for the first quarter of fiscal 2026 compared to 6.1% for the first quarter of fiscal 2025. Net loss was $3.9 million or $0.41 of earnings per diluted share for the first quarter of fiscal 2026 compared to net income of $1.7 million or $0.22 of earnings per diluted share for the first quarter of fiscal 2025. Adjusted EBITDA, excluding FX, for the first quarter of fiscal year 2026 was $0.6 million, a decrease of $3.2 million or 84% compared with $3.8 million for the first quarter of fiscal 2025. The decrease was primarily driven by the previously mentioned materials purchase variance as well as higher organic SG&A and year-over-year increase in profit and ending inventory resulting from our tariff-related inventory build during the quarter.

As of quarter end, total profit and ending inventory was $1.3 million. Revenue for the trailing 12 months ended April 30, 2025, was $177.6 million, an increase of $45.3 million or 34% versus the Q1 fiscal 2025 TTM revenue of $132.3 million, with our recent fire services acquisition supporting Lakeland’s continued growth. Trailing 12- month adjusted EBITDA, excluding the impacts of FX, was $14.1 million compared to $16.5 million for the prior quarter’s trailing 12 months. The shortfall was a direct result of the revenue falling in key high-margin regions, the impact of the purchase variance described previously, higher-than-expected SG&A expenses, including increased travel and trade show participation as well as commission and incremental cost — operating costs associated with the Veridian acquisition.

Considering that we completed 4 major acquisitions in the past 12 months, the full integration and implementation of which does take some time, we believe those benefits will begin translating into even greater improved financial performance that will be recognized in coming quarters. Gross margin percentage decreased in the first quarter of fiscal 2026 due to geographic revenue mix, coupled with lower margins in our acquired businesses, higher manufacturing and freight costs. Margins in the acquired businesses were impacted by the amortization of the inventory write-up as part of purchase accounting. Organic gross margin percentage decreased to 35.9% from 44.6% for the first quarter of fiscal 2026, primarily due to lower sales in our higher-margin Latin American and Canadian markets and the material price variance allocations.

As we migrate to new systems, we expect to seamlessly ensure that purchase variances are properly identified and accounted for in alignment with inventory capitalization standards. The primary effect of this variance relates to the timing of expense recognition rather than underlying operational performance and has introduced short-term volatility into our gross margin reporting. We anticipate a corresponding improvement in gross margins in future quarters as this timing difference normalizes. Adjusted EBITDA, excluding FX for the first quarter of fiscal 2026 was $0.6 million, a decrease of $3.2 million or 84% compared with $3.8 million for the first quarter of fiscal 2025. The decrease was driven by this purchase variance where the full amount was expensed through COGS instead of being partially capitalized.

As I noted on the prior slide, the $3.2 million decrease in adjusted EBITDA, excluding FX, was driven by materials purchase variance, which will be reversed in subsequent quarters. We anticipate sequential growth in gross margin and adjusted EBITDA, excluding FX in the second quarter. Reviewing our performance for the first quarter, our most recent acquisition, Veridian contributed $4.4 million in revenue during the quarter. Revenues for Eagle, Pacific Helmets, Jolly, LHT and Veridian totaled $15.6 million, and we expect these to accelerate as we fulfill open orders and capitalize on cross-selling opportunities, including Jolly’s substantial fire orders that were previously delayed to the first half of fiscal 2026. Looking at our organic business, our Latin American operations decreased 12% in sales year-over-year due mainly to shipment timing and the previously mentioned impact of tariffs.

In Asia, however, we saw sales increase 15% year- over-year. We are very excited about the new sales leadership that we have put in place in Asia and we’re encouraged by the growth we’re seeing in both China and the new Asian markets outside of China. Our European revenue, including Eagle, Jolly and our recently acquired LHC business, grew by $6.1 million or 102% to $12.1 million. We continue to see very good sales opportunities in Europe and are committed to its growth trajectory. Our U.S. revenue increased 42% to $22.5 million, driven by continued growth in the Lakeland Fire Services business as well as a $1.1 million or 10% increase in our U.S. industrials business. Regarding product mix for the first quarter, our fire services business grew $10.5 million or 100% versus the same period last year.

and represents 45% of total revenue, driven by our recent LHD acquisition, a full quarter of Veridian sales and organic gains in the U.S. and for Eagle as we start to see gains from our head-to-toe strategy. For our industrial product lines, disposables represented 28% of revenue for the quarter, while chemicals represented 13%. The remainder of our industrial products, including FR/AR, high performance and High-vis accounted for 14% of sales. Now turning to the balance sheet. Lakeland ended the quarter with cash and cash equivalents of approximately $18.6 million and long- term debt of $24.7 million. This compares to $17.5 million in cash and $16.4 million in long-term debt as of January 31, 2025. As of April 30, 2025, we had borrowings of $19.8 million outstanding under the revolving credit facility with an additional $20.2 million of available credit under the loan agreement.

We were in compliance with all credit facility covenants. Net cash used in operating activities was $4.8 million in the 3 months ended April 30, 2025, compared to net cash provided of $300,000 in the 3 months ended April 30, 2024. The increase was driven by a net loss of $3.9 million and increase in working capital of $3 million, offset by noncash charges of $2.1 million. Capital expenditures were $1.2 million for the 3 months ended April 30, 2025, primarily related to capital investment in our new ERP system. At the end of Q1, inventory was $85.8 million, up from $82.7 million at the end of Q4 of fiscal year 2025 due to inventory buildup in preparation for the forecasted increase in sales in the first half of fiscal 2026, the delayed shipment of a large boot order from Jolly and tariff mitigation initiatives.

Inventory of acquired companies totaled $15 million. Year-over-year, we saw an increase in our organic inventory of $14.8 million versus the quarter ended April 30, 2024. Organic finished goods were $37.2 million in the first quarter of fiscal 2026, up $9.4 million year-over-year and up $700,000 quarter- over-quarter. Organic raw materials were $32.2 million in the first quarter of fiscal 2026, up $4.9 million year-over-year and up $1.2 million quarter-over-quarter. Despite margin pressure in Q1, we remain confident in our fiscal year outlook, including expected revenue between $210 million to $220 million. Due to lower margins and higher operating expenses in the first quarter, we are trending toward the lower end of our previously issued FY 2026 adjusted EBITDA, excluding FX guidance of $24 million to $29 million.

This reflects near-term order delays and uncertainty related to tariffs. Looking further ahead, we believe our cost discipline, acquisition strategy and operational improvements will position the company for accelerated growth over the next 3 to 4 years. With that overview, I’d like to turn the call back over to Jim before we begin taking questions.

James M. Jenkins: Thank you, Roger. In conclusion, we continue to demonstrate strong net sales growth driven by 100% year-over-year increase in our fire services and strong growth in both the U.S. and in Europe of 42% and 102%, respectively. Our near-term strategy is focused on growing top line revenue in our fire services and industrial verticals and implementing operating and manufacturing efficiencies to achieve higher margins while navigating the ongoing environment surrounding tariff uncertainties. Long term, our strategy is to grow both our fire services and industrial PPE verticals with our strategically located company-owned capital-light model, focusing on operating and manufacturing efficiencies to achieve higher margins with positioning to grow faster than the markets served.

Our acquisition pipeline remains strong, and we are engaged in active discussions aligned with our growth strategy. We maintain a fortified balance sheet from our $46 million oversubscribed capital raise in January and have identified up to $4 million in cash savings, excluding the Veridian consolidation, — with our expectation of continued top line revenue growth in our fire services and industrial verticals, combined with operating and manufacturing efficiencies, we are maintaining our fiscal year 2026 guidance range for revenue of $210 million to $220 million and adjusted EBITDA, excluding FX, in the lower end of a range of $24 million to $29 million. As we look toward the future, we are confident that our continued focus on cost discipline, targeted acquisitions and operational enhancements will serve as key growth drivers over the next 3 to 4 years.

As we scale, we anticipate steady expansion in EBITDA margins moving into the mid- to high teens range over the next 3 to 5 years, driven by improved efficiencies, a stronger product mix and disciplined pricing execution across the platform. With that, we will now open the call for questions. Operator?

Operator: [Operator Instructions] Our first question is from Gerry Sweeney with ROTH Capital Partners.

Q&A Session

Gerard J. Sweeney: A lot of information out there. I had a few questions I want to dig into certainly a couple of areas. I mean, specifically around gross margins, a couple of different things moving there. But Roger, I think you talked about purchase variance and amortization write-up in some of the products sold and that may reverse itself over time. Could you give a little bit more detail as to how much of a headwind that was this quarter and what we — how the next couple of quarters are going to develop? And when do we see sort of the net benefit coming through?

Roger D. Shannon: As you likely saw on the graph, we were talking about the bar chart about the impact to EBITDA. The total increase to manufacturing cost was close to $3 million impact to adjusted EBITDA. And we think a fairly significant part of that relates to a full flow-through of the purchase variance into COGS rather than being capitalized into inventory. Again, it’s a systems-related issue as we related, it’s just not possible at a detailed product-by-product level to break that out at the level that’s required for auditors and for financial statements. And similarly, on the purchase accounting, we’re in early days of purchase accounting with Veridian. We’re kind of still going through that. I guess the kind of the good news on that one is they tend to have fairly light in finished goods because of it being made to order.

And we’re coming up kind of toward the end of the purchase accounting impact on Jolly. And as you can imagine, being about halfway through with LHD, we’re kind of about halfway in the middle. So kind of as I think about that, thinking about the numbers, I think the impact was somewhere in the $500,000 range or about a 1% impact to gross margins.

Gerard J. Sweeney: That is separate from the €“

Roger D. Shannon: Yes, the purchase accounting was about a 1% impact to gross margins. And like I said, we’ve got about 8 months left on Veridian, and we’re about halfway through LHD. The impact from the cost variance was you would expect larger than that. It was, say, 2 to 3 margin points, I would estimate. In addition to, as I mentioned in the notes, while it has not been as large as it had been in some quarters, we did have a slight headwind again in the property lending inventory compared to last quarter where we had a big reversal. And that relates to, again, getting to a build of inventory as part of our tariff mitigation strategies.

James M. Jenkins: Gerry, the good news is that on the purchase variance, that should reverse in Q2 and Q3 as inventory sold through. So we’ll see sort of a natural lift, I would think in that. The purchase accounting, we’re still working our way through that.

Gerard J. Sweeney: Got you. But part of that headwind was you built the inventory and for future sales and that caused some of the issues. Got it.

James M. Jenkins: Yes. Correct.

Gerard J. Sweeney: What about on the OpEx side? So I mean, SG&A was — or I mean, operating costs were $20 million plus. I think that was probably higher than a lot of people had modeled on the Street. And again, a lot of numbers being thrown around here. So anything in there that is onetime or we can adjust — I saw some adjustments at the end, but didn’t have a time to go through with a fine tooth comb, but maybe help me where SG&A can kind of fall out term.

Roger D. Shannon: Yes, a few things. Our travel expenses were up considerably in Q1, and we expect those to back off pretty stiffly. We had the FDIC fire show in the first quarter. And quite frankly, there was just a significant amount of travel by the executive team really all around the world as we were visiting the different acquisition sites, manufacturing sites. And that’s naturally was going to taper off, but we’ve put some additional measures in place, and that’s part of that $4 million in costs that we’ve identified that we’re focusing on and potential cost cutting. Other things that were up in the quarter G&A labor were up a bit year-over-year, again, kind of getting the right people in the right places. The outbound freight, freight number was up quite a bit related to, again, inventory movements related to tariff strategies, and we would kind of expect that to more normalize going forward. Y

James M. Jenkins: Roger, if I just add on the freight, there was sort of a window when there was a loosening on the tariffs that there was a buildup of freight demand and the freight costs came in abnormally high for that period of time. We’re working through that now on the procurement front to reduce that for us in the coming quarters. And we’ve got a strategy to do that. And frankly, there’s also just going to be a natural lowering of that as this starts to normalize.

Roger D. Shannon: I think just the last thing I’d add, we had increases from the acquired company OpEx. And having just closed on 2 of those, we’re kind of going through that as we speak as part of the integration and kind of rationalization process. So that’s really starting to ramp up. So that will kind of be ongoing over the next couple of quarters.

Gerard J. Sweeney: And suffice to say, you’ve identified $4 million in sort of cost out. I think that — does that come from the OpEx side? Or is that a mix of OpEx and cost of goods sold?

Roger D. Shannon: That is for the OpEx.

James M. Jenkins: Yes, that’s the OpEx. That’s the SG&A discipline, I think, optimizing procurement, streamlining overhead and then consolidating some of our acquired companies.

Gerard J. Sweeney: Got it. Some of it is just natural consolidation. One last question, I’ll jump back in line. When I head over to the growth side. Obviously, fire big opportunity for you. Can you maybe give us a little detail of how things are going on — I mean, growth was up, obviously, as you highlighted, but some of it was certainly by acquisition. But really interested in sort of maybe the head-to-toe strategy, bundling. What are we seeing on that front and just opportunities as we move forward?

James M. Jenkins: I’ll start, and Roger, you can jump in. But I mean, we’re — we’ve got much greater engagement with our customers. We’re seeing a lot more opportunities. We’re seeing opportunities with some of the larger places that we wouldn’t have expected to. And I think that’s primarily as a result of sort of a focus that we adopted from our Veridian acquisition with their glove strategy. I mean Veridian sells — if you don’t want to be bothered with the real hassle sometimes of a major metro market, selling gloves into that market is the easiest thing to do. And gloves, firefighters use gloves in a matter of a few months, they can burn through them and need another pair. And the Veridian Glove is obviously something that is very well regarded in the marketplace.

As I think I mentioned, they’ve got Dallas as a customer, L.A. Fire Department as a customer. So there’s some big opportunities and even some of the — what you might think to be sort of a lower cost commodity type product. So that is going very well. We brought in a new leader into Pacific Helmets and with Barry Phillips’ strong product management skill set, I’m expecting to see some real growth out of that. We’re seeing real opportunities in a lot of different spaces all over the world. just closed on an opportunity with the Korean fire department, nothing huge, but that’s obviously a nice market for us and one that we haven’t really been terribly active in. So yes, there’s a lot of steps being taken as we start pruning the opportunities and being a little bit more laser-focused on those, Pacific Helmet being one of them.

Obviously, LHD, we’ve got — it was no surprise to us when we took over the backlog that we had and some of the customer issues that we had to attend to. We’re seeing some lift with that. And then in our own name, our own name brand in Lakeland, we’re seeing significant opportunities. Unfortunately, there’s a couple of really cool ones we can’t talk about, Gerry, but because we haven’t let us talk about them yet, but we’re hoping that in the coming weeks, we’re going to be able to make some announcements about some pretty cool developments where we’ve gotten some wins.

Gerard J. Sweeney: And those developments are wrapped around that sort of head to toe. I mean, whether gloves give you an opportunity

James M. Jenkins: They’re absolutely head to toe. They’re head to Toe, and they’re partnering with — you might see an opportunity where we have a Pacific helmet or Veridian turnout gear and even a Veridian boot and Veridian Gloves or Lakeland turnout gear and Veridian Gloves. So the use of the portfolio is something that we’ve got several arrows in our quiver, greater engagement with our customers, more targeted focus on channel partners. And then Roger and his team with the deal desk, sort of an operational real-time visibility for regions to see where we might be able to have some flexibility in margins when we’re putting together a full head-to-toe offering.

Roger D. Shannon: One thing I would point out that is creating possibly some timing within the current year is an evolution of another NFPA standard in 1970, 1971. So there is — that change that’s going to be happening later this year. So I think that we had — anecdotally, I think we’ve been seeing some hold off on purchases in the U.S. kind of waiting until the new standard does come out later this year. It’s not — it didn’t go negative. But I think the — anecdotally, we’ve been hearing that there is some desire to hold off. I know we’re in Veridian facilities, we’re gearing up. And in a lot of cases, it’s a matter of kind of getting inventory staged up into the point that the product label goes in, and we don’t want to put the 1970 label in when it needs to be labeled 1971. So really, it’s kind of a matter of managing that inventory tightly of what’s going to be sold under the current standard versus being prepared for the new standard.

James M. Jenkins: And I’ll add, Gerry, that we are driving hard to get those certifications. And it’s really — the backup right now, the backlog is at UL, which is a certifying body. But we’ve got, to Roger’s point, you want to be the one that you want to get that certification and be an early mover on that because the — it’s sort of like I liken it to the new model of car. If you come out in August and you want to buy your 2026, you want to buy a 2025 model and you know the 2026s are coming out in October, you might wait. So we want to make sure that we’ve got that lined up and that certification ready so that when the firefighter says, well, I’m looking for the 1970 certification, not the old one, we have it ready to go. So we’ve got our products in front of UL to get those certifications. It’s a function of hearing from them.

Operator: Our next question is from Mike Shlisky with D.A. Davidson.

Michael Shlisky: If I read everything correctly, I heard your comments, kind of the bottom line organic growth in the quarter, I think it was 2%, if I’m mistaken, correct me. can you update us on your expectations for organic growth for the full year? Is it still high single digits? Or has that changed at all?

Roger D. Shannon: It is. And like I mentioned in the call, we saw a really strong organic growth in the U.S., almost 10% growth in our industrial product as well as in our fire products. Where we saw the drop off, as we mentioned in the comments, was in LatAm, where we had a 12% year-over-year decrease and in Canada. So those are the 2 higher-margin countries to start with. So right off the bat is while they were both down, that also impacted the gross margin of the company because they were — they tend to be higher gross margin. So to have 2% across the company kind of given the headwinds we saw in Canada and especially in LatAm was very encouraging. It’s very encouraging to see the growth returning in the U.S. And like we said in the prepared remarks, we’re also very enthusiastic about the results and the turnaround we’re seeing in our Asian market.

Michael Shlisky: Okay. And then to reach that full year goal and really your overall revenue goal for the year, do you need to have that Jolly order that’s been kind of hung up here shipped during the year? Or is that kind of like a bonus on top of what you’re already thinking you’re going to be getting?

James M. Jenkins: Look, I’m actually — I’m going to meet with the Italian government next week. One, to thank them for the relationship because it’s been a long-standing relationship; and two, to better understand the timing of the delivery of that. We’ve been engaging with them for the last several months. All indications are positive. I think I may have said this on the last call, but the issue isn’t with anything related to Jolly. The entire procurement division of the Ministry of Interior in Italy has — they were under investigation. So they’ve moved people out and moved new people in, and it was sort of a corruption investigation. So you’re dealing with a whole subset of new individuals within the procurement space, the senior official of whom I’m going to meet with next week.

we remain very optimistic. There’s no indication of anything about the quality of the boot or any — I mean we’ve been a long-standing traditional customer. It’s just a function of we’re now dealing with a whole new subset of people within the government, all of whom have communicated to us their satisfaction with the product. It’s a function right now of dealing with internal sort of politics. That is an important component of our go-forward forecast, but I have every confidence in our ability to be able to have that materialize.

Michael Shlisky: Okay. Perfect. And maybe lastly, just on the cadence of how the rest of the year is going to play out from an EBITDA perspective and some of the accounting machinations that happened here in the first quarter. Does it completely reverse in 2Q? Or is there some kind of gradual rollout that’s going to happen for the rest of the year with kind of what was lost here and was gained for the rest of the year?

Roger D. Shannon: Yes. We really — we already had it kind of increasing quarter-over-quarter. It’s — part of it will be the kind of seeing the impact of that materials purchase price variance versus the standard start to work itself out. And that’s a matter of kind of working through that inventory. Part of it will be kind of picking up the momentum of the cost containment and cost-cutting efforts that we have. And then, of course, kind of seeing the timing of the LatAm, Canadian and then ongoing U.S. organic shipments accelerating. So I would discourage putting it all into the second quarter. We already had it kind of increasing quarter-over-quarter, but we do expect an improvement in the second quarter.

Operator: Our next question is from Mark Smith with Lake Street Capital Markets.

Mark Eric Smith: First off, I just want to look at the balance sheet a little bit here on inventories and just kind of your comfort level with where inventories are and maybe if there needs to be more build as we think about tariff mitigation.

Roger D. Shannon: Speaking for myself, I don’t really believe that there is a kind of overwhelming increase for more build. I think we positioned ourselves well for the inventory that we bring in from China, which is primarily the clean room. We talked about that in the previous quarter of how we had begun — sorry, at our year-end call just several weeks ago about how we begin staging and building that — on the inventory from Vietnam, we believe there will continue to be kind of progress toward a deal with that country. I know the administration has said that they’re not — it’s not a matter of clothing and shirts that they’re concerned about bringing that back to the U.S. So we do expect that environment to improve and likely will settle at around a 10% level for Vietnam.

So we kind of got our handle — got our arms around that and those conversations with the customers as that’s being passed along. I guess the wildcards at this point are what’s going to happen with the EU. Of course, our Jolly boots are made in Romania, and we are, again, still expecting that NFPA North American fire boot to be rolled out in early fall of this year into the U.S. market that is certainly been slower than we originally expected, but expect that in early fall. And we really don’t see anything a big concern from Pacific and New Zealand. So we’d expect that to probably stay in the 10% range as well. So obviously, I would like to see the inventory start to work down.

James M. Jenkins: Yes, that’s where I am, Roger. We’ve got — we’ve obviously made the strategic purchase where we brought in strategically that critical environment piece. We will continue to drive that down. I know we’ve got several opportunities in the pipeline that I’m very confident about that I think are going to help us window that down over the course of the coming quarters. So — and then, of course, we fired up our Vietnam clean room capacity so that we’re not — we’re no longer reliant on China for that critical environment piece.

Mark Eric Smith: Okay. Next, I wanted to dig back into gross margin a little bit. Just kind of looking at the bar chart you guys have in your presentation here, manufacturing costs being kind of the biggest headwind. Obviously, a lot of things happening there. But I’m curious if you can just kind of break out just if you call it, organic kind of headwinds there, labor, increased cost of materials, — what’s kind of hurting there and what you can do to kind of help fix that a little bit and including price increases and what you maybe have done or are looking at as far as price?

Roger D. Shannon: Again, part of it is this kind of systems challenge of the price area. So what we mean by that is we use our current system we use a standard costing system. And with the — kind of with the tariff situation, we’ve been adding more vendors. I think there’s been a fairly large increase in the number of suppliers and vendors, and there’s standards not necessarily set up on those so that this variance kicks out and because you are challenged in kind of accurately identifying it between what goes in COGS and what goes to inventory, it pretty much all flow through COGS. So that’s part of it. We mentioned in gross margins, the purchase accounting was about 1 margin point. profit in inventory, the year-over-year impact was about 1 margin point.

But I guess what I would add to that is, like I said in the prepared comments, we’ve got about $1.3 million in profit in the inventory. So there was a — where Q1 of last year was a — I believe it is $200,000 help. It was a $300,000 hurt this time, so about $0.5 million swing year-over-year. But the — and we did see a large increase or decrease kind of coming out of that build last year. But we are monitoring that quarter-to-quarter and do have $1.3 million of profit in the inventory that will still kind of flush through. And then the other part is you’re kind of really digging in, in the acquired company gross margins, and that’s something that is really starting up in earnest and we’re having conversations about opportunities with Veridian to improve their margin.

We’ve talked about that. We’ve hired a new Managing Director at Pacific. There’s certainly been some challenges with manufacturing and with OpEx at Pacific. That new MD has been on the job about 5 weeks, and they’re coming in next week for kind of a preliminary readout with us. And there’s some — there’s others as well with Jolly, we’re still not where we need to be from a gross margin perspective and a production efficiency in the factory there. So all those initiatives that are underway.

Mark Eric Smith: Okay. And my last question, just digging a little deeper on the SG&A here. I’m curious, as we look at the breakdown that you guys gave on kind of organic cash SG&A, just up a little bit year-over-year. I’m curious about the inorganic cash SG&A. It seems like these acquired companies are pretty clean, but are there opportunities to cut at all or to get more efficiencies within SG&A on some of these acquired companies?

James M. Jenkins: There absolutely is. I mean I’m in Quitman, Arkansas today at one of the Veridian — former Veridian facilities, now our facility where they manufacture gloves. And I’ve spent the entire day with the team and our North American Global VP of Manufacturing, looking into efficiencies within the plant, and there are several that we can achieve. In addition, we’re looking at — we’ve talked about this before, consolidating Veridian into 2 operations, probably shorter term and then 3 — I mean, 1 longer term. So there are some opportunities here to squeeze some significant savings out over the short term, medium term and long term.

Operator: This concludes the question-and-answer session. I would now like to turn the call over to Mr. Jenkins for his closing remarks.

James M. Jenkins: Thank you, operator. Thank you all for joining us for today’s call, and thank you to our customers and distributor partners worldwide for trusting us with your lives and safety. Lakeland continues to be well positioned for long-term growth. If you’re unable to answer any of your questions today, please reach out to our IR firm, MZ Group, who will be more than happy to assist. And for those of you attending the upcoming ROTH London Conference, June 24 through the 26, we look forward to seeing you there.

Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.