Good day, and welcome to the Lakeland Industries Fiscal 2023 Third Quarter Financial Results Conference Call. All lines have been placed on a listen-only mode, and the floor will be opened for your 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'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 EBITDA and adjusted EBITDA. 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' Chief Executive Officer, Charlie Roberson. Mr. Roberson, the floor is yours.

Thank you, John. Good afternoon, and thank you all for joining. I'm joined today by Lakeland's Chief Operating and Financial Officer, Allen Dillard. As you saw in this afternoon's press release, Lakeland delivered another quarter of sequential improvement, with net sales of $28.4 million and a gross margin of 43.3%. Our sequential revenue growth was primarily volume driven, and our gross margin continues to exceed our long-term target threshold of 40%. While we're proud of the sustained profitability we've delivered, macroeconomic headwinds have continued to hold back our revenue growth potential in fiscal 2023, as global industrial markets remain pressured, a continuation of demand trends we have seen year-to-date. This is particularly true in our European and Asian markets as rising inflation and energy costs, along with zero tolerance COVID policies, respectively, weigh heavily on industrial markets in these regions. While we anticipate these conditions will continue through the first half of next year, we believe that the industrial decline in these regions will be somewhat mitigated by a transference of some industrial activity to other geographic regions, specifically India. India recognizes the opportunity it has to replace China as manufacturer to the world and is aggressively working to attract manufacturing from China. We are responding by increasing our sales presence in India and leveraging our India manufacturing with the goal of accelerating our growth there. Despite these ongoing global market complexities and industrial headwinds, our team has been successful in accelerating the initiatives we have in place to stabilize or enhance our operating model. Allen will touch on this in more detail, but I would note that these efforts cut across our organization and include manufacturing and cost structure rationalizations, as well as targeted resource allocation between our human and technical assets. These efforts continue to flow through our…

Thanks, Charlie, and good afternoon, everyone. Lakeland was pleased to deliver another quarter of sequential revenue growth and strong profitability as our performance in the post-pandemic era continues to benefit from our strong product portfolio, end market and geographic diversity, financial strength and a continued focus on operational efficiency. On a consolidated basis for the third quarter of fiscal 2023, net sales were $28.4 million, domestic sales were $14 million, or 49% of total revenues, and international sales were $14.4 million, or 51% of total revenues. This compares with domestic sales of $11.9 million, or 42% of the total, and international sales of $16.3 million, or 58% of the total, in the second quarter of fiscal 2023, while fiscal 2022 third quarter domestic sales were $10.6 million, or 35% of total revenues, and international sales were $19.4 million, or 65% of total revenues. Similar to last quarter, European and Latin American industrial markets are still challenged, which has accelerated the geographic shift in our revenue towards the U.S. On a consolidated basis, compared to fiscal 2022, currency fluctuations negatively impacted revenues by approximately $1.6 million. In terms of product mix for the quarter, disposables represented 50% of total revenues for the period compared to 60% in the year-ago quarter. As we discussed last quarter, this is a result of our strategy to more aggressively shift our product mix towards higher value, higher margin and less commoditized, non-disposable products in specific markets. Gross profit as a percentage of net sales was 43.3% for the fiscal 2023 third quarter as compared with 41.3% for the fiscal 2023 second quarter, and 42.5% a year ago. During the quarter, our gross margin benefited from improved product mix and pricing power, lowering freight rates, and an increase in direct container sales. Lakeland reported operating profit…

Thank you. [Operator Instructions] First question is coming from Alex Fuhrman with Craig-Hallum. Please proceed.

Hey, guys. Thanks very much for taking my question. It sounds like you're positioning for quite an opportunity over the next couple of years in India. I was wondering if you can give us an update on how big your business is in India currently, and what the next couple of years could be, and if there could be an opportunity for perhaps growth in India to offset some of the macro-related weakness that you're seeing over the next couple of quarters?

Hey, Alex. This is Allen. I'll start off with kind of the size and then I'll let Charlie jump into the market. So, currently, India is kind of a mid-sized facility for us. We have just under 100 employees in the manufacturing operations there, and it serves the European market and the American markets in addition to the India domestic market. And so, where we see the growth primarily in the near term is in the India domestic market. And as we bring the Eagle portfolio to the table, we see an opportunity to enhance our operations there.

Yes, Alex, the current size of India is relatively small percentage of Lakeland's total revenue, and that's largely because of bureaucracy and some conflict as far as which products they want to utilize. It's a developing country. The use of disposables is a difficult sell there, all right. We do believe that with the acquisition of Eagle and their new product lines, we'll have a CE and NFPA fire service gear to sell there. The state, meaning their airports and state firefighting, prefer NFPA gear. Industrially, CE gear is preferred because it's lighter weight and about 30% less expensive than NFPA gear. So, we think the acquisition there is going to help us. I would also add that half of our manufacturing there is in a special economic zone to facilitate the import of foreign raw materials economically.

Okay, that's really helpful. And then thinking about the Eagle deal here, I mean this is the first real meaningful acquisition, and as long as I can recall, it seems like you have a nice balance sheet to do continued M&A if you wanted to. Are there other good targets out there that you're looking at that could be bolted on here during this downturn?

Yes, we're aware of the opportunities that the economic conditions may present. We are focused right now on a balanced approach to our use of capital. I won't rule out M&A, but it's not a priority over any other options. As we pulled more cash out of inventory, our situation changes, and that's going to be largely opportunity driven.

Okay, that's really helpful. Thank you very much.

[Operator Instructions]. Okay, I'd now like to turn the floor back to Charlie Roberson for closing remarks.

Thank you all for joining us in today's call. We look forward to closing out a strong year for the company and preparing for growth in calendar year 2023 and beyond. Thank you, and have a good day.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.