Leatt Corp

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.

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.

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?