Clarus Reports Third Quarter 2022 Results

– Sales in the Third Quarter of 2022 Increased 6% Year-Over-Year to $115.7 Million (up 9% on a Constant Currency Basis) –

SALT LAKE CITY, Utah, Nov. 07, 2022 (GLOBE NEWSWIRE) -- Clarus Corporation (NASDAQ: CLAR) (“Clarus” and/or the “Company”), a global company focused on the outdoor and consumer enthusiast markets, reported financial results for the third quarter ended September 30, 2022.

Third Quarter 2022 Financial Summary vs. Same Year‐Ago Quarter

  • Sales of $115.7 million increased 6.0%.
  • Gross margin was 34.1% compared to 36.0%.
  • Net income of $2.8 million, or $0.07 per diluted share, compared to $4.5 million, or $0.13 per diluted share.
  • Adjusted net income before non‐cash items of $10.2 million, or $0.26 per diluted share, compared to $18.1 million, or $0.50 per diluted share.
  • Adjusted EBITDA of $15.1 million with an adjusted EBITDA margin of 13.0% compared to $19.2 million with an adjusted EBITDA margin of 17.7%.

Management Commentary

“Our portfolio of ‘Super Fan’ brands were largely resilient amid a challenging consumer backdrop," said Clarus President John Walbrecht. “Demand in both our Outdoor and Precision Sport segments remained intact during the quarter, demonstrating market share gains as activity-based, Super Fan consumer brands can gain market share even when macroeconomic challenges arise.

“In our Adventure segment, limited vehicle deliveries and higher-than-normal inventory in the channel persisted in our home market of Australia, and we began to experience challenging conditions in North America after a strong first half of the year. These headwinds were further exacerbated by volatile foreign currency markets. We believe these issues will be short-lived, and we see more opportunity than ever to ‘Innovate and Accelerate’ these brands on a global basis as overlanding continues to expand its addressable market.

“In total, we estimate foreign currency headwinds reduced our sales and Adjusted EBITDA by over $3.3 million in the third quarter. Higher freight costs also continued, lowering our profitability by $2.3 million during the third quarter. We believe higher freight costs to be transitory in nature as we are already experiencing an improved supply chain. As such, we expect to remain well-positioned to drive relative outperformance in this area given our agile approach across our businesses.

“As we look to the remainder of the year and into 2023, we believe we have a portfolio of brands that can continue to grow and gain market share, even in a weaker consumer environment. This is a key attribute of Super Fan brands, and we believe we are laying the foundation for long-term shareholder value creation.”

Third Quarter 2022 Financial Results

Sales in the third quarter increased 6% to $115.7 million compared to $109.0 million in the same year‐ago quarter. The increase includes revenue contribution of $3.7 million from MAXTRAX, an acquisition completed on December 1, 2021. Organic sales were up 6% in the third quarter, MAXTRAX contributed 3% and foreign exchange was a 3% headwind. On a constant currency basis, total sales were up 9%.

Sales in the Outdoor segment increased 7%, or 11% on a constant currency basis, to $62.9 million compared to the same year-ago quarter due to strong demand, slightly offset by supply chain challenges associated with microchips that negatively impacted the Company’s ability to deliver its snow-safety products on time and in full. Precision Sport sales increased 13% to $34.2 million, reflecting continued strong demand and market share gains. Sales in the Adventure segment were $18.6 million, reflecting lower consumer demand given the challenging economic environment and constraints on new vehicle deliveries, which impacted new product sales both in the Australian and North American markets.

Gross margin in the third quarter was 34.1% compared to 36.0% in the year‐ago quarter. Improvements in channel and product mix were more than offset by higher freight costs, as well as unfavorable foreign exchange movements. Higher freight costs had a negative impact on gross margin of 200 basis points, while foreign currency had a 180 basis point impact.  

Selling, general and administrative expenses in the third quarter were $32.3 million compared to $31.3 million in the same year‐ago quarter. The inclusion of MAXTRAX and higher go-to-market investments in the Outdoor segment were partially offset by lower non-cash stock-based compensation for performance awards.

Net income in the third quarter was $2.8 million, or $0.07 per diluted share, compared to net income of $4.5 million, or $0.13 per diluted share, in the prior year quarter.

Adjusted net income in the third quarter, which excludes non‐cash items and transaction costs, was $10.2 million, or $0.26 per diluted share, compared to $18.1 million, or $0.50 per diluted share, in the same year‐ago quarter.

Adjusted EBITDA in the third quarter was $15.1 million, or an adjusted EBITDA margin of 13.0%, compared to $19.2 million, or an adjusted EBITDA margin of 17.7%, in the same year‐ago quarter. The decline in adjusted EBITDA was driven by lower sales in the Adventure segment, as well as heightened freight costs and unfavorable movements in foreign exchange rates, partially offset by lower discretionary spending.

Net cash provided by operating activities for the three months ended September 30, 2022, was $(11.5) million compared to net cash provided of $(17.5) million in the prior year quarter. Capital expenditures in the third quarter of 2022 were $2.1 million compared to $2.4 million in the prior year quarter. Free cash flow for the third quarter of 2022 was $(13.6) million compared to $(19.8) million in the prior year quarter due to higher working capital, specifically accounts receivable.

Liquidity at September 30, 2022 vs. December 31, 2021

  • Cash and cash equivalents totaled $10.4 million compared to $19.5 million.
  • Total debt of $167.2 million compared to $141.5 million.
  • Remaining access to approximately $110 million on the Company’s revolving line of credit.
  • Net debt leverage ratio of 2.2x compared to 2.0x

Stock Repurchase Program

During the third quarter, the Company repurchased 527,277 shares of its common stock for approximately $7.2 million, or $13.60 per share, leaving approximately $42.8 million remaining on its $50 million stock repurchase program.

2022 Outlook

Given lower sales in the Adventure segment, as well as the volatile foreign currency market and higher freight costs, Clarus is revising its full-year 2022 outlook. Clarus now expects fiscal year 2022 sales to grow approximately 19% to $445.0 million ($470.0 million prior) compared to 2021. This includes the assumption that the strong U.S. dollar will be a $6 million sales headwind in the fourth quarter of 2022. By segment, the Company now expects Outdoor segment sales to increase 1% to approximately $223.0 million ($237.5 million previously). The Precision Sport segment is now expected to increase 18% to approximately $130.0 million ($127.5 million previously) and the Adventure segment is now expected to contribute approximately $92 million ($105 million previously).

The Company now expects adjusted EBITDA in 2022 to be approximately $64 million ($78 million prior), or an adjusted EBITDA margin of 14.4%. In addition, capital expenditures are now expected to be approximately $8.0 million ($9.0 million previously) and free cash flow is now expected to range between $0 to ($5) million ($30.0 to $40.0 million previously) for the full year 2022.

Net Operating Loss (NOL)

The Company estimates that it has available NOL carryforwards for U.S. federal income tax purposes of approximately $58.4 million, which includes $37.2 million of NOL carryforwards that expire on December 31, 2022. The Company expects to fully utilize the $37.2 million in the current year, prior to expiration. 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 2022 results.

Date: Monday, November 7, 2022
Time: 5:00 p.m. Eastern time (3:00 p.m. Mountain time)
Registration Link: https://register.vevent.com/register/BI58988a2f2e7047f1bdd63c5e2f1a5f6b

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. If you have any difficulty connecting with the conference call, please contact Gateway Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay here and on the Company’s website at www.claruscorp.com.

A replay of the conference call will be available after 7:00 p.m. Eastern Time on the same day through November 7, 2023.

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 and consumer enthusiast markets. Our mission is to identify, acquire and grow outdoor “super fan” brands through our unique “innovate and accelerate” strategy. We define a “super fan” brand as a brand that creates the world’s pre-eminent, performance-defining product that the best-in-class user cannot live without. 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®, Sierra®, and Barnes® 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.maxtrax.com.au, www.sierrabullets.com, www.barnesbullets.com, www.pieps.com, or www.goclimbon.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) 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”), EBITDA margin, adjusted EBITDA, and adjusted EBTIDA 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) 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, 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. 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, 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 Contacts:

John C. Walbrecht
President
Tel 1‐801‐993‐1344
john.walbrecht@claruscorp.com

Michael J. Yates
Chief Financial Officer
Tel 1‐801-993‐1304
mike.yates@claruscorp.com

Investor Relations Contact:

Gateway Group, Inc.
Cody Slach
Tel 1‐949‐574‐3860
CLAR@gatewayir.com

               
CLARUS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
           
  September 30, 2022     December 31, 2021  
Assets              
Current assets              
Cash $ 10,365     $ 19,465  
Accounts receivable, less allowance for              
credit losses of $1,200 and $811   76,468       66,180  
Inventories   155,206       129,354  
Prepaid and other current assets   14,586       11,831  
Income tax receivable   860       116  
Total current assets   257,485       226,946  
               
Property and equipment, net   42,140       42,826  
Other intangible assets, net   56,789       73,683  
Indefinite-lived intangible assets   119,201       128,271  
Goodwill   112,247       118,090  
Deferred income taxes   22,304       22,433  
Other long-term assets   17,775       19,578  
Total assets $ 627,941     $ 631,827  
               
Liabilities and Stockholders' Equity              
Current liabilities              
Accounts payable $ 23,640     $ 31,488  
Accrued liabilities   26,271       27,473  
Income tax payable   1,109       4,437  
Current portion of long-term debt    10,306       9,585  
Total current liabilities   61,326       72,983  
               
Long-term debt, net   156,852       131,948  
Deferred income taxes   30,704       35,280  
Other long-term liabilities   15,970       21,448  
Total liabilities   264,852       261,659  
               
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;              
41,625 and 41,105 issued and 37,036 and 37,094 outstanding, respectively   4       4  
Additional paid in capital   677,120       662,996  
Accumulated deficit   (254,313 )     (263,342 )
Treasury stock, at cost   (32,707 )     (24,440 )
Accumulated other comprehensive loss   (27,015 )     (5,050 )
Total stockholders' equity   363,089       370,168  
Total liabilities and stockholders' equity $ 627,941     $ 631,827  
               

CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
       
   Three Months Ended
  September 30, 2022     September 30, 2021  
               
Sales              
Domestic sales $ 55,540     $ 61,259  
International sales   60,175       47,712  
Total sales   115,715       108,971  
               
Cost of goods sold   76,291       69,792  
Gross profit   39,424       39,179  
               
Operating expenses              
Selling, general and administrative   32,340       31,314  
Transaction costs   858       8,147  
Contingent consideration expense   104       -  
               
Total operating expenses   33,302       39,461  
               
Operating income (loss)   6,122       (282 )
               
Other expense              
Interest expense, net   (2,216 )     (1,476 )
Other, net   (1,238 )     338  
               
Total other expense, net   (3,454 )     (1,138 )
               
Income (loss) before income tax   2,668       (1,420 )
Income tax benefit   (83 )     (5,950 )
Net income $ 2,751     $ 4,530  
               
Net income per share:              
Basic $ 0.07     $ 0.13  
Diluted   0.07       0.13  
               
Weighted average shares outstanding:              
Basic   37,369       33,800  
Diluted   39,580       36,164  
               

CLARUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
               
   Nine Months Ended
  September 30, 2022     September 30, 2021  
               
Sales              
Domestic sales $ 181,920     $ 160,708  
International sales   162,004       96,903  
Total sales   343,924       257,611  
               
Cost of goods sold   216,566       163,361  
Gross profit   127,358       94,250  
               
Operating expenses              
Selling, general and administrative   101,959       72,903  
Transaction costs   2,880       9,272  
Contingent consideration expense   493       -  
               
Total operating expenses   105,332       82,175  
               
Operating income   22,026       12,075  
               
Other expense              
Interest expense, net   (5,060 )     (1,926 )
Other, net   (2,648 )     (4,263 )
               
Total other expense, net   (7,708 )     (6,189 )
               
Income before income tax   14,318       5,886  
Income tax expense (benefit)   2,494       (6,161 )
Net income $ 11,824     $ 12,047  
               
Net income per share:              
Basic $ 0.32     $ 0.37  
Diluted   0.30       0.35  
               
Weighted average shares outstanding:              
Basic   37,256       32,159  
Diluted   39,694       34,044  
               

                 
CLARUS CORPORATION
RECONCILIATION FROM GROSS PROFIT TO ADJUSTED GROSS PROFIT
AND ADJUSTED GROSS MARGIN
                 
THREE MONTHS ENDED
       
    September 30, 2022       September 30, 2021
                 
Gross profit as reported   $ 39,424   Gross profit as reported   $ 39,179
      -   Plus impact of inventory fair value adjustment     3,099
Adjusted gross profit   $ 39,424   Adjusted gross profit   $ 42,278
                 
Gross margin as reported     34.1%   Gross margin as reported     36.0%
                 
Adjusted gross margin     34.1%   Adjusted gross margin     38.8%
                 
NINE MONTHS ENDED
                 
    September 30, 2022       September 30, 2021
                 
Gross profit as reported   $ 127,358   Gross profit as reported   $ 94,250
Plus impact of inventory fair value adjustment     269   Plus impact of inventory fair value adjustment     3,460
Adjusted gross profit   $ 127,627   Adjusted gross profit   $ 97,710
                 
Gross margin as reported     37.0%   Gross margin as reported     36.6%
                 
Adjusted gross margin     37.1%   Adjusted gross margin     37.9%
                 

CLARUS CORPORATION
RECONCILIATION FROM NET (LOSS) 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
           Per Diluted               Per Diluted   
  September 30, 2022     Share     September 30, 2021     Share  
                               
                               
Net income $ 2,751     $ 0.07     $ 4,530     $ 0.13  
                               
Amortization of intangibles   3,683       0.09       3,577       0.10  
Depreciation    2,091       0.05       1,631       0.05  
Amortization of debt issuance costs   232       0.01       173       0.00  
Stock-based compensation   2,220       0.06       3,064       0.08  
Inventory fair value of purchase accounting   -       -       3,099       0.09  
Income tax benefit   (83 )     (0.00 )     (5,950 )     (0.16 )
Cash paid for income taxes   (1,663 )     (0.04 )     -       -  
                               
Net income before non-cash items $ 9,231     $ 0.23     $ 10,124     $ 0.28  
                               
Transaction costs   858       0.02       8,147       0.23  
Contingent consideration expense   104       0.00       -       -  
State cash taxes on adjustments   (21 )     (0.00 )     (202 )     (0.01 )
                               
Adjusted net income before non-cash items $ 10,172     $ 0.26     $ 18,069     $ 0.50  
                               

CLARUS CORPORATION
RECONCILIATION FROM NET (LOSS) 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
           Per Diluted               Per Diluted   
  September 30, 2022     Share     September 30, 2021     Share  
                               
                               
Net income $ 11,824     $ 0.30     $ 12,047     $ 0.35  
                               
Amortization of intangibles   11,740       0.30       5,971       0.18  
Depreciation    5,800       0.15       4,336       0.13  
Amortization of debt issuance costs   593       0.01       335       0.01  
Stock-based compensation   9,142       0.23       6,414       0.19  
Inventory fair value of purchase accounting   269       0.01       3,460       0.10  
Income tax expense (benefit)   2,494       0.06       (6,161 )     (0.18 )
Cash paid for income taxes   (7,155 )     (0.18 )     (353 )     (0.01 )
                               
Net income before non-cash items $ 34,707     $ 0.87     $ 26,049     $ 0.77  
                               
Transaction costs   2,880       0.07                               9,272                         0.27  
Contingent consideration expense   493       0.01                                      -                               -    
State cash taxes on adjustments   (74 )     (0.00 )                              (230 )                     (0.01 )
                               
Adjusted net income before non-cash items $ 38,006     $ 0.96     $                       35,091     $                   1.03  
                               

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, 2022     September 30, 2021  
               
               
Net income $ 2,751     $ 4,530  
               
Income tax benefit   (83 )     (5,950 )
Other, net   1,238       (338 )
Interest expense, net   2,216       1,476  
               
Operating income (loss)   6,122       (282 )
               
Depreciation   2,091       1,631  
Amortization of intangibles   3,683       3,577  
               
EBITDA   11,896       4,926  
               
Transaction costs   858       8,147  
Contingent consideration expense   104       -  
Inventory fair value of purchase accounting   -       3,099  
Stock-based compensation   2,220       3,064  
               
Adjusted EBITDA $ 15,078     $ 19,236  
               

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, 2022   September 30, 2021  
             
             
Net (loss) income $ 11,824   $ 12,047  
             
Income tax expense (benefit)   2,494     (6,161 )
Other, net   2,648     4,263  
Interest expense, net   5,060     1,926  
             
Operating income   22,026     12,075  
             
Depreciation   5,800     4,336  
Amortization of intangibles   11,740     5,971  
             
EBITDA   39,566     22,382  
             
Transaction costs   2,880     9,272  
Contingent consideration expense   493     -  
Inventory fair value of purchase accounting   269     3,460  
Stock-based compensation   9,142     6,414  
             
Adjusted EBITDA $ 52,350   $ 41,528  
             

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Source: Clarus Corporation