Clarus Corp. significantly raised its 2021 guidance after reporting sales more than doubled in the second quarter. Black Diamond sales were up 122 percent and Sierra sales were up 190 percent, or 71 percent excluding Barnes.
Second Quarter 2021 Financial Highlights vs. Same Year‐Ago Quarter
- Sales increased 144 percent to a record $73.3 million.
- Gross margin improved 280 basis points to 38.2 percent.
- Net income improved to $1.8 million, or $0.06 per diluted share, compared to a net loss of $(2.7) million, or $(0.09) per diluted share.
- Adjusted net income before non‐cash items increased significantly to $6.8 million, or $0.20 per diluted share, compared to an adjusted net loss of $(1.2) million, or $(0.04) per diluted share.
- Adjusted EBITDA increased significantly to a record $11.7 million compared to $(1.3) million.
- Free cash flow (net cash provided by operating activities less capital expenditures) was $1.0 million compared to $10.2 million.
On June 1, 2021, Clarus announced the entry into a definitive agreement to acquire Rhino-Rack, a leading manufacturer of highly engineered automotive roof racks, trays, mounting systems, luggage boxes, carriers, and accessories. Clarus acquired Rhino-Rack for $AUD 194 million (approximately $USD 145 million) in cash, subject to a post-closing working capital adjustment, and approximately 2.3 million shares of Clarus common stock for a total purchase price of $AUD 273 million or approximately $USD 205 million based upon the AUD/USD exchange rate and market value of the stock price at closing. The acquisition closed on July 1, 2021. Rhino-Rack will continue to operate independently as a wholly-owned indirect subsidiary of Clarus and will constitute a third reporting segment.
“We had another outstanding quarter driven by continued growth across our portfolio of ‘Super Fan’ brands and favorable trends in the overall outdoor industry,” said Clarus President John Walbrecht. “Our ability to report record sales and Adjusted EBITDA performance while continuing to increase gross margin is a testament to our brand value, operational excellence, and strong supplier partnerships.
“At Black Diamond, favorable consumer trends in the outdoor market and inventory normalization at retail drove our strong performance. We have also realized success from a community-centric approach to consumer engagement. This includes brand awareness and product education in mecca mountain towns across the world. We believe that this level of engagement not only drives sales, particularly in key categories where we can maximize product availability but builds lasting relationships with our consumers.
“In our Sierra segment, we continue to experience unprecedented demand for both our Sierra and Barnes brands. In addition to underlying market tailwinds, we are experiencing success by treating each business as a discrete brand. This allows for rapid alignment with our retail partners and promotes an ‘ease of doing business with’ mentality that is driving our market share gains. We have also used our strong balance sheet to take more control over our supply chain, which has allowed us to have less constraints on product availability, particularly in our core categories.
“During the second quarter, we entered into a definitive agreement to acquire Rhino-Rack, a premier aftermarket automotive roof rack and accessories Super Fan brand. After owning the business for just over a month, we are even more compelled by the opportunities to expand its existing network of key distributors, develop incremental sales channels, and expand its product offering.
“Given our recent financial momentum, our strategic and disciplined approach to capital allocation will remain paramount to both our organic and M&A growth strategies. We are well-positioned to continue to execute our growth plan and are raising our full-year financial outlook as a result.”
Second Quarter 2021 Financial Results
- Sales in the second quarter increased 144 percent to a record $73.3 million compared to $30.0 million in the same year‐ago quarter. The increase includes a revenue contribution of approximately $11.7 million from Barnes, an acquisition Clarus completed on October 2, 2020. Excluding Barnes, the company’s second-quarter sales increased 105 percent on an organic basis compared to the same year-ago quarter.
- Black Diamond sales were up 122 percent and Sierra sales were up 190 percent, or 71 percent excluding Barnes. The increase across both segments is attributed to continued strong consumer demand and the recovery from the COVID-19 pandemic. On a constant currency basis, total sales were up 141 percent compared to the same year-ago quarter.
- Gross margin in the second quarter improved 280 basis points to 38.2 percent compared to 35.4 percent in the year‐ago quarter. Improvements in the channel and product mix and foreign exchange benefit more than offset unfavorable impacts on the company’s supply chain and logistics due to COVID-19.
- Selling, general and administrative expenses in the second quarter were $20.7 million compared to $14.5 million in the same year‐ago quarter, primarily due to the significant increase in sales, the inclusion of Barnes, which contributed $1.5 million, and an increase in stock-based compensation of $1.2 million due to the increase in the company’s share price.
- Net income in the second quarter improved to $1.8 million, or $0.06 per diluted share, compared to a net loss of $(2.7) million or $(0.09) per diluted share, in the same year‐ago quarter.
- Adjusted net income in the second quarter, which excludes non‐cash items and transaction costs, increased to $6.8 million, or $0.20 per diluted share, compared to an adjusted net loss of $(1.2) million, or $(0.04) per diluted share, in the same year‐ago quarter.
- Adjusted EBITDA in the second quarter increased to a record $11.7 million compared to $(1.3) million in the same year‐ago quarter.
- Net cash provided by operating activities for the three months ended June 30, 2021 was $2.9 million compared to $10.9 million in the prior year. Capital expenditures in the second quarter were $1.9 million compared to $0.7 million in the same year-ago quarter. Free cash flow, defined as net cash provided by operating activities less capital expenditures, for the quarter ended June 30, 2021 was $1.0 million compared to $10.2 million in the same year‐ago period.
Liquidity At June 30, 2021 versus December 31, 2020
- Cash and cash equivalents totaled $6.8 million compared to $17.8 million.
- Total debt of $27.1 million compared to $34.6 million.
- Remaining access to $49.9 million on the company’s revolving line of credit.
- Net debt leverage ratio 0.5x compared to 0.6x at the end of 2020.
Increased 2021 Outlook
Clarus now anticipates fiscal year 2021 sales to grow approximately 56 percent to $350 million ($295 million prior) compared to 2020. By brand, the company now expects sales for Black Diamond to increase 26 percent to $215 million ($205 million prior) and Sierra and Barnes combined to increase 80 percent to $95 million ($90 million prior) compared to 2020. The company expects sales for Rhino-Rack to be $40 million for the second half of 2021.
The company now expects adjusted EBITDA in 2021 to increase approximately 132 percent to $52 million ($38 million prior) compared to 2020. Included in this assumption is the expectation for Rhino-Rack to contribute approximately $6 million in adjusted EBITDA for the second half of 2021. Capital expenditures are expected to be approximately $8.5 million ($7.5 million prior) in 2021.
Under its former guidance, sales were expected to grow 32 percent with Black Diamond ahead 20 percent and Sierra and Barnes combined increasing 71 percent. EBITDA was expected to increase by approximately 70 percent.
Net Operating Loss (NOL)
The company estimates that it has available NOL carryforwards for U.S. federal income tax purposes of approximately $120 million. The company’s common stock is subject to a rights agreement dated February 7, 2008, that is intended to limit the number of 5 percent or more owners and therefore reduce the risk of a possible change of ownership under Section 382 of the Internal Revenue Code of 1986, as amended. Any such change of ownership under these rules would limit or eliminate the ability of the company to use its existing NOLs for federal income tax purposes. However, there is no guaranty that the rights agreement will achieve the objective of preserving the value of the NOLs.
Photo courtesy Black Diamond