Clarus Corp. reported sales grew 7 percent in the third quarter and predicted its fourth-quarter sales would climb in the range of 11 percent to 13 percent. Black Diamond sales dropped 8 percent while Sierra Bullet’s sales soared 135 percent.

Third Quarter 2020 Financial Summary vs. Same Year‐Ago Quarter

  • Sales increased 7 percent to $64.5 million. Wall Street’s consensus estimate was $63.6 million.
  • Gross margin was 33.6 percent compared to 34.1 percent.
  • Net income was $1.2 million, or $0.04 per diluted share, compared to $3.5 million, or $0.11 per diluted share.
  • Adjusted net income, before non‐cash items, was $9.2 million, or $0.30 per diluted share, compared to $6.0 million, or $0.19 per diluted share. Results were well ahead of Wall Street’s consensus estimate of 21 cents a share.
  • Adjusted EBITDA increased 34 percent to $9.1 million.
  • Free cash flow (net cash provided by operating activities less capital expenditures) improved significantly to $5.0 million compared to $(4.9) million.

On October 21, Clarus said it expected sales for the third quarter to range between $63 million to $64 million with adjusted EBITDA in the range of $8-$9 million,

Management Commentary
“As indicated in our pre-announcement, our third-quarter results showed the strength of our well-diversified brand portfolio,” said Clarus President John Walbrecht. “Black Diamond sales continued to improve and ended the third quarter down only 8 percent year-over-year, and sales for Sierra increased 135 percent to a record $15.1 million. These results were supported by our well-defined strategy of preserving brand equity while continuing to execute on our ‘innovate & accelerate’ playbook across our portfolio of brands.

“Subsequent to the third quarter, we welcomed Barnes Bullets—our newest ‘superfan’ brand—to our platform. Barnes embodies the traits we seek in an acquisition, including a rich history of innovation and strong brand awareness amongst the core, yet untapped market potential. Leveraging our balance sheet, we expect to execute the same playbook to drive accelerated growth and market share expansion with Barnes that we’ve done with both Black Diamond and Sierra. We look forward to ending 2020 on a strong note and continuing our momentum into 2021.”

Third Quarter 2020 Financial Results
Sales in the third quarter increased 7 percent to $64.5 million compared to $60.2 million in the same year‐ago quarter. Black Diamond sales were down 8 percent and Sierra sales were up 135 percent. The decrease in Black Diamond was primarily due to lower levels of retail demand due to COVID-19. The increase in Sierra was due to sales improvements across every channel and region. Sales in the company’s DTC channel were up 24 percent. On a constant-currency basis, total sales were up 7 percent.

Gross margin in the third quarter decreased 50 basis points to 33.6 percent compared to 34.1 percent in the year‐ago quarter due to unfavorable impacts on the company’s supply chain and logistics as a result of COVID-19.

Selling, general and administrative (SG&A) expenses in the third quarter increased 14 percent to $18.7 million compared to $16.4 million in the year‐ago quarter primarily due to higher stock-based compensation given Clarus’ stock price appreciation during the quarter. Black Diamond brand SG&A was down 11 percent due to cost-saving initiatives. Sierra SG&A was up 14 percent due to strong sales growth.

Net income in the third quarter was $1.2 million, or $0.04 per diluted share, compared to $3.5 million or $0.11 per diluted share, in the year‐ago quarter. The decrease included $6.6 million of non‐cash charges and $1.4 million in transaction costs compared to $2.5 million of non‐cash charges and minimal transaction costs in the same year‐ago quarter.

Adjusted net income in the third quarter, which excludes the non‐cash items and transaction costs, was $9.2 million, or $0.30 per diluted share, compared to an adjusted net income of 6.0 million, or $0.19 per diluted share, in the same year‐ago quarter. Adjusted EBITDA in the third quarter increased 34 percent to $9.1 million compared to $6.8 million in the same year‐ago quarter.

Net cash provided by operating activities for the third quarter ended September 30, 2020, was $6.6 million compared to $(4.0) million in the prior year. Capital expenditures in the third quarter were $1.6 million compared to $0.8 million in the same year‐ago period. Free cash flow for the quarter ended September 30, 2020, was $5.0 million compared to $(4.9) million in the same year‐ago period.

Liquidity At September 30, 2020 vs. December 31, 2019

  • Cash and cash equivalents totaled $17.0 million compared to $1.7 million. Total debt of $41.1 million compared to $22.7 million and reflected the full purchase price of Barnes Bullets of $30.5 million, which was acquired on October 2, 2020.
  • Remaining access to $38.9 million on the company’s revolving line of credit.
  • The net debt leverage ratio of 1.3x compared to 0.9x.

2020 Outlook
Clarus anticipates sales in the fourth quarter of 2020 to range between $67.5 million and $69.0 million, up 11 percent to 13 percent, compared to $61.0 million in the fourth quarter of 2019.

Photo courtesy Black Diamond