The South African motorsports company Leatt Corporation is expanding into mountain biking and boosting its presence in the United States and Europe. It grew revenue 26 percent in the fourth quarter and turned a profit for the year ended Dec. 31, 2014.
The company introduced its Leatt helmet for bicycle users at the 2014 Interbike show in Las Vegas and at the 2014 Eurobike show in Germany, and the motorcycle version of the helmet was introduced at the 2014 Intermot show in Germany. Though based in South Africa, Leatt reports its sales in U.S. dollars.
The company made its first volume shipments of the new Leatt C-Frame Knee Brace in time for the 2014 holiday season. Fourth quarter sales were also buoyed by demand for the Fusion 2.0 Junior and Five.Five neck brace introduced in 2013 and the new C-Frame Knee Brace.
“The results of this quarter are a continuation of the positive trend of the last several quarters and have again confirmed that our strategy of investment in R&D, diversifying and broadening our product lines is working, and working well,” said Leatt CEO, Sean Macdonald. “Not only is revenue increasing overall, but we are seeing growth again in our higher margin products and we expect that all these trends will continue.”
Leatt said it boosted spending on advertising and commissions to launch its DBX helmets and C-Frame knee brace during the quarter. Leatt designed the mountain biking version of the helmet to be lighter than the motorsports version and to integrate with its neck brace as well as third party hydration tubes.
Payroll expenses also increased during the quarter as Leatt expanded branding and marketing staff in the United Kingdom and United States.
Net income reached $1.1 million, or $0.20 per share compared to revenues of $5.8 million, with net income of $1.6 million, or $0.30 per share, for the fourth quarter of 2013.
Fiscal Year 2014 results
Revenues for calendar year 2014 grew by 24 percent to $18.5 million, from the previous year's $14.9 million, primarily due to sales of new neck and knee braces and the new Fusion upper-body braces and body armor for children and for adults. Neck braces increased by 17 percent, or $1.4 million year-to-year.
Revenues from the sale of Body Armor products increased by 40 percent, or $2.2 million, primarily as a result of the successful introduction of the Leatt C-Frame Knee Brace.
Gross profit margin increased to 53 percent from 52 percent in 2013, due largely to a larger percentage of premium products in the overall product mix, combined with cost reductions in the bills of materials.
In spite of the higher revenues, most expense categories declined, with the exception of product R&D and salaries, but the result was a total increase in expense year-to-year of approximately $120,000. Notably, the company reported net income of $418,351, or $0.08 per share compared with a loss of $375,176, or $0.07 per share in 2013.
“We believe that our investments in marketing and R&D, as evidenced by the radical innovation and continued excellence of products developed by the R&D team led by Dr. Chris Leatt, will continue our transition to a more diverse, all-sports oriented company,” MacDonald said. “We expect that our new Leatt products will take their place alongside our flagship Leatt-Brace neck protection system, which remains the gold standard in the industry.”
Operations generated positive cash flow of $759,462 in 2014, compared to $255,500 in 2013. There was no debt at Dec. 31, 2014 as Leatt continued to meet its working capital needs from cash on hand and internally generated cash flow from operations.
Business outlook
“Leatt remains exceptionally serious about protection, which is backed by our investment in product research and development. Just as the Leatt neck braces have saved athletes from cervical injuries that could result in very severe results such as paralysis, we believe that the Leatt helmet can play a major role in reduction of impact at concussion level,” said MacDonald. “Leatt's helmet range includes 360 degrees Turbine Technology which reduces rotational acceleration of head and brain as well as a reduction in G-forces transferred to the head and brain. We believe that our new 360 degrees Turbine Technology is another game changing development by Leatt.
“We are also thrilled to announce that the Leatt Knee Brace is now registered to be sold as a Class 1 Medical Device in both the United States and the EU, and that the Leatt Shoulder Brace has been registered as such in the United States,” continued Macdonald. “We are particularly hoping to benefit from the upward trend in full and partial knee replacement surgeries in the United States reported by the American Academy of Orthopaedic Surgeons. United States and EU approval clears our products for therapeutic use by patients who need support to a shoulder or knee whether as a result of injury or surgery.”
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LEATT CORPORATION |
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|
Consolidated statements of operations and comprehensive income (loss) |
||||||
|
For years ended Dec. 31, 2014 and 2013 |
||||||
|
2014 |
2013 |
|||||
|
Revenues |
$ |
18,458,928 |
$ |
14,891,667 |
||
|
Cost of Revenues |
8,636,546 |
7,158,943 |
||||
|
Gross Profit |
9,822,382 |
7,732,724 |
||||
|
Product Royalty Income |
190,961 |
953,893 |
||||
|
Operating Expenses |
||||||
|
Salaries and wages |
2,302,115 |
2,134,815 |
||||
|
Commissions and consulting expenses |
581,601 |
545,846 |
||||
|
Professional fees |
1,117,887 |
1,228,514 |
||||
|
Advertising and marketing |
1,442,450 |
1,492,086 |
||||
|
Office rent and expenses |
244,510 |
256,407 |
||||
|
Research and development costs |
1,222,209 |
1,170,039 |
||||
|
Bad debt expense (recovery) |
75,285 |
(5,218) |
||||
|
General and administrative expenses |
2,081,339 |
2,097,155 |
||||
|
Depreciation |
304,690 |
334,049 |
||||
|
Total operating expenses |
9,372,086 |
9,253,693 |
||||
|
Income (loss) from Operations |
641,257 |
(567,076) |
||||
|
Other Income |
||||||
|
Interest and other income, net |
10,854 |
20,020 |
||||
|
Total other income |
10,854 |
20,020 |
||||
|
Income (Loss) Before Income Taxes |
652,111 |
(547,056) |
||||
|
Income Taxes |
233,760 |
(171,880) |
||||
|
Net Income (Loss) Available to Common Shareholders |
$ |
418,351 |
$ |
(375,176) |
||
|
Net Income (Loss) per Common Share |
||||||
|
Basic |
$ |
0.08 |
$ |
(0.07) |
||
|
Diluted |
$ |
0.08 |
$ |
(0.07) |
||
|
Weighted Average Number of Common Shares Outstanding |
||||||
|
Basic |
5,200,623 |
5,200,623 |
||||
|
Diluted |
5,200,623 |
5,200,623 |
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