Clarus Corporation Q1 FY2026 earnings call

Outdoor Segment - Q1 Performance

• Delivered solid results with revenue, margin, and EBITDA well ahead of prior year.
• Core go-forward styles and categories grew 7% vs Q1 last year.
• Big three business units account for over 90% of total revenue.
• Mountain up 7.7%, climb up 6.6%, apparel up 4.3% (10.1% full price).
• Gross margins lifted 190 basis points.
• Operating expenses excluding restructuring up 11.6%, with specific legal and consulting costs.
• Restructuring costs of $793,000.
• Inventory increased 10% reflecting tariffs and strategic investments.

Adventure Segment - Q1 Performance

• Revenues increased 5.9% driven by Australia and new partner relationships.
• Adjusted EBITDA improved from loss to profit.
• Gross margin increased by 260 basis points.
• Recent Maxtrax product launches well received, Rocky Mounts a bright spot.

Strategic Alternatives

• Board initiated review of strategic alternatives to enhance shareholder value, potential includes sale of all or part of business or other transactions. Retained Jeffrey's LLC as financial advisor.

Outdoor Segment: Total revenues for the quarter were up 5.4%. Core go-forward styles and categories grew 7% versus Q1 of last year. Big three business units (mountain, climb, apparel) were up 6.7% versus prior period and account for over 90% of total revenue. Mountain was up 7.7%, climb was up 6.6%, apparel was up 4.3% (4.3% lapping high clearance on PFAS inventories from prior year, 10.1% full price). Gross margins lifted 190 basis points. Operating expenses excluding restructuring were up 11.6%. Restructuring costs of $793,000. Adjusted EBITDA for the quarter came in at $1.4 million. Inventory ended the quarter at $61.9 million, a 10% increase. Adventure Segment: Q1 revenues increased 5.9%, driven by strong growth in Australia and new partner relationships. Adjusted EBITDA improved from a loss of $200,000 in Q1 2025 to a profit of $200,000 in Q1 2026. Gross margin increased by 260 basis points. Recent Maxtrax product launches well received, Rocky Mounts a bright spot. Outlook for remainder of 2026 challenging due to geopolitical and macro factors.

Full Year 2026 Guidance

• Revised full year 2026 sales range to be between 245 million and 255 million and adjusted EBITDA to be in the range of 3 to $5 million.
• Revenue guide revised due to challenging environment in Adventure segment, with Adventure revenue expected to be approximately 70 million and outdoor revenue remaining 180 million.
• Second quarter sales expected to range between 51 and 53 million, and adjusted EBITDA expected to be approximately a $3 million loss.
• Outlook includes estimated costs for ongoing litigation.

Risks

• Geopolitical and macro uncertainty across the global outdoor market.
• Iran war driving higher energy prices, affecting factor costs, supply chain, deliveries, and consumer discretionary spend.
• Prolonged conflict could lead to factor price increases outweighing tariff relief, potentially requiring price increases.
• Ongoing legal matters including Section 16B securities litigation and CPSC/DOJ matters, with associated costs and uncertainties.

Q: Hi, guys. I want to start with kind of a big question. First off, just as we look at, you know, really all of the profitability and EBITDA and the guidance is coming second half here. What gives you as far as ordered books or what gives you the confidence in second half EBITDA producing to be able to hit that number?

A: Oh, I can start. Obviously we have, if you're aware, we have real decent visibility with our, at the outpour space with the, you know, preseason orders, you know, in our back half. order book that Neil can comment on is extremely strong, right? And along with the strength in our apparel, apparel has been gaining traction, both, you know, spring, summer lines, as well as the fall, winter lines. So we do have some visibility both on our order book and with some of the feedback from our top retailers, you know, that we've been growing our business with over the last couple of years.

Q: You guys talked a bit about some of the pressures on the adventure segment just due to consumers being squeezed primarily in Australia, interest rates, gas prices, etc., What are you seeing domestically as well as internationally as we think about the outdoor segment? At retail, are we starting to see some pullback in consumer spend, or especially domestically, is the consumer holding up?

A: Neil, you want to address Black Diamond, and then I can add some comments around adventure. Yeah. Hi, Mark. Thanks for the question. I think the good news is so far, consumers hanging in there in the outdoor in North America. We're pretty happy with what we're seeing in sell-through and turn right now. I would add, in addition to Mike's comments about a strong fall order book, we're seeing very good results in our big accounts and our most important specialty accounts year-to-date. So it's a It's certainly a volatile, uncertain environment. But so far, at least through April, I think we were pretty pleased with the sales results and the resilience of the consumer thus far. Obviously, if this conflict drags on and gas prices keep going up, it's a whole different story. But year-to-date, consumers hanging in there. Yeah. Mark over on the adventure side, you know, we are seeing, you know, directly shortly after the Iran conflict and the impact that that's had on oil getting from Iran to Southeast Asian refineries, and then ultimately onto Australia, that's had a big, I don't want to say a bigger impact, but almost a bigger impact in Australia than, than maybe what we're seeing here. We are seeing higher gas prices in the U S but, um, the environment in Australia has, um, The economy is really slowing with the higher fuel costs. Interest rates are being raised. And I think we've talked about this. Mortgages in Australia aren't fixed. They do adjust with the interest rate movement. There's even been communications from the government to work from home two days a week to save on gasoline and gas. I saw a headline and a story where the government suggested removing your roof rack from your vehicle to improve your miles per gallon as well. So the environment in Australia is much more challenging and the consumer is really feeling it. And our big partners there, even though we had a great first quarter, right, we saw the strength of the brand carry through, we really saw a slowdown in April. And now, as I said in the prepared remarks, we're expecting that business to slow, you know, $10 million for the remainder of the year on the top line.

Q: And the last one for me is just can you walk us through the price increases that you took Here in Q1 and how much of the two and a half percent revenue growth came purely from the price increases versus, you know, mix and, you know, increased orders, other things that maybe drove that growth.

A: Well, at Adventure, I'll start with Adventure. Adventure, you know, we took price up around $2 million is what we forecasted back at the beginning of the year. The amount that that, you know, realized, I think in the prepared remarks I mentioned that we really didn't get a lot of pushback on any of our pricing actions that we took across the Adventure segment. So, you know, I'd say, is it, evenly is going to be realized, I think that's probably a safe assumption. So probably about a half a million dollars in the first quarter. Neil, do you want to comment on, I know Neil's pricing actions were more targeted. We would take price where we were definitely a market leader and where we were allowed to, you know, had the ability in certain other spots, we didn't take price. But, you know, the realization of that, I'm not sure we have that number. I don't think we do, to be honest with you. Maybe just a feel for it, Neil, as we think, you know, primarily in apparel and you know, was a bigger factor in growth in apparel just the lack of discounting and kind of clearance of some of that PFAS apparel a year ago or, you know, did the price increases? You know, I don't know how much of that was in apparel, you know, how much that maybe helped drive that segment. Sure. Well, a couple of things just as a sort of macro comment on the way we planned our price increases and forecasted that into revenue. We assumed a, a one for one elasticity rule that every percent increase in price, we'd lose a corresponding percent in, in units and that the two would, would offset. So we didn't plan on getting any net revenue growth from, uh, price increases. I think that, um, that has largely played out. Maybe it's been a little bit better, um, But the real driver of growth for us has just been growth in market share. And I think in particular in apparel, expanded distribution. Retailers have seen very good sell-through rates and velocity on black diamond apparel. So the reorders have been really strong. And I think it's much more driven by the performance of the lines itself than any price increase. Great. Thank you. And Mark, just to clarify some of the prepared remarks, we mentioned that apparel is up a little over 4% in the quarter. That's year over year. But when you take out the change in the discount, discontinued merchandise, that's where we got it on full line apparel, it was up over 10%. So yes, we're selling less DM this year and apparel compared to last year. Okay, great. Thank you.

Q: Hey, thanks for taking my question. I wanted to follow up on apparel here. You mentioned distribution expansion and favorable sell-through. Could you give us a little bit more on the products that are driving the increased full price growth in apparel and then how that contributes to the outdoor segment's margin profile through 2026?

A: Sure, I can take that. Generally, we think about two segments in apparel, sportswear and technical outerwear and technical apparel. And the good news is we're seeing growth in both our sportswear and our technical outerwear. I think maybe the thing that has really helped propel our success in the apparel category besides just having a much stronger assortment year over year and continued improvement there is the marketing we put behind it. In particular, last year we launched our first sort of reboot of the catalog with a theme called Born from the Climbing Life that really featured apparel as the hero in that story, and it led to a rapid acceleration of sportswear apparel and some technical apparel. We then followed that up in the Winter season with another catalog, again, where I think apparel played a key role. It's called Design for the Deep. It's very much focused on ski category or the sport of ski and winter sport. And we saw phenomenal results to that catalog, really lifting our outerwear and technical apparel in the winter season. So we have a really nice mix of sportswear that tends to perform very well in the spring and summer and is growing double digits. And then our technical outerwear, which kicks in in the colder weather. And it's been a nice balance and helped us sustain the growth. And we expect, again, what we're seeing in the fall order books, apparel to be up. Again, double digits in the back half of the year. Very helpful. And then, Mike, one for you on the cost pressures you mentioned for aluminum and some other inputs. Are these having an influence on guidance or can you help us think about what is fixed for the year or perhaps the timing on the run rate if we turn the page into 2027? as those products flow through the income statement. Any guardrails on that side?

A: No, sure. So, again, as a direct result of some of the Iran war and the higher energy prices, Neil referred to higher factor costs, right? Input costs are escalating, right? Whether that's a printed circuit board, aluminum, any tungsten products, All types of inflation, material inflation is being presented to us. Now, with the change from the Supreme Court, we are also seeing some relief from tariffs. Right now, we see those kind of offsetting. So the impact on guidance is a net zero, but it's very different than what we even spoke to yesterday. you know, 60 days ago, right, with the Supreme Court ruling and now with the war. So right now I'd say they offset, but, you know, Neil also referred to the fact that, you know, if inflation and material inflation continues to escalate, we're going to have to look at taking price as early as for the, you know, in the third quarter related to our fall-winter line. So right now, our best estimate is that they're offsetting the benefits from tariff relief and is being offset by higher material inflation. So no one's backed on guidance. Go ahead. No, I'd just clarify that tariff relief excludes the tariff refund when Mike said they balance each other out. The tariff refund would be over and above that, which obviously would be sort of a one-off if we get it. But我们're really, when we talk about the two factors balancing each other out, it excludes the 6.2 tariff rebate that might be coming our way. Important distinction. Thank you for that. That will conclude our question and answer session.