Q3 2022 Leatt Corp Earnings Call
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Greetings and welcome Juliet Corporation third quarter 2022 results conference call. At this time all participants are in a listen only mode. A brief 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.
It is now my pleasure to introduce your host Mike Amazing Investor Relations. Dr. Liang Corporation. Please go ahead.
Thanks, Victoria.
Good morning, and welcome to the Lee at Corporation Investor Conference call to discuss the financial results for the third quarter 'twenty 'twenty to.
The company issued a press release today Wednesday November nine at eight a M. Eastern and also filed its report with the SEC.
Press release is posted on <unk> website at Www Dot Lee at Dash Corp Dot com.
This call is being broadcast live and maybe 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 184451 to two nine to one or one for 123176671 for international callers. The replay pin number is 1373.
3893.
A replay of the webcast will be available immediately following this call and we 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.
The 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 nine 2022.
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 Lear Corporation. Good afternoon to you in Capetown Sean.
Good morning, and thank you, Mike and thank you all for joining us today.
I am pleased to report that the third quarter of 2022 was our 18th consecutive quarter of year over year revenue right.
Total global revenues were $23 $3 million, an increase of 5% over the third quarter of last year.
Gross profit was $10 $1 million up 6% over 2021 and return on revenue was 17% with earnings per share of $1 90 yesterday.
This growth was particularly encouraging in light of the challenging comparative period.
Q3 of 2021 was an extraordinary quarter with a record breaking revenue and growth of pinpoint saving $3 million or 94%.
Considering some challenging macroeconomic and geopolitical headwinds, we believe that our growth in this environment is a testament to the solid momentum and market penetration.
<unk> brand and head to toe offering of exceptional has achieved over the past several years.
It also highlights our operational efficiencies, our resilience and our ability to control costs in these challenging inflationary times.
Yes.
The sales traction market penetration and brand development that we have achieved over the last several years.
Due to our team's ability to Nevada market.
And so innovative products to wider groups of consumers all over the world.
Yeah.
For the third quarter of 2022 operating expenses increased by 24% due largely to investments in sales and distribution channels marketing campaigns designed to build a global consumer brand and a return to trade shows and global consumer outreach travel.
The investments that we believe will fuel growth moving forward.
We continue to manage working capital needs through internally generated cash flow.
That said we are seeing these headwinds caused some moderation in the extraordinary consumer demand levels that the global maritime and MTBE industry has enjoyed over the last several quarters.
This doesn't change the overall strategy and solid fundamentals that have contributed to our success.
Consumers continue to write and participate heavily in outdoor activities and dealers continue to digest inventory and reorder.
These are trends that we expect to continue.
We were particularly pleased with our results in the U S for the quarter.
An area, where we continue to invest in our sales and distribution capacity.
U S revenues increased by $1 $1 million or 26% year over year, and some dealers began to restock inventory around the country.
Our Reno, Nevada warehouse is now fully up and running and well start to ship products to customers and consumers efficiently.
The U S sales team continues to grow substantially as we reach and say this is a wider group of Mitra and MTV dealers around the country.
Yeah.
International revenues for the quarter grew marginally by $42000 of an extraordinary 2021 third quarter as our customers look to digest inventory levels of our most established product categories.
Do we see 2021 international revenues grew by a staggering $10 $6 million to $8 million or 150%.
The employment of a team of global sales and marketing managers and some of our most important regions outside the U S continues to be an important focus area as we aim to grow our multichannel sales approach and leverage the tremendous momentum that the lead brand has gained over the last several years.
For the first nine months of 2022 global revenues was $65 $4 million up 33% over the same period of 2021 net income for the first nine months of the year grew to $11 million, a 26% increase over the same period of 2021.
He's a tremendous achievements since the first nine months of 2021, so revenue increasing by 91%.
On a year to date basis, we saw double digit revenue growth in all of our expanding product categories with the exception of Meg prices. Our most established product where sales decreased compared to an extraordinary nine months period in 2021, when Nick price sales increased by 74%.
Sales of much on MTBE helmets and offer a motorcycle boots were particularly encouraging.
Furthermore, because many of our innovative products are still in the infancy in terms of market share with significant opportunities for future games. We believe that there is a long runway for our products and that we are well positioned to deliver long term growth and shareholder value.
Now, let's turn to some cell details on individual product categories for the third quarter of 2022.
How long that sales were a highlight for the quarter increased by 88% to $4 $4 million, primarily due to the exceptional global demand for our redesigned much at home at line for off road motorcycle use.
Hello, <unk> sales were 19% of our total revenue for the quarter up from 11% a year ago.
Sales of other products parts and accessories category comprised of bubbles hydration bags and apparel items were also particularly encouraging sale.
Sales increased by 38% to $6 $5 million.
Comprising 28% of our revenues for the quarter.
The increase was primarily due to a 51% increase in the sales volume of our maritime MTB technical apparel designed for off road motorcycle and mountain biking use respectively.
Sales of our flagship <unk> price decreased by 30% to $1 $9 million as compared to the third quarter of 2021, which was once again, a particularly strong quarter for net process net price sales for the third quarter of 2021 had increased by 128% over the prior year period.
Yeah.
Oh body armor products comprised of chest protectors, and upper body protect us as well as knee braces knee and all the gods or Fred motorcycle boots, and mountain biking shoes totaled $10 five $2 million.
A decrease of 15% year over year. The decrease was mainly an upper body armour revenues, which were down 30%.
Two our strong third quarter of 2021.
Body on the product sales were 45% of our total revenues for the third quarter.
Here are the key financial results for the third quarter.
Total global revenues were $23 3 million, an increase of 5% over the third quarter last year.
Profit was $10 $1 million up 6% over 2021.
Income from operations decreased to $5 $5 million down about 5% compared to $5 $8 million with the third quarter of 2021.
Net income decreased to $4 1 million or 70 cents per basic and <unk> 65 cents per diluted share down, 5% compared to $4 $3 million or 79 cents per basic and <unk> 69 cents per diluted share in 2021.
To summarize where we stand year to date for 2022 global revenues were $65 $4 million up 33% over the same period of 2021 net income for the first nine months of the year grew to $11 million, a 26% increase over the same period of 2021.
And as of September 30 of 2022, we had cash and cash equivalents, a $4 $8 million and a current ratio of 3.121.
We continue to sustain revenue growth despite the challenging macroeconomic and geopolitical environment that has caused currency fluctuations and may impact consumer sentiment of customers around the world.
Well, we are seeing some moderation in global demand due to these headwinds our overall strategy remains on track.
Consumers continue to ride and participate heavily in outdoor activities and dealers continue to digest inventory and reorder diesel trains that we expect to continue.
Our U S operations are well stocked for growth and well positioned to reach a wider group of dealers and consumers internationally, we are aggressively growing our multichannel amount multichannel sales approach.
We remain very proud of our operational efficiencies, our resilience and our ability to control costs. Despite the challenging inflationary.
Environment we.
We believe in our team's ability to develop market and sell innovative products to wider groups of consumers all over the world.
Importantly, many of our innovative products are still in the infancy in terms of market share with significant opportunity for future games.
We believe that we are well positioned to deliver long term growth and shareholder value with solid fundamentals in place.
While we will continue to monitor worldwide geopolitical and macroeconomic risks we are focused on continuing the momentum that we have gained over the last several years, managing working capital and driving consumer demand.
As always we'd like to thank all retired Ed family, our dedicated employees business partners and team writers for the continued strong efforts and support in making this success. It now is.
With that I'd like to turn the call over for any questions operator.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
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One moment, please while we poll for questions.
Okay.
Our first question comes from Manuel Carly are private Investor. Please go ahead.
Yes, Hi, Ed.
Thanks for taking my questions.
Good afternoon.
Oh.
Hi.
And then my third question is on the gross profit margin. So the gross profit margin is up quarter over quarter. Despite I think there's some sort of mix.
This is mainly driven by lower transportation costs or what is explaining that.
Yes that is correct, we have seen a decrease in transportation cost him out of China to our customers around the world and particularly into the U S.
Which has resulted in him a better margins.
Okay and this is a trend that will continue into Q4, then I guess because shipping rates continue to trade lower.
That is correct last year, there was a huge spike in shipping cost.
We have seen the shipping market are suffering.
And and quite a positive fashion over the last few quarters, So I would expect them.
<unk>, our top line margins to carry on improving.
Okay. Good and then the second question is on the stock levels are.
Both that are multiple but they'll set like you have seen a quite so melissa company's worn on the high stock levels, especially for the bike segment on the other hand, you're less exposed to get to New York type of bike products.
Anyway, I would be happy to hear how you look at the stock levels.
Yeah sure. So I think I think obviously, you're you've got if you look at your stock levels in terms of the different product categories that you sell them and it's the same when it comes to bicycles themselves. Your very high end box Oh still end use demand is a lot of inbox them you know what it is that there's less demand in stock levels are very high.
In our case.
We have different categories of stock, we have different categories of product and we have products that carry over for several seasons like a lot of our protection a products and if you look at the kind of product mix that we have in our stock a lot of it is carryover product or were not too concerned about the aging of that stuff.
We can sell it over several seasons.
And of course, we need to be well stocked in order to able to to keep up with our demand levels.
So I would say that we're not overstocked I would say that would be all well stocked.
And our strong stock position to be able to supply the market.
You know as demand levels and hopefully increase over time.
And that's the same for them on the motor side and on the MTBE side. It very much is product and product category dependent.
And we feel that Oh, there, although there are always areas, we all going to have some closeouts without.
Any damage to the brand positioning them on the whole I'm, all stock is as well positioned and well aged.
So you don't you don't believe that's a high stock levels at your customers could be a reason for potentially materially softer sales level in Q4 or the beginning of next year.
And in terms of inventory levels at our customers are of course, I was talking particularly about the stock level that we have which are in three places.
South Africa, where we own the distribution the U S and then obviously China.
In terms of our customers and I would say that generally the industry and again, it's the same for our customers. It depends on the product categories. You know there is a there is inventory on the biotech side on the MTBE side.
That needs to be digested in the pipeline and.
And of course are we doing everything possible to support our customers as much as possible.
So that <unk> stands out as a brand and what we do see is that Alere is quite well positioned in terms of lids inventory at our customers, but of course, our customers have got in our various brands and there is quite a lot of inventory out there in the market.
Which will take some time to be digested.
So this is a timing thing.
And you know I do believe that this the inventory levels will decrease over time and our.
People are still riding and theres more riders than ever on both sides of our motor and and MTV I'm sorry, It will take some time for this inventory to be digested, but.
I'm positive about the future.
I think medium to long term you know when some of these inventory blockages are cleared.
We can return to strong growth levels.
Okay, and then back into that and then eight I think our motto was cyclical but on the other hand to the company cannot be competitive because you had only one product and some supply chain issues.
The unemployment rate remains also pretty high so would it be fair to say that.
You would expect a much less negative impact versus debt, that's Peter I'm, just trying to understand what the worst case outcome could be.
I think led us as a business.
Full hate to tire business in terms of product offering on the motor side on the MTBE side and of course, the more diversity you have in your annual revenues and the level of the risk.
When we were an enterprise company only.
If prices are a kind of optional product so there's a double.
Risk there of course, because people don't have to wear them. We of course encourage people to wear them because I mean, that's a potentially catastrophic accidents a if that's correct that can cause catastrophic results. If you do not weighing in there right.
If you're going to ride them you need to have a whole net you need to have something they love. All me you need to have mountain biking shoes, if you're writing them off with like you need to have what you need to have bubbles you need to have apparel.
Those are my pets, and I think that that puts us puts puts us in a much stronger position.
In terms of the diversification of our revenue streams.
To be able to manage the risks moving forward.
Yeah No. That's helpful. Maybe very final question is on the Beaumont that you'd see some moderation in global demands.
Could you maybe split it up a little bit the last couple of months or weeks just to give us an indication if you really start to see sales coming down.
Or is it just me.
No longer growth that you see but the kind of stabilization and then so then.
Yeah look I think it's.
As I've commented in the in the in the script earlier, you know I think we have to always put a moderation of demand into context, and I think it's in the context of the extraordinary levels of growth in demand that we've seen for the last several quarters.
You know with this explosion of up to activity participation.
Level I'm sorry.
I think there's certainly some moderation in the extraordinary demand levels.
But as I said I think people are still writing them you know this and when you're riding you need our products and so I think that's something which is very positive in the last few.
<unk> and months I mean, I you know I don't think it's gotten them Sydney hasn't gotten any worse than what we have been seeing him you know of course, yeah. They are.
All headwinds at all that all around.
An inflationary environment, which is and.
An impact, particularly on our currency fluctuations, we do sell a large portion of all our product in U S dollars are two countries.
That do not sell in U S dollars, so that means that currency fluctuations and particularly the strength of the U S. Dollar does effect.
Pricing levels of our products in countries outside of the U S and ER.
That's another factor that we that needs to be taken into account, but I certainly would say that it's a moderation we haven't seen demand kind of falling through the floor. We haven't seen anything drastic we've just seen a moderation in in terms of demand levels in relation to the extraordinary demand that we'd previously seen.
Okay, great. Thanks, a lot and good luck. Thank you very much for the questions I really appreciate it.
Okay.
There are no further questions at this time.
I would like to turn the floor back over to shove Mcdonald CEO for closing comments.
Thank you all for joining US today, we look forward to our next call to review the results of the 2022 fourth quarter.
Okay.
This concludes today's conference call you may need to come back to your lines. At this time. Thank you for your participation and have a great day.
Okay.
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