Black Diamond Parent Clarus Reports Record First Quarter 2021 Results, Raises Full-Year Outlook

Clarus Corporation (NASDAQ: CLAR) has reported financial results for the first quarter ended March 31, 2021.

First Quarter 2021 Financial Summary vs. Same Year‐Ago Quarter

• Sales increased 41% to $75.3 million.
• Gross margin improved 130 basis points to 35.9%; adjusted gross margin up 180 basis points to 36.4%.
• Net income improved significantly to $5.7 million, or $0.17 per diluted share, compared to $0.04 million, or $0.00 per diluted share.
• Adjusted net income before non‐cash items increased 280% to $10.2 million, or $0.31 per diluted share, compared to $2.7 million, or $0.09 per diluted share.
• Adjusted EBITDA increased 191% to $10.6 million.
• Free cash flow (net cash provided by operating activities less capital expenditures) was $(3.9) million compared to $2.2 million.

Management Commentary

“We had another quarter of double-digit revenue growth driven by continued robust demand across all of our brands and product categories,” said Clarus President John Walbrecht. “Additionally, we substantially improved gross margins and earnings thanks to the strength of our ‘super-fan’ brands, our capabilities to fulfill demand and our consistent pricing strategy. Overall, the first quarter was another quarter where we not only did what we set out to do, but we also exceeded our expectations.

“Across our Black Diamond and Sierra segments, we continued to outperform the market as we strived to enhance the value proposition for our end consumer. In Black Diamond, we benefited from the recovery in the outdoor market and reduced inventory volatility at retail, which allowed us to accelerate our growth, particularly with some of our key retail accounts. This is despite continued headwinds from COVID-19 and supply chain challenges. Demand in our bullet businesses continued to surge, and we were able to navigate component shortages relatively well as seen by the 94% and 92% pro forma first quarter sales growth in our Sierra and Barnes brands, respectively.

“Given our momentum, we are raising our full-year outlook and expect to continue leveraging the high demand for our diversified portfolio of brands. We will also expect to continue to innovate, whether that means adding new technical-rich features to our products or acquiring a new super-fan brand. Overall, 2021 is shaping up to be a record year.”

First Quarter 2021 Financial Results

Sales in the first quarter increased 41% to $75.3 million compared to $53.6 million in the same year‐ago quarter. The increase includes revenue contribution of approximately $8.5 million from Barnes, an acquisition Clarus completed on October 2, 2020. Excluding Barnes, the Company’s first quarter sales increased 25% on an organic basis compared to the same year-ago quarter.

Black Diamond sales were up 13% and Sierra sales were up 203%, or 94% excluding Barnes. The increase across both Black Diamond and Sierra segments is attributed to surging consumer demand and the recovery from the COVID-19 pandemic. On a constant currency basis, total sales were up 39%.

Gross margin in the first quarter improved 130 basis points to 35.9% compared to 34.6% in the same year‐ago quarter. Improvements in product mix and foreign exchange benefits more than offset unfavorable impacts on the Company’s supply chain and logistics due to the COVID-19 pandemic. Excluding a fair value inventory step-up associated with the Barnes acquisition, adjusted gross margin in the first quarter increased 180 basis points to 36.4%.

Selling, general and administrative expenses in the first quarter were $20.9 million compared to $17.4 million in the year‐ago quarter, primarily due to the inclusion of Barnes, which contributed $1.9 million, and an increase in stock-based compensation of $0.9 million due to the vesting of certain performance awards.

Net income in the first quarter improved substantially to $5.7 million, or $0.17 per diluted share, compared to $0.04 million or $0.00 per diluted share, in the same year‐ago quarter. The increase is largely due to the increase in sales.

Adjusted net income in the first quarter, which excludes non‐cash items and transaction costs, increased 280% to $10.2 million, or $0.31 per diluted share, compared to an adjusted net income of $2.7 million, or $0.09 per diluted share, in the same year‐ago quarter.

Adjusted EBITDA in the first quarter increased 191% to $10.6 million compared to $3.6 million in the same year‐ago quarter.

Net cash provided by operating activities for the three months ended March 31, 2021 was $(2.5) million compared to $3.5 million in the year-ago quarter. Capital expenditures for the three months ended March 31, 2021 was unchanged compared to the prior year quarter at $1.3 million. Free cash flow, defined as net cash provided by operating activities less capital expenditures, for the three months ended March 31, 2021 was $(3.9) million compared to $2.2 million in the same year‐ago period.

Liquidity at March 31, 2021 vs. December 31, 2020

• Cash and cash equivalents totaled $6.5 million compared to $17.8 million.
• Total debt of $28.6 million compared to $34.6 million.
• Remaining access to $49.3 million on the Company’s revolving line of credit.
• Net debt leverage ratio was flat at 0.6x.

Increased 2021 Outlook

Clarus now anticipates fiscal year 2021 sales to grow approximately 32% to $295 million ($280 million prior) compared to 2020. By brand, the Company now expects sales for Black Diamond to increase 20% to $205 million ($200 million prior) and Sierra and Barnes combined to increase 71% to $90 million ($80 million prior) compared to 2020.

The Company now expects adjusted EBITDA in 2021 to increase approximately 70% to $38 million ($35 million prior) compared to 2020 with capital expenditures of approximately $7.5 million and free cash flow of approximately $15 million.

Net Operating Loss (NOL)

The Company estimates that it has available NOL carryforwards for U.S. federal income tax purposes of approximately $120 million. The Company’s common stock is subject to a rights agreement dated February 7, 2008 that is intended to limit the number of 5% or more owners and therefore reduce the risk of a possible change of ownership under Section 382 of the Internal Revenue Code of 1986, as amended. Any such change of ownership under these rules would limit or eliminate the ability of the Company to use its existing NOLs for federal income tax purposes. However, there is no guaranty that the rights agreement will achieve the objective of preserving the value of the NOLs.