Clarus Corporation

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Claris Corporation's financial results for the second quarter ended June 30, 2019. Joining us today are Claris Corporation's President, John Walbrecht, Chief Administrative Officer and CFO, Aaron Cuney, and the company's External Director of Investor Relations, Cody Slaw. Following their remarks, we'll open the call for your questions. Before we go further, I would like to turn the call over to Mr. Sloan 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, Liz. 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 meeting 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, financial strength of the company's customers, 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 governmental 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. 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 cause 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 Thank you very much. Thank you, Cody, and good afternoon, everyone. It's a pleasure to be joining you. Our results in the second quarter of 2019 capped an excellent first half season, with sales up 9% for the first six months of the year, fueled by 13% growth at Black Diamond.

We also continue to drive operational improvements and profitability gains across the business with the adjusted EBITDA margin in the first six months of 2019 increasing to 8.2% of 100 basis points compared to that of last year. It is important to note that historically the second quarter is our lowest sales quarter of the year and we still believe that we will remain on track to exceed our 10% EBITDA margin target for the full year. Our results in the second quarter are proof that the innovation and acceleration strategy we have been implementing at Black Diamond is driving both brand awareness and market share gains across all categories. However, performance in the quarter was somewhat offset by a protracted winter season, which impacted Black Diamond's spring product sell-throughs and our at-once orders, as well as the difficult bullet and ammunition marketplace which impacted Sierra, both of which we'll cover later in this call. Turning to Black Diamond, during the first half of 2019, the brand has invested in its people by either hiring or promoting several individuals into key category roles, including footwear, snow, mountain hard goods, as well as key R&D and design roles. Additionally, we have added or promoted individuals into critical sales roles including the VP of Sales for North America and directors for both national accounts and key accounts. These roles add significant experience and expertise to an already strong team that is making significant strides in designing and developing an expanded product offering focused on the activity-based consumers while increasing brand awareness within both retail and the consumer levels and deepening relationships with our key distribution channels. Also in the first half of 2019, the Black Diamond marketing team has been hard at work driving product awareness and sell-through with impressive results. On top of the strong first half sales growth of 13%, brand impressions were up 12% to 1.7 billion. This increase in impressions was driven by overwhelming positive response to our new products, which have already won 52 total product awards through Q2. The amazing accomplishment of our athletes, with several of them preparing now for the 2020 Tokyo Summer Olympics, as well as our ever-expanding social presence. Now I'd like to dive into our category results within Black Diamond. Starting with Ski, sales in the second quarter were up 17% due to the protracted winter I mentioned previously. This helps support the continued strong demand for our Avalanche safety gear. which we were able to fulfill as a result of the recovery of our supply chains in delivering our new beacons. Turning to apparel sales, sales in the second quarter were up 10% driven by continued strong demand for bottoms, logo wear, and sportswear. The second quarter was a relatively tough comparison for the apparel category as last year we saw the introduction of our best-selling stretch rainwear line. That said, we continue to see strong positive response across the offering as apparel remains one of the fastest growing categories with what we believe is a significant runway for continued long-term growth. Our mountain business was up 6% due to strength across lighting, trekking poles, packs, and tents. Our team continues to design and develop award-winning products within our mountain business, providing retailers and consumers with additional touch points to the brand. Given the large addressable markets for each of these product categories, we are encouraged by the continued strong performance and see further opportunities to potentially grow our market share. Lastly, our climb category was up 7% in the second quarter, driven by the strength of our carabiner line and the continued positive overall trends and popularity in the climb industry. Additionally, one of our fastest growing product segments within climb is that of footwear. which continues to gain traction with existing customers and is bringing new customers into the brand. Going forward, we believe there is a large market share opportunity in the footwear space that we can seek to capitalize on through continued innovation, focused execution and product extensions, but more on this later. Turning to Sierra, as expected, we experienced strong industry-wide headwinds in the bullet and ammunition space as sales were down 16% for the second quarter of 2018. Despite these continued headwinds, we remain focused on our innovate and accelerate strategy, international expansion, and our entrance into the ammunition category, which I'll discuss later in this call. Now on to some regional comments for the second quarter. Sales domestically were up 2% due to the solid performance in both wholesale and D2C channel. Within wholesale, Black Diamond's key accounts and especially retail partners experienced strong demand across all of our major categories led by Mountain. D2C also performed well with higher levels of traffic online as well as in-store. Our retail store performance was driven by higher levels of consumer engagement, including our increased focus on holding more community outreach activities and enhanced product offerings and more refined approach to in-store merchandising. Regarding our D2C strategy, in today's world, clearly a direct relationship with our consumer is a necessity and we will continue to develop this through our focus on community engagement and education supported by our expertise in all of the product categories we offer. However, We not only view this strategy as allowing us to create deeper relationships with our customers but also an effective marketing platform that can support sell-through and growth at our retail partners as well. Turning to our international regions, sales were up 3% despite a slow kickoff to the spring-summer season due to extended winter conditions. Europe experienced strong order fulfillment in key markets of Germany, France, Austria, and Scandinavia. Additionally, we saw strong performance in the UK, Korea, and Hong Kong with our distributor business. Before turning the call to Aaron, I'd like to mention that even in the face of adverse weather at Black Diamond and a tough market environment at Sierra, our performance in the second quarter shows the strength and resiliency of our portfolio. On top of this, we generated strong first half 2019 results with sales up 9% and an adjusted EBITDA margin expansion of 100 basis points. Looking towards the second half of 2019, where we historically generate a little over half of our annual sales, we have an extremely compelling product offering that we expect will continue to propel our brands forward, drive awareness, and in fact grow market share. With that, I'd like to turn the call over to Aaron to speak more details about our second quarter financial results. Aaron?