Yahoo Finance Lakeland Industries Inc (LAKE) Q4 2024 Earnings Call Transcript Highlights: Strong Revenue ...
Revenue (Q4): $31.2 million, up 7.7% from $29 million in the previous year.
Revenue (FY 2024): Increased by $11.8 million or 10.5% compared to last year.
Net Income (FY 2024): Increased by $3.6 million to $5.4 million.
EPS (FY 2024): Net income per diluted share of $0.72 compared to $0.24 in the prior year.
Gross Margin (Q4): 44.6% excluding one-time inventory adjustment.
Adjusted EBITDA (Q4): $3.4 million, excluding FX losses.
Adjusted EBITDA Margin (FY 2024): Excluding FX, 12.6%.
Fire Service Business Growth (FY 2024): Over 80% versus last fiscal year.
Eagle Technical Products Growth (FY 2024): Over 103% since acquisition.
Latin America Business Growth (FY 2024): Up 49% year over year.
Adjusted EBITDA (FY 2024): Excluding FX loss increased by over $6 million to $15.7 million.
Operating Cash Flow (FY 2024): $10.9 million, led by decreases in inventory.
Capital Expenditures (FY 2024): $2.1 million, expected to be approximately $3 million in FY 2025.
Guidance (FY 2025): Revenue in the range of $140 million to $150 million; Adjusted EBITDA, excluding FX, to be in the range of $16.8 million to $18.5 million.
Release Date: April 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Net sales for the fourth quarter of fiscal 2024 increased by 7.7% to $31.2 million compared to the previous year.
For the full fiscal year 2024, Lakeland delivered solid revenue growth of $11.8 million or 10.5% compared to last year.
Growth in US and Latin American operations was strong, with a 13% and 49% increase year over year, respectively.
The Fire Service business grew over 80% versus last fiscal year, driven by strategic acquisitions and new distributor onboarding.
Adjusted EBITDA, excluding FX losses, for the fourth quarter of fiscal 2024 was $3.4 million, reflecting improvements in sales mix and logistics operations.
Negative Points
A 44% decrease in the Asia business during the year and a weaker than expected fourth quarter.
A one-time charge for inventory rightsizing negatively impacted the fourth quarter gross profit margin.
Foreign exchange volatility, particularly from the Argentine peso, had a negative impact on financial results.
The company reported an operating loss of $3.3 million for the fiscal fourth quarter of 2024.
Net income was negatively impacted by increased tax expenses and foreign exchange losses, resulting in a net loss of $1 million for the quarter.
Q & A Highlights
Q: How much of the current business has a service component and will the service component growth come organically or inorganically or both? A: James Jenkins (Executive Chairman of the Board, Acting President and CEO) responded that this is Lakeland's first foray into service through the LHD acquisition and they do not currently have that offering. They are excited about it and are exploring whether it's something they might greenfield in other areas of the world. Roger Shannon (CFO) added that LHD has a strong care program in a number of countries, which provides a leg up, and the gross margins for that business are well above company averages.
Q: Can you provide details around the value proposition and important benefits of providing a head-to-toe fire product offering? A: James Jenkins explained that having a complete head-to-toe offering provides a significant competitive advantage, especially for tenders where they can bid for the entire contract without needing a partner. Roger Shannon mentioned that they recently won a significant tender in LATAM against larger providers due to their comprehensive offering.
Q: Is the FX impact strictly due to the devaluation of the Argentinean peso, or were there other aspects at play? A: Roger Shannon clarified that the FX impact they called out was almost exclusively due to the Argentinean peso. He explained the unique situation in Argentina due to high inflation rates and US GAAP requirements, which causes currency impacts to flow through OpEx. He also mentioned that unlike most currencies, the peso is not hedgeable, but they are bullish on the market and are taking market share.
Q: What are the details on the company-wide focus on growing the service aspects for both fire and the core business? A: James Jenkins stated that they are exploring the potential for expanding service offerings following the LHD acquisition. Roger Shannon added that LHD's strong care program offers attractive recurring revenue streams and gross margins.
Q: Can you provide some details on the impact of FX, particularly regarding the Argentinean peso? A: Roger Shannon explained that the FX impact was primarily due to the Argentinean peso's devaluation. The high inflation rate in Argentina requires them to carry the subsidiary in a US dollar functional currency, which results in currency impacts affecting operating expenses. Despite these challenges, they are optimistic about improvements in Argentina's fiscal stability.
Q: What is the outlook for the company's growth and strategy moving forward? A: James Jenkins highlighted the company's strategy to emphasize opportunities for business growth, including leveraging their growing portfolio of product offerings in the fire space and expanding their presence in markets like Latin America. They also plan to upgrade systems and software to drive technology as a competitive advantage and continue their acquisition strategy to drive organic growth post-acquisition.
Q: What are the financial expectations for fiscal 2025? A: Roger Shannon provided forward-looking guidance for fiscal 2025, expecting revenue in the range of $140 million to $150 million and adjusted EBITDA, excluding FX, to be in the range of $16.8 million to $18.5 million. These expectations include the recently announced Jolly Starbase and Pacific elements acquisitions but do not include the LHD. fire business, which is expected to close in late May 2024.
Q: What are the plans for capital expenditures in fiscal 2025? A: Roger Shannon mentioned that they expect capital expenditures to be approximately $3 million as they develop additional in-house fire service manufacturing capacity and replace existing equipment in the normal course of operations. He also noted that the Monterey expansion remains on pause as they continue to assess weather-related damage to their leased building.
Q: How is the company addressing system improvements and integration? A: James Jenkins discussed the company's efforts to upgrade systems and software to drive technology as a competitive advantage, which is a longer-term play. They are confident in the anticipated mid to longer-term productivity improvements and associated EBITDA margin expansion.
Q: What is the company's acquisition strategy and how does it support growth? A: James Jenkins explained that acquisitions are an important element of their growth strategy, supported by healthy cash flow. They plan to expand their integration programs and focus on smaller companies for easier integration, aiming to execute sales and cost synergies while maintaining brand value.
This article first appeared on GuruFocus.
