Leatt (LEAT) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenues declined 18% year-over-year to $10.08 million, with U.S. sales up and international sales down, resulting in a net loss of $1.06 million or $(0.17) per basic share, compared to net income of $776,000 in Q2 2023.

• Consumer direct sales rose 19% and dealer direct sales increased 14%, while distributor sales fell 33%.

• New product launches, including a bicycle components portfolio, contributed to growth in product categories.

• Operating expenses rose 27% in Q2, mainly due to higher salaries, marketing, and lower bad debt recovery.

• Inventory digestion is ongoing, with positive trends in ordering patterns expected to support future revenue growth.

Financial highlights

• Q2 2024 global revenues were $10.08 million, down 18% year-over-year, with gross profit at $3.92 million (39% margin), down from $5.34 million (43% margin) in Q2 2023.

• U.S. sales rose to $3.73 million, while international sales fell to $6.34 million.

• Cash and cash equivalents increased to $13.33 million as of June 30, 2024, up from $11.35 million at year-end 2023.

• Cash flows from operations for the first six months were $2.99 million, despite lower revenues and higher costs.

• No advances were made on the $1.5 million revolving line of credit, which remains fully available.

Outlook and guidance

• Management anticipates revenue growth as inventory levels normalize and new distributor partnerships mature.

• Expects improved margins with the introduction of new product lines and reduced need for promotional activity.

• Positive outlook for upcoming global launches in Moto, MTB, and ADV product lines.

• Current cash and cash equivalents, along with operating cash flow, are expected to meet operating needs for at least the next twelve months.

• Management expects continued impact from elevated industry inventory levels, global economic fragility, and foreign exchange volatility.