Black Diamond Parent Clarus Reports Fourth Quarter & Full Year 2024 Results

Clarus Corporation (NASDAQ: CLAR) (“Clarus” and/or the “Company”), a global company focused on the outdoor enthusiast markets, reported financial results for the fourth quarter and full year ended December 31, 2024.

Fourth Quarter 2024 Financial Summary vs. Same Year‐Ago Quarter (adjusted to reflect the reclassification of the Precision Sport segment as discontinued operations)

• Sales of $71.4 million compared to $76.5 million.
• Gross margin was 33.4% compared to 28.9%; adjusted gross margin of 38.0% compared to 34.7%.
• Net loss, which includes the impact of discontinued operations, of $65.5 million, or $(1.71) per diluted share1, compared to net loss of $8.4 million, or $(0.22) per diluted share.
• Loss from continuing operations of $73.3 million, or $(1.92) per diluted share, compared to loss from continuing operations of $7.2 million, or $(0.19) per diluted share.
• Adjusted loss from continuing operations of $3.2 million, or $(0.08) per diluted share, compared to adjusted income from continuing operations of $1.6 million, or $0.04 per diluted share.
• Adjusted EBITDA from continuing operations of $4.4 million with an adjusted EBITDA margin of 6.1% compared to $1.6 million with an adjusted EBITDA margin of 2.1%.

2024 Financial Summary vs. 2023 (adjusted to reflect the reclassification of the Precision Sport segment as discontinued operations)

• Sales of $264.3 million compared to $286.0 million.
• Gross margin was 35.0% compared to 34.1%; adjusted gross margin was 37.5% compared to 35.6%.
• Net loss, which includes the impact of discontinued operations, of $52.3 million, or $(1.37) per diluted share2, compared to net loss of $10.1 million, or $(0.27) per diluted share.
• Loss from continuing operations of $88.4 million, or $(2.31) per diluted share, compared to loss from continuing operations of $15.8 million, or $(0.42) per diluted share.
• Adjusted loss from continuing operations of $2.6 million, or $(0.07) per diluted share, compared to adjusted income from continuing operations of $3.8 million, or $0.10 per diluted share.
• Adjusted EBITDA of $6.9 million with an adjusted EBITDA margin of 2.6% compared to $7.3 million with an adjusted EBITDA margin of 2.6%.

1 Includes $44.8 million impairment of goodwill and indefinite-lived intangible assets as well as a $21.0 million tax expense for the establishment of a valuation allowance associated with deferred tax assets.

2 Includes gain on sale Precision Sport segment of $40.6 million as well as $44.8 million impairment of goodwill and indefinite-lived intangible assets as well as a $21.0 million tax expense for the establishment of a valuation allowance associated with deferred tax assets.

Management Commentary
“During 2024 we remained focused on executing against our strategic roadmap and positioning Clarus for profitable growth over the long term,” said Warren Kanders, Clarus’ Executive Chairman. “Despite significant market headwinds, we took important steps during the year to simplify and strengthen the core at the Outdoor segment, while investing in new R&D and product development initiatives to scale the Adventure segment. At Outdoor, we made steady progress building a smaller, more profitable business in 2024. Primarily as a result of our product simplification and SKU rationalization initiatives, Outdoor adjusted gross margin improved to 36.9% in Q4 compared to 32.8% in the year ago quarter. In the Adventure segment, we anticipated this past year would require significant investment, and despite a difficult 2024, we are committed to maintaining these fixed investments to scale the business globally outside the home region of Australia."

Mr. Kanders added, “We enter 2025 encouraged by the strides our teams have made to advance our turnaround and excited about the potential to unlock new growth opportunities going forward. Following multiple quarters of incremental progress at Outdoor, we believe our success simplifying the business, rightsizing inventory and reshaping the organization positions Black Diamond for a return to growth as the market stabilizes. While initiatives to accelerate our Adventure brands’ traction in global markets will continue to take time, we have enhanced product development and the commercialization processes and plan to launch compelling new products throughout the coming year. With the recent acquisition of RockyMounts, we now have a comprehensive portfolio of roof and hitch-mounted bike racks solutions to reach a broader addressable market of customers in North America, Australia and New Zealand."

Fourth Quarter 2024 Financial Results
On a consolidated basis, sales in the fourth quarter were $71.4 million compared to $76.5 million in the same year‐ago quarter. This decrease was primarily driven by isolated challenges with two large accounts in our OEM and Australian wholesale channels in our Adventure segment. This decline was partly offset by growth in the North American wholesale and international distribution channels at the Outdoor segment.

Sales in the Outdoor segment were $51.1 million, compared to $50.1 million in the year-ago quarter. Sales in the Adventure segment decreased 22.9% to $20.3 million, compared to $26.4 million in the year-ago quarter.

Gross margin in the fourth quarter was 33.4% compared to 28.9% in the year‐ago quarter. The increase in gross margin was primarily due to lower PFAS inventory reserves related movements compared to the prior year at the Outdoor segment. This was further improved by favorable product mix due to continued product simplification and SKU rationalization efforts at the Outdoor segment, as well as a favorable channel mix at the Adventure segment due to lower OEM sales. This was partially offset by a $2.3 million increase in the inventory reserve at the Adventure segment to address slow-moving and obsolete inventory. Adjusted gross margin reflecting the PFAS related, other one-time inventory reserve movements, and inventory fair value adjustments as a result of purchase accounting was 38.0% for the quarter compared to 34.7% in the year-ago quarter.

Selling, general and administrative expenses in the fourth quarter were $27.8 million compared to $30.0 million in the same year‐ago quarter. The decrease was primarily a result of lower marketing, research and development, and retail expenses due to store closures at the Outdoor segment as well as lower corporate costs. These reductions were partially offset by investments in marketing, research and development, and e-commerce initiatives, primarily at Rhino-Rack USA in the Adventure segment.

During the fourth quarter, the Company incurred non-cash expense for goodwill and indefinite-lived assets impairments of $44.8 million as well as an increase in tax expense of $21.0 million for a valuation allowance to fully reserve all deferred tax assets associated with U.S. federal income taxes.

The loss from continuing operations in the fourth quarter of 2024 was $73.3 million, or $(1.92) per diluted share, compared to loss from continuing operations of $7.2 million, or $(0.19) per diluted share in the year-ago quarter. Loss from continuing operations in the fourth quarter included a non-cash impairment of goodwill and indefinite-lived intangible assets charge of $44.8 million in the Adventure segment due to the decline in the Company’s stock price and lower sales and profitability in the segment compared to expectations. The loss also includes $8.7 million of cost and charges associated with amortization of intangibles, restructuring charges, transactions costs, inventory fair value adjustment from purchase accounting, PFAS and other inventory reserves, legal costs and regulatory matter expenses, and stock-based compensation.

Adjusted loss from continuing operations in the fourth quarter of 2024 was $3.2 million, or $(0.08) per diluted share, compared to adjusted income from continuing operations of $1.6 million, or $0.04 per diluted share, in the year-ago quarter. Adjusted loss from continuing operations excludes amortization of intangibles, impairment of goodwill and indefinite-lived intangible assets, restructuring charges, transactions costs, inventory fair value adjustment from purchase accounting, PFAS and other inventory reserves, legal costs and regulatory matter expenses, and stock-based compensation.

Adjusted EBITDA from continuing operations in the fourth quarter was $4.4 million, or an adjusted EBITDA margin of 6.1%, compared to adjusted EBITDA from continuing operations of $1.6 million, or an adjusted EBITDA margin of 2.1%, in the same year‐ago quarter.

Net cash provided in operating activities for the three months ended December 31, 2024, was $16.6 million compared to net cash provided by operating activities of $14.5 million in the prior year quarter. Capital expenditures in the fourth quarter of 2024 were $2.2 million compared to $1.2 million in the prior year quarter. Free cash flow for the fourth quarter of 2024 was $14.4 million compared to $13.3 million in the prior year quarter.

Liquidity at December 31, 2024 vs. December 31, 2023

• Cash and cash equivalents totaled $45.4 million compared to $11.3 million.
• Total debt of $1.9 million (related to the RockyMounts acquisition) compared to $119.8 million.

Full Year 2024 Financial Results
Sales in 2024 decreased 7.6% to $264.3 million compared to $286.0 million in 2023. The decrease in sales was primarily driven by continued softness across all selling channels in Outdoor, combined with the effects of the Company’s product line simplification strategy, as well as lower Adventure segment sales. The Adventure decline resulted from less OEM channel demand and challenging wholesale markets globally, partially offset by the benefit from the TRED Outdoors acquisition.

From a segment perspective, Outdoor sales were down 10.0% to $183.6 million and Adventure sales were down 1.5% to $80.7 million, or $81.3 million on a constant currency basis, compared to 2023.

Gross margin in 2024 was 35.0% compared to 34.1% in 2023 primarily due to favorable product mix at the Outdoor segment as a result of product simplification and SKU rationalization efforts, combined with favorable Adventure segment channel mix due to lower OEM sales. This was partially offset by a $2.3 million inventory reserve expenses at the Adventure segment. Adjusted gross margin reflecting the PFAS related inventory reserve, Adventure inventory reserve, and inventory fair value purchase accounting was 37.5% for the year compared to 35.6% in the prior year.

Selling, general and administrative expenses in 2024 were $111.9 million compared to $114.6 million in 2023. The decrease was primarily due to lower retail expenses due to store closures and lower marketing and research and development expenses at the Outdoor segment. These decreases were partially offset by investments in global marketing, operational improvements, and e-commerce initiatives to accelerate growth at the Adventure segment and incremental SG&A from the TRED Outdoors acquisition.

Loss from continuing operations in 2024 was $88.4 million, or $(2.31) per diluted share, compared to net loss of $15.8 million, or $(0.42) per diluted share, in the prior year. Loss from continuing operations for 2024 included a non-cash impairment of goodwill and indefinite-lived intangible assets charge of $44.8 million in the Adventure segment due to the decline in the Company’s stock price and lower sales and profitability in the segment compared to expectations. The loss also includes $28.4 million of cost and charges associated with amortization of intangibles, restructuring charges, transactions costs, contingent consideration benefit, inventory fair value of purchase accounting, PFAS and other inventory reserves, legal costs and regulatory matter expenses, and stock-based compensation.

Adjusted loss from continuing operations in 2024 was $2.6 million, or $(0.07) per diluted share, compared to adjusted income from continuing operations of $3.8 million, or $0.10 per diluted share in the year-ago quarter. Adjusted loss from continuing operations excludes amortization of intangibles, impairment of goodwill and indefinite-lived intangible assets, restructuring expenses, transactions costs, contingent consideration benefit, inventory fair value of purchase accounting, PFAS and other inventory reserves, legal costs and regulatory matter expenses, and stock-based compensation.

Adjusted EBITDA in 2024 was $6.9 million, or an adjusted EBITDA margin of 2.6%, compared to $7.3 million, or an adjusted EBITDA margin of 2.6%, in 2023.

Net cash used in operating activities for the year ended December 31, 2024, was $7.3 million compared to net cash provided by operating activities of $31.9 million in 2023. Capital expenditures in 2024 were $6.7 million compared to $5.7 million in the prior year. Free cash flow for the year ended December 31, 2024, was $(14.0) million compared to $26.2 million in the same year‐ago period.

Acquisition of RockyMounts
In December, Rhino-Rack USA completed the acquisition of certain assets and liabilities constituting the RockyMounts business, a Colorado-based brand specializing in bicycle transport products, that we expect to deepen Rhino-Rack’s product expertise in a key growth vertical. For over 30 years, RockyMounts has designed innovative roof and hitch rack solutions, attracting a dedicated following of customers thanks to the products’ distinct style and exceptional durability. Founded in Boulder, Colorado in 1993, RockyMounts is known for making well designed and dependable premium bicycle racks and other accessories compatible with vehicles of all sizes, including SUVs, vans and trucks. Its award-winning products can be found in local and national retailers across North America.

2025 Outlook
The Company expects fiscal year 2025 sales to range between $250 million to $260 million and adjusted EBITDA of approximately $14 million to $16 million, or an adjusted EBITDA margin of 5.9% at the mid-point of revenue and adjusted EBITDA. In addition, capital expenditures are expected to range between $4 million to $5 million and free cash flow is expected to range between $8 million to $10 million for the full year 2025. Clarus has not provided net income guidance due to the inherent difficulty of forecasting certain types of expenses and gains, which affect net income but not Adjusted EBITDA and/or Adjusted EBITDA Margin. Therefore, we do not provide a reconciliation of Adjusted EBITDA and/or Adjusted EBITDA Margin guidance to net income guidance.

Net Operating Loss (NOL) and Deferred Tax Asset Valuation Allowance
The Company has historically had net operating loss carryforwards (“NOLs”) for U.S. federal income tax purposes. During 2024 the remaining NOLs have been utilized. Additionally, during the fourth quarter of 2024 the Company established a full valuation allowance through a charge to income tax expense for $21.0 million.