Q1 2025 Leatt Corp Earnings Call
Greetings and welcome to the Lee at corporations first quarter 2025 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.
Speaker Change: Would anyone 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 of Investor Relations. Thank you you may begin.
Archie: Thanks Archie.
Michael Mason: Good morning, and welcome to the Lear Corporation Investor Conference call to discuss the financial results for the first quarter 2025.
Michael Mason: The company issued a press release today Wednesday May 14, 2025 at eight a M Eastern and filed its report with the SEC.
Michael Mason: The press release is posted on <unk> website at Lee at Dash Corp Dot com.
Michael Mason: This call is being broadcast live and maybe accessed on the company's website.
Michael Mason: An audio replay of this call will be available for seven days and may be accessed from North America by calling 84451 to two nine to one or four one to 3176671 for international callers.
Michael Mason: Replay pin number is 13753843.
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: Lear Corporation does not undertake any obligation to update such statements made in this call.
Speaker Change: Please refer to the complete cautionary statement regarding forward looking statements in today's press release dated May 14 2025.
Sean Mcdonald: 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 and good afternoon to you in Cape Town Sean.
Mike: Thank you Mike and thank you all for joining us today.
Speaker Change: The first quarter of 2025 was a strong and encouraging start to the new yes.
Mike: Mobile revenues increased by $4 $75 million or 45% increase.
Speaker Change: Last year's first quarter.
Speaker Change: It was our third consecutive quarter of revenue growth and the second consecutive quarter of double digit.
Speaker Change: Gross profit was up 68% to $6 $72 million and gross profit as a percentage of sales increased.
Speaker Change: Increased from 38%.
Speaker Change: 244% compared to last year.
Speaker Change: Overall, we believe that we are making important progress and working our way back to a position of sustainable growth. After the contraction that we experienced a pause kindness.
Speaker Change: All of our major product categories grew by double digits compared to last year body armour revenues by 37%.
Speaker Change: Net revenues by 101 of the things other product parts and accessories sales by 33% and Nic by 21%.
How long of a sales were particularly strong as we continued to show strong Adv helmet orders and sales of our innovative and consumer focused lineup of MTV helmets were exceptionally strong.
Speaker Change: We continue to invest in design and innovation and are holding a promising pipeline of cutting edge products and IDB and all other categories that will fuel our growth in future.
International distributor sales increased by 79% are strong right.
Speaker Change: <unk> continues inventory is being digested and sell through unconstrained ordering pattern continued to improve.
Speaker Change: The uptick in orders from our international distributor.
Speaker Change: Turning to our revenues are trends that we believe will continue as all expanded long term distributor partner well ourselves over the next several quarters.
Speaker Change: Consumer direct sales increased by 14% domestic sales on our consumer facing channels in the U S continues to gain momentum and lead towards.
Speaker Change: Our consumer direct platform in South Africa continues to deliver very strong sales.
Speaker Change: Direct sales in the U S. That's a brick and mortar level contracted by 9% and U S.
Speaker Change: My tie in MTBE dealers continue to manage some elevated inventory levels and some short term turmoil.
Speaker Change: We expect to see an improvement over the next several quarters tend to self momentum as our reorganized U S sales force gains traction.
Speaker Change: Our revenue growth and momentum is being fueled by encouraging international sell through and re stocking dynamics and the important work of our distribution partners and ourselves and brand managers around the world.
Speaker Change: Reordering patterns continue to improve.
Ross: Thanks Ross.
Speaker Change: And yet.
Speaker Change: Now I'll go into more details on sales in all product categories for the first quarter of 2025 compared to 2024.
Speaker Change: Sales of our flagship Mcbride for $680000, a 21% increase attributable to a 21% increase in the volume of milk prices Soar next Brian sales represented 4% of our total revenues for the first quarter.
Speaker Change: Our body armor products are comprised of chance to kick the full body protectors knee braces.
Speaker Change: Well find motorcycle basin mountain biking shoes.
Speaker Change: Yeah on the revenues, but $6 7, billion% to 37% increase over 2024.
Speaker Change: The decrease was primarily the result of a 48% increase in revenues from sales of upper body and loan protection.
Speaker Change: What do you have a product represented 45% of our revenues for the quarter.
Speaker Change: How old the sales were $3 4 million a one.
101% increase over last year.
Speaker Change: The increase was primarily attributable to a 51% increase in sales of helmets coal mountain biking or for motorcycle and adventure monocoque riding unlocked yet how.
Speaker Change: How much revenues represented 22% of our total revenues for the quarter.
Speaker Change: Our other products parts and accessories category is comprised of goggles moderation bags and apparel items, including jerseys past short some jackass.
Speaker Change: Revenues were $4 $42 million, a 33% increase over last year.
Speaker Change: Sales of our Martha Apparel line, Inc decreased.
Speaker Change: Revenues during the quarter was primarily due to strong shipments of our Adv and MTV apparel lines for mountain biking, and eventual motorcycle riding.
Speaker Change: Oh Wow.
Speaker Change: Parts and accessories represented 29% of ourselves for the quarter.
Speaker Change: Oh, Okay. So our financial results in a bit more detail total revenues for the first quarter of 2025 were $15 three $7 million up about 45% compared to $10 six $1 million for the first quarter of 2024.
The increase in global revenues is primarily attributable to a $1.84 million increase in body on the cells and 171 billion, increasing home itself, a $1.09 billion increase in sales of other products parts and accessories and $120000 increase and make myself.
Speaker Change: Gross profit for the first quarter was $6 $17 million up by 68% compared to $4 million for the first quarter of 2024 and net income for the first quarter of 'twenty three 'twenty five was $1.12 million or 18th two basic and 17 cents.
Speaker Change: Per diluted share up by 237% as compared to a net loss of $820000 or 13 cents per basic and <unk> 15 cents.
Speaker Change: The diluted share for the first quarter of 2024.
Speaker Change: We have continued to meet this working capital need from cash on hand, and internally generated cash flow from operations. Our liquidity continued to improve as we continue to manage our working capital and invest for the future.
Speaker Change: Cash increased by $331000.
Speaker Change: Cash flows provided operations of $768000 and at March 31, 2025.
Speaker Change: The company had cash and cash equivalents of $12 $7 million and our current ratio at quarter end was 7.321.
Speaker Change: In conclusion, this was a strong and encouraging quarter I have recently returned from trips to China and the U S for meetings with our longtime vendors and U S sales and marketing teams.
Speaker Change: Everyone is excited about the future Amato Adv and MTV teams are making positive strides and it's really great to see our new team taking shape.
Speaker Change: Of course, we face some industry wide geopolitical and economic headwinds, particularly in the U S, where the trade war could impact inflation consumer confidence and potentially demand to some extent did.
Speaker Change: Did that and we are working closely with suppliers and customers to mitigate tariff risks and costs wherever possible.
Speaker Change: We are continually refining our global selling capabilities and are confident that the newest additions to our team will have a strong impact on our performance going forward.
Speaker Change: These investments can take time to make a significant impression on yourself, but.
Speaker Change: We believe our faith in building a great team.
Speaker Change: Cornerstone for our future growth.
Speaker Change: It was particularly encouraging to see all of our product categories body armor, Nick prices hold it and other products parts and accessories, so returning to double digit growth.
Speaker Change: Cutting edge product engineering and design.
Speaker Change: At the core of the expanding the brand.
Speaker Change: Expect working capital investment to grow in the coming period, that's the ordering patterns of the consumer dealer and distributor levels continued to show encouraging but we are confident that we have sufficient liquidity do you feel this expansion.
Speaker Change: Importantly inventory continues to be digested right of participation remains strong and ordering patterns are in roofing and filtering through to our revenue.
Speaker Change: These trends to continue.
In conclusion.
Speaker Change: We remain very enthusiastic about our future given our strong portfolio of innovative products in the market and in the pipeline and multichannel sales organization that continues to grow and develop and a robust balance sheet to fuel the brand expansion and revenue growth.
Speaker Change: <unk> confidence that we are well positioned for future growth and sustained shareholder value as always I'd like to thank all entirely a family our dedicated employees business partners and team brought us for their continued strong support with that I'd like to turn the call over for any questions operator.
Speaker Change: Thank you we will now be conducting a question and answer session. If he would 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 would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: The first question is from Olivier Colombo from a private investor. Please go ahead.
Olivier Colombo: Good afternoon, Sean.
Speaker Change: Hi, Olivia.
Speaker Change: Congrats on the very big Q1, it's nice to see double digit growth in all our category that.
Speaker Change: That you have and this is the best quarter since Q4 of 'twenty to 'twenty, two so quite an achievement.
Speaker Change: Okay.
Olivia: Thank you Olivia.
Olivia: I'm, sorry, I I have four questions for you.
Olivia: You just mentioned that you were recently in Asia to see your distributors.
Olivia: Can you tell us what their concerns and your concerns are regarding this trade war between China and the U S and how you plan to work together in the future has anything changed from the past.
Olivia: Yes, I think that's a good question and I think that's a very relevant question right now and of course, I think Oh windows all concerned.
Olivia: Regarding the pricing of stock that's going into the U S. If one adds on what the proposed tariffs all.
Olivia: And that they're concerned about what the landed cost will be in the U S and what impact that will have on our relationship moving forward and all manufacturing decisions. I mean, that's that's the basic concern that they have with quite committed to working with them.
Olivia: We've seen that tariffs have started to cool down just a little bit and it is a pause now.
Olivia: I don't think anybody feels that a tariff of 145%.
Olivia: <unk>, which has now been paused and it's sustainable and I think the tariffs are well listen I'll settle on zero it probably be somewhere in between currently they're sitting on about a 30%.
Olivia: And at that kind of a level, we can work with our suppliers.
Olivia: On pricing of course as far as possible.
Olivia: Can also work with our customers in the U S and of course as we.
Olivia: You know as we sit here right now.
Olivia: So there's a proportion of our total sales.
Olivia: Shipments into the U S is about 20%.
Olivia: And in terms of revenues its obviously higher.
Olivia: So if I ask you this is a very important market.
Olivia: And it's very important for us to be working with customers in the U S as well as with our vendors to make sure that we can get stuck into the U S and at the right price and also at.
Olivia: At the right time.
Olivia: I think one of the additional concerns of course effects.
Olivia: As terrorists at true North.
Olivia: We could face.
Olivia: Issues with shipments because a lot of companies that put shipments on post.
Olivia: And of course, now things are going to be opening up and we will probably see what I would call some congestion at ports and in terms of containers.
Olivia: But we're doing everything doing everything that we can now to make sure that we can shut them.
Olivia: Products into the U S. So we have products available for sale.
Olivia: Okay. That's perfect. Thank you very much.
Speaker Change: My next question is regarding your very impressive 17, 9% international distribution sales increased during the quarter I wanted to know if you have made any significant new distribution with your partners.
Speaker Change: To justify this growth and if you could highlight to us what part of the world are doing the best for the company for the time being.
Speaker Change: Yeah and so.
Speaker Change: Yeah, we do have a few new.
Speaker Change: And your distributors that would be bolt on in emerging markets in South America, we haven't seen the distributors.
Speaker Change: And of course in the UK, we had thorough fisheries are you and your distribution partner.
Speaker Change: That is.
Speaker Change: Really well for us on the MTBE side.
Speaker Change: You know we brought them on off the.
Speaker Change: Unfortunate issues with legal C C.
Speaker Change: That's been really positive for us in the U K are.
Speaker Change: You're starting to see Europe, and what we would call rest of the world outside of the U S and after lots of Africa, we started to see a general recovery.
Speaker Change: In terms of ordering patents as confidence has improved a little bit.
Speaker Change: And and also of course stock levels have started to return to a little off of what you could say it's sustainable levels.
Speaker Change: So the biggest reason really for the increase is as distributors start to reorder based on the demand that they see in the market and based on the forecast, saying Oh the stock levels moving forward.
Speaker Change: And that has been throughout Europe.
Speaker Change: It's been in South America.
Speaker Change: Yeah, and really all the countries outside of South Africa, and the U S, where we saw them.
Speaker Change: Into distributors, but it's a function of restocking.
Speaker Change: And demand in those areas.
Speaker Change: That's perfect. Thank you very much. This is very helpful. And then my final question is regarding the Adv line, which seems to be doing extremely well for you.
Speaker Change: On the press release, Dr. Phil You had commented that you have a pipeline of new innovative products in that category can you tell us a bit more about that.
Speaker Change: Absolutely I mean, I think for us no.
Speaker Change: We've had a really strong interest into the IDB and IDB category.
Speaker Change: Got some products that are already in the market now that have got fantastic reviews at the consumer level with dealers.
Speaker Change: With our customers it's been a huge success in terms of boots in terms of apparel items jackets pants gloves.
Speaker Change: Hello.
Speaker Change: Oh My God. This is going to have been put out in may.
Speaker Change: Yeah.
Speaker Change: And that's been really really strong for us and so I think Chris.
Speaker Change: Christmas comments was really referring to how are we going to widen out.
Speaker Change: The the line.
Speaker Change: Really the one currently is in its infancy and it is you know 15% to 20% of ourselves now so that's really encouraging to see them. So as we normally would go into a market we start off with the topline.
Speaker Change: Kind of in terms of protection and then in terms of pricing and then we filter out and develop products around that and we do want to have some some innovative cutting edge.
Speaker Change: Areas that we will be touching on and some really exciting things.
Speaker Change: He used to the market in due course.
Speaker Change: Heath.
Speaker Change: But I'll leave that to.
Speaker Change: Chris I have to announce when we're ready to do so but in the interim we certainly are working on a pipeline.
Very exciting products to widen our offering to a D V brought us.
Aaron Gal: The next question is from Aaron Gal banned from Warren Street Capital. Please go ahead.
Aaron Gal: Hi, Sean Congrats on a great quarter, and it's nice that we're starting to see the recovery two questions for you one you've mentioned kind of the need for inventory build.
Aaron Gal: Over the last couple of years inventory as a percentage of sale of sales has been higher than historical averages and kind of the 40% to annual sales range and it used to be kind of 25, 30% I'm. Just wondering kind of how you think about inventory as a percentage of sales going forward now that there's more skus.
Aaron Gal: All of that.
Aaron Gal: And then the second question is.
Aaron Gal: On the level of Opex, So we've kind of been running at 21 22 million annualized and.
Aaron Gal: I'm just kind of curious you know, obviously theres been a lot of investment in strengthening the team and building for growth and I'm kind of curious what.
Aaron Gal: Level of sales this type of Opex could support can we get back can this if we can we go back to 70 to 80 million of sales without needing to add much more opex trying to get a feel for operating leverage alright. Thank you.
Speaker Change: Understood higher and thanks, and very good questions in terms of inventory of course, I mean in the past few years.
Speaker Change: We've increased our SKU level significantly.
Speaker Change: You know we've got.
Speaker Change: Over 7300, Skus now and so we've got a really wide product offering and that is.
Speaker Change: I mean, you're supposed to enter the ATB market, which is of.
Speaker Change: Of course added quite a lot of meat to hold inventory a further 25% of sales is on the low end and I saw that 40% themselves on the high end and I think we will settle somewhere in between and I'll say you know we have inventory now obviously, the NDP that but most of the industry that hold is in the U S and South Africa, which keeps things really.
Speaker Change: Fishing because.
Speaker Change: With 70% of all of our sales is not inventory that were holding their manufacturing obviously for distributors.
Speaker Change: I would think or somewhere in between 25 and 40%.
Speaker Change: I think our inventory has reached the point now where there's a lot more efficient than we are.
Speaker Change: It was and a large portion of the inventory that you see them in.
Speaker Change: In stock at the end of Q1, well, we'll be shipping shipping out because a lot of it is Israeli new so that's great to see I think we're getting a lot more efficient in terms of our inventory turns.
Speaker Change: So I would imagine that and then people will drop down as it pertain to sensors yourselves music food.
Speaker Change: And then in terms of your second question on operating expenditure I think youre going to return them to we can get to $70 million to $80 million up themselves without having significant increases in our opex.
Speaker Change: So you know we're sitting ourselves up all these people for future growth in terms of ourselves team who've actually been working very hard in the U S to make sure that we are a lot more efficient in terms of the sale of structuring that.
Speaker Change: We bought <unk> as a V P yourselves on the motto side working with the brick and mortar dealers in the brick and mortar reps and I think that's going to add a lot of efficiency in terms of our sales for them I mean to answer your answer your question the kind of Opex that we're sitting on now 'twenty to 'twenty, one 'twenty 2 million.
Speaker Change: I think we can still leverage that are significantly before needing to go to any kind of much higher.
Speaker Change: <unk> level so.
So we are holding our base not really for future growth.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: There are no further questions at this time I would like to turn the floor back over to Sean Macdonald for closing comments.
Speaker Change: Yeah.
Speaker Change: Thank you all for joining us today on this call. We look forward to Mexico to review the results of the 'twenty 'twenty four second quarter.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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