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Leatt Corp (LEAT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a strong inflection: revenue $15.37M (+45% y/y), gross margin 44% (up from 38%), and net income $1.12M (vs. $(0.82)M) with diluted EPS $0.17; momentum was broad-based across categories and geographies .
  • Helmets were the standout (+101% y/y), body armor (+37%), other products (+33%), and neck braces (+21%); international distributor sales surged +79% while U.S. brick-and-mortar dealer-direct contracted 9% .
  • Liquidity strengthened with cash $12.70M, CFO $0.77M, and current ratio 7.3:1, despite ongoing investments in working capital and digital platforms; inventory fell sequentially vs. year-end .
  • Management reiterated constructive outlook but flagged tariff/trade-war risks (U.S. exposure ~20% of shipments) and potential near-term logistics congestion; no formal numerical guidance provided .
  • Estimates context: S&P Global consensus EPS and revenue for Q1 2025 appear unavailable; given limited coverage (OTCQB), we anchor comparisons to company-reported actuals [GetEstimates Q1 2025].

What Went Well and What Went Wrong

What Went Well

  • Broad-based category growth: body armor +37%, helmets +101% (ADV and MTB helmet strength), other products +33%, neck braces +21% .
  • Margin expansion: gross margin reached 44% vs. 38% a year ago, driven by improved mix and sell-through as industry inventory digestion progressed .
  • International acceleration: distributor sales +79% with improved reordering patterns and restocking flowing through to revenues .
  • Quote: “We continued to fill robust ADV helmet orders and sales of our innovative and consumer focused line up of MTB helmets were exceptionally strong...” .
  • Quote: “Our revenue growth and momentum are being fueled by encouraging international sell-through and re-stocking dynamics...” .

What Went Wrong

  • U.S. dealer-direct softness: brick-and-mortar MOTO/MTB dealers in the U.S. contracted 9% amid stocking dynamics and turbulence at the dealer level .
  • Tariff uncertainty: vendors and customers concerned about landed costs; proposed extreme tariff levels (paused) could strain pricing and supply; potential port/container congestion as shipments resume .
  • Elevated operating costs vs. historical: OpEx has been rebuilt to support growth; while leverageable, investors will watch efficiency as scale returns .
  • Analyst concern focus: inventory as % of sales normalizing from ~40% toward 25–40% range; management expects improvement with SKU breadth and ADV build-out .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$12.14 $11.20 $15.37
Gross Profit ($USD Millions)$5.17 N/A$6.72
Gross Margin %42.6% (calc from 5.17/12.14) 41% 44%
Operating Income ($USD Millions)$0.03 N/A$1.43
EBIT Margin %0.2% (calc) N/A9.3% (calc)
Net Income ($USD Millions)$0.12 $(0.45) $1.12
Net Income Margin %1.0% (calc) (4.0)% (calc) 7.3% (calc)
Diluted EPS ($USD)$0.02 $(0.07) $0.17

Actual vs. consensus (Q1 2025):

MetricActualConsensusSurprise
Revenue ($USD Millions)$15.37 UnavailableN/A
Diluted EPS ($USD)$0.17 UnavailableN/A

Segment/product breakdown (Q1 2025):

CategoryRevenue ($USD Millions)% of TotalYoY Growth
Body Armor$6.87 45% +37%
Helmets$3.40 22% +101%
Other Products, Parts & Accessories$4.42 29% +33%
Neck Braces$0.68 4% +21%

KPIs:

KPIQ1 2025Comment
International distributor sales growth+79% y/y Restocking and improved sell-through
Consumer-direct sales growth+14% y/y U.S. channels and SA platform strong
U.S. dealer-direct (brick-and-mortar)(9%) y/y Inventory/turbulence persists
Cash from Operations$0.77M Operating cash generation despite investments
Cash & Equivalents$12.70M +$0.33M q/q
Current Ratio7.3:1 Strong liquidity
Inventory (net)$16.93M Down vs. $17.99M at 12/31/24
Gross Margin %44% +600 bps y/y

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY/Q2–Q4 2025None providedQualitative: expect growth to continue as reordering improves N/A
Gross MarginFY 2025None providedQualitative: margin improvement supported by sell-through/domestic conditions N/A
OpExFY 2025None providedQualitative: current OpEx can support $70–$80M sales before significant increase N/A
Working CapitalFY 2025None providedExpect WC investment to grow with ordering patterns; liquidity sufficient N/A
Tariffs/TradeFY 2025None providedMonitoring tariff risks; mitigating with suppliers/customers N/A

Note: The company did not issue formal numerical guidance ranges in Q1 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Tariffs/macroFlagged headwinds; flexibility via diversified Asia supply (Cambodia, Bangladesh, Thailand, Taiwan, Vietnam) Vendors/customers worried; extreme tariffs paused; U.S. shipments ≈20%; potential port congestion Intensifying risk management
Inventory digestionQ3: stabilization, −23% inventory over 9 months ; Q4: margins +5 pts as older inventory cleared Continued digestion; reordering improving; WC investment to grow Improving/normalizing
International distributorsQ3: uptick in Europe/South America/Oceania ; Q4: new UK/EU/emerging partners +79% y/y distributor sales; restocking drives revenue Strengthening
U.S. dealer directQ3: constrained brick-and-mortar ; Q4: pressure from KTM turmoil/interest rates (9%) y/y; reorganized U.S. sales force gaining traction Stabilizing but soft
ADV product performanceQ3: ADV apparel shipments; strong pipeline ; Q4: exceeded expectations Helmets/apparel strong; ADV 15–20% of sales; pipeline expanding Expanding
Consumer-direct channelQ3: +12% ; Q4: SA/U.S. platforms strong +14% y/y Steady growth

Management Commentary

  • “Gross profit for the quarter was up 68%, to $6.72 million, and gross profit as a percentage of sales increased from 38% to 44%...” .
  • “International distributor sales increased by 79%... The uptick in ordering... is filtering through to our revenues” .
  • “We continued to fill robust ADV helmet orders and... MTB helmets were exceptionally strong... building a promising pipeline of cutting-edge products” .
  • “We face some industry-wide geo-political and economic headwinds... trade war could impact consumer confidence and inflation... mitigate tariff risks and costs” .
  • “Cash increased by $331,000, to $12.70 million, with cash flows provided by operations of $768,000... current ratio... 7.3:1” .

Q&A Highlights

  • Tariffs and supply chain: U.S. shipments ≈20% of volume; extreme tariffs paused; current ~30% manageable with supplier/customer pricing; risk of port/container congestion as pauses lift .
  • Distribution: New partners in South America and UK (post-Wiggle CRC), broader restocking across Europe/Oceania driving order recovery .
  • ADV pipeline: Category already 15–20% of sales; broadening portfolio (boots, apparel, helmets) with upcoming innovative products .
  • Inventory normalization: Targeting inventory at ~25–40% of sales; efficiency improving with many new items shipping out; turns expected to improve .
  • Operating leverage: Current OpEx ($20–$22M annualized) can support $70–$80M sales before significant increases; reorganized U.S. sales structure to improve coverage .

Estimates Context

  • S&P Global consensus for Q1 2025 EPS and revenue appears unavailable for LEAT; comparisons are anchored to reported actuals. In the absence of coverage, the magnitude of the beat/miss versus consensus cannot be determined [GetEstimates Q1 2025].
  • Given strong y/y growth and margin expansion, where covered, models would likely need to reflect improved demand in helmets/ADV and stronger international restocking; however, formal estimate revisions are not observable due to limited coverage .

Key Takeaways for Investors

  • The quarter confirms a durable recovery led by helmets/ADV with international distributor restocking (+79%), positioning LEAT for continued top-line acceleration as inventory digestion progresses .
  • Margin expansion to 44% reflects improved mix and domestic trading conditions; sustaining >40% gross margin is a central driver of earnings power as scale returns .
  • U.S. dealer-direct remains a drag (−9%), but management is rebuilding the sales organization; watch for evidence of traction in U.S. brick-and-mortar over coming quarters .
  • Tariff and logistics risks are tangible; diversified Asian supply and active cost management provide partial mitigation, but volatility around landed costs and port congestion could affect near-term shipments .
  • Liquidity is robust (cash $12.70M; current ratio 7.3x); expect working capital investment to rise alongside improving orders—near-term cash allocation likely toward inventory/receivables and targeted marketing .
  • Category breadth and ADV expansion (now 15–20% of sales) are strategic growth pillars; continued product awards and pipeline strength (e.g., later Eurobike awards) support brand momentum .
  • Actionable: Near-term trading focus on restocking/helmets momentum vs. tariff/logistics headlines; medium-term thesis hinges on scaling sales channels (U.S. and international) and leveraging current OpEx to $70–$80M revenue without step-up costs .