OTC:LEAT
Leatt Corp
Leatt Corp manufactures high-performance protective gear for extreme sports enthusiasts and professionals worldwide.
Key Metrics
Investment Thesis
Bull Case
Leatt represents a deep-value opportunity with total assets of $46.5M against only $8.2M in liabilities, providing a substantial equity cushion for potential turnaround strategies. The company maintains robust liquidity with net fixed assets and low long-term debt obligations relative to its revenue base. Strategic partnerships with elite athletes offer defensive moats that could help stabilize demand even during broader economic downturns affecting discretionary spending.
Bear Case
Investors should be wary of the deteriorating profitability trajectory as net income has fallen from $10M in 2022 to a loss in 2024, signaling potential structural issues with cost management or pricing power. The significant retained earnings deficit of $28.6M indicates that the company has not been able to generate sustainable earnings over a multi-year period despite healthy cash flow. Revenue contraction from $76.3M to $44.0M over three years suggests a shrinking addressable market or loss of market share to more aggressive competitors.
About Leatt Corp
Leatt Corp (LEAT) is a premier manufacturer of protective performance apparel and equipment serving motocross, snow sports, and action sports enthusiasts globally. The company leverages advanced materials science to produce high-performance gear including helmets, body armor, and footwear for professional athletes and recreational users. With operations focused on the United States, Europe, and Asia-Pacific, Leatt delivers specialized protection that meets rigorous safety standards across diverse winter and summer sports markets.
Analysis
Management Discussion
Recent financial performance reflects challenging operating conditions with revenue declining to $44M from $76.3M in 2022, while net income turned negative at -$2.2M compared to $10M profitability two years prior. Despite a strong cash flow from operations of $2.8M and healthy cash reserves of $12.4M, the company recorded an operating loss of -$3.0M, indicating margin pressure likely stemming from inventory adjustments of -$2.1M and elevated general administrative costs relative to revenue. The accumulated deficit of $28.6M suggests a prolonged period where reinvestment in growth and market share has prioritized expansion over immediate profitability.
Industry Overview
The global action sports protective equipment industry is fragmented but highly competitive, dominated by specialized manufacturers who have built loyal fanbases around professional athletes. Growth in this sector is driven by increasing participation in extreme sports and a growing cultural emphasis on safety gear among younger demographics. However, the market is sensitive to economic cycles as consumers may delay purchases of premium-priced protective apparel during periods of inflation or recession.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Revenue | $76.3M | $47.2M | $44.0M |
| Cost of Revenue | $45.2M | $27.4M | $26.3M |
| Gross Profit | $31.1M | $19.8M | $17.7M |
| Operating Expenses | $18.4M | $18.5M | $21.0M |
| Operating Income | $13.0M | $1.4M | $-3.0M |
| R&D | $2.2M | $2.5M | $2.5M |
| G&A | $3.3M | $3.4M | $3.9M |
| Stock-Based Comp | $1.2M | $100.1K | $242.9K |
| D&A | $1.1M | $1.2M | $1.2M |
| Other OpEx | $12.9M | $12.5M | $14.6M |
| Non-Operating Income | $-13.6K | $-39.1K | $275.4K |
| Pre-Tax Income | $13.0M | $1.4M | $-2.7M |
| Income Tax | $3.0M | $576.2K | $-498.8K |
| Continuing Ops | $10.0M | $803.2K | $-2.2M |
| Discontinued Ops | $0 | $0 | $0 |
| Net Income | $10.0M | $803.2K | $-2.2M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $10.0M | $803.2K | $-2.2M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Current Assets | $47.7M | $42.3M | $41.2M |
| Cash & Equivalents | $7.1M | $11.3M | $12.4M |
| Accounts Receivable | $12.8M | $7.0M | $6.4M |
| Inventory | $22.8M | $20.4M | $18.0M |
| Prepaid Expenses | $2.9M | $2.3M | $3.0M |
| Other Current Assets | $2.1M | $1.3M | $1.4M |
| Long-Term Assets | $4.2M | $5.3M | $5.3M |
| PP&E (Net) | $3.1M | $4.0M | $4.0M |
| Operating Leases | $1.1M | $845.2K | $553.0K |
| Other LT Assets | $40.8K | $430.4K | $768.7K |
| Total Assets | $51.9M | $47.6M | $46.5M |
| Current Liabilities | $11.2M | $6.8M | $7.9M |
| Current Leases | $280.7K | $299.4K | $251.9K |
| Taxes Payable | $3.4M | $0 | — |
| Other Current Liab | $7.5M | $6.5M | $7.7M |
| Long-Term Liabilities | $1.0M | $576.4K | $302.8K |
| LT Operating Leases | $811.4K | $545.8K | $301.0K |
| Other LT Liab | $208.2K | $30.7K | $1.8K |
| Total Liabilities | $12.2M | $7.3M | $8.2M |
| Shareholders' Equity | $39.7M | $40.3M | $38.3M |
| Paid-In Capital | $10.6M | $10.7M | $11.0M |
| Retained Earnings | $30.0M | $30.8M | $28.6M |
| AOCI | $-1.1M | $-1.4M | $-1.5M |
| Total L&E | $51.9M | $47.6M | $46.5M |
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Net Income (CFO) | $10.0M | $803.2K | $-2.2M |
| Non-Cash Adjustments | $-41.8K | $18.3M | $5.8M |
| Working Capital Changes | $-6.8M | $-12.5M | $-782.7K |
| Cash from Operations | $3.1M | $6.7M | $2.8M |
| Cash from Investing | $-1.0M | $-2.0M | $-1.2M |
| Cash from Financing | $288.8K | $-1.3K | $-515.0K |
| FX Effect | $-252.8K | $-415.2K | $-28.6K |
| Net Change in Cash | $2.1M | $4.2M | $1.0M |
| Beginning Cash | $5.0M | $7.1M | $11.3M |
| Ending Cash | $7.1M | $11.3M | $12.4M |
Frequently Asked Questions
How does Leatt Corp make money?
The company derives revenue from three primary segments: motocross and off-road apparel which serves professional riders and recreational users; snow sports protective equipment including helmets and pads for skiing and snowboarding markets; and action sports footwear designed for skateboarding, BMX, and similar disciplines. These segments collectively account for the majority of the $44M reported revenue, supported by a diverse product catalog that addresses safety needs across multiple seasonal and geographic markets.
What are the main risks for LEAT?
Concentration risk in seasonal revenue streams where winter sports demand significantly impacts quarterly performance. The company faces intense competition from larger conglomerates entering the protective gear market with lower price points. Currency exchange rate volatility poses a threat given the global nature of their sales and manufacturing operations. A decline in consumer discretionary spending could disproportionately affect this non-essential niche market.
What is LEAT's competitive advantage?
First, Leatt commands strong brand recognition within niche extreme sports communities through sponsorships with top-tier professional athletes and teams. Second, the company's proprietary material technologies allow for lightweight yet durable protection that competitors struggle to replicate at scale. Third, a vertically integrated supply chain enables rapid prototyping and agile response to shifting consumer trends in action sports fashion.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.