Exhibit 99.1

 

 

 

 

 

Clarus Reports Third Quarter 2019 Results

 

SALT LAKE CITY, Utah – November 4, 2019 – Clarus Corporation (NASDAQ: CLAR) (“Clarus” and/or the “Company”), a company focused on the outdoor and consumer industries, reported financial results for the third quarter ended September 30, 2019.

 

Third Quarter 2019 Financial Summary vs. Same Year-Ago Quarter

 

·Sales increased 8% to $60.2 million.

 

·Gross margin was 34.1% compared to 35.7%.

 

·Net income was $3.5 million or $0.11 per diluted share, compared to $4.1 million or $0.14 per diluted share.

 

·Adjusted net income before non-cash items was $6.0 million or $0.19 per diluted share, compared to $7.0 million or $0.23 per diluted share.

 

·Adjusted EBITDA was $6.8 million compared to $7.1 million.

 

·Repurchased 243,873 shares of the Company’s common stock for approximately $2.7 million, or $10.92 per share.

 

Management Commentary

 

“Our third quarter continued to be driven by the momentum in our Black Diamond® brand with sales up 14%,” said John Walbrecht, president of Clarus. “We grew in every geography, sales channel and category, led by 61% growth in ski on strong demand in our backcountry portfolio of products like JetForce®, beacons and packs. Apparel also continues to meaningfully contribute to brand sales growth, up 23% driven by men’s and women’s sportswear, technical outerwear, and logowear. These strong top-line trends also drove a 13% increase in brand EBITDA. Our commitment to product innovation, new product introductions and an accelerated go-to-market strategy are producing these results.

 

“As expected, continued bullet and ammunition market softness impacted our Sierra® brand during the quarter. However, we have further strengthened the brand’s market positioning by investing in product innovation and forging new, long-term revenue opportunities like our launch into ammunition. Despite what we believe are short-term market headwinds, Sierra still meaningfully contributes to our profitability and free cash flow, and we look forward to various opportunities that we believe will re-accelerate brand sales growth in the near-term.

 

“We also experienced headwinds during the third quarter due to the strengthening U.S. dollar and the escalating trade wars. While the proactive steps we laid out in early August were expected to minimize the tariffs announced at that time, the impact of additional assessments since then will exceed our mitigation efforts.

 

“We view these headwinds as transitory, and most importantly, we believe our brands are better-positioned for growth than they have ever been. Our commitment to innovation is fueling new and more disruptive products that are being recognized by trade publications and well-received by our retail partners. We believe the continued focus on our brands will ultimately drive both long-term growth and profitability, as well as shareholder value creation.”

 

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Third Quarter 2019 Financial Results

 

Sales in the third quarter increased 8% to $60.2 million compared to $55.7 million in the same year-ago quarter. The increase was driven by 14% growth in Black Diamond, partially offset by a 24% decline in Sierra. The year-over-year decline at Sierra was expected due to headwinds in the bullet and ammunition industry. On a constant currency basis, total sales were up 10%.

 

Gross margin in the third quarter was 34.1% compared to 35.7% in the year-ago quarter. The decline was primarily due to foreign exchange headwinds from the strengthening U.S. dollar, the impact from recent tariffs, as well as channel and product mix. Foreign exchange headwinds reduced year-over-year gross margin by approximately 80 basis points in the third quarter of 2019 and the impact from tariffs was a 60 basis point headwind.

 

Selling, general and administrative expenses in the third quarter were $16.4 million compared to $15.8 million in the year-ago quarter. The increase was attributable to the Company’s continued investment in Black Diamond brand-related activities like research and development and direct-to-consumer. As a percentage of sales, selling, general and administrative expenses declined 100 basis points to 27.3% compared to 28.3% in the year-ago quarter.

 

Net income in the third quarter was $3.5 million or $0.11 per diluted share, compared to $4.1 million or $0.14 per diluted share in the year-ago quarter. The decline was primarily due to lower sales from Sierra, which carry higher operating margins than the Black Diamond brand, and foreign exchange and tariff headwinds. Net income in the third quarter of 2019 included $2.5 million of non-cash charges, compared to $2.8 million of non-cash charges and $0.1 million in transaction and restructuring costs in the same year-ago quarter.

 

Adjusted net income, which excludes the non-cash items, as well as transaction and restructuring costs, in the third quarter was $6.0 million or $0.19 per diluted share, compared to $7.0 million or $0.23 per diluted share in the same year-ago quarter.

 

Adjusted EBITDA in the third quarter was $6.8 million compared to $7.1 million in the same year-ago quarter. As a percentage of sales, adjusted EBITDA was 11.2% compared to 12.7% in the same year-ago quarter.

 

Net cash provided by operating activities for the nine months ended September 30, 2019 was $5.6 million compared to $7.6 million in the same year-ago period. Capital expenditures for the nine months ended September 30, 2019 were $2.8 million compared to $1.8 million in the same year-ago period. Free cash flow, defined as net cash provided by operating activities less capital expenditures, for the nine months ended September 30, 2019 was $2.8 million compared to $5.8 million in the same year-ago period.

 

At September 30, 2019, cash and cash equivalents totaled $1.9 million compared to $2.5 million at December 31, 2018. During the third quarter, the Company repurchased 243,873 shares of its common stock for approximately $2.7 million, or $10.92 per share, leaving approximately $10.8 million remaining on its $30 million share repurchase program. The Company’s debt balance at September 30, 2019, was $24.9 million compared to $22.1 million at December 31, 2018.

 

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Updated 2019 Outlook

 

Clarus now anticipates fiscal year 2019 sales to grow approximately 7% to $228 million compared to 2018. By brand, the Company still expects sales for Black Diamond to increase low-double digits but sales for Sierra to now decrease double-digits.

 

The Company now expects adjusted EBITDA to increase approximately 6% to $22 million compared to 2018. Clarus still expects capital expenditures to be approximately $4.5 million and free cash flow to be approximately $10 million in 2019.

 

Net Operating Loss (NOL)

 

The Company estimates that it has available NOL carryforwards for U.S. federal income tax purposes of approximately $141 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% 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.

 

Conference Call

 

The Company will hold a conference call today at 5:00 p.m. Eastern time to discuss its third quarter 2019 results.

 

Date: Monday, November 4, 2019

Time: 5:00 p.m. Eastern time (3:00 p.m. Mountain time) 

Toll-free dial-in number: 1-877-511-3707 

International dial-in number: 1-786-815-8672 

Conference ID: 2095212

  

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 1-949-574-3860. 

 

The conference call will be broadcast live and available for replay here and via the investor relations section of the Company’s website at www.claruscorp.com

 

A replay of the conference call will be available after 8:00 p.m. Eastern time on the same day through November 18, 2019. 

 

Toll-free replay number: 1-855-859-2056 

International replay number: 1-404-537-3406 

Replay ID: 2095212

 

 

About Clarus Corporation

 

Clarus Corporation is focused on the outdoor and consumer industries, seeking opportunities to acquire and grow businesses that can generate attractive shareholder returns. The Company has substantial net operating tax loss carryforwards which it is seeking to redeploy to maximize shareholder value. Clarus’ primary business is as a leading developer, manufacturer and distributor of outdoor equipment and lifestyle products focused on the climb, ski, mountain, and sport markets. The Company’s products are principally sold under the Black Diamond®, Sierra®, PIEPS®, and SKINourishment® brand names through specialty and online retailers, distributors and original equipment manufacturers throughout the U.S. and internationally. For additional information, please visit www.claruscorp.com or the brand websites at www.blackdiamondequipment.com, www.sierrabullets.com or www.pieps.com.

 

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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) net income before non-cash items and related income per diluted share, and adjusted net income before non-cash items and related income per diluted share, (iii) earnings before interest, taxes, other income or expense, depreciation and amortization (“EBITDA”), and adjusted EBITDA, and (iv) free cash flow. The Company believes that the presentation of certain non-GAAP measures, i.e.: (i) adjusted gross margin and adjusted gross profit, (ii) net income before non-cash items and related income per diluted share, and adjusted net income before non-cash items and related income per diluted share, (iii) EBITDA and adjusted EBITDA, 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. 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 release include, but are not limited to, the overall level of consumer demand on our products; general economic conditions and other factors affecting consumer confidence, preferences, and behavior; disruption and volatility in the global currency, capital, and credit markets; the financial strength of the Company's customers; the Company's ability to implement its business strategy, the ability of the Company to execute and integrate acquisitions; changes in governmental regulation, legislation or public opinion relating to the manufacture and sale of bullets and ammunition by our Sierra segment, and the possession and use of firearms and ammunition by our customers; the Company’s exposure to product liability or product warranty claims and other loss contingencies; stability of the Company's manufacturing facilities and suppliers; the Company's ability to protect patents, trademarks and other intellectual property rights; any breaches of, or interruptions in, our information systems; fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations; our ability to utilize our net operating loss carryforwards; changes in tax laws and liabilities, tariffs, legal, regulatory, political and economic risks; and the Company’s ability to declare a dividend. More information on potential factors that could affect the Company's financial results is included from time to time in the Company's public reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and 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.

 

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Company Contact:

 

John C. Walbrecht

President

Tel 1-801-993-1344

john.walbrecht@claruscorp.com

or

Aaron J. Kuehne

Chief Administrative Officer and

Chief Financial Officer

Tel 1-801-993-1364

aaron.kuehne@claruscorp.com

 

Investor Relations Contact:

 

Gateway Investor Relations

Cody Slach

Tel 1-949-574-3860

CLAR@gatewayir.com

 

 

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CLARUS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share amounts)

 

   September 30, 2019   December 31, 2018 
Assets          
Current assets          
Cash  $1,851   $2,486 
Accounts receivable, less allowance for doubtful          
accounts of $528 and $392, respectively   41,717    35,943 
Inventories   73,535    64,933 
Prepaid and other current assets   5,171    5,115 
Income tax receivable   -    24 
Total current assets   122,274    108,501 
           
Property and equipment, net   22,640    23,401 
Other intangible assets, net   16,649    19,416 
Indefinite lived intangible assets   41,547    41,694 
Goodwill   18,090    18,090 
Other long-term assets   3,748    2,026 
Total assets  $224,948   $213,128 
           
Liabilities and Stockholders' Equity          
Current liabilities          
Accounts payable and accrued liabilities  $28,275   $21,489 
Income tax payable   -    210 
Current portion of long-term debt   -    41 
Total current liabilities   28,275    21,740 
           
Long-term debt   24,908    22,105 
Deferred income taxes   2,144    2,919 
Other long-term liabilities   797    159 
Total liabilities   56,124    46,923 
           
Stockholders' Equity          
Preferred stock, $.0001 par value; 5,000          
shares authorized; none issued   -    - 
Common stock, $.0001 par value; 100,000 shares authorized;          
33,605 and 33,244 issued and 29,750 and 29,748 outstanding, respectively   3    3 
Additional paid in capital   491,546    488,404 
Accumulated deficit   (300,235)   (304,577)
Treasury stock, at cost   (22,269)   (18,102)
Accumulated other comprehensive (loss) income   (221)   477 
Total stockholders' equity   168,824    166,205 
Total liabilities and stockholders' equity  $224,948   $213,128 

 

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CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

 

   Three Months Ended 
   September 30, 2019   September 30, 2018 
         
Sales          
Domestic sales  $28,794   $26,168 
International sales   31,409    29,518 
Total sales   60,203    55,686 
           
Cost of goods sold   39,646    35,829 
Gross profit   20,557    19,857 
           
Operating expenses          
Selling, general and administrative   16,443    15,773 
Restructuring charge   -    22 
Transaction costs   37    50 
           
Total operating expenses   16,480    15,845 
           
Operating income   4,077    4,012 
           
Other (expense) income          
Interest expense   (353)   (303)
Other, net   (420)   102 
           
Total other expense, net   (773)   (201)
           
Income before income tax   3,304    3,811 
Income tax benefit   (188)   (316)
Net income  $3,492   $4,127 
           
Net income per share:          
Basic  $0.12   $0.14 
Diluted   0.11    0.14 
           
Weighted average shares outstanding:          
Basic   29,876    29,739 
Diluted   31,077    30,166 

 

 

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CLARUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

 

   Nine Months Ended 
   September 30, 2019   September 30, 2018 
         
Sales          
Domestic sales  $87,805   $79,667 
International sales   80,610    75,167 
Total sales   168,415    154,834 
           
Cost of goods sold   109,810    101,290 
Gross profit   58,605    53,544 
           
Operating expenses          
Selling, general and administrative   51,215    48,692 
Restructuring charge   13    86 
Transaction costs   124    383 
           
Total operating expenses   51,352    49,161 
           
Operating income   7,253    4,383 
           
Other (expense) income          
Interest expense   (978)   (1,020)
Other, net   (260)   31 
           
Total other expense, net   (1,238)   (989)
           
Income before income tax   6,015    3,394 
Income tax benefit   (570)   (359)
Net income  $6,585   $3,753 
           
Net income per share:          
Basic  $0.22   $0.13 
Diluted   0.21    0.12 
           
Weighted average shares outstanding:          
Basic   29,841    29,939 
Diluted   30,999    30,162 

 

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CLARUS CORPORATION

RECONCILIATION FROM GROSS PROFIT TO ADJUSTED GROSS PROFIT

AND ADJUSTED GROSS MARGIN

 

THREE MONTHS ENDED
     
    September 30, 2019       September 30, 2018 
              
        Gross profit as reported  $19,857 
        Plus impact of inventory fair value adjustment   - 
Gross profit as reported  $20,557   Adjusted gross profit  $19,857 
              
        Gross margin as reported   35.7%
              
Gross margin as reported   34.1%  Adjusted gross margin   35.7%

 

NINE MONTHS ENDED
            
    September 30, 2019       September 30, 2018 
              
        Gross profit as reported  $53,544 
        Plus impact of inventory fair value adjustment   1,049 
Gross profit as reported  $58,605   Adjusted gross profit  $54,593 
              
        Gross margin as reported   34.6%
              
Gross margin as reported   34.8%  Adjusted gross margin   35.3%

 

 

 

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CLARUS CORPORATION

RECONCILIATION FROM NET INCOME TO NET INCOME BEFORE NON-CASH ITEMS, ADJUSTED

NET INCOME BEFORE NON-CASH ITEMS AND RELATED EARNINGS PER DILUTED SHARE

(In thousands, except per share amounts)

 

    Three Months Ended  
 September 30, 2019

 

 

 

Per Diluted

Share

 

 

   September 30, 2018    

Per Diluted

Share

 
 
                         
                         
Net income   $ 3,492     $ 0.11     $ 4,127     $ 0.14  
                                 
Amortization of intangibles     888       0.03       965       0.03  
Depreciation     1,090       0.04       1,106       0.04  
Amortization of debt issuance costs     74       0.00       64       0.00  
Stock-based compensation     678       0.02       912       0.03  
Loss from removal of accumulated translation adjustment     -       -       131       0.00  
Income tax benefit     (188 )     (0.01 )     (316 )     (0.01 )
Cash paid for income taxes     (28 )     (0.00 )     (50 )     (0.00 )
                                 
Net income before non-cash items   $ 6,006     $ 0.19     $ 6,939     $ 0.23  
                                 
Restructuring charge     -       -       22       0.00  
Transaction costs     37       0.00       50       0.00  
State cash taxes on adjustments     (1 )     (0.00 )     (2 )     (0.00 )
AMT cash taxes on adjustments     (1 )     (0.00 )     (1 )     (0.00 )
                                 
Adjusted net income before non-cash items   $ 6,041     $ 0.19     $ 7,008     $ 0.23  

 

 

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CLARUS CORPORATION

RECONCILIATION FROM NET INCOME TO NET INCOME BEFORE NON-CASH ITEMS, ADJUSTED

NET INCOME BEFORE NON-CASH ITEMS AND RELATED EARNINGS PER DILUTED SHARE

(In thousands, except per share amounts)

 

   Nine Months Ended 
   September 30, 2019   Per Diluted Share   September 30, 2018   Per Diluted Share 
                 
                 
Net income  $6,585   $0.21   $3,753   $0.12 
                     
Amortization of intangibles   2,665    0.09    2,902    0.10 
Depreciation   3,332    0.11    3,314    0.11 
Amortization of debt issuance costs   206    0.01    371    0.01 
Stock-based compensation   2,246    0.07    2,067    0.07 
Loss from removal of accumulated translation adjustment   -    -    172    0.01 
Inventory fair value of purchase accounting   -    -    1,049    0.03 
Income tax benefit   (570)   (0.02)   (359)   (0.01)
Cash paid for income taxes   (131)   (0.00)   (296)   (0.01)
                     
Net income before non-cash items  $14,333   $0.46   $12,973   $0.43 
                     
Restructuring charge   13    0.00    86    0.00 
Transaction costs   124    0.00    383    0.01 
State cash taxes on adjustments   (5)   (0.00)   (14)   (0.00)
AMT cash taxes on adjustments   (3)   (0.00)   (9)   (0.00)
                     
Adjusted net income before non-cash items  $14,462   $0.47   $13,419   $0.44 

 

 

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CLARUS CORPORATION

RECONCILIATION FROM NET INCOME TO EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA), AND ADJUSTED EBITDA 

(In thousands)

 

   Three Months Ended 
   September 30, 2019   September 30, 2018 
         
         
Net income  $3,492   $4,127 
           
Income tax benefit   (188)   (316)
Other, net   420    (102)
Interest expense, net   353    303 
           
Operating income   4,077    4,012 
           
Depreciation   1,090    1,106 
Amortization of intangibles   888    965 
           
EBITDA  $6,055   $6,083 
           
Restructuring charge   -    22 
Transaction costs   37    50 
Stock-based compensation   678    912 
           
Adjusted EBITDA  $6,770   $7,067 

 

 

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CLARUS CORPORATION

RECONCILIATION FROM NET INCOME TO EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA), AND ADJUSTED EBITDA 

(In thousands)

 

   Nine Months Ended 
   September 30, 2019   September 30, 2018 
         
         
Net income  $6,585   $3,753 
           
Income tax benefit   (570)   (359)
Other, net   260    (31)
Interest expense, net   978    1,020 
           
Operating income   7,253    4,383 
           
Depreciation   3,332    3,314 
Amortization of intangibles   2,665    2,902 
           
EBITDA  $13,250   $10,599 
           
Restructuring charge   13    86 
Transaction costs   124    383 
Inventory fair value of purchase accounting   -    1,049 
Stock-based compensation   2,246    2,067 
           
Adjusted EBITDA  $15,633   $14,184 

 

 

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