Greetings and welcome to the Leatt Corporation first quarter 2024 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should 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, Investor Relations. Thank you, sir. You may begin. Thanks, Maria. Good morning and welcome to the Leatt Corporation investor conference call to discuss the financial results for the first quarter of 2024. The company issued a press release today, Monday, May 13, 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 seven 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 13746608. A replay of this webcast will be available following the call and will continue for seven days. Certain statements in this conference call may constitute forward-looking statements. Actual results could differ materially from those discussed in the call. Leatt Corporation does not undertake any obligation to update such statements made in this call. Please refer to the complete cautionary statement regarding forward-looking statements in today's press release dated May 13, 2024. 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. Good morning, Mike. Thank you, and thank you all for joining us today. Although there are areas of the cycling and motorcycle industries that remain challenging, we continue to see the signs of a return to growth ahead. Participation remains strong, and the elevated industry-wide inventory levels that have resulted in somewhat of a growth pause are being digested. Consumer direct and dealer direct revenues continue to show solid improvement, and our newly launched adventure line of products have generated promising initial shipments during the quarter. Despite the ongoing challenges, we believe that our expanding portfolio of innovative products, robust financial position, and our growing and developing multi-channel sales organization have us well positioned for future growth, profitability, and additional value. Total global revenues for the quarter were $10.61 million, a 19% decrease from the first quarter of 2023, as dealers and distributors continue to regulate ordering levels. Although sales to our global distributors, representing 60% of our revenues for the first quarter of 2024, decreased by 31% as our distributors continue to manage industry-wide stocking dynamics, consumer direct sales increased by 15%, and dealer direct sales increased by 9%. Domestic and South African dealer direct sales to both Moto and MTB dealers also grew during the quarter, a very encouraging trend and testament to the gradual recovery that we believe will filter through to distribution over the next several quarters. It is relevant to note that the majority of distributor orders that shipped during Q1 of 2024 were for MTB product and were placed in mid-2023 when industry-wide inventory was peaking and sentiment was particularly strained. Historically, consumer direct and dealer direct revenues are the first to reflect the pulse of market conditions, whether challenging or buoyant, often followed by global distributor ordering patterns as fulfillment filters through the channel. We remain very focused on our margins, which decreased in the first quarter, largely due to short-term promotional activities at the dealer direct level and particularly in the U.S., as an improvement in consumer demand, dealer financial strength, and dealer sentiment towards competitively priced categories have created opportunities to turn slow-moving inventory to cash that will fuel future growth. We do expect our margins to improve as we release our newest products globally and inventory levels continue to stabilize over time. Despite current industry-wide conditions, cash increased by $2.18 million to $13.53 million, and our cash flows provided by operations were $2.83 million. Inventory levels continue to stabilize, decreasing by $3.32 million or 16% for the first quarter. Our liquidity also continues to improve as our team continues to efficiently manage working capital levels. Our new adventure, or ADV line, represents a solid opportunity globally. Dealers and distributors have received the initial line with great excitement, and ordering patterns once again demonstrate our ability to develop products that will reach a much wider group of consumers around the world. We continue to build out our ADV distribution network and are working with select influencers to build market reach. ADV legend Chris Birch, our strongest ADV ambassador, has ridden and raced in over 50 countries during his career. Chris has competed successfully in the world's biggest enduro races like Erzbergrodeo, Red Bull Last Man Standing, and Hell's Gate, and he has competed successfully in the grueling Dakar Rally, finishing 27th and 2nd in the rookies class in 2012. He is a three-time Roof of Africa winner, and he has been on the podium seven times at Red Bull Romaniacs, including as the 2010 winner. Chris is also very active on YouTube and other social media and hosts his own podcast. So far, we have only shipped ADV technical apparel, but are very excited about our pipeline of ADV gear. We have developed the core competencies to create a strong innovative head-to-toe offering in this area that are very, very promising. Domestic sales on our consumer-facing Leatt.com continue to be a highlight as we continue to refine the platform and reach a wider consumer group with targeted marketing campaigns. We successfully launched our direct-to-consumer store in South Africa during the quarter, with initial orders exceeding our expectations. Our digital direct-to-consumer channels continue to be an important focus area as we strive to reach wider consumer groups around the world. We continue to build out a high-performing team of sales and other professionals around the world to improve our penetration and reach across sales channels. Industry-wide consolidation and turmoil have also presented opportunities for us to add new talented team members to the Leatt family, all facilitated by our relatively strong financial position. Our inventory levels continue to stabilize, decreasing by $3.3 million or 16% in the first quarter as we continue to seek opportunities to turn over slower-moving merchandise. Let me turn to more details on sales of our product categories for the first quarter of 2024 compared to 2023. Sales of our flagship neck brace were $560,000 or 5% of our revenues, a 28% decrease from 2023. The decrease represented a 13% decrease in the volume of neck braces sold. Our body armor products are comprised of chest protectors, full upper body protectors, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots, and mountain biking shoes. Body armor sales were $5 million or 47% of our quarterly revenues, a 21% decrease from 2023. The decrease was primarily the result of a 21% decrease in upper body revenues and a 48% decrease in the volume of mountain biking shoes sold. Additionally, while Moto boot sales increased by 14%, Moto boot revenues decreased by 29% due to short-term sales promotions meant to manage inventory levels and margins as efficiently as possible. Helmet sales were $1.69 million or 16% of our revenues, a 46% decrease from 2023. The decrease was primarily due to a decrease in MTB helmet sales compared to the 2023 first quarter, which reflected helmets ordered in mid-2022 before the current high inventory dynamics. Our other products, parts, and accessories category is comprised of goggles, hydration bags, and apparel items, including jerseys, pants, shorts, and jackets, and aftermarket product support items. Total sales were $3.33 million or 32% of our revenues, a 19% increase over 2023. While sales of our MTB and Moto apparel lines did decrease, the increase in revenue came from strong initial shipments of our ADV apparel line designed for adventure motorcycle riding during the first quarter of 2024. Here is the financial summary for the first quarter. Total revenues for the first quarter of 2024 were $10.61 million, down by 19% compared to $13 million for the first quarter of 2023. The decrease in worldwide revenues is primarily attributable to a $1.34 million decrease in body armor sales, a $1.43 million decrease in helmet sales, and a $220,000 decrease in neck brace sales that were partially offset by a $550,000 increase in sales of other products parts and accessories as our distributors continue to manage industry-wide stocking dynamics. Loss from operations for the first quarter was $791,000, down by 157% compared to income of $1.3 million for the first quarter of 2023. Total operating costs increased by 10% in the quarter, which reflects sustained inflationary pressure and our investments in fueling future growth through brand recognition, channel development, and a strong drive, particularly in the U.S., to continue building a multi-channel team of sales professionals tasked with increasing and leveraging revenue opportunities on a regional level that we believe will fuel growth in the coming months and years. Net loss for the first quarter of 2024 was $817,000 or $0.13 per basic and $0.13 per diluted share, down by 180% compared to net income of $1 million or $0.17 per basic and $0.16 per diluted share for the first quarter of 2023. Leatt continued to meet its working capital needs from cash on hand and internally generated cash flows from operations. Liquidity continued to improve as cash for the first quarter increased by $2.18 million. As at March 31, 2024, the company had cash and equivalents of $13.53 million and a current ratio of 9.421 compared to a current ratio of 5.621 at March 31, 2023. Looking to key areas around the world, we have some exciting new distributor partnerships in the United Kingdom, Europe, and emerging markets that we expect will filter through to revenues over the next few quarters. Dealer direct sales at our company-owned distribution channels in the U.S. and South Africa grew during the first quarter, which is a very encouraging trend. To sum up, although there are still some challenging market conditions in certain industry areas, particularly at the distribution level, we are seeing the first signs of a recovery at play. We continue to refine our network, and inventory is being digested. Participation remains strong, and more direct channels that typically decline or recover first are already experiencing growth. Market conditions continue to normalize, and although ordering patterns at the dealer level do reflect a tapering in large pre-ordering, daily order volume continues to increase, and dealer financial conditions, stocking levels, and demand sentiment continue to improve. We expect that these trends will continue to filter through to the distribution level over time. We remain enthusiastic about the future of Leatt as a company and as a brand. We have a strong portfolio of innovative products in the market and in our development pipeline. Our multi-channel sales organization and our team of sales and marketing professionals are growing and developing, and we have a solid financial position. We remain confident that we will return to sustained growth, profitability, and shareholder value. As always, I would like to thank our entire Leatt family, our dealers, business partners, and team riders for their continued strong support. With that, I'd like to turn the call over for questions. Operator. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question comes from Christopher Mueller. Please proceed with your question. Hi, Sean. I hope you're doing well today. Hi, Chris. Nice to hear from you. Always good to speak with you. Just two or three questions. You noted at the end there that ordering patterns at the dealer level reflect a decline in large pre-orders. I'd like to understand that a bit better. I believe you've historically had some seasonality in the business in the sense that pre-orders for next year's line during Q2 would lead to stronger revenues in the back half of the year. Of course, last year was a notable exception to that. So I'm wondering how the pre-order trends you're seeing might compare to last year versus more historic norms. No problem. So what we are seeing is that dealers, and that's when you're selling direct to dealers, dealers are more reluctant to place bigger orders on a pre-order level. So because of the stocking dynamics that they've experienced over the last several quarters and some of them several years, they've become more reluctant to invest too much of their cash into pre-orders. So pre-orders have become a bit leaner, but the day-to-day orders are more. So there's actually more volume coming through on a day-to-day basis with dealers. So those are dealer direct channels. I think the seasonality that you're referring to is maybe more on the distributor side of things where, of course, we get pre-orders and then we ship sometimes 70-80 days later. So there is a certain reliance on pre-ordering. What I can say is that I'm seeing an improvement in pre-ordering in certain areas there. On the MTB side of things, which is really what's reflected in the Q1 numbers, the pre-orders have not been as strong as in previous periods. But certainly, on the Moto and on the protection side of things, we are seeing an improvement. So things are improving. So if dealers rely less on pre-orders and take a more just-in-time approach to their ordering, does that sort of shift the working capital obligations upstream to Leatt? In other words, without firm pre-orders in hand, do you have to hold greater inventory levels to fulfill that anticipated but more sporadic ordering pattern? We do have to make sure that we do have enough inventory on hand to be able to fulfill those deals on a more just-in-time basis, for sure. It's not as if we have no pre-orders. We do still have some pre-orders. So there is a bit more risk that I guess we do need to take when it comes to ordering inventory to make sure that we can fulfill. So I would agree with your statement that there's definitely more reliance on our own inventory that we'll be looking at over time now. Okay. Great. Then lastly for me, turning to gross margins, it sounds like much of the softness this quarter was due to discounting of stale inventory in the U.S. Putting that short-term issue aside, are there any other factors at play here, whether that be in manufacturing or channel mix or product mix, particularly with the new ADV line that would significantly impact your gross margin profile going forward, positively or negatively? Yeah. So I mean, I think it's a very good question. And I mean, you're 100% right. I mean, the main softness in our gross margins was due to some short-term promotional activity in the U.S. And that's very market-related. So there's some dealers that have become a lot more confident in terms of consumer demand going forward. And they are taking some opportunities we are taking some opportunities to sell them some slow-moving inventory that's a little bit older. It's not current inventory. And that has all been created by some of the industry consolidation that we've seen in the U.S. So some of the big distributors, particularly on the Moto side, there's been some consolidation activity at the distributor level, which has affected some of our competitors. And some of the sellouts of older goods have been at very low prices. We're seeing this as an opportunity to move some of this older inventory and to turn that into cash at this time to make room for the new inventory that we'll be bringing in quite soon to fulfill ordering levels moving forward. In terms of our margins moving forward, we do expect margins to improve. I think it's important to note you mentioned ADV that we primarily shipped out technical apparel on the ADV side. It's a very competitive area. ADV margins on the apparel side are a little bit tighter than what we see in the rest of the business. That's really because of the competitiveness in the area. It's a strategic move on our behalf. We took a decision that we needed to really get the stock into the shops in front of the eyes of end consumers. On a short-term basis, our margins there were quite tight. Now, of course, that all changes when we start bringing other ADV products into the mix. Things will certainly start improving and balancing out as the mix improves. Great. That was all very helpful. Thanks for the time, Sean. Chat soon. Thanks, Chris. Thanks a lot, Chris. I appreciate it. Our next question comes from Olivier Colombo. Please proceed with your question. Yes. Hello, Sean. Thank you for taking my questions. Hello, Olivier. Thank you. Hello, Olivier. I have actually four questions for you. The first one is, can you tell us more about those areas of the cycling and motorcycle industry that remain challenging? Yeah, sure. No problem, Olivier. So I mean, I guess the kickoff is mainly at the distributor level. And if we drill down, it's mainly with MTB distributors. And I would say that the most difficult area right now is Central Europe and the U.K. Of course, in the U.K., our distributor, WiggleCRC, had some administration issues last year, and their liquidation has been announced. So we are currently in the market with a new distributor that will be coming on board soon. And that will be announced quite soon. It's actually a very exciting move. But of course, that affected us in terms of Q1 shipments this year because last year, we were still shipping to a very healthy distributor in the U.K. Central Europe on the MTB side is also pretty tough at the moment. There's been some consolidation there as well and some financial difficulties at the dealer level, which has made distributor ordering a lot tighter than previously. But of course, that will move through the channel over time. So certainly, at the distributor level, more prevalent on the MTB side of the business. And in terms of regions, Central Europe and the U.K. are really the toughest areas. If I look at Moto, as I mentioned to Chris earlier, in the U.S., there's been some consolidation at the distributor level. So traditionally, there were three big distributors in the U.S. Two of them have had some troubles over the last few quarters. And that has affected some of the other brands out there in the market in terms of their distribution. And of course, they've also had very high inventory levels. That has created challenges, certainly, you could say, on the Moto side, particularly in the U.S., but also opportunities. We've been in a position where we can move some of our older inventory. Sure, the margins were not fantastic, but those will improve over time. So the Moto side in the U.S., we had an increase in sales to dealers, which is great, but the margins were not great, which, of course, reflects some of the difficulties that the marketplace is going through there right now. So primarily on the MTB side, Olivier, and some Moto difficulties that we are having in the U.S. Okay. Thank you very much. That's very helpful. Now, I have a question on the ADV line, which seems to be doing extremely well initially with the first apparel that have been shipped. When do you plan to release the boots and the glove line? And maybe a question for a non-professional from me or maybe a naive question. When a company like Leatt launches a brand new category, wouldn't it make sense to offer head-to-toe directly from day one? It's an interesting question, Olivier. I think strategically for us, what we try to do because, of course, we need to find a place in the dealers and in the distributors. At the beginning, we find it's best to select an area where there will be investment. Placing ourselves in front of our competitors will not require a huge investment like a head-to-toe line would require upfront. We then obviously try to get a place on the floor in retail and obviously also online. Once we establish ourselves as being a value player in the area and we can build a little bit on the brand, we then release the higher-ticket items once we've actually got a position as a player in the channel. That is exactly what we are doing now with ADV. It obviously also does take time to develop these products. We've been very excited to get this ADV line of apparel out to the market, especially under the current conditions where we wanted to make sure that we got our apparel in front of consumers and distributors and dealers as soon as possible. But of course, over time now, you should start seeing it filtering through over the next few quarters. Our head-to-toe offering will be at the dealer level. So I mean, generally, we would look at boots. We would look at helmets and those types of products as a kind of second tier to get us into the dealerships and into the distributors. So in the relatively short term, we should start seeing that at a dealer level and a consumer-facing level, which, of course, is very exciting. Yeah. No, I bet I understand the reason why. And my last question would be regarding salary increases of 26% for the quarter. I guess you have hired some new talent. Can you tell us more about these people, who they are, their industry experience, and what role will they fit at Leatt? Absolutely. No problem. I mean, this has really been a very strategic move from Leatt. We have taken the decision that there are some opportunities that have come out of the current industry dynamics, and particularly in the U.S., where we've been working very, very hard at building our own employee-managed sales force. Traditionally, in the U.S., we've worked with a kind of mix of employee sales reps and independent external reps that sell other brands. Over the last several quarters, we've been working very hard to bring on board some great sales managers, sales reps, and marketing people that have become available in the market. In the U.S., we've got about an additional eight people on board when compared to Q1 last year. We've got two new marketing people that are going to be making sure that we get a great presence out at some of the core events. So they're working hard at the grassroots level in the U.S. We also have the balance of the salespeople. We've got an additional two sales managers on the Moto side for different regions where we see that we've got potential for expansion. And of course, it takes some time for them to really start flexing their muscle. But that's going really, really well so far. And then, of course, we've got Dain, who we've brought on board. Dain is an industry guru on the MTB side. And he's our VP of sales and marketing on the MTB side. And he's also brought on a new sales rep on the MTB side. Great experience. And then, of course, the balance is really sales reps. So these are employee sales reps based in the U.S. covering the domestic market there, making sure that we improve our presence at the dealer level. There's still a huge opportunity for Leatt to grow its dealer base on the Moto side, and especially now that we have ADV on board as well. It becomes a door opener for us and something that we'll be focusing really, really hard on moving forward. And then if I look at in the rest of the world, we do have new product developers on board that have got huge industry experience in developing a few new categories on the Moto and the MTB side, which will be very exciting and should be in the market over the next few quarters. But of course, their salaries will go to product development costs. So now, we have also recently brought on in Q1 a sales and brand manager that is focusing on Eastern Europe, which is a huge emerging area for us. In fact, in Q1, we grew quite nicely in Eastern Europe. We see that as an area of great potential. Maciej came on board. He used to work for one of our strong distributors in Poland. He's now working for Team Leatt, focusing on the area. We do see great potential for growth there. I think one can expect us to continue looking at growth areas and finding strong people that will add focus to those areas moving forward. Yeah. That's perfect. Thank you very much for the detailed answers to my question. I really appreciate it, Sean. And wish you and the team all the best. Thanks, Olivier. Thank you so much, Olivier. Talk soon. We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Sean Macdonald for closing comments. Thank you all for joining us today on this call. We look forward to our next call to review the results of the 2024 second quarter.