Clarus Reports First Quarter 2024 Results

Rhea-AI Summary

Clarus (NASDAQ: CLAR) reported financial results for the first quarter of 2024, showing an increase in quarterly adventure sales by 27% and a reduction in apparel inventory by 38%. The company reaffirmed its full-year guidance and emphasized its focus on simplification, right-sizing, and new product launches in the outdoor enthusiast markets. Sales in the Adventure segment increased by 27%, driven by OEM customer demand, while the Outdoor segment faced challenges in the European wholesale market. Despite a decrease in gross margin due to promotional pricing and inventory reserves, Clarus remains committed to enhancing margins and profitability.

Positive

• Increased quarterly adventure sales by 27%.

• Reduction in apparel inventory by 38%.

• Reaffirmed full-year guidance.

• Focus on simplification and right-sizing in Outdoor segment.

• Launch of compelling new products and expansion in Adventure segment.

• Saw evidence of strategic initiatives yielding near-term benefits.

• Progress on inventory reduction initiatives in Outdoor segment.

• Continued success with new product launches in Adventure segment.

• Adjusted EBITDA from continuing operations increased to $2.0 million.

• Net cash generated in the prior year quarter.

Negative

• Loss from continuing operations of $6.5 million, or $(0.17) per diluted share.

• Decline in sales in the European wholesale market at Outdoor segment.

• Decrease in gross margin due to promotional pricing and inventory reserves.

• Significant reduction in free cash flow due to lower accounts payable.

• Net cash used in operating activities for the three months ended March 31, 2024, was $16.4 million.

Insights

Financial Analyst

Reviewing Clarus Corporation's first quarter 2024 results reveals a mixed financial situation. The slight dip in sales to $69.3 million suggests potential challenges in the European market, particularly in the Outdoor segment. However, the 27% surge in Adventure sales is a strong counterpoint, indicating successful product introductions and OEM customer engagement. Improved adjusted EBITDA margins, up to 2.9% from 1.6%, reflect efficient cost management despite a net loss from continuing operations. The significant reduction in inventory by 38% is a prudent move to mitigate cash flow risks. Investors should note the hefty repayment of long-term debt, which dramatically improved the company's liquidity position to $47.5 million in cash and equivalents, from $11.3 million. However, the use of $16.4 million in operating activities contrasts with the prior year's generation of $3.2 million, flagging a potential concern. The confirmation of full-year guidance hints at management's confidence in the company's strategic direction, but it's the execution that will determine if these goals are achievable.

Market Research Analyst

The outdoor enthusiast market is notoriously competitive and subject to seasonal and economic fluctuations. Clarus' decision to shrink its apparel inventory reflects a strategic alignment with market demand and streamlining efforts. The emphasis on an ESG-friendly approach might be tapping into the growing consumer preference for sustainable and ethically produced goods, potentially opening up additional market segments. The growth within the Adventure segment, particularly through OEM channels, suggests that Clarus is effectively leveraging its brand in niche markets. Nonetheless, the broader market's reaction could be muted due to the mixed financial results and the net loss reported. For future-minded investors, the sale of the Precision Sports segment and the focus on pure-play outdoor business could signify a strategic pivot worth monitoring, as it may lead to a more streamlined and focused business model.

Debt & Equity Analyst

Clarus Corporation's announcement to have cleared a substantial portion of its long-term debt is a significant event. By terminating the credit agreement and repaying $135.0 million, the company's debt profile has improved remarkably. This action will reduce future interest expenses and enhance financial flexibility. It's also noteworthy that Clarus has maintained a healthy level of net operating loss carryforwards, which could offer tax advantages moving forward. In terms of capital structure, there's a clear shift towards equity financing, as evidenced by the negligible total debt of $0.1 million. From a credit perspective, this deleveraging is a positive sign, but the negative free cash flow coupled with operational cash outflow may raise some eyebrows among investors who value solid cash flow generation.

Increased Quarterly Adventure Sales 27%

Reduced Apparel Inventory at Outdoor 38%

Reaffirms Full Year Guidance

SALT LAKE CITY, May 02, 2024 (GLOBE NEWSWIRE) -- Clarus Corporation (NASDAQ: CLAR) (“Clarus” and/or the “Company”), a global company focused on the outdoor enthusiast markets, reported financial results for the first quarter ended March 31, 2024.

First Quarter 2024 Financial Summary vs. Same Year‐Ago Quarter (adjusted to reflect the reclassification of the Precision Sport segment as discontinued operations)

• Sales of $69.3 million compared to $70.3 million.
• Gross margin was 35.9% compared to 36.3%; adjusted gross margin of 36.9% compared to 36.3%.
• Net income, which includes the impact of discontinued operations, of $21.9 million, or $0.57 per diluted share, compared to $1.6 million, or $0.04 per diluted share.
• Loss from continuing operations of $6.5 million, or $(0.17) per diluted share, compared to loss from continuing operations of $2.0 million, or $(0.05) per diluted share.
• Adjusted EBITDA from continuing operations of $2.0 million with an adjusted EBITDA margin of 2.9% compared to $1.1 million with an adjusted EBITDA margin of 1.6%.
  

Management Commentary
“We entered 2024 with a strong balance sheet and an experienced leadership team focused on initiating our strategic plan for our next phase as a pure-play, ESG-friendly outdoor business,” said Warren Kanders, Clarus’ Executive Chairman. “We are pleased with our execution in the first quarter, prioritizing simplification and right-sizing in Outdoor, along with the launch of compelling new products and expansion beyond the home market in Adventure. Based on our results to date, we have reaffirmed our full-year guidance and believe we have laid the foundation to drive increased profitability and unlock new growth opportunities going forward.”

Mr. Kanders added, “During the quarter, we saw evidence that our strategic initiatives are yielding incremental near-term benefits. Specifically, at Outdoor, we made progress on our inventory reduction initiatives, highlighted by a decline in apparel inventory of nearly 38% year-over-year. Overall, while we saw continued stabilization of the North American wholesale market, Europe and our independent global distributor markets still face difficult conditions. Building on the momentum we generated in the second half of last year, Adventure sales increased 27% in Q1 driven by strength in OEM customer demand. We are committed to establishing a best-in-class product ecosystem across the Adventure segment, while remaining intensely focused on enhanced product margins as we scale.”

First Quarter 2024 Financial Results
Sales in the first quarter were $69.3 million compared to $70.3 million in the same year‐ago quarter. This decrease was primarily driven by softness in the European wholesale market at Outdoor, partly offset by strength at the Adventure segment due to continued success with new product launches and OEM customers.

Sales in the Adventure segment increased 27% to $22.3 million, or $23.0 million on a constant currency basis, compared to $17.5 million in the year-ago quarter, reflecting higher demand from OEM customers and the impact of the TRED Outdoors acquisition. Sales in the Outdoor segment were $47.0 million, or $46.7 million on a constant currency basis, compared to $52.8 million in the year-ago quarter. The decline primarily reflects weakness in European and independent global distributor markets, partially offset by growth in the North American wholesale channel.

Gross margin in the first quarter was 35.9% compared to 36.3% in the year‐ago quarter. The decrease in gross margin was primarily due to promotional pricing at the Outdoor segment, the increase in PFAS related inventory reserves, as well as unfavorable channel mix at the Adventure segment. Adjusted gross margin in the first quarter was 36.9% compared to 36.3% in the year-ago quarter.

Selling, general and administrative expenses in the first quarter were $28.2 million compared to $29.4 million in the same year‐ago quarter. The decrease was attributable to expense reduction initiatives in the Outdoor segment to manage costs, as well as lower intangible amortization and lower stock compensation expenses. The decrease was partially offset by higher investment in marketing initiatives in the Adventure segment.

The loss from continuing operations in the first quarter of 2024 was $6.5 million, or $(0.17) per diluted share, compared to loss from continuing operations of $2.0 million, or $(0.05) per diluted share in the year-ago quarter. Loss from continuing operations in the first quarter included $3.0 million of charges relating to legal cost and regulatory matter expenses and $0.7 million of PFAS inventory reserve.

Adjusted loss from continuing operations in the first quarter of 2024 was $0.1 million, or $(0.00) per diluted share, compared to adjusted income from continuing operations of $0.4 million, or $0.01 per diluted share, in the year-ago quarter. Adjusted (loss) income from continuing operations excludes legal cost and regulatory matters expenses, PFAS inventory reserves, restructuring charges and transaction costs, as well as non-cash items for intangible amortization and stock-based compensation.

Adjusted EBITDA from continuing operations in the first quarter was $2.0 million, or an adjusted EBITDA margin of 2.9%, compared to $1.1 million, or an adjusted EBITDA margin of 1.6%, in the same year‐ago quarter.

Net cash used in operating activities for the three months ended March 31, 2024, was $16.4 million compared to net cash generated of $3.2 million in the prior year quarter. Capital expenditures in the first quarter of 2024 were $1.9 million compared to $1.5 million in the prior year quarter. Free cash flow for the first quarter of 2024 was an outflow of $18.3 million compared to positive free cash flow of $1.7 million in the prior year quarter. Free cash flow was significantly lower because of a significant reduction in accounts payable.

Liquidity at March 31, 2024 vs. December 31, 2023

• Cash and cash equivalents totaled $47.5 million compared to $11.3 million.
• Total debt of $0.1 million compared to $119.8 million.
• On February 29, 2024, approximately $135.0 million of long-term debt, interest and fees were repaid and the credit agreement was terminated.
  

Sale of Precision Sport / Discontinued Operations

On December 29, 2023, the Company announced the sale of its Precision Sport segment for $175 million. As the disposition was completed on February 29, 2024, we recognized a gain of $40.6 million, pending customary working capital adjustments, on the disposition during the three months ending March 31, 2024. The activities of the Precision Sport segment have been segregated and reported as discontinued operations for all periods presented.

2024 Outlook
The Company continues to expect fiscal year 2024 sales to range between $270 million to $280 million and adjusted EBITDA of approximately $16 million to $18 million, or an adjusted EBITDA margin of 6.2% at the mid-point of revenue and adjusted EBITDA. In addition, capital expenditures are expected to range between $4 million to $5 million and free cash flow is expected to range between $18 million to $20 million for the full year 2024.

Net Operating Loss (NOL)
The Company has net operating loss carryforwards (“NOLs”) for U.S. federal income tax purposes of $7.7 million. None of the NOLs expire until December 31, 2029.

Conference Call
The Company will hold a conference call today at 5:00 p.m. Eastern time to discuss its first quarter 2024 results.

Date: Thursday, May 2, 2024
Time: 5:00 p.m. Eastern time (3:00 p.m. Mountain time)
Registration Link: https://register.vevent.com/register/BIcdb6a4a884d64ac9a3bcfbb6965a71f6

To access the call by phone, please register via the live call registration link above and you will be provided with dial-in instructions and details. The conference call will be broadcast live and available for replay here and on the Company’s website at www.claruscorp.com.

About Clarus Corporation
 Headquartered in Salt Lake City, Utah, Clarus Corporation is a global leading designer, developer, manufacturer and distributor of best-in-class outdoor equipment and lifestyle products focused on the outdoor enthusiast markets. Each of our brands has a long history of continuous product innovation for core and everyday users alike. The Company’s products are principally sold globally under the Black Diamond®, Rhino-Rack®, MAXTRAX®, TRED Outdoors® brand names through outdoor specialty and online retailers, our own websites, distributors, and original equipment manufacturers. Our portfolio of iconic brands is well-positioned for sustainable, long-term growth underpinned by powerful industry trends across the outdoor and adventure sport end markets. For additional information, please visit www.claruscorp.com or the brand websites at www.blackdiamondequipment.com, www.rhinorack.com, www.maxtraxus.com / www.maxtrax.com.au, www.tredoutdoors.com, or www.pieps.com.

Use of Non‐GAAP Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). This press release contains the non-GAAP measures: (i) adjusted gross margin and adjusted gross profit, (ii) adjusted (loss) income from continuing operations and related earnings (loss) per diluted share, (iii) earnings before interest, taxes, other income or expense, depreciation and amortization (“EBITDA”), EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin, and (iv) free cash flow (defined as net cash provided by operating activities less capital expenditures). The Company believes that the presentation of certain non-GAAP measures, i.e.: (i) adjusted gross margin and adjusted gross profit, (ii) adjusted (loss) income from continuing operations and related earnings (loss) per diluted share , (iii) EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin, and (iv) free cash flow, provide useful information for the understanding of its ongoing operations and enables investors to focus on period-over-period operating performance, and thereby enhances the user's overall understanding of the Company's current financial performance relative to past performance and provides, along with the nearest GAAP measures, a baseline for modeling future earnings expectations. Non-GAAP measures are reconciled to comparable GAAP financial measures within this press release. We do not provide a reconciliation of the non-GAAP guidance measures Adjusted EBITDA and/or Adjusted EBITDA Margin for the fiscal year 2024 to net income for the fiscal year 2024, the most comparable GAAP financial measure, due to the inherent difficulty of forecasting certain types of expenses and gains, without unreasonable effort, which affect net income but not Adjusted EBITDA and/or Adjusted EBITDA Margin. The Company cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, the Company's reported GAAP results. Additionally, the Company notes that there can be no assurance that the above referenced non-GAAP financial measures are comparable to similarly titled financial measures used by other publicly traded companies.

Forward-Looking Statements
Please note that in this press release we may use words such as “appears,” “anticipates,” “believes,” “plans,” “expects,” “intends,” “future,” and similar expressions which constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting the Company and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements in this press release, include, but are not limited to, those risks and uncertainties more fully described from time to time in the Company's public reports filed with the Securities and Exchange Commission, including under the section titled “Risk Factors” in the Company's Annual Report on Form 10-K, and/or Quarterly Reports on Form 10-Q, as well as in the Company’s Current Reports on Form 8-K. All forward-looking statements included in this press release are based upon information available to the Company as of the date of this press release and speak only as of the date hereof. We assume no obligation to update any forward- looking statements to reflect events or circumstances after the date of this press release.

Company Contact:
Michael J. Yates
Chief Financial Officer
mike.yates@claruscorp.com

Investor Relations:
The IGB Group
Leon Berman / Matt Berkowitz
Tel 1-212-477-8438 / 1-212-227-7098
lberman@igbir.com / mberkowitz@igbir.com

CLARUS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
	March 31, 2024				December 31, 2023
Assets
Current assets
Cash	$	47,484			$	11,324
Accounts receivable, less allowance for
credit losses of $1,394 and $1,412		51,954				53,971
Inventories		88,630				91,409
Prepaid and other current assets		7,966				4,865
Income tax receivable		930				892
Assets held for sale		-				137,284
Total current assets		196,964				299,745
Property and equipment, net		16,345				16,587
Other intangible assets, net		37,526				41,466
Indefinite-lived intangible assets		56,897				58,527
Goodwill		38,300				39,320
Deferred income taxes		16,280				22,869
Other long-term assets		14,664				16,824
Total assets	$	376,976			$	495,338
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	12,772			$	20,015
Accrued liabilities		22,441				24,580
Income tax payable		816				805
Current portion of long-term debt		44				119,790
Liabilities held for sale		-				5,744
Total current liabilities		36,073				170,934
Long-term debt, net		37				-
Deferred income taxes		17,324				18,124
Other long-term liabilities		13,167				14,160
Total liabilities		66,601				203,218
Stockholders’ Equity
Preferred stock, $0.0001 par value per share; 5,000 shares authorized; none issued		-				-
Common stock, $0.0001 par value per share; 100,000 shares authorized; 42,878 and 42,761 issued and 38,236 and 38,149 outstanding, respectively		4				4
Additional paid in capital		692,381				691,198
Accumulated deficit		(329,811	)			(350,739	)
Treasury stock, at cost		(33,114	)			(32,929	)
Accumulated other comprehensive loss		(19,085	)			(15,414	)
Total stockholders’ equity		310,375				292,120
Total liabilities and stockholders’ equity	$	376,976			$	495,338

CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
	Three Months Ended
	March 31, 2024				March 31, 2023
Sales
Domestic sales	$	28,284			$	24,197
International sales		41,027				46,081
Total sales		69,311				70,278
Cost of goods sold		44,460				44,770
Gross profit		24,851				25,508
Operating expenses
Selling, general and administrative		28,215				29,354
Restructuring charges		370				-
Transaction costs		38				37
Contingent consideration benefit		-				(1,565	)
Legal costs and regulatory matter expenses		3,002				128
Total operating expenses		31,625				27,954
Operating loss		(6,774	)			(2,446	)
Other (expense) income
Interest income, net		370				5
Other, net		(909	)			76
Total other (expense) income, net		(539	)			81
Loss before income tax		(7,313	)			(2,365	)
Income tax benefit		(851	)			(334	)
Loss from continuing operations		(6,462	)			(2,031	)
Discontinued operations, net of tax		28,346				3,629
Net income	$	21,884			$	1,598
Loss from continuing operations per share:
Basic	$	(0.17	)		$	(0.05	)
Diluted		(0.17	)			(0.05	)
Net income per share:
Basic	$	0.57			$	0.04
Diluted		0.57				0.04
Weighted average shares outstanding:
Basic		38,208				37,137
Diluted		38,208				37,137

CLARUS CORPORATION
RECONCILIATION FROM GROSS PROFIT TO ADJUSTED GROSS PROFIT
AND ADJUSTED GROSS MARGIN
THREE MONTHS ENDED
	March 31, 2024					March 31, 2023
Sales	$	69,311			Sales	$	70,278
Gross profit as reported	$	24,851			Gross profit as reported	$	25,508
Plus impact of PFAS inventory reserve		729			Plus impact of PFAS inventory reserve		-
Adjusted gross profit	$	25,580			Adjusted gross profit	$	25,508
Gross margin as reported		35.9	%		Gross margin as reported		36.3	%
Adjusted gross margin		36.9	%		Adjusted gross margin		36.3	%

CLARUS CORPORATION
RECONCILIATION FROM LOSS FROM CONTINUING OPERATIONS TO ADJUSTED (LOSS) INCOME FROM CONTINUING OPERATIONS AND RELATED EARNINGS PER DILUTED SHARE
(In thousands, except per share amounts)
	Three Months Ended March 31, 2024
	Total sales			Gross profit			Operating expenses				Income tax (benefit) expense				Tax rate			Loss from continuing operations				Diluted EPS(1)
As reported	$	69,311		$	24,851		$	31,625			$	(851	)		(11.6	)%		$	(6,462	)		$	(0.17	)
Amortization of intangibles		-			-			(2,449	)			617							1,832
Restructuring charges		-			-			(370	)			59							311
Transaction costs		-			-			(38	)			6							32
PFAS inventory reserve		-			729			-				114							615
Legal costs and regulatory matter expenses		-			-			(3,002	)			461							2,541
Stock-based compensation		-			-			(1,178	)			181							997
As adjusted	$	69,311		$	25,580		$	24,588			$	587			129.6	%		$	(134	)		$	(0.00	)
(1) Potentially dilutive securities are excluded from the computation of diluted earnings (loss) per share if their effect is anti-dilutive to the loss from continuing operations. Reported loss from continuing operations per share and adjusted loss from continuing operations per share are both calculated based on 38,208 basic and diluted weighted average shares of common stock.
	Three Months Ended March 31, 2023
	Total sales			Gross profit			Operating expenses				Income tax (benefit) expense				Tax rate			(Loss) income from continuing operations				Diluted EPS(1)
As reported	$	70,278		$	25,508		$	27,954			$	(334	)		(14.1	)%		$	(2,031	)		$	(0.05	)
Amortization of intangibles		-			-			(2,768	)			278							2,490
Transaction costs		-			-			(37	)			6							31
Contingent consideration (benefit) expense		-			-			1,565				(335	)						(1,230	)
Legal costs and regulatory matter expenses		-			-			(128	)			2							126
Stock-based compensation		-			-			(1,286	)			277							1,009
As adjusted	$	70,278		$	25,508		$	25,300			$	(106	)		(36.7	)%		$	395			$	0.01
(1) Potentially dilutive securities are excluded from the computation of diluted earnings (loss) per share if their effect is anti-dilutive to the loss from continuing operations. Reported loss from continuing operations per share is calculated based on 37,137 basic and diluted weighted average shares of common stock. Adjusted income from continuing operations per share is calculated based on 38,109 diluted shares of common stock.

CLARUS CORPORATION
RECONCILIATION FROM LOSS FROM CONTINUING OPERATIONS TO EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA), EBITDA MARGIN, ADJUSTED EBITDA, AND ADJUSTED EBITDA MARGIN
	Three Months Ended
	March 31, 2024				March 31, 2023
Loss from continuing operations	$	(6,462	)		$	(2,031	)
Income tax benefit		(851	)			(334	)
Other, net		909				(76	)
Interest income, net		(370	)			(5	)
Operating loss		(6,774	)			(2,446	)
Depreciation		1,026				939
Amortization of intangibles		2,449				2,768
EBITDA		(3,299	)			1,261
Restructuring charges		370				-
Transaction costs		38				37
Contingent consideration benefit		-				(1,565	)
PFAS inventory reserve		729				-
Legal costs and regulatory matter expenses		3,002				128
Stock-based compensation		1,178				1,286
Adjusted EBITDA	$	2,018			$	1,147
Sales	$	69,311			$	70,278
EBITDA margin		-4.8	%			1.8	%
Adjusted EBITDA margin		2.9	%			1.6	%

 

 

FAQ

What were Clarus 's sales in the first quarter of 2024?

Sales in the first quarter were $69.3 million compared to $70.3 million in the same year‐ago quarter.

How much did Adventure segment sales increase by in the first quarter of 2024?

Sales in the Adventure segment increased by 27% to $22.3 million.

What was the gross margin in the first quarter of 2024 compared to the year-ago quarter?

Gross margin was 35.9% compared to 36.3% in the year‐ago quarter.

What was the adjusted EBITDA from continuing operations in the first quarter of 2024?

Adjusted EBITDA from continuing operations was $2.0 million.

What was the net cash used in operating activities for the three months ended March 31, 2024?

Net cash used in operating activities was $16.4 million.