Clarus Corporation

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Claris Corporation's financial results for the fourth quarter and full year ended December 31st, 2021. Joining us today are Claris Corporation's president, John Walbrecht, executive vice president and COO, Aaron Cuney, CFO, Mike Yates, and the company's external director of investor relations, Cody Swall. Following their remarks, we'll open the call for your questions. Before we go further, I would now 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, Crystal. Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements. and we make these statements under the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements reflect our best estimates and assumptions based on our understanding of information known to us today. These forward-looking statements are subject to the risks and uncertainties that face Claris Corp. and the industries in which we operate. 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. I'd like to remind everyone this call will be available for replay through March 21st, 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 in the company's website at clariscorp.com. Now I'd like to turn the call over to Claris' president, John Walbrecht. John?

Thank you, Cody, and good afternoon, everyone. Before we get to our traditional commentary, we at Claris are mindful of the geopolitical crisis that is taking place between Russia and Ukraine and stand in solidarity with the people of Ukraine. Our hearts and our prayers go out to them at this time. As part of this unwavering support, we have stopped all exports to Russia and will be suspending all business with the country. We are also actively working to send aid to the Ukrainian people in the form of certain key product items from our various businesses that will assist their efforts in this crisis. We hope and pray that the conflict will end quickly and that peace will prevail. Now turning to our most recent business results. We are reporting another record quarter of performance in a year filled with record-setting sales and adjusted EBITDA. We're incredibly proud of our entire team who make our vision a reality each day, and especially with the global backdrop around COVID and the supply chain concerns. We continue to be nimble and decisive at the brand level, which is critical in achieving this level of performance. As we turn the calendar on 2021, I'd like to provide some perspective on the strategy we set five years ago and how this has positioned us in the market today and where we will go in the future. The question we are often asked is, how did we get to this point? The answer is that we seek to create markets through our understanding of superfan brands, their unique DNA, and what drives their success. We take a superfan brand, execute our innovate and accelerate strategy, and then focus on creating sustainable growth by taking market share with a disciplined go-to-market strategy supported by both commercial and operational excellence. In 2016, I had the great opportunity to join Claris to help create something exciting as well as disruptive in the outdoor industry. At that time, we owned Black Diamond Equipment, which was and continues to be the world's number one climbing brand. Starting in 2017, we initiated our Innovate and Accelerate strategy, developing more than 100 new products per season for the next four years. We relaunched apparel with a focus on technology and innovation, treating apparel like we would our R&D heavy equipment categories And we also launched successfully into footwear. Over the past five years, BD has won more than 371 industry awards across all categories, proving out our focus on product innovation. We accelerated our sales, creating industry-winning trade show booths, hiring the best sales team, and expanding our distribution. We accelerated our marketing through our athlete and influencer content. amazing photography, and strong public relations. We accelerated our digital first strategy, growing our Instagram, Facebook, and YouTube followings by more than 10x. In 2021, Black Diamond had an impressive total of over 5 billion impressions across all product categories. In particular, apparel grew at a higher rate, recording a 58% year-over-year increase in earned consumer impressions. BD closed out 2021 with a strong December, earning 21 Tier 1 placements and over 598 million impressions. Once again, the apparel category dominated our coverage, with its focus on key push products like gloves and our Vision Down Hybrid Jacket. Today, BD is the premium, badass image brand of the outdoor industry and the superfan brand for climbing, backcountry skiing, trail running, and hiking. We are the reference brand for equipment, driving industry-leading growth, resulting in market share gains across all categories, channels, and geographies. An important piece of our growth plan is our M&A strategy. We have demonstrated a disciplined approach to acquisitions, Focusing on brands where we are quickly able to deploy our innovate and accelerate strategy, we target superfan brands that may give us a foothold in a new product group or customer channel as we seek to diversify further within the enthusiast outdoor and consumer markets. Sierra was the first brand acquired under our superfan acquisition strategy in 2017. Established in 1947, Sierra is the reference brand of premium accuracy bullets. With 90% of all long-distance competitions won with Sierra Match Team, Sierra is the definition of bullet smiths. Starting in 2018, we turned Sierra into an innovation house, hiring the best product engineers in the industry. We took the last pure play bullet company and in 2019 launched it into an award-winning MO brand. For some perspective, bullets represent 2% of the industry, whereas ammo represents 98% of the consumer industry, selling for four to six times the price of the individual bullet. Since the launch of 2019, we've taken ammo sales from zero to now representing over 30% of Sierra's sales. We have a strong pipeline of innovations anticipated for 2022 and beyond in both bullets and ammunition. On top of restarting the innovation engine, we added an industry-leading sales team and successfully expanded our distribution into the top retailers. We accelerated marketing initiatives by launching the Sierra Performance Shooting Team and introducing the industry's most demanded reloading manual, and expanded our digital first strategy through our new website and our brand video content. In 2021, we launched all new packaging for both bullets and ammunition, creating a disruptive statement unique to the market. Our customers have responded, and we have doubled sales while significantly increasing our EBITDA margins. With the success of Sierra, Specifically, seeing our playbook in action, we acquired another brand over the last 18 months. We embarked on a strategic initiative to deploy nearly $275 million of capital, marking an extraordinary transformation for Clarus. We purchased Barnes in October of 2020, representing another great example of our brand acquisition strategy. Barnes was established in 1932 and is known as the most effective all-copper hunting bullet. This brand had the heritage and the innovation of a superfan brand, but was treated as a low-end manufacturer of bullets under its prior ownership. When we acquired the business, it was doing about $20 million in revenue. We set out to re-establish Barnes as the innovator of copper technology and the Ferrari of the bullet industry, so to speak, the leader of terminal impact or torque. Copper bullets and ammo are the green alternative and the fastest growing trend in big game hunting due to their 100% weight retention. We recognized this and saw a clear path to launching new technologies and expanding categories into all hunting ammunition. Today, Barnes is a $45 million business with a strong pipeline of more innovations anticipated in both bullets and ammunition. Immediately after acquiring Barnes, we focused on accelerating sales, targeting the OEM and wholesale distribution markets, adding a strong sales team, and quickly expanding our distribution to the top hunt retailers. We launched new booths at the recent SHOT Show and Safari International shows, which featured our all-new copper ammo collections. Now that we have re-established Barnes in its core channel, we will be accelerating our marketing through our digital first strategy, launching our new website, and a national advertising campaign we are calling Utah Proud. We have begun an aggressive social media strategy through Instagram, Facebook, and YouTube, partnering with the most influential hunt celebrities, followed writers, and industry-leading partners. Again, another proof of an old demand super fan brand in its ability to raise prices every year while still growing market share. Over the past 12 months, we successfully relaunched Barnes as the reference brand for big game hunting, reconnected with their very strong tribal community, and doubled sales while expanding EBITDA margins. We have the inspirational goal of doubling sales again in the next three years. Rhino Rack became our next targeted superfan brand when two years ago we saw the growing demand from our consumers to get outdoors and take our products farther from home. Consumers are getting off the pavement and headed to brown roads and need to rack all of their gear with them. Under the banner of making space for adventure, which has a strong following within the growing Overland community, Rhino Rack is the undisputed leader in platform racks in Australia and the image brand of the Outback. With sales of Jeeps, Toyotas, Fords, and SUVs and trucks outgrowing passenger cars by more than 2 to 1, we believe that Rhino Rack is well positioned to capitalize on this trend relative to its competition. We remain confident that our innovate and accelerate strategy can unlock the huge potential both in Australia and, more importantly, in North America. First, Rhino Rack already has a leading market share in platform racks. Rhino Racks Foundation is in product innovation, winning two Red Dot Design Awards in 2021 for the Pioneer 2 Rack and the Stoet, with a robust pipeline of innovations planned for 2022 and beyond, including the new Recon Platform Rack for pickup truck beds, which launched at SEMA in 2021 in November. We will be accelerating our innovations in both racks and overlanding accessories, the hottest growing category. Our sales growth initiatives for 2022 include targeting the OEM market, the automotive aftermarket, and the ever-expanding outdoor retailer market. In fact, we have already had appointments with the top North American outdoor retailers for a 2022 launch later this year. We will be accelerating our marketing, launching a North American-specific website, new overlanding trade booths, new trade and consumer catalogs, and launching an aggressive Make Space for Adventure ad campaign. We will be accelerating our participation in events and gear reviews through our Black Tops to Brown Roads public relations campaign. Over the next 24 months, using the same playbook that we have been so successful with in our last two acquisitions, We are confident we can successfully launch Rhino as the brand of reference for the hyper-growing category of overlanding in North America. Our most recent acquisition was Maxtrax, the market leader in vehicle recovery and extraction boards for the overland and off-road market. We closed the acquisition on December 1st and have been busy integrating the business into our adventure segment. acquisition was immediately accretive. Maxtrax was founded based on the need for a system that makes vehicle recovery and extraction a safe, simple, one-person task that does not require towing. Today, Maxtrax is considered the creator of the Vehicle Recovery Board. We are already well underway in using Maxtrax to help expand capacity and speed up new product development as well as build our high growth adventure segment. Like Rhino Rack, we see substantial opportunity to expand in North American market. In fact, we launched our first go-to market offering at SHOT Show and the retailer's feedback was very strong. So here we are today with five superfan brands that are all benefiting from the innovate and accelerate strategy and strong market tailwinds. We've grown from roughly $150 million in sales that was losing approximately $3 million a year in adjusted EBITDA in 2016 to a record-setting result in 2021 of $375.8 million in sales and $61.5 million in adjusted EBITDA. The transformational change I've just walked through guides our vision for the future. This growth has required us to also invest heavily in our people, and while all deserve recognition, I'd like to highlight a couple of key senior hires and promotions. First, we announced that Aaron Cooney was promoted from EVP and CFO to the new role of Executive Vice President and Chief Operating Officer. In his new role, Aaron will have the responsibility for Claris' operating model, business integration and optimization, as well as our operational support functions. I'd like to reiterate the partnership approach that exists between our executive leadership team. It is not one of hierarchical nature. Instead, each of us has our own respective roles and responsibilities, which enables us to move quickly and evaluate and execute on the various opportunities for growth and value creation. As a result, we have appointed Mike Yates as our new CFO. Mike joins us with nearly 35 years of financial management, executive leadership, accounting, and M&A experience, most recently from the IDEX Corporation, an S&P 500 diversified engineered product company. At IDET, he held multiple accounting and financial executive leadership positions, including most recently serving as the Chief Accounting Officer, a role which he held since 2010. In this role, Mike will not only oversee global finance functions, but also lead our investor relations. We are focused on expanding our investor base, increasing our interactions with current as well as future shareholders, and broadening our communication. This includes an upcoming investor day, the details of which will be forthcoming. He will also be focused on helping to better outline our efforts involving corporate social responsibility and ESG. It is important to highlight that the people and culture of Claris are rooted in the idea that the style in which goals are accomplished is as important as achieving them at all. And this applies as much to our business as it does to our outdoor activities. That's why we have paired an innovative approach to building equipment with a unique approach to running a company, one that champions conservation and the access to the outdoors while minimizing our environmental footprint. With the expansion of our leadership team, we have taken a major step to further seek to scale our diversified brand globally and accelerate growth both organically and through additional acquisitions. So with that, I'd like to welcome Mike to his first earnings call. Congratulations, Mike.