Leatt Corporation (LEAT) Earnings Call Transcript & Summary

Hello, and welcome, everyone, joining today's Leatt Corp. Second Quarter 2026 Results Conference Call. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to Michael Mason. Please go ahead.

Thanks, Leslie. Good morning, and welcome to the Leatt Corporation investor conference call to discuss the financial results for the second quarter 2026. The company issued a press release today, Friday, August 14, 2026, at 8:00 a.m. Eastern and filed its report with the SEC. 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 1 (844) 512-2921 or 1 (412) 317-6671 for international callers. The replay pin number is 11162418. A replay of the webcast will be available immediately following this call and will continue for 7 days. Certain statements made during this call regarding Leatt Corporation are 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 are included such as forward-looking statements. These forward-looking statements may be identified by the use of forward-looking terminologies 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. 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.

Thank you, Mike, and thank you all for joining us today. The second quarter of 2026 was another solid quarter for Leatt despite some temporary supply chain timing challenges that have since been fully cleared. Global consumer demand for our innovative products remains strong and has fueled robust sell-through and reordering patterns. International and domestic sales continue to show promising trends and encouraging traction at the consumer and dealer level. Total global revenues for the quarter were $16.39 million, only a slight increase over last year due to supply chain timing issues, but second quarter numbers don't reflect the momentum that we are achieving. U.S. revenues grew by about 11% to $6.15 million. International revenues were $10.24 million, an increase of 4% over last year. Consumer direct sales continue to be a highlight and grew strongly, increasing by 68% or $962,000 during the quarter. In terms of product sales, body armor and helmet sales were the leaders, up by $462,000 and $444,000, respectively. MOTO shipments of apparel, boots, and helmets that were scheduled for the last half of the second quarter were delayed due to timing challenges, resulting in a decrease in sales to our global distributors of 6% or $653,000. This has been resolved, and we continue to fulfill strong global orders. It is also worth noting that prior year Q2 global distribution revenues increased by a staggering 79%, a tough comparative. Gross profit for the quarter increased by 8% to $7.44 million and gross profit as a percentage of sales increased by 2% to 45%. Net income was $909,000. Total operating costs increased by 16% in the quarter as we continue to build out a diverse and professional global team of sales and marketing professionals, and intensify our brand awareness activities around the world. On a year-to-date basis, total global revenues were up by $4.35 million or 14% to $35.9 million. Net income was $2.68 million, an improvement of $420,000 or 19% compared to the first 6 months of 2025 and consumer direct sales increased by 61%. Cash increased by $6.29 million to $19.53 million with cash flows provided by operations of $7.44 million for the first 6 months of 2026. Our current ratio as of June 30, 2026, was 7.4:1, and we believe we have sufficiently strong liquidity to fuel future growth. We are continuing our previously announced Board-authorized share repurchase program of up to $750,000 of outstanding Leatt common stock. We believe that this demonstrates our continued confidence in the strength of the company and our business plan as well as our commitment to enhance long-term shareholder value. Now I will turn to more details on sales of our product categories for the second quarter of 2026 compared to the second quarter of 2025. Sales of our flagship neck brace designed to prevent potentially devastating sports injuries to the cervical spine were $542,000, a 23% decrease due primarily to a 43% decrease in neck braces sold. Neck braces represented 3% of revenues for the second quarter. Our body armor products are comprised of chest protectors, full upper body protectors, knee braces, limb protectors, off-road motorcycle boots, and mountain biking shoes. Body armor revenues were $8.75 million, a 6% increase due primarily to a 21% increase in revenues generated from the sale of our innovative MOTO and ADV boot range designed for off-road and adventure motorcycle riding. Body armor products represented 53% of our revenues for the quarter. Helmet sales totaled $3.56 million, a 14% increase due primarily to a 15% increase in revenues generated from the sale of off-road MOTO and ADV helmets sold during the quarter as global demand for these exceptional product categories continues to grow. Helmet sales represented 22% of our revenues for the quarter. Our other products, parts and accessories category is comprised of goggles, hydration bags, apparel, sunglasses, and bicycle components. Other products, parts and accessories sales were $3.54 million, a 13% decrease due primarily to a 20% decrease in revenues from sales of MTB, ADV and MOTO apparel and was partially offset by a 16% increase in revenues from the sale of bicycle components. Other products, parts and accessories represented 22% of our revenues for the second quarter. Now I will turn to our financial results in a bit more detail. Revenues for the quarter ended June 30, 2026, were $16.39 million, a 1% increase compared to $16.18 million for the quarter ended June 30, 2025. This increase in worldwide revenues is attributable to a $462,000 increase in body armor sales and a $444,000 increase in helmet sales that were partially offset by a $550,000 decrease in other product parts and accessories sales, and a $162,000 decrease in neck brace sales. Net income for the second quarter of 2026 was $909,000 or $0.15 per basic and $0.14 per diluted share, down by 20% as compared to $1.14 million or $0.18 per basic and $0.18 per diluted share for the second quarter of 2025. Revenues for the 6 months ended June 30, 2026, were $35.9 million, a 14% increase compared to $31.54 million for the 6 months ended June 30, 2025. This increase in worldwide revenue is attributable to a $2.18 million increase in body armor sales and a $2.43 million increase in helmet sales that were partially offset by a $151,000 decrease in other products, parts and accessories sales and $111,000 decrease in neck brace sales. Net income after taxes for the 6-month period ended June 30, 2026, was $2.68 million, an increase of 19% when compared to net income after taxes of $2.26 million for the 6 months period ended June 30, 2025. Leatt continued to meet its working capital needs from cash on hand and internally generated cash flows from operations. And at June 30, 2026, company had cash and cash equivalents of $19.53 million. Turning to recent news. Just after the quarter closed, we announced a partnership with Cardo Systems, a global leader in motorcycle communication systems, to integrate a wireless real-time mesh communication system into our innovative MOTO 8.5 Helmet. We see this as another example of the expertise and competency of our design and engineering team. Our goal is always to be on the cutting edge of industry innovation and when it's mutually beneficial, collaborate with leading partners in our industry. We look forward to releasing our integrated helmet offering in the second half of the year. And in product category expansion news, we have developed an exciting range of bike care products through the establishment and acquisition of Bike Care Technologies, a Polish entity that will develop, distribute and market premium bike care products around the world. We expect sales to start to filter through to revenues during the third quarter of 2026 when we launch this new exciting venture. Looking forward, while there are some potential headwinds globally, participation and consumer demand for our products around the world remains strong. Ordering patterns fueled by sell-through remain robust and very encouraging. Direct-to-consumer sales are growing rapidly. We plan to continue to invest in building out our best global team of sales and marketing professionals and in the development of a pipeline of exceptional products. We believe that these investments will continue to fuel strong gains in market share and growth. In conclusion, our team remains very excited and enthusiastic about the future, driven by our innovative head-to-toe product portfolio, our plans to amplify the brand to reach a much wider rider audience and a strong balance sheet that is well positioned to fuel growth and shareholder value. As always, I'd like to thank our entire Leatt family, our dedicated employees, business partners and team riders for their continued strong support. And with that, I'd like to turn the call over for questions. Operator?

[Operator Instructions] Our first question comes from Chris Muller, private investor.

Just a few questions, if I may. First, regarding the supply chain issue, was there any material revenue loss as a result of this? Or should essentially all of it shift into Q3? And could you maybe quantify what the scale of this impact was?

Yes, absolutely. I think it's a really good question. There was absolutely no revenue lost. This is really just weeks in terms of shipping. So instead of shipping in the last few weeks of Q2, which is what the stock was earmarked to shipping. The stock shipped at the beginning of Q3. It already has shipped. It's all cleared out. So we absolutely have not lost any revenue. It just means that Q3 got off to a hot blazing start. So it's good news for Q3.

All right. And regarding the Cardo Venture announcement, this is obviously very exciting from a product development perspective. Could you maybe speak to how Leatt participates economically in that partnership and maybe what that opportunity can look like going forward?

Absolutely. I mean I think this is going to be -- we're going to be earning our revenues here due to the sales that we make of Cardo Venture helmets to Cardo. So those are Leatt helmets that have got Cardo technology built in. And of course, we'll be making a strong margin on those products. And I think it's economic in terms of the margin, but it's also a very good collaboration in terms of the 2 leaders in the industry in terms of communication and in terms of protection, and how the technology working together. So there's, of course, a brand building element to it. But we'll be earning margin on the products that we sell to Cardo. They've got a distribution network that is slightly different than ours. And so there's additional customers that they can reach.

All right. Great. Regarding the acquisition of Bike Care Technologies, could you maybe speak to the scale of investment here aside from the nominal purchase price disclosed in the filing? And is this going to be a subsidiary funded exclusively by Leatt and just flowing through the OpEx? Or is this a partnership with your Polish distributor or some other entity?

This is going to be 100% funded by Leatt. And just looking at the revenues in terms of preorders that we already have, I don't expect that there's going to be any significant funding that's going to be needed by Leatt in the long term. This is going to be pretty much self-funded through Bike Care as soon as things get moving. But 100% owned subsidiary by Leatt. Of course, it's based in Poland because we manufacture these products in Poland and then we distribute around the world. So I don't think this is going to mean that we're going to have significant OpEx investment in this entity. Of course, it is a consumable type of product that we are going to be selling. So there will be some investment in inventory in order to make sure that we have the product available to sell. But we're really excited about it and the response so far from our global distribution and dealer network has been well beyond what we expected.