Lakeland Industries reported strong top-line momentum in Q3 FY2025, with revenue of $45.8 million, up 45% year over year and driven primarily by a 245% year-over-year increase in the Fire Services segment, aided by the LHD acquisition and cross-selling opportunities. Organic revenue growth persisted at 7.3% year over year, underscoring the company’s ability to scale through a mixed portfolio of Fire Services and Industrial PPE. Gross profit rose 39% to $18.56 million, but gross margin declined to 40.6% from 42.2% a year ago, pressured by amortization of acquired inventory step-ups and higher inbound freight ahead of Q4 sales. Organic gross margins expanded by 200 basis points to 44.2% versus 42.2% prior year, signaling improving core efficiency even as one-time acquisition-related factors temporarily compress reported margins.
Management reaffirmed FY2025 guidance, projecting revenue of at least $165 million and adjusted EBITDA excluding FX of at least $18 million, aided by a substantial multi-year LHD backlog and continued growth in LATAM, Europe and Asia. The quarter featured a material backlog backlog unwind in Q4, with management targeting 80–90% of the LHD multi-year backlog to ship in the fourth quarter. The company also highlighted a ramp in U.S. Fire Services penetration and ongoing integration/enhancement of cross-selling across recent acquisitions. Balance sheet discipline remains important as Lakeland navigates a deliberate build in working capital to support higher volumes, with cash of about $15.8 million and total debt of roughly $45.8 million (net debt around $30.0 million). The near-term cash flow profile remains challenged by working capital needs, as evidenced by negative cash flow from operations in the nine months ended October 31, 2024 (-$12.5 million) and negative free cash flow (-$9.08 million). The investment thesis rests on: (i) rapid acceleration of Fire Services leadership, (ii) a diversified, global go-to-market footprint with improving margins, (iii) a strong backlog-driven revenue runway into FY2026, and (iv) accretive M&A and cross-selling to expand profitability faster than underlying markets.