Leatt Corp

Greetings and welcome to the LIAC Corporation first quarter 2021 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 a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Mason, Investor Relations for LIAC Corporation. Thank you. You may begin.

Thanks, Doug. Good morning and welcome to the LIAT Corporation Investor Conference Call to discuss the financial results for the first quarter of 2021. The company issued a press release today, Wednesday, May 12, at 11 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 conference ID number 13719613. 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. Liette 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 May 12, 2021. The company will make a presentation on the quarterly results and then open the call to questions. I would now like to turn the call over to Mr. Sean McDonald, CEO of Liette Corporation. Good afternoon to you in Cape Town, Sean.

Good morning on your side, Mike, and thank you all for joining us today. I am pleased to report that our strong performance at the end of 2020 has continued into a record-breaking 2021 first quarter. First quarters have been traditionally slow, but global revenues for the 2021 first quarter were $12.9 million, up 71% compared to the 2020 first quarter. This was the best quarter in our company's history, exceeding our previous best quarter, the 2020 fourth quarter. We achieved revenue growth across our head to toe range of products for mountain biking and off-road motorcycle riding in North America and abroad. We believe that these results are a strong testament to the momentum that the Lear brand continues to achieve and the effectiveness of our business model. We are very proud of the Lear team of talented staff and riders that have contributed to our continued excellence. While we saw surge in growth in most of our products during the period, we are especially proud of the increases in revenue in our body armour products. First quarter sales of body armour products, which includes our complete shoe and boot line, increased by 79% when compared to the first quarter of 2020, and accounted for $7 million, or 57% of our quarterly revenue. Our revenues from neck braces were also very encouraging, up 48% over the first quarter of 2020, and helmet sales increased 109% over last year, primarily due to strong demand for our innovative award-winning MTB helmet line, and continued strong initial shipments of our completely redesigned motor helmet line for off-road motorcycle use. We will get to more detail on the financial results of the quarter in a moment, but some of the important headline numbers were remarkable. Net income was $2.1 million, a 469% increase compared to a year ago. Margins remained consistent with last year at 47%, which is a major achievement as we continue to actively manage manufacturing and logistics costs in the midst of rising war materials and shipping costs in Asia. Our operating costs increased by 10%, which is in line with our expectations. As we continue to grow, we are investing in our people, increasing commissions and salaries in line with sales growth, and we are investing in more professional sales and marketing teams, which we believe will pay dividends by fueling growth now and in the future. We continue to advertise in various motorsports and bicycle magazines and online media, sponsor a number of events and sponsor professional teams and riders who not only help us engineer and design our products, but have proven to increase product and brand awareness globally. Now I'll turn to the financial results for the first quarter in a bit more detail. Total revenues for the first quarter of 2021 increased to $12.9 million, up 71%. compared to $7.5 million for the first quarter of 2020. First quarter income from operations increased to $2.8 million, up 460%, compared to $491,000 for the first quarter of 2020. Net income for the first quarter of 2021 was $2.1 million, or 38 cents per basic and 34 cents per diluted share, compared to $362,000, or 7 cents per basic and diluted share for the three months ended March 31, 2020. Although I've touched on some of the highlights and percentage increases, I'll provide a further breakdown by product category. We are very pleased with the performance of our neck brace products for the quarter, as they continue to generate a higher gross margin than our other product categories. The 48% increase during the 2021 period is due to continued strong demand both in the U.S. and abroad. Back brace sales accounted for 15% of our first quarter revenue. Our body armor products are comprised of a range of chest protectors, body protectors and desks, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots and mountain biking shoes. And the 79% increase in body armor revenue is attributable to strong market demand for our full line of upper body and limb protectors, as well as our footwear category of off-road motorcycle boots and mountain biking shoes. both in the US and internationally. Body armor accounted for 57% of first quarter revenue. As I mentioned, our helmets continue to be refined, and in some cases, completely redesigned to meet the needs of a wider riding community. All Lear's helmets contain our patented 360 degree turbine technology for brain protection. The 109% increase in helmet sales is due to strong demand for our innovative award-winning MTB helmet line and strong initial shipments of our completely redesigned, redefined motor helmet line for off-road motorcycle use to our customers around the world. Helmets accounted for 12% of our first quarter revenue. Our other products, parts, and accessory category is comprised of our goggles, hydration bags, and our apparel line of jackets, pants, and jerseys. A 47% increase during the first quarter is due to the continued strong demand for our line of cutting-edge motor and MTB apparel lines for off-road motorcycle and mountain biking use. These are the products, parts, and accessories category accounted for 16% of first quarter revenue. Turning to the balance sheet, we are currently meeting our working capital needs through cash on hand, a revolving line of credits, as well as internally generated cash from operations. We believe that our current cash and cash equivalent balances along with the net cash generated by operations, are sufficient to meet anticipated cash requirements for at least the next 12 months. We have no plans for any major capital-intensive expenditures in the next 12 months beyond tooling for the production of our growing product range. As of March 31, 2021, we had cash and cash equivalents of $3.79 million compared to $1 million on March 31, 2020. Our current debt-to-equity ratio stands at 2.8 to 1, and we have no long-term debt. In closing, this has been a truly remarkable quarter. We expect the trend in worldwide participation in outdoor activities in spite of the COVID-19 pandemic to continue. Our strategy of building a global consumer brand and a pipeline of award-winning, cutting-edge and innovative protective gear that appeals to a wide range of riders is working exceptionally well. We believe that our products give riders the confidence that they need to push themselves further with gear that they can rely on. We look forward to presenting our 2022 product lineup to consumers during the second half of 2021. And we are encouraged by the initial ordering sentiment from our distributors and dealers. In 2006, we produced a single product, our gold standard neck brace for a single market. Now, 15 years later, We produce an array of products that protect virtually every part of the body and appeal to a wide rider community. Importantly, our suite of head-to-toe products has been a valuable investment for our partner dealers and distributors around the world. This is a truly exciting time for Liat, as the company and its stockholders are finally reaping some of the rewards of over a decade of hard work and persistent dedication to excellence. As always, we'd like to thank our entire Liat family. our dedicated employees, business partners, and team riders for their continued support in making Lear the success that it has become. With that, I'll turn the call back over to the operator for a few questions. Operator?