Clarus Corporation

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Claris Corporation's financial results for the first quarter ended March 31st, 2023. Joining us today are Claris Corporation's Executive Chairman, Warren Kanders, COO, Aaron Cuney, CFO, Mike Yates, and the company's External Director of Investor Relations, Cody Slaw. Following the 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 statements 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. Before we begin, I would 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 potential risks and uncertainties that could cause the actual results of operations or financial condition of Claris Corp. to differ materially from those expressed or implied by the forward-looking statements. More information on potential factors that could affect the company's operating and 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 May 1, 2024, starting at 7 p.m. Eastern Time 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. Now I'd like to turn the call over to Claris' Executive Chairman, Warren Tanders. Warren?

Thank you, Cody. Good afternoon, and thank you for joining Claris' earnings call to review our results for the first quarter of 2023. I am joined today by Aaron Cooney, our Chief Operating Officer, and Mike Yates, our Chief Financial Officer. I will start by addressing the overall business and corporate strategy Aaron will provide an update on each of our business segments, and Mike will walk through our financial performance for the quarter. Our consolidated performance for the quarter highlights the resilience of our portfolio, given the uncertain market conditions and headwinds that carried over from 2022. Each of our segments experienced sequential top line improvement throughout the first quarter. Outdoor generated modest growth over the prior year, highlighted by increases in our direct-to-consumer and international channels, which were mostly offset by fewer shipments to our North American retail partners due to elevated inventory levels and reduced open-to-buy dollars. Precision Sport started slowly in January as market participants took stock of inventory levels and customer demand across SKUs. In aggregate, sales in February and March were off 3% over the same period in 2022. We have quickly rebuilt our order book, indicating that we have open demand plus year-to-date shipments that covers more than 70% of our full-year sales target. We are seeing a strong focus on specialty components and calibers as our core reloading customers restock, while we remain constrained by limited availability of rifle shell casings. The first quarter presented a difficult comparison for adventure given the record performance of the U.S. business in Q1 of 2022. The North American market continues to be hampered by promotional activity due to excess inventory at wholesale distributors down to retailers. While our North American business was off nearly 70% over the same period last year, we are seeing declines level off and turn to sequential growth. After a slow January in our adventurous home markets of Australia and New Zealand, we saw sales in February and March that we believe represent stabilization. More importantly, the operational improvements we implemented are taking hold as we generated gross margins in excess of 40% for the quarter versus 32% and 28% in Q4 and Q3 of last year, respectively. At the corporate level, I'm pleased with the progress that we have made to upgrade our segment leadership. As Claris has grown from a single brand, Black Diamond, to three distinct segments, we identified the need to shift to an operating model focused on individual entity growth, accountability, and performance. The changes that began in late 2022 are now manifesting themselves throughout our organization. We implemented cost cuts in Q1 and Q2, which will save us a million dollars at the corporate level on an annualized basis over 2022. As a precursor to our cost saving initiatives, we recognized an inflection point in our organizational evolution, implementing a strategic plan to decentralize and focus on individual segment performance. As we look forward, we are establishing baselines in each business, upgrading our talent pool, and driving towards the critical few metrics that we believe matter to operations and shareholder value. Cash flow generation, debt pay down, and margin enhancement at both the gross profit and EBITDA lines. With respect to cash flow generation, we've been working through inventory rationalization, which we expect to normalize by year end. Our budgeting process for 2023 identified the inventory overhang, affecting customer channels across all segments, and we have moderated our inbound purchases accordingly. Furthermore, as we focus our efforts at the segment level, we hired key leaders in outdoor and adventure who are each in the initial phases of their long-term planning. We are looking forward to sharing their views with you at the appropriate time. Neil Fisk joined as the new president of Black Diamond during Q1. An avid outdoorsman and experienced mountaineer, Neil brings deep expertise in building brands, driving innovation, and improving operational performance. We are enthusiastic about Neil's energy and vision for Black Diamond and its place as an iconic brand in the broader outdoor ecosystem. Likewise, in March, we hired Matt Hayward to run our Australian adventure business. Matt has over 20 years of experience in brand architecture, product strategy, and global marketing operations. He was previously the Chief Marketing and New Business Development Officer at R.M. Williams, an iconic Australian brand. Prior to that, he was with L. Catterton in its APAC operations and value-add team, along with marketing roles at Decker's, Quicksilver, and DC Shoes. With that, thank you for being with us today, and I'll turn the call over to Aaron.