Clarus Corporation

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Claris Corporation financial results for the third quarter ended September 30, 2021. Joining us today are Claris Corporation's President, John Walbrecht, Executive Vice President and CFO, Aaron Cuney, and the company's External Director of Investor Relations, Kodis Law. 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. Slough as he reads the company's Safe Harbor Statement within the meaning of the Private Security Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead.

Thank you. 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 the 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, 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 will have on the company and its suppliers and customers, the 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 global pandemic and government actions and restrictive measures implemented in response, the 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 COVID-19, changes in governmental regulation, legislation, or public opinion relating to the manufacturing and sales of bullets and ammunition by our Sierra segment, and the position and use of firearms and ammunition by our customers, the company's ability to protect patents, trademarks, and other intellectual property rights, any breaches or interruptions in our information systems, 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 in connection with branding, 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, ongoing disruptions and delays in the shipping and transportation of our products due to port congestion, container ship availability, and or other logistical challenges, 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, 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 risks 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, Form 10-Q, and current reports on Form 8-K. All four of the looking statements 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 this call will be available for replay through November 22nd 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 Corp. is strictly prohibited. Now I'd like to turn the call over to Claris' president, John Walbrecht. John?

Thank you, Cody, and good afternoon, everyone. Thank you all for joining us today on our third quarter earnings call. We've had another exceptional quarter driven by our portfolio of well-diversified superfan brands, and supported by continued favorable trends in the outdoor industry. I'd like to thank our team of colleagues across our brands for their continued hard work and execution towards such a strong and profitable growth. For the third quarter, we reported sales of approximately $109 million, up 69% versus last year, and an adjusted EBITDA more than doubled to $19.2 million. Both metrics set new records, and I'm happy to share that it is our fifth consecutive quarter reporting revenue and adjusted EBITDA growth. Despite having to face the toughest supply chain environment in our history, we increased gross margins by 240 basis points year over year and by 520 basis points to 38.8% on an adjusted basis. This performance was driven by our continued focus on First, connecting directly with our community of users through a digital-first approach. Second, a high degree of operational excellence. And finally, our devotion to maintaining an easy-to-do business mentality with our partners and, of course, our superfan brands, which continue to be highly sought after by our outdoor enthusiasts around the world. To provide a bit more color on how we are managing the difficult supply chain environment, We continue to seek to leverage the recognition of our superfan brands to strengthen our relationships with both retail and our vendor partners. As an example, in Black Diamond, we continue to change product availability in our seven core product categories. This allowed us to isolate the needs of our supply chain on the components that move the needle, which enabled us to maximize product availability. Additionally, we believe that our size, relative to some of the larger outdoor players, has allowed us to be more nimble when it comes to our supply chain. We have been able to quickly pivot and adapt in a dynamic environment, leading us to these continued strong results. As this quarter shows, suppliers prioritize the formation of long-lasting and productive partnerships with superfan brands like ours, that are best poised for sustainable long-term performance. We continue to see that in good times and bad times, superfan brands remain resilient. Our brands are gaining market share across all of our leading categories, and bookings remain strong across our portfolio as we head into 2022. I'd like now to provide a summary of the key drivers that supported our outstanding Q3 results. And then I'll pass it over to Aaron to cover our third quarter financial results and discuss our increased full-year outlook in more detail. At Black Diamond, favorable consumer trends in the outdoor market led to a 20% year-over-year increase in sales for the quarter. By category, ski was up 20%, mountain was up 18%, and climb was up 14%. Hard goods growth of 19% was driven by double-digit and triple-digit growth across the product portfolio, including particular skis, lighting, climbing shoes, harnesses, T-poles, and gloves. Our footwear and apparel businesses, which are included in the business categories above, were up 33% and 28% respectively. Again, apparel is our fastest growing category at BD, and our apparel as equipment position has resonated well with our consumers. We continue to innovate and accelerate our apparel offerings, whether that's through next generation material innovation or advancement in technical aspects of our products. In fact, across the BD brand, we expect to introduce over 150 new products for 2022, ranging from award-winning skis and snow safety equipment to climb hard goods, apparel, footwear, packs, new headlamps, and trekking poles. Due to the fact that we continue to prioritize inventory allocations to our wholesale partners first and focus on our sacred seven core products, heightened demand meant that our direct-to-consumer business was impacted by the lack of inventory. So the low double-digit growth we experienced in this business during the quarter was lower than we normally expect. As we activate our digital first strategy, we continue to refine our activation efforts, focusing on performance marketing, balancing an approach of search, top of funnel, paid social, and email retargeting. These efforts are expected to further position our e-commerce business for accelerated growth once we can fulfill the increasing demand. We will also continue to accelerate our community-centric model through the opening of our Black Diamond flagship retail stores in Jackson, Wyoming, Burlington, Vermont, and Bend, Oregon over the coming months. According to our Sierra segment, which includes both the Sierra and Barnes brands, we generated sales of $30.3 million, up 100% from Q3 2020. This performance reflects broad-based sales growth across both bullets and ammunition. Strong domestic tailwinds in the third quarter continued, including growing participation in outdoor hunting and indoor shooting ranges. For Sierra and Barnes, we continue to focus on increasing daily output to meet demand. Since acquiring Barnes a year ago, we have already doubled bullet production to a run rate of 110 million bullets. Similarly, Sierra has increased its bullet production by 89% since we acquired the brand in 2017 to a run rate of 350 million bullets a year. While it has been difficult to keep up with the surging demand, we've been prioritizing increases in output. We are now starting to work on commercializing two years of R&D innovations that we have put on pause. We are pleased to announce that as part of our Innovate and Accelerate strategy, we have some new ammo classifications and other innovations coming down the pipeline for late 2022 and 2023. This strategy continues to be critical as we seek to further reinforce our position in the marketplace as the leading provider of specialty premium bullets and ammunition. Moving to Rhino Rack. We reported sales of 19.6 million in the quarter. This is a strong result on its own, but when you consider that Australia, the brand's dominant market, was in severe COVID lockdown the entire quarter, it's a tremendous achievement and a compelling case for the resilience of superfan brands. At Rhino Rack, we have identified a clear and defined strategy for growth. Most importantly, we intend to expand Rhino Rack's product penetration in North America where we can seek to capitalize on our existing network of key distributors and dealers and leverage those relationships to grow the brand domestically. We also believe we have plenty of opportunities for continued expansion in the home markets. Today, we believe Rhino Rack has number one market share in Australia and New Zealand, but less than 1% market share in the United States. That leaves significant white space for us to solidify Rhino Rack as the leading overland brand in North America. To date, we've had many positive conversations with potential new retail partners in North America. This has traditionally been a space served by the auto aftermarket, but given the growth of the category, it's a perfect extension for many of our outdoor retailers to include as part of their assortments. So it's great to be in this position as our retailers start chasing demand and we believe we have a strong brand to offer. In the immediate term, however, we are focusing on prioritizing product availability to ensure on-time deliveries and better fulfillment amongst our current accounts given supply chain headwinds. Looking forward, we are also assessing ways to expand the brand's direct-to-consumer penetration through a digital-first initiative and build even stronger OEM partnerships that provide for cross-shelling opportunities. Overall, we believe that Rhino Rack is proving to be a great entry point to the growing overland and vehicle accessory category. Overlanding is an incredible popular space right now, and an increasing number of people want to go outdoors, getting from black tops to brown roads. As the premier provider of highly engineered automotive roof racks, trays, mounting systems, luggage boxes, carriers, and accessories, we expect Rhino-Rack to capitalize on the trends in this category, whether organically or through new product launches or through strategic M&A. Speaking of new product launches, at SEMA last week, we launched the new Recon Pioneer Deck, a versatile truck bed system similar to our over-the-cab Pioneer rack, to much anticipation. Before passing it to Aaron, I'd like to state that we believe our third quarter epitomizes our super fan brand mission within Claris. Our well-diversified portfolio of brands are resonating well with the core consumer and growing market share on the back of strong innovation and the booming trend in outdoorism. This performance is driving margin expansion and high free cash flow conversion, which we're using to reinvest in our growth and to opportunistically acquire other companies with the same super fan-defining characteristics as our current portfolio. We see this mission continuing to pay dividends for our customers, our partners, and our shareholders, and feel fortunate that the market timing is right. I'll now turn the call over to Aaron Cooney, our Chief Financial Officer, our Executive Vice President, who will provide additional commentary on the performance in the third quarter and details on our increased 2021 outlook. Thank you, Aaron.