Clarus Corporation

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Claris Corporation's financial results for the first quarter ended March 31, 2019. Joining us today are Claris Corporation's President John Welbrecht, Chief Administrative Officer and CFO, Aaron Cuney, and the company's External Director of Investor Relations, Cody Schla. 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. Slaw 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. Cody, please go ahead.

Thanks, Gigi. Please note that during this call, the company may use words such as appears, anticipates, believes, plans, expects, intends, future, and similar expressions which constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on the company's expectations and beliefs concerning future events impacting the company and therefore involve a number of risks and uncertainties. The company cautions you that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Potential risks and uncertainties that could cause the actual results of operations or financial condition of the company to differ materially from those expressed or implied by forward-looking statements used in this call include but are not limited to the overall level of consumer demand on the company's products, general economic conditions and other factors affecting consumer confidence, preferences, and behavior, disruption and volatility in the global currency, capital, and credit markets, the financial strength of the company's customers, the company's ability to implement its business strategy, the ability of the company to execute and integrate acquisitions, the company's exposure to product liability or product warranty claims and other loss contingencies, the stability of the company's manufacturing facilities and suppliers, changes in government regulation, legislation, or public opinion relating to the manufacture and sale of bullets and ammunition by our Sierra segment, and the possession and use of firearms and ammunition by our customers. The company's ability to protect patents, trademarks and other intellectual property rights, any breaches of or interruptions in our information systems, fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations, the company's ability to utilize its net operating loss carry forwards, Changes in tax laws and liabilities, tariffs, legal, regulatory, political, and economic risks, and the company's ability to declare a dividend. More information on potential factors that could affect the company's financial results is included from time to time in the company's public reports filed with the SEC, including the company's annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. All forward-looking statements included in this call are based upon information available to the company as of the date of this call and speak only as the date hereof. The company assumes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this call. I'd like to remind everyone that this call will be available for replay through May 20th starting at 8 p.m. Eastern tonight. Webcast replay will also be available via the link provided in today's press release as well as on the company's website at clariscorp.com. Any redistribution, retransmission, or rebroadcast of this call in any way without the express written consent of Claris Corporation is strictly prohibited. Now I would like to turn the call over to the President of Claris, John Walbrecht. John?

Thank you, Cody, and good afternoon, everyone. It's great to be joining you today. The momentum of 2018 continued into the first quarter of 2019 with sales growth across every brand, category, geography, and channel. Sales were up 15% to a record 61 million due to our continued dedication to product innovation as well as better order fulfillment and effective marketing campaigns. Aiding our strong first quarter performance was the favorable winter weather that extended late into the season in both the U.S. and in Europe. which drove 49% year-over-year growth in our ski category. Sales growth was also due to the shipment and strong sell-through of the new Black Diamond Beacon products, which you may recall we moved from the fourth quarter of last year into the first quarter of this year. Additionally, our mountain and climb categories were both up 12%, further support in a quarter that experienced solid performance across the board. accompanying strong top line results was continued gross margin expansion with 60 basis points of improvement compared to our adjusted gross margin in the first quarter of 2018. Increases like this have been a familiar trend as we continue to make great strides on delivering truly innovative product to our customers on time, improve sourcing and our supply chain activities, and more importantly, our increased operational efficiencies. We also continued our focus on efficient brand investment allocations, which led to selling general and administrative expenses increasing only 3% in the quarter, significantly below that of our 15% sales growth. This resulted in meaningful growth of both net income and adjusted EBITDA, as well as adjusted EBITDA margin increasing 370 basis points to 11.8%. Our financial discipline has allowed us to reinvest in our brands to drive increased product innovation, higher levels of brand awareness and demand, all of which we believe strongly position us for the long term. Now I'd like to dive into our category results within the Black Diamond brand. Starting with Ski, sales in the first quarter were up 49% due to the strong winter I just referenced. As we laid out on our last call, we were chasing demand with our winter products, including our Avalanche safety gear. This continued throughout the first quarter as we saw increased demand and consumer willingness to wait for the new products. Additionally, as we expected, there was pent-up demand for the Black Diamond beacons, which we began shipping in the first quarter and have been well received both on our retail partners as well as our end consumers. Turning to apparel. Apparel in the first quarter was up 18% driven by continued strong demand for bottoms, logo wear, and sportswear. The first quarter was a relatively tough comparison for the apparel category as the first quarter of last year saw the introduction of our best-selling stretch rainwear line. That said, we continue to see positive, strong momentum across the offering of apparel and remains one of our fastest growing categories with what we believe is still a significant runway for continued long-term growth. Our mountain business was up 12% due to the strength across gloves, lighting and packs. Our mountain business continues to be an area of strategic focus where we believe we are under-penetrated from both a product and a distribution standpoint on a global basis. Given the large addressable markets for each of these product categories, we are encouraged by the continued strong performance and only see further opportunity to grow our share. Our climb category was up 12% in the first quarter, driven by the strength of our carabiner line and the continued positive overall trends and popularity within the climb industry. Additionally, one of our fastest growing product segments within climb is that of footwear, which continues to gain traction with existing consumers and is bringing new consumers into the Black Diamond brand. Our footwear business grew 60% in the first quarter, led by continued strong momentum within our rock climbing line. Going forward, we believe there is a huge market share opportunity in the footwear space that we can seek to capitalize on through continued innovation, focus execution, and additional product extensions. More on this later. Turning to Sierra, we experienced strong organic growth within the Sierra brand with sales up 7% for the first quarter of 2018. This was achieved despite a broader overall firearm and ammunition market declining and at an estimated low double digits. The go-to market improvements we've been implementing at Sierra continue to drive market share leading results. Now on to some regional comments for the first quarter. Sales domestically were up 19% due to solid performance in both wholesale and the direct-to-consumer channels. Within wholesale, Black Diamond's key accounts experienced strong demand across all of our major categories, again led by Skii. The strength that our key accounts were aided by our efforts to foster deeper relationships with these retailers, including providing market and visual merchandising support, as well as partnering with them on first-to-market product launches. In our international region, sales were up 11%. Europe had strong pre-season bookings, which led to increased replenishment orders. Japan, Korea, and Australia continue to be markets where we believe we have substantial long-term growth opportunities. These markets have favorable trends surrounding the outdoor activities and in particular when it comes to our climbing, mountain, and apparel products. Our strong performance in the first quarter was a great start to 2019 and furthers the momentum we've built across the brand portfolio. We have an extremely compelling product offering for the spring and fall 2019 seasons and we expect we'll continue to propel our brands forward, drive awareness, and grow our market share. On top of this, we believe that our mindful capital allocation strategy, which is focused on quarterly dividends, share repurchases, and the opportunistic acquisition of additional superfan brands, provides the opportunity to drive outsized returns for our shareholders. With that, I'd like to turn the call now over to Aaron to speak in more detail about our first quarter financial results.