Clarus Corporation

Good afternoon, everyone. Thank you for participating in today's conference call to discuss the CLARS Corporation's final results for the second quarter ended June 30, 2021. Joining us today are CLARS Corporation President John Walbrecht, Executive Vice President 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. 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, Buena. 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 forwarding statements are not guaranteed 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 impact of the global economy. climate change trends may have on a company and its suppliers and customers, a company's exposure to product liability or product warranty claims and other loss contingencies, disruptions and other impacts to the company's business as a result of the COVID-19 pandemic and government actions and restrictive measures implemented in response, stability of the company's manufacturing facilities and suppliers as well as consumer demand, for our products in light of disease, epidemics, and health-related concerns such as the COVID-19 pandemic. Changes in governmental regulation, legislation, or public opinion relating to the manufacture and sale of bolts and ammunition by our CRS segment, the possession and use of firearms and ammunition by our customers, the company's ability to protect patents, trademarks, and other intellectual property rights, The ability of our information technology systems or information security systems to operate effectively, including as a result of security breaches, viruses, hackers, malware, natural disasters, vendor business interruptions, or other causes. Our ability to properly maintain, protect, repair, or upgrade our information technology systems or information security systems or problems with our transitioning to upgrade or replacement systems. the impact of adverse publicity about the company and or its brands, including without limitation through social media or connection with brand damaging events and or public perception, fluctuations in the price, availability, and quality of raw materials and contracted products, as well as foreign currency fluctuations, companies' 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 maintain a quarterly dividend. Any material differences in the actual financial results of the Rhino Rack acquisition is compared with expectations, including the impact of the acquisition on the company's future earnings per share. 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 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 of the date of this call and speak only as of 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 August 16th starting at 8 p.m. Eastern 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 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'd like to turn the call over to Claris' president, John Wabrecht. John?

Thank you, Cody, and good afternoon, everyone. It is great to be addressing you all today. We are very proud of about another outstanding quarter driven by continued growth across our portfolio of superfan brands, as well as the favorable trends in the outdoor industry overall. We reported sales of approximately $73 million of 144% versus last year and an adjusted EBITDA of $11.7 million compared to a loss of $1.3 million in Q2 of 2020. Both metrics were a record for any second quarter in our history. We also saw continued increases in gross margin, reporting a 280 basis point year-over-year improvement to 38.2%. These results are a testament to the value of the brands, continued operational excellence, and strong supplier partnerships. On the supplier front, we have leveraged our superfan brand recognition to strengthen our relationship with our key retail partners and our global suppliers. We continue to see evidence that suppliers prioritize the formation of long-lasting and productive partners with brands that are best poised for long-term performance, and we believe our brands fit this mold. To give you an example, in our Black Diamond business, We prioritize product availability in seven of our core products during the quarter. This allowed us to isolate the needs of our supply chain on the components that really move the needle, which allowed us to increase sales and satisfy our retail partners and ultimately our consumers. It's creative, nimble, and deliberate actions like these that have allowed us to stay ahead of our supply chain challenges our peers and the broader industry are facing. I want to thank our entire team for the hard work. Without them, these results and our performance over the past few quarters surely would not be possible. In addition to our strong results during the second quarter, we entered into a definitive agreement to acquire Rhino Rack, a premier aftermarket automotive roof rack and accessory superfan brand. Rhino Rack will continue to operate on a standalone basis as a wholly owned subsidiary of Claris and will constitute a third reporting segment. Headquartered in Sydney, Australia, and founded in 1992, Rhino Rack is an iconic brand that embodies Claris' superfan ethos. Rhino Rack has leading market share for its core products in Australia and New Zealand, with growing presence globally, particularly in the U.S., and is best known for its superior, award-winning north-south roof rack designs with best-in-class solutions that make space for adventure. Customers rely on Rhino Rack to transform their vehicles for work, play, and overland adventuring. Rhino Rack has well-established opportunities to market through a combination of long-standing distributors, retailer relationships, OEM partners, third-party e-commerce sites, and a growing direct-to-consumer presence. Rhino-Rack is truly a unique brand and one that we view as perfectly aligned with our superfan brand acquisition strategy. Since its founding, Rhino-Rack has built a durable business with leading brand and market positioning, a customer-centric focus, and affinity for protecting and funding an important cause related to the rhinoceros conservation. While we continue to prioritize with the first half of 2021 after a great start, we believe that Claris is certainly a more resilient and profitable business than we have ever been. We are excited about the second half of the year and the momentum our brands carry as we enter the fall and winter seasons. As such, We are raising our full-year outlook and look forward to continuing to drive shareholder value. Aaron will cover our second quarter financial results and the outlook in more detail shortly. But first, I want to review the key drivers that supported our outstanding Q2 results. At Black Diamond, favorable consumer trends in the outdoor market, particularly compared to the depth of the pandemic we experienced in Q2 last year, and inventory normalization at retail, drove 122% year-over-year increases in sales for that quarter. In fact, inventory normalization created the ability for us to accelerate market share gains, particularly within our national accounts such as REI and MEC. By category, Mountain was up 182%, Climb was up 90%, and Ski was up 111%. Hard goods growth of 120% was driven by double-digit and triple-digit growth across the product portfolio, in particular, lighting, climbing shoes, harnesses, T-poles, and gloves. Our footwear and apparel businesses, which are included in the business categories just discussed, were up 252% and 132% respectively. While we continue to prioritize inventory allocations to our wholesale partners, to seek to ensure their ability to have a strong finish to the spring and summer season, a direct-to-consumer channel accelerated from Q1. We defined our direct-to-consumer channel as both our e-commerce business as well as our growing retail brand community centers. After relaunching the brand Black Diamond website in January, we continued to refine our activation efforts within e-commerce, focusing on paid digital campaigns centered around social media versus pure search and building the top funnel of entrance. If we can tell our brand story simultaneously across various mediums, like digital as well as brick and mortar, we find the connection with our consumers elevated and elongated. As inventory imbalances normalize, and as we develop more refined data-driven tools along with expanding our retail footprints, We believe our direct-to-consumer channel will become the most brand-creative touchpoint for our superfans. Our new Boulder location has already proven this. We opened a new Black Diamond retail store in Boulder, Colorado last month, bringing our total retail footprint to seven. In just one week, our Boulder location is on track to be one of our top retail locations. Our retail store has allowed us to amplify our community-centric approach to the consumer engagement. This includes brand awareness and product education in mega mountain towns across the world, many of which will house our community center retail locations. We have found that this level of engagement has another key driver to our strong sales growth and increasing brand awareness, particularly in key product categories where we have chosen to maximize product availability. Now moving to our Sierra segment. We continue to experience unprecedented demand for both our Sierra and Barnes brands as we generated sales of approximately $28 million, up 190% from the prior year quarter. This performance reflects broad day sales growth across both bullets and ammunition. The continuation of external demand drivers, such as social and civil uncertainties, as well as increased participation in outdoor hunting and indoor shooting ranges, has continued to drive this strong demand for both bullets and ammunition domestically. In addition to the underlying market tailwinds, we are experiencing success by treating each business as its own discrete and stand-alone brand. This allows for rapid alignment with our retail partners, promotes an ease of doing business with mentality that is driving our market share gains, and enables an agile go-to-market strategy focused on the innovate and accelerate mindset. We have also used our strong balance sheet to take more control over our supply chain, which has allowed us to have less constraints on product availability, particularly in our core categories. With this backdrop in mind, we have also kicked off a three-year planning cycle for each of our businesses. Within Black Diamond, we are taking a community-centric approach in ensuring that we implore a customer-backed innovation mindset, focusing on resourcing on the brand, defining product categories with large addressable markets, while solidifying and optimizing the core. We are also focused on going deeper within our existing distribution, further entrenching our partnership mentality. We believe this will enable us to accelerate our direct-to-consumer business without creating unnecessary channel conflict as we focus on building community centers within these outdoor meccas, similar to what I recently opened the Boulder location and soon to open locations in Jackson Hole, Bend, and Burlington, Vermont. For Sierra and Barnes, our go-forward focus is on employing our Innovate and Accelerate playbook as we look to commercialize nearly two years of R&D innovations that we have paused during this heightened demand environment. This will be accompanied by further capacity enhancement activities in support of our ammunition initiative. We believe this approach will further reinforce our position in the marketplace as the leading provider of specialty premium bullets and ammunition. At Rhino Rack, We intend to expand Rhino-Ratch product penetration in North America, which we believe can become the largest geographic region over time, organically grow in its core Australia and New Zealand markets, and seek to capitalize on our existing network of key distributors and dealers to develop sales in the rest of the world. After owning the business for just over one month, we are even more compelled by these opportunities than we are now getting to work as one unified team. Rhino RAC also presents a valuable beachhead strategy to scale further in the overlanding and vehicle accessory category. Before passing it on to Aaron, I'd like to state that we continue to remain cognizant of health recommendations, especially as it relates to conditions within retail and supply chain environments that we operate in. Challenges remain, but we believe that we are well equipped to provide sustained long-term growth to our shareholders as we have a great portfolio of superfan brands and a disciplined team and strategy leading to continued success. With that, I'll now turn the call over to Aaron Cooney, our Chief Financial Officer, who will provide additional commentary on our performance in the second quarter and details on our increased 2021 outlook.