Title

Presentation

Clarus Corporation misses on earnings expectations. Reported EPS is $-0.02 EPS, expectations were $0.01.

Operator: Good afternoon, everyone, and thank you for participating in today’s conference call to discuss Clarus Corporation’s financial results for the first quarter ended March 31, 2025. Joining us today are Clarus Corporation’s Executive Chairman, Warren Kanders, CFO, Mike Yates, President of Black Diamond Equipment, Neil Fiske, and the company’s external director of Relations, Matt Berkowitz. Following the remarks, we’ll open the call for your questions. Before we go further, I would like to turn the call over to Mr. Berkowitz, as he reads the company’s Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Matt, please go ahead. Thank you.

Matt Berkowitz: Before we begin, I’d like to remind everyone that during today’s call, we will be making several forward-looking statements, and we will be making these statements under the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements reflect our best estimates and assumptions based on our understanding of information known to us today. These forward-looking statements are subject to potential risks and uncertainties that could cause the actual results of operations or financial condition of Clarus Corporation to differ materially from those expressed or implied by the forward-looking statements. More information on potential factors that could affect the company’s operating and financial results is included from time to time in the company’s public reports filed with the SEC.

I’d like to remind everyone this call will be available for replay starting at 7 PM Eastern Time tonight. A webcast replay will also be available via the link provided in today’s press release as well as on the company’s website at claruscorp.com. Now I’d like to turn the call over to Clarus’ Executive Chairman, Warren Kanders. Good afternoon. And thank you for joining Clarus’ earnings call to review our results.

Warren Kanders: For the first quarter of 2025. I am joined today by our Chief Financial Officer, Mike Yates, who will cover our overall performance, and our adventure segment, as well as Neil Fiske, who will discuss our outdoor segment. During the first quarter, we remained focused on executing against our strategic roadmap and positioning Clarus for profitable growth over the long term. Despite an increasingly challenging consumer backdrop across the global consumer market, Q1 net sales of $60.4 million were above expectations. Our teams have continued to take important steps thus far in 2025 to further strengthen the core and outdoor and invest to scale adventure. Momentum in the outdoor has been driven by our success prioritizing Black Diamond’s best and most profitable styles.

Overall, Q1 financial results were in line with our plan, which reflected our expectations of softer market conditions compared to the prior year period. We continue to benefit from product simplification and SKU rationalization initiatives, providing our customers with clear product differentiation and segmentation. The Black Diamond organization is healthier than ever, and the hard work of the prior two years to simplify the business and rightsize our inventory has better positioned us to weather turbulent periods. A key bright spot has been the strong feedback we have heard from our partners regarding our revamped apparel line. Supported by a new approach to apparel and enhanced creative direction, we see opportunities to continue to capitalize on Black Diamond’s well-defined brand equity.

At Adventure, we experienced significant revenue as compared to the prior year period, in large part due to discrete shipments that were either delayed or we elected to forego in 2025. Mike will provide specifics, but we continue to see revenue from one OEM customer get pushed out while they restart production. I am pleased to say that orders recently began to flow again. Additionally, we cleared a significant amount of slow-moving and aged inventory through an off-price retailer in the US in Q1 2024, which did not recur this quarter. In our core Australian market, we continue to manage through lower order levels at a historically key retailer, which has been partially offset by growth in certain specialty accounts. Excluding the impact of these three customers, we saw overall sales flat in Adventure over the comparable period, which we believe reflects the strength of our brands even in difficult market conditions.

I would also like to point out the change in our adventure leadership. We have a new segment leader recently promoting Trip Wyckoff to head the business. Trip joined Clarus last year to strengthen our US business for adventure segment and has made an immediate impact driving critical progress revamping the organizational structure, bringing on new team members in key positions, and changing the go-to-market approach. Trip is an industry veteran with over twenty years of deep operating experience in senior leadership roles at global businesses. He has a wealth of knowledge focused on guiding brands of our size and executing the next phase of growth. As part of the global leadership team since joining, Trip understands the importance of our core Australian market to the success of adventure and possesses a unique view on compelling long-term growth opportunities in other regions.

He will be splitting his time between the US and Australia headquarters. We believe Trip is the right leader for adventure to reach its full potential moving forward. Outgoing leader Matt Hayward will depart the company, and we thank him for his contribution during his time with Clarus. Matt played a key role in establishing the foundation for the adventure segment, hiring excellent new talent, and developing new brand architecture. Core to this has been the development of a comprehensive new multiyear product plan across the portfolio and an entirely new commercialization process that will continue to guide us. We thank Matt for his contributions and leadership and wish him success in his future endeavors. Moving to the big picture, the primary question as we approach the remainder of the year is how macro conditions will evolve.

As Mike will detail shortly, driven by growing economic uncertainty due to US trade policy, we have withdrawn our full-year guidance. While we believe we have effective countermeasures to mitigate a portion of the impact from the tariffs, we cannot predict how these tariffs might affect consumer sentiment and demand, making it very difficult to confidently forecast. Our focus is on controlling what we can. And in that regard, we have taken decisive actions to maintain our competitive positioning and Clarus’ financial strength overall. Supported by a balance sheet with zero third-party bank debt, we are committed to taking a prudent approach to capital allocation and managing our businesses to drive long-term market share gains while delivering sustainable value for Clarus shareholders.

With that, thank you for being with us today. And I will turn the call over to Neil.

Neil Fiske: Thanks, Warren. Turning to Slide six, I will review the outdoor segment’s Q1 performance and our expectations for the remainder of 2025. Overall, Q1 results exceeded our plan and expectations for the quarter from a top-line perspective, while adjusted EBITDA was in line with our goal. And I’m pleased with the continued progress on our strategic initiatives. Absent tariffs, we would be affirming our 2025 top-line expectations that we shared during our call in early March. But, of course, a lot has changed since then. That’s the wild card in all of this. Like every company, we are confronting tremendous uncertainty and the adverse impacts of the new administration’s tariff and trade policies. Thankfully, the hard work we’ve done to simplify, focus, and restructure the business over the last two years puts us in a better position to absorb the shock and come out the other side even stronger.

I’ll come back to the tariff topic shortly. For the quarter, revenue came in at $44.3 million.

Mike Yates: Compared to the prior year, sales were down 5.7%, $2.7 million, due to two factors we had expected. First, the planned decline in our ski business from the exit of bindings and the pullback in snow safety, both of which were part of our simplification and product rationalization process. And second, the shift of IGD revenue to more optimal delivery timing in Q4 of 2024. It’s important to note that we made the decision to push out more discontinued merchandise in Q1 as a defensive move against macroeconomic uncertainty and potentially weakened consumer sentiment. By region and channel, North America wholesale was down 7.3%, the biggest driver of which was a 38% decline in the ski category in the region. North America digital D2C was down 7% but delivered more gross profit dollars and channel contribution margin than in the prior year period.

Europe wholesale was down a more modest 2.7% while Europe digital D2C was up 10.7%. International distributor markets were down 21.4% due to the more optimal timing shift of deliveries into Q4 of last year. We expect to get some pickup in Q2 with a corresponding decrease in Q3 from the new delivery cadence as we deliver more of the fall assortment a month earlier this year than in the past. Gross margin for the quarter was down 80 basis points to the prior year due to the higher mix and quantity of discontinued merchandise, plus a couple of cost variances which we don’t expect to continue in Q2. Operating expenses, excluding restructuring charges, were down 7.3%, reflecting the benefits of our simplified and more focused business and the efforts to rightsize our cost structure over the past few years.

Inventories ended the quarter in great shape, down 3.5% to the prior year period at $60.6 million and was 74% of value in our best ACE styles, which is where we want to see the mix. Adjusted EBITDA for the quarter came in at $1.7 million, down $1.2 million to the prior year due to the lower gross margin and lower top-line volume year over year. We continue to make excellent progress on our key initiatives. We completed the strategic review of our PEEPS snow safety business with the announced signing of the sale agreement today. Mike will detail further. We see a healthy order book for our fall winter season with apparel bookings up 30% in Europe and up 50% in North America. We successfully launched our new Black Diamond e-commerce site this past April.

Our marketing message is sharper and more differentiated as we saw with our very successful “Born from the Climbing Life” campaign this spring. Operating expenses continue to come down as a percentage of sales, another 40 basis points this quarter. Headcount is now more than 25% lower than during the first quarter of 2023 when I first stepped into the role. Inventory productivity continues to improve with a better match between supply and demand. While we are confident in both our strategic direction and performance through Q1, we are also in a completely different world than at the beginning of the year. The chaos, uncertainty, and supply chain disruption threaten to take a heavy toll not only on business operations but on consumer confidence as well.

Let me address the biggest of these factors, which is tariffs. As we see it, there are really three groups of tariffs that impact or potentially impact our business. First, the 10% universal tariff and the 25% tariff on steel and aluminum products, which are in place now. We believe these are likely to stick, so we have taken up price accordingly and proportionately as of May 5. Second, the timing of tariffs of 145%. These are simply untenable and unsustainable. Thankfully, we’ve been working over the years to reduce our exposure to China-sourced products. China represents about 25% of our merchandise costs today, and even before the tariff wars, we were working on a plan to reshore into other countries by the end of 2026. Now we are accelerating those efforts and expect to have new country-of-origin production up and running by Q4 this year.

We believe it will take us six to nine months to complete the move out of China. So the good news is that we are looking at a very defined period of impact. During this transition period, we are limiting price increases on China-sourced products, in most cases, to around 10% in order to protect consumer demand and our market share. We look at this potential margin hit as transitory and short-term in nature. The third category is reciprocal tariffs, which have been postponed until July 8. Until we have greater clarity on the outcome of trade negotiations currently underway, there is simply no way to predict or plan for this group of trade surcharges. So what does all this mean in terms of economic impact? We break it down this way. We estimate that the gross impact absent any pricing action would be $7.5 to $8 million of exposure for Black Diamond for the remainder of the year.

Pricing actions we have implemented as of May 5 are expected to reduce that exposure to $3.5 to $4 million and essentially cover the 10% universal and 25% steel and aluminum tariffs. If we can accelerate our China exit plan, we can further reduce this net exposure by about $1 to $2 million in the back half of the year. And of course, if there’s a favorable negotiation outcome with China,

Operator: Our

Neil Fiske: exposure would drop proportionally. Our primary goal in all of this is to protect supply, fill orders, and possibly gain share as the market shakes out. The silver lining here is a very real possibility that we come through this in an even stronger competitive position. The fundamentals of our strategy are more important than ever. And I’m confident that we are well-positioned to take on the challenges ahead and grateful for the tremendous effort by our teams to adapt quickly to such an uncertain, rapidly changing environment. With that, let me turn it back to Mike.

Mike Yates: Thank you, Neil, and good afternoon, everyone. On today’s call, I’ll provide some brief comments on the Adventure segment and then we’ll conclude with a detailed summary of our Q1 financial results followed by the Q&A session. I’m on Slide seven. Our Q1 Adventure results continue to be affected by near-term pressure on the business. As we have discussed previously, we have made significant investments that we are committed to maintaining to realize the long-term potential that we believe is achievable with our existing adventure brands. We are excited to have added the Rocky Mounts business to our portfolio, which is an ideal complement to Rhino Rack. The brand is fully integrated, and the product line performed well in Q1.

Additionally, after a broad corporate realignment last year within Adventure, the new leadership appointment Warren referenced of Trip Wyckoff is a step forward to take the business to the next level. Among his twenty years of industry experience, including time at Thule here in the US, where he grew the brand significantly in the peak periods and was primarily responsible for bringing the market global initiatives and building one-on-one customer relationships. Regarding tariffs, and the effect on the Adventure business, I would note that while nearly all of the Adventure products are sourced from Australia and China, based on full-year 2024 revenue, over 80% of Adventure’s revenue is outside the United States. So the tariffs have a limited impact on a relative basis.

Nevertheless, we have been evaluating new strategies for our China-sourced products given that our US business is exposed. We are proactively working with our suppliers and are confident in our ability to move significant manufacturing out of China by 2026. I’d like to spend a minute diving into key customer mix shifts that Warren outlined. Within the Adventure business during the quarter, we had three customers account for $6.5 million of Adventure revenue in the first quarter of 2024, that only generated $1.1 million of revenue in the first quarter of 2025. This, coupled with lower recovery board sales of approximately $1 million, which was partially offset by incremental Rhino Rack revenue sales to specialty customers, accounts for the decline over the prior year.

Of the three customers, we believe that two, our OEM partner and an Australian big box auto part chain, will normalize on an ongoing basis, but not to the same level as 2024. The third customer, a US off-price retailer, we don’t expect to be part of our go-to-market strategy moving forward. We continue to make inroads with new customers across all product categories, including increasing bike rack doors from 300 to 800 in the quarter of 2025. We’ve also worked to expand our global reach, adding new customers into UAE and Africa while improving distribution agreements in Germany and the UK. Likewise, our OEM approach is taking root, with new RFQs coming through primarily in Australia and New Zealand. Both of these market opportunities will take some time to develop as the sales lead cycles are longer than those on the consumer side.

Let me now turn to the consolidated and segment financial review on Slide eight. First quarter sales were $60.4 million compared to $69.3 million in the prior year first quarter. The 13% decline in total sales was driven by a decrease in the Adventure segment of 28% and a decrease in the outdoor segment of 6%. FX was a $1.3 million headwind in the quarter, and the acquisition impact from Rocky Mounts was a $1.3 million tailwind in the first quarter. This was the first full quarter of revenue for the Rocky Mounts acquisition. Clarus’ first quarter revenue of $60.4 million was above our Q1 guidance of $56 million. Sales did decline year over year as anticipated, as we executed on our simplification strategy and continue to deal with a tough macro economy.

At Adventure, first quarter revenue of $16.1 million was short of our expectations and down compared to the prior year. The 28% decline in revenue at Adventure is nearly all related to the significant decline in the year-over-year performance at the three specific accounts that I and Warren just highlighted. At Outdoor, first quarter sales were $44.3 million, down 6% year over year. The decrease was due to our continued efforts around product simplification, SKU rationalization strategy. Specifically, the lower revenue from SKU bindings and snow safety that Neil mentioned. This combined with the planned impact from the shift to the IGD revenues out of the first quarter were the primary drivers of the lower revenue at Outdoor. This decrease was partially offset by higher revenue from our high-margin A and B styles consistent with our simplification strategy.

The $44.3 million in outdoor revenue exceeded our expectations due to strength within our apparel and hard goods categories compared to our budgeted expectation. This beat includes approximately $1.8 million of revenue at PEEPS that was not contemplated in our previous guidance. The gross margin rate in the first quarter was 34.4% compared to 35.9% in the prior year quarter. Gross margin was adversely impacted in the quarter by lower volumes and unfavorable product mix at both Outdoor and Adventure. Specifically, the unfavorable product mix at Outdoor was due to high levels of discontinued merchandise that was sold by promotional pricing during the quarter, including the majority of the remaining PFAS inventory. The unfavorable product mix at Adventure was primarily driven by promotional sales efforts in the North American market, which combined with the lower wholesale volumes at both Rhino Rack and Maxtrax in Australia drove the decline in gross margin compared to the prior year quarter.

Adjusted gross margin, which reflects inventory fair value adjustments of $120,000 associated with the Rocky Mounts purchase accounting, was 34.6% for the quarter compared to 36.9% in the year-ago quarter.

Mike Yates: First quarter selling, general and administrative expenses were $26.6 million compared to $28.2 million, or down 6% versus the same year-ago quarter. The decrease was primarily due to lower retail expenses because of our decision to close unprofitable retail stores at Outdoor, as well as lower wage expense, lower marketing costs, and a successful implementation of other expense reduction initiatives to manage costs across both segments. Adjusted EBITDA in the first quarter was a loss of $800,000 or an adjusted EBITDA margin of negative 1.3%. The first quarter 2025 consolidated adjusted EBITDA of $800,000 negative was short of our guide breakeven. Our adjusted EBITDA is adjusted for amortization expense, disposal of internally developed software, restructuring charges, transaction costs, stock compensation expenses, and inventory fair value of purchase accounting.

Additionally, beginning the first quarter of 2024, we adjusted legal costs associated with the Section 16 litigation and the consumer product Safety Commission, DOJ matter, known as the CPSC and DOJ matter. These legal costs were $625,000 in the first quarter of 2025. First quarter adjusted EBITDA by segment was a negative $200,000 at Adventure, and $1.7 million positive at Outdoor. Adjusted corporate costs were at $2.3 million in the first quarter of 2025. Next, let me shift to liquidity. At March 31, 2025, cash and cash equivalents were $41.3 million compared to $45.4 million at December 31, 2024. Total debt on March 31, 2025, was $1.9 million. This debt is related to an obligation associated with the Rocky Mounts acquisition, which is payable in December of 2025.

We have no other third-party debt outstanding. Free cash flow, defined as net cash provided by operating activities less capital expenditures for the first quarter of 2025, was a use of $3.3 million compared to a use of $18.3 million in the prior year quarter. The significant improvement in free cash flow was expected and is consistent with my prior commentary that the prior year’s drain on cash would not reoccur. Regarding our cash balance, we have successfully completed the sale of an asset which will further increase our cash on hand upon completion. Today, we announced that we’ve entered into an agreement to divest our PEEPS snow safety brand for €7.8 million. This follows a comprehensive strategic review process launched last fall, and we are pleased with the outcome of a competitive process that recognized the value of the PEEPS brand, its intellectual property, and its exceptional people.

This divestiture is aligned with Clarus’ prioritization of simplifying the business and rationalizing our product categories. Turning to our outlook. As you heard from Warren, we are withdrawing the company’s previously issued full-year 2025 revenue, adjusted EBITDA, capital expenditures, and free cash flow guidance. This is not reflective of the results to date, but rather the uncertain environment stemming from US global trade policies, the potential impact on consumer demand, and the potential impact from this uncertainty on our adjusted EBITDA and free cash flow. This environment is just too unpredictable from which to forecast future financial performance effectively. With that said, as we approach the balance of the year, we are confident in our strategic plan and proactively working with our teams, vendors, and shipping partners in real-time to mitigate the impact from these trade policies on our P&L.

In addition to the price actions, as Neil outlined, we are accelerating initiatives to reshore into countries other than China. Even prior to the current trade war, we have been working over the years to reduce our manufacturing base in China and believe we can complete our move out by early 2026. As I mentioned already, Adventure sources nearly all of their products from China and Australia. Black Diamond sources approximately 25% from China, 31% from Taiwan, 15% from Vietnam, 12% from the Philippines, and the remainder from elsewhere.

Operator: Overall, we are actively implementing solutions to

Mike Yates: offset the cost impact of tariffs, specifically working with our vendors and negotiating concessions. We have taken price actions where we believe the higher costs are permanent, and we continue to evaluate other countries of origin strategies to source our products. We’re taking a long-term view such that these businesses can emerge in an even stronger competitive position once the end from these trade policies subsides. Before turning the call over to the Q&A, I’d like to provide an update on outstanding Section 16 securities litigation matters that the company is pursuing. We continue to proceed in our lawsuit against App Trading LLC and Mr. Harish A. Padilla. In March of this year, the court opined in favor of the defendants, granting summary judgment for the defendants.

We are appealing this ruling to the appellate court. We also filed a lawsuit against Caption and its related entities and control persons. Those defendants filed a motion to dismiss on June 27, 2024. We filed opposition papers in July 25 of 2024, and reply papers were filed in August 2024. In March of this year, the court denied the defendant’s motion to dismiss and instructed the parties to proceed with the discovery process. On November 7, 2024, the company was notified by the CPSC that they referred the unresolved matter with Black Diamond to the Department of Justice. In January of 2025, the DOJ served the company and Black Diamond grand jury subpoenas requesting various category documents related to Black Diamond’s avalanche beacons. As of May 8, 2025, we continue to cooperate with the request from the DOJ.

Additionally, on March 13, 2025, the company received a letter from the CPSC requesting various categories of documents and information in connection with a new investigation into whether Black Diamond sold products that were subject to a recall. The company is cooperating with this investigation. Taking a step back, looking at both Adventure and Outdoor, we see Clarus today as well-positioned to drive sustainable profitable growth despite the uncertain macro climate currently caused by the uncertainty from US trade policy. Supported by talented teams globally and a strong balance sheet, we look forward to more incremental progress advancing our turnaround in 2025 and delivering significant long-term value for Clarus shareholders. At this point, operator, we are ready to take questions.

Operator: Thank you. At this time, we will conduct the question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please stand by. Our first question comes from Peter McGoldrick from Stifel. Your line is open.

Peter McGoldrick: Hi, thanks for taking my question. Hey, how are you doing? Neil, you mentioned Black Diamond guidance would have been reaffirmed if not for macro uncertainty. So I’m curious if the level of tariff impact from China is causing any cancellations in the products you bring into the United States?

Neil Fiske: No cancellations as of this point. And it’s a great question, Peter. Let me sort of describe our thinking and approach on this. So I think our first principle here is to contain the impact of the China impacts and make the duration as short as possible. So all efforts into accelerating our planned transition out of China. We think that will be a six to nine-month period to complete that. Number one. Number two, given that it’s a relatively short duration, in the scheme of things, our approach is to maintain our supply even if we have to take a short-term hit on margin in order to keep our market share, keep our products on the pegs that they occupy and not go backwards. So you’ll see us protect deliveries of, in particular, our headlamps, a couple models of climbing helmets.

That’s really sort of the extent of what’s exposed here. As well as a couple models of our climb shoes. But we’ll continue to bring those in. We’ve positioned our inventory quite well ahead of the tariffs so we can ride that for a little bit. As Mike mentioned, having reshaped our inventory to get 74% of it in our best styles puts us in a better position from the start to fulfill orders. So at this point, we don’t see an impact on deliveries to our customers. And we haven’t seen any fallout yet in the fall and winter order books from our pricing actions. Although, it’s clearly very early still given that we took those price actions earlier in May, just a little more than a week ago. So I think we’re gonna have to wait and see on the price impacts, but net-net, in terms of supply, no interruption that we foresee at this point in time.

We’ll continue to protect our market share, deliver our products. And the margin hit associated with that is about $3.5 to $4 million. And, again, the way we look at it is we’ll take that $3.5 to $4 million hit this year in order to protect our market share. And then by the second quarter of next year, we should be out of China, where those impacts are coming from. And if we can accelerate that migration into Q3 of this year, that $4 million could drop to three or possibly $2 million of impact. We’ll just have to see how fast we can move. Does that answer your question?

Peter McGoldrick: It definitely does. And, yeah, I was curious on you provided the clarification that so February 19, 2026, is the targeted date of the six to nine months for which you would be out of China the BD goods, and then you could accelerate that? And the swing factor there is $1 to $2 million of profit. Correct?

Neil Fiske: In ’25. Correct. Five. Okay. And then I guess I’m curious on the promotionality of the two segments. There’s an unfavorable merch margin mix in each. So can you size the headwinds to gross margin in each segment and the visibility to progression given current end market demand? Does that dissipate given the current market dynamics absent the tariff impacts that flow through?

Mike Yates: Yes. Peter, it’s Mike. Go you wanna cover Black Diamond? Go ahead, Neil.

Neil Fiske: I can if you want. So go ahead. I think, Peter, maybe to give you a sense of that the percent of discontinued merchandise in Q1 this year versus last year. This year, it was 7.5% of our mix. Last year was 5.8. So you can see both in absolute dollars and as a percentage of the total, it was higher. And this was very much part of our strategy given the uncertainty of the year. To pull a more graduated program across the year forward into the first quarter. And make sure that we’re not trying to move discontinued merchandise in a weaker consumer environment. So very much a timing play on our part. And then as Mike mentioned, and, by the way, that would account for all of the year-over-year decline in gross margin rate at Black Diamond, so 80, 90 basis point impact from that.

And then relative to our expectations, there were some timing impacts of things that will either reverse over the course of the year and or were contained to the first quarter. So margin was a little lower than our expectation. But mostly because of actions we took. And on the DM front and some issues that we think are either timing-related or contained in the first quarter. So we feel pretty good about still our margin progression for the rest of the year and feel really good coming out of the first quarter that our inventories are clean. In the best quality products, and that should allow margins to continue to lift over the course of the year.

Mike Yates: So I’ll handle the adventure. Yes. Adventure’s gross margins were negatively impacted by mix as well. In the prepared remarks, Peter, I mentioned promotional sales efforts in the North American market. We have some inventory that we’re trying to move, and be aggressive. And that was a drain on, you know, realized gross margin there. It’s also combined with brand mix over in Australia. We talked about lower volume. At the Rhino Rack and Maxtrax business. The volume at Maxtrax was down over a million dollars year over year, and their gross margin is accretive to the segment’s average. So when they were down, that mix also brought their margin down, correspondingly. Going forward, you know, we expect that to recover. Right? We don’t we expect those margins to, you know, to rebound back to more traditional experience that we’ve seen at Adventure through the prior quarters.

Peter McGoldrick: I appreciate that. And then one on PEEPS. As that business goes away after the third quarter, could you give us sort of a run rate of annualized contribution to revenue, gross margin, and EBITDA?

Mike Yates: Yeah. So yeah, in the first quarter, which is a you know, the business is lumpy due to the nature of the product. Right? I mean, it’s Avalanche Snow Beacon. The first quarter, I think I in the prepared remarks, mentioned a $1.8 million of revenue. EBITDA was around breakeven. So by divesting this, I think it automatically becomes, you know, gross margin and EBITDA margin accretive. In the second quarter, revenue historically has been, a very small you know, a third of the first quarter’s amount. So I wouldn’t expect that to be a big number at all here in the second quarter. And then at some point in the third quarter, the transaction will close. Annually, PEEPS does about $5 million of revenue.

Peter McGoldrick: Very helpful. Last one for me. There’s some strong numbers from international outdoor apparel for fall winter. What is the size of that business thinking of what that could mean for the back half?

Mike Yates: Well, think I’ll let Neil comment, but we’re seeing strong demand in on the new apparel line. I think in the prepared remarks, we mentioned that US is up 50% and international is up 30%. On the preseason orders. You know, that’s a direct result of a lot of work that the teams put in to update and, you know, put a little more edge into the apparel, but that’s a positive. A significant positive, from my perspective as we look forward for the BD business. And Neil and Jack One No. One point of clarity. So looking at the fall winter order book is kinda what we are referencing so that those orders start to deliver in July through December. So in that order book, The US was up 50%. So that’s not the international part.

And then Europe was up in that order book 30%. So we took our two biggest regions in reference there, The US up 50, Europe up thirty. IGD is also up. We didn’t give that specific number don’t have it in front of me, but it’s a smaller part of the overall apparel mix.

Peter McGoldrick: So

Neil Fiske: hope that helps. And apparel overall in the mix

Mike Yates: is

Neil Fiske: is trending towards about 25% of the total. Thank you very much.

Operator: Thank you. Our next question comes from Mark Smith from Lake Street. Your line is open.

Mark Smith: Hi, guys. Sorry if I missed this earlier, but

Neil Fiske: can you quantify or speak to it all how much the sales in outdoor of this discontinued inventory how much that boosted sales during the quarter?

Mike Yates: We sold in the first quarter $2.7 million of discontinued merchandise at Outdoor. $2.7 million. Now that’s not an entire boost. Right? We always sell DM. So the total was 2.7. And like I mentioned, I mentioned that a vast majority of that was the remaining PFAS inventory. But go ahead. Neil, what would you add to I was gonna say

Neil Fiske: year over year, the quantum on that is about $600,000 more than per year.

Mike Yates: Yeah. Not a bad 2.7.

Neil Fiske: It’s, like, seven and a half percent versus

Mike Yates: yeah.

Neil Fiske: Yeah. Okay. And and

Mark Smith: can probably do the math. And, Neil, you just spoke to

Matt Berkowitz: kind of the impact. I think you said 80 to 90 basis point impact on, gross profit margin from from these sales.

Mike Yates: Correct. Okay.

Matt Berkowitz: Perfect. One thing we haven’t haven’t talked about much, but I just wanted to ask about was kind of the the strategy around, Black Diamond stores. Where are we at? Today, and, you know, any future movements maybe we should look at on, on storefront.

Neil Fiske: Sure, Mike. Do wanna take at see it?

Mike Yates: Yeah. Go ahead. Take talk about the new Seattle store.

Matt Berkowitz: So first,

Neil Fiske: let me just say kind of our philosophy on what the role of our company-owned stores are. Or is, which is basically to have a limited number of stores that can be the full expression of the brand and give us learning labs of real-time information of what’s working, what we can build on, what we need to edit. And so it’s primarily an ex getting the full expression of the brand out there, getting the learning that we can then translate into sales strategies for our wholesale channel. They’re not intended to be a substantial part of our revenue or driver of our revenue. I would say that our store base now is relatively flat and will continue to be in the eight, nine, 10 store sort of range. For the foreseeable future.

That said, within that kind of defined footprint of company-owned retail, we have opened up a flagship store in Seattle to, as I said, be the full expression of the brand number one. A learning lab for us, number two. But also in that region, it’s part of our strategy really to broaden the Black Diamond brand from really technical climb into broader mountaineering. And, of course, the Pacific Northwest is sort of the home of mountaineering in the United States. And so we wanted to have a flagship store in that region that could really give us some learning associated with building out Black Diamond as a mountaineering brand. And as part of that, we have a very interesting partnership with Ranir Mountaineering, which is I think, the largest Guide Service In The United States based of course, in on Mount Rainier, but they have 70 guides all over the world.

From Denali I guess, McKinley now to Aconcoglo and Cotopaxi and the big peaks around the world. So those 70 guides are now all in Black Diamond gear head to toe. And so that’s also part of why we wanted to have company-owned store in the Pacific Northwest to really be able to build on that partnership. The other one, by the way, that I would highlight, which is in a similar vein, are our store in Jackson Hole Wyoming is not only a retail store, but it’s also a platform for our partnership with the Jackson Hole Mountain Guides. And if you were able to visit the store in Jackson, it looks great, but there’s now a corner of that store where the Jackson Hole Mountain Guides actually post up and they sell trips and they do gear checks and they interact with their customers and ours.

And it’s been a really productive partnership so far, and we’re seeing a nice lift to our retail business from it. But it’s very much intended to be a community-based store with a tight partnership with one of the leading CAD companies in that region.

Mike Yates: Okay.

Mark Smith: Great.

Matt Berkowitz: Thank you.

Operator: Thank you. Our next question comes from Anna Glasgow from B. Riley Securities. Your line is open. Hey, good afternoon. Thanks for taking my question.

Anna Glaessgen: First, I’d like to touch on the adventure in the US in light of the commentary around that off-price retailer. Can you update us on what distribution looks like here? And as you navigate the migration of the supply from China, should we expect distribution gains this year or is that kind of on hold in light of the tariff environment? Thanks.

Mike Yates: Sure, Anna. This is Mike. Last year, we under Trip’s leadership, we made a decision not to pursue that discount channel that we had pushed some revenue through last year for the adventure product, the Rhino Rack product. So that did anniversary this year. Right? That’s the year-over-year change. As we think about this going forward, whether it’s bike racks or roof racks, right, we’re leaning into specialty distribution channels. Right? Whether that’s frac stores that are focused for automobiles and SUVs, or bicycle shops that are focused on bike racks. Right? We’re leaning more into those types of channels than, I’ll say, mass retailers. Especially mass discount retailers. And that’s where I mentioned, you know, with the bike racks, we’ve expanded, you know, with the addition of Rocky Mounts as a product line within our portfolio here in the US.

We expanded our doors from 300 doors, you know, a year ago to 800 doors. Right, because of the adding, you know, the success and the desire to have the Rocky Mounts product brings. Right? That they are so well-established product that gets us into that many more bike shops compared to what we had done historically. Got it. Thank you. And then turning to Black Diamond,

Anna Glaessgen: Neil, can you share some perspective on the price increases you’ve taken up far and how that compares to key competitors? Is there a sense that most have already taken price? Or are you earlier on that timeline? Thanks.

Neil Fiske: Yeah. We’re definitely earlier on the timeline. Our philosophy on this was hit it head-on, be super transparent with our consumers and with our trade partners. So we went out with communication towards the April, letting our trade partners and our consumers know we would be taking price up. On May 5. So we gave them some time to adjust. And so I think we were among the first in the outdoor industry to go out with a very explicit position. We tied that back to the tariffs that we believe will stick. Obviously, there’s a whole bunch of uncertainty around that, but we think the 10% universal tariff will stick and likely to the steel and aluminum 25% will stick. And so we took prices up accordingly. And to essentially offset that 10% universal tariff and 25% aluminum we couldn’t offset, of course, was 45% on China.

And that was the exposure. Right? I talked about earlier. But the first tranche of the 10% and the 25% on steel and aluminum we have covered in our price increases. And we’re just now starting to see

Anna Glaessgen: various companies

Neil Fiske: take a position. Some are still

Matt Berkowitz: let’s

Neil Fiske: give it a little bit more time, see where the discussions on reciprocal tariffs come out. Some are starting to break with their own price increases. I would

Mike Yates: think

Neil Fiske: it’s gonna play out over the next two to three months still. But we should start to see more and more companies taking price. Some might decide to hold for a little bit, but the outdoor industry in total has not really passed on a lot of the inflationary pressures that have existed in the industry over the years. And so I don’t think there’s a lot of room to hold and take the margins hit. I think people are gonna have to follow the tariffs up.

Anna Glaessgen: Great. Thanks, Neil.

Operator: Bye bye.

Matt Berkowitz: You’re welcome. Thank you.

Operator: Our next question comes from Joseph Gonzalez from Roth Capital Partners. Your line is open.

Matt Berkowitz: Just wanted to see if you guys could talk a little bit further on tariffs. I know you guys already spoken a lot towards the pricing.

Mike Yates: Mitigation. But, anyway, we’re thinking about mitigation efforts around vendor negotiation. At all just to not offset completely, but kind of take a little bit from say, a continued 145 tariff throughout the year.

Matt Berkowitz: If

Mike Yates: if that continues to play out. Yeah. Hey, Joseph. Mike it’s Mike here. We’ve looked and we continue to look at all different ways to mitigate and countermeasure the tariff situation. We’ve talked a lot about pricing. Yes. We’ve been engaged with our vendors. For concessions. We’ve also looked at changing country of origin and moving, you know, outside of, to other lower-cost areas or that may have a lower tariff like Neil discussed, like, getting out of China. Right? So we’re looking at all different types of mitigating efforts. Right? So those you know, some of those vendor concessions you are asking about we’d actually had that was one of the first things we had done back in March and in February. And, Neil Neil, you can confirm that.

Right? We were we were we were pursuing those, right, as as we steer the tariffs. The wildcard in this was on April 2, the degree of tariffs that and the percentages that were introduced. That, and as Neil’s discussed in great detail. Right, we think the 1025% stuff is is permanent. The 10% is kind of permanent. At least that’s the way we’re moving forward with that. Hence, we’ve done this pricing action to cover that. The other other hopefully, are negotiations. Hopefully, those all subside. And therefore, in the short term, we’re going to absorb the impact of that into our into our gross margin. But, we are considering all different types of countermeasures. And we’ve been pursuing them as as I’ve mentioned. Got it. I appreciate the color there.

And then just switching gears, I wanna talk about any capital allocation plans given the divestiture know, with the 8,000,000 around the Euro cash infusion. Do you to your current cash balance around 41,000,000. That puts us at

Matt Berkowitz: probably close to 50. Anything that you guys can just talk about if you’re looking at buying another segment or potential other possible capital allocations channels that you’re looking at? Yeah. I think for Lauren, you wanna address

Mike Yates: yeah. I’m gonna address that. Thanks, Mike. Yeah. I think, you know, it’s gonna take a lift. We’re we’re waiting a regulatory approval

Warren Kanders: in Austria, so that’s gonna take a little bit of time. But, you know, we need to understand better, you know, what the you know, kind of what the the tariff and business impacts you know, possibly could be. And so, you know, at this point, I think we’re just gonna, you know, hold on our cash hold on to our cash. Let’s invest it. You know, in, in, treasuries and, you know, see where it goes. But but I will certainly update you, you know, the next time we report.

Mike Yates: Got it. I appreciate that. Thank you for taking my questions.

Operator: Thank you. You bet. This concludes the question and answer session. I would now like to turn it back to Mike Yates for closing remarks.

Mike Yates: Okay. Thank you very much. Wanna thank everyone for attending the call this afternoon. And most importantly, your continued support and interest in Clarus. We look forward to updating you on our results again next quarter. Again, thank you very much.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.