Leatt Corp

Greetings and welcome to Liat Corporation third quarter 2022 results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the 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 Mazin, Investor Relations of Liat Corporation. Please go ahead.

Thanks, Vittoria. Good morning and welcome to the Liat Corporation Investor Conference Call to discuss the financial results for the third quarter 2022. The company issued a press release today, Wednesday, November 9, 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 13733893. 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 this call. LEIA Corporation does not undertake any obligation to update such statements made in this call. Please refer to the complete cautionary statement regarding forward-looking statements in today's press release dated November 9, 2022. 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 LEAC Corporation. Good afternoon to you in Cape Town, Sean.

Good morning, and thank you, Mike, and thank you all for joining us today. I am pleased to report that the third quarter of 2022 was our 18th consecutive quarter of year over year revenue growth. Total global revenues were $23.3 million, an increase of 5% over the third quarter of last year. Gross profit was $10.1 million, up 6% over 2021, and return on revenue was 17%, with earnings per share of $1.90 year to date. This growth was particularly encouraging in light of the challenging comparative period. Q3 of 2021 was an extraordinary quarter with record-breaking revenue and growth of $10.73 million, or 94%. Considering some challenging macroeconomic and geopolitical headwinds, we believe that our growth in this environment is a testament to the solid momentum and market penetration that the Lear brand and head to toe offering of exceptional gear has achieved over the past several years. It also highlights our operational efficiencies, our resilience, and our ability to control costs in these challenging inflationary times. The sales traction, market penetration, and brand development that we have achieved over the last several years are due to our team's ability to develop, market, and sell innovative products to wider groups of consumers all over the world. For the third quarter of 2022, operating expenses increased by 24%, due largely to investments in sales and distribution channels, marketing campaigns designed to build a global consumer brand, and a return to trade shows and global consumer outreach travel. All investments that we believe will fuel growth moving forward. We continue to manage working capital needs through internally generated cash flow. That said, we are seeing these headwinds cause some moderation in the extraordinary consumer demand levels that the global motor and MTB industry has enjoyed over the last several quarters. This doesn't change the overall strategy and solid fundamentals that have contributed to our success. Consumers continue to ride and participate heavily in outdoor activities and dealers continue to digest inventory and reorder. These are trends that we expect to continue. We were particularly pleased with our results in the U.S. for the quarter, an area where we continue to invest in our sales and distribution capacity. U.S. revenues increased by $1.1 million, or 26% year over year, as some dealers began to restock inventory around the country. Our Reno, Nevada warehouse is now fully up and running and well stocked to ship products to customers and consumers efficiently. The US sales team continues to grow substantially as we reach and service a wider group of motor and MTV dealers around the country. International revenues for the quarter grew marginally by $42,000 over an extraordinary 2021 third quarter. as our customers look to digest inventory levels of our most established product categories. Q3 2021 international revenues grew by a staggering $10.68 million, or 150%. The employment of a team of global sales and marketing managers in some of our most important regions outside the U.S. continues to be an important focus area as we aim to grow our multi-channel sales approach and leverage the tremendous momentum that the Lear brand has gained. over the last several years. For the first nine months of 2022, global revenues were $65.4 million, up 33% over the same period of 2021. Net income for the first nine months of the year grew to $11 million, a 26% increase over the same period of 2021. These are tremendous achievements since the first nine months of 2021 saw revenue increasing by 91%. On a year to date basis, we saw double digit revenue growth in all of our expanding product categories, with the exception of neck braces, our most established product, where sales decreased compared to an extraordinary nine month period in 2021 when neck brace sales increased by 74%. Sales of motor and MTB helmets and off-road motorcycle boots were particularly encouraging. Furthermore, Because many of our innovative products are still in their infancy in terms of market share with significant opportunity for future gains, we believe that there is a long runway for our products and that we are well-positioned to deliver long-term growth and shareholder value. Now let's turn to some sales details on our individual product categories for the third quarter of 2022. Helmet sales were a highlight for the quarter. They increased by 88% to $4.4 million primarily due to exceptional global demand for our redesigned motor helmet line for off-road motorcycle use. Helmet sales were 19% of our total revenue for the quarter, up from 11% a year ago. Sales of our other products, parts, and accessories category comprised of goggles, hydration bags, and apparel items were also particularly encouraging. Sales increased by 38% to $6.5 million, comprising 28% of our revenues for the quarter. The increase was primarily due to a 51% increase in the sales volume of our motor and MTB technical apparel designed for off-road motorcycle and mountain biking use, respectively. Sales of our flagship neck brace decreased by 30% to $1.9 million as compared to the third quarter of 2021, which was once again a particularly strong quarter for neck brace sales. Neck brace sales for the third quarter of 2021 had increased by 128% over the prior year period. Our body armor products, comprised of chest protectors and upper body protectors, as well as knee braces, knee and elbow guards, off-road motorcycle boots, and mountain biking shoes, totaled $10.52 million. A decrease of 15% year over year. The decrease was mainly in upper body armor revenues, which were down 30%, compared to a strong third quarter of 2021. Body armor product sales were 45% of our total revenues for the third quarter. Here are the key financial results for the third quarter. Total global revenues were $23.3 million, an increase of 5% over the third quarter last year. Gross profit was $10.1 million, up 6% over 2021. Income from operations decreased to $5.5 million, down by 5% compared to $5.8 million for the third quarter of 2021. Net income decreased to $4.1 million or 70 cents per basic and 65 cents per diluted share, down 5% compared to $4.3 million or 79 cents per basic and 69 cents per diluted share in 2021. To summarize where we stand here to date for 2022, global revenues were $65.4 million, up 33% over the same period of 2021. Net income for the first nine months of the year grew to $11 million, a 26% increase over the same period of 2021. And as of September 30th, 2022, we had cash and cash equivalents of $4.8 million and a current ratio of 3.1 to 1. We continue to sustain revenue growth despite the challenging macroeconomic and geopolitical environment that has caused currency fluctuations and may impact consumer sentiment of customers around the world. While we are seeing some moderation in global demand due to these headwinds, our overall strategy remains on track. Consumers continue to ride and participate heavily in outdoor activities, and dealers continue to digest inventory and reorder. These are trends. that we expect to continue. Our U.S. operations are well-stocked for growth and well-positioned to reach a wider group of dealers and consumers. Internationally, we are aggressively growing our multichannel sales approach. We remain very proud of our operational efficiencies, our resilience, and our ability to control costs despite the challenging inflationary environment. We believe in our team's ability to develop, market, and sell innovative products to wider groups of consumers all over the world. Again, importantly, many of our innovative products are still in their infancy in terms of market share, with significant opportunity for future gains. We believe that we are well positioned to deliver long-term growth and shareholder value with solid fundamentals in place. While we will continue to monitor worldwide geopolitical and macroeconomic risks we are focused on continuing the momentum that we have gained over the last several years, managing working capital and driving consumer demand. As always, we'd like to thank our entire Liat family, our dedicated employees, business partners, and team riders for their continued strong efforts and support in making Liat the success it now is. With that, I'd like to turn the call over for any questions. Operator? Operator?