Before we begin, parties are reminded that statements made during this call contain forward-looking information within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements are all statements other than statements of historical facts, which reflect management’s expectations regarding future events and operating performance and speak only as of today December 10, 2020. Forward-looking statements are based on current assumptions and analysis made by the company in light of its experience and its perception of historical trends, current conditions, including business affairs pertaining to the COVID-19 pandemic, expected future developments and other factors that believes are appropriate under circumstances.

Thank you and good afternoon to you all. We appreciate you taking the time to join our Fiscal 2021 Third Quarter Financial Results Conference Call. I am joined here today by Lakeland’s Chief Financial Officer, Allen Dillard. We had a blowout third quarter, where I believe, we sent an indelible message to the global PPE marketplace, and hopefully to our shareholders and investors alike, that Lakeland is the source for protective apparel, not only during Black Swan events, but any time of any year when quality and delivery are critical. Our production capacity, resiliency and flexibility are unparalleled and our production lines are expanding to generate long-term traction with customers around the world to drive sustainably improved profitability absent any Black Swan events such as COVID-19. No discussion of our third quarter performance would be complete if we did not recognize the great links our global team has gone to in support of the healthcare community’s defense against COVID-19. While taking measures to ensure the safety and well being of our staff and their families, our partners and our customers around the world, we are fortunate to have a team that has repeatedly risen to the challenge. Our ability to meet and surpass Lakeland’s obligations as a global supplier of personal protective equipment for PPE during the COVID-19 pandemic has helped to alleviate PPE shortages and protected healthcare workers and first responders around the world. As a result of the dedication of our people, the scalability of our manufacturing and efficiency improvements, we are unfortunately or fortunately depending on one’s perspective, a significant beneficiary on the business front as a result of the pandemic.

Thank you, Charlie. Net sales for our third quarter of fiscal 2021 were $41.5 million, up over 18% from $35 million in our second quarter of this year and 51% from $27.5 million in the same period of the prior year. For the sixth consecutive quarter, our revenues exceeded $27 million. For the past three quarters we have revenues in excess of $35 million. On a consolidated basis for the third quarter of fiscal 2021, U.S. sales were $17 million or 41% of total revenues and the international sales were $24.5 million or 59% of total revenues. This compares with U.S. sales of $14.2 million or 52% of the total and international sales of $13.3 million or 48% of the total in third quarter of fiscal 2020.

Thank you. And our first question is from Gerry Sweeney of ROTH Capital.

Hey. Good afternoon, Charlie and Allen. Thanks for taking my call and congratulations on a really nice quarter.

Thank you, Gerry.

I wanted to start with maybe the revenues or I should say production. Obviously, we are getting to a period where, I think, by commentary we are seeing some pickup in more traditional industrial businesses maybe the eco -- global economies are improving and then -- but we still have a pretty strong demand for PPE. Is there a possibility that knowing that your competitors use third-party manufacturing that some of these industrial products may be being limited supply if the economy keeps coming back if they are focused on PPE?

All right. I think that is a possibility, Gerry, and it’s one that, I think, that what is more likely to drive that just -- I think the industrial -- return of the industrial market in general will be additive. I think a greater contributor to that shortage is likely to be PPE stockpiling globally. There was an article just yesterday in The Wall Street Journal acknowledging that PPE stockpiles at least in the U.S. have only attained the 50% level of what they are intended to have and that’s due largely to the continued surge in COVID so that as they are receiving in stockpile materials, they think that they have enough. There’s a hole in the bottom of the bucket, where it’s draining out only a little bit slower than it’s coming in.

Got it. So I think I understand PPE remains strong. But then you also just have improving demand on the industrial side?

Yeah.

You got a longer overlap, maybe.

Right.

Okay.

We suspect that the decline in COVID coming up over the next three quarters.

Yeah. Six months, nine months, 12 months, but, yeah.

Yeah. It is and the rise of the industrial market are going to be almost inversely proportional to some degree.

Have you turned away any business or have you been able to supply everybody? Because in the past, I know you have some guys that are just opportunistic coming in for equipment and may not be sticking around for longer periods or may not necessarily transition to longer term clients. I am just curious as to how that is playing out with customers who’s turning some away or capacity across the Board?

We turned some business away early on in Q1, early Q2. The people that we turned away know that we did for a reason. We are still staying with our original strategy, which is to service our industrial customers and fill COVID demand where we have excess capacity. We have been fortunate that we have been able to continue to expand that capacity by improved efficiency. And as a result, it’s not that we have turned down industrial business, but there are some stockpiling, RFPs and other opportunities relative -- relatively large opportunities for COVID that we have elected not to pursue, because of our commitment to our industrial accounts.

Okay. Got it. One or two more quick questions, just on the gross margin side, obviously, you have got a few moving parts, lower amount of SKUs, longer hours. The SKU side is permanent, longer hours is more flexible, higher selling price is probably more, flexible may not be the word, but I am using it and then mix?

Yeah.

As look forward and we see PPE maybe declining, industrial coming up, where can gross margins that allowed or if you don’t want to necessarily go there, which of those items that I just sort of mentioned are more sort of permanent versus maybe some of the other ones that may flex?

I am going to let Allen handle that. He’s done the analysis on our margins.

So, as Charlie mentioned in his remarks, Gerry, some of the things that we are going to see on a permanent basis going forward. The benefits from the SKU reductions, the planning efficiencies and basically the kind of core operational elements of our overall manufacturing process, planning, distribution, etcetera. So those are the elements that we are going to control and manage directly going forward. The elements around pricing are the ones that will be probably the more of the challenge. But as Charlie said before, pricing is not going to go back to pre-pandemic levels in any of these product lines, just due to what we believe is going to be an overall increase in sustained demand for PPE going forward. So that’s the -- that’s probably the biggest variable factor in the going forward impact on margins.

That’s really helpful. And just one other question, this is just for nuance I guess. Direct container sales, higher margin, is that just direct sales to customers cutting out some distributors, I just wanted to understand?

No. The direct containers means, that we don’t bring it into our own distribution facility. The container is loaded at our manufacturing facility and shipped directly to the distributor or the customer.

Okay. Got it. So…

We cut out a lot of the intermediate costs.

Got it. That’s helpful. I really appreciate it. Thank you.

Yes, sir.

And our next question is from Alex Fuhrman of Craig-Hallum Capital Group.

Great. Thanks very much for taking my question and congratulations on a really historic quarter. I wanted to drill down further on, on what you were talking about with gross margin. I think you mentioned in your prepared remarks that you are starting to reintroduce some SKUs that, that had been temporarily curtailed? If you could talk a little bit more about that. I mean do you think the company ever needs to get back to the full product assortment or will it still be a streamlined assortment going forward? And just kind of putting that together with pricing, just trying to understand those puts and takes, I guess, as you think about gross margin in sort of post-pandemic time in the second half of next year?

Yeah. As far as SKUs, the biggest thing that we are doing is there are some underperforming SKUs that we have eliminated and we don’t intend to ever bring back. Quite frankly, part of our -- the margin problems we had pre-pandemic where we had some products that we were dragging behind just like dragging anchor. We have got significant pickup in our margins. It’s going to be sustainable just by eliminating those products. When I say that -- anyway that -- we are not going back for instance to manufacturing spun-bond polypropylene. I won’t get into detail about it. But it doesn’t really protect against anything. We have, as a result of the process of COVID-19, our sales force I think has come to grips with who our customer is and who is a good customer and who values reliable delivery. It is the reliable delivery that we tend to protect most going forward, because that is an attribute of your product that end users value and will pay for. So to the extent that SKU reduction makes our manufacturing more streamlined and reliable, that is a major driver in our SKU selection.

Okay. That’s really helpful. Thank you for that. And then if I could ask about just your business outside the United States has obviously been tremendously strong and really it seems like all regions and I know Lakeland is obviously that’s not an accident, you have made tremendous investments with your sales force in emerging markets. Can you talk a little bit about the competitive dynamics internationally and Europe foreign market? Do you have, I would assume a pretty big market share in some of those markets? Is the discussions around pricing or some of your growth, does that start to look different in Asia or South America or some of your other emerging markets that you have been growing quickly in?

Yeah. I wouldn’t -- obviously, we have some markets where our market penetration initially is at a greater level. We don’t have -- with the possible exception of China, I don’t know that we have any market or Canada create fully, where we have the level of penetration that we have in the U.S. That said, Europe is definitely lower, South America is lower, Southeast Asia and India are lower. I think that a large part of our pickup in those markets in the current quarter is reflective of the surge in Europe that came actually preceded our surge here in the U.S. a little bit. So we redirected, rechanneled manufacturing capacity to Europe. And it’s reflective of the fact that we started from a lower market penetration. The delivery problems that our customers have seen in the U.S. are global. So we have picked up new customers in the foreign markets where they just quite frankly are more of them that we are not already working with. So I think that’s the primary driver in that road. We are going to emerge from COVID-19 in foreign markets with better market penetration and better branding.

Great. That’s really helpful. Thank you very much.

Yeah, sir.

And our next question comes from Mark Amberson , a private investor.

Thank you. I guess the biggest question for management at this point is what can be done for a higher multiple placed on the company six times on an annualized quarterly run rate for earnings of $4-plus a share, 20% plus market cap cash on the balance sheet. It seems like the marketplace just doesn’t recognize the extreme low valuations of Lakeland at this point, which fair value just in the marketplace would be in the low- to mid-30s a share. Is there any idea, any thought about increasing stock purchase program or a special dividend? Thank you.

Yeah. Yeah. On a regular basis, we have those discussions internally and we have a number of things on the table. I think that -- as far as our multiple, I think, that in all honesty, I think Lakeland is carrying its history with it. We have multiple years of relatively flat performance for a number of reasons. I am not going to go through our entire history. We were very well-positioned for COVID to hit, and when I say, that not just position for COVID but prior management did a very good job of building up our balance sheet so that we were poised for an accelerated growth rate relative to our history with or without COVID. COVID has accelerated that and I think this is really our third quarter of significant improvement. I think that there’s a certain amount of the market waiting to see if we can sustain it post-COVID. I think when we show that, I think we will see the multiples you are talking about. But aside from that, we are not relying on that completely. We are looking at uses of capital. I don’t want to get into too much detail with regard to that. But suffice it to say that we want to make sure that we deploy that very wisely.

Okay. You guys are doing a great job. Hope the market recognizes the management performance sometime soon.

Thank you.

That was our final question. So I’d like to turn the call back over to you, Mr. Roberson.

Thank you. We appreciate your participation on Lakeland’s fiscal 2021 third quarter financial results conference call. As we look ahead to the balance of fiscal 2021, we continue to be well-positioned as the new standard of excellence for PPE manufacturers anywhere in the world. Thank you again for joining us on today’s conference call. Have a nice day.