Greetings and welcome to the Leatt Corporation Fourth Quarter 2024 Results Call. At this time, all participants are in a listen-only mode. A 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. I would now like to turn the conference over to your host, Mr. Michael Mason, Investor Relations for Leatt Corporation. Thank you. You may begin. Thanks, Melissa. Good morning and welcome to the Leatt Corporation Investor Conference Call to discuss the financial results for the fourth quarter and full year 2024. The company issued a press release today, Friday, March 28, 2025, 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 13752688. A replay of the webcast will be available immediately following this 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 this 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 March 28, 2025. The company will make a presentation on the quarterly and year-end results, and then we will 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, and thank you. Thank you all for joining us today. Our entire team is very encouraged by the return to double-digit revenue growth in the fourth quarter. Total global revenues increased by 14% compared to the fourth quarter of 2023. This growth was fueled by international sell-through, new stocking dynamics, and the addition of strong distribution partners in key areas. Reordering patterns continue to stabilize, so this is a trend that we believe will continue. It was particularly encouraging to see growth from so many of our product categories in the fourth quarter. Body armor revenues increased by 14%, helmet revenues increased by 41%, and other product parts and accessories increased by 9%, with the only category that decreased being neck braces, which were down 25% compared to last year. ADV apparel sales exceeded our expectations, and we look forward to delivering a pipeline of innovative products to the growing ADV market over the next several quarters. We remain confident that we have the initial distribution, core competencies, and talent to reach this substantial segment. Gross profit as a percentage of sales continued to improve during the quarter, increasing from 36% in last year's fourth quarter to 41% as domestic trading conditions continued to improve. We continue to ship our new products, and inventory levels continue to stabilize. International distributor sales grew by 24% in the fourth quarter as inventory was digested, and as mentioned, margins for the fourth quarter increased by 5%. On a full-year basis, total revenues were $44 million, a 7% or $3.2 million decrease compared to 2023. Our consumer direct channel continues to display encouraging trends as our brand continues to build momentum around the world. Domestic sales on our consumer-facing channels in the U.S. continue to surge, and leatt.co.za, our consumer direct platform in South Africa, continues to show strong sales. International distributor sales decreased by 11.5% for the full 2024 year as our distributors digested elevated inventory levels in the first half of the year. Although dealer direct motor and MTB sales in South Africa continued to grow and MTB dealer sales in the U.S. were strong in 2024, these gains were partially offset by challenging U.S. motor dealer direct sales at the brick-and-mortar level, which contracted by 8%, resulting in a marginal 0.3% increase in total dealer direct sales. Margins for the full year decreased by 2%, from 42%- 40%, as a result of promotional selling opportunities to move older inventory in the first half of the year as we converted inventory to cash. While participation and demand for Leatt products remained strong, U.S. motor dealers continued to manage elevated inventory levels, and some industry turmoil is stabilizing. Cash increased by $1 million- $12.37 million, with cash flows provided by operations of $2.8 million for the full year. This result came despite current industry-wide conditions, reinvestments in working capital, capital expenditures on digital capabilities, and product molds that will fuel future growth. Our liquidity continues to improve as our team continues to manage working capital efficiently. In recent weeks, we have made some important strides in continuing to optimize our selling capabilities by building and refining a team of sales and marketing professionals around the world. We are confident that some of our newest additions to the team will have a strong impact on our performance moving forward. I've noted the addition of Rob Ramlos to the team as VP of motor and ADV sales. Rob brings a 20-year track record of strong industry success and a passion for building high-performance teams and dealer partnerships to the U.S. team. Although these investments typically take some time to make an impression on our results, we do believe that building out a great team will continue to be a cornerstone of our future growth plans. Now I will turn to more details on sales of our product categories for the full year 2024 compared to 2023. Sales of our flagship neck brace were $2.44 million, an 11% year-over-year decrease, attributable to the decrease in volume of neck braces sold. Neck brace sales were 6% of our total revenues for the year. Our body armor products are comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots, and mountain biking shoes. Body armor revenues for 2024 were $22.46 million, a 1% decrease year-over-year. Although revenues generated from the sale of upper body and limb protection increased by 14%, the overall 1% decrease was primarily the result of a 36% decrease in revenues from the sale of footwear, comprised of motorcycle boots and mountain biking shoes during the year. Footwear has been a particularly constrained category due to post-COVID stocking dynamics on an industry-wide basis. Body armor sales were 51% of our total revenues for the year. Helmet sales were $8.39 million, a 25% decrease year-over-year. Although strong shipments of our ADV helmet designed for adventure motorcycle riding continued, the decrease is due primarily to a 37% decrease in motor and MTB helmets sold to our international customers during 2024. As our distributors continue to manage elevated inventory levels as a result of post-COVID stocking dynamics that continue to improve as participation remains strong and ordering patterns improve. Helmet sales were 19% of our revenues for the year. Our other products, parts, and accessories category, which is comprised of goggles, hydration bags, and apparel items that include jerseys, pants, shorts, jackets, and aftermarket support items. Revenues were $10.74 million, a 1% decrease year-over-year. The decrease was partially due to a 22% decrease in the sale of our motor and MTB technical apparel lines designed for motorcycle and mountain biking use that was partially offset by strong sales of ADV technical apparel designed for adventure motorcycle riding. Our other products and accessories category were 24% of our revenues for the year. Now I will turn to our financial results in a bit more detail. Total revenues for the fourth quarter of 2024 were $11.19 million, up by 14% compared to $9.8 million for the fourth quarter of 2023. Net loss for the fourth quarter was $446,000 or 7 cents per basic and 7 cents per diluted share, as compared to a net loss of $1.46 million or 24 cents per basic and 23 cents per diluted share for the fourth quarter of 2023. Total revenues for the full year 2024 were $44 million, a 7% decrease compared to revenues of $47.24 million for the full year of 2023. This decrease in worldwide revenues is attributable to a $2.73 million decrease in helmet sales, a $310,000 decrease in neck brace sales, a $120,000 decrease in body armor sales, and a $60,000 decrease in other products, parts, and accessory sales. Net loss for the full year 2024 was $2.2 million or $0.35 per basic share and $0.34 per diluted share, down by 374% compared to $803,000 or $0.13 per basic share and $0.13 per diluted share for 2023. Leatt continued to meet its working capital needs from cash on hand and internally generated cash flows from operations. At December 31, 2024, the company had cash and cash equivalents of $12.37 million compared to $11.35 million at December 31, 2023, and a current ratio of 5.2 to 1. In other developments during the quarter, we are proud to announce that Leatt has once again been recognized with two prestigious Design & Innovation Awards for 2025. The first award is in the apparel category with our Ride Kit MTB 1.0, and the second is in the components category with the Ceramic All Mountain 8.0 Ti Flat Pedals. The Design & Innovation Awards are considered the gold standard in the bike industry as products are put through real-world testing by a panel of 50 international experts, including journalists, test riders, and engineers. Winning in two categories is a huge achievement and a testament to our team's dedication to innovation, performance, and quality. In addition, we are also extremely proud to announce our sponsorship of highly respected supercross athletes, Colt Nichols, Justin Hill, and Kyle Chisholm. Their partnerships with Leatt reinforces our commitment to providing world-class gear, and we look forward to seeing these athletes compete at the highest level while showcasing the innovation and quality that Leatt is defined by. To summarize, we are all very enthusiastic about the future of Leatt. Although there are still some challenging geopolitical, trading, and economic headwinds globally that could impact demand, inventory continues to be digested, participation remains strong, and ordering patterns continue to improve and have started to filter through to our revenues. These are trends that we do believe will continue. As ordering patterns at the consumer level and ultimately the distributor and dealer level continue to improve, we also expect working capital investments to grow in the coming periods. We are confident that we have sufficient strong liquidity to fuel this growth. Despite some constrained brick-and-mortar motor dealer sales in the U.S., our team remains enthusiastic about the recovery that is currently in play and the latest additions to our team. We will continue to optimize our selling capabilities by building and refining a team of sales and marketing professionals around the world. We also have some very exciting new distributor partnerships in the United Kingdom, Europe, and emerging markets that will continue to filter through to our revenues over the next few quarters. It was particularly encouraging once again to see body armor, helmets, and other products, parts, and accessories return to growth in the fourth quarter on a global basis. Growth in sales of our ADV gear also exceeded our expectations, and we remain confident that we have the track record and ability to reach the substantially growing ADV market segment in the upcoming quarters. With a strong portfolio of innovative products in the market and in the pipeline, a multi-channel sales organization that is growing and developing, and a robust balance sheet to fuel brand and revenue growth, we remain confident that we are very well positioned for future sustainable growth and shareholder value. As always, we'd like to thank our entire Leatt family, our dedicated employees, business partners, and team riders for the continued strong support. With that, I'd like to turn the call over to the operator for questions. Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd 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. Thank you. Our first question comes from the line of Christopher Mueller, private investor. Please proceed with your question. Hey, Sean. I hope you're doing well today. Hey, Chris. Nice to hear from you. Hey, good to speak with you. Good to see the return to double-digit growth. I have maybe three or four questions today. First, could you comment on the impact and any response thus far to the escalating trade war and tariffs? Maybe more specifically, what degree of flexibility do you have on the manufacturing side to mitigate this? Absolutely. It certainly is a dynamic that we are watching very, very closely. With the increase in tariffs already and the trade war that is clearly in play, we are taking steps currently to work on the flexibility that you speak of. We've got very good relationships with our suppliers throughout Asia. As you will know, three or four years ago, we already started working on supply-side channels outside of China. We've got some supply set up now in Cambodia, in Bangladesh, in Thailand, in Taiwan, and soon to be in Vietnam as well. Many of our factories that we are working with do have factories in areas outside of China. Of course, we are very aware of the fact that Asia as a target in general is something that we need to keep an eye on. We are working very closely with our manufacturers right now to look at what flexibility they have in terms of supply and in terms of pricing and in terms of support so that we can maintain the margins that we have been able to achieve in the past. Currently, it hasn't affected our margins materially. Of course, we're very aware of the fact that this is something that needs to be managed very carefully. Okay. Possibly on a related note, in the 10-K, you noted the increase in rent expenses related to "inclusion of consolidation warehousing costs to facilitate global shipping." Is this a reclassification of expenses that were previously under cost of goods, or are you doing something differently on the operation side? That's correct. What we're doing is we're reclassifying some of the expenses that were under cost of goods previously for China consolidation, and we're bringing that out in order to manage that really carefully and putting it into warehousing costs below the cost of sales line. Okay. Great. In regards to the personnel changes in the U.S. and the new leadership on the moto side, does this signal any sort of change in direction? Generally, how are you thinking about U.S. sales and marketing priorities as we move through the year? Absolutely. I think it's really just an intensification of our efforts, particularly on the moto sales side of things. I mean, MTB continues to be a strong focus for us in the U.S., where we feel that we have a lot of opportunity for growth and for market penetration. Even though the MTB industry remains under some stress, I think Leatt has some great opportunities on the MTB side of things. Strategically, really, we just felt that we needed to intensify some of the selling activities, particularly on the moto side, which is why we brought on a VP of moto sales that has got really strong selling and operational skills, as well as some fantastic industry contacts and relationships, which we feel is really, really important. We will be looking now quite closely at the selling organization that we have and with a view to really having a mix between employee sales reps and perhaps in some areas where it makes sense, looking at getting independent rep groups on board just in order to make sure that where we are able to sell strongly, we have the right kind of rep mix in play. I think in general, on the brick-and-mortar side in the U.S., we are very focused now on getting better coverage and on servicing our dealers a lot more professionally. Hopefully, we'll see that filtering through to the results over the next several quarters. Great. That's all good to hear. Just as one last question for me, the financial difficulties and restructuring at KTM have been widely discussed. Maybe you could just comment on any effects you're seeing there and how this may relate to the softness you're seeing on the moto dealer sales in the U.S.? Absolutely. That's a very big factor that's been around for the last six months. I mean, I think the biggest impact that we see is really on a sentiment level at the dealer level because dealers are, I mean, a lot of dealers have got significant KTM stock of motorcycles. They are now probably in a position where they will be looking to channels in order to sell those. Of course, they have brought them at a certain level, at a certain price. Other bikes could potentially be distressed quite soon or already are distressed. Many dealers are under stress because of what is going on with KTM. It certainly has resulted in some industry turmoil and mainly on an uncertainty level because there is no real certainty as to exactly what is going to happen with KTM, whether there is going to be some support coming from a buyer or whether they are going to need to liquidate. The market turmoil in the motor industry has certainly been an impact of it. It is really bad timing because obviously, after COVID, things were already a little bit stressed. We're seeing dealer sentiment and dealer appetite to really invest strongly in things has been certainly impacted. We hope that the uncertainty moves through the system as fast as possible. Participation remains strong. People are still riding, and people still want to ride, so that obviously is a big plus. Dealers are monitoring very closely the foot traffic through their doors. I think economically, should interest rates start to drop, I mean, interest rates obviously have been a little bit sticky, and we can see some choppiness now also with inflation. There's a bit of uncertainty on that level as well, I think, at the dealer level because, of course, when interest rates start dropping, people will then have a much bigger appetite to finance things like motorcycles. I think that's going to also have a really positive impact on dealers in the U.S. over time. Yes, KTM has been a factor. The economic conditions have been a factor, and COVID stocking dynamics continue to be a factor, although less of a factor than in the MTB industry where that is still definitely in play. All right. That's all very helpful. Thanks for the time, Sean. Chat soon. Chat soon. Cheers, Chris. Bye. Thank you. Our next question comes from the line of Nick Fisher, private investor. Please proceed with your question. Thanks for taking my call, Sean. I just have a couple of questions. The first is, with the industry relatively stabilized, as you said, how do you think about the use of cash here at nearly $2 a share now? I mean, I think obviously, things are starting to increase now in terms of particularly on the international distribution side of things. We are already starting to see an uptick in the ordering. I think we are going to start seeing cash being put back into working capital and inventory. There is no doubt about that. Over the next few quarters, we will be investing in inventory for sure, which is, of course, I mean, we get a great return on that. That is the best place for it to be and receive a lot. Payments to our suppliers in the form of deposits and low-cost capital investment. We do have some cash that we are going to be using over the next few quarters. Of course, I mean, we are always looking at different opportunities to use our cash as efficiently as possible. Okay. Very good. I appreciate that. You essentially addressed it, but I just wanted to get a little more color on the use of cash for working capital growth, as you mentioned in the release, and the need to address inventory levels a little bit with the return to growth and the ADV line. Sure. Absolutely. I think, yeah, as I said, we're going to be investing in inventory. We're going to be investing in working capital in the form of accounts receivables. Growth, marketing, you can expect us to intensify some of our marketing activities with some of these new categories that we've got in. ADV is a big category for us now, and we've already had some fantastic initial success. The products are fantastic, and many of our distributors and dealers around the world are very supportive of what we're doing on the ADV side. That also requires investment. If we want to grow in the ADV market, that's certainly going to impact our inventory investments and our investments in receivables and just investing in general in marketing to fuel future growth. That is really what I was referring to in terms of working capital spend, that we can expect nothing out of the ordinary, nothing that one wouldn't expect from a company that is looking to grow double digits. Very good. Thank you for the color, Sean. I appreciate it. Appreciate it. Chat soon. Thank you. Our next question comes from the line of Chris Brennan with Milwaukee Capital. Please proceed with your question. Hey, Sean. Good to hear that things are back to growth and that orders are stabilizing here. If I take a step back, if I look back to where you guys were in 2020, you guys were about a $40 million top-line business at that point. Yet you're operating, and you're still roughly there, around $40 million or so in sales. Yet the OpEx line for you guys has almost doubled from $10 million- $20 million. And the business as a whole has cumulatively lost in terms of net income for nine quarters or so. My question is, you and I have talked about $100 million in sales is the point where this business really gets to scale and can really start generating healthy profits. I'm just wondering, is that still a feasible goal? As we grow into that, and as we get to that point, do you expect to earn profits as we get there, or is it kind of a break-even? Let me deploy all my free cash flow and gross profits into growth and telecom. It's a good question. I mean, I think this is obviously the journey to $100 million, and hopefully, we do believe that we can get there. I think there's profitability on the way there. I certainly don't think that we will be break-even if we do do $100 million in sales. We'll be strongly profitable at that point. Of course, we have set our costs up for the future growth that we are expecting. The team that we have on board now is really set up, and the marketing level that we have now is set up for the categories that we have, the full head-to-toe categories that we have, and the three primary markets that we are trying to sell to, which is, of course, moto, MTB, and ADV, and the growing products that we have on board. We're expecting to get back to double-digit growth on an annual basis as soon as possible. Should we do that along the way, we are targeting to have profitability and growth in profitability certainly on an annual and a sequential basis. There may be some choppiness as we go over the next few quarters, over the next few years, but we remain focused on trying to double our revenues every three to five years. We certainly think that we do have the team on board now, and many of the investments in R&D and product development are not going to be increasing in order to be able to do those kinds of numbers. I think we are expecting profitability along the way, to summarize. Should we double our revenues, we certainly will be a strongly profitable business. Got it. How do you think about a normalized level of sales for the business? It's obviously volatile and going to be dependent on macro trends and riding trends and trade wars and whatever else. Is there a way for you to say, "Hey, I really think that this industry is 30% off its peak and that I should thereby be at sales levels that are X percent higher"? Is it just any kind of simple mental math that you use when you're thinking about, "Hey, I'm investing ahead of what I think is going to be growth, and here's what I think that growth actually is"? I get the double-digit target, but is the industry depressed to a certain level that everybody should be a certain percent higher? I mean, it's obviously a very good question, and it's quite an analytical question. I mean, I think it's difficult to answer that question with very broad strokes because different categories, different industries are at different levels right now in terms of their recovery from the hangover after COVID, and different industries are exposed to some of the risks that are out there right now at different levels. I would not say that it is a kind of broad stroke answer, but I can go by what I am seeing in some of the reporting that we do and get to see in the industry and certainly in discussions that I am exposed to with some of our industry peers. I mean, I think the industry is certainly, I can say, still depressed. We are not at a normalized level yet. I think should we have double-digit growth over the next one to two years, things will then be more normal, I think. Certainly, for many of the industry players, if they do do that, I think that they would be on track to reach their goals too. It is quite a difficult question in the current turmoil that we are seeing and the many variables that are out there. I do think things are certainly still depressed. To put an exact percentage on the entire industry is a little bit challenging, but I think there's certainly many opportunities for growth. If you look also at a company like Leatt, where we are still in our infancy in terms of market share in many other categories that we sell, we still have a huge amount of opportunity. I think that is a very strong position to be coming at this situation from. Got it. Makes sense. Thank you, Sean. Thanks. Thanks very much, Chris. Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn it back to Mr. MacDonald for any final comments. Thank you all for joining us today on this conference call. We look forward to our next call to review the results of the 2025 fiscal quarter. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.