Clarus Corp. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Outdoor Segment: Completed restructuring, simplified the business, strengthened the core, exited unprofitable categories, improved gross margins, right-sized inventory, reshaped the organization. Fourth-quarter adjusted gross margin improvement was a result of product simplification and focus on best and most profitable styles. Full-year adjusted EBITDA was up 80%, showing progress towards a smaller, more profitable business.
• Adventure Segment: Made operational progress in 2024, with early signs of investment traction, especially in US and international markets outside Australia. Appointed key executives, acquired Rocky Mounts in December 2024 to strengthen the adventure offering, and expects broad new product launches in 2025. Focused on building a product ecosystem and improving fitments.

Segment Performance

• Outdoor Segment: Fourth-quarter sales were $51.1 million (compared to $50.1 million in the prior year). Adjusted gross margin improved to 36.9% in Q4 2024 from 32.8% in Q4 2023, a 410 basis point improvement. Fourth-quarter adjusted EBITDA was $4.4 million. Full-year 2024 revenue was $183.6 million, and adjusted EBITDA was $11.4 million, which was an 80% increase year-over-year. Revenue contribution from outdoor segment was significant, with efforts to simplify and strengthen the business.
• Adventure Segment: Fourth-quarter revenue was $20.3 million, and adjusted EBITDA was $1.6 million. The segment was impacted by lower OEM and Australian wholesale revenue, as well as higher growth investments. Revenue contribution was affected by market weakness in the latter part of 2024.

Guidance

• Full-year 2025 sales expected to range between $250 million and $260 million, with adjusted EBITDA from continuing operations in the range of $14 to $16 million.
• Segment guidance: Outdoor sales expected at $175 million with $17 million EBITDA; Adventure sales expected at $80 million with $7 million EBITDA.
• First-quarter 2025 sales expected between $55 million and $57 million, with adjusted EBITDA breakeven.
• Tariffs could impact gross margins by up to $2.5 million, a moving target that the company is working to mitigate.

Risks

• Macro conditions, potential tariff implications, and overall consumer sentiment.
• Ongoing legal matters including Section 16(b) securities litigation, CPSC matter, and DOJ investigation related to Black Diamond's avalanche beacons.

Question and Answer

Q: Clarification on outdoor segment EBITDA margin path A: Mike Yates stated that on the current outdoor revenue base, there is a path to double-digit EBITDA margin, with lower margins in the first half and higher margins in the back half of the year.

Q: Impact of tariffs on ordering behavior A: Neil Fiske said it's too early to tell the material impact on order book or sales rate, but consumer sentiment has been rattled by macroeconomic and trade issues.

Q: Rocky Mounts impact on Adventure segment A: Mike Yates and Mathew Hayward mentioned Rocky Mounts is an entree into the North American market, opens opportunities in Australia, and provides a larger distribution footprint in the US.

Q: PEATs business size A: Mike Yates said details of the PEATs business will be announced via press release, and it's too small to break out in detail currently