Greetings, and welcome to the Leatt Corporation first quarter 2021 results conference call. At this time, all participants are on 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. It is now my pleasure to introduce your host, Michael Mason, Investor Relations for Leatt Corporation. Thank you. You may begin.
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 A.M. 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. 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.
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 has continued into a record-breaking 2021 first quarter. First quarters have been traditionally slow, but global revenues for the 2021 first 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 surging 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 our 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 our completely redesigned Moto helmet line for off-road motorcycle use. We will get to 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, a 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 raw 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. 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 motorsports 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 first quarter of 2021 increased to $12.9 million, up 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've touched on some of the highlights for percentage increases, I'll provide a further breakdown by product categories.
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 our other product categories. The 48% increase during the 2021 period is due to continued strong demand both in the U.S. and abroad. Neck brace sales accounted for 15% of our first quarter revenue. Our body armor products are comprised of a range of chest protectors, body protectors, and vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots, and mountain biking shoes. The 79% increase in body armor revenue is attributable to strong market demand for our full line of upper body and limb protectors, as well as our footwear category of off-road motorcycle boots and mountain biking shoes, both in the U.S. and internationally. Body armor accounts for 57% of first 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 Leatt helmets contain our patented 360° Turbine Technology for brain protection. The 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 Moto 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 goggles, 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 Moto and MTB apparel lines for off-road motorcycle and mountain biking use.
This other products, parts, and accessories category accounted for 16% of first quarter 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 for 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 31st, 2021, we have cash and cash equivalents of $3.79 million, compared to $1 million on March 31st, 2020. Our current debt-to-equity ratio stands at 2.8 to one, and we have no long-term debt. In closing, this has been a truly remarkable quarter.
We expect the trend in worldwide participation in outdoor 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 ordering sentiment 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 produce 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?
Thank you. Ladies and gentlemen, at this time, we'll be conducting a question and answer session. If you'd like to ask a question, you may 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 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 key. Our first question comes from the line of Olivier Colombo with A Private Investor. Please proceed with your questions.
Good afternoon, Sean.
Hello, Olivier. How are you doing?
Doing extremely well. Thank you very much. I would like to congratulate you and your team for the best quarter in Leatt's history, and especially in the Q1, which is seasonally a slow quarter. Congrats.
Thank you.
I had four questions for you. The first one is, did you face any out of stock during Q1? If yes, in what product category was that? The same question would apply for Q2.
Okay. Across our distribution network, demand and sales through distributors and also through dealers, was a bit stronger than expected. Some of our dealers were out of stock in certain categories. 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. The situation has certainly improved, Olivier.
That's excellent to hear. Thank you. The second question is regarding, I would like to better understand your strategy regarding the rising input cost. Do you plan to pass that over to retailers or to take some costs on by yourself?
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, 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, we have to respect what the realistic retail prices are. There will be some pass on to dealers, and to distributors, and ultimately end consumers, if the market moves in that direction. 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, we have managed to avoid any significant cost increases so far.
Excellent. Third question would be on the body armor sales that saw incredible increase during the quarter. Can you say that the Moto boots and the mountain bike shoes were ahead of management's expectations?
I can absolutely say. Sales of motorcycle boots and shoes have gone extremely well. Having said that, I would say that sales of our full body armor lineup exceeded our expectations. We've got some products, of course, that have been in the lineup for many, many years. They've continued to grow and they continue to sell well. Upper body armor and limb protection also exceeded our expectations.
That's excellent. Thank you. The last question is regarding the helmets, which were up also this quarter. You mentioned in your remarks that it's initial shipments of the redesigned Moto helmets. Does that mean that some regions did not get those helmets during Q1?
They all received the helmets during Q1. It has to pass from the distributor onto the dealer, so there may be some areas that have not fully received all of their stock at the dealership level. The vast majority of our dealers and our distributors had received stock in Q1. We had some really strong shipments of those new Moto helmets, and we hope to get really good restocking orders soon on those helmets.
Excellent. Thank you very much. Those were all the questions that I had. I wanted to wish you and the whole team an excellent Q2 as well. Please continue the great work that you have done for us here.
Thanks, Olivier, I appreciate that.
I could say that I am personally very, very happy.
Fantastic, Olivier. Thank you.
Our next question comes from the line of Chris Morris with Leatt Corporation. Please proceed with your question.
Hey, Sean. As a fan of you guys, I don't think I'm an official employee yet, but that's fine.
Yes, it's new to me, Chris. It's new to me.
Yeah. I just want to echo Olivier's sentiments on the quarter. On that, given how strong things were and, thinking back a year ago, you now sit on a cash balance that's greater than anything the company's ever had before. What are the things that you are looking to do? What does that new balance and that new level of investment ability afford you guys? What do you think over the next 12, 18 months and beyond?
Yeah, Chris, it's a good question. Of course, we'll 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. It's a combination of growing the product categories that we sell, refining the product categories that we sell, and I think it also gives us an opportunity to do some extensive marketing activities that'll just add fuel to the sales engine, and really help us to maintain the kind of momentum that we are currently seeing.
Okay. What are you hearing from, to the vein of continuing, kind of pouring fuel on the fire, what are you hearing from distributors about the competitive environment? I have to assume that you're one of the brands with stronger 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?
Yeah. 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. 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. 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.
Okay, great. Thank you.
Thanks, Chris.
Our next question comes from the line of Christopher Miller with a private investor. Please proceed with your question.
Yeah. Hi, Sean. Congratulations on the great start to the year.
Thanks, Chris. Nice to hear from you.
Just two questions for you today. First, in terms of the international sales, obviously the timeline of COVID impacts and recovery have varied widely region to region. Maybe you could comment on what you're seeing there. Is it broad-based strength across Europe and Asia, or are some areas performing much stronger than others?
Yeah. Generally, this trend towards outdoor activities and a growth in the outdoor industry is global. We don't see many areas or many major areas emerging or well-established where there's a weakness in demand. Things are surging really around the world. Looking at some of the sentiment that we've seen in some of the ordering patterns for our new lineup, the current trends that we're seeing industry-wide are continuing and are sustaining.
All right. Thanks for the color there. Secondly, there seems to be an increasing consumer interest in sustainability. Perhaps you're already ahead of the curve there, given your reputation for product durability and longevity. Maybe you could comment on how you think about sustainability in general, both in terms of product design and product sourcing. Are these matters that routinely come up in discussions with dealers and distributors?
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. We are continuously reviewing the material that we use in all of our products, and particularly on the packaging and the plastic side of things. 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 is 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. Certainly something which is very important to us, particularly actually in the bicycle industry.
We see that that is very 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.
That's great to hear. Well, that's all I have for you today. Thanks again, Sean, and good luck here in the second quarter.
Thanks, Chris. Nice chatting.
Our next question comes from the line of Jason Hirschman, a private investor. Please proceed with your question.
Hey, Sean. How are you doing?
Jason, how are you doing? I'm good, thank you. Good to hear from you.
Oh, I just called just to basically to say congratulations. It's really a tremendous quarter. It was a tremendous 2020. It's really been a fantastic journey. I don't really have much more to say than just. It's just amazing what you and Chris and the entire Leatt team have done. I'm just so happy for you and everybody there for having achieved what you've done. I'm sure there's wonderful things to come. I really just called basically and woke up early in Las Vegas just to say that, actually.
Well, Jason, that's fantastic. Thank you so much for the call and for calling in.
You know what? If you don't mind, let me ask you one question since I got you on the line anyway, right? I have to ask a question.
Sure.
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 sort of improve your inventory turnover so that more money ends up on the balance sheet and cash and less of it percentage-wise ends up in inventory? I know you've moved things a little bit forward, but I was wondering if maybe you can discuss that a little bit then.
Yeah, I think one of the big things that we 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. They move a little bit quicker. Things like gloves and apparel, you can sell them three to four times turnover a year, whereas other products that we've traditionally sold, like neck braces, it's more like one to two times a year. Just by nature 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 decrease the lead time between ordering and delivery to our distributors and to dealers. Also the amount of online e-commerce selling that we do.
I think all of those things are going to contribute to a higher inventory turnover rate.
Wow. Always amazing, always great, and 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.
Thank you, Jason. Fantastic to hear from you. Always a pleasure.
There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.
Thank you all for joining us today. We look forward to speaking with you again to recap the second quarter of 2021.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.