Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consumer Direct sales increased by 19% and dealer direct sales increased by 14%, indicating strong brand recognition and successful global outreach.
- 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.
- Body armor sales increased by 4%, with a notable 45% increase in upper body and limb protection sales.
- The company is launching a new innovative product category for its MTB line, featuring 32 top-level bicycle components, which is expected to drive future growth.
- Leatt Corp (LEAT, Financial) continues to invest in consumer brand recognition and building a high-performing sales and marketing team, positioning the company for future growth.
Negative Points
- Total global revenues for the second quarter were $10 million, an 18% decrease from the previous year.
- Sales to global distributors decreased by 33% as distributors continue to manage industry-wide stocking dynamics.
- Helmet sales saw a significant 64% decrease, contributing to a 59% decrease in net sales for the quarter.
- Loss from operations for the second quarter of 2024 was $1.13 million, a 186% decrease compared to income in the same quarter of 2023.
- Gross margins were impacted by promotional efforts to move older inventory, indicating ongoing margin pressure.
Q & A Highlights
Q: How far along is Leatt Corp in moving older inventory through promotions, and is there still a significant volume subject to these promotions?
A: Sean Macdonald, CEO, stated that they are far down the line in selling off older inventory through aggressive promotions in Q1 and Q2. With new products coming in, margins are expected to improve, balancing out any future promotional activities.
Q: Is the weakness in the motor side, specifically helmets and apparel, due to distributor consolidation in the US, or are there other factors?
A: Sean Macdonald explained that the weakness is primarily due to inventory levels and distribution pressures in Europe. Orders placed last year during high inventory levels are now being shipped, but new orders for 2025 products are looking more encouraging.
Q: Will most global distributors stock the full new components line debuted at Eurobike, or will it require demonstrating consumer demand first?
A: Sean Macdonald indicated that most distributors are excited and will stock most of the line. Initial orders are expected to ship in the next few quarters, as distributors already have channels open for these products.
Q: How does the margin profile of the new components line compare to Leatt's current blended gross margin?
A: Sean Macdonald noted that the margin profile is similar, with high-end products offering healthy margins. The components line is not expected to decrease overall margins, and shipping efficiencies should help maintain net margins.
Q: Are there any other factors impacting gross margins besides promotional efforts?
A: Sean Macdonald mentioned that while promotional efforts have impacted margins, the introduction of new products with strong margins should balance this out. The focus is on selling older inventory to make room for new, higher-margin products.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
