Leatt Corp

Greetings and welcome to the LEAC Corporation fourth quarter 2024 results 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 the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Michael Mason, Investor Relations for LEAC Corporation. Thank you. You may begin.

Thanks, Melissa. Good morning and welcome to the Liat Corporation Investor Conference Call to discuss the financial results for the fourth quarter and full year 2024. The company issued a press release today, Friday, March 28, 2025, 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 1-844-512-2921 or 1-412-317-6671 for international callers. The replay pin number is 1-375-2688. 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. LEAC 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 March 28, 2025. The company will make a presentation on the quarterly and year-end results, and then we will open the call to questions. I would now like to turn the call over to Mr. Sean McDonald, CEO of Liat Corporation, and good afternoon to you in Cape Town, Sean.

Good morning, Mike, and thank you, and thank you all for joining us today. Our entire team is very encouraged by the return to double-digit revenue growth in the fourth quarter. Total global revenues increased by 14% compared to the fourth quarter of 2023. This growth was fueled by international sell-through, restocking dynamics, and the addition of strong distribution partners in key areas. Reordering patterns continue to stabilize, so this is a trend that we believe will continue. It was particularly encouraging to see growth from so many of our product categories in the fourth quarter. Body armor revenues increased by 14%, helmet revenues increased by 41%, and other product parts and accessories increased by 9%, with the only category that decreased being neck braces, which were down 25% compared to last year. ADV apparel sales exceeded our expectations, and we look forward to delivering a pipeline of innovative products to the growing ADV market over the next several quarters. We remain confident that we have the initial distribution, core competencies and talent to reach this substantial segment. Gross profit as a percentage of sales continue to improve during the quarter, increasing from 36% in last year's fourth quarter to 41% as domestic trading conditions continue to improve. We continue to ship our new products and inventory levels continue to stabilise. International distributor sales grew by 24% in the fourth quarter as inventory was digested, and as mentioned, margins for the fourth quarter increased by 5%. On a full year basis, total revenues were $44 million, a 7% or $3.2 million decrease compared to 2023. Our consumer direct channel continues to display encouraging trends as our brand continues to build momentum around the world. Domestic sales on our consumer-facing channels in the U.S. continue to surge, and Lear.co.za, our consumer direct platform in South Africa, continues to show strong sales. International distributor sales decreased by 11.5% for the full 2024 year, as our distributors digested elevated inventory levels in the first half of the year. Although dealer direct motor and MTB sales in South Africa continued to grow and MTB dealer sales in the U.S. were strong in 2024, these gains were partially offset by challenging U.S. motor dealer direct sales at the brick and mortar level, which contracted by 8%, resulting in a marginal 0.3% increase in total dealer direct sales. Margins for the full year increased by 2% from 42% to 40% as a result of promotional selling opportunities to move all the inventory in the first half of the year as we converted inventory to cash. While participation and demand for lead products remain strong, U.S. motor dealers continue to manage elevated inventory levels and some industry turmoil is stabilizing. cash increased by $1 million to $12.37 million, with cash flows provided by operations of $2.8 million for the full year. This result came despite current industry-wide conditions, reinvestments in working capital, capital expenditures on digital capabilities and product models that will fuel future growth. Our liquidity continues to improve as our team continues to manage working capital efficiently. In recent weeks, We have made some important strides in continuing to optimize our selling capabilities by building and refining a team of sales and marketing professionals around the world. We are confident that some of our newest additions to the team will have a strong impact on our performance moving forward. I've noted the addition of Rob Ramblos to the team as VP of Motor and ADV Sales. Rob brings a 20-year track record of strong industry success and a passion for building high-performance teams and dealer partnerships to the U.S. team. Although these investments typically take some time to make an impression on our results, we do believe that building out a great team will continue to be a cornerstone of our future growth plans. Now I will turn to more details and sales of our product categories for the full year 2024 compared to 2023. Sales of our flagship neck brace were $2.44 million, an 11% year-over-year decrease, attributable to the decrease in volume of neck brace assault. Neck brace sales were 6% of our total revenues for the year. 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 2024 were $22.46 million, a 1% decrease year over year. Although revenues generated in the sale of upper body and limb protection increased by 14%, the overall 1% decrease was primarily the result of a 36% decrease in revenues from the sale of footwear, comprised of motorcycle boots and mountain biking shoes during the year. Footwear has been a particularly constrained category due to post-COVID stocking dynamics on an industry-wide basis. Body armor sales were 51% of our total revenues for the year. Helmet sales were $8.39 million, a 25% decrease year-over-year. Although strong shipments of our ADV helmets designed for adventure motorcycle riding continued, The decrease is due primarily to a 37% decrease in motor and MTD helmet sales to our international customers during 2024, as our distributors continue to manage elevated inventory levels as a result of post-COVID stocking dynamics that continue to improve as participation remains strong and ordering patterns improve. Helmet sales were 19% of our revenues for the year, and our other products, parts, and accessories category, which is comprised of goggles, hydration bags, and apparel items that include jerseys, pants, shorts, jackets, and aftermarket support items. Revenues were $10.74 million, a 1% decrease year over year. The decrease was partially due to a 22% decrease in the sale of our motor and MTB technical apparel lines. designed for motorcycle and mountain biking use that was partially offset by strong sales of ADV technical apparel designed for adventure motorcycle riding. Our other products and accessories category put 24% of our revenues for the year. Now I will turn to our financial results in a bit more detail. Total revenues for the fourth quarter of 2024 were $11.19 million, up by 14%, compared to $9.8 million for the fourth quarter of 2023. Net loss for the fourth quarter was $446,000, or $0.07 per basic and $0.07 per diluted share, as compared to a net loss of $1.46 million, or $0.24 per basic and $0.23 per diluted share, for the fourth quarter of 2022. Total revenues for the full year 2024 were $44 million, a 7% decrease, compared to revenues of $47.24 million for the full year of 2023. The decrease in worldwide revenues is attributable to a $2.73 million decrease in helmet sales, a $310,000 decrease in neck brace sales, a $120,000 decrease in body armor sales, and a $60,000 decrease in other products, parts, and accessory sales. Net loss for the full year 2024 was $2.2 million, or $0.35 per basic share and $0.34 per diluted share, down by 374%. compared to $803,000 or $0.13 per basic share and $0.13 per diluted share for 2023. Lear continued to meet its working capital needs from cash on hand and internally generated cash flows from operations and at December 31, 2024, the company had cash and cash equivalents of $12.37 million compared to $11.35 million at December 31, 2023, and a current ratio of 5.2 to 1. In other developments during the quarter, we are proud to announce that LIEP has once again been recognized with two prestigious design and innovation awards for 2025. The first award is in the apparel category with our white kit MPB 1.0, and the second is in the components category with the Ceramac All Mountain 8.0 TI flat pedals. The Design and Innovation Awards are considered the gold standard in the bike industry as products are put through real-world testing by a panel of 50 international experts, including journalists, test riders, and engineers. Winning in two categories is a huge achievement and a testament to our team's dedication to innovation, performance, and quality. In addition, we are also extremely proud to announce our sponsorship of highly respected supercross athletes, Colt Nichols, Justin Gill, and Kyle Chisholm. Their partnerships with Lear reinforces our commitment to providing world-class gear, and we look forward to seeing these athletes compete at the highest level of showcasing the innovation and quality that Lear is defined by. To summarize, we are all very enthusiastic about the future of LIT. Although there are still some challenging geopolitical trading and economic headwinds globally that could impact demand, inventory continues to be digested, participation remains strong, and ordering patterns continue to improve and have started to falter through to our revenues. These are trends that we do believe will continue. As ordering patterns at the consumer level and ultimately the distributor and dealer level continue to improve, we also expect working capital investments to grow in the coming periods. We are confident that we have sufficient strong liquidity to fill this role. Despite some constraints looking more to motor dealer sales in the U.S., our team remains enthusiastic about the recovery that is currently in play and the latest additions to our team. We will continue to optimize our selling capabilities by building and refining a team of sales and marketing professionals around the world. We also have some very exciting redistributive partnerships in the United Kingdom, Europe, and emerging markets that will continue to filter through to our revenues over the next few quarters. It was particularly encouraging once again to see body armor, helmets, and other products, parts, and accessories return to growth in the fourth quarter on a global basis. growth in sales of our ADV today also exceeded our expectations. And we remain confident that we have the track record and ability to reach the substantial and growing ADV market segment in the upcoming quarters. With a strong portfolio of innovative products in the market and in the pipeline, a multi-channel sales organization that is growing and developing, and a robust balance sheet to fuel brand and revenue growth, we remain confident that we are very well positioned for future sustainable 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 to the operator for questions.