Q2 2024 Leatt Corp Earnings Call
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I'm MacDonald.
Eric Clemens, President, Fundamentalist, Roger Marvin, PM, Mr Karatillou, Michael Dombrowski, Administrative Director Thank you all.
Unknown Speaker: Christopher Jarrous, Unknown Attendee, Christopher Leatt, Unknown Executive, Christopher Leatt,
Speaker Change: Greetings. Welcome to Leatt Corporation's second quarter 2024 results conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation.
Speaker Change: If anyone today should require operator assistance during the call, please press star zero from your telephone keypad.
Unknown Speaker: Greetings, and welcome to Leatt Corporation's second quarter 2024 results conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone today should require operator assistance during the call, please press star zero from your telephone keypad. Please note, the conference is being recorded. At this time, I'll turn the conference over to Michael Mason from Investor Relations. Michael, you may now begin.
Speaker Change: Please note the conference is being recorded.
Speaker Change: At this time, I'll turn the conference over to Michael Mason with Investor Relations. Michael, you may now begin.
Michael Mason: Good morning, and welcome to the Leatt Corporation Investor Conference call to discuss the financial results for the second quarter of 2024. The company issued a press release today, Friday, August 9, 2024, at 8 a.m. Eastern, and filed its report with the SEC. The press release is posted on Leatt's website at www.leatt-corp.com.
Michael Mason: Thanks Rob. Good morning and welcome to the Leatt Corporation Investor Conference call to discuss the financial results for the second quarter of 2024.
Speaker Change: The company issued a press release today, Friday, August 9, 2024, at 8 a.m. Eastern, and filed its report with the FCC.
Speaker Change: The press release is posted on Leatt's website at leatt-corp.com.
Michael Mason: This call is being broadcast live and may be 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 844-512-2921 or 412-317-6671 for international calls. The replay PIN number is 13748296.
Speaker Change: This call is being broadcast live and may be accessed on the company's website.
Speaker Change: An audio replay of this call will be available for seven days and may be accessed from North America by calling 844-512-2921 or 412-317-6671 for international callers.
Speaker Change: The replay PIN number is 13748296.
Michael Mason: A replay of the webcast will be available immediately following this call and will continue for seven days. Actual results could differ materially from those discussed in this call. Leatt 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 9, 2024. 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 MacDonald, CEO of Leatt Corporation. Good afternoon to you in Cape Town, Sean.
Speaker Change: A replay of the webcast will be available immediately following this call and will continue for seven days.
Speaker Change: Certain statements in this conference call may constitute forward-looking statements. Actual results could differ materially from those discussed in this call.
Speaker Change: Leatt 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 9, 2024.
Speaker Change: 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 MacDonald, CEO of Leatt Corporation. Good afternoon to you in Cape Town, Sean.
Sean MacDonald: Good morning, Mike, and thank you all for joining us today. I am pleased to say that we are beginning to see progress on a return to sustainable growth. Sales at the consumer and dealer direct levels have started to falter through to ordering from our distributors, and we have started to see a level of growth in some key product categories. While there are still some challenging industry and economic headwinds globally, as inventory is digested, we believe that this promising uptick in ordering patterns will filter through to our results in due course and is a trend that will contribute to revenue growth over the next few periods and beyond. Total global revenues for the second quarter were $10 million, an 18% decrease from last year's second quarter.
Sean MacDonald: Good morning, Mike, and thank you all for joining us today.
Sean MacDonald: I am pleased to say that we are beginning to see progress in a return to sustainable growth. Sales at the consumer and dealer direct levels have started to falter through to ordering from our distributors, and we have started to see a level of growth in some key product categories.
Sean MacDonald: While there are still some challenging industry and economic headwinds globally, as inventory is digested, we believe that this promising uptick in ordering patterns will falter through to our results in due course, and is a trend that will contribute to revenue growth over the next few periods and beyond.
Sean MacDonald: Total global revenues for the second quarter were $10 million and 18% decrease from last year's second quarter. US sales increased to $3.73 million.
Sean MacDonald: U.S. sales increased to $3.73 million, and international sales decreased to $6.34 million. Consumer direct sales increased by 19% and dealer direct sales increased by 14%, which we believe is a testament to strong brand recognition and the success of our drive to reach a wider group of consumers globally. leatt.com and leatt.co.za, our consumer direct platforms, continue to display strong sales exceeding our expectations. While sales to our global distributors decreased by 33%, as distributors continue to constrain ordering and manage industry-wide stocking dynamics, we expect that current ordering patterns and the addition of some promising new distributor partnerships in the United Kingdom, Europe, and emerging markets will filter through to our results over the next several quarters. The Pfizer push to invest in long-term growth 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.
Sean MacDonald: and international sales decreased.
Sean MacDonald: to $6.34 million. Consumer direct sales increased by 19% and dealer direct sales increased by 14%, which we believe is a testament to strong brand recognition and the success of our drive to reach a wider group of consumers globally.
Sean MacDonald: Leatt.com and Leatt.co.za our consumer direct platforms continue to display strong sales exceeding our expectations.
Sean MacDonald: While sales to our global distributors decreased by 33 percent, as distributors continue to constrain ordering and manage industry-wide stocking dynamics,
Sean MacDonald: We expect that current ordering patterns and the addition of some promising new distributor partnerships in the United Kingdom, Europe and emerging markets will filter through to our results over the next several quarters.
Sean MacDonald: The fight I pushed to invest in long-term growth, cash increased by $1.98 million to $13.33 million.
Sean MacDonald: with cash flows provided by operations of $2.99 million for the six months ended June 30th, 2024.
Sean MacDonald: Our liquidity continues to improve, and our team continues to manage working capital efficiently. On a year-to-date basis, despite the decrease in revenues and an increase in costs, we generated cash flows from operating activities of nearly $3 million as of June 30, 2024, reflecting the robust quality of our business model. At a product level, declines in helmet cells and our other products, parts, and accessories category were partially offset by increases in body armour cells and neck braces. Diving down a bit, it was particularly encouraging to see neck braces, body and limb protection, knee braces, and MTB apparel returning to growth on a global basis.
Sean MacDonald: Our liquidity continues to improve and our team continues to manage working capital efficiently.
Sean MacDonald: On a year-to-date basis, despite a decrease in revenues and an increase in costs, we generated cash flows from operating activities of nearly $3 million as of June 30, 2024, reflecting the robust quality of our business model.
Sean MacDonald: At a product level, declines in helmet sales and our other products, parts and accessories category were partially offset by increases in body armour sales and neck braces.
Sean MacDonald: Drilling down a bit, it was particularly encouraging to see neck brace, body and limb protection, knee braces and MTB apparel returning to growth on a global basis.
Sean MacDonald: We also continue to ship promising ADV apparel orders during the quarter and look forward to delivering a pipeline of innovative product categories to the growing ADV market over the next several quarters. We expect to start shipments later this year of a new innovative product category for MTB line that was introduced at Eurobike 2024 last month. The new line boasts a portfolio of 52 top-level bicycle components, including handlebars, grips, and ultralight fins and pedals, ranging from medium to high price points. Top of the line products feature a ceramic coated magnesium alloy for the main component bodies and titanium hardware. This construction technology makes our pedals and stems outstandingly light and impeccably durable.
Sean MacDonald: We also continue to ship promising ADV apparel orders during the quarter and look forward to delivering a pipeline of innovative product categories to the growing ADV market over the next several quarters.
Michael Mason: Christopher Jarrous, Unknown Attendee, Michael Mason, Christopher Jarrous, Unknown Attendee, Michael Mason, Sean MacDonald, Welcome to Leatt Corporation, 2nd quarter of 2024 Results Conference Call. At this time, I'll turn the conference over to Michael Mason with Investor Relations. Michael, you may now begin. Thanks, Rob. Good morning and welcome to the Leatt Corporation Investor Conference Call to discuss the financial results for the 2nd quarter of 2024. The company issued a press release today, Friday, August 9, 2024, at 8 a.m. Eastern, and fireworks report with the SEC.
Sean MacDonald: We expect to start shipments later this year of a new innovative product category for our MTB line that was introduced at Eurobike 2024 last month.
Sean MacDonald: The new line boasts a portfolio of 52 top-level bicycle components, including handlebars, grips and ultralight stems and pedals.
Sean MacDonald: Ranging from medium to high price point items.
Sean MacDonald: Top of the line products feature a ceramic coated magnesium alloy for the main component bodies and titanium hardware. This construction technology makes our pedals and stems outstandingly light.
Sean MacDonald: Now I will turn to more details on sales of our product categories for the second quarter compared to 2023. Bells of a flagship neck brace were $590,000, a 9% increase over the second quarter of 2024, primarily due to a 10% increase in the volume of neck braces sold. Neck braces made up 6% of our revenues for the quarter. Our body armor products are comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots, and mountain biking shoes. While your ARMA revenues for the 2024 second quarter were $5.58 million, a 4% increase over last year, the increase was primarily due to a 45% increase in upper body and limb protection cells.
Sean MacDonald: and impeccably durable.
Sean MacDonald: Now I will turn to more details on sales of our product categories for the second quarter compared to 2023.
Speaker Change: Wells of our flagship neck brace were $590,000, a 9% increase over the second quarter of 2024, primarily due to a 10% increase in the volume of neck braces sold. Neck braces made up 6% of our revenues for the quarter.
Speaker Change: Our body armor products are comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots and mountain biking shoes.
Speaker Change: While your ARMA revenues for the 2024 second quarter were $5.58 million, a 4% increase over last year.
Speaker Change: The increase was primarily due to a 45% increase in upper body and limb protection cells.
Michael Mason: The press release is posted on Leatt's website at leatt-corp.com. This call is being broadcast live and may be accessed on the company's website. An audio replay of this call will be available for 7 days and may be accessed from North America by calling 844-512-2921 or 412-317-6671 for international callers. The replay pin number is 137-48296. A replay of the webcast will be available immediately following this call and will continue for 7 days.
Speaker Change: It was partially offset by a 49% decrease in the volume of footwear, comprised of motorcycle boots and mountain biking shoes, sold during the quarter, as our distribution partners continue to digest inventory.
Sean MacDonald: It was partially offset by a 49% decrease in the volume of footwear, comprised of motorcycle boots and mountain biking shoes sold during the quarter, as our distribution partners continue to digest inventory. Body Armour products made up 55% of our revenues for the quarter. Home sales were $1.43 million, a 59% decrease from last year.
Speaker Change: Body Armour products made up 55% of our revenues for the quarter.
Speaker Change: Home sales were $1.43 million, a 59% decrease from last year.
Sean MacDonald: This was primarily attributed to a 64% decrease in the volume of motor helmets sold compared to an exceptionally strong second quarter of 2023, when helmet sales increased by 141% over the prior year. Again, our distributors continue to adjust ordering patterns as inventory levels stabilize. Under the sales accounted for 14% of our revenues for the quarter. Our Other Products, Parts, and Accessories category is comprised of goggles, hydration bags, and apparel items including jerseys, pants, shorts, and jackets, as well as off-the-market support items.
Speaker Change: Primarily attributed to a 64% decrease in the volume of motor helmet sold compared to an exceptionally strong second quarter of 2023 when helmet sales increased by 141% over the prior year.
Michael Mason: Certain statements in this conference call may constitute forward-looking statements. Actual results could differ materially from those discussed in this call. Leatt Corporation does not undertake any obligations, updates such statements made in this call. Please refer to the complete cautionary statement regarding forward-looking statements in today's press release date at August 9, 2024.
Speaker Change: Again, all distributors continue to adjust ordering patterns as inventory levels stabilise.
Speaker Change: Our sales accounted for 14% of our revenues for the quarter.
Speaker Change: Our other products, parts and accessories category is comprised of goggles, hydration bags and apparel items, including jerseys, pants, shorts and jackets, as well as aftermarket support items.
Unknown Executive: The company will make a presentation on the quarterly results and then open the call to questions.
Sean MacDonald: Revenues were $2.47 million, a 15% decrease due primarily to a 50% decrease in sales of motor technical apparel designed for motorcycle use. However, sales of NTB technical apparel increased by 63%, and we continue to ship orders of ADB technical apparel to our global customers. Overall, our inventory levels continue to stabilize. They decreased by 5.65 million dollars, or 28 percent, in the last six months as we continue to look for opportunities to turn over slower moving inventory.
Sean MacDonald: I would now like to turn the call over to Mr. Sean McDonald, CEO of Leatt Corporation. Good afternoon to you and Cape Townsend. Good morning, Mike, and thank you all for joining us today.
Speaker Change: Revenues were $2.47 million, a 15% decrease due primarily to a 50% decrease in sales of motor technical apparel designed for motorcycle use.
Sean MacDonald: I am pleased to say that we are beginning to see progress in a return to sustainable growth. Sales at the consumer and dealer direct levels have started to filter through to ordering from our distributors, and we have started to see a level of growth in some key product categories. While there are still some challenging industry and economic headwinds globally, as the inventory is digested, we believe that this promising uptick in ordering patterns will filter through to our results in due course. And as a trend that will contribute to revenue growth over the next few periods and beyond.
Speaker Change: Sales of NTB technical apparel increased by 63% and we continue to shift orders of ADB technical apparel to our global customers.
Speaker Change: Overall, our inventory levels continue to stabilize. They decreased by 5.65 million dollars or 28 percent in the last six months as we continue to look for opportunities to turn over slower moving inventory.
Sean MacDonald: Now I will turn to more financial details for the second quarter of 2024 compared to 2023. Total revenues for the second quarter were $10 million, down by 18% compared to $12.35 million for the second quarter of 2023. The decrease in worldwide revenues is attributable to a $2 million decrease in helmet sales and a $440,000 decrease in other products, parts, and accessories sales, partially offset by a $210,000 increase in body on the saddle and $50,000 increase in net price sales.
Speaker Change: Now I will turn to more financial details for the second quarter of 2024 compared to 2023.
Sean MacDonald: Total global revenues for the second quarter worth $10 million and 18% decrease from last year's second quarter. US sales increased to $3.73 million and international sales decreased to $6.34 million. Consumer direct sales increased from 19% and dealer direct sales increased by 14%. Which we believe is a testament to strong brand recognition and a success of our drive to reach a wider group of consumers globally. Leatt have come and leatt of CO.va out consumer direct platforms continue to display strong sales, exceeding our expectations.
Speaker Change: Total revenues for the second quarter were $10 million, down by 18%, compared to $12.35 million for the second quarter of 2023.
Speaker Change: The decrease in worldwide revenues is attributable to a $2 million decrease in helmet sales and a $440,000 decrease in other products parts and accessory sales that were partially offset by a $210,000 increase in body armor sales.
Sean MacDonald: Lots from operations for the second quarter of 2024 were $1.93 million, down by 186% compared to income of $1.31 million for the second quarter of 2023. Net loss for the second quarter of 2024 was $1 million, or $0.17 per basic and $0.16 per diluted share, down by 236% as compared to net income of $776,000 or $0.13 per basic and $0.12 per diluted share for the second quarter of 2023.
Speaker Change: and the $50,000 increase in net price sales.
Speaker Change: Lost from operations for the second quarter of 2024 was $1.13 million, down by 186% compared to income of $1.31 million for the second quarter of 2023.
Sean MacDonald: While sales time global distributors decreased by 33% as distributors continue to constrain ordering and manage industry-wide stocking dynamics, we expect that current ordering patterns and the addition of some promising new distributor partnerships in the United Kingdom, Europe and emerging markets will filter through to our results over the next several quarters. The five are pushed to invest in long-term growth. Cash increased by $1.98 million to $13.33 million. With cash flows provided by operations of $2.99 million for the fixed month and the June 30th 2024.
Speaker Change: Net loss for the second quarter of 2024 was $1 million, or $0.17 per basic and $0.16 per diluted share, down by 236%, as compared to net income of $776,000, or $0.13 per basic and $0.12 per diluted share.
Sean MacDonald: Leatt continued to meet its working capital needs from cash on hand and internally generated cash flow from operations. In City June 2024, the company had cash and cash equivalents of $13.33 million and a current ratio of 9.6 to 1 compared to a current ratio of 6.3 to 1 at June 30th 2023.
Speaker Change: for the second quarter of 2023.
Lee: Leatt continued to meet his working capital needs from cash on hand and internally generated cash flow from operations.
Sean MacDonald: Our liquidity continues to improve and our team continues to manage working capital efficiently. On a year-to-date basis, despite the decrease in revenues and an increase in costs, we generate a cash flow from operating activities of nearly $3 million as of June 30th 2024, reflecting the robust quality of our business model. At a product level, declines in helmet sales and our other products parts and accessories category were partially offset by increases in body on the cells and neck braces.
Speaker Change: At City June 2024, the company had cash and cash equivalents of $13.33 million and a current ratio of 9.6 to 1 compared to a current ratio of 6.3 to 1 at June 30th, 2023.
Sean MacDonald: Although they are still experiencing challenging industry and economic headwinds globally, inventory continues to be digested, participation remains strong, and ordering patterns continue to improve, and have started to filter through to our international distributors. We also continue to see encouraging growth trends at the dealer and consumer level as demand for Leatt products continues to be strong. We continue to invest heavily in consumer brand recognition and building out a high-performing team of sales and marketing professionals around the world.
Speaker Change: To summarise, although they are still from challenging industry and economic headwinds globally, inventory continues to be digested, participation remains strong and ordering patterns continue to improve and have started to filter through to our international distributors.
Speaker Change: We also continue to see encouraging growth trends at the dealer and consumer level, as the demand for Leatt products continues to be encouraging.
Sean MacDonald: Drilling some protection, knee braces and empty-be-a-parall returning to growth on a global basis. We also continue to shift promising ADV apparel orders during the quarter and look forward to delivering a pipeline of innovative product categories to the growing ADV market over the next several quarters. We expect to start shipment later this year of a new innovative product category for MCD line that was introduced at Eurobike 2024 last month. The new line, both support earlier, of 52 top level bicycle components, including handlebars, grips and ultra-like Miles.
Speaker Change: We continue to invest heavily in consumer brand recognition and building out a high-performing team of sales and marketing professionals around the world. Industry-wide turbulence presents an opportunity to grow the Leatt family by adding talented team members.
Sean MacDonald: Industry-wide turbulence presents an opportunity to grow the Leatt family by adding talented team members. Although these investments typically take time to add to our financial results, we believe that investing in brand momentum and building a great team remain cornerstones of our future growth plan. In conclusion, we look forward in the coming months to what we believe will be successful global launches of our product lines for Moto, MTB, and ADB as our team of developers and engineers continue to strive for product excellence.
Speaker Change: Although these investments typically take time to add to our financial results, we believe that investing in brand momentum and building a great team remain cornerstones of our future growth plans.
Speaker Change: In conclusion, we look forward in the coming months to what we believe will be successful global launches of our product lines for Moto, MTB and ADB as our team of developers and engineers continue to strive for product excellence.
Sean MacDonald: Ranging from medium to high price point items, top of the line products feature a ceramic coated magnesium alloy for the main component bodies and titanium hardware. This construction technology makes our pedals and spins outstandingly light and impeccably durable.
Sean MacDonald: As mentioned, the MTB lineup will include an exciting new category, top-level innovative bicycle components. We are all very enthusiastic about the future at Leatt; with a strong portfolio of innovative products in the market and in the pipeline, a multi-channel sales organization that is growing and developing, a passionate, cohesive team, and a robust balance sheet to fuel brand and revenue growth, we remain confident that we are well positioned for future growth and shareholder value.
Speaker Change: As mentioned, the MTB line-up will include an exciting new category, Top Level Innovative Bicycle Components.
Speaker Change: We are all very enthusiastic about the future at Leatt, with a strong portfolio of innovative products in the market and in the pipeline, a multi-channel sales organisation that is growing and developing, a passionate, cohesive team and a robust balance sheet to fuel brand and revenue growth.
Sean MacDonald: Now I will turn to more details on cells of our product categories for the second quarter compared to 2023. Cells of our flagship neck brace were $590,000 or 9% increase over the second quarter of 2024, primarily due to a 10% increase in the volume of neck braces sold, neck braces made up six percent of our revenues for the quarter. Our body on the product, some comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, knee and elbow guards, off road motorcycle boots and mountain biking shoes.
Speaker Change: We remain confident that we are well positioned for future growth and shareholder value.
Sean MacDonald: As always, we'd like to thank our entire Leatt family of dedicated employees, business partners, and team riders for their continued strong support. And with that, I'd like to turn the call over to you for some questions, operator. Thank you.
Speaker Change: As always, we'd like to thank our entire Leatt family of dedicated employees, business partners and team riders for their continued strong support.
Speaker Change: And with that, I'd like to turn the call over for some questions. Operator?
Unknown Speaker: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions; we're going to star one. Thank you. Thank you. Our first question is from the line of Christopher Mueller with a private investor.
Speaker Change: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Sean MacDonald: While you're on our revenues for the 2024 second quarter were $5.58 million, a full percent increase over last year. The increase was primarily due to a 45% increase in upper body and limb protection cells, but was partially offset by a 49% decrease in the volume of footwear, from products of motorcycle boots and mountain biking shoes sold during the quarter. As our distribution partners continued to digest inventory, body on the product made up 55% of our revenues for the quarter.
Speaker Change: You may press star two if you'd like to withdraw your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please, while we poll for questions. One's going to star one. Thank you.
Speaker Change: Thank you for watching.
Speaker Change: Thank you. Our first question is from the line of Christopher Muller with Private Investor. Please receive your questions.
Christopher Mueller: Hi Sean, hope you're doing well today.
Sean MacDonald: Hi Chris, nice to hear from you.
Sean MacDonald: Palmetallas were $1.43 million, a 59% decrease from last year, primarily attributed to a 54% decrease in the volume of motor home and soul, compared to an exceptionally strong second quarter of 2023, when helmet cells increased by 141% over the prior year. Again, our distributors continued to adjust ordering patterns, those inventory levels stabilized. On the cell, the count is from 14% of our revenues for the quarter. Our other products plots and accessories category is comprised of goggles, hydration bags and apparel items, including jerseys, pants, shorts, and jackets, as well as aftermarket support items.
Speaker Change: Hi Sean, hope you're doing well today.
Christopher Mueller: Good to speak with you. I just have a few questions today.
Speaker Change: Bye Chris, nice to hear from you.
Christopher Muller: Good to speak with you. Just a few questions today.
Speaker Change: Thank you.
Speaker Change: First, it looks like gross margins continue to be impacted a bit by some of the promotional efforts you're making to move older inventory.
Speaker Change: Of course, it's good to see inventories come down so significantly this year. But I guess I'm just wondering, now that we're moving toward the 2025 launches, how far along are we in this process? Is there still a significant volume of inventory subject to these promotions?
Christopher Mueller: First, gross margins continue to be impacted a bit by some of the promotional efforts you're making to move older inventory. Of course, it's good to see inventories come down so significantly this year. But I guess I'm just wondering, now that we're moving toward the 2025 launches, how far along are we in this process? Is there still a significant volume of inventory subject to the promotion?
Sean MacDonald: Revenues were $2.47 million, a 15% decrease, two primarily to a 50% decrease in cells of motor technical apparel designed for motorcycle use. Sales of MTB technical apparel increased by 63% and we continue to ship orders of ADB technical apparel to our global customers.
Sean MacDonald: Great question, Chris. Yes, we still have had some margin pressure on the promotions that we have looked to sell out some of our older inventory. And the short answer is that we are far down the line of selling out some of the inventory that has been a little bit slower moving. And, of course, with a new line coming in, as you correctly have noted, the strong margins that we should see on sales of those products will balance out nicely any future promotional activity that we might need to enter into.
Speaker Change: Great question Chris. Yes, we still have had some margin pressure for the promotions that we
Speaker Change: have looked to sell out some of our old inventory and the short answer is we are far down the line of selling out some of the inventory that has been a little bit slower moving.
Speaker Change: And of course, with a new line coming in, as you correctly have noted, you know, the strong margins that we should see on sales of those products will balance out nicely any future promotional activity that we might need to enter into.
Sean MacDonald: Overall, our inventory levels continue to stabilise, they decreased by $5.65 million or 28% in the last six months as we continue to look for opportunities to turn over slower moving inventory.
Sean MacDonald: But, as I said, we are far down the line. We have done some pretty aggressive deals over the last two quarters in Q1 and Q2 to move that inventory and to make room really for the 25 products that need to come in. But I feel confident that margins are going to improve, especially with the new products coming in. This is the balancing act that we are currently facing, selling out some of the older inventory to make room for the new inventory, which has improved margins.
Speaker Change: But as I said, we are far down the line.
Speaker Change: Pretty aggressive deals over the last two quarters in Q1 and Q2 to move that inventory and to make room really
Sean MacDonald: Now I will turn to more financial details for the quarter of 2024, compared to 2023. Circle revenues for the second quarter were $10 million, down by 18% compared to $12.35 million for the second quarter of 2023. The decrease in worldwide revenues is attributable to a $2 million increase in helmet cells, and a $440,000 decrease in other products parts and accessory cells that were partially offset by a $210,000 increase in body armor cells and a $50,000 increase in neck brace cells.
Speaker Change: for the 24th product that needs to come in
Speaker Change: I feel confident that margins are going to improve, especially with the new products coming in. This is the balancing act that we currently are facing, selling out some of the old inventory to make room for the new inventory, which has got improved margins.
Christopher Mueller: And second, you mentioned in your remarks some weakness on the moto side, specifically helmets and apparel. Is this still a hangover from some of the distributor consolidation that's been going on in the US? Or are there other factors in play there?
Speaker Change: Great. And second, you mentioned in your remarks some weakness on the Modo side.
Sean MacDonald: Lots from operations for the second quarter of 2024 was $1.3 million down by 186%, compared to income of $1.3 million, $31 million for the second quarter of 2023. Net loss for the second quarter of 2024 was $1 million, or $17 million for basic and $16.3 million down by 236%, compared to income of $776,000 or $13.3 million per basic and $12.3 million for the second quarter of 2023. Let's continue to meet his working capital needs from cash on hand and internally to generate a cash worth of operations. At 50 June 2024, the company has cash and cash equivalents of $13.3 million and a current ratio of $9.6 to $1, compared to a current ratio of $6.3 to $1 at June 3, 2023.
Sean MacDonald: Yeah, I think it's still a hangover really from the distribution pressure that has been in Europe. There's a bit of consolidation that has happened as well.
Speaker Change: Yeah, I think it's still a hangover really from the distribution.
Speaker Change: Sharsha that has been in Europe .
Speaker Change: There's a bit of consolidation that has happened as well.
Sean MacDonald: But the main reason for this was really the inventory levels that existed at the time when these orders were placed. So the primary shipments that took place to international distributors just in terms of our ordering cycle during Q2 were moto-oriented, so apparel, boots, and helmets. And those orders were placed midway through last year. So the shipments that took place in Q2 this year were placed midway through last year just due to our ordering cycle.
Speaker Change: But the main reason for this is really the inventory levels that existed at the time when these orders were placed. So,
Speaker Change: The primary shipments that took place to our international distributors, just in terms of our ordering cycle during Q2, were moto orientated, so apparel, boots, helmets.
Speaker Change: And those orders were placed midway through last year. So the shipment that took place
Speaker Change: In Q2 this year, we were placed midway through last year, just due to our ordering cycle. And at that time, of course, you know, there was still a lot of pressure in the market in terms of inventory levels.
Sean MacDonald: At that time, of course, there was still a lot of pressure in the market in terms of inventory levels. What we really are excited about moving forward though is that the moto-orders that we see coming in now for 2025 products are looking a lot more encouraging. So I guess it's to be expected that as more inventory sells out at the dealer-consumer and ultimately distributor level, distributors need to order new inventory. And that's the trend that we're starting to see coming through now. And, of course, that should have an impact on the results in Q3 and Q4.
Sean MacDonald: To summarize, although they are thought from challenging industry and economic headwinds globally, inventory continues to be digested, but the situation remains strong, and ordering patterns continue to improve, and have started to filter through to our international distributors. We also continue to see encouraging growth trends at the dealer and consumer level, as the demand for leaf products continues to be encouraging. We continue to invest heavily in consumer brand recognition and building out a high performing team of sales and marketing professionals around the world.
Speaker Change: What we really are excited about moving forward, though, is that the promoter orders that we see coming in now, you know, for 2025 products are looking a lot more encouraging.
Speaker Change: Sorry
Speaker Change: I guess it's to be expected as more inventory sells out at the dealer-consumer and ultimately distributor level, distributors need to order new inventory and that's a trend that we're starting to see coming through now and of course that should have an impact on the results in Q3 and Q4.
Christopher Mueller: That's very encouraging. Switching maybe to the new components line that you debuted at Eurobike, is it your expectation that most of your global distributors will carry the full line in this first year? Or is this a case where you maybe have to demonstrate consumer demand in some select markets before you can attain full distribution?
Sean MacDonald: A industry white turbulence presents an opportunity to grow the lead family by having talented team members. Although these investments typically take time to add to our financial results, we believe that investing in brand momentum and building a great team remain cornerstones of our future growth plans.
Speaker Change: That's very encouraging.
Speaker Change: Switching maybe to the new components line that you've debuted at Eurobike.
Sean MacDonald: In conclusion, we look forward in the coming months to what we believe will be successful global launches of our product lines for motor, NTV and ADV. As our team of developers and engineers continue to strive for product excellence. As mentioned, the NTV lineup will include an exciting new category, top level innovators' bicycle components. We are all very enthusiastic about the future at least, with a strong portfolio of innovative products in the market and in the pipeline, a multi-channel sales organization that is growing and developing, a passionate, cohesive team, and a robust family sheet to fuel brand and revenue growth.
Sean MacDonald: I think the majority of our distributors are really excited about the line, and they will stock it. They might stock a conservative line, but they definitely will stock some of the line. And most of them will stock most of the line. They do see it as a unique line in terms of what we can offer to the market. And, of course, they've already got the dealers and consumer channels open to sell this line. So I think the majority of our distributors will place an initial order for the line, which should ship in the next few quarters. So it was very exciting.
Speaker Change: I think the majority of our distributors are really excited about the line and they will stock, they might stock a conservative line, but they definitely will stock some of the line.
Speaker Change: and most of them will stock most of the line. They do see it as a unique line in terms of what we can offer to the market and of course they've already got the dealers and end-consumer channels open to sell this line.
Speaker Change: So I think the majority of our distributors will place an initial order for the line which should ship in the next few quarters, so also very exciting.
Sean MacDonald: We remain confident that we are well positioned for future growth and share our value. As always, we'd like to thank our entire their family, our dedicated employees, business partners and team writers, for their continued strong support.
Christopher Mueller: Definitely, that's good to hear. You know, and of course, I appreciate that this new line spans a range of materials and price points. But maybe, broadly speaking, how does the margin profile on components compare to your current blended gross margin?
Speaker Change: Definitely, that's good to hear. You know, of course, I appreciate that this new line spans a range of materials and price points. But maybe broadly speaking, how does the margin profile on on components compared to your current blended gross margin?
Sean MacDonald: And with that, I'd like to general pull over for some questions. I'll break that. Thank you.
Unknown Executive: We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press star one on your telephone keypad and a confirmation to them indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your hands that before pressing the star keys. One moment please, we'll be pulled for questions. What's going to star one? Thank you.
Sean MacDonald: It's similar. There are some items, you know, where the price points in the market are very, very well established. And the costing at the manufacturers is also very well established. And you've got to have those lines, obviously, you have those products in your lineup in order to be a competitive components supplier and brand.
Speaker Change: It's similar, they are some items with a price point in the market.
Speaker Change: very, very well established, and the cost thing at the manufacturer is also very well established. And you've got to have those lines obviously, you're gonna have those products in your lineup in order to be a competitive components, supplier and brand.
Sean MacDonald: But the high-end stuff, the margins are relatively healthy. You know, I would say I don't foresee sales of components being a major contributor to any kind of decrease in margins, you know, in terms of Leatt's top line margin. So, of course, you also have to look at the net margin, which is after things like shipping and that type of thing. And you can ship a lot of components in a container. So that should certainly help margins on a net level.
Speaker Change: And at the high end stuff, the margins are relatively healthy. You know, I would say I don't foresee sales of components being a major contributor to any kind of decrease in margins, you know, on in terms of Leatt's top line margin.
Christopher Muller: Our first question is from the line of Christopher Muller with Private Investor. Please receive your question. Hi, Sean. Hope you're doing well today. I trust not to get from you. Good to speak with you.
Sean MacDonald: Just a few questions today. First, it looks like Gross margins continued to be impacted a bit by some of the promotional efforts you're making to move older inventory. Of course, it's good to see inventories come down so significantly this year, but I guess I'm just wondering, and now that we're moving toward the 2025 launches, how far along are we in this process? Is there still a significant volume of inventory subject to these promotions?
Speaker Change: So, of course, you know, you also have to look at the net margin, which is off the things like shipping and that type of thing. And you can ship a lot of components in a container. And so, so that should certainly help margins on a net level.
Christopher Mueller: Great. Well, thanks for the time, Sean. I'll chat again soon.
Unknown Speaker: Unknown Speaker, Unknown Speaker, Unknown Speaker
Speaker Change: Well, thanks for the time, Sean. Chat again soon.
Unknown Speaker: At this time, we've reached the end of our question and answer session, and I'm going to call over to Sean MacDonald for closing remarks.
Speaker Change: and Michael Mason.
Speaker Change: Thank you. At this time, we've reached the end of our question and answer session, and I'll turn the call over to Sean MacDonald for closing remarks.
Sean MacDonald: Great question, Chris. Yes, we still have had some margin pressure for the promotions that we have looked to sell out some of our older inventory. The short answer is we are far down the line of selling out some of the inventory that has been a little bit slower moving. Of course, with a new line coming in, as you correctly have noted, the strong margins that we should see on sell of those products will balance out nicely any future promotional activity that we might need to enter into.
Sean MacDonald: Thank you all for joining us today. We look forward to our next call to review the results of the 2024 third quarter.
Sean MacDonald: Thank you all for joining us today. We look forward to our next call to review the results of the 2024 third quarter.
Unknown Speaker: Thank you. This will conclude today's conference. We will disconnect your lines at this time. We thank you for your participation.
Speaker Change: Thank you. This will conclude today's conference. You may disconnect your lines at this time and we thank you for your participation.
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Sean MacDonald: But as I said, we are far down the line. We've done some pretty aggressive deals over the last two quarters and Q1 and Q2 to use that inventory and to make room for the 25 product that needs to come in. But I feel confident that margins are going to improve, especially with the new products coming in. This is the balancing aspect that we currently are facing, selling out some of the older inventory to make room for the new inventory, which has got improved margins.
Sean MacDonald: Great. And second, you mentioned in your remarks, some weakness on the moto side, specifically it sounded like helmets and apparel. Is this still hangover from some of the distributor consolidation that's been going on in the US or are there other factors in play there? Yeah, I think it's still hangover really from the distribution pressure that has been in Europe. There's a bit of consolidation that have happened as well. But the main reason for this is really the inventory levels that exist at the time when these orders were placed.
Sean MacDonald: So the primary shipments that took place during the national distributors just in terms of the ordering cycle during Q2 were moto orientated, so apparel or beach helmets. And those orders were placed midway through last year. So the shipments that took place in Q2 this year were placed midway through last year, just due to our ordering cycle. And at that time, of course, there was still a lot of pressure in the market in terms of inventory levels.
Sean MacDonald: What we really are excited about, moving forward though, is that the motel orders that we see coming in now for 20-25 products are looking a lot more encouraging. So I guess it's to be expected as more inventory cells out at the dealer consumer and ultimately distributor level distributors need to need to order new inventory. And that's the trade that we're starting to see coming through now. And of course, that should have an impact on the results in Q3 and Q4.
Sean MacDonald: Great, that's very encouraging. Switching maybe to the new components line that you've debuted at Eurobike, is it your expectation that most of your global distributors will stop the full line in this first year? Or is this the case where you maybe have to demonstrate consumer demand and select markets before you can obtain full distribution? I think the majority of other distributors are really excited about the line, and they will stop the conservative line, but they definitely will stop some of the line, and most of them will stop most of the line.
Sean MacDonald: Then you see it as a unique line in terms of what we can offer to the market, and of course they've already got the dealism and the end consumer channels open to sell this line. So I think the majority of other distributors will place an initial order for the line, which should shop in the next few quarters. So it was a very exciting.
Sean MacDonald: Definitely, that's good to hear. Of course, I appreciate that this new line spans a range of materials and price points, but maybe broadly speaking, how does the margin profile on components compare to your current blended growth margin? Yes, it's similar. There are some items with the price points in the market are very, very well established, and the cost things at the manufacturers are also very well established, and you've got to have those lines, obviously.
Sean MacDonald: You're going to have those products in your line up in order to be a competitive components supplier and brand, but the higher end stuff, the margins are relatively healthy. I don't foresee sales of components being a major contributor to any kind of decrease in margins in terms of the top-line margin. Of course, you also have to look at the net margin, which is after things like shipping, and that type of thing, and you can ship a lot of components in a container. So that should certainly help margins on the net level. Thanks for the time, Sean. Chad, again soon. Yes, look forward to it. Thank you.
Unknown Executive: At this time, we've reached into a question and answer session.
Sean MacDonald: That's going to call over to Sean McDonald for closing remarks. Thank you all for joining us today. We look forward to our next call to review the results of the 2024 third call.
Unknown Executive: Thank you. This will conclude today's conference. Let me disconnect your lines at this time.
Unknown Executive: We thank you for your participation.