Leatt Corp

Greetings. Welcome to the LEAC Corporation's second quarter 2024 results conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone today should require operator assistance during the call, please press star zero from your telephone keypad. Please note the conference is being recorded. At this time, I'll turn the conference over to Michael Mason with Investor Relations. Michael, you may now begin.

Thanks, Rob. Good morning and welcome to the Liat Corporation Investor Conference call to discuss the financial results for the second quarter of 2024. The company issued a press release today, Friday, August 9, 2024, at 8 a.m. Eastern, and 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 844-512-2921 or 412-317-6671 for international callers. The replay pin number is 13748296. A replay of the webcast will be available immediately following this call and will continue for seven days. Certain statements in this conference call may constitute forward-looking statements. Actual results could differ materially from those discussed in this call. Liat 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 date at August 9, 2024. 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, Mike, and thank you all for joining us today. I am pleased to say that we are beginning to see progress in a return to sustainable growth. Sales at the consumer and dealer direct levels have started to falter through to ordering from our distributors, and we have started to see a level of growth in some key product categories. While there are still some challenging industry and economic headwinds globally, as inventory is digested, we believe that this promising uptick in ordering patterns will filter through to our results in due course and is a trend that will contribute to revenue growth over the next few periods and beyond. Total global revenues for the second quarter were $10 million, an 18% decrease from last year's second quarter. U.S. sales increased to $3.73 million, and international sales decreased to $6.34 million. Consumer direct sales increased by 19%, and dealer direct sales increased by 14%, which we believe is a testament to strong brand recognition and the success of our drive to reach a wider group of consumers globally. Lear.com and lear.co.za, our consumer direct platforms, continue to display strong sales, exceeding our expectations. While sales to our global distributors decreased by 33%, as distributors continue to constrain ordering and manage industry-wide stocking dynamics, we expect that current ordering patterns and the addition of some promising new distributor partnerships in the United Kingdom, Europe, and emerging markets will filter through to our results over the next several quarters. Despite our push to invest in long-term growth, cash increased, by $1.98 million to $13.33 million, with cash flows provided by operations of $2.99 million for the six months ended June 30, 2024. Our liquidity continues to improve as our team continues to manage working capital efficiently. On a year-to-date basis, despite a decrease in revenues and an increase in costs, we generated cash flows from operating activities of nearly $3 million as of June 30, 2024, reflecting the robust quality of our business model. At a product level, declines in helmet sales and our other products, parts, and accessories category were partially offset by increases in body armor sales and neck braces. Drilling down a bit, it was particularly encouraging to see neck brace, body and limb protection, knee braces, and MTB apparel returning to growth on a global basis. We also continue to ship promising ADV apparel orders during the quarter and look forward to delivering a pipeline of innovative product categories to the growing ADV market over the next several quarters. We expect to start shipments later this year of a new innovative product category for our MTB line that was introduced at Eurobike 2024 last month. The new line boasts a portfolio of 52 top-level bicycle components, including handlebars, grips, and ultralight stems and pedals, ranging from medium to high-price point items. Top-of-the-line products feature a ceramic-coated magnesium alloy for the main component bodies and titanium hardware. This construction technology makes our pedals and stems outstandingly light and impeccably durable. Now I will turn to more details on sales of our product categories for the second quarter compared to 2023. Sales of our flagship neck brace were $590,000, a 9% increase over the second quarter of 2024, primarily due to a 10% increase in the volume of neck braces sold. Neck braces made up 6% of our revenues for the quarter. Our body armor products are comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots, and mountain biking shoes. Body armor revenues for the 2024 second quarter were $5.58 million, a 4% increase over last year. The increase was primarily due to a 45% increase in upper body and limb protection sales that was partially offset by a 49% decrease in the volume of footwear, comprised of motorcycle boots and mountain biking shoes sold during the quarter, as our distribution partners continued to digest inventory. Body armor products made up 55% of our revenues for the quarter. Helmet sales were $1.43 million, a 59% decrease from last year, primarily attributed to a 64% decrease in the volume of motor helmet sold, compared to an exceptionally strong second quarter of 2023, when helmet sales increased by 141% over the prior year. Again, our distributors continue to adjust ordering patterns as inventory levels stabilize. Helmet sales accounted for 14% of our revenues for the quarter. Our other products, parts, and accessories category is comprised of goggles, hydration bags, and apparel items, including jerseys, pants, shorts, and jackets, as well as aftermarket support items. Revenues were $2.47 million, a 15% decrease due primarily to a 50% decrease in sales of motor technical apparel designed for motorcycle use. Sales of NTB technical apparel increased by 63%, and we continue to ship orders of ADB technical apparel to our global customers. Overall, our inventory levels continue to stabilize. They decreased by $5.65 million, or 28%, in the last six months, as we continue to look for opportunities to turn over slower-moving inventory. Now I will turn to more financial details for the second quarter of 2024 compared to 2023. Total revenues for the second quarter were $10 million, down by 18%, compared to $12.35 million for the second quarter of 2023. The decrease in worldwide revenues is attributable to a $2 million decrease in helmet sales and a $440,000 decrease in other products, parts, and accessory sales. that were partially offset by a $210,000 increase in body armor sales and a $50,000 increase in neck brace sales. Loss from operations for the second quarter of 2024 was $1.3 million, down by 186%, compared to income of $1.31 million for the second quarter of 2023. Net loss for the second quarter of 2024 was $1 million, or $0.17 per basic and $0.16 per diluted share, down by 236%, as compared to Lear's income of $776,000, or $0.13 per basic and $0.12 per diluted share, for the second quarter of 2023. Lear continued to meet his working capital needs from cash on hand and internally generated cash flow from operations, At 30 June 2024, the company had cash and cash equivalents of $13.33 million and a current ratio of 9.6 to 1 compared to a current ratio of 6.3 to 1 at June 30th, 2023. To summarize, although they are still some challenging industry and economic headwinds globally, Inventory continues to be digested, participation remains strong and ordering patterns continue to improve and have started to filter through to our international distributors. We also continue to see encouraging growth trends at the dealer and consumer level as the demand for Lear products continues to be encouraging. We continue to invest heavily in consumer brand recognition and building out a high-performing team of sales and marketing professionals around the world. Our industry-wide turbulence presents an opportunity to grow the Lear family by adding talented team members. Although these investments typically take time to add to our financial results, we believe that investing in brand momentum and building a great team remain cornerstones of our future growth plans. In conclusion, we look forward in the coming months to what we believe will be successful global launches of our product lines for Moto, MTB, and ADB as our team of developers and engineers continue to strive for product excellence. As mentioned, the MTB lineup will include an exciting new category, top-level, innovative bicycle components. We are all very enthusiastic about the future at Lear's. With a strong portfolio of innovative products in the market and in the pipeline, a multi-channel sales organization that is growing and developing, a passionate, cohesive team, and a robust balance sheet to fuel brand and revenue growth, we remain confident that we are well positioned for future growth and shareholder value. As always, we'd like to thank our entire Lear family, our dedicated employees, business partners, and team writers, for their continued strong support. And with that, I'd like to turn the call over for some questions. Operator?