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spk05: Greetings. Welcome to the LEAC Corporation fourth quarter near-end 2020 results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note that this conference is being recorded. At this time, I'll turn the conference over to Michael Mason with Investor Relations. Mr. Mason, you may begin.
spk02: Thanks, Rob. Good morning and welcome to the Liat Corporation Investor Conference call to discuss the financial results for the fourth quarter and full year ending 2020. The company issued a press release today, Wednesday, March 24, at 8 a.m. Eastern, and also filed its report with the SEC. The press release is posted on Liat's website at liat-corp.com. This call is being broadcast live and may be accessed on the company's website. An audio replay of this call will be available for seven days and may be accessed from North America by calling 1-844-512-2921 or 1-412-317-6671 for international callers. Enter replay PIN number 13717624. A replay of the webcast will be available immediately following this call and will continue for 30 days. Certain statements in this conference call may constitute forward-looking statements. Actual results could differ materially from those discussed in the call. Liet Corporation does not undertake any obligation to update such statements made in the call. Please refer to the complete cautionary statement regarding forward-looking statements in today's press release dated March 24, 2021. The company will make a presentation on the quarterly and full-year results and then open the call to questions. I would now like to turn the call over to Mr. Sean McDonald, CEO of LEAC Corporation. Good afternoon to you in Cape Town, Sean. Please go ahead.
spk01: Thank you, Mike, and thank you all for joining us today. Well, by nearly any measure, from a performance perspective, 2020 was our strongest year ever, topped off by a fantastic fourth quarter, the best quarter in our history in terms of revenue and profitability. Global revenues for the fourth quarter were $12.7 million, an increase of $5.4 million, or 75%, compared to the fourth quarter of 2019. We saw breakout sales of our innovative products for upper body and limb protection, and of our motorcycle boots and helmets for off-road motorcycle and mountain biking use. Total revenues for the 2020 year were $38.6 million, up by a staggering $10.3 million, or 36% over 2019. In the United States, one of our key markets, revenues grew by 48%, led by fantastic demand for our protective gear from motor dealers, MTB dealers, and ultimately, end consumers. International revenues continue to surge, growing by 31%. We enjoyed strong double-digit growth in all of our product categories, except for net braces. with the COVID outbreak at the start of the year caused some uncertainty and conservative buying patterns for some of our most established customers. We expect ordering patterns of our flagship neck brace to normalize over the next several quarters. We had breakout revenue growth in our footwear, now consisting of mountain biking shoes and motorcycle boots. Our expanding line of body armor, technical apparel, goggles, and helmet product categories Helmet revenues turned particularly well, increasing by 32% during the year. Helmets are traditionally the largest single safety product category in the protective gear industry, and we have completely re-engineered our line of motor helmets, including the motor 9.5 carbon and motor 8.5 composite helmets. We believe that this investment in our helmet designs to meet the needs of a wider group of riders will contribute to significant returns going forward. Net income for 2020 was $4.4 million, an increase of 222%. Thanks to stellar work from our entire team, we only saw a 5% increase in operating costs, highlighting our ability to operate efficiently and with agility in the midst of the COVID-19 pandemic, while achieving strong revenue growth. Basic earnings per share more than tripled to 82 cents per share, up 215% compared to 2019. Our design and engineering team continue to create a strong pipeline of innovative products for both our professional team riders and our loyal customers around the world. These products are not only winning in the marketplace, they are earning rave industry reviews. In recent weeks, our X-Frame Hybrid MiBrace earned a Power Sports Business Nifty 50 award for its expected marketability and demand. And our Velocity 4.0 MTB goggles won a design and innovation award, which we have previously won for our 4.0 helmet and our 3.5 neck brace. These are excellent examples of the promising future of Liat and our ability to innovate, characteristic that the Liat brand is known for around the world. We are also very proud of the acceptance that our products are gaining in the field, among the most demanding consumers of all, professional riders. We recently signed a multi-year partnership with the Motoconcepts Honda Racing Team, one of the leading teams in global motocross racing. Under the agreement, their riders will be outfitted in our Lear-branded head-to-toe protective gear as they compete with the world's elite riders in the professional racing circuit. We see this as a premium endorsement from the highest levels of the industry that our products not only keep riders safe, but also give them the confidence to push themselves to go faster, harder, and further. We believe that the backing of the finest riders in the world will prove to be an important factor in our consumers' buying decisions moving forward. In February of this year, we announced that mountain biking legend Brett Tippie joined the Liat riding family. Tippie, also an acclaimed snowboarder and television broadcaster, is a member of the Mountain Biking Hall of Fame. In joining us, Tippie highlighted that Liat, and I quote, has a well-respected legacy and reputation. Our reputation for building exceptional high-quality products is something that remains at our core. Now I'll turn to the financial results of 2020 in a bit more detail, starting with details from the fourth quarter. Revenues for the fourth quarter were $12.7 million, up by $5.4 million, or 75%, compared to $7.3 million for the same 2019 period. Operating expenses for the 2020 fourth quarter increased by 16% to $3.4 million as our sales performance incentives were earned and settled. Income from operations for the fourth quarter was $2.3 million compared to $101,000 for the same 2019 period. Net income for the fourth quarter was $1.8 million compared to a loss of $28,000 for the same 2019 period. Moving on to more of the full year 2020 results. Again, total revenues for 2020 were $38.6 million, up by $10.3 million, or 36%, compared to $28.3 million for 2019. Gross profit was $17.4 million, or 45% of revenues, up 34%, or 6% of revenues for 2019. Total operating expenses increased by 5% in 2020, when compared to 2019, due to increases in salaries, commissions, and marketing as we continue to grow our sales force and brand position, both in the United States and abroad. Net income for 2020 was $4.4 million, up by $3.05 million, or 222%, compared to $1.4 million for 2019. Learnings per share increased 215% to 82 cents per basic share, and 196% to 74 cents per diluted share, from 26 cents per basic share and 25 cents per diluted share for 2019. Breaking it down a bit by product category, the 36% increase in global revenues was primarily driven by a 61% increase in body armor sales, a 34% increase in sales of other products, parts, and accessories, a 32% increase in helmet sales, It was offset by a 17% decrease in neck brace health. Here is how it looks in slightly greater detail. Our body armor products are comprised of a range of chest protectors, body protectors and desks, back protectors, knee braces, and knee and elbow guards. The increase in body armor revenue is attributable to strong demand for our hard and soft shell upper body and limb protectors, as well as the highly anticipated Moto 4.5 and 5.5 off-road motorcycle boot lines, both in the United States and abroad. Body armor accounted for 58% of 2020 revenue. Our other products, parts, and accessories category is comprised of our goggles, hydration bags, and our apparel line of jackets, pants, and jerseys. The 34% increase is due to the continued strong demand for our line of technical apparel for motorcycle and mountain biking, and increased sales of our Velocity 6.5 line of goggles sold to our customers in the United States and abroad. Our apparel line continues to be a strong driver of brand awareness for Lyot. The products, parts, and accessories category accounted for 19% of 2020 revenue. As I mentioned, our helmets continue to be refined, and all helmets contain our patented 360 turbine technology for brain protection. The 32% increase in helmet sales is due to strong demand for the innovative, award-winning MTV helmet line and encouraging shipments of our redefined and relaunched motor helmet line for off-road motorcycle use to our customers globally. Helmets accounted for 10% of our 2020 revenue. And again, neck braces ordering decreased in the initial phase of COVID-19, but we do expect these patterns to normalize over the next several quarters. Turning to the balance sheet, we are meeting our working capital needs through cash on hand, as well as from internally generated cash from operations. At December 31, 2020, the company had cash-in-cash equivalents of $2.97 million compared to $2.07 million as of December 31, 2019. Our current ratio stands at 2.2 to 1, and there was no long-term debt. Based on these promising results and the momentum that we have achieved, we will continue to do what we have been doing, investing in innovative products and engaging marketing campaigns and developing a professional multi-channel sales organization. We believe that these investments are arming our dealers with the products and marketing tools that are the key contributors to the growth of Liat as a global consumer brand. Looking ahead, we believe that the results of 2020, the encouraging levels of demand for our products from consumers and our expanding product pipeline demonstrate the resilience and agility of our business model, even amidst the turmoil brought on by the COVID-19 pandemic. While we are achieving outstanding sustained growth, we do have a long runway ahead of us. Our market share potential is still in its infancy in the majority of categories that we sell. Today's consumers are participating in increasing numbers in auto activities, which is a trend that we do expect to continue. Our expanding line of products have defined Liat as a genuine head-to-toe brand, with a full offering of cutting-edge products that appeal to an increasingly wider rider audience around the world. As always, we'd like to thank our entire Liat family, our dedicated employees, business partners, and team riders for the continued effort and support in making LIIT a success. With that, I'll turn the call back over to the operator for some questions. Operator?
spk05: Thank you. At this time, we'll now be conducting a question and answer session. If you'd like to ask a question today, please press star 1 from your telephone keypad and a confirmation tone to indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions, and once again, it's star one to ask a question today. Thank you. Our first question comes from the line of Olivier Colombo, a private investor. Let's just see if there are questions. Hello, Sean.
spk01: Hi, Olivier. How are you?
spk03: I'm doing fine. Thank you very much. Thank you for those fantastic results and congratulations to the whole team.
spk01: Thank you.
spk03: I have four questions for you today. The first one is regarding the strong helmet sales that you had in Q4 with sales roughly 1.2 million up from last year. You said in your remarks that it is mostly due to the MTB helmets, but how much of that is also due to the GPX helmets, the new 8.5 and 9.5? And were you able to ship those helmets until the end of last year, or are there still shipments coming on in the first quarter?
spk01: That's a good question, Olivier. It's about 30%. So a lot of the growth was also from the GPX side of things, the motor helmet. And we ship the majority of our shipments out to our distributors around the world by the end of December. But we do still have some helmets that will ship in Q1.
spk03: Okay, that's perfect. Thank you very much. My second question would be on the freight container costs that have increased significantly over the past years. Have you been able to pass those higher costs to end customer or are you taking the hit internally?
spk01: Olivier, I would say it's a combination of things. I mean, in China, there have been some costs across the boards, not only container cost increases, it's also some of the material costs, some of the labor costs just due to COVID have increased with some constraints. So we've seen some small increases, and that is a balancing act. We've taken some of the costs on ourselves, but we have had to pass on a small percentage of those costs to some of our customers around the world.
spk03: Excellent. Regarding the challenges that you faced in 2020, are they still there this year? What were the biggest challenges last year that you still see this year, potentially?
spk01: I would say that what you just touched on, so logistics and freight costs. There was a big shortage of containers coming out of China to go around the world. It was certainly a very big challenge for us. We've seen that trend continuing into Q1. There is an opinion in the market that after Chinese New Year, which is really now, we should start seeing things loosening up a bit and that some freight costs have gone up by 80% to 100%, and we are expecting that to decrease moving forward now into 2021. We certainly are hoping that those costs are going to go down. So I'd say that's probably been the biggest challenge that we saw, of course, You know, there were some advantageous trading conditions that came out of COVID for us with a lot of end consumers really wanting to get away from all of the nasty statistics on the terrible pandemic and getting out there on their mountain bikes and on their motorcycles. So that's certainly been beneficial for us. But logistics and freight have been very, very challenging.
spk03: Okay, perfect. Thank you very much. And then my last question is, on what product line are you the most excited for this year?
spk01: That's an interesting question. There's so many. As I said earlier, we are really in our infancy in a lot of our different product categories. So there's so much potential for growth across the board. And I'd say that I'm probably most excited about the growth that we are seeing on the mountain biking side of things. So it's not a specific product line, but it's the overall market penetration that we're starting to see. Liat has traditionally been an off-road motorcycle brand and we've been working extremely hard over the last 10 years to build ourselves as a kind of dual brand on the off-road motorcycle side of things and also now on the mountain biking side of things. And to see Liat as a respected mountain biking brand, not only in the shops but also out on the trails, that is absolutely tremendously exciting, not only for myself but for our whole team.
spk03: And maybe if I just may add a question here, what is the feedback regarding the first three videos that you have released on the Liat Heritage?
spk01: The feedback has been absolutely fantastic. And if you go have a look at some of the media out there, if you go have a look on the Mountain Bike Society, Pink Bike, you'll see that there's been some very, very positive comments there. I think it's been a long time coming for us to get the story out to a broader consumer base. It's obviously something that we are very aware of internally, but we're trying very hard to get the message out, and it's been a very positive response around the world. Okay.
spk03: So thank you very much, Sean, for answering all my questions, and I wish you a fantastic 2021. Thank you, as always. Take care, Olivier.
spk01: Thank you.
spk05: Our next question is from the line of Christopher Miller, a private investor. Please proceed with your questions.
spk06: Hi, Sean. Congratulations on another great quarter.
spk01: Thank you very much, Chris. How are you?
spk06: I'm doing well, thanks. A few questions for you today. First, a follow-up regarding the supply chain and logistics. Besides the cost issues, how is this impacting product availability, both in terms of your current inventory as well as your planning for next year's line?
spk01: So far, we haven't had any major impacts. There are some raw material constraints, if you could call it that, but we're working very, very closely with our suppliers, and we don't expect to have any significant impact on any of our product deliveries, certainly for the next several quarters.
spk06: Okay, great. And when we last spoke, you mentioned that distributor inventory levels were running quite low. I believe you said a typical three-month stock was down to just a few weeks. Have you seen any rebound there, or are the stocking levels still very lean?
spk01: We've seen some really positive rebound. So they are starting to stock up really nicely. This is a new normal now. Looking at some of the demand levels that our distributors are seeing, not only for but also just specifically for Lear, now that we're a much stronger head-to-toe brand that is gaining tremendous momentum in the marketplace. Our distributors are also adjusting their buying patterns, and they are stocking up really nicely, which is really encouraging to see.
spk06: Okay, great. Did you speak a bit about the office and warehouse lease that you mentioned in your filing in Reno and what the role of that facility will be versus Santa Clarita going forward?
spk01: Yes, certainly. So it's a really exciting development for us. Now that we're a head-to-toe brand on motor and on MTB, we have a much wider pipeline of products that we need to get out there into the market. And some of these products, like motorcycle boots, obviously take up a certain amount of space. So we've actually outgrown our Santa Clarita warehouse. And, you know, that's the one reason why we are moving our primary warehouse space in the United States to Reno. The other reason is just from a cost perspective, it makes a lot of sense, you know, to be in Reno. And from a logistics perspective as well, we can get our products to the East Coast in two days now, whereas previously it was three to four days. As we've seen our footprint grow around the country and our demand levels grow around the country outside of California, we realized that we really needed to spread our wings a bit. With our new product offerings, it made sense for us to expand into the area where there were cost advantages. We decided to move our primary warehouse facility to Reno, Nevada. It's going to take a while for all of that to happen. We've obviously signed a lease. They're busy currently outfitting the building, getting everything ready for us to move over. And certainly in the next few quarters, a lot of our products will be directly shipped from China into Reno. And then we will transition and sell out from Santa Clarita. We do plan to have a small office in Santa Clarita still. just because we've got some staff that live there, and there are advantages from an industry perspective. You know, some of the media are based there, but it just wasn't effective from a cost perspective to grow our warehouse footprint in Santa Clarita.
spk06: Great. Sounds great. And then just one last question, if I may. I saw that you continued the partnership with Shorefoot and Whistler last season. How is that going, and do you see opportunities for similar concept stores like that in any other markets?
spk01: It's going really well. At the moment, you know, it's a kind of isolated store that we have, and we've been using it for quite a while now as a kind of test model. It has gone well. Of course, with COVID-19, We've had a little of a hand break on that kind of a model just because, of course, we've got to get people around the world and out there and consumer-facing, and that's been a little bit difficult. But it's definitely something that you may see from us moving forward. Partnering with somebody, setting up a concept store so that consumers can really touch and feel our whole head-to-toe brand is something that makes a lot of sense to us. And if we can partner with somebody in terms of the costs, then we're all in.
spk06: All right. Sounds great. That's all I have for you today. Thanks again, Sean.
spk01: Thanks, Chris. Nice chatting. Take care.
spk05: Our next question comes from the line of Mikkel Davies with TC Global Equities. Please proceed with your questions.
spk04: Hi, Sean. Congratulations on the great results. So I have a question that's more kind of a big picture question. I'm just wondering if you can comment on Of course, 2020 has been something of an unusual year in terms of increasing participation in a lot of these outdoor activities like you mentioned. So I'm just wondering whether you have any kind of high-level thoughts on how the market for your product has changed and if you see that a lot of this demand for new participants in the sport are going to be there for the long run. I hope that makes sense.
spk01: Yes, it makes sense. It's a very good question. It's something that we discuss a lot internally at Leert and externally with our dealers and with our distributors around the world. And of course, we are hoping that all of these trends continue. You know, it's been a few different factors that have led to the breakout growth that we've seen in 2020. I think the market trends in the industry is certainly one of the factors, and that has definitely accelerated our growth a bit. But at the same time, the Lear brand was gaining tremendous momentum already in Q1 this year, you know, before COVID hit. So I think that was also a very important factor that as a head-to-toe brand with all of these new products that we brought up, organically without COVID, the growth is certainly there. The underlying growth is there. COVID and the consumers need to get out there has accelerated things a bit for us. And I must say that of the industry players that I've talked to, and the industry players that I really respect, the feeling is that these trends are going to continue because a lot of lifestyle changes have been made around the world. They've been forced on, but I think just from a health perspective and from a general lifestyle perspective and from a flexibility perspective, consumers have got a bit more time to do some of the things that they love. And I do think that the trend is going to continue. You know, to answer your question, the short answer is yes, I do feel it's going to continue. And certainly the indicator that we are seeing, you know, in terms of our pipeline of orders for the forthcoming quarters, you know, there certainly are positive trends that are not tapering off.
spk04: Great. Thank you very much.
spk01: Thank you.
spk05: Thank you. At this time, I'll turn the floor back to management for closing remarks.
spk01: Thanks for joining us today. We do look forward to speaking with you again to recap the first quarter of 2021.
spk05: Thank you. Thank you everyone who has joined us today. You may now disconnect your lines at this time, and we thank you for your participation.
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