Leatt Corp

Greetings. Welcome to LIAC Corporation's second quarter 2021 results conference call. At this time, all participants are in listen-only mode. Any question and answer session will follow the formal presentation. If anyone should require operator assistance during today's conference, please press star zero on your telephone keypad. Please note this conference is being recorded. At this time, we'll now turn the conference over to Michael Mason with Investor Relations. Michael, you may now begin.

Thanks, Rob, very much. Good morning and welcome to the Liat Corporation investor conference call to discuss the financial results for the 2021 second quarter. The company issued a press release today, Thursday, August 12, at 8 a.m. Eastern, and also filed its report with the SEC. The press release is posted on Liat's website at www.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. The replay pin number is 1-372-2133. 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. LEAD Corporation does not undertake any obligation to update such statements made in this call. Please refer to the complete questionnaire statement regarding forward-looking statements in today's press release dated August 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 Liat Corporation. Good afternoon to you in Cape Town, Sean.

Good morning. Thank you, Mike, and thank you all for joining us today. I am very pleased to report that our performance over the last several quarters continues to improve as we work to deliver a suite of exceptional award-winning protective gear and position Liat as a global consumer brand. The second quarter of 2021 was another groundbreaking and record-setting quarter for Liat. We had strong double-digit revenue growth across all of our head-to-toe product categories, and we grew our revenues in every major geographic area that we sell to. Global revenues more than doubled to $14.3 million for the second quarter, the strongest quarterly revenue in our company's history, and an increase of 106% over the 2020 second quarter. Net income rose to $2.4 million, an increase of 257% over the 2020 second quarter. On a year-to-date basis, for the first six months of 2021, our revenues were $27.2 million, up 88% over the same period last year. And net income for the first six months was $4.5 million, up a staggering 331%. These numbers demonstrate our ability to achieve strong revenue growth while remaining operationally efficient and effective. We are all very pleased with the tremendous momentum that we are building. 2021 second quarter marked the fourth quarter in a row of record-breaking revenue and 13 consecutive quarters of revenue growth. We believe that this period of ongoing growth is a testament to the discipline and focus on our strategy for building Lear into a global consumer brand by growing our product categories to anticipate and serve the needs of riders around the world. The highlighted results are certainly very encouraging. Let us now drill down a bit further to look at performance 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 46% increase during the quarter is due to continued strong demand both in the US and abroad, The neck braces. Neck brace sales accounted for 11% of second quarter revenue. Our body armor products are comprised of a range of chest protectors, body protectors and vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots and mountain biking shoes. The 107% increase in body armor revenue is attributable to remarkable worldwide demand for our full line of upper body and limb protectors. as well as our footwear category, consisting of off-road motorcycle boots and mountain biking shoes. Body armor accounted for 60% of 2021's second quarter revenue. 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 91% increase in helmet sales is due to strong global demand for our innovative award-winning MTB helmet line and our motor helmet line for off-road motorcycles. Helmets accounted for 7% of our 2021 second quarter revenue and remain an absolutely key focus area. Our other products, parts and accessory categories are comprised of our goggles, hydration bags and our apparel line of jackets, pants and jerseys. The 165% increase during the 2021 second quarter is due to continued strong demand for a line of cutting-edge motor and MTB apparel designed for off-road motorcycle and mountain biking, with consistent demand for our innovative Velocity line of military-tested, bulletproof goggles also contributing to this growth. The other products, parts and accessories category, accounted for 22% of second-quarter revenue. For the last several quarters, consumer spending patterns on outdoor products have continued to increase, as people around the world participate widely in outdoor activities that provide some escape from the COVID-19 pandemic. This is a trend that we do expect to continue. Now turning to the detailed financial results for the 2021 second quarter. Total revenues for the second quarter of 2021 increased to $14.3 million, up 106%, compared to $6.9 million for the second quarter of 2020. Second quarter income from operations increased to $3.1 million, up 246%, compared to $909,000 for the second quarter of 2020. And net income for the second quarter of 2021 was $2.4 million, or 44 cents per basic and 39 cents per diluted share, compared to $675,000, or 13 cents per basic and 12 cents per diluted share for the second quarter of 2020. Margins did decrease from 47% for the first six months of 2020 to 45% for the first six months of 2021, mainly due to our sales mix and increases in global shipping and logistics costs. We are actively managing our global supply chain in the midst of rising raw material and shipping costs in Asia. to improve margins and to create a predictable and stable supply of our products. To that end, we will continue to work closely with our supply chain team around the world, particularly in Asia, where we are streamlining and optimizing our supply chain processes to mitigate rising costs. Our operating costs increased by 32% when compared to the 2020 second quarter, led by increases in salaries, commissions in general, and administrative costs that are in line with our expectations as we continue to grow. continue to build a team of sales, marketing, and product development professionals. In addition, we invest in strategic global marketing campaigns and online media campaigns to increase product and brand awareness. The increase in operational costs was compounded by the company's normalizing of salaries that had been reduced as part of the cost reduction measures implemented by the company to partially mitigate the potential effects of the COVID-19 pandemic during the 2020 quarter. Now turning to the balance sheet, we are currently meeting our working capital needs through cash on hand, a revolving line of credit that is mainly used for supply chain opportunities, as well as internally generated cash from operations. As of June 30th, 2021, we had cash and cash equivalents of $3.75 million compared to $2.6 million on June 30, 2020. Our current debt to equity ratio stands at 4.3 to 1, and we have no long-term debt. We believe that our current cash and cash equivalent balances, along with net cash generated by operations, are sufficient to meet anticipated cash requirements for at least the next 12 months. We have no major plans for any capital intensive expenditures in the next 12 months. On our last call, I made an observation that I think bears repeating, given this remarkable quarter. In 2006, we pioneered and produced a revolutionary single product that didn't exist. our gold standard neck brace for a single market. Now, 15 years later, we produce an impressive array of products that protect virtually every part of the body and appeal to a wide consumer base in growing consumer markets. The app has grown into a well-recognized consumer brand, respected for performance and cutting-edge innovation. We have certainly come a long way, and we are proud of the momentum that we are building. That being said, we remain focused and determined In fact, we are working harder than ever and moving quickly to the next phase of gaining market share and building this incredible brand and company, as well as creating long-term shareholder value. This is an exciting time for Lyot as the company and its stockholders begin to reap some of the rewards of over a decade of hard work and persistent dedication to excellence. We look forward to presenting our 2022 product line to consumers around the world in the second half of this year. As always, we'd like to thank our entire Lear family, our dedicated employees, business partners, and team riders for their continued strong efforts and support in making Lear the success that it has become. With that, I'd like to turn the call over for questions. Operator?