Lakeland Fire + Safety — Fiscal Second Quarter 2027 Earnings Summary

Financial Performance

• Net sales for Q2 FY27 were $50.1 million, a 4.5% decrease year-over-year from $52.5 million in Q2 FY26, and a 5.7% increase sequentially from $47.4 million in Q1 FY27.
• Year-to-date (1H FY27) net sales were $97.6 million, down 1.7% from $99.2 million in 1H FY26.
• Gross profit was $18.5 million in Q2 FY27, down 1.5% from $18.8 million in Q2 FY26; gross margin improved to 37.0% from 35.9% in Q2 FY26 and 31.4% in Q1 FY27.
• Year-to-date gross profit was $33.4 million, down 3.0% from $34.5 million in 1H FY26; year-to-date gross margin was 34.3%, down 46 basis points from 34.8% in 1H FY26.
• Net loss for Q2 FY27 was $4.9 million compared to net income of $0.8 million in Q2 FY26; year-to-date net loss was $4.6 million compared to a net loss of $3.1 million in 1H FY26.
• Adjusted EBITDA for Q2 FY27 was $1.4 million, down 72.8% from $5.0 million in Q2 FY26; Adjusted EBITDA excluding FX was $2.7 million, down 47.1% from $5.1 million in Q2 FY26 but more than doubled sequentially from $1.1 million in Q1 FY27.
• Year-to-date Adjusted EBITDA was $1.8 million, down 62.5% from $4.8 million in 1H FY26; Adjusted EBITDA excluding FX was $3.8 million, down 33.3% from $5.7 million in 1H FY26.
• Operating expenses were $20.6 million in Q2 FY27, up 7.0% from $19.3 million in Q2 FY26; Adjusted operating expenses excluding FX were $16.2 million, up 11.1% from $14.6 million in Q2 FY26.
• Foreign exchange losses were $1.3 million in Q2 FY27 compared to $43 thousand in Q2 FY26.
• Operating cash flow for the first six months of FY27 was $5.4 million, an improvement of $15.1 million year-over-year.
• Inventory ended the quarter at $74.9 million, down $15.3 million year-over-year and $2.8 million sequentially.
• Cash and equivalents increased to $17.9 million; total debt declined to $28.7 million from $32.3 million at January 31, 2026.
• Borrowings under the revolving credit facility were $24.9 million as of July 31, 2026, with $15.1 million available; the company remained in compliance with debt covenants.
• Deferred revenue was $5.2 million as of July 31, 2026, compared to $0 at January 31, 2026.

Guidance and Future Outlook

• Management expects margin performance to continue improving as production volumes increase, the North American inventory build converts to revenue, and recent tender wins are delivered.
• Management anticipates the second half of fiscal 2027 marks the beginning of a return to more consistent growth, though the cadence may vary quarter-to-quarter.
• The company aims to enter fiscal 2028 with a more focused portfolio, stronger cost structure, and greater operating leverage.
• Tender activity is expected to continue into the third and fourth fiscal quarters.

Business Segments and Product Lines

• Fire segment revenue was $26.1 million in Q2 FY27, up 2% year-over-year and 12% sequentially, representing 52% of total net sales.
• Fire Services revenue increased 78% year-over-year to approximately $3.5 million in Q2 FY27.
• Industrial revenue was $24.0 million in Q2 FY27, down 10.8% reported; excluding $3.7 million from divested HPFR and HiViz lines, Industrial revenue increased approximately 3%.
• Turnout gear sales in Fire were up 5.5%, helmets up 41%, and hoods up 66% year-over-year.
• The company secured multiple tender and contract awards across 9 countries, including a potential £220 million value over seven years under the UK National Fire Chiefs Council National Firefighter PPE Framework.
• Expanded certified Fire Products portfolio with UL certification of the Wildland Glove to the NFPA 1950 (1977), 2025 edition standard.
• Expanded manufacturing capacity for Fire Products and Critical Environments, including UL-certified production of Vanguard® structural turnout gear and a new cleanroom achieving Class 1 cleanliness.
• Commenced start-up of a new Independent Service Provider location in Denver, Colorado, and expanded existing service capacity.

Market and Competitive Landscape

• Global tender wins accelerated during the quarter with continued activity expected.
• Sales in Asia increased 27.0% year-over-year to $4.7 million.
• U.S. sales decreased 3.6% to $21.3 million; Europe sales decreased 17.9% to $12.4 million, primarily due to a $3.1 million Jolly boot tender delivered in the prior-year quarter.
• LATAM sales decreased 4.7% to $4.1 million.
• Primary manufacturing facilities remain at capacity.

Risks and Challenges

• Foreign exchange remained a meaningful headwind, with currency losses of $1.3 million in Q2 FY27 compared to $43 thousand in the prior-year quarter; the company is evaluating hedging strategies.
• Recorded a non-cash goodwill impairment charge of approximately $3.2 million related to LHD Germany due to performance and revised outlook.
• Operating expenses included $0.5 million in Interschutz expenses and $0.6 million in expedited freight associated with a strategic inventory build.
• The company noted it is not satisfied with current performance and is taking action on leadership, cost structure, and investment levels in underperforming businesses.

Management Commentary and Tone

• CEO Jim Jenkins stated the underlying business is improving with momentum in Fire, expansion of the Fire Services platform, and improving performance in several parts of Industrial.
• Management emphasized a deliberate approach to the portfolio, focusing capital on businesses with attractive growth opportunities and taking action where returns have not met expectations.
• CFO J. Calven Swinea highlighted that excluding the $3.7 million contribution from divested lines, net sales increased 2.8% year-over-year.
• Management expressed confidence that actions underway, combined with momentum in Fire Products and Services, will produce a more consistent, profitable, and higher-return business.
• Priorities for the second half include converting demand and backlog into revenue, continuing to improve gross margin, maintaining expense discipline, and simplifying areas not producing acceptable returns.

Other Key Points

• Resolved the Monterrey, Mexico lease matter during the quarter, recording a $1.9 million gain on lease settlement and eliminating the remaining lease liability.
• Recorded a gain on sale of certain assets related to the HPFR and HiViz product lines divested in March 2026.
• Dividends paid were $0 in the first six months of FY27, compared to $571 thousand in the same period of FY26.
• Proceeds from the sale of certain assets were $5.1 million in the first six months of FY27.
• The company is accelerating investment in Fire Services but intends to do so with discipline, prioritizing density in attractive markets and appropriate returns on capital.
• LHD operations in Australia and Hong Kong continue to perform well despite the impairment charge on LHD Germany.