Release Date: March 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Leatt Corp (LEAT, Financial) experienced a return to double-digit revenue growth in the fourth quarter, with a 14% increase compared to the same period in 2023.
- International distributor sales grew by 24% in the fourth quarter, indicating strong global demand.
- Gross profit as a percentage of sales improved from 36% to 41% year-over-year in the fourth quarter.
- The company has been recognized with two prestigious design and innovation awards for 2025, highlighting its commitment to innovation and quality.
- Leatt Corp (LEAT) has strengthened its sales and marketing team, including the addition of a new VP of MOTO and ADV sales, to enhance its market presence and performance.
Negative Points
- Total revenues for the full year 2024 decreased by 7% compared to 2023, primarily due to declines in helmet and neck brace sales.
- Net loss for the full year 2024 was $2.2 million, a significant increase from the $803,000 loss in 2023.
- International distributor sales decreased by 11.5% for the full year 2024 as distributors adjusted elevated inventory levels.
- US MOTO dealer direct sales at the brick-and-mortar level contracted by 8%, impacting overall dealer direct sales growth.
- The company faces challenges from geopolitical trading and economic headwinds, which could impact future demand.
Q & A Highlights
Q: Could you comment on the impact and any response to the escalating trade war and tariffs? What degree of flexibility do you have on the manufacturing side to mitigate this?
A: We are closely monitoring the situation and have taken steps to increase flexibility. We have established supply channels outside of China, including Cambodia, Bangladesh, Thailand, Taiwan, and soon Vietnam. Our relationships with suppliers in Asia are strong, and we are working to maintain margins despite the trade war.
Q: In the 10-K, you noted an increase in rent expenses related to warehousing costs for global shipping. Is this a reclassification of expenses previously under cost of goods, or are you doing something differently operationally?
A: We are reclassifying some expenses that were previously under cost of goods to warehousing costs below the cost of sales line to manage them more carefully.
Q: Regarding personnel changes in the US and new leadership on the MOTO side, does this signal a change in direction? How are you thinking about US sales and marketing priorities?
A: It's an intensification of efforts, especially on the MOTO sales side. We see growth opportunities in the US, particularly in MTB and MOTO. The new VP of MOTO sales brings strong skills and industry contacts, which we believe will enhance our sales efforts and dealer relationships.
Q: How are the financial difficulties and restructuring at KTM affecting you, and how does this relate to the softness in US MOTO dealer sales?
A: The situation with KTM has impacted dealer sentiment and created uncertainty. Dealers with significant KTM stock are under stress, affecting their willingness to invest. We hope the uncertainty resolves quickly, as participation remains strong, and interest rate changes could positively impact dealer financing.
Q: With the industry stabilizing, how do you plan to use cash, especially with nearly $2 a share now?
A: We plan to reinvest cash into working capital and inventory, particularly as international distribution orders increase. We are also looking at opportunities to use cash efficiently, including marketing investments in new categories like ADV.
Q: Is the goal of reaching $100 million in sales still feasible, and do you expect to earn profits as you grow?
A: We believe reaching $100 million in sales is feasible and expect profitability along the way. Our current team and marketing levels are set up for future growth, and we aim for double-digit growth annually. We anticipate being strongly profitable as we approach $100 million in sales.
Q: How do you view the normalized level of sales for the business, considering macro trends and industry conditions?
A: The industry is still depressed, but we expect normalization with double-digit growth over the next one to two years. Different categories are at different recovery stages, but we see significant growth opportunities, especially given our current market share position.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
