Leatt Corp

Greetings and welcome to the third quarter 2024 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 for this 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 of VYAC Corporation. Thank you. You may begin.

Thanks, LaTanya. Good morning and welcome to the Liat Corporation investor conference call to discuss the financial results for the third quarter 2024. The company issued a press release today, Tuesday, October 29, 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 13749831. 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. 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 October 29, 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 LEAC Corporation. Good afternoon to you in Cape Town, Sean.

Good morning, Mike, and thank you all for joining us today. We are all very encouraged by the results of the third quarter of 2024. We see it as a pivotal quarter as global revenues return to growth, albeit still marginal at this early stage. Total global revenues for the quarter were $12.14 million, a 1% increase the other year. Body armor sales were up $270,000. Helmet sales were up $140,000. And neck brace sales were up $40,000. International sales were $8.58 million, up by 5% as inventory continues to be digested and the uptick in ordering begins to falter through to our revenues. Gross profit for the third quarter was $5.17 million. Although we continue to monitor the impact of potential economic headwinds, and there are areas of inflated inventory, the start of our pivot to growth is the important and encouraging point, as participation remains strong and ordering patterns continue to improve. We believe that these are trends that will continue through the coming quarters. Our margins also continue to improve on a quarterly basis, increasing 4% sequentially over the second quarter as we manage clearing all the inventory and selling your stock at higher margins. Our inventory levels continue to stabilize, decreasing by $4.62 million, or 23%, over the last month, as we continue to see opportunities to turn over slow-moving inventory and replenish stock levels in preparation for for stronger ordering. We continue to ship orders for our ADB Adventure apparel line, a product line designed for motorcycle enthusiasts seeking comfort and safety while riding in all weather conditions and terrains. We remain confident that we have an initial distribution, track record, core competencies, and talent to continue delivering a pipeline of innovative ADB product categories to reach the substantial market segment. Footwear, comprising of MTB shoes and motor boot revenues, contracted on a global basis during the quarter. Footwear has been particularly constrained in the current environment, with aggressive competitive pricing and high inventory levels, causing very cautious buying at the dealer level. We expect this area to improve as inventory is digested and ordering continues to pick up. We continue to see very encouraging trends at the direct-to-consumer level, growing by 12% during the quarter. Our consumer direct platform in South Africa continues to display strong sales, exceeding our expectations. Despite current industry-wide conditions, reinvestments in working capital and our push to invest in long-term growth cash increased by $1.1 million to $12.47 million, with cash flows provided by operations of $2.98 million for the nine months ended September 30th, 2024. Our liquidity continues to improve as our team continues to manage working capital efficiently. Overall, Despite some constrained brick-and-mortar motor dealer sales in the U.S. during the quarter, our team remains enthusiastic about this pivotal moment in our recovery that is currently in play. We believe strongly that our investment in talent, innovative product development, and the brand, as well as our distribution capabilities, will fuel growth going forward. Now I will turn to more details on sales of our product categories for the third quarter of 2021. when compared to the third quarter of 2022. Start of our flagship net rates were $750,000, a 6% year-over-year increase, attributable primarily to a 109% increase in sales of our premium 6.5 net rates, partially offset by a 37% decrease in sales of our 3.5 net rates. Net rate sales were 6% of our total revenues for the quarter. Our body armor products are comprised of chest protectors, full upper body protectors, knee braces, knee and elbow guards, off-road motorcycle boots, and mountain biking shoes. Body armor revenues for the 2024 third quarter were $5.73 million, a 5% increase year over year. The increase was primarily the result of a 25% increase in sales of upper body and limb protection. partially offset by a 55% decrease in sales of footwear, comprising motorcycle boots and mountain biking shoes, as our distribution partners continue to digest inventory. Body armor products with 47% of our total revenues. Helmet sales were $3 million, 5% increase year over year, due primarily to a 98% increase in the sale of our motor helmets, partially offset by a 23% decrease in sales of our NTD helmets. Helmets sales made up 35% 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 $2.65 million, an 11% decrease year-over-year, The decrease was partially due to a 37% decrease in MPV apparel sales as our MPV distribution partners continue to manage ordering as a result of stocking dynamics. Other products and parts and accessories category made up 22% of our revenues for the quarter. Now I will turn to our financial results in a bit more detail. Total revenues for the third quarter of 2024 were $12.14 million, up by 1%, compared to $12 million for the third quarter of 2023. This increase in worldwide revenues is primarily attributable to a $270,000 increase in body-owner sales. a $140,000 increase in helmet sales, a $40,000 increase in neck brace sales that were partially offset by a $320,000 increase in other products, parts, and accessories sales. Net income for the third quarter of 2024 was $116,000, or $0.02 per basic and $0.02 per W-2 share, down by 75% as compared to net income of $460,000 or $0.08 per basic and $0.07 per diluted share for the third quarter of 2023. Let's continue to meet its working capital needs from cash on hand and internally generated cash flow from operations. At September 30th, 2024, the company had cash and cash equivalents of $12.47 million and a current ratio of 6.5 to 1. Although there are still some challenging economic headwinds globally that may impact the bond to some extent, inventory continues to be digested, participation remains strong, and ordering patterns continue to improve and have started to filter through to our international distribution revenues and ultimately our revenue position. This is a trend that we expect to continue over the next few periods and beyond. Additionally, we have some very exciting new distributor partnerships in the United Kingdom, Europe, and emerging markets that should filter through to revenues over the next few quarters. We will continue to optimize our selling capabilities by building a team of sales and marketing professionals around the world as industry-wide turbulence presents an opportunity to continue growing the Lear family by adding talent. Although these investments typically take some time to make an impression on our results, We do believe that building out a great global team is a cornerstone of our future growth plans. In conclusion, we are all very enthusiastic about the future of this. With our strong portfolio of innovation and pipeline, multi-channel self-organization that is growing and developing, and the robust energy to fuel brand and revenue growth, we remain confident that we are well positioned for future growth and increased shareholder value. As always, We'd like to thank our entire Lear family, our dedicated employees, business partners, and team riders for their continued strong support. With that, I'd like to turn the call over for any questions. Operator?