Lakeland Fire + Safety Fiscal Second Quarter 2026 Financial Results Conference Call

Lakeland Fire + Safety

Fiscal Second Quarter 2026 Financial Results Conference Call

CORPORATE PARTICIPANTS

Jim Jenkins, President, Chief Executive Officer, and Executive Chairman

Roger Shannon, Chief Financial Officer and Secretary

CONFERENCE CALL PARTICIPANTS

Mark Smith, Lake Street Capital

Gerry Sweeney, ROTH Capital Partners

Good day, and welcome to the Lakeland Fire +

Safety Fiscal Second Quarter 2026 Financial Results Conference Call.

All lines have been placed on a listen-only mode, and the floor will be open for

questions and comments following the presentation.

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 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, adjusted gross profit, adjusted organic gross margin, and adjusted operating expenses. A reconciliation of each of the

non-GAAP measures discussed on this call to the most directly comparable GAAP measure is presented in our earnings release and/or the supplemental slides filed with our earnings release.

A press release detailing these results was issued this afternoon and is available in the Investor Relations section of our Company's website,

At this time, I would like to introduce your hosts 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.

Thank you, Operator, and good afternoon,

everyone. Thank you for joining us today to discuss the results of our fiscal 2026 second quarter ended July 31, 2025.

We continued to build

momentum in the second quarter of 2026, despite a challenging tariff environment, as we focused on recent acquisition synergies, increasing our market share within the fragmented $2 billion Fire Protection sector in the largest global markets,

and growing our global industrial products business.

Roger will go over the financials in more detail shortly, so I will provide you with a brief

We achieved record net sales of $52.5 million, representing a 36% year-over-year increase, driven by a 113% increase in Fire Service

products and the ongoing momentum from our recent acquisitions. In the U.S., our net sales increased 78% year-over-year to $22.1 million, and in Europe, our net sales increased 113% year-over-year to $15.1 million. We anticipate continued

robust growth in our Fire Services, both organically and through acquisitions, as well as in our Industrial segments, in the months and years ahead. Adjusted EBITDA excluding FX was $5.1 million, an increase of $2.4 million, or 89%,

compared with $2.7 million for the comparable year-ago period. Sequentially, our Adjusted EBITDA increased $4.5 million, or 740%.

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Adjusted Gross profit as a percentage of net sales in the second quarter was 37.4% versus 41.1% in the

comparable year-ago period but increased 220 basis points sequentially from 35.2% in the first quarter. Our adjusted gross margin percentage decreased in the second quarter for fiscal 2026 compared to the same

period last year, primarily due to lower acquired company gross margins, increased material costs and tariffs, partially offset by a reduction in profit in ending inventory. Margins in the acquired businesses were impacted by increased material

costs and amortization of the write-up in inventory as part of purchase accounting.

A largely anticipated

$3.1 million boot order through Jolly Scarpe also contributed materially to the quarter, as part of our previously awarded four-year supply contract from the Italian Ministry of the Interior, which provided 47,500 intervention boots for

firefighters. Our manufacturing facility in Romania provides high production flexibility, and every detail of the boot was custom designed to fully meet the fire brigade's requirements.

Additionally, we are diligently working to bring an NFPA-certified Jolly boot to the U.S. markets, the world's largest market for fire turnout gear.

While this launch has taken longer than originally anticipated due to certification backlogs, we expect to bring the boot to the U.S. market in the first half of 2026. Jolly's strong brand has a well-established reputation for producing

high-quality, innovative professional footwear designs and manufacturing in the growing first responder safety market.

Additionally, the recent

announcement of our facility closures and the $6.1 million sale and partial leaseback of our Decatur facility further strengthens our balance sheet and support our M&A activity. The sale was part of the Company's previously disclosed

financial and operational initiatives aimed at streamlining global operations and improving profitability. Lakeland has begun a search for a new, upgraded warehouse, logistics, and lab facility in a more strategic location to replace the Decatur

Combined with our previously announced closures, which include the planned closures of our warehouse facility in Hull, England, and Veridian

manufacturing facility in Quitman, Arkansas. These initiatives are expected to streamline global operations, improve profitability, and generate annual savings of approximately $1 million for the remainder of fiscal 2026. We have further

identified and are executing initiatives expected to yield an additional $3 million in annualized savings, with the benefits anticipated to materialize in the second half of fiscal 2026. We believe these efforts will enable higher margins and

build a more agile and cost-effective Lakeland in the longer term.

On the capital markets front during the quarter ended June 30, 2025, we saw an

increase in reported institutional holdings by 447,000 shares, or 6.2%, to 7,622,035 shares, and the number of institutional holders rose to 94 from 82. Most notably, our recent inclusion on the Russell broad-market 3000 Index and Russell 2000 Index

due to our expanding market capitalization is a significant milestone resulting from our revenue and global momentum.

The second quarter reflected the

impact of tariff uncertainty and the associated mitigation strategies we have employed since the election. Our diversified manufacturing footprint enables us to adapt effectively 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, including in the Latin American industrial space. One of our higher-margin geographies.

Our focus remains on strengthening customer relationships, driving operational efficiency, and maintaining sound financial stewardship. Our positioning within

two 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.

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Looking ahead into the remainder of fiscal 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 integrating acquired companies and realizing cross-selling and operational

synergies to accelerate growth while also pursuing opportunities in the fire suit rental, decontamination and services business.

Efforts to integrate and

optimize our recent Fire Services product acquisitions are going well. We are particularly excited about our recent Veridian acquisition and are very pleased with the efforts of the Veridian and Lakeland sales and operations team to integrate that

business and expand sales opportunities.

To expand our firefighter protection offerings and further consolidate the fragmented fire market, we are

continuing to pursue M&A opportunities within the fire suit rental, decontamination, and services business, particularly within the United States. Our acquisition pipeline remains strong with this recurring revenue services channel, and we are

actively engaged in several strategic discussions that align with our growth strategy, with expected activity in the second half of the year. We will utilize our strong balance sheet to support this acquisition strategy, with a focus on efficiency,

reducing costs, and financial and operational agility.

With the four recently completed acquisitions, which added product line extensions, innovative new

products, and expanded our global footprint, we are well-positioned to grow our global head-to-toe Fire portfolio and generate long-term value for our shareholders.

With that, I would like to pass the call to Roger to cover our financial results and updated guidance outlook.

Thanks Jim, and hello, everyone.

I'll provide a quick overview of our fiscal 2026 second quarter financials before diving into the details.

Revenue for the quarter grew $14 million year-over-year to a record $52.5 million, an increase of 36% compared to the second quarter of fiscal 2025.

Consolidated gross margin decreased to 35.9% from 39.6% for the second quarter of fiscal 2025, while our adjusted gross margin decreased to 37.4% as

compared to 41.4% in the year-ago period.

Adjusted operating expense increased by $1.4 million from

$13.2 million in Q2 of last year to $14.6 million in the second quarter of fiscal 2026, primarily due to inorganic growth.

$800,000, or $0.08 per basic and diluted earnings per share, for the second quarter of fiscal 2026, compared to a net loss of $1.4 million, or $0.19 per basic and diluted earnings per share, for the second quarter of fiscal 2025.

Adjusted EBITDA excluding FX was $5.1 million for the quarter, an increase of $2.4 million, or 90%, compared with $2.7 million for the second

quarter of fiscal 2025.

Adjusted EBITDA excluding FX margin in the second quarter of fiscal year 2026 was 9.6%, an increase of 270 basis points from 6.9%

in the second quarter of fiscal 2025 and an increase of 830 basis points from 1.3% in the first quarter of fiscal 2026.

Cash and cash equivalents were

$17.7 million on July 31, 2025, compared to $17.5 million on January 31, 2025.

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provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

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On a consolidated basis, for the second quarter of fiscal year 2026, domestic sales were $22.1 million,

representing 42% of total revenues, and international sales were $30.4 million, accounting for 58% of total revenues, as our recent Veridian acquisition contributed to increased U.S. revenue. This compares with domestic sales of

$12.4 million, or 32% of the total, and international sales of $26.1 million, or 68% of the total, in the second quarter of fiscal year 2025.

Looking at our second quarter of 2026, our quarterly revenue continued to grow, both organically and through acquisitions. Sales from our recent acquisitions