CLAR

• Overall Operational Strategy

  • Management is executing a strategy of business simplification, inventory optimization, and focus on high-volume, high-margin core products to drive profitability improvement.
  • Claris completed a bolt-on acquisition of Onward Supply Company's assets and liabilities, adding complementary high-margin in-vehicle accessories to the Adventure segment portfolio.
  • The company repurchased 153,331 common shares under its $50 million buyback program for approximately $448,000 at $2.92 per share, leaving ~$42.4 million remaining in the program. Management views repurchases as an attractive capital use while maintaining financial flexibility for strategic investments.
  • A strategic review process, launched in May 2026 with Jeffries as financial advisor, is ongoing to explore options to unlock shareholder value, including potential sale of all or part of the business.

• Outdoor Segment Operational Highlights

  • Core business health is strong, with growth across all regions. Apparel sales have grown for 5 consecutive quarters, with improved momentum for revamped product offerings and a shift to a healthier full-price sales model with less discounting.
  • Regional performance: North America wholesale grew 0.5% YoY following 4.8% growth in Q1; North America direct-to-consumer (DTC) digital (17.7% of regional revenue) grew 5.7% YoY with improved margins. EU wholesale grew 25.3% in USD (16.7% constant currency), while EU DTC digital (5.3% of regional revenue) fell 10.6% constant currency as the company pulled back on unprofitable promotional activity. International distributor channel grew 10.6% YoY.
  • Ending inventory was $72.2 million, up 12% YoY, reflecting intentional build in preparation for expected stronger second half demand.

• Adventure Segment Operational Highlights

  • Soft top-line results were driven by weaker-than-expected demand in large North American and Australian core markets, though growth was double-digit in France, Germany, the UK, and Japan, which was not enough to offset larger market weakness. Management attributes the sales decline to market conditions rather than share loss.
  • Bright spots include solid demand for Rocky Bounce in North America and growing traction for Rocky Mounts in Australia. The newly launched Maxtrax integrated shovel has outperformed sales forecasts in all markets.
  • New product pipeline: A new Rofrac legs series will launch in September, alongside Onward product rollout in Australia for the spring-summer season. An expanded new product assortment is planned for Northern Hemisphere spring 2027, with growing OEM interest from multiple European carmakers expected to accelerate double-digit growth in Europe and Asia.

• Legal Updates

  • The DOJ closed its criminal investigation into Black Diamond's avalanche transceiver reporting obligations, and the CPSC closed a separate investigation into recalled product sales with no further action. This eliminates expected future legal expenses for the second half of 2026.
  • One Section 16B litigation was settled, while a second appeal is pending before the Second Circuit Court; a separate stockholder attorney fee claim is pending in New York state court, which the company will defend.

• Full-year 2026 revenue guidance is maintained at $245 million to $255 million, with full-year Adventure revenue expected to be ~$68 million and full-year Outdoor revenue expected to be ~$182 million.
• Full-year 2026 adjusted EBITDA guidance is revised upward to $12 million to $13 million, from the prior range of $3 million to $5 million. The upward revision is driven by the $6.1 million in IEPA tariff refunds recognized in Q2 and the elimination of $2 million in expected future legal expenses following the resolution of DOJ/CPSC investigations.
• Q3 2026 sales are expected to range between $66 million and $68 million, with adjusted EBITDA expected to be approximately $3 million.
• Management expects to maintain the Q2 Adventure segment gross margin level of ~41.5% through the remainder of 2026, and forecasts Outdoor segment gross margin (excluding tariff refunds) to be 37% to 37.5% in the second half of 2026.

Consolidated total Q2 2026 revenue was $56.2 million, a 1.6% increase year-over-year (YoY).

• Outdoor Segment (Black Diamond Equipment): Revenue grew 8.5% YoY, contributing approximately 68% of total consolidated revenue. The segment's three core categories (mountain, climb, apparel) drove 95% of total segment revenue, with growth of 9.5% YoY: mountain grew 7.4% YoY, climb grew 13.5% YoY, and apparel grew 7.4% YoY (inline apparel sales grew 22.9% YoY while clearance/discontinued merchandise fell 61% YoY). Reported gross margin for the segment was 52.0% (420 bps YoY improvement) including a $6.1 million tariff refund; excluding the refund, gross margin was 36.5%, a 160 bps YoY improvement. Adjusted EBITDA for the segment was $9.0 million.
• Adventure Segment: Revenue declined 11.9% YoY, contributing approximately 32% of total consolidated revenue. Gross margin improved 420 bps YoY to 41.5% driven by pricing actions, cost controls, and favorable product mix. SG&A expenses decreased $0.6 million YoY, with a 20% headcount reduction and 11% lower overall cost base. Adjusted EBITDA for the segment was $0.5 million.

• Continued geopolitical and macroeconomic uncertainty across the global outdoor and adventure retail markets.
• The ongoing conflict in the Middle East creates uncertainty for raw material costs and energy pricing, with potential inflationary pressure on product costs for fiscal year 2027 that is not yet fully quantifiable.
• A potential unseasonably warm winter could dampen winter product demand and lead to order trimming by retail partners, though management notes any impact so far has been modest.
• The outcome of pending litigation, including the pending Section 16B appeal and the New York state court attorney fee claim, creates uncertainty for potential future legal costs.

Q: In the context of a potentially very warm coming winter, have retail partners discussed trimming wholesale orders, and what is the current impact outlook? / A: Management notes that while there may be a modest dampening effect from the prior year's winter, it is not a major concern at this time. The fall order book and product lineup are strong, and any potential impact has been offset by the strength of current order momentum heading into the second half.

Q: How should gross margins be modeled for the second half of 2026, after accounting for the noise from tariff refunds? / A: Management states it expects to maintain the Adventure segment's 41.5% Q2 gross margin through the second half. Excluding the Q2 tariff refund, Outdoor segment gross margin was ~36.5%, and management expects that figure to rise slightly to 37% to 37.5% in the back half of 2026.

Q: What is your outlook for raw material inflation for fiscal year 2027, based on conversations with suppliers? / A: Management notes it is watching inflation closely, and has already seen some cost inflation for 2027 spring products. The full magnitude of inflation depends on whether the Middle East conflict is prolonged and oil markets normalize, so a clear picture will not emerge for another a couple of months. The worst-case inflation outcomes feared when the conflict began have not yet materialized, but all stakeholders are continuing to monitor the situation closely.