Clarus Corporation Q3 FY2025 earnings call

• Warren Kanders mentioned Clarus generated net sales of $69.3 million, a 3% increase year-over-year, with quarterly adjusted EBITDA up 15%.
• Outdoor segment had strong North American wholesale demand and success with new adventure customer in Australia and RockyMounts. Revamped Black Diamond apparel line saw 29% sales growth. Full-price product sales increased, sales from discontinued merchandise declined, and high margin A styles represent ~70% of inventory.
• Adventure segment made operational progress with $600,000 YOY decrease in SG&A due to reorganizations. Opened 3PL warehouse in the Netherlands to serve customers better in Nordic, U.K., and European markets.
• Tariff mitigation efforts: estimated unrecovered tariff impact on EBITDA in 2025 is $2.5 million to $3.5 million, with expected 70% offset in 2026. FX contracts led to $600,000 EBITDA impact in Q3 2025, rolling off in 2026.

Outdoor Segment

• Generated net sales, with revenue of $69.3 million, a 1% decrease excluding PIEPS. North America wholesale was a strong point, up 15.6% year-over-year. Apparel sales, particularly the revamped Black Diamond apparel line, saw growth of 29%. Apparel now makes up 23% of the mix, up 490 basis points from the prior year. Gross margin was 36.0% in Q3 2025, up from 33.2% in the prior year quarter. Excluding FX contract impacts, comparable gross margins were up 410 basis points. Adjusted EBITDA for Outdoor was $4.7 million, up 9% from the prior year period.

Adventure Segment

• Generated 15.9% year-over-year growth. Excluding the RockyMounts acquisition, organic growth was 7.4%. Adjusted EBITDA was $349,000, about $100,000 ahead of the prior year. Gross margin was pressured by additional tariffs in the U.S., inventory clearouts, and freight costs to customers. SG&A was reduced by $600,000 year-over-year due to reorganizations and cost control.

• No full-year 2025 guidance provided due to ongoing uncertainty in trade, consumer sentiment, and macroeconomic environment.
• Revenue for the month of October exceeded forecast for both segments.
• Cautious outlook for the fourth quarter due to low consumer sentiment, rising promotional activity, and conservative stance from retailers.

• Tariffs: Unrecovered tariff impact on EBITDA in 2025 estimated at $2.5 million to $3.5 million, with remaining unrecovered tariffs in 2026 expected to be ~$3.2 million.
• FX losses: Significant losses on FX contracts in 2025, totaling $1.3 million year-to-date, impacting product margins.
• Legal matters: Pending Section 16(b) securities litigation and CPSC/DOJ matters, including ongoing appeals and discovery processes.

Q: Parsing out the Outdoor segment sales, which were flat in the quarter, but Black Diamond apparel was up 29%. What was the offset to the Black Diamond strength?

A: PIEPS was essentially 0 in the quarter, which was a year-over-year headwind. Also, North America digital D2C was down 16.5% and Europe digital D2C was down 16%, pulling back on pro sales and discounting.

Q: How are retail partners ordering for the spring of 2026 in the Outdoor segment, and thoughts on the holiday?

A: Order books for spring look pretty good, reflecting some caution from retail partners but with the wholesale channel showing strength, including big national accounts and specialty. Regarding the holiday, it's cautious with retailers being conservative and not wanting to take on too much inventory, but 90% of the game is still to be played in the fourth quarter.