Q3 2021 Leatt Corp Earnings Call
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Greetings and welcome to lay at Corporation third quarter 2021 earnings 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 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. Thank you you may begin.
Thanks, Rob.
Good morning, and welcome to the Lee at Corporation Investor Conference call to discuss the financial results for the 2021 third quarter. The company issued a press release today Friday November 12 at eight a M. Eastern and also filed its report with the SEC.
The press release is posted on <unk> website at Www Dot Lee at Corp Dotcom.
This call is being broadcast live and maybe accessed on the company's website, an audio replay of the call will be available for seven days and may be accessed from North America by calling 184451 to two nine to one.
We're one for 123176671 for international callers.
The replay pin numbers 137 to 4984.
A replay of the webcast will be available immediately following this call and will continue for 30 days.
Certain statements in this conference call May constitute forward looking statements actual results could differ materially from those discussed in this call. We had 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 November 12.
2021 the.
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 <unk> Corporation, Sean Good afternoon to you in Cape Town.
Yeah.
Good morning, and thank you, Mike and thank you all for joining us today.
Nearly every measure the third quarter of 2021 with an absolutely remarkable quota fully yet.
Global revenues for the quarter increased by 94% over the 2023rd quarter to $22 $1 million.
Gross profit increased by 93% to $9 $5 million.
Net income increased by a staggering 166% to $4 $3 million.
Third quarter growth was led by an exceptionally strong increase in international revenues, which grew substantially at $17 8 million from $7 $1 million for the 2023rd quarter as we successfully shifted our highly anticipated 2022 line of products to our customers around the world.
Our global supply chain team and manufacturing partners have done incredibly well in a challenging and often dynamic environment to ensure that inventory is delivered.
And we believe we are well positioned at this time to meet customer demand levels for the upcoming holiday shopping season.
We have now achieved record breaking quarterly revenue for five consecutive quarters and year over year revenue growth for the last 14 quarters.
We have successfully grown into a leading global consumer brands that is respected around the world for designing and engineering exceptional products for the sports industry.
Third quarter, Great places across our growing portfolio of products.
With a $6 6 million an increase in body on the sales of one $5 million increase in net price styles and $1 $5 million increase in the sale of other products parts and accessories and a one $1 million increase in home itself.
It's taking a look in more detail.
Our body armor products are comprised of a range of choice to protect is plenty protect isn't this expert tick there's knee braces Oh my God.
<unk> offered motorcycle boots and mountain biking shoes.
The 114% increase in body on the revenue so if COVID-19.
101% increase in the volume of the body protection sold during the period.
This demand has resulted in significant restocking orders, that's encouraging sales and are growing so quick category up motorcycle between mountain biking shoes contributing.
Feed all expectations, what do you Wanna accounted for 56% of 2021 faithful to Randy.
We are very pleased with the performance of our new fresh products for the quarter as they continued to generate a higher gross margin than our other product categories worldwide demand for nickel prices continues to increase Nick Bray style was accounted for 12% of 2021 third quarter revenue.
Our other top product parts and accessories category are comprised of alcohol penetration bags apparel line of jackets pants shorts, and <unk> as well as the Austin after market support items.
The 47% increase is due to a 118, 9% increase in the volume of mountain biking.
And offered Monica apparel sold during the period and the global consumer demand for all.
H, yes continues to surge.
The other product parts and accessories category accounted for 21% anticipated quarter revenues.
The 93% increase in Helmand sales during the third quarter is primarily due to a 114, 9% increase in the volume on our innovative award winning MTB and fried motorcycle helmet lines sold globally during the 2021 period.
Helmets accounted for 11% of our 2021 third quarter revenue and remain a key focus area for our company.
While international revenues for the quarter grew substantially revenues in the United States grew at a more marginal rate. This was due in part to Tim pre domestic port congestion and trucking delays caused causing a leg in the performance of domestic orders about 2022 product line.
Dealer and consumer demand for our products remains very strong in the U S and we have been able to deliver significant orders during the first half of the fourth quarter in time for the holiday shopping season.
<unk> in Reno, Nevada has three times, the storage space of our California facility, which will enable us to fulfill a higher volume of orders a key component of our continued development in the U S.
Reflecting back on the headline financials.
Revenues for the third quarter of 2021 increased to $22 $1 million up 94% compared to $11 $4 million for the fiscal 2020 gross profit for the third quarter increased to $9 5 million Oh.
93% compared to $4 9 million.
Of 2020 total operating expenses.
Third quarter 'twenty to 'twenty, one increased to $3 $8 million.
54% compared to $2 9 million for the third.
Third quarter of 2020 due to increases in salaries G&A costs and professional fees.
And income from operations for the third quarter of 2020 increased to $5 8 million up 170% compared to $2 $1 million for the third quarter of 2020.
Net income for the third quarter.
Coming in at $4 3 million or 17, nine cents per basic and <unk> 69.
<unk> hundred 66% compared to $1 6 million or 50 cents per basic and <unk> 27 cents per diluted share for the third quarter 2020.
The extraordinary third quarter added to what is already our strongest yet.
Global revenues for the first nine months of 2021 increased 19, 1% to $49 3 million.
Net income year to date increased by 261% to $8 $8 million a return on revenue of 18%.
Earnings of $1 61 to <unk>.
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Turning to the balance sheet at September 32021, we had cash and cash equivalents of $2 five 9 million.
Our coverage ratio stands at 221, and we have no long term debt.
We believe that our current cash and cash equivalent balances along with net cash generated by operations are sufficient to meet anticipated cash requirements for at least the next 12 months.
No plans for any major capital expenditures in the next 12 months beyond investments in molds and tooling to facilitate further expansion and refinement of our product categories.
We believe that our performance for the third quarter demonstrates once again, our ability to grow revenue remain operationally efficient and generate significant shareholder value.
To summarize global consumer spending, particularly on auto products like how it continues to grow as people participating auto activities that provide some escape from the restrictions of the Covid pandemic.
This is a trend that we expect to continue.
Global demand for our exceptional hips protective gear for fried motorcycle in MTBE riders continues to surge around the world.
We see this through significant restocking orders.
Managing with our supply chain and distribution partners worldwide.
This sustained consumer demand along with recognition from the media business partners and industry athletes continues to energize our entire team.
While we still had a lot of work to do and what did you defer ACI type products, leveraging our brand and manage our supply chain. We remain committed to excellence in all that we do our team is focused on increasing our market share in refining our already strong pipeline of innovative products that we believe will continue to attract SPF and consumers around the world.
In conclusion, we continue to evolve the company and the brand through our consistent focus on developing a diverse line of products are growing sales and marketing efforts and the number of resilience of our global supply chain team. During these dynamic times.
We believe that we are well positioned to deliver an incredible financial performance in 2021 and beyond.
We'd like to thank our entire family our dedicated employees business partners and team writers for their continued efforts and relentless support.
And with that I'd like to turn the call over for questions operator.
Thank you at this time well be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question comes from Chris Javaris with Dunlap equity. Please proceed with your question.
Hey, Sharon and congratulations on the exception thanks, Chris.
Thank you.
Yes, two questions first one is you mentioned in your press release about being able to manage through supply chain issues. Obviously, some product held up in the fourth but what what are you guys do have a relatively small company in that large market. How have you been able to manage the supply chain given that you're and manufacturer in China.
What have you guys done that's allowed you to execute so well.
So I think we've.
There's really two big drivers that we've been focused on this space is just nurturing relationships that they've had with some of our manufacturers that.
That would be live for a very long time now.
Also with the tremendous growth that we've seen has really become a very important.
Business for these for these manufacturers, which has placed us in a favorable position in terms of manufacturing space. So that's the one side of it and then in terms of just the actual deliveries.
Am I getting stuck onto the water.
Yes.
It is being very well positioned for the current situation that we now see with Covid.
Got a solid supply chain actually in Asia, and with the limited travel that one can do now into Asia that has really benefited us. So we drive a lot of all of our supply chain globally directly inside Asia with people that are focused on getting our inventory from a manufacturer.
Two one of our customers around the world and I think that has really been a great strength for us in these difficult times.
Okay. So these arent just regular brokers that anybody is using an R.
These are people not having to react.
These people are focusing on 'twenty.
24 hours a day.
Okay. That's great second question.
A higher level question.
Recent interviews with manufacturers of the E. Bikes have said that you know they've got their products are sold out for the next you know they've got two years of capacity sold through the channel are ready, they're just waiting to fulfill over time.
So that market has grown dramatically and as I think about that market I think about the different types of people that would use that as a lot of you know that.
Allow us to enter the market you know kids older people people that historically arent. Your you know 25 year old biker bombing down the mountain.
So now if that's if that's if that is correct.
Expanding into that market, but I would think that those people are more interested in your types of products innovative safety first kinds of products. What have you seen any is that correct and what is what are E bikes doing to the general MTBE market.
No absolutely I mean, there's obviously, there's different segments and the E mountain biking marketplace.
And Oh, sorry on the E bike marketplace E Mountain biking is a very very strong segment.
And that has definitely benefited us in terms of consumer demand because we do sell products at all are protected if he's got a lot of new entrants that are only able to ready to enter this market.
And because of the fact that these are electrified bicycles. So they get to two really experienced some things that they never would have experienced if it was not an E bike if it was a general bicycle.
And that has really benefited us because these are the kinds of people.
Either the gas being borne by parents for youngsters that are getting on onto these bikes.
The less capable maybe slightly older people that have now gained access to two cycling is a sport and can get to see some great places and potentially some really dangerous places actually.
They are obviously very concerned about.
Getting back to work on Monday.
So the people and the lead line of protection and particularly the body armor decision. We've seen body armor demand I believe that he bought E Mountain biking market has has been one of the drivers.
Around that a surgeon demand.
We see them and we do have products. Some products that we have now started labeling is a very specific T. E mountain backing that the vast majority of our body armor is absolutely terrific full E Mountain bike rider, which is great news, because we actually have the products really onsite.
To sell to these people.
And that has certainly benefited us.
Okay Fantastic. So thank you and best of luck in the Q4 season.
Okay.
Thanks, very much Chris.
Our next question is from Christopher Muller with a private Investor. Please proceed with your question.
Yes, Hi, Sean Congrats to you and the team on the continued success.
Thanks, very much Chris nice to hear from you.
I have maybe three questions for you today first of all just a follow up on the supply chain. Besides me container delays to the U S are you seeing any challenges there whether it be factory shutdowns and material shortages are such that.
That would impact your product availability or a growth plan over the next few quarters.
Yeah.
We haven't seen anything.
Jay in terms of raw material shortages and some of the factories that we work with them Havent had temporary.
Electrical shutdowns, but those are short term.
Most of the kind of slowdown in manufacturing has been very short term in nature and I don't see it affecting them all.
Our ability to supply over the next several quarters.
That's that's great to hear.
And last we spoke you were just about to begin shipping out of greenhouse how how is that progressing is that is that all scaled up now in Q4.
So it's great news, we all we are shifting out of Reno now are not shipping anything out of Santa Teresa anymore Arena is now fully operational and we've been able to get some some really good warehouse specific specialized warehouse staff and rina.
And we all we really are seeing and experiencing a grapes.
The increase in our ability to fulfill orders quickly are the Reno warehouse LSI fully operational and going really guns, a blazing out of there. So that's great news.
A quick great news indeed.
Any any significant changes in distributors or ecommerce retailers this year.
Are you still finding expanded reach particularly in the more mainstream.
Alrighty market on the mountain bike side.
Absolutely I think thats been something which has also been a key driver of our growth.
Over the last several quarters. It was just our relationships both with some of our e-commerce.
Our dealers are now dealing with directly and you know, we really have been able to reach a much wider rada audience not only limited by what you know where the distributor is a strength.
Actually a lot closer to the end consumer and I think that's part of the reason why we've seen some some great demand for our products just getting that Wednesday velocity.
The end consumer, but still selling obviously through our dealer partners.
Yeah.
Okay.
And I noticed the the Moto and the bike net prices were consolidated into a single line this year.
Besides the obvious benefits that maybe have reduced inventory and a greater selection of colors for both markets were there any other considerations are factors around that change.
Okay.
Sorry could you could you repeat that I didnt fully understand that so could you just repeat the E.
Yes, the Moto and E bike neck brace lines looked like they were consolidated into a single single line. This year you no longer have designations on the on the two different products and I was just wondering what factors went into into that change and what are your expectations from that yes.
Yes.
I think that you know there's a couple of things that obviously came in to that.
I mean I think the biggest reason is just that there's very little differentiation actually between those two product lines. I mean, you know we wanted to be authentic in terms of our product offerings. So that's the one the one angle.
And then the other side of it is just in terms of the manufacturing efficiency perspective, we didnt feel that having separate lines was going to change anything in terms of consumer demand. It certainly hasn't and also it obviously makes it a lot more effective from a manufacturing perspective.
With demand, increasing we took the opportunity to consolidate things just a little bit.
And I think that's going to work well for us.
Okay, all right well that's all the questions I had for you.
I just wanted to give a shout out to our design team on a very impressive 2022 lines.
Thanks, again, Sean I'm sure with up then.
Okay. Thanks, Craig Jetson Jetson.
Yeah.
Yeah.
Our next.
Our next question comes from Olivia Colombo, a private investor.
Okay.
Yeah.
Yeah.
How did you hear me okay.
Yes, I can hear you Hello, Olivia that that's perfect. Thank you very much yeah. Congratulations on this incredible Q3 report. What is also remarkable is this courtyard alone is 10% higher than your food sales in 2017. So I think this is quite an achievement.
I have three Tonight, so thanks Olivia.
Mike you know I like statistics.
[laughter].
My first question is like most of the outdoor brands that have reported so far most of them have mentioned the slippage of some of their Q3 products into the next quarter. I guess this is the same for you is it possible for you to potentially quantify it eventually person touch wise is it.
10% 15, 20% you think.
I think what I would say is that we probably lost a good 20% of sales in the U S. Because of the lag in probably about 10% of sales I'm going to say lost I mean am I mean, we didn't lose them, there's still going to deliver the inventory because it's all on backorder in probably about 10% on the international side I think we're going to see falling now into Q4.
Really started shifting a lot of that out of them out of the U S. A warehouse because that stock has now arrived and is now moving through the network.
So about 20% in the U S and about 10% are international.
Okay perfect. Thank.
Thank you very much and the next question is regarding the professional fees, which were up 182% during the quarter due to an increase in product liability litigation settlement. I guess this is probably a one time event and that should not repeat in the coming quarters.
Yes that is correct. So there was a settlement of one of our trials.
And we should not see that certainly does not have any other areas.
Areas, where we all litigating now we can expect any settlement like that.
So in Q4, it's definitely do not expect to see anything like that.
There are no further draws its come up.
That's perfect Yeah, we all hope so.
And then my final question would be on your U a sustainability line that youre launching the 2022 I would just like to know how long have you been working on this line and what has been the market reception to something that I think is incredibly innovative and it looks very.
Cool.
Yeah.
Especially thank you Olivia and we've been working on it for about three years now.
Just planning how are we going to release it of course I mean.
At the moment it is and he's a few products that are in the line.
We hope to we obviously have to grow that.
That line of products and just become a more sustainable and it's something that we that we do take very seriously at least we realize that our responsibility towards our sustainability and becoming more eco friendly so step by step we are working.
Working on increasing that are talking about three years to get to where we all but of course now.
We do have the technology, we have the capabilities. We have the supply is vital to the extend this I mean, all planning on expanding at a quite quite quickly.
Now I have food eco packaging. So all of the packaging that was anything around the world now and is a fully eco friendly using things like soy ink.
And products that are that are not harmful to the environment. So that is the that'd be linking all of this is about two years now and that's been a huge change for us of course, a lot has to be done in order to put that in place, but we are.
Relieved that we are not in a position maybe you can say that all of our packaging is eco friendly.
Do you think this eco packaging is a is a higher cost for you or does it lower your costs on the packaging in general.
We're talking packaging packaging in general yes.
I mean it.
Yeah.
So it's it's it's it's pretty much breakeven there might be a slight in some areas it might be a slight increase.
And costs, but generally when you guys on the economy and you know you do see some cost increases, but then things become colors.
There's less you limit the distributed materials, which English decrease your cost side of it it's pretty much breakeven maybe slightly higher in some areas.
That's perfect.
We're talking about.
If you'll.
Please go on to something.
Oh, no I was going to say that if you're talking about on the on the product side, what's the sustainable materials that we're using our products like those are a bit more expensive, but in our consumers. Some consumers are willing to pay a bit of a premium.
Knowing that they are using our materials.
Cutting age like that.
Great.
Okay. So thank you very much for taking my questions today and congratulations once more on the great work and looking forward for the rest of the year.
Yeah.
Thank you Olivia it's always a pleasure to hearing from you.
We have reached the end of the question and answer session I'd now like to turn the call back over to Sean Mcdonald's for closing comments.
Thank you all for joining US today, we look forward to speaking with you about our 2021 year over year performance in the spring.
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This concludes today's conference you may disconnect your lines at this time and have a wonderful day.
Okay.
Okay.