Operator: Greetings and welcome to the Leatt Corporation First Quarter 2021 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host, Michael Mason, Investor Relations for Leatt Corporations. Thank you. You may begin.

Michael Mason: Thanks, Doug. Good morning and welcome to the Leatt Corporation Investor Conference Call to discuss the financial results for the first quarter of 2021. The company issued a press release today Wednesday, May 12, at 11:00 am Eastern and also 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, and our conference ID number 137 19613. A replay of the webcast will be available immediately following this call and will continue for 30 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 the call. Please refer to the complete cautionary statement regarding forward-looking statements in today's press release dated May 12, 2021. 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.

Sean Macdonald: Good morning on your side, Mike, and thank you, all, for joining us today. I am pleased to report that our strong performance at the end of 2020 have continued into a record-breaking 2021 first quarter. First quarters have been traditionally slow, but global revenues for the 2021 this quarter were $12.9 million, up 71% compared to the 2020 first quarter. This was the best quarter in our company's history exceeding our previous best quarter, the 2020 fourth quarter. We achieved revenue growth across our head-to-toe range of products, for mountain biking and off-road motorcycle riding in North America and abroad. We believe that these results are a strong testament to the momentum that the Leatt brand continues to achieve and the effectiveness of our business model. We are very proud of the Leatt team of talented staff and riders that have contributed to our continued excellence. While we saw soothing [ph] growth in most of our products during the period, we are especially proud of the increases in revenue in our body armor products. First quarter sales of body armor products, which includes a complete shoe and boot line increased by 79% when compared to the first quarter of 2020 and accounted for $7 million or 57% of our quarterly revenue. Our revenues from neck braces were also very encouraging, up 48% over the first quarter of 2020 and helmet sales increased 109% over last year, primarily due to strong demand for our innovative award winning MTB helmet line, and continued strong initial shipments of a completely redesigned motor helmet line for off-road motorcycle use. We will get some more detail on the financial results of the quarter in a moment, but some of the important headline numbers were remarkable. Net income was $2.1 million, 469% increase compared to a year ago. Margins remained consistent with last year at 47%, which is a major achievement as we continue to actively manage manufacturing and logistics costs in the midst of rising war materials and shipping costs in Asia. Our operating costs increased by 10%, which is in-line with our expectations. As we continue to grow, we are investing in our people, increasing commissions and salaries in-line with sales growth. And we are investing in more professional sales and marketing teams, which we believe will pay dividends by fueling growth now and in the future. We continue to advertise in various motor sports and bicycle magazines and online media, sponsor a number of events and sponsor professional teams and riders who not only help us engineer and design our products, but have proven to increase product and brand awareness globally. Now I'll turn to the financial results for the first quarter in a bit more detail. Total revenues for the fiscal quarter of 2021 increased to $12.9 million, up to 71%, compared to $7.5 million for the first quarter of 2020. First quarter income from operations increased to $2.8 million, up 460% compared to $491,000 for the first quarter of 2020. Net income for the first quarter of 2021 was $2.1 million, or $0.38 per basic and $0.34 per diluted share, compared to $362,000, or $0.07 per basic and diluted share for the three months ended March 31, 2020. Although I captured some of the highlights of percentage increases, I'll provide a bit of breakdown by product category. We are very pleased with the performance of our neck brace products for the quarter, as they continue to generate a higher gross margin than other product categories. The 48% increase during the 2021 period is due to continued strong demand both in the U.S. and abroad; [indiscernible] for 15% of our first quarter revenue. Our body armor products are comprised of a range of chest protectors, body protectors and base-back protectors, knee braces, knee and elbow guards to motorcycles boots and mountain biking shoes. And the 79% increase in body armor revenue is attributable to strong market demand for our full line of other body and limb protectors, as well as our footwear category of off-road motorcycle boots and mountain biking shoes both in the US and internationally. Body armor accounts for 57% of this quarter revenue. As I mentioned, our helmets continue to be refined and, in some cases, completely redesigned to meet the needs of a wider riding community. All these helmets contain our patented [ph] 360 degree turbine technology for brain protection. 109% increase in helmet sales is due to strong demand for our innovative award-winning MTB helmet line. And strong initial shipments of our completely redesigned redefined motor helmet line for off-road motorcycle use to our customers around the world. Helmets accounted for 12% of our first quarter revenue. Our other products, parts and accessory category is comprised of our bottles, hydration bags, and our apparel line of jackets, pants and jerseys. The 47% increase during the first quarter is due to the continued strong demand for our line of cutting edge motor and MTB apparel lines both for motorcycle and mountain biking use. This other products parts and accessories category accounted for 16% of fiscal to revenue. Turning to the balance sheet. We are currently meeting our working capital needs through cash on hand, a revolving line of credit as well as internally generated cash from operations. We believe that our current cash and cash equivalent balances along with the net cash generated by operations are sufficient to meet anticipated cash requirements by at least the next 12 months. We have no plans for any major capital intensive expenditures in the next 12 months beyond tooling for the production of our growing product range. As of March 31, 2021, we had cash and cash equivalents of $3.79 million compared to $1 million on March 31, 2020. Our current debt-to-equity ratio, stands at 2.8 to 1 and we have no long term debt. In closing, this has been a truly remarkable quarter. We expect the trend in worldwide participation in auto activities in spite of the COVID-19 pandemic to continue. Our strategy of building a global consumer brand and a pipeline of award-winning cutting edge and innovative protective gear that appeals to a wide range of riders is working exceptionally well. We believe that our products give riders the confidence that they need to push themselves further with gear that they can rely on. We look forward to presenting our 2022 product lineup to consumers during the second half of 2021. And we are encouraged by the initial order and sentiments from our distributors and dealers. In 2006, we produced a single product, a gold standard neck brace for a single market. Now 15 years later, we produced an array of products that protect virtually every part of the body and appeal to a wide rider community. Importantly, our suite of head to toe products has been a valuable investment for our partner dealers and distributors around the world. This is a truly exciting time for Leatt as the company and its stockholders are finally reaping some of the rewards of over a decade of hard work and persistent dedication to excellence. As always, we'd like to thank our entire Leatt family, our dedicated employees, business partners and team riders for their continued support in making Leatt the success that it has become. With that, I'll turn the call back over to the operator for a few questions. Operator?

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Olivier Colombo [ph], a private investor. Please, proceed with your question.

Unidentified Analyst: Good afternoon, Sean.

Sean Macdonald: Hello, Olivier. How are you doing?

Unidentified Analyst: I'm doing extremely well, thank you very much. We'd like to congratulate you and your team for the best quarter in Leatt's history and especially in the Q1 which is seasonally slow quarter. So congrats.

Sean Macdonald: Thank you.

Unidentified Analyst: I had four questions for you. The first one is did you face any out-of-stock during Q1? And if yes, in what product category was that? And the same question would apply for Q2.

Sean Macdonald: Okay. So, across our distribution network, demand and sales through distributors and also through dealers was a bit stronger than expected. So, some of our dealers were out-of-stock in certain categories. And of course, now in Q2, they have replenished their stock. They do have stock to sell. So, the situation is improving. There were no major categories that were affected beyond a few weeks out-of-stock. So, the situation has certainly improved, Olivier.

Unidentified Analyst: That's excellent to hear. Thank you. The second is a question is regarding - I would like to better understand your strategy regarding the racing input cost. Do you plan to pass that over to retailers or to take some costs on by yourself?

Sean Macdonald: I think, to answer your question, Olivier, there's a combination of things that we'll be doing. Of course, input costs have been increasing across the industry. So, we are watching the situation very carefully to see what's going to happen to retail pricing on the off-road motorcycle and the bicycle side of things. Because of course, we have to respect what the realistic retail prices are. So, there will be some pass on to dealers and to distributors, and ultimately end consumers if the market moves in that direction. And in some of the costs, we will be absorbing ourselves in order to balance everything out. I don't expect there to be a major knock on effect on our margins over the next several quarters because we have managed to avoid any significant cost increases so far.

Unidentified Analyst: Excellent. Third question would be on the body armor sales that saw incredible increase during the quarter. Can you say that the motor boots and mountain bike shoes were ahead of management's expectations?

Sean Macdonald: Yes. I can absolutely say so. Sales of motorcycle boots and shoes go on extremely well. But having said that, I would say that cells of our full body on a lineup exceeded our expectations. We've got some products, of course, that have been in the lineup for many, many years and they've continued to grow, they continue to sell well. Upper body armor and on protection also exceeded our expectations.

Unidentified Analyst: That's excellent, thank you. And the last question is regarding the helmets, which were up also this quarter. You mentioned in your remarks that its initial shipments of the redesign motor helmets, does that mean that some regions did not get those helmets during Q1?

Sean Macdonald: They all received the helmets during Q1. There may be - it has to pass [ph] from the distributor onto the dealer. So, there may be some areas that are not fully received all of their stock at the dealership level. But the vast majority of our dealers and our distributors had received stock in Q1. So, we had some really strong shipments of new motor helmets and we hope to get really good restocking orders soon on these helmets.

Unidentified Analyst: Excellent. Thank you very much. Those were all the questions that I had and I wanted to wish you and the whole team an excellent Q2 as well and please continue the great work that you have done for us.

Sean Macdonald: Thanks, Olivier. Appreciate that.

Unidentified Analyst: I could say that I am personally very, very happy.

Sean Macdonald: Fantastic, Olivier, thank you.

Operator: Our next question comes from the line of Chris Jares with React [ph] Corporation. Please, proceed with your question.

Unidentified Analyst: Hey, Sean. As proud as I am of you guys, I don't think I'm officially an employee yet. But that's fine.

Sean Macdonald: That's news to me.

Unidentified Analyst: Yes. I just want to echo Olivier's sentiments on the quarter. And on that, given how strong things were, thinking back in years, you now sit on a cash balance that's greater than anything that the company has ever had before. What are the things that you are looking to do? What is that that you balance in that? The new level of investment ability kind of afford you guys? What do you think your - the next 12, 18 months and beyond?

Sean Macdonald: Yeah, Chris, it's a good question. Of course, we will be plowing a lot of that back into product development and back into refining the product categories that we have. Many of these product categories are still in their infancy in terms of what we can do in the market. So, it's a combination of growing the product categories that we saw, refining the product categories that we saw and I think it also gives us an opportunity to do some extensive marketing activities that will just add fuel to the sales engine and really help us to maintain the kind of momentum that we are currently seeing.

Unidentified Analyst: Okay. So, what are you hearing from to that vein of continuing pouring fuel on the fire? What are you hearing from distributors about that competitive environment? I have to assume that you're one of the brands with strong momentum and what are they telling you from what other brands are doing what you're seeing in the marketplace in regards to taking share?

Sean Macdonald: Yes. The industry itself is of course doing really, really well, because people are pushing to get outdoors and to get away from the pandemic and the horrible statistics. So, as a whole, the industry is doing well. It is highly competitive. Leatt as a business took a conscious decision at the beginning of the lockdowns to continue developing products, to continue selling to our distribution network, servicing our customers, and really being very, very active as much as possible during lockdown, which I think has benefited us. The feedback that we're getting from our distribution network is that there has been some consolidation and some movement in the competitive environment. And Leatt has certainly benefited from that and we do expect that to continue as we become a much more important source of revenue for our distributors and for our dealers. We've certainly in certain areas, got a really good foot in the door now. And we plan on making sure that we maintain that moving forward.

Unidentified Analyst: Okay, great. Thank you.

Sean Macdonald: Thanks, Chris.

Operator: Our next question comes from the line of Christopher Moore [ph], a private investor. Please, proceed with your question.

Unidentified Analyst: Yes. Hi, Sean, congratulations on the great start of the year.

Sean Macdonald: Thanks, Chris. Glad to hear from you.

Unidentified Analyst: Just two questions for you today. First, in terms of the international sales. Obviously, the time line of COVID impacts and recovery have varied widely region to region. Maybe you could comment on what you're seeing there? Is it broad strength across Europe and Asia or are some areas performing much stronger than others?

Sean Macdonald: So generally, this trend toward auto activities and a growth in the auto industry is global. We don't see many areas or many major areas emerging well established, where there's weakness in demand. Things are surging really, around the world. And looking at some of the things that we've seen and some of the ordering patterns for our new lineup, the current trends that we're seeing industry-wide are continuing and are sustaining.

Unidentified Analyst: Alright, thanks for the color there. And secondly, there seems to be an increasing consumer interest in sustainability. And perhaps you're already ahead of the curve there, given your reputation for product durability and longevity. But maybe you could comment on how you think about sustainability in general, both in terms of product design and product sourcing and are these matters that routinely come up in discussions with dealers and distributors?

Sean Macdonald: Absolutely. It comes up a lot with dealers, with distributors with end consumers. And also, of course, now with our manufacturers in Asia. It's something which Leatt as a business is very, very serious about and we are continuously reviewing the material that we use in all of our products particularly on the packaging and the plastic side of things. And I think you'll see quite a big swing in the way that we deal with those areas over the next six to 12 months. It's something which is obviously extremely important to Leatt as a business, being the innovative cutting edge business that we are, it's important to us to make sure that we are sustainable and that our footprint is built on a sustainable basis. So certainly, something which is very important to us. Particularly actually in the bicycle industry, we see that that is important to end consumers and it's a focus area for us. It's one of the pillars that we are working on in our strategy to grow moving forward.

Unidentified Analyst: That's great to hear. Well, that's all I have for you today. Thanks again, Sean and good luck to you in the second quarter.

Sean Macdonald: Thanks, Chris. Nice chatting.

Operator: Our next question comes from the line of Jason Hershman [ph], a private investor. Please, proceed with your question.

Unidentified Analyst: Hey, Sean, how are you doing?

Sean Macdonald: Jason, how are you doing? I'm good, thank you. Good to hear from you.

Unidentified Analyst: I just called just basically to say congratulations, and truly tremendous quarter with a tremendous 2020, but it's really been a fantastic journey. And I don't really have much more to say than just it is amazing what you and Chris and the entirely Leatt team have done. I'm just so happy for you and everybody there for having to achieve what you've done. And I'm sure there's wonderful things to come. So, I really just called basically, woke up early in Las Vegas, just to say that actually.

Sean Macdonald: Jason, that's fantastic. Thank you so much for the call and for calling in.

Unidentified Analyst: If you don't mind me asking one question, since I got you on the line anyway. Right?

Sean Macdonald: Go ahead.

Unidentified Analyst: As you continue to grow - and I know we've talked about this in the past - what do you think you can do maybe to improve your inventory turnover so that more money ends up on the balance sheet in cash and less of it percentage-wise ends up in inventory? I know you've moved things a little bit forward. I was wondering if maybe you can discuss that a little bit, then?

Sean Macdonald: I think one of the big things that we all are looking at now is of course, a lot of the products that we are now selling are more - you could call them commodity based. So, they move a little bit quicker. So things like gloves and apparel, you can sell them three to four times a year. Whereas other products that we have traditionally sold like neck braces, it's kind of more like one to two times a year. So, just financial of the products that we are now moving towards selling more of, we should see inventory turnover rates, increasing. Of course the other thing is, we want to try and get more decrease the lead time between ordering and delivery to distributors and to dealers and also the amount of online ecommerce selling that we do. And I think all of those things are going to contribute to a higher inventory turnover rate.

Unidentified Analyst: Wow. Always amazing, always great. I'm so happy for you guys and I know you'll have a great rest of the year and your future is so bright. Really, well done.

Sean Macdonald: Thank you, Jason. Fantastic to hear from you. Always a pleasure.

Operator: There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Sean Macdonald: Thank you, all, for joining us today. We look forward to speaking with you again to recap the second quarter of 2021.

Operator: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation.