CAPE TOWN, South Africa, (May 11, 2023) – Leatt Corporation (OTCQB: LEAT), a leading developer and marketer of protective equipment and ancillary products for many forms of sports, especially extreme high-velocity sports, today announced financial results for the first quarter ending March 31, 2023. All financial numbers are in U.S. dollars.
First Quarter 2023 and Recent Highlights
- Global revenues of $13.1 million, down 46%, compared to the record-breaking first quarter of 2022.
- Gross Profit increased to 44% as supply chain constraints continue to improve.
- Cash and cash equivalents increased 60% to $11.4 million, compared to $4.2 million in 2022.
- Cash provided by operating activities of $5.3 million for the first quarter of 2023.
- 2023 Design & Innovation Awards for Mono Suit MTB HydraDri 5.0 and MTB Enduro Helmet.
- Partnership with Orbea Leatt Speed Company Racing Team and Expansion into Marathon Endurance Segment.
CEO, Sean Macdonald, commented: “The wider MOTO and MTB industry continues to experience a variety of post-Covid issues including supply chain dynamics that have created challenging stocking and inventory issues. Although we continue to see consumer demand for Leatt products, the first quarter of 2023 was particularly challenging in terms of growth in comparison with the 2022 period. The first quarter of 2022 was by far the strongest quarter in our company’s history in terms of revenue, which increased 88% over the prior comparable period. However, we are optimistic that the arrival of the spring riding season after the extended cold weather period will increase consumer participation in outdoor activities which will in turn stimulate growth as industry-wide inventory levels are digested and replenished at distributor and dealer levels. Our team remains enthusiastic about the future of our brand and Company as we work towards a return to delivering double-digit growth.
“Global revenues for the first quarter were $13.1 million, a decrease of 46% compared to the exceptionally strong first quarter of 2022. International revenues were $9.2 million, a decrease of 52% year-over-year, and sales in the U.S. were $3.9 million, a 26% decrease year-over-year. U.S. dealers continue to manage elevated stocking levels and adjust ordering patterns accordingly and we continue to actively grow and invest in our team of U.S. employee sales reps to reach a wider dealer base of both MOTO and MTB dealers throughout the country.
“Gross profit as a percentage of sales increased to 44% in the first quarter of 2023 as a result of a strong improvement in global and domestic shipping and logistics costs as supply chain constraints continue to improve and our focus on maintaining margins and strong brand positioning strategies remain in place. Net income in the first quarter was $1.02 million, a decrease of 76%, compared to the strong prior period. Total operating expenses increased by 8%, displaying our ability to control costs despite a global inflationary environment. Cash flow generated from operations was $5.3 million, as our team continues to focus on working capital management and cash flow during a challenging industry period, a testament to the resilience of our business model and team.
“We are very encouraged by the increased Leatt activity on both our own consumer direct channels and those of our international e-commerce partners. Increased Leatt.com consumer purchasing continued to grow during the first quarter of 2023, with consumer direct sales increasing by 10% as Leatt as a brand recognized globally for product excellence and design continues to gain momentum.
“Our team of sales and brand managers covering key established and emerging global markets are working closely with our distribution partners to facilitate a strong Leatt presence at the dealer level and react to fluid market conditions. We continue to focus on building and refining a strong multi-channel sales organization that has the ability to leverage our ‘head-to-toe’ offering of exceptional products.”
Founder and Chairman, Dr. Christopher Leatt, remarked: “Our design and engineering team, in collaboration with our team riders, continues to deliver an exceptional product pipeline and product offerings that are recognized throughout the industry. We believe that this continued focus on excellence in product innovation will allow us to gain market share moving forward.”
Total revenues for the first quarter of 2023 were $13.1 million, down 46%, compared to $24.2 million for the first quarter of 2022 which was an exceptional quarter for the Company. Revenues for the first quarter of 2022 increased by 88% when compared to the prior year period.
The decrease in global revenues is attributable to a $6.1 million decrease in body armor sales, a $2.6 million decrease in helmet sales, a $1.7 million decrease in other products, parts, and accessories sales, and a $0.8 million decrease in neck brace sales. The impact of an exceptionally strong comparative quarter was compounded by industry-wide stocking dynamics that continue to affect distributor and dealer ordering levels.
Income from operations for the first quarter of 2023 was $1.4 million, down 75%, compared to $5.6 million for the first quarter of 2022.
Net income for the first quarter of 2023 was $1.02 million or $0.17 per basic and $0.16 per diluted share, down 76%, as compared to net income of $4.2 million, or $0.73 per basic and $0.68 per diluted share, for the first quarter of 2022.
Leatt continued to meet its working capital needs from cash on hand and internally generated cash flow from operations. At March 31, 2023, the Company had cash and cash equivalents of $11.4 million and a current ratio of 5.6:1.
Mr. Macdonald added: “Despite the variety of post-Covid challenges, we continue to push hard and to focus on the areas that we can control—strong brand building, a global, multi-channel, professional sales organization, a pipeline of exceptional products, a plan to reach a much wider rider community and continued financial resilience. We believe that our strengths in these areas will overcome current industry stocking dynamics and product stock will get digested, rider participation will remain strong and we will return to our track record of double-digit growth.
“The increased activity on the leatt.com site, with consumer direct sales now representing 5% of global revenues, is a testament to the brand momentum that we have experienced over the past several years. This is a trend that our online global dealers continue to report—amidst constrained stocking ability at dealer and distributor levels, consumer demand and resultant sell-through of Leatt product categories remain healthy and well-positioned for future growth.
“Many of our product categories, such as our innovative helmets, knee braces, off-road motorcycle boots and mountain biking shoes, and other apparel, are still in their infancy and show potential to meet the needs of riders of all levels and contribute to exponential growth. We are particularly excited about our entries into much wider segments of the MTB and MOTO markets in the second half of the year. We believe that this continued expansion will appeal to large total addressable markets.
“Although the results of the first quarter of 2023 were particularly challenging in the context of distributor and dealer adjustments to ordering patterns as the industry continues to digest areas of elevated stocking levels due to post-Covid supply chain dynamics, we believe that the onset of the delayed spring season will mean strong consumer participation in outdoor activities as we look towards the second half of 2023.”
The Company will host a conference call at 10:00 am ET on Thursday, May 11, 2023, to discuss the first quarter 2023 results.
Participants should dial in to the call ten minutes before the scheduled time, using the following numbers: 1-877-407-9716 (U.S.A) or +1-201-493-6779 (international) to access the call.
There will also be a simultaneous live webcast through the Company’s website, www.leatt-corp.com. Participants should register on the website approximately ten minutes prior to the start of the webcast.
An audio replay of the conference call will be available for seven days and can be accessed by dialing 1-844-512-2921 (U.S.A) or +1-412-317-6671 (international) and using passcode 13738621.
For those unable to attend the call, a recording of the live webcast will be archived shortly following the event for 30 days on the Company’s website.
About Leatt Corp
Leatt Corporation develops personal protective equipment and ancillary products for all forms of sports, especially extreme motorsports. The Leatt-Brace® is an award-winning neck brace system considered the gold standard for neck protection for anyone wearing a crash helmet in two-wheeled sports as a form of protection. It was designed for participants in extreme sports or riding motorcycles, bicycles, mountain bicycles, all-terrain vehicles, snowmobiles, and other vehicles. For more information, visit www.leatt.com.
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This press release may contain forward-looking statements regarding Leatt Corporation (the “Company”) within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included herein are “forward-looking statements” including statements regarding the likelihood that the Company’s double digit revenue growth will continue; the ability of the Company to continue to maintain its innovative and cutting-edge pipeline of branded products or to financially benefit from its sales and marketing efforts; the ability of the Company to meet increased customer demand; the financial outlook of the Company; the general ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as “believes,” “expects,” “anticipates,” “seeks,” “should,” “could,” “intends,” or “projects” or similar expressions, and involve known and unknown risks and uncertainties. These statements are based upon the Company’s current expectations and speak only as of the date hereof. Any indication of the merits of a claim does not necessarily mean the claim will prevail at trial or otherwise. Financial performance in one period does not necessarily mean continued or better performance in the future. The Company’s actual results in any endeavor may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, which factors or uncertainties may be beyond our ability to foresee or control. Other risk factors include the status of the Company’s common stock as a “penny stock” and those listed in other reports posted on The OTC Markets Group, Inc.