LEAT - Earnings call 1 2023 | Leatt Corporation

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Operator

Greetings, and welcome to the Leatt Corporation First Quarter 2023 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Mason, Investor Relations for Leatt. Thank you, Michael.

You may begin.

Michael Mason

Devin. Thanks, welcome financial Corporation quarter results and to conference XXXX. the the discuss for to morning, investor Leatt call Good the first XXXX The Thursday, press a at XX, company X:XX release a.m. issued May today, filed also the Eastern and with SEC. press leatt-corp.com. This is at be on being Leatt's website. may call the and release company's is live The on accessed website posted broadcast XXX-XXXX America audio for or may be and replay X for days XXX-XXXX of An callers. (XXX) from international this by North available X X call (XXX) will be calling accessed replay number is XXXXXXXX. The PIN A this replay conference for statements the immediately of statements. webcast will this call X available be in call following forward-looking continue may constitute and will days. Certain differ could results Actual from this those discussed in call. materially undertake obligation statements does update not Corporation Leatt any this to such call. made in cautionary press statement in complete statements XXXX. XX, the release May forward-looking today's regarding to refer dated Please on will call the questions. then company a The make quarterly results and open the to presentation I would the to over now to like call Mr. turn of CEO MacDonald, Corporation. Leatt Sean to you Cape afternoon Sean. Town, Good in

Sean MacDonald

thank morning, you Good Mike. joining us and for all thank you, And today.

of quarter challenging Leatt. XXXX both first The for and promising was

Leatt we MOTO Although a participation and dynamics course, remains to industry stocking experience COVID that, post factors the demand macroeconomic around as see following strong and buying MTB the direct-to-consumer for level, spring world activity encouraging weather. at constrained and distributor begin continues dealer colder to to wider rider products return of some

year-over-year XX% comparative. a of context decreased global and the revenues difficult in a environment quarter particularly by First inflationary

that of continue we that dealer million stimulate operations of is at million by will, increase XXXX. the our XXXX so hand from turn, net Despite was to earned restocking in which $XX.X in slowest quarter of quarter revenues, distributor that with riding in $X.X on and the consumer growth will season March and our generated optimistic digestion in drop inventory and XX, equivalents history. Revenues The of strongest traditionally at in in $X can year-over-year participation million activities, income the intensify. and XX% first cash in company's a outdoor spring arrival quarter level remain the We cash the grew quarter.

Our and a sales reps record as shareholder Total first revenues logistics a supply profit of for of first quarter the team company million, base the XXX% to team International our track percentage sales XX% XXXX double-digit in quarter the is throughout grow revenues diligently compared continue a to remarkable improved U.S. the $XX.X as of in XXXX international levels MOTO and return in sales costs the were of country. Gross growth first actively chain $X.X when wider decrease And the our to U.S. of enthusiastic we about adjust million, XXXX. first a future accordingly. dealers continue detail. were million, and quarter over decrease Reflecting income as USD continues to manage share towards growth brand operations a working a in the flow to $X.X on XX% both reach flow. elevated XX% growth were as $X.X and increased environment. our was income to future of delivering our cash a was model increased in ability on were strong to exceptionally was the and of we positions of compared patterns a more Sales testament to dealers and $X stocking our maintaining in the compared and XX% and per value. strong result period. bit well the challenging ordering to generate on our team year-over-year. U.S. financials our invest quarter, MTB work in decrease decrease of particularly XX% the in a first purchasing first to for strong our the of during prior partners. quarter of million, focus quarter brand site e-commerce our X.XX. margins representing common and and that year business and capital Net expenses positioning. continued other Leatt activity is growth. We Leatt.com flow by operating during in period. Net Total to million consumer direct inflationary increased this by the team believe our and the cash X% consumer were our managing grow able direct period strong total cash generated encouraged control to we costs international X% resilience to with global the a increasing despite those sales from We The of global the focus activity channels revenues. and XX%, consumer by the

global team conditions. covering our emerging markets managers with fluid strong are to Leatt facilitate at key level to brand the distribution Our of working and dealer market closely sales partners presence and react established a and

on offering actively of focus building to competitors our has of are and our channels in Unlike to refining we sales growing our contracted talent in teams and leverage head-to-toe their continue sustainable who products. exceptional a and We multichannel centers, the sales ability have organization investing a cost some strong that manner.

which 'XX quarter the decrease 'XX quarter and the million $X.XX XX% limb to $X.XX and million generated knee of up first down volume over or guards, Now ordering first of of XXXX. quarter XX% To million of first decrease million exceptional first first XXXX. of armor details primarily decrease flow is XXXX, levels. decrease of for off-road and our to per first MTB of revenues working a and the that $X.XX quarter the total XX% the current dealer of for attributable over $X.XX quarter $X.XX of first first year-over-year. The pieces, March were were dynamics to a off-road million, for motorcycle distributor million revenues, prior XXXX decrease decrease for for or to quarter key compared compared XX% a on the to of in year revenues XX% the -- the of upper summarize quarter categories for for of revenues now to $XXX,XXX to sales first the financial quarter of per period. compared products, diluted capital details XX% quarter of XX% internally quarter our of operations. cash compared and and a Leatt $XX.X XXXX, of XX% net sold were of million first armor XXX% motorcycle were primarily quarter first and quarter exceptionally the of $X.X a product use volume of Apparel a share, the and products, XX% the and exceptional for compared in a quarter to increased $XX.X Income Total was of the of from other in sales. $X sales per for decrease for sales revenues the mountain a XXX% in neck or sales, sales. apparel up million by quarter X.X:X. XXXX. in our compared products is of impact for a XX, quarter comparative sales $X.X of the shoes. Helmet million body $X.XX parts $X.X for MTB of $X.XX parts an the biking XX% boots affect company attributable our or body other compounded XX% to sold. our were The sales X% year-over-year. The over when include revenues $X.XX and first armor $XXX,XXX and of year-over-year. in and 'XX million, our decrease decrease the continue the helmet quarter a of XX% million decrease down in cash the an on global biking to $X.XX primarily for the quarter, XX% braces, XX% more million basic revenues $XX.X as for for first of The I'll exceptionally first was strong helmet 'XX. Net brace XXXX. was decrease result was from to a a And in mountain the were decrease technical helmet neck protection neck braces MTB by in the quarter stocking was from total Sales the designed by decrease accessories sales decrease had in hand a first revenues boots flagship million income our its or a was to decrease of strong quarter industry-wide company. The equivalents XX% of accessories for XXXX. Sales upper or and body armor decrease revenues in cash strong 'XX brace operations MOTO turn XXXX. and quarter the $X.XX Body XX% share diluted the at income revenues, from attributable meet Body ratio basic first XXXX, decrease continued needs and the sales were armor first 'XX body per in quarter

resilience. position to rider in the to areas stocking will post sales despite Leatt much macroeconomic influence. Strong pipeline and COVID plan for growth ahead, brand and audience we a products, can a continue of to that building, wider a hard future financial continued multichannel that Looking the a and exceptional organization, push invest global and we challenges, reach

by to over of now are in X% have encouraged momentum through Consumer increased several e-commerce experienced represent our revenues, sales the activity a and the global years. brand We internationally. leatt.com on we that sales past direct the partners testament

to our categories for and continue and demand dealers remain report healthy future that consumer of well resultant global online Our positioned sell-through product growth.

invest developing products. in our of cutting-edge continue to innovative strategy We

continues the excellence exceptional share. this product offerings to collaboration us market recognized continued with We focus that gain additional an to in are innovation and product industry. will team and on Our our team allow engineering throughout design riders deliver product believe pipeline in that

although share spring have in professional dynamics as mountain believe in and levels in performance, our the and up We that distributor market year, excellence our COVID in as To ideal events we MOTO long-term much off Epic endurance move are we advance and our continue growing Throughout Leatt growth committed and series elevated first levels will ramping about our we and design coming summarize, our Select significant and excited UCI are team Cup they mountain consumer MTB apparel with constrained of dealer an returning and are compete we level, to kicks partnership the of stock continues. Rider MTB into biking focused industries activity us the for in our existing by the to more. is as opportunities, be team. This value. participation for post and positioning that Leatt remain team, and Speed to with intensify a face segment. shared Many and direct the categories will track We mainstream still helmet are as Orbea the be the share rider infancy Leatt properly, brand Racing our product larger riders in partnership biking Company ] and World products momentum especially their of communities [ protected in market season sustainable innovation shareholder double-digit growth. ordering record at level and digested. team, to in investing vision our

over to partners with riders call continued employees, our dedicated business that, their thank family entire I'd As like And turn Operator? always, for of for Leatt like support. team the to strong questions. and we'd

Operator

is question investor. Olivier the with first a Our Instructions] line [Operator private from Colombo, of

Olivier Colombo

guess that is your QX faced. all it toughest now you to behind us was happy I as ever have very see we're comp

Sean MacDonald

correct. is That

Olivier Colombo

quarter. X think your just that highlight I I in points are pretty like to would interesting

starting them that cash lot today. brands what outdoor XXXX QX most is the by compare is the comparison, I you're are grow comparing important again. to a increase up numbers point in provided we QX you're a you XXX% you operations, at XXXX, had And million. huge 'XX at as And then And XXXX versus always today, think the numbers XX%. from $X.X before. is This which a putting of QX look for if in up to the your if reported one

I remarkable. So quite think is this

Sean MacDonald

Yes, absolutely correct, Olivier.

got You've numbers your there. quite right

Olivier Colombo

X for have if you I you, allow to questions me ask them.

Sean MacDonald

problem. no Yes,

Olivier Colombo

Okay.

long growth? to get do stocking how The persist? will when double-digit could is, first do you you the issue think And think back you one

Sean MacDonald

will get there big slightly months. elevated like the and which by So our something digested that and macroeconomic the good And all time management over mean course, quickly with level. I question, question our there's discuss here. several next we dealers play it's the the market think how is I conditions partners, can the the what to very with obviously is a Olivier. is stock with this at that of is factors out distributors, internally XX at And X look

So I segments, think to different are going in frames. be there time different

course, areas have to geographical different see a different that is get true the frames. different time time think generally the you you will Leatt channels the business, I also trends get the frames. closer consumer, What different And being multichannel have of what end the are. to we closer

with see So growth of started case, to already. Leatt's we leatt.com, in course, there some

If look directly our you sales, South mainly to distributor. not our through through selling are at USA and and Africa, dealer which dealers dealer Leatt sales, a direct we Leatt were

stocking to up course, the consumers, seeing we to there international the caught lower You'll to is and dealers. the see was that levels that since really side. we end saw way sell U.S. consumers in sales than what to the saw furthest quite the you And decrease the also that on of haven't international that we're

and frames So trend, that play there's fluid. is consumer, to going where going the I here. different is, we as the going through an digested. important a of end to It's this It get which to all really the is market. at to give stock that we is when time where get course, the to is to think get think difficult And that closer bit is the consumed true stock get a to is exact demand because play are little we Olivier date closer

XX that next within months, X double-digit We can we to return to the growth. hoping revenue certainly are

Olivier Colombo

the and what question second MOTO after? would us emerging And can markets of key you're mountain be, size you about My those markets, more the going particular, tell are bike? in in

Sean MacDonald

Sure. Yes.

question. good another So

you look terms markets sponsored, getting So company that we without new if into at speed the racing in that look much these detail, too now, at a I support the strategic of X% there a a we're of if at. participate get trying that top segment, endurance, team looking some team endurance that think mean, to the the mountain much wider markets trail company the is riders. And we're which biking, speed the team of was community you outside kind a mountain call at bike the mountain, of more move that support racing in, team, riding. some was we riding gravel what looking market. to And mainstream obviously. and the is of of great mountain gravity, of to or which Those also are of to kind of We're that's traditional kind I kinds

that But that multiples say total exact say we've is So the that selling markets would I there market of markets. been the is to bigger difficult say of size those bicycle size will addressable by much to. I the currently it's what

the which we really MOTO MTB the might side. And looking Instagram side, new So And to that's a full on you some the now a site, of brand on a hard noticed lineup market. on have a bring a that then marketing of working on to right are riding riding is launched level, recently we leatt_adv. great level, to the gear adventure product gear, level, influencers a adventure partnering with

I around market this the this world bigger the between is guys adventure It's market riding. Typically, it to are supercross size. is geographical enduro and huge a on the say we again, haven't off-road, quantify in -- than is a is that reached GS than around market So that is crossover commuter BMW certainly then riding. many can yet. world areas some There the bikes. MOTO a motocross, and Difficult the exact that What is again.

we're as as the soon products out forward So into really getting business, market looking to very possible. for the those it's and exciting

Olivier Colombo

you U.S. how exactly My plan you're is hear sales that you you excellent. then doing, you the salesperson? quarter? how much as it would to on this question And have in question well many team, do is which hired today? growing and actively many And have you how is be, investing the find competitor opposite in said the correct and to third sales what U.S. That's to that. another is the hard tell us hire? How please of Can like I'd

Sean MacDonald

Okay.

I year. valuable Olivier over at frame So the think time to I last a -- think just look maybe is

So XX And reps the at added the year, we last year, -- nearly the now if look over in or we've we've got last in added X U.S. employee we've X.

and viable brand, So add growth reps Leatt we've them, I that revenue. more. And generating cost enough in covering -- independent that employ see the now. We added sell we we quite few. have we are we're a the less to regions the different of think become they that add going to as find We more We plan to do plan when our regions dedicated completely to. employee reps in terms do

some planning Leatt some right is those opportunities have teams of So never board, are has that out But ways and we something And the that people expanding. take as the for the it's been of on to of turmoil you get way sales peers like there's on contracting this Leatt, of are that when to market come costs. that cut to we've our said, currently one looking seen. at their the opportunities really we opportunities. And

are that be of, to feel marketing there of some people to the go in market some for selective. you for good trend forward. course, let people because we getting is always moment, a Leatt sales growth have to sales we we moving there. story But have managers, will are the opportunities actively looking that So and reps, revenues the add At for and Leatt

Olivier Colombo

to What sales. are that And X% the customer your you which on doing leatt.com question be would website, represents on today overall visits exactly my increase of last site? today

Sean MacDonald

area in we e-mail of different various traditional the run in This includes a all We've a got leatt.com newsletters, lot to Google team order sales. from and, perspective SEO close so a days of this improve of to to got also search art sure we is campaigns then, And that our also, of can We've from cards we and traffic traffic. content And got an place, the a are our sales really these So digital site that get people so focused open. sure campaigns things. perspective team. course, more put campaigns a optimizing the that make that make that And I course, professional can left not your to site. place. is focus mean you've to to we're in is we time. that drive on site more the sites that It

of In fact, getting in to Town teams and realize we is digital building that, because important more are and the a position more leverage we around as speak need in a those be we few course, kinds Cape places BXC we channels. and and in business world, optimize we can of where

Operator

of Capital. Our from Milwaukee next question Brown comes [ the with line ] Chris

Unknown Analyst

Sales a to your I on years. there impressive X wanted focus over Can has me bit last you the been okay? little international very hear growth business.

Sean MacDonald

I can perfect, hear yes. you

Unknown Analyst

say, to very you the it last, doors? direct. driving the about just hear if some difference internationally thoughts Is know of -- been out than wanted you years Is look if I of over lines? of Would your it just different or quite new -- could hey, And stronger growth product what's number sales kind impressive we're X rolling it extending a there. internationally, the has something love is a else? talk dealer So matter retail the bit performance. in of, we're in and so to

Sean MacDonald

Sure.

are the along with really question. dealer really, really that has are are marketing managers with and because have that it's with key what we've network fantastic. between on with brand out relationships, a in good of is is the the absolutely, very We've great think manager been the that get brand the you catalog also really get distribution embarked you and and years brand from. a attention really, that really distributor But building is focused has areas, I focused best-in-class for working Leatt side geographical and on international the of many is MTB dealers dealers. employing sales sales really well buying dealers are the on of split that -- Leatt the great us on Leatt and MOTO which on last And are that distribution partners meant been focused there that working X has place. They in products dealers the what And benefit a employee, there. successful it's

of we've in great I we mean, on growth the the what's that this kind happening got some story channels, really I mean, Leatt reason U.S., and strong through domestically the I dependent dealers place had geographical So for dealer on on U.S. carry the growing investment the having on in the the U.S. In those to some construction of on on of we're numbers that that diversification with really different it's have ourselves. And Leatt some selling of a full have along think combination in issues. employees and fact and we Obviously, can it's dealers areas. -- the direct receivables Leatt we're focus the the But the products. been sales side. be a which and to slightly to those international inventory have direct course, because, side quite U.S. to we macroeconomic the we selling in and is distribution

that sales bear the think reps and I fruits independent we're now. company we're going less tide dependent on when to now reps more where we've dependent is steps taken, employed turns the sales latest on

beginning. I on at the MOTO Leatt I now was we're will able So that the upfront. in we distribution kind as Leatt U.S. us taken international how was turning we were our bit on the It's starting U.S., a be when to to are areas it's founded. strategic to had quite hard the working up focusing we that a But affected what really I dynamics And that of out. that dealers I forward. a all picking in that momentum, the have it's ahead MTB hard start an of will of time And seeing that It's the think distribution and -- feel MTB also been build the sales course, really in move with some big that brand we for as get domestic stocking go than more really MTB proper we're with strong taken revenues focused key have the particularly we're industry. we'll the expected. distributors and we longer where that relationships as moving area domestic working we the growth. U.S. MTB some we confident build from MTB network. because an working side, one But think higher situation start one that's percentage on. mean our now, leverage Unfortunately, us we with the to also returning And really U.S. to MTB in traditionally of

Unknown Analyst

Sure. sense. point just one And follow to then there. on up Makes

and South your in quarterly active about the you you have the in disclosure of number U.S. distributors know gave Africa. filings in I So

we see it? of But on Are time. the way it Difficulty] kind What's can can Is has of give think roughly have trended retail -- kind any right over the doors those color significantly. how changed So internationally? us [Technical flat? do you growing about you number how of to those have

Operator

speaker me our appears line for disconnected. Give just We apologize the one moment. inconvenience. moment. has One It

Our speakers us. have rejoined

Sean MacDonald

Okay.

could I repeat seem but you. Chris question, you, we Sorry, if I'm we how didn't hear you ], the last I [ to apologize. you, just sure lost not

Unknown Analyst

worries. no so Thanks for Yes, Sure. much rejoining.

follow up Let's on so one see, to point. just

your the So in disclosure gave and in number distributors the U.S. XX-K you in some and filings South your that of Africa. on quarterly in you active have

curious, have the selling a steadily? it? Are retail number What's several the growing those roughly flat internationally, can over are -- changed sounds Is of see So about number we of way has But -- like just last trended think to doors? how doors in years? the the it right how over time. they it you

Sean MacDonald

opening where that a we There correct manager doors, South brand more growing open we've us areas area, a like some a emerging lot sales have been I employed again, get But we where say doors. full to to since areas would lot the in he's and of didn't started traditionally, able it's are we partners distribution America coverage. steadily.

the we've So increase seen a to. doors we're in some number in dramatic selling of areas, that

a big product is here factor think I our mix.

retail were easier was So to retailer. a sometimes new But brand because we a it and you brand, get a get head-to-toe full doors. to doors we now previously, head-to-toe before on offering MOTO into a lot don't open have into it difficult the to MTB, are full that is

would to are we has we'll increased. which I that doors that and a doors selling the now of that say the steadily number tide lot So obviously will, more when to turns, sell And to. place in have all remains it

Operator

Our Muller line next question comes from the of [ Christopher ], a investor. private

Unknown Attendee

you for today. X X questions or Just

count. distributors do more bit differences team leave the done versus the the build Is maybe to First, in opportunity those as on team in questions a differences sales Could there out between in distribution MTB more about industries on you the MTB? just reliant regarding the an MOTO sales speak in-house U.S.? to there Or an follow prior you've up U.S. you MOTO bicycle on side? the structural

Sean MacDonald

the of a desks. some There's for opportunity with absolutely. like, are big the stronger in to out build No, U.S. differences business MTB lot representatives MTB a done example, a structural team is U.S. of sales in There call-out

well focusing now Leatt order inside some areas on in distribution the distributors do as to currently but external help phone are us means our to the the dealers better. as penetrate that's and really people, in of market trying smaller razor-sharp that of So team the is that MTB you're we building to taking to in and strengthen to are and you're We reps, get to there mean, a order out to we our we that dealers. that stronger. USA, on MTB get literally to -- calling needed have speak, the in with marketing to be with distribution, focus I there, we But one get are areas everything our to work means orders sales order U.S. out the that

attrition talent, to an on up is really that and spoke good there earlier, particularly I As creates some currently peers, the some opportunity obviously to from side. pick our MTB

Unknown Attendee

Good Prop of to Cape And what year, current to whether currently your this was up as set something purchase for saw or its status? last in whether leased filing me maybe is space wasn't a It well Could this speak intention that was established you the you clear to to else Ltd. hear. your subsidiary altogether. Leatt I as Town on that

Sean MacDonald

absolutely. Yes,

So the I the leased There is the ongoing was South building our intention there's an that. the in time timing Africa. purchase to set order mean, of discussion building up opportunity and as an to and purchase at to quantum in the to entity

Unknown Attendee

Okay. just million could right. you you deferred which well. revenue I And here recall in had the help quarter. in $X.X was then don't understand of All recognized believe year-end, at revenues? me Very large past. the finally, I the first XXXX most deferrals any

change a different order maybe there to this I'm recognition standards? specific to was whether an policy that related was revenue So or wondering large accounting is subject

Sean MacDonald

this guess revenue previously. that And Yes. there's financials. our in XXX% had I'm our now we X statements financial why you're has And sorry, appeared it's a correct reasons in have deferred I great question. not

accounting an has taken standard, the of many gain of to been has which The time, standards, first and the a the are interpretation really us. through And new standard And for there affect XXX. clarity. the although standard standard, time long is do some like that of standard areas to basically, there the is ASC interpretation filter some quite the around

funds receive a assurance you You going revenue are from transactions. very high that need certain the with you probability to reasonable be to -- have of level are that

sale, not And our became to sale financial standards, of we that receive in sure So make end of potentially full defer quite revenue some reporting have complete it's that then X the to standard had meant terms line customers or some and position and released want quite there that assurance holding, we also a in reasonable this that fact is from of year revenue when then recognition revenue QX we the prudently in macroeconomically latest 'XX. happened deferred had the out because of were of that That that the we removed complete stock funds. a revenue. we to economic course, X that quite didn't during of with and because, we in place. And of we to a to treated going contract -- would of was at had conditions we we because clear assurance a U.S. correct, we conservatively and that it and record accounting be contract that last where of and there,

be period, obviously consider. forward had first And can don't that's we we'll through do course, learned revenues need XXXX, ship, to the assessment be you'll you in affect is of is of balance when the moving need then fluid our and which, need at which quickly. the released we XXXX. income asset because COVID revenues to So statement quarter the can any in It balance, was deferred to some to significantly the we've see there of a things why that fluid. environment, do revenue assessment. but will the This way, quite quite we in monitoring And and happen deferred that it make this now. something expect make something to this end I an changes of on based to this are be times

Operator

closing at over no I'd further like are time. There turn back to floor questions comments. to Sean the this for

Sean MacDonald

to us Thank this next our quarter. on the forward for call review conference all look the XXXX you joining of to second today We call. results

Operator

This concludes today's teleconference.

time. have a your participation, disconnect wonderful lines at and your day. this may you Thank for You

Leatt (LEAT) 11 May 232023 Q1 Earnings call transcript