Clarus Corp. logged a second quarter loss as sales sunk 2.4 percent as a 13.6 percent sales gain in the company’s Adventure segment was offset by a 9.7 percent slide at Black Diamond that was blamed on weakness in North American DTC operations and softness in Europe.

“Against a backdrop of constrained consumers in the outdoor space, we made incremental progress in the second quarter executing Clarus’ strategic initiatives to seek to create long-term value,” said Warren Kanders, Clarus’ executive chairman. “We are pleased to see continued improvement in the Outdoor segment, particularly related to simplification and the rationalization of product lines, combined with continued evidence of stabilizing trends in the North American wholesale market, as we focus on our core products and categories. In the Adventure segment, while revenue increased year-over-year for the fourth consecutive quarter, the level of sales growth was affected by constrained consumer demand in the North American market compared to our expectations, and overall profitability was impacted by increased investment aimed at accelerating long-term growth.”

Kanders added, “Looking forward, we are confident that Clarus is well positioned to drive sustainable and profitable growth as a pure-play, ESG-friendly outdoor business, supported by outstanding leadership and a debt-free balance sheet. We remain in the early stages of our multi-year strategic plan but believe the investments we have made to date strengthening our teams, enhancing business processes, and ensuring we offer in-demand, premium product across our key categories will deliver significant long-term benefit. Based on our results through the first half of the year, we are pleased to reaffirm our full-year revenue guidance. Reflective of market headwinds, as well as our strategic decision to aggressively invest in the business, we have revised our 2024 adjusted EBITDA expectations.”

Clarus lowered its full-year earnings guidance to reflect weakness in its Adventure segment and investments in scaling the Adventure segment.

The company also initiated a review and evaluation of strategic options for its Pieps snow safety brand, with the intention of soliciting interest from potential acquirers. This strategic initiative is aligned with Clarus’ prioritization of simplifying the business and rationalizing our product categories. The company’s Board of Directors has not set a timetable to complete this review and evaluation of strategic options nor have any decisions been made relating to strategic options at this time. There can be no assurance that the review process will result in any transaction that will be consummated. The company and the company’s Board of Directors do not intend to comment further about this strategic review unless and until they deem further disclosure is appropriate.

For the second quarter,  consolidated sales slid 2.4 percent to $56.5 million compared to $57.9 million in the comparable year‐ago quarter. This decrease was primarily driven by softness in the European wholesale and North American direct-to-consumer markets at Outdoor, partially offset by a year-over-year increase in Adventure segment sales, specifically the OEM channel.

Sales in the Adventure segment increased 13.6 percent to $20.3 million, or $20.5 million on a constant currency basis, compared to $17.9 million in the year-ago quarter, reflecting higher demand from OEM customers and an increase from the Tred Outdoors acquisition. The Adventure segment includes Rhino-Rack, Maxtrax and Tred Outdoors.

Sales in the Outdoor segment (Black Diamond) were $36.2 million, compared to $40.1 million in the year-ago quarter. The decline primarily reflects weakness in our North American direct-to-consumer markets and softness in the European markets.

Gross margin in the second quarter was 36.1 percent compared to 39.0 percent in the year‐ago quarter. The decrease in gross margin was primarily due to an increase in PFAS (Per-and Polyfluoroalkyl Substances) related inventory reserve expenses, unfavorable product mix due to increased discontinued merchandise sales at the Outdoor segment, as well as higher inventory and sales return reserve expenses at the Adventure segment. Adjusted gross margin reflecting the PFAS related inventory reserve was 37.4 percent for the quarter.

Selling, general and administrative expenses in the second quarter were $28.1 million compared to $26.9 million in the same year‐ago quarter. The increase was primarily due to an increase in higher investment in marketing initiatives in the Adventure segment, as well as higher employee-related expenses across the company. These increases were partially offset by expense reduction initiatives in the Outdoor segment to manage costs, as well as lower intangible amortization.

The loss from continuing operations in the second quarter of 2024 was $5.5 million, or loss of 14 cents per diluted share, compared to loss from continuing operations of $4.3 million, or a loss of 12 cents per diluted share in the year-ago quarter. Loss from continuing operations in the second quarter included $0.4 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 second quarter of 2024 was $1.2 million, or a loss of 3 cents per diluted share, compared to adjusted loss from continuing operations of $0.1 million, or $0.00 per diluted share, in the year-ago quarter. Adjusted loss from continuing operations excludes legal cost and regulatory matters expenses, PFAS inventory reserves, contingent consideration benefits, 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 second quarter was $(1.9) million, or an adjusted EBITDA margin of (3.4) percent, compared to adjusted EBITDA from continuing operations of $1.0 million, or an adjusted EBITDA margin of 1.7 percent, in the same year‐ago quarter.

Net cash generated in operating activities for the three months ended June 30, 2024, was $0.8 million compared to net cash generated of $14.1 million in the prior year quarter. Capital expenditures in the second quarter of 2024 were $1.6 million compared to $1.8 million in the prior year quarter. Free cash flow for the second quarter of 2024 was an outflow of $0.7 million.

Liquidity at June 30, 2024 vs. December 31, 2023

  • Cash and cash equivalents totaled $46.2 million compared to $11.3 million.
  • Total debt of $0.0 million compared to $119.8 million.

2024 Outlook
The company continues to expect fiscal year 2024 sales to range between $270 million to $280 million. Due to investments seeking to scale the Adventure segment, particularly in North America, Europe and through direct marketing initiatives, the company now expects adjusted EBITDA of approximately $11 million to $14 million (between $16 million to $18 million previously), or an adjusted EBITDA margin of 4.5 percent at the mid-point of revenue and adjusted EBITDA. In addition, the company now expects capital expenditures to range between $6 million to $7 million (between $4 million to $5 million previously), of which $0.9 million related to Precision Sport prior to disposal, and adjusted free cash flow to range between $7 million to $9 million for the full year 2024, excluding $2.0 million of cash outflow related to Precision Sport prior to disposal.

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.

Image courtesy Black Diamond