Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Leatt Corp (LEAT, Financial) reported a 1% increase in total global revenues for the third quarter of 2024, marking a return to growth.
- International sales rose by 5%, indicating strong performance outside the domestic market.
- Gross profit for the third quarter was $5.17 million, with margins improving by 4% sequentially over the second quarter.
- Direct-to-consumer sales grew by 12% during the quarter, showcasing the strength of their consumer platform.
- Cash increased by $1.12 million to $12.47 million, with cash flows provided by operations of $2.98 million for the nine months ended September 30, 2024, indicating strong liquidity management.
Negative Points
- Net income for the third quarter of 2024 was down by 75% compared to the same period in 2023.
- Footwear revenues contracted globally due to aggressive competitive pricing and high inventory levels.
- Brick-and-mortar MOTO dealer sales in the US were constrained during the quarter.
- Revenues from other products, parts, and accessories decreased by 11% year over year.
- The company faces challenging economic headwinds globally that may impact demand.
Q & A Highlights
Q: It looks like Europe has stabilized and customers are coming back. Have you seen this also? Can you provide a few anecdotes?
A: Yes, we have seen an improvement in consumer sentiment in Europe. With inflation decreasing and interest rates starting to decline, people are feeling more confident about spending. Consumer sentiment indexes showed an uptick in October. Ordering from our European customers is looking more positive as inventory is digested and the cost of capital decreases. We are well-positioned for improvement in Europe. - Sean Macdonald, CEO
Q: Your cash continues to increase and is now at $12.5 million. Do you have any plans to use this money in the coming months?
A: We plan to invest in working capital in the US and South Africa as we return to sustainable growth. We are also intensifying spending on marketing and talent, particularly in sales and marketing. Additionally, we are always looking for opportunities to invest in new areas or categories. Investing in the Leatt brand and building a strong sales organization are wise uses of our cash. - Sean Macdonald, CEO
Q: What makes you most proud this quarter, and where do you see headwinds?
A: We are proud of returning to growth, with revenues up 20% sequentially and margins increasing by 4%. The team has managed inventory well, balancing older inventory sales with new inventory at higher margins. However, brick-and-mortar sales in the US were tough, but we are working hard to address this. Overall, we are proud of our results and careful management of working capital. - Sean Macdonald, CEO
Q: Can you provide more color on the increase in salaries and marketing expenses?
A: The primary salary increases are for sales and marketing staff, particularly in the US, where we have a full employee force. This strategic move aims to fuel growth. Marketing expenses are focused on our ADV line, a significant market for us. We are also investing in brand managers and sales staff outside the US to build a strong sales organization. - Sean Macdonald, CEO
Q: Could you comment on the product royalty income that has spiked recently?
A: We have developed new partnerships that are licensing our products in emerging markets, which has contributed to the increase in product royalty revenues. - Sean Macdonald, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
