Clarus Corporation

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Clarus Corporation's financial results for the fourth quarter and full year ended, December 31, 2019. Joining us today are Clarus Corporation's President, John Walbrecht, Chief Administrative Officer and CFO, Aaron Cuney, and the company's External Director of Investor Relations, Cody Slough. 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. Sloth 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, Carmen. 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 competence, preferences, and behavior Disruption and volatility in the global currency, capital, and credit markets 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 impact that global climate change trends may have on the company and its suppliers and customers The company's exposure to product liability or product warranty claims and other loss contingencies The stability of the company's manufacturing facilities and of suppliers, including in light of disease, epidemics, and health-related concerns such as coronavirus. Changes in governmental regulation, legislation, or public opinion relating to the manufacturing, sales, bolts, 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 Securities and Exchange Commission, 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 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 this call will be available for replay through March 23rd, 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 Clariscorp is strictly prohibited. Now I'd like to turn the call over to the President of Claris, John Walbrecht. John?

Thank you, Cody, and good afternoon, everyone. It's a pleasure to be joining you to discuss our fourth quarter and full year 2019 results. We are pleased with our strong performance in the fourth quarter, driven by the continued momentum within Black Diamond, which grew 13% year over year with contributions from all regions and product categories. The solid performance from Black Diamond demonstrates the continued success of our innovate and accelerate growth strategy. The same can be said for our full year performance. Black Diamond sales were up 13% with growth in every geography, sales channel, and category. This drove a 9% increase in our consolidated adjusted EBITDA for the year and 10% growth in adjusted net income. We achieved these results while managing through headwinds brought on by the ongoing trade wars and the strengthening U.S. dollar, which, together, reduced our full-year adjusted EBITDA by $3.7 million. We have taken and will continue to take proactive steps to re-engineer our supply chains whenever possible in order to mitigate these headwinds. Aaron will share more on this shortly. As we've discussed previously, we have focused our Black Diamond strategy over the past three years on leading the market with new product introductions across all categories of climb, mountain, and snow, including the core activities of climbing, alpinism, mountaineering, trail running, backcountry skiing, and snowboarding. These innovations in equipment have generated more than 2,900 product reviews in popular media and more than 92 industry awards for 2019 compared to 75 in 2018. This allowed us to achieve more first-to-markets with our key retailers than ever before while accelerating the marketing of these new products through social media, athlete content, and national advertising. In fact, we increased followers across social media platforms by more than 33%, and so our athletes achieved their greatest accomplishments using our new equipment. These products were widely recognized by some of the most prestigious trade organizations in our industry. During the recent winter trade show circuit previewing products for fall 20, Black Diamond won an ISPO Gold Award for backcountry touring apparel in the snowsports category, with Black Diamond's Dawn Patrol Hybrid Shell recognized as the best overall product in the category. Additionally, at the Outdoor Retailers Snow Show, the editors of Men's Journal Magazine named Black Diamond's Dawn Patrol Hybrid Shell one of the 10 coolest products of the year. These recognitions demonstrate how our engineer and design teams truly understand the needs of climbers, skiers, and mountain athletes and bring the most relevant, thoughtfully designed, and high performance gear to the market. Now moving on to some brand specific updates for the fourth quarter. Our black diamond apparel business was up 25% due to continued growth in men's and women's sportswear, technical outerwear, and logo wear. Our technical outerwear has been a bright spot in an otherwise challenging broader market for this type of products due to our unique point of differentiation. Some of our key apparel styles, like the vision down approach and recon and boundary lines, are matching innovations with specific activity-based user groups, which is resonating very well in the market. We are also gaining greater awareness around the technical features of differentiation within our apparel line. Our client business was up 19% driven by harnesses, carabiners, and helmets, as well as the continued positive growth trends and popularity of the sport. Additionally, footwear, our fastest growing product segment, continues to gain traction amongst both existing and new customers to the brand. We've been quite pleased with the early results and look forward to our global performance footwear launch this spring. Our ski business grew 13% due to strong demand across our backcountry portfolio of products, specifically focused on snow safety products such as beacons and our new line of Jet Force packs, along with equipment for alpine touring such as bindings and skins. In our mountain business, we grew sales by 4% due to some early launches of spring products to our international distributor markets, and we experienced particularly strong growth in trekking poles and gloves. Finally, our efforts to evaluate the customer experience, build brand awareness, and support our wholesale partners is also gaining traction with a 38% increase in our direct business. We are prospecting and retargeting more effectively to drive increased levels of traffic to our website as well as to our three new strategic retail locations in Castle Rock, Colorado, Lehigh, and Salt Lake City, Utah. We also continue to support our multi-channel direct business with more community outreach, increased trainings of our employees, and an enhanced product offering and improved merchandising efforts. Switching gears to Sierra. As expected, we continue to experience softness in the bullet and ammunition market, which contributed to a 35% decline in sales. We believe the brand is still outperforming the competition in this environment due to Sierra's diversified customer base of retailers, distributors, and OEM partners, as well as its 250 SKU offering. Like last quarter, Sears Premium Products have allowed us to maintain margins and continue executing our innovate and accelerate playbook regardless of the market dynamics. This playbook includes further strengthening the brand's market positioning by investing in product innovations, sales and marketing, and pursuing new long-term revenue opportunities like our launch in Jamunition. Now a few comments on regional sales in the fourth quarter. Sales domestically were up 3% as Sierra Headwinds masked otherwise healthy sales trends at Black Diamond, particularly in our apparel and climb categories. We also experienced strong growth at a couple key accounts and, as I just mentioned, realized strong growth in our direct-to-consumer business. Internationally, sales were up 11% due to solid snow safety orders in our European market, which was partially due to favorable winter weather that drove healthy replenishment orders. In our distributor markets, improved product availability, early launches of spring 2020 products, and higher replenishment orders drove the increases in sales. At Black Diamond, we are committed to continued product innovation, new product introductions, and an accelerated go-to-market strategy to deliver strong results. And we look forward to carrying this momentum into 2020. As we have previously discussed, Our primary focus is to maximize the organic growth and profitability of our brands. We strongly believe this will provide the highest levels of return on invested capital. We also take a strategic and disciplined approach to our capital allocation. We regularly evaluate opportunities to opportunistically acquire similar superfan brands to complement our portfolio and where we can deploy our unique innovate and accelerate brand strategy. We expect to target acquisitions that provide access to new product groups and customer channels or that can diversify us within the outdoor and consumer markets. SuperFam brands not only have leading product market share and brand strength among diehard customers, but also provide recurring revenue, sustainable margins, and strong cash flows to be accretive to earnings. They must be well-run businesses. This will ensure we are enhancing value for the company and continue to be careful stewards of the shareholder capital along with funding our quarterly dividends and repurchasing our common stock. Consistent with our focus on the disciplined pursuit of value enhancing external growth opportunities, we have identified a target that meets our stringent M&A criteria and expect to have more news to share if this opportunity progresses further. Before I talk more about the outlook for 2020, I'd like to turn the call over to Aaron to walk through our Q4 results in more detail.