Earnings call: Lakeland Industries posts strong Q3 results, acquires Pacific Helmets

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Earnings call: Lakeland Industries posts strong Q3 results, acquires Pacific Helmets
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Lakeland Industries , Inc. (NASDAQ: LAKE ) has reported an encouraging set of financial figures for the third quarter of fiscal 2024, with net sales climbing 11.6% year-over-year to $31.7 million. This growth is primarily attributed to the robust performance of its fire service and industrial product lines. Gross margins have held steady at a healthy 42.2%, while adjusted EBITDA saw a 10.8% increase, reaching $3.3 million. The period also marked a strategic expansion for the company with the acquisition of Pacific Helmets, a move poised to bolster Lakeland's product range and drive future growth. Despite facing headwinds in Asian markets, particularly China, the company enjoyed robust demand in North America, Latin America, and select international markets. Lakeland's approach to growth remains focused on small, strategic acquisitions designed to augment its product offerings and enhance cross-selling opportunities.

Key Takeaways

  • Net sales up by 11.6% to $31.7 million, with fire service and industrial products leading growth.
  • Gross profit margin steady at 42.2%; adjusted EBITDA increased by 10.8% to $3.3 million.
  • Acquisition of Pacific Helmets expected to contribute to Lakeland's future growth.
  • Strong demand in North America and Latin America; challenges persist in Asian markets, especially China.
  • Fire service business represents 21.4% of sales; disposables account for 39% of fiscal year-to-date sales.
  • U.S. sales rose by $1.1 million; Latin American sales jumped 63%.
  • The company maintains a debt-free status with $26.4 million in cash and cash equivalents.

Company Outlook

Lakeland Industries is optimistic about its global growth opportunities for fiscal 2024. The acquisition of Pacific Helmets is a strategic move that is expected to enhance the company's product offerings and contribute to its revenue growth, particularly in the fire and higher-value industrial sectors.

Bearish Highlights

The company has acknowledged weaker sales performance in Asian markets, with China being notably challenging. However, it's worth noting that the company has a strategy in place to navigate these challenges and is not solely reliant on these markets for growth.

Bullish Highlights

Lakeland's growth trajectory is supported by strong sales growth in the U.S., Europe, Canada, and Latin America. The company's strategic acquisitions and its strong position in the disposables market, with initiatives like the clean room applications and a distributor direct-to-customer container program, are expected to continue driving revenue.


While the company is performing well overall, the sales in Asia, particularly China, have not met expectations. This has been identified as an area that needs attention, and the company is focusing on recovery and growth in these markets.

QA Highlights

Jim Jenkins, CEO of Transcat (NASDAQ: TRNS ), during the earnings call, drew parallels between Transcat and Lakeland's strategic M&A approaches. He expressed confidence in the successful integration of the recent acquisition of Pacific. Additionally, the importance of disposables to the company's revenue was discussed, highlighting strategic opportunities in this area. Efforts to reduce inventory levels by $2-4 million were also a point of discussion, with the company expressing satisfaction with its progress in this area and emphasizing it as a high priority.

In summary, Lakeland Industries remains on solid financial footing as it moves into the next fiscal year, with strategic acquisitions and product diversification at the core of its growth strategy. Despite some regional challenges, the company's broad market presence and focused approach to inventory and acquisitions provide a positive outlook for the future.

InvestingPro Insights

Lakeland Industries, Inc. (LAKE) has shown resilience in its latest financial results, bolstered by a strong performance in key product lines and strategic acquisitions. To further understand the company's financial health and future potential, let's delve into some key metrics and insights from InvestingPro.

InvestingPro Data shows that Lakeland holds a market capitalization of $112.53 million, indicating its size within the industry. The company's P/E ratio stands at 17.02, suggesting that investors are paying $17.02 for every dollar of earnings, which is relatively low when considering the near-term earnings growth potential. This aligns with one of the InvestingPro Tips highlighting that the company is trading at a low P/E ratio relative to near-term earnings growth. Additionally, Lakeland's revenue has grown by 10.67% over the last twelve months as of Q3 2024, further underlining the company's accelerating revenue growth.

Another InvestingPro Tip to consider is that Lakeland holds more cash than debt on its balance sheet, which is a strong indicator of financial stability and positions the company well for future investments or to weather economic downturns. This is particularly relevant for investors considering the company's strategic growth initiatives and acquisitions, such as the recent purchase of Pacific Helmets.

Investors looking for more insights can find additional tips on InvestingPro, including the expectation of net income growth this year, and the fact that analysts predict the company will be profitable this year. For those interested in a deeper dive, a subscription to InvestingPro is currently on a special Cyber Monday sale, with discounts of up to 60%. Plus, use coupon code sfy23 to get an additional 10% off a 2-year InvestingPro+ subscription. With 7 more tips listed on InvestingPro, subscribers can gain a comprehensive understanding of Lakeland's financial outlook and investment potential.

Full transcript - Lakeland Industries (LAKE) Q3 2024:

Operator: Good day, and welcome to the Lakeland Industries Fiscal 2024 Third Quarter Financial Results Conference Call. [Operator Instructions]. During today's call, we will 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's 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. During today's call, we will discuss financial measures derived from our financial statements that are not determined in accordance with U.S. GAAP, including adjusted EBITDA and adjusted EBITDA margin. 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. At this time, I would like to introduce you to your host for this call, Lakeland Industries' Executive Chairman, Jim Jenkins, Mr. Jenkins, the floor is yours.

Jim Jenkins: Thank you, operator. Good morning, and thank you all for joining us for our third quarter fiscal 2024 earnings call. I would like to begin today's call by thanking and celebrating our Lakeland team members across the company with our commitment to delivering our strategic initiatives during the quarter. These efforts have helped drive revenue growth in key strategic markets, execute a continued shift in our revenue profile towards higher-value products and carry out our small, strategic and quick, or SSQ, acquisition strategy. As we enter the next chapter for Lakeland, I know I can speak for myself, our executive team and the Board when I say that we are excited about the company's future supported by the strength and depth of our organization and leadership teams. Before turning to our third quarter results, I'd like to provide a brief update on our ongoing CEO search. The Board is following a very thorough vetting and selection process and engaging executive recruiter has preliminarily identified a few candidates. We're eager to find the right leader, but we will be methodical and deliberate as we seek a candidate who will continue to drive our business strategy and culture. Lakeland has a solid foundation in place with an exciting runway for growth, and the Board and I look forward to sharing more with you as the search process evolves. Now shifting gears to the quarter. Our first third quarter results -- our fiscal third quarter results were very positive. And as we continue to see demand accelerate and growth within our key product lines and markets, Lakeland delivered net sales of $31.7 million, up 11.6% year-over-year. Notably, many of our high-value strategic product lines saw growth in the quarter, including fire service and industrial products categories. Our fire service business continues to expand, driven by our superior lead times versus our competitors, innovative designs from the Eagle team and onboarding successes with new distributors. As expected, we also continue to see strong demand from oil and gas turnaround activity, which, as we discussed in previous quarters, is having extended season in 2023. Finally, we saw a significant increase in our direct-to-customer container business, which is a strategic focus for us. This growth highlights the significant momentum Lakeland is building in our high-value product lines, and our goal to increase penetration in high-value markets is producing positive results. We believe our recently announced Pacific Helmets acquisition will further enhance our fire service growth. In terms of profitability, our third quarter gross margins remained strong at 42.2%. And importantly, our adjusted EBITDA grew by over $300,000 or 10.8% to $3.3 million in the quarter, even with the negative impact of foreign exchange in the quarter, which Roger will discuss later. This resulted in an adjusted EBITDA margin of 10.4% compared to 10.4% last year. Adjusted for the impact of negative FX in the quarter, our adjusted EBITDA would have been approximately 14.2%. With regard to our geographic markets, we continue to see strong demand trends in North America, particularly in the U.S. and Latin America as well as our EMEA markets to a lesser extent. We also were encouraged to see increases in our India and Australia markets for the quarter as these are potential growth markets for us. In North America, our sales teams continue to have success adding new distributors and expanding our commercial reach. Additionally, our considerably shorter manufacturing lead times as compared to many of our competitors have resulted in Lakeland gaining traction as a preferred supplier in our fire service and industrial categories. As we have discussed in past calls, we continue to see our strategically located manufacturing as a competitive advantage in enabling our favorable lead times. Finally, our Latin American business continued its exceptionally strong performance for the year as we are the market leader in several of the markets served. As has been the case for the first half of the year, our Asian markets continued to perform below expectations as a result of ongoing macroeconomic weakness and overhang of PPE equipment from China's COVID-19 lockdown. As a result, we expect our Asia Pacific business to remain below our initial projections over the last quarter of the year. Shifting gears a bit, I'd like to spend a few minutes discussing the company's small, strategic and quick M&A strategy and our overall commitment to identifying and maintaining a robust acquisition pipeline with opportunities that enhance Lakeland's high-value product portfolio. Last week, we were pleased to announce the acquisition of Pacific Helmets. Pacific is a highly regarded global brand with a well-established reputation for quality and innovative design and manufacturing and the growing first responder safety helmet market. The company has a broad range of helmet models, styles and certifications and they have demonstrated the ability to develop new products and sell successfully around the world. The acquisition of Pacific is a significant milestone in our efforts to build Lakeland as a premier global fire brand as it enhances our product portfolio and strengthens our ability to deliver exceptional fire turnout protection offerings to our customers worldwide. Pacific has one of the largest ranges of helmets -- helmet model, styles and certifications of any international helmet manufacturer. The company currently produces 26-plus helmet models and has a significant number of new product innovations launching in the near future. Like Lakeland, Pacific owns its own manufacturing facilities and has an in-house R&D team that enables it to customize and produce helmets specified to the customers' specific requirements more easily. Pacific Helmet currently has a strong revenue and tender pipeline and global demand for safety helmets is growing. They already sell into over 40 countries, and we believe the business is further scalable through the addition of new distributors, particularly in the Northern Hemisphere and emerging markets, in which Lakeland already has a strong presence. We expect this acquisition to be immediately accretive to Lakeland's bottom line results and are excited about the organic and cross-selling opportunities going forward. I'm excited to see our global sales team execute on this opportunity, and we look forward to sharing more about the integration of the Pacific business in the Lakeland platform in the future. I'd also like to welcome the Pacific team to the Lakeland's family, and we're very excited to have you as part of our team and the potential for the future. I also want to thank our team here at Lakeland for all their hard work recently in closing this deal. We continue to be very pleased with the performance of our Eagle acquisition, and we believe Eagle is an excellent template for our SSQ acquisition model. After delivering a large tender during Q2 of this year, we expect Eagle to ship another larger order in Q4. Additionally, we are continuing efforts to integrate Eagle products into Lakeland's geographic markets as well as to accelerate the sales of Eagle gloves in particular block and hoods. Eagle's fired gloves and particle blocking hoods are progressing through the certification process, and Lakeland has leveraged Eagle's in-house designers in the development of our next-generation NFPA turnout gear, which is currently underway. As we look to the balance of the fiscal year and beyond, I am confident in and impressed by our current management team. I'm also encouraged by the exciting runway for growth this company has. Lakeland is focused on solidifying our foundational business and investing our resources in high-growth geographies, which will include product line enhancements and the optimization of our operating and sales channels. Over the longer term, we are committed to building out a premier global fire brand, as I previously mentioned. This will include the release of new and innovative products, additions to our global sales force and a renewed marketing focus, all of these efforts will benefit from the addition of Pacific to our existing platform. Finally, Lakeland is committed to expanding our products and capabilities through our small strategic and quick acquisition strategy. Continued M&A will help Lakeland's already diverse line of products, bring premier global brands on to the Lakeland platform and drive strong operating leverage through cross-selling on Lakeland's vast distribution and sales network. I'll now pass the call to Roger to provide an overview of our financial results. Roger?

Roger Shannon: Thank you, Jim, and hello, everyone. Before I get started with my comments on the financials, I'd like to remind everyone listening that we have posted investor slides that align with the information I'll present on our website at www.lakeland.com. Lakeland delivered sales of $31.7 million in the third quarter ended October 31, 2023. Domestic sales were $15.1 million or 47.6% of total revenues and international sales were $16.6 million or 52.4% of total revenues. This compares with domestic sales of $14 million or 49.3% of the total and international sales of $14.4 million or 50.7% of the total in the third quarter of fiscal '23. As we noted in our earnings press release issued yesterday afternoon, we delivered strong year-over-year sales growth and continued strong profitability. In terms of product mix for the quarter, our fire service category continues to increase as a percentage of Lakeland sales and represented 18% of the total revenue for the quarter compared to 12.5% in the year ago period. Disposables continue to decrease as a percentage of Lakeland sales and represented 38% of total revenues compared to 50% in the year ago period. This reflects the efforts we've made to shift our product mix towards higher value, higher margin and less commoditized products, as we have discussed in prior calls, as well as continued weakness for this product line in Asia. For the fiscal year-to-date, our fire service business is 21.4% of sales and disposables are 39%. From a segment reporting standpoint, Lakeland saw strong sales growth in our U.S., European, Canadian and Latin American markets. This growth was partially offset by softer Asian sales, particularly in China, which is a continuation of what we've seen over the last few quarters. For the current quarter, sales in the U.S. were $15.1 million or 48% of total revenue, an increase of $1.1 million over the year ago period. Latin American sales grew $1.6 million to $4.2 million in the current quarter, an increase of 63% over Q3 of last year. All geographic regions except for Asia showed increases over the year ago period. Due to the inherent timing variability in our fire service business as a result of the timing of deliveries on large tenders, we have begun more closely tracking our trailing 12-month, or TTM, revenue. For the 12 months ended October 31, 2023, our TTM revenue was $122.4 million, an increase of $11.8 million or 11% over the trailing 12 months ended October 31, 2022. Gross profit for Q3 of this quarter was $13.4 million, an increase of $1.1 million or 9% over the year ago period. Gross profit as a percentage of net sales was 42.2% for the fiscal 2024 Q4, as compared to 43.3% a year ago. Gross profit performance in the current period was driven by increased revenue during the quarter, including sales of previously reserved excess inventory, partially offset by an adjustment for intercompany profit in ending inventory. Our gross margin percentage was affected by an adjustment for intercompany profit and ending inventory and amortization of previous year adjustments to excess inventory, partially offset by improved product mix, lower freight cost, manufacturing cost improvements and the reduction of total inventory, including fully and partially reserved inventory. Lakeland reported operating profit of $3.6 million in Q3 of '24 as compared to $2.1 million in the third quarter of last year. As a result, operating margins were 11.4% in the third quarter, up from 7.6% in the third quarter of last year. Our operating profit benefited from increases in sales and lower operating expenses during the third quarter. The company evaluated the earn-out consideration accrual related to the Eagle acquisition and reduced this accrual by $1.5 million, which was recorded as a reduction in operating expense in the quarter. This decrease was offset by increases in currency fluctuations of $700,000, primarily related to the Argentine peso. Additionally, higher related -- higher sales-related costs, including increases in travel and trade show expenses, were realized as we continue to invest in growth initiatives across the company. Lakeland delivered net income of $2.6 million or $0.35 per basic share and $0.34 per diluted share during the quarter. This compares to net income of $1.4 million or $0.19 per basic and diluted share in the prior year period. Adjusted EBITDA was $3.3 million in Q3 '24, an increase of 10.8% compared to $3 million in Q3 of '23. Adjusted EBITDA performance in the quarter was driven by higher sales, partially offset by the impact of the previously mentioned negative FX impacts in operating expenses. Our adjusted EBITDA margin for Q3 of fiscal 2024 was 10.4% compared to the same number in the year ago period. Adjusted for the impact of negative FX in the quarter, our adjusted EBITDA would have been approximately 14.2% in the current quarter. On a trailing 12-month basis, Lakeland's adjusted EBITDA of $12.1 million is an increase of 21.2% versus the TTM adjusted EBITDA of $9.9 million as of October 31, 2022. Now turning to the balance sheet. Lakeland ended the quarter with cash and cash equivalents of approximately $26.4 million, an increase of $1.8 million compared to our prior year-end cash balance of $24.6 million. Lakeland delivered cash flow from operations during the quarter of $3.8 million, driven by profitable operations and a $2.6 million reduction of raw materials and finished goods inventory. Year-to-date, we have produced positive operating cash flow of $7.7 million, led by profitable operations and a $3.2 million decrease in inventory. Offsetting the operating cash flows were $3 million in investing activities split between capital equipment and additional investment in body track. Financing activities for the fiscal year-to-date, primarily quarterly dividends, U.K. bank repayments and treasury stock purchases totaled $1.8 million. Finally, cash balances have been impacted by $1.1 million during the year-to-date due to currency fluctuations, primarily from the Chinese yuan and Argentine peso. The company continued to have no debt at the end of the quarter and has up to $25 million available from bank credit facilities. Capital expenditures for the 3 months at October 31, 2023, were $400,000 and $1.5 million year-to-date. As a reminder, we now expect CapEx to be approximately $2 million for the full fiscal year as we replace existing equipment in the normal course of operations. The Monterrey expansion, which we discussed last quarter, remains on pause as we continue to assess weather-related damage to our leased building. Inventories declined $3 million quarter-over-quarter to $54.4 million from $57.4 million at the end of the second quarter of fiscal '24. We were pleased to see the acceleration of inventory reduction in the quarter, and this remains a top operating objective. During the quarter, we utilized various sales and marketing programs as well as price deviations on reserved inventory to assist this effort, and we will continue to do so moving forward. In closing, I'd like to briefly discuss 2 transactions that occurred subsequent to quarter end and their impact on Lakeland's financial profile. First is the acquisition of New Zealand-based Pacific Helmets for $8.5 million, subject to post-closing adjustments and customary holdback provisions, which Jim already covered in detail. The transaction was funded through the company's revolving credit facility and cash balances. We expect Pacific to add $7 million to $8 million of sales revenue to Lakeland in our next fiscal year and for the company to be immediately accretive to Lakeland's bottom line results. Next is the sale of the company's Brantford, Ontario warehouse. On November 27 of 2023, the company sold its office and warehouse facility in Brantford, Ontario to an unrelated party for $4.9 million. This sale will result in a pretax gain after selling expenses approximately $3.8 million that will be recognized in the fourth quarter of this year. Going forward, the company will utilize third-party logistics providers for customer fulfillment in Canada. Finally, on November 30, 2023, we entered into Amendment number 3 to the loan agreement with Bank of America (NYSE: BAC ). In this third amendment, the lender consented to our acquisition of the equity interest of Pacific and to permit additional indebtedness to be made available on Pacific by its existing bank relationships. The amendment also waived Lakeland's borrowing base limitations through January 31, 2024. With that overview, I'd now like to turn the call over to the operator to open the call up for questions.

Operator: [Operator Instructions] Your first question for today is coming from Gerry Sweeney with ROTH Capital.

Gerry Sweeney: Just a couple of quick questions. Obviously, fire service is doing quite well, and there's a lot of talk about getting into distributors. Just curious, is the fire -- are the fire gear products in all your distributors that you currently want to be in? Or is there an opportunity to get into more meaning? If you have some relationships with distributors, are they all in those distributors that you have relationships with, not new ones? I'm assuming sometimes it's easier to get into existing relationships expanding

Jim Jenkins: I think it's a combination of -- yes, I do. I think it's a combination of both at this point, Gerry. And in particular, with our North American sales team, they have done a tremendous job of developing additional distribution arrangements. And we are -- we've recently hired somebody in the West Coast to help further expand those relationships. So we've seen what I would consider more than modest success in developing our current distribution network but also expanding it. And I give kudos to our North American sales team -- the fire sales team, in particular, for that. And then, of course, on the Eagle front, we've inherited a lot of relationships from them as they seek bidding opportunities throughout the world. And certainly, with Pacific Helmet, we'll see beneficiary of some very strong APAC distributor relationships that they have. And then you sort of do the cross-selling with that, and I get really excited about it because there's all kinds of opportunities that we might have had to partner with someone else to do that now we don't have to do that because we've got it -- we've got that service and product offering in-house.

Gerry Sweeney: Got it. I mean I don't want to put words in your mouth, but sort of what I'm looking at it is distribution growth has been great. It sounds like there's still opportunities there, but you take your fire turnout here, Eagle, Pacific Helmet, there's you can layer on additional cross-selling opportunities and maybe even get into additional distributors different regions of the world. So still some low-hanging fruit maybe on the distributor set?

Jim Jenkins: Yes. Look, I remain -- yes, I think that's -- and you're not putting words in my mouth. I think that's right. And I think we feel we're in the early stages of growing out this opportunity. And given the certain competitive advantages we have, certainly on our sort of captive manufacturing, the additional product lines that we offer, yes, this is -- in a 9-inning game, I think we're at about second inning.

Gerry Sweeney: All right. That's very helpful. And then, obviously, maybe acquisitions, right? Totally Pacific Helmets absolutely makes sense. Are there other opportunities out there that you would be looking for that sort of add -- I don't know whether it's the fire gear or some other areas that just add this cross-selling opportunity?

Jim Jenkins: Yes. I mean we see opportunities in industrials and in fire. Fire is where we sort of found the low-hanging fruit. We'd love to round -- we want to round out our fire offering with other possible products. So I'm certainly interested in that. And in terms of the pipeline, I mean, for anybody's benefit on the call, my background is I really have been moving on a strategic plan for Transcat in the M&A circles where we have pretty much done what we're trying to do at Lakeland, right? And as I look at the 2 companies, there's lots of similarities there about opportunities that we can move the needle without betting the farm, right? Pacific was an $8.5 million deal, we're going to get it right. I know we're going to get it right. But if we only get it a little right, we're going to be fine. In fact, we're going to be better than fine.

Gerry Sweeney: Got it. Yes, certainly -- sorry, go ahead.

Jim Jenkins: Yes, go ahead.

Gerry Sweeney: I was going to say, Transcat, you absolutely expanded the addressable market, right, through the asset management side. So that's sort of what I'm seeing here.

Jim Jenkins: Exactly.

Gerry Sweeney: Yes. Got it. Maybe just a couple of quick questions on disposables. Where does this go in terms of percentage of revenue? I imagine there's always some component of sales for disposables but some needs. And I'm just curious if it's less important that there's less differentiation, et cetera, but I'm wondering where that goes longer term? And then maybe just talk about where inventory -- maybe a right inventory level should be in terms of dollars on a -- maybe a constant basis, I know it's going to change over time, but I think

Jim Jenkins: So in the interest of not making myself a fool, I'm going to have Roger answer that one.

Roger Shannon: Yes, I would just point out that under Jim's and the Board's leadership, we have spent a lot of time and effort over the course of the summer and the fall. And of course, I joined in February 1 of this year kind of looking at our strategy, strategic direction, how we compete and where we think we have competitive advantages. Of course, we have talked about the benefits that in-house manufacturing brings. We don't want to give the message at all that we're minimizing disposables. Disposables, even though it's down to 38% or so of the total revenue, that's because other revenue is growing in addition to, of course, the weakness in China that we've seen. But as we think about disposables, we don't want to give the message or the perspective, the disposables are not strategic. Now there are some places where it does not make sense to compete in disposables where we don't think we have competitive advantage and we don't want to race to the bottom on pricing there. But as we think about what is strategic and how best to where we have advantages, there are disposable products that we're very excited about and we're going to continue to leverage. And a couple of things specifically that come to mind, and we talked about this a bit last quarter is the clean room applications. Clean rooms, it's not just your basic run the mill, low level disposable item, we see opportunities in semiconductor EV, continued in health care and the Lakeland brand and the product there is very good. The other, we alluded to this a bit in our prepared remarks is our larger distributor direct-to-customer container program. And we saw a tick in that. This quarter, again, our large customer sales force is doing a great job. And what that enables us to do is kind of strategically use certain disposable products to fill out a container that we ship directly to the customer. It's better margin and cost profile for us because we're not handling it and it results in more sales because they can go to one place, one stop and kind of get the full range of needs that fill out the container the goods shipped to them. So while we see the most growth -- the most accelerated growth and growth percentages in fire and especially from an M&A perspective in fire service and also in industrial, the disposables as it relates to things like critical environment, clean room and direct-to-customer container programs is considered highly strategic for us.

Gerry Sweeney: Got it. Understood.

Jim Jenkins: And I didn't mean --

Gerry Sweeney: Disposable go all the way, but I -- that's a great overview.

Roger Shannon: And I'd just add, it's kind of hard -- gotten the question, it's hard to say what you think the percentage is going to be It gets down to what the -- when you see China recovery on one hand and on the other hand, what the acquisitions look like because the acquisitions are going to be typically in the fire or the higher value industrial. So that revenue channel would just expect it to grow faster.

Gerry Sweeney: Understood. Yes. And I'm sorry, I didn't mean to imply that it was going to absolutely go away, but what -- I understand what you're saying. There's certainly --

Roger Shannon: No, no, we didn't take it that way. It's just you opportunity to kind of make it clear how we think about disposables.

Jim Jenkins: And in a lot of ways, it's math, right? A lot of ways, it's math, Gerry, right? I mean as we continue to grow the higher value and we continue -- and we move -- continue -- we don't abandon in any way, safe perform the disposable market, but it's just as a percentage of our portfolio, we just sort of naturally get a little bit smaller, which I don't think

Gerry Sweeney: What -- and this -- little housekeeping more for modeling, but where do you want to get inventory levels down? I think all things being equal, right. You're going to grow -- you're continuing to grow, et cetera. But just curious as to what level

Roger Shannon: Gerry, I'll take that one as well. And again, it's -- what way we'll need to kind of keep in mind is the caveat is that we are starting to do the purchase accounting on Pacific. We will bringing that in. So that will affect the inventory balance. Like -- kind of like Eagle, like our fire products, these are made to order. So there's not going to be significant, if any, finished goods that come along with Pacific. But of course, they have the raw materials and the work in process. That said, we have been very pleased at how we were able to reduce the -- call it, the -- what I've roughly circled up is the $58 million of inventory down to the $54 million level. As I think about that baseline, we would like to get another $2 million to $4 million out of that. It's like

Gerry Sweeney: So you're pretty close, yes.

Roger Shannon: Yes. So now we still have -- it's a call we still have weekly. We have targets and programs underway, and it's still very much a high priority. And you can see the cash flow that's resulted in during the quarter.

Gerry Sweeney: Got it. I appreciate.

A –Jim Jenkins: And I’ll just add on that just briefly, and that’s really a testament to Roger and his team, our COO, Helena and her team, they really have worked together on – and our sales team on forecasting and driving down that inventory number. And it’s become a significant priority for us. And under Roger’s leadership, we’re starting to see some real encouraging results.

Operator: We have reached the end of the question-and-answer session. And I will now turn the call over to Jim for closing remarks.

Jim Jenkins: Thank you, operator. Thank you all for joining us on today's call. We appreciate your continued interest in Lakeland. The global growth opportunities for our business are robust, and we look forward to building on the strong momentum Lakeland has built and sharing our successes with you in fiscal 2024. Have a great day.

Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

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