Q2 2023 Leatt Corporation Earnings Call
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Greetings and welcome to the Liard Corporation's second quarter 2023 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 Michael Mason. Please go ahead.
Thanks Stacy.
Good morning, and welcome to the Lee at Corporation Investor Conference call to discuss the financial results for the second quarter 2023.
The company issued a press release today Thursday August 10, 2023 at eight a M. Eastern and also filed its report with the SEC.
The press release is located on <unk> website at Lee at Dash Corp Dotcom.
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 one eight worked for five one to two nine to one where one for 123176671 for international callers.
The replay pin number is 13740487, a replay of the webcast will be available immediately following this call and we will continue for seven days.
Certain statements in this conference call May constitute forward looking statements actual results could differ materially from those discussed in this call. We at 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 August 10.
2023.
The company will make a presentation on the quarterly results and then open the call to questions.
I'd now like to turn the call over to Mr. Sean Mcdonald CEO of <unk> Corporation. Good afternoon to you on Cape Town Sean.
Good morning, and thank you, Mike and thank you all for joining us today.
Compared to last year, the best year in our company's history in terms of revenue 2023 continues to be a challenging period for the entire milestone MTB industry.
Current industry headwinds remain centered around places cause it's stocking and sell through dynamics.
And that is displayed by international distribution partners, particularly on the MTBE side, all indicative of constraints purchasing and conservative dealer sentiment, which we believe will remain prevalent at high distributor and dealer post COVID-19 inventory levels all digested.
Oh and enthusiastic about the momentum that the <unk> brand continues to maintain globally and do you expect the early stages of a market recovery in domestic consumer styles to continue to appear in our results over the next several quarters.
Total global sales for the second quarter with $12 $35 million, a decrease of 31% from last year's second quarter.
Total global revenues for the first six months of 2023, or 20 543 million a decrease of 40% over the first six months of 2022, which was an exceptionally strong period for our company.
Revenues for the period increased by 55% compared to the 'twenty to 'twenty, one comparative period.
Net income off the cell so the 'twenty to 'twenty three second quarter was $776000, but do you have to net income of $1.8 million.
The decrease in revenues and resulting net income contraction came in the context of continued industrywide distributor and dealer adjustments to ordering patterns.
We do expect this trend to be temporary as inventory levels are digested and consumer participation in auto sports activities remains strong.
We are particularly infused by global sales of our homeless featuring our innovative.
60 degree tube on technology.
Overall, how much sales increased by 48% to $352 million over last year's second quarter and accounted for 29% of our total revenues for the second quarter of 2023.
Our award winning MTB helmet lineup was a key contributor to this growth generating a sales revenue increase of 116% led by initial shipments of our highly anticipated MTV 3.0 in euro helmet designed to reach a wider audience of elite amateur athletes.
The MTBE three zero, how much showcases unrivaled versatility and innovation with three levels of protection for any trial.
The three in one design means that it can be worn as a half shell.
But for lifestyle, writing in the <unk> with the addition of over the years also added coverage all the time.
This can be used on the whole chimp got maximum protection.
Our redesigned lots of helmets are generally I think strong demand with sales volumes, increasing 41% in the period.
We also remain energized by continued growth in consumer and actually direct sales in the U S and the moderate improvement in domestic dealer buying.
After the T and sentiment.
And inventory is digested in some key categories.
These dot com sites activity in consumer interest and continued to grow during the second quarter, increasing by 11% and now representing 7% of our global revenues on a year to date basis.
Other important highlights during the 2023 period include.
The improvement in our gross margins from 41% to 44% year to date as global than shipping costs continued to stabilize and an increase of $5 million to $12 million in cash and cash equivalents, which we see as a testament to the resilience of our business model and prioritization of cash and working capital.
Management at this time.
Cash flows generated from operations was $6 8 million for the first six months of 2023.
Current ratio of 625 to one at June 2023 up from $4 two five to one at 30 June 2022.
We will continue to carefully manage margins in order to maintain long term brand equity and expect to see global shipping and logistics costs continued to stabilize as COVID-19 pandemic supply chain constraints continue to improve.
International revenues for the second quarter were $893 million, a decrease of 36% compared to a very strong 2022 second quarter.
Sales in the U S decreased by $610000 or 15% compared to last year.
Although U S dealer dealers continued to manage some elevated stocking areas and order conservatively. We are encouraged by increased activity in our consumer direct channel and a market improvement in domestic dealer activity and buying sentiment.
Our global team of sales and brand managers covering key established and emerging markets continue to build a strong presence at the dealer and consumer level and to leverage fluid market conditions.
We are continuing to focus on building and refining our strong multichannel selling organization.
It has the ability to distribute to our exceptional hit to talk products to a much water audit audience.
Yeah.
Now turning to more details on sales of all product categories for the second quarter of 2023.
Sales of our flagship Nick price were $540000 accounting for 4% of our second quarter 2023 revenues.
The 9% decrease due primarily to decrease in the volume of Nick prices sold in the U S and abroad.
In the second quarter of 2022, net sales were $1 3 million and 7% of our revenues.
Our body armor products category is comprised of chest protectors full upper body protectors upper body protection vis best protectors knee braces knee and elbow Goss will find motorcycle boots and mountain biking shoes.
But on the sales were at $538 million accounting for 43% of our second quarter 2023 revenues.
A 43% decrease due primarily to a 60% decrease in the volume of upper body protection unit sold globally.
In the second quarter of 2022, what are you on the product sales were $95 million and 53% of our revenues.
As mentioned earlier held ourselves with 352 million accounting for 29% of our second quarter 2020 fee revenues.
48% increase due primarily to the strong increase in MTB home itself, which increased by 116%.
Italy, Moshe how much sales volumes increased by 141% due to strong demand for our redesigned motorhomes lineup.
The second quarter of 'twenty, two element cells with $2, three 8 million accounting for 13% of our revenues.
Our other product parts and accessories categories comparator.
Back in apparel, I think reading jerseys pants shorts and Jackups.
As well as aftermarket support items required primarily to replace worn or damaged Pos.
Through our global distribution network.
Sales in this category were $2 $91 million accounting for 24% over second quarter 2023 revenue of 59% decrease from last year. The decrease was due primarily to a 33% decrease in sales volumes of Mitel in MTBE technical apparel designed for off road motorcycle and mountain biking use respectively.
And the 2022 second quarter sales in this category with $4 seven 3 million accounting for 27% of our revenues.
Here is the headline financial summary for the second quarter of 2023.
Total revenues for the second quarter.
<unk> three $5 million down about three 1% compared to $17 $94 million for the second quarter of 2022.
The decrease in global revenues is attributable to a $4 $1 million decrease in body on myself of what $182 million decrease in other products parts and accessory sales.
And $770000 decrease in net sales that was partially offset by a 1.15 million dollar increase in home itself.
Despite the current global inflationary environment total operating costs remained relatively flat and only increased by 2% or $79000 to $4 million for the second quarter.
Income from operations for the second quarter was $131 billion down by 65% compared to $3 seven $3 million for the second quarter of 2022.
Net income for the second quarter was $776000 or 13 cents per basic and <unk> 12 cents per diluted share down 72% as compared to net income of $2 $73 million or 47 cents per basic and <unk> 44 cents per diluted share for the second quarter.
Me too.
One additional item to note we had a once off tax charge of approximately $200000 relating to our 2021 assessments of taxes payable in California that we received in April 2023, as a result of our move from California to Nevada, which impacted our effective tax sanction percentage and on net income.
For the second quarter, we expect that this was an extraordinary one so fight them.
We have continued to meet this working capital needs from cash on hand, and internally generated cash flow from operations.
At June 32023, the company had cash and cash equivalents of $12 million and a current ratio of 625 to one.
Looking ahead, while industry wide inventory stocking dynamics remain a challenge that have caused temporary adjustments in ordering patterns. We continue to focus heavily on areas that we believe will stimulate growth and profitability moving forward.
We are actively refining involving our multichannel sales organization in established and emerging markets, both in internal and partner level e-commerce capabilities and investing in product launch in brand building campaigns that leverage the tremendous momentum affiliate brand has achieved.
We will also continue to focus on financial resilience and cash flow through working capital.
Well as margin and the management of operational expense with investments in areas that we believe will drive future growth.
We continue to strive to develop exceptional product offerings to a wider erotic community. Our team is focused on gaining market share through product innovation and consumer brand management and many of our categories remain in their infancy.
And show great potential to meet the needs of variety of at all levels and contribute to exponential growth.
Although we do expect international distributor purchasing levels to remain constrained we are particularly excited about our entry into much water MTB and most of the markets in the second half of the yeah.
Our international distributors continued to evaluate dena purchasing patterns and they noticed that Iliad brands' momentum remains positive as the riding season gains traction.
We are looking forward to continued right up anticipation around the world. The launch of some exciting new market segments opportunities and a return to revenue growth as the inventory is a retention revenue growths as inventories suggests it and ordering patterns return to more robust levels that reflect the tremendous brand and company momentum that way.
Both over the last several years.
Of course, we will continue to monitor the current macroeconomic environment that influence of disposable income and revenue spending globally.
Including worldwide geopolitical risks the inflationary environment and the results of the currency fluctuations that impact consumer sentiment in order to adjust for any potential economic headwinds.
We believe that we have built a solid foundation and are in a very strong position to gain market share and deliver long term shareholder value moving forward.
As always we'd like to thank all entirely SME passionate dedicated employees business partners partners and team riders for their continued dedication and support.
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.
Confirmation tone will indicate your line is in the question queue you.
You May press Star two if you would 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.
First question comes from Christopher Butler Private Investor. Please go ahead.
Hi, Sean Hope you're doing well today.
Yeah.
Hey, Chris good Thanks, how are you.
I'm doing well thanks.
Just two questions for today.
First time I've seen an expanded presence in China. This year in terms of sponsorship Tradeshows social media.
Knowing that the Chinese market is one that some western brands has failed to penetrate in a meaningful way and I'm just curious to hear your thoughts around both the on the opportunity and your approach in China.
I think there's a there's a huge opportunity in China and as you say, we've got distribution partners now in China that are doing a great job in terms of marketing the leer brand to the domestic Chinese market, which obviously is quite unique in terms of the approach that is required. So we're looking at all channels. We're looking at.
On the digital side of things, you'll see a social media presence.
There's some really good and really strong digital sales and E. Commerce platforms. There that there is is trying to turn the heat up on a little bit.
So we're really going to use a multichannel approach that.
Selling through E Commerce partners and through the traditional <unk>.
And distribution channels.
And our brick and mortar dealers.
What we have done is engaged.
With some experts in the field in terms of getting into the Chinese market 93 of our distribution partners.
So we'd be working really really hard on that opportunity, which we think is is quite significant.
Okay. That's good to hear and then.
Secondly, I noticed that several of your distributors have launched a branded consumer websites recently.
Australia, Canada, Brazil et cetera.
Like to understand a bit more about your strategy. There I would imagine that this brings us closer to the end consumer probably gives you greater control of our brand messaging.
Might open up access to a wider range of Skus.
But I would also assume that there must be.
On balance then managing existing dealer relationships when you do that particularly those already selling online.
And just as well as the requirement that places on our distributor two to now manage a consumer facing business.
Any thoughts you can provide around around that would be helpful.
Oh, absolutely I think this is absolutely one of our key strategic decisions that we took.
With the current stocking environment, that's out there at the moment at the distributor level and also at the dealer level and we've realized that there are some some really good consumer demand for certain categories. The products will not actually able to get through to the consumer because of the constraints that are currently that all that all distribution.
And our dealers are facing and.
So they've had a lot of discussions with distributors about this when we decided to take the step exactly as you said not just to get a little closer to the end consumer.
Not necessarily that we want to control the way that all distributors operate or the way the deal is off right.
It's more that would be one that we wanted to make sure that there's a uniform yet presence online and the various different countries and that's the inventory that distributors have got is able to move through to the end consumer as soon as possible.
So it really is one way that we are supporting our distributors around the world by allowing them to build these these websites and of course, we have got.
Control over this we use.
James.
And everything will be uniform in terms of the Leer brand presence around the world of course, you know there's some linguistic things that we have to take care of them in certain countries in order to make sure that consumers that they can see the engagement and communication is it's great.
So we're working really really hard on that and I don't think this is one of the areas that are the current stocking situation has created an opportunity to.
To address because I'm I think although we are fully committed to multichannel sellers selling through distributors selling through dealers brick and mortar dealers ecommerce dealers.
We realize that there's a there's a growing number of consumers out there that still needs to get exposed to the brand.
And by going a little bit more direct supporting our dealers you obviously are in a position where they can.
Their dealers and a.
A lot of them are decided that a physician himself they'll do them. They will still take care of the dealer in the certain areas. So that the deal is still get some form of a kickback in order to make sure that they all still getting margin from from online sales, but the overall strategy as indicated that we need to get closer to the end consumer number one.
To them, it's very very important that the stuff that is currently out there and move through to the consumers that want it as soon as possible without eroding margin to match and of course, another three there's a big marketing angle here, because it's probably one of the most important areas that we see yet because of course.
You know we are marketing the leer brand around the world three out distributors with a little bit more control than what we've had before and and I think.
That has meant that the pie is just bigger for everybody. So dealers are in areas, where we have a really good web presence are all benefiting from the fact that people are walking into dealerships brick and mortar and actually asking for the liffe products. So that is obviously something that is really really important to create a great.
Our pool of consumers towards yet as a brand.
And if the distributors about the stock and the consumer is out there and this is something that we are quite quite committed.
Commit to do and we haven't seen much falloff from the brick and mortar dealers are they appreciate the situation that is currently you know in the market.
And they can see the benefits in terms of brand engagement.
Great. That's all very good to hear I appreciate the color.
That's all I had today.
I'm sorry.
Okay.
Thank you I would like to turn the floor back to Sean for closing remarks.
Yeah.
Thank you all for joining US today, we look forward to our next call to review the results of the 2023 third quarter.
Okay.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
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Yeah.
Okay.
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