Q3 2023 Clarus Corp Earnings Call
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Speaker 1: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Claris Corporation's financial results for the third quarter and the September 30, 2023.
Good afternoon, everyone and thank you for participating in today's conference call to discuss Clarus Corporation's financial results for the third quarter ended September 32023.
Speaker 1: Joining us today are Clares Corporation's Executive Chairman, Warren Candors, CSO Mike Yates, and the company's External Director of Investor Relations, CODIS Law. Following the remarks, we will now take a short break.
Joining us today are Clarus Corporation's executive Chairman Warren Kantor.
Oh, Mike Yates and the company's external director of Investor Relations Cody Slaw.
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. Slaw as he reached the Companys Safe Harbor statement within the meaning.
Speaker 1: Before we go further, I would like to try to call over to Mr. Slaw as he reads the company's safe harbor statements that date the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead.
Private Securities Litigation Reform Act of Nike 95 that provides important cautions regarding forward looking statements Cody. Please go ahead.
Speaker 2: Thanks. Before we begin, I would like to remind everyone that during today's call, we're making several forward-looking statements and we make these statements under the safe harbor provisions of the private security litigation reform act.
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.
Speaker 2: These four-looking statements reflect our best estimates and assumptions based on our understanding of information.
These forward looking statements reflect our best estimates and assumptions based on our understanding of information.
Speaker 2: 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 Corporation.
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 Clarus Corporation to differ materially from those expressed or implied by the forward looking statements more information on potential factors that could affect the companys operating and financial results is included from time to time.
Speaker 2: to differ materially from those expressed or implied by the four looking statement.
Speaker 2: 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 SEC. I'd like to remind everyone this call will be available for replay through November 7.
And in the company's public reports filed with the SEC I'd like to remind everyone. This call will be available for replay through November seven.
Speaker 2: 2024 starting at 7pm 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 Canders. Warren. We'll be adding here a campaign by?y
2024, starting at seven 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 Clarus Corp Dot com.
Now I'd like to turn the call over to Claris as executive Chairman Warren Cantor's Oren.
Thank you Cody.
Speaker 3: Good afternoon, and thank you all for joining Claris's earnings call to review our results for the third quarter of twenty twenty three.
Good afternoon, and thank you all for joining <unk> earnings call to review our results for the third quarter of 2023.
Speaker 3: I am joined today by our Chief Financial Officer, Mike Yates.
I'm joined today by our Chief Financial Officer, Mike Yates.
Speaker 3: I will start the call by addressing the overall business and corporate strategy.
I will start the call by addressing the overall business and corporate strategy.
Speaker 3: Mike will then provide specific comments on the performance of our three segments and the detail to the audience sections.
Mike will then provide specific comments on the performance of our three segments.
And a detailed financial review.
Speaker 3: Given the non-binding indication of interest I previously submitted to acquire the company's Precision Sports segment, and our special committee's ongoing review, I believe it's prudent for Mike to handle today's Q&A session.
Given the nonbinding indications of interest I previously submitted to acquire the company's precision sports segment and our Special Committee is ongoing review I believe it's prudent for Mike to handle today's Q&A session.
Now jumping into our performance.
Speaker 3: Our brands largely experienced another challenging quarter given persistent macroeconomic headwinds that have constrained consumer demand and the continued inventory overhang at retail and distributor.
Our brands largely experienced another challenging quarter, given persistent macroeconomic headwinds that have constrained consumer demand and the continued inventory overhang at retail and distributors.
Speaker 3: This was especially pronounced in our Precision Sports segment, where customers stockpiling with Markdown inventory earlier this year impacted sales velocity in the third quarter.
This was especially pronounced in our precision sports segment, where customer stockpiling with markdown inventory earlier this year impacted sales velocity in the third quarter.
Speaker 3: This was partially offset by a snapback quarter in our adventure segment, which I will discuss shortly. As an organization,
This was partially offset by a snapback quarter in our adventure segment, which I will discuss shortly.
As an organization however, we did not stand idle.
Speaker 3: During the quarter, we made significant strides in the strategic review of our brands, developing compelling long-term growth plans, rebuilding our teams, and taking steps to recalibrate each business to operate most efficiently in the post-COVID era.
During the quarter, we made significant strides in the strategic review of our brands developing compelling long term growth plans rebuilding our teams and taking steps to recalibrate each business to operate most efficiency efficiently in the post Covid era.
Speaker 3: We are undoing some of the choices made by prior management.
We are undoing some of the choices made by prior management teams so to a certain extent we needed to press the reset button in order to pursue rebuilding our reputation as a customer centric enterprise.
Speaker 3: So to a certain extent, we needed to press the reset button in order to pursue rebuilding our reputation as a customer-centric enterprise.
Speaker 3: I am confident that the teams in place are fully capable of driving the turnaround.
I am confident that the teams in place are fully capable of driving the turnaround.
Speaker 3: Both of our leaders that outdoor and adventure have specific past experiences as operators for private equity back this.
Both of our leaders at outdoor and adventure has specific past experiences as operators for private equity backed businesses, where they were responsible for structurally correcting and right sizing iconic global heritage brands in preparation for their re growth stays.
Speaker 3: where they were responsible for structurally correcting and right sizing iconic global heritage brands in preparation for their regrowth phase.
Speaker 3: We see the same characteristics with our brands. But the early steps require patience as the strategic initiatives are in motion.
We see the same characteristics with our brands, but the early steps require patience as the strategic initiatives are in motion.
Speaker 3: with our pivot away from a corporate cost structure nearly complete.
With our pivot away from a corporate cost structure nearly complete.
Speaker 3: Each of the segment leaders now have full P&L ownership and are tasked with driving the success of their respective business units.
Each of the segment leaders now have full P&L ownership and are tasked with driving the success of their respective business units.
Speaker 3: As we build for the long term, I am pleased with our ability to progress the cash flow initiatives that we can control in this challenging market.
As we build for the long term I am pleased with our ability to progress the cash flow initiatives that we can control in this challenging market.
Speaker 3: We continue to seek opportunities to reduce our inventory levels without eroding overall gross margin.
We continue to seek opportunities to reduce our inventory levels without eroding overall gross margin.
Speaker 3: This includes improving the age of our inventory at outdoor.
This includes improving the age of our inventory at outdoor.
Speaker 3: while prioritizing the investment in new products underlying potentially compelling new business opportunity.
While prioritizing the investment in new products underlying potentially compelling new business opportunities.
Speaker 3: As mentioned, adventure turned the corner in Q3, reporting 9% sales growth and generating an adjusted EBITDA margin over 13%.
As mentioned adventure turned the corner in Q3 reporting 9% sales growth and generating an adjusted EBITDA margin over 13%.
Speaker 3: From an operational standpoint, we completely reshape the adventure organization.
From an operational standpoint, we completely reshaped the adventure organization.
Speaker 3: forming new leadership globally, engaging strategically with key accounts, and developing a clear three-year product horizon, which was well received.
Forming new leadership globally, engaging strategically with key accounts and developing a clear three year product horizon.
Which was well received.
Speaker 3: This includes the launch of our new Rhino-Rack Pioneer 6 product.
This includes the launch of our new Rhino rack pioneer six product.
Speaker 3: our premium tray portfolio leader, which we began delivering in October .
Our premium trade portfolio leader, which we began delivering in October.
Speaker 3: This product carries an average gross profit margin that is twelve hundred basis points superior to the last generation product.
This product carries an average gross profit margin that is 12 100 basis points superior to the last generation product.
Speaker 3: This was supported with additional launches in our crossbar business, with the introduction of both the RX100 and RX200.
This was supported with additional launches in our cross border business with the introduction of both the Rx 100, and Rx 200.
Speaker 3: for our OEM partnership with Ford and their Everest product.
For our OEM partnership with Ford and their Everest product.
Speaker 3: In our recovery products, we launched the Max Tracks light board to an exclusive 500 door release with a key retail partner in Australia. Furthermore.
And our recovery products, we launched launched the Max tracks Whiteboard through an exclusive 500 door release with a key retail partner in Australia.
Furthermore, we are excited about the acquisition.
Speaker 3: of Australia-based tread outdoors, which we acquired subsequent to quarter.
Australia based tread outdoors, which we acquired subsequent to quarter end.
Speaker 3: Tread is a fast-growing, out-tour adventure brand, Best in Class, innovative recovery products across off-road, four-by-four auto, mode of touring, camping and caravage.
Trade is a fast growing outdoor adventure brand best in class innovative recovery products across off road four by four auto motive touring camping and caravans.
Speaker 3: Tread will continue to operate independently as a wholly unsubstitiality and will be part of our adventure segment.
<unk> will continue to operate independently as a wholly owned subsidiary and will be part of our adventure segment.
Speaker 3: The tread outdoor brand is designed to build for the seriously adventurous and embodies clearest philosophy to identify brands that are passionately supported by customers and consumers who live and breathe the lifestyle.
The tread outdoor brand is designed and built for the seriously adventurous antibodies Claris is philosophy to identify brands that are passionately supported by customers and consumers, who live and breathe the lifestyle.
Speaker 3: This transaction highlights our continued focus on identifying sought-after brands within the adventure segment that are expected to both enhance our offering to existing retail customers and expand our reach into new
This transaction highlights our continued focus on identifying sought after brands within the adventure segment that are expected to both enhance our offering to existing retail customers and expand our reach into new and larger channels.
Speaker 3: In our outdoor segment, revenue trends improve sequentially from the low of Q2 to down only 3% in the third quarter compared to prior year third quarter.
In our outdoor segment revenue trends improved sequentially from the low of Q2 to down only 3% in the third quarter compared to prior year third quarter.
Speaker 3: North America is stabilizing but remains challenging as retailers continue to manage inventory and keep open to buys tight.
North America is stabilizing but remains challenging as retailers continue to manage inventory and keep open to buys tight.
Speaker 3: Europe was a drag on the overall result as the region felt some of the inventory and macroeconomic challenges that are North American business-based in the fourth quarter of last year and the first half of this year.
Europe was a drag on the overall result, as the recent felt some of the inventory on macro macroeconomic challenges that our north American business faced in the fourth quarter of last year and the first half of this year.
Speaker 3: We expect this softness to persist in Europe in the coming quarter.
We expect this softness to persist in Europe in the coming quarters.
Speaker 3: Gross margins continue to be compressed as we right-side inventory and cleared slower moving products.
Margins continued to be compressed as we rightsize their inventory and cleared slower moving products.
Speaker 3: We also continue to pursue various cost reduction initiatives and operational improvements in the quarter. We drove efficiencies in our R&D marketing sales and discretionary areas.
We also continued to pursue various cost reduction initiatives and operational improvements in the quarter.
We drove efficiencies in our R&D marketing sales and discretionary areas. While also strategically investing in key areas to get the brand growing from the core again.
Speaker 3: while also strategically investing in key areas to get the brand growing from the core again.
Speaker 3: As such, we hired a new Vice President of North American Sales and simplified the structure of the team while adding new directors for specialty and key accounts.
As such we hired a new vice President of North American sales and simplified the structure of the team, while adding new directors for specialty and key accounts.
Speaker 3: In apparel, an important growth driver for Black Diamond, we hired a new business unit director, strengthen the design team, and implement in a more rigorous, athlete-driven product development process.
In apparel and important growth driver for Black Diamond, we hired a new business unit director strengthened the design team and implemented a more rigorous athlete driven product development process.
Speaker 3: importantly, we signed a multi-year agreement to be the official outfit of Reneer mountaineering. One of America's premier guide services with over 70 guides around the world from Reneer to Denali to Akron Kongwa and the Himalayas.
Importantly, we signed a multiyear agreement to be the official outfitter of Rainier mountaineering one of America's Premier Guide services with over 70 guidance around the world from Rainier to Denali tack on Congo, and the Himalayas.
Speaker 3: Under this partnership, Renere Mountnering will be a close partner in bringing innovation and extensive field testing to our Alpine Mountneuring apparel and hard goods.
Under this partnership.
Rainier mountaineering will be a close partner in bringing innovation and extensive field testing to our alpine mountaineering apparel and hard goods.
Speaker 3: We have also bolstered our roster of legendary climbers, skiers and mountain athletes with the addition of Angela Haas, House President of the American Mountain Guides Association, Adrian Valinjay, High Altitude Climber and Skier, and founder of Elk Joe Glow Expeditions, and Topomina and Carla Perez, Big Mountain Alpenas and Guides based in South America.
We have also bolster bolstered our roster of legendary climbers skiers and mountain athletes.
Additionally, Angela.
As president of the American Mountain Guides Association.
Adrian balance high altitude climber and skier and.
And founder.
Joe.
Expeditions and top of Mena and Carlos Perez Bigmouth Alpinist guides based in South America.
Speaker 3: Given our operational progress and outdoor this year, we expect to begin 2024 on a much firmer footing as we pursue growth from our core while seeking to develop new revenue streams and categories, channels, and geographies.
Given our operational progress and outdoor this year, we expect to begin 2024 on a much firmer footing as we pursue growth from our core while seeking to develop new revenue streams and categories channels and geographies.
Speaker 3: Assuming out on our consolidated brands and setting our sites on the fourth quarter and beyond, our priorities remain firmly set on the stabilization of sales and margins, additional organizational reshaping and cost reductions, and resetting our brands to a new baseline as we enter 2024.
Zooming out on our consolidated brands in setting our sights on the fourth quarter and beyond our priorities remain firmly set on the stabilization of sales and margins additional organizational reshaping and cost reductions and resetting our brands to a new baseline as we enter 2024.
Speaker 3: We are confident in our belief that the strategy is grounded in the maximization of shareholder value creation.
We are confident in our belief that this strategy is grounded in the maximization of shareholder value creation.
Speaker 3: But before the call, before passing the call over to Mike, I'd like to update shareholders on a couple of matters.
Okay.
Before the call before passing the call over to Mike I'd like to update shareholders on a couple of matters.
Speaker 3: First, we are planning to host an investor day in late January . We will have myself, Mike, and our segment leaders, Neil and Matt, available to share their strategies and growth plans.
First we are planning to host an investor day in late January we will have myself, Mike and our segment leaders, Neil and Matt available to share their strategies and growth plans.
Speaker 3: And finally, although we do not make a practice of commenting on pending litigation, we are pleased that the progress of the lawsuit against tap trading LLC, and it's principle for this gorgement of short swing profits under Section 16B of the securities laws.
And finally, although we do not make a practice of commenting on pending litigation. We are pleased with the progress of the lawsuit against <unk> trading LLC and its principal for disgorgement of short swing profits under section <unk> of the securities laws.
Speaker 3: Fact discovery has for the most part concluded and expert reports are due to be exchanged shortly in late November with rebuttal reports due by late December .
Fact discovery has for the most part concluded an expert reports are due to be exchanged shortly in late November with rebuttal reports Dubai late December.
Speaker 3: The depositions of the experts will be taken by mid-January 2024, and the parties will submit a joint status letter to the court by late January 2020.
The depositions of the experts will be taken by mid January 2024, and the parties will submit a joint status letter to the court by late January 2024.
Speaker 3: At that point, the court will issue a schedule for summary judgment, and if the motion is denied, set a trial date.
At that point the court will issue a schedule for summary judgment and if the motion is denied set a trial date.
Speaker 3: With that, thank you for being with us today, and I will turn the call over.
With that thank you for being with US today, and I will turn the call over to Mike.
Speaker 4: Thanks Warren, and good afternoon everyone. Jumping right into the performance in the third quarter, total sales were 100.1 million compared to 115.7 million in the prior year quarter. On a reported and constant currency basis, total sales were down 14 and 13% respectively.
Thanks, Lauren and good afternoon, everyone.
Jumping right into the performance in the third quarter total sales were $101 million compared to $115 7 million in the prior year quarter on a reported and constant currency basis total sales were down 14, and 13% respectively.
Speaker 4: By segment, adventure reported sales increased 9% to 20.2 million in the third quarter, and on a constant currency basis, sales were up 12%. Compared to 18.6 million in the third quarter of last year, due to the strong sales in Rhino Racks, home market of Australia, and the stabilization of sales in the North American ??????? queste Trump Ab bra.
The segment adventure reported sales increased 9% to $22 million in the third quarter and on a constant currency basis sales were up 12% compared to $18 6 million in the third quarter of last year due to the strong sales and Brian of racks home market of Australia.
And a stabilization of sales in the North American market.
Speaker 4: In Australia, new car sale records have been broken for the third month running with the Australian car market posting this best ever September . As such, we experienced sales in Australia surpassing the $20 million Australian level for the quarter, which is a level not seen since the first quarter of 2022.
In Australia, New car sale records have been broken for the third month running with the Australian Carb market posting its best ever September as such we experienced sales in Australia, surpassing the $20 million Australian dollars level for the quarter, which is a level not seen.
Since the first quarter of 2022.
Speaker 4: This was driven by strong OEM sales with the introduction of a new vehicle and product line and strong sell into a new box retail part.
This was driven by strong OEM sales with the introduction of a new vehicle and product line and strong sell into a new box retail partner.
Speaker 4: The team did a tremendous job engaging with key accounts like these to Bremot. Our vision and product horizon was well received.
The team did a tremendous job engaging with key accounts like these to our vision and product horizon was well received.
Speaker 4: In the US, adventure revenues surpassed our internal expectations. While demand for overlanding gear remains sluggish, we experienced success with select new customers through targeted marketing, promotion, and training. We continue to focus on expanding our go-to-market strategy and increasing attention to our e-commerce channel. On boarding of large new customers in North American market that will start to ship
In the U S adventure revenue surpassed our internal expectations, while demand for over landing gear remains sluggish we experienced success with select new customers through targeted marketing promotion and training. We continue to focus on expanding our go to market strategy and increasing attention.
Two our e-commerce.
Channel Onboarding of large new customers in North American market that will start to ship.
Speaker 4: In the fourth quarter of 2023 has completed with a specific product portfolio, portfolio being tailored for their large national customer base.
In the fourth quarter of 2023 has completed with a specific product portfolio portfolio being tailored for their large national customer base.
Speaker 4: But overall, customers domestically in the US have been and continue to control their open-to-buy dollars and are selective on their replenishment. As an example of tighter purse strings, many participants pulled out of the Overland Expo and manufacturers are not displaying at Seam of this year in order to reduce costs.
But overall customers domestically in the U S have been and continue to control their open to buy dollars and our selective on their replenishment.
As an example, a tighter purse strings, many participants pulled out of the overland Expo and.
And manufacturers are not displaying it seem at this year in order to reduce cost.
Speaker 4: In our MACS tracks brand, sales in Q3 rebounded compared to Q2. A few key accounts are back online after softness in the second quarter. And we expect strong revenue in the fourth quarter, in part due to the introduction of our MACS tracks like new products.
And our Max tracks brand sales in Q3 rebounded compared to Q2.
A few key accounts are back online after softness in the second quarter and we expect strong revenue in the fourth quarter in part due to the introduction of our backs tracks light new product.
Speaker 4: We currently believe the worst is behind us for our adventure brands in this segment. And we're quite constructive about the opportunities we have to drive strong sales growth and better than 13% adjusted EBITDA margins in our adventure segment over the long term.
We currently believe the worst is behind us for adventure brands in this segment and we're quite constructive about the opportunities we have to drive strong sales growth and better than 13% adjusted EBITDA margins and our adventure segment over the long term.
Speaker 4: And as Warren mentioned, after the quarter ended on October 9, 2023, we purchased tread outdoors to complement our other brands in this segment. We are excited by the prospects for growth in this recovery brand and currently expect tread to contribute roughly one and a half to $2 million US dollars in sales in the fourth quarter of 2023.
And as Warren mentioned after the quarter ended on October 19, 2023, we purchased tread outdoors to complement our other brands. In this segment. We are excited by the prospects for growth in this recovery brand and currently expect tread to contribute roughly one and a half to 2 million U S dollars in <unk>.
Sales in the fourth quarter of 2023.
Moving to outdoor.
Speaker 4: Sales were down 3% on a reported basis to 61.1 million versus 62.9 million in a year ago core. While sales have improved from Q2, the overall market continues to be soft due to excess inventory in the channel and a constrained consumer given the macroeconomic head.
Sales were down 3% on a reported basis to $61 1 million versus 62 9 million in the year ago quarter, while sales have improved from Q2.
The overall market continues to be soft due to excess inventory in the channel and a constrained consumer given the macroeconomic headwinds as Lorne mentioned the regional dynamics are shifting from what we experienced earlier in the year and in the fourth quarter of last year with our North American business stabilizing and the rest of the world.
Speaker 4: As Warren mentioned, the regional dynamics are shifting from what we experienced earlier in the year and in the fourth quarter of last year, with our North American business stabilizing and the rest of the world getting tough.
Speaker 4: We entered the fourth quarter with a strong order book. However, headwinds have continued to increase in our European market given mild early winter conditions as well as impact from macroeconomic headwinds and geopolitical issues. Our international global distributor business remains resilient, but we do anticipate some softness relative to the strength this region showed in a prior year.
Getting tougher.
We entered the fourth quarter with a strong order book, However headwinds have continued to increase in our European market given mild early winter conditions as well as the impact from macroeconomic headwinds and geopolitical issues are international global distributor business remains resilient resilient, but we do.
Anticipate some softness relative to strength this region showed in the prior year.
Speaker 4: Partially offsetting the 3% decline at outdoor was continued strong execution in our direct to consumer business at black diamond which was up 22%
Partially offsetting the 3% decline at outdoor with continued strong execution in our direct to consumer business at Black Diamond.
Which was up 22% in the quarter.
Speaker 4: We see our direct to consumer business as one of the best indicators of the strength of the brand since it is the fullest expression of our assortment and has less of the inventory hangover effect that is dragged on the wholesale mark.
We see our direct to consumer business as one of the best indicators of the strength of the brand since it is the fullest expression of our assortment and has less of the inventory hangover effect that has dragged on the wholesale market.
Speaker 4: We have executed well on an initial set of immediate cost reduction in operational alignment priorities. Our results at Outdoor in 2023 from a margin standpoint reflected difficult market conditions. And our effort to write size not just a dollar value, but also the quality and aging of the inventory is all in an attempt to reset the business to a new baseline for 2024.
We have executed well on an initial set of immediate cost reduction and operational alignment priorities. Our results at outdoor in 2023 from a margin standpoint reflects the difficult market conditions and our effort to right size not just the dollar value, but also the quality and aging of the inventory is all in an attempt to reach.
Set the business to a new baseline for 2024.
Speaker 4: Precision sports sales were 18.8 million in the third quarter compared to 34.2 million in the third quarter of last year, down 45%. Sales in this segment were constrained by heightened inventory levels at both retail and key distributors. But also some wallet.
Precision sports sales were $18 8 million in the third quarter compared to $34 2 million in the third quarter of last year down 45%.
In this segment were constrained by heightened inventory levels at both retail and key distributors.
But also some wallet tightening by the consumer.
Speaker 4: As one partner told me, not only is there too much inventory at retail and in the distribution channel, but there's also too much inventory in the hands of the consumer.
As one partner told me not only is there too much inventory at retail in it and in the distribution channel, but Theres also too much inventory in the hands of the consumer.
Speaker 4: We believe the consumer took advantage of the promotional pricing environment earlier in the year to stockpile inventory and frankly bought inventory when it was available. But now has ample supply to get them through this fall hunting.
We believe the consumer took advantage of the promotional pricing environment earlier in the year to stockpile inventory and frankly bought inventory when it was available but now has ample supply to get them through this fall hunting season.
Speaker 4: Fall 2023 hunting season has been very tough. We did not move the expected ammo that we were planning to sell, especially at Barnes. We have been working through this rough patch and need to find an equal living of supply and demand for precision sports business.
Fall 2023 hunting season has been very tough we did not move the expected AMOLED that we were planning to sell especially at Barnes, we have been working through this rough patch and need to find an equilibrium of supply and demand for our precision sports business. We specifically did not take any action to be promotional.
Speaker 4: We specifically did not take any action to be promotional in our pricing to move our premium inventory. We are comfortable with our barn center filed rifle hunting ammo and did not want to liquidate these premium products hastily as we expect that demand will recover in the coming quarter.
And our pricing to move our premium inventory, we're comfortable with our burn center filed rifle hunting ammo and did not want to liquidate these premium products hastily as we expect that demand will recover in the coming quarters.
Speaker 4: Moreover, given the two geopolitical conflicts, our world is facing, we are seeing a modest uptick on some of our bullet calibers in October geared towards the military and the defense sector. Well, this could be a catalyst for growth in 2020-24. It is still too early to tell, but we are shifting production capacity to these new opportunities.
Moreover, given the two geopolitical conflicts our world is facing we are seeing a modest uptick on some of our bullet calibers in October geared towards the military and the defense sector.
This could be a catalyst for growth in 2000 2024 is still too early to tell.
We are shifting production capacity to these new opportunities.
Speaker 4: Moving on to consolidated gross margins. In the second quarter, gross margin increased 140 basis points to 35.5% compared to 34.1% in the year ago period.
Moving onto consolidated gross margins in the second quarter gross margin increased 140 basis points to 35, 5% compared to 34, 1% in the year ago period.
Speaker 4: This increase was primarily driven by easing freight cost, positively impacting gross margins by 90 basis points, along with positive channel and product mix of 80 basis points. This was some on offset by 30 basis point unfavorable impact from foreign exchange.
This increase was primarily driven by easing freight costs positively impacting gross margins by 90 basis points, along with positive channel and product mix up 80 basis points. This was somewhat offset by 30 basis point unfavorable impact from foreign exchange.
Speaker 4: From a segment perspective, gross margin and venture increased significantly to 40.7% in the quarter compared to 27.6% in the prior year quarter. Due to lower freight costs, the benefit from prior year cost out actions being realized in the current period and higher value.
From a segment perspective gross margin adventure increased significantly to 47% in the quarter compared to 27, 6% in the prior year quarter due to lower freight cost the benefit from prior year cost out actions being realized in the current period and higher volume gross margin.
Speaker 4: Gross margin at outdoor was 31.2% in the quarter compared to 33.6% in the prior year quarter. Reflecting the continuing right sizing of our inventory via promotional pricing and higher sales of discontinued merchandise.
Arjun at outdoor was 31, 2% in the quarter compared to $33 six in the prior year quarter, reflecting the continued right sizing up our inventory via promotional pricing and higher sales of discontinued merchandise.
Speaker 4: The quality of our outdoor inventory is improving, but it's not yet fully aligned with the man. We also continue to work on organizational reshaping to reduce cost and expect the actions we are taking to drive improvements in gross and operating margins in 2024 at the outdoor bus.
Quality of our outdoor inventories improving but it's not yet fully aligned with demand. We also continue to work on organizational reshaping to reduce costs and expect the actions. We are taking to drive improvements in both gross and operating margins in 2024 at the outdoor business.
Speaker 4: Gross margin of precision sports increased 540 basis points to 44% in the third quarter compared to 38.6% in the prior year quarter due to favorable cost variances being realized along with better product.
Gross margin at precision sports increased 540 basis points to 44% in the third quarter compared to 38, 6% in the prior year quarter due to favorable cost variances being realized along with better product mix, specifically less ammo sales and more bullet sales.
Speaker 4: Specifically less ammo sales and more bullet sales, which are at a higher mark.
Alright, a higher margin.
Speaker 4: Selling general administrative expenses in the third quarter decreased 2% to 31.8 million compared to 32.7 million in the same year ago quarter.
Selling general and administrative expenses in the third quarter decreased 2% to $31 8 million compared to $32 7 million in the same year ago quarter.
Speaker 4: The decline was driven by lower sales commissions, lower and tangible amortization expense, and lower non-cashback based compensation expenses for performance awards at corporate, partially offset by investments in e-commerce initiatives at the outdoor segment and approximately $400,000 of higher legal costs in the third quarter of 2023 related to the pending litigation against half trade.
The decline was driven by lower sales commissions, lower intangible amortization expense and lower noncash stock based compensation expense for performance awards at corporate.
<unk> offset by investments in e-commerce initiatives at the outdoor segment and approximately $400000 of higher legal costs in the third quarter of 2023 related to the pending litigation against half trading.
Speaker 4: Net loss in the third quarter was 1.3 million or a negative three cents for deluded share.
Net loss in the third quarter was $1 3 million or a negative <unk> <unk> per diluted share.
Speaker 4: This compares to net income of 2.8 million or 7 cents.
This compares to net income of $2 8 million or seven cents.
Speaker 4: per diluted share in the prior year quarter. Net loss in the third quarter included 1.1 million restructuring charge on a pre-tax basis relating to our efforts to take costs out across our portfolio.
Per diluted share in the prior year quarter.
Net loss in the third quarter included.
One 1 million restructuring charge on a pretax basis relating to our efforts to take cost out across our portfolio.
Speaker 4: The net loss also included approximately $800,000 for transaction costs on a pre-tax base.
The net loss also included approximately $800000 for transaction costs on a pre tax basis.
Speaker 4: These transactions cost related to the tread outdoor acquisition and cost related to the ongoing processes process undertaken by the special committee of the Board of Directors relating to its evaluation of the potential sale of the precision sports business.
These transaction costs related to the tread outdoor acquisition and cost related to the ongoing processes process undertaken by the special Committee of the board of directors relating to its evaluation of the potential sale of the precision sports business.
Speaker 4: Adjusted EBITDA on the third quarter was 9.9 million, or an adjusted EBITDA margin of 9.9%. Compare to 15.1 million or adjusted EBITDA margin of 13.0% in the same quarter a year ago. The decline in adjusted EBITDA was driven by lower sales volumes, partially offset by improvements in SG&A in the quarter.
Adjusted EBITDA in the third quarter was $9 9 million or an adjusted EBITDA margin of nine 9% compared to $15 1 million or adjusted EBITDA margin of 13.0% in the same quarter a year ago. The decline in adjusted EBITDA was driven by lower sales volumes, partially offset by improvements in.
SG&A SG&A in the quarter.
Speaker 4: 5 segment adjusted Yvada was 3.5 million or 5.8% at outdoor, 6.9 million or 36.6% at precision sports, and 2.7 million or 13.3% at adventure for the quarter.
<unk> segment, adjusted EBITDA was $3 5 million or five 8% at outdoor $6 9 million or 36, 6% at precision sports and $2 7 million or 13, 3% at adventure for the quarter the.
Speaker 4: The consolidated adjusted eva.in concludes 3.2 million in corporate costs, which was higher than the 2.8 million in the prior year due to higher legal costs associated with the short swing profit litigation. Now, let's-
Consolidated adjusted EBITDA includes $3 2 million in corporate costs, which was higher than the $2 8 million in the prior year due to higher legal costs associated with the short swing profit litigation.
Now, let me shift over to our liquidity.
Speaker 4: At September 30th, cash and cash equivalents were 8 million compared to 12.1 million at December 31st, 2022.
At September 30th cash and cash equivalents were $8 million compared to $12 1 million at December 31st 2022.
Speaker 4: Free cash flow to find as net cash provided by operating activities less capital expenditures for the third quarter was a negative 1.1 million.
Free cash flow defined as net cash provided by operating activities less capital expenditures for the third quarter was a negative $1 1 million.
Speaker 4: This compares to a negative 13.6 million of free cash flow in the same year go quarter. The improvement of free cash flow was due to our efforts to reduce invadage.
This compares to a negative $13 6 billion of free cash flow in the same year ago quarter. The improvement in free cash flow was due to our efforts to reduce inventory.
Speaker 4: We paid down roughly 5 million of debt and ended the quarter with total debt of 122.6 million. This put us in a net debt position of 114.6 million resulting in a net debt leverage ratio of 3.3 times on a trailing 12 month adjusted EBITDA base.
We paid down roughly $5 million of debt and ended the quarter with total debt of $122 6 million. This put us in a net debt position of $114 6 million, resulting in a net debt leverage ratio of three three times on a trailing 12 month adjusted EBITDA basis.
Speaker 4: Under our $300 million Revolving Credit Facility, we have approximately 10.4 million outstanding and further borrowing capacity of approximately 17.3 million at September 30, 2020.
Under our $300 million revolving credit facility, we have approximately $10 4 million outstanding and further borrowing capacity of approximately $17 3 million at September 32023.
Speaker 4: Our inventories were lower sequentially by 8.5 million.
Our inventories were lower sequentially by $8 5 million.
Speaker 4: $240 million a September 30th.
$240 million at September 30.
Speaker 4: This compares, this $8.5 million decrease compared to the June 30th balance. As Warren discussed, we did a good job of clearing slow moving inventory and investing behind products with good growth process.
This compares this eight and a half million dollar decreased compared to the June 30 balance as warrant discussed we did a good job of clearing slow moving inventory and investing behind products with good growth prospect prospects by segment outdoor has approximately $70 million of inventory and what's behind our internal.
Speaker 4: By segment, Outdoor has approximately 70 million of inventory and was behind our internal targeted inventory balance due to soft, softer market conditions and a mismatch between available inventory and demand opportunities.
Our targeted inventory balance due to soft softer market conditions, and a mismatch between available inventory and demand opportunities. However, the aging of inventory has significantly improved in 2023 and the team is focused on prioritizing faster moving products.
Speaker 4: However, the aging of inventory has significantly improved in 2023, and the team has focused on prioritizing faster moving products.
Speaker 4: Precision sports inventory was higher than expected. Precision sports has $45 million of inventory at the end of the quarter due to the market's lolling and fall hunt season weakness resulting in much higher finished goods ammunition, especially at barn.
Precision sports inventory was higher than expected precision sports has $45 million of inventory at the end of the quarter due to the market slowly and fall hunting season weakness, resulting in much higher finished goods ammunition, especially at Barnes.
Speaker 4: Adventures, Tred Nina's plan, and in the quarter of approximately 25 million of inventory. This includes our investment in new inventory for the new commercial opportunity I mentioned in North American market with our new part.
Adventures trending as planned and in the quarter with approximately $25 million of inventory. This includes our investment in new inventory inventory for the new commercial opportunity I mentioned in North American market with our new partner.
Speaker 4: From a tax perspective, we have over 18 million of NOLs remaining, and we expect these NOLs to offset any federal cash taxes due in 2023. Now, let me move on.
From a tax perspective, we have over $18 million of Nols remaining and we expect these nols to offset any federal cash taxes due in 2023.
Now let me move on to our 2023 outlook. We now expect sales to land within the range of 364 million to $368 million for the full year of 2023, and adjusted EBITDA to be in the range of 33 million to $35 billion or an adjusted EBITDA margin of nine 3%, assuming the midpoint of sales and adjust.
Speaker 4: We now expect sales to land within the range of 364 million to 368 million for the four year 2023 and adjusted EBITDA to being a range of 33 million to 35 million or an adjusted EBITDA margin of 9.3% assuming the midpoint of sales and adjusted EBITDA guys.
The EBITDA guidance, we all well. He also now expect full year capital expenditures to be approximately $6 million and free cash flow is now expected to range between 20 and $22 million for the full year 2023, we expect to end the year with approximately $120 million in debt and this is inclusive of the approximate $6 million of debt.
Speaker 4: We all, but we also now expect full year capital expenditures to be approximately six million. And free cash flow is now expected to range between 2022 million for the full year, 2023. We expect to end the year with approximately 120 million in debt. And this is inclusive of the approximately six million of debt we borrowed in October to fund the TRED outdoor acquisition.
We borrowed an eye tober to fund the tread outdoor acquisition.
Speaker 4: For the fourth quarter, this outlook implies sales in a range of 83 to 87 million and adjusted in four parts.
For the fourth quarter. This outlook implies sales in a range of $83 million to $87 million and adjusted EBITDA to.
Speaker 4: to range between $6 and $8 million. The fourth quarter in full year guidance includes one and a half to two million of revenue related to the tread that I mentioned earlier.
To range between six and $8 million, the fourth quarter and full year guidance includes one and a half to $2 million of revenue related to tread that I've mentioned earlier.
Speaker 4: Lastly, during the quarter, Claire's confirmed the receipt of a non-binding indication of interest from Warren Candor's to acquire a precision sports segment.
Lastly, during the quarter Claire's confirm the receipt of a nonbinding indications of interest from Warren, Kansas to acquire a pursuit and sports segment.
Speaker 4: In response, our Board of Directors formed a special committee and retained Hula-Han Loki as a financial advisor to evaluate the proposal and assist in the solicitation of parties that have expressed an interest in and other parties that might be interested in acquiring precision sports sites.
In response, our board of Directors formed a special committee and retained Houlihan Lokey as a financial advisor to evaluate the proposal and assist in the solicitation of parties that have expressed an interest in and other parties that might be interested in acquiring a precision sports segment at this point the process is still ongoing.
Speaker 4: At this point, the process is still ongoing, so we have no updates to share.
So we have no updates to share there can be no assurance that any definitive agreement will result from this process or that any transaction will be consummated, whether with Mr. Kansas or any other party.
Speaker 4: There can be no assurance that any definitive agreement will result from this process or that any transaction will be consummated whether with Mr. Candor's or any other party.
Speaker 4: I will pause here and call back to the operator as we are now ready for the Q&A.
I will pause here and the call back to the operator as we are now ready for your queue for the Q&A.
Speaker 1: Thank you, sir, in order to ask a question, please press tar 11 on your telephone and rate for your name to be announced. To withdraw your question, please press tar 11 again. Please can buy while the-
Thank you Sir in order to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Please standby welcome Pat the Q&A roster.
Speaker 5: And your first question comes from the line of San Ed Layskin with B. R. Lee. Your line is now open. Hi, good afternoon. Thanks for taking my question.
And your first question comes from the line of Glenn.
<unk> with B Riley your line is now open.
Hi, good afternoon, Thanks for taking my question.
Hi.
Good to hear your voice.
Speaker 5: I guess first I'd like to dig a little bit into the implied fourth quarter guidance.
Thanks.
I guess first I'd like to dig a little bit inconvenient.
Slide fourth quarter guidance.
Speaker 5: It seems to imply a sequential acceleration in the trend is that, but you said it's mostly due to the Dynamics 2 described of.
It seems to imply.
Hi.
As clients work with salaries and the trend is that would you say that's mostly due to the dynamics you described.
Speaker 5: North America is stabilizing Europe , seeming to get a little bit worse.
Okay.
North America stabilizing Europe seeming to get a little bit worse.
Speaker 5: And then any color by segment given that precision sports was a little bit of an outlier with the clients in 3Q. Should that get better in 4Q? Just any help there would be great.
And then any color by segment given that precision sport, that's a little bit of an outlier.
Clients in three key areas should that get better in <unk> any help there would be great. Yes.
Speaker 4: Yeah, based on the guidance, you know, for the quarter of it to the midpoint for the third quarter is 80, 85 million.
Yes.
Sure.
Based on the guidance for the quarter, obviously, the midpoint for the third quarter's 80 $885 million.
<unk>.
Speaker 4: That is really being driven by slower Europe , as we mentioned in our outdoor continued.
You know that that is really being driven by slower.
Slower Europe, as we mentioned in our outdoor.
Continued.
Speaker 4: substantial inventory in the market here in North America for outdoor and then also the decline at precision ports, right? the The business does slow down in December for its annual
Substantial inventory in the market here in North America for outdoor and then also the decline at precision sports right.
The business does slow down in December for it's annual.
Speaker 4: Maintenance, right? We close the factory for a couple of weeks at the end of the year. So normally, if you look back, you can see lower volumes of precision sports, but let me be clear, the business at precision sports has slowed, right? The market is weaker, and that's part of the change as well compared to earlier in the year, right? So overall, the decline is of the fourth quarter is really about equal between precision and outdoor.
Maintenance right close the factory for a couple of weeks at the end of the year. So normally if you look back you can see lower <unk>.
Volumes have precision sports, but let me be clear the business that precision sports has slowed right. The market is weaker and that's part of the change as well compared to earlier in the year right. So overall the decline.
The fourth quarter is really a.
About equal between precision in outdoor.
Okay.
Speaker 4: Okay, thanks. So come here to our prior guidance, not just to be clear.
Okay. Thanks, Gary.
Here too our prior guidance, let's just to be clear.
Speaker 5: Okay, but from a year of year perspective, should we expect kind of a similar decline as in three two in precision sports?
Okay, but from a year.
Year over year perspective should we expect kind of a similar decline <unk> and precision sport.
Speaker 5: Yes. Okay, thanks. And then turning back to some of the commentary and prepared remarks, you alluded to, or war and alluded to, I'm doing some of the choices made by prior management teams. Can you elaborate on kind of what changes have been made over the past year to set you guys up for 2024 and beyond?
Yes.
Okay. Thanks, and then.
Turning back to some of.
The commentary in the prepared remarks.
You alluded to.
Warren alluded to some of the choices made by prior management team.
<unk>.
Can you elaborate on kind of what changes have been made over the past year at a set you guys up for 2024 and beyond.
Speaker 4: I don't want to get into specific details of what we're unwinding, but that's...
I don't want to get into specific details of what what we're unwinding, but.
Speaker 4: I don't think that's necessary to discuss at this point in time, but the both Matt at Adventure and Neil at Outdoor are specifically focused on new products, new channels, new customer opportunities to grow the business. And we'll go into a lot more detail of that with both those
That's.
I don't think that's necessary.
Discuss at this point in time, but.
Both Matt at adventure and Neil at outdoor.
Specifically focused on new products, new channels, new customer opportunities right to grow the business and that will go into a lot more detail of that with both of those.
Speaker 6: gentlemen in late January at the analyst day that we talked about.
Gentlemen in late January at the Analyst day that we talked about.
Okay. Thanks.
Okay great.
Thanks.
Okay.
One moment. Please our next question.
Yeah.
Speaker 6: Your next question comes to the line of Matthew Caronda with Roth MKM. Your line is now open. Hello, Matt.
Your next question comes from the line of Matthew Koranda with Roth and Kim Your line is now open.
Hello, Matt.
Thanks.
Speaker 7: So just wanted to drill down on BD and Outdoor. I'm just curious, can you highlight for us why profitability is so challenged there? It sounds like you alluded to the DTC growing. So I would assume there'd be a mix benefit there. Obviously, international wholesale sounds weak. And then obviously, I think everybody well understands.
So just wanted to drill down on BD.
BD and outdoor <unk>.
Curious can you.
Slight for US why profitability is so challenged there.
It sounds like you alluded to DTC growing so I would assume there'll be a mix benefit there obviously international wholesale sounds a week and then obviously I think everybody well understands the North America wholesale challenges with reticence to take inventory.
Speaker 7: the North America sort of wholesale challenges with reticence to take inventory. But I would think that a DTC mix would help you from a large standpoint. Are there particular headwinds that you're facing in terms of margins there? Does selfless understand why they're weak, why they're continuing to remain weak in the fourth quarter and then what the path is?
But.
I would think that DTC mix would help you from a margin standpoint are there particular headwinds that youre facing in terms of margins. There just help us understand why they're weak why theyre continuing to remain weak in the fourth quarter and then what the path is.
Speaker 7: to give back that kind of 10% bogey that you guys have put out.
Yeah.
Kind of 10% bogey that you guys have put out there before.
Speaker 4: So your assumption is right that DDC, you know, is a positive product mix and helps the profitability. Don't in DDC, DDC was up.
So your assumption is right that DTC is a.
Positive product mix and it helps the profitability.
Don in DTC was up.
Speaker 4: 22% in the quarter, but D to C is still a relatively small piece of the overall black diamond business.
22% in the quarter the D to C.
Still a relatively small piece of the overall black diamond business.
Speaker 4: You know, we did a little over nine, just around $9 million in revenue D to C this quarter, just to put in perspective. So the weakness is so
We did a little over nine just around $9 million in revenue D to C. This quarter just to put it in perspective, so the the weakness is.
Speaker 4: continues around kind of right-sizing inventory. And I think in the prepared remarks.
Continues around kind of right sizing the inventory and I think in the prepared remarks, I mentioned that we sold more inventory more discontinued merchandise inventory more promotional pricing so to continue to move inventory and turn that into cash.
Speaker 4: I mentioned that we sold more inventory, more discontinued merchandise inventory, more promotional pricing. So to continue to move inventory and turn that into cash, pricing.
Speaker 4: very aggressive in the marketplace.
Pricing is very aggressive in the marketplace.
Speaker 4: You know, we did reduce inventory at Black Diamond by over $10 million. And in order to do that, we needed to be very aggressive on pricing, specifically in the wholesale.
We did reduce inventory at black diamond by over $10 million and up in order to do that we needed to be very aggressive on pricing.
Pacific Lean the wholesale market here in North America.
Speaker 4: Okay. And then in the fourth quarter implied guide, it just sounds like you're assuming deterioration in profitability relative to the third quarter, at least out and overall basis. Did your guide build in the assumption that promotions that BD get worse in the fourth quarter? Is that how we should think about that? No, I don't think it implies. I think it, no, I think it stays about the same. You know, I,
Okay, and then in the fourth quarter implied guide it sounds like Youre assuming deterioration in.
And profitability relative to the third quarter at least out on overall basis.
Does your guide build in the assumption that promotions at BD to get worse in the fourth quarter or is that how we should think about.
I think no I think it stays about the same.
Okay.
Hi.
Speaker 4: Our guide assumes about a 35% gross margin in the fourth quarters, which is not too dissimilar to what we experienced here, 35, five here and no.
Our guide assumes about 35% gross margin in the fourth quarters, which is not too dissimilar to what we experienced here at 35 five here in the.
Third quarter.
Speaker 7: Okay, but the, he bit out sort of the implied he bit out.
Okay, but the EBITDA sort of the implied EBITDA.
Speaker 7: margin and the fourth word does sequentially get worse. So if gross margin isn't the culprit, are we leaning into S-GNA? There's some sort of off-tick and spending there like, help us understand that that sequential decline because I think it goes down by the north of 100 bits.
Margin in the fourth quarter does sequentially get worse.
Margin isn't the culprit are we leaning into SG&A is there some sort of uptick in spending there like help us understand that that sequential decline because I think it goes down by north of 100 bps I think.
Speaker 4: I think the bigger impact you're going to see is on the gross margins and the Ivedah at precision sports and the fourth.
Relative to the third I think the bigger impact youre going to see is on the gross margins and the EBITDA at precision sports in the fourth quarter.
Speaker 7: Okay, so precision. All right, can we just want to touch on that for just a second, and I'll turn it over to others, but...
Okay. So precision alright lets can we just wanted to touch on that for just a second and then I'll turn it over to others.
Speaker 7: Should we just assume that that third quarter run rate in terms of revenue contribution from precision sustains into the fourth quarter? I'm just trying to get the right way to think about sort of revenue contribution from precision in the fourth quarter at these kind of lower levels.
Or should we just assume that that third quarter run rate in terms of revenue contribution from precision.
Sustains into the fourth quarter I'm, just trying to get the right way to think about.
Sort of revenue contribution from precision in the fourth quarter at these kind of lower levels.
Speaker 4: It's probably even a little less because of the shutdown I mentioned in in them.
Even a little less because of the shutdown I've mentioned.
Speaker 7: Okay, got it. So sequentially lower than the third quarter on Rabs and then probably in terms of margin, we should assume probably some headwinds to margin as well. And the quarter just given the ship.
I remember.
Got it so sequentially lower than the third quarter on revs and then probably in terms of margin, we should assume probably some headwinds to margin as well part of it is giving us.
Speaker 7: Correct. Correct. Okay. And then any benefit you mentioned and we picked up in the data.
Correct correct, Okay, and then any benefit you mentioned and we picked up in the data.
Speaker 7: you know, kind of mid-October with the geopolitical disruption and whatnot. There was definitely an uptick in demand for at least a period of time.
Kind of mid October with the geopolitical disruption and whatnot.
There was definitely an uptick in demand for at least a period of time.
Speaker 7: How much, what extent have you built in the benefit of that in the fourth quarter?
How much to what extent have you built in the benefit of that in the fourth quarter.
Speaker 7: And how sustainable do you think that is because it feels like maybe it's just a couple of weeks of benefit and then that that died down but
And how sustainable do you think that is because it just it feels like maybe it's just a couple of weeks of benefit and then that goes down but have you guys seen any sort of decline in demand.
Speaker 7: Have you guys seen any sort of decline in demand?
Speaker 4: There's that uptick and I've ever. Yeah, good question that there's two things going on. I mentioned both in October we saw an uptick both from a military and a defense standpoint. I think the defense, home defense or uptick in that market here in the US with some of the...
Theres still uptick in October.
Good question that Theres, two things going on I mentioned, both you know in October we saw an uptick both from a military and a and a defense standpoint, I think the defense what home defense or.
Uptick in that market here in the U S with some of the.
Speaker 4: geopolitical things going across the world. That was, there was an uptick late October related to that, but we don't think that has a lot of legs. That was a couple of week, 10 days worth of uptick that we heard from our distributors and retail partners. From a military standpoint, we have seen that uptick, right? But for a certain caliber bullet, right? And we are,
Yes.
Geopolitical.
Things going on across the World that was there was an uptick later.
In late October related to that but we.
We don't think that has a lot of legs that that was a couple a week 10 days worth of uptick.
Uptick that we're that we've heard from our distributors and retail partners.
Military standpoint, we have seen that uptick right, but for a certain caliber bullet right.
And we are we are <unk>.
Speaker 4: shifting capacity to that opportunity. And we already had capacity designated to that. We're just adding more capacity to that opportunity for the geopolitical.
Shifting capacity to that opportunity.
We'd already had capacity designated that we're just adding more capacity to the opportunity for the geopolitical.
Speaker 4: challenges over in Europe in the Middle East. So, long way to say yes, I think the military has some legs, but the market here is. So, long way to say yes, I think the military has some legs, but the market here is.
<unk> over in Europe, and the Middle East So.
Long way to say, yes, I think the military has some legs, but the.
Market here at home was what's uplift.
Speaker 7: Okay, all right, helpful Mike, thank you for the detail. And then one more thing I could just take one in.
Okay. All right helpful. Mike. Thank you for the detail and then.
One more if I could just sneak one in just on the sale of precision I mean, I know you said theres no updates there, but what I'm curious about is just sort of how long is that process opposed to take I guess at the outset of the indication from counters.
Speaker 7: on the sale of precision. I mean, I know you said there's no updates there. But what I'm curious about is just sort of, how long is that process supposed to take? I guess at the outset of the indication from Canders.
Speaker 7: Yeah, the assumption I think, at least, probably among investors, it was probably gonna be about a 40, 45 day process. We're kinda outside that window now. What, is there anything you can highlight as to like, why we need more time, just anything around the mechanics? I know you can't really probably share a lot around the specifics, but I'm planning on an update of thinking.
The assumption I think at least broadly among investors was that it was probably going to be about a 40 to 45 day process, where kind of outside that window. Now what is there anything you can highlight as to like why do we need more time.
Just anything around the mechanics, I know you can't really probably share a lot around the specifics but.
Yes.
An update on thinking around that.
Speaker 4: I don't have a specific update on the timing. I will say there's
Sure.
I don't have a specific update on the timing I will say theres several interested parties.
Speaker 4: several interested parties in the process. And we're going to run the process to its conclusion. And if that extends beyond the 45 days, which...
In the process.
And we're.
We're going to run the process to its conclusion and if that extends beyond the 45 days, which which.
Speaker 4: which we probably passed that here last week. We're gonna run this process to, you know, to conclusion to under the guidance of the special committee, the board, to make sure that they evaluate all opportunities to create the most shareholder value possible. That's the most possible.
Probably pass that I'm here.
Weak.
We're going to run this process to conclusion to.
Under the guidance of the special Committee of the board to.
Make sure that they evaluate all opportunities to create the most.
Shareholder value possible.
Okay helpful. I'll leave it there thank you okay.
Yeah.
The next question.
Yes.
Speaker 1: And your next question comes from the line of Jim Duffy, Vids Teethel, your longest novel.
And your next question comes from the line of Jim Duffy with Stifel. Your line is now open.
Thank you Hey, Jim.
Speaker 8: Mike, I've got three lines of question here. I'll keep it direct and quick. First on the precision sports business, I'm curious the extent to which the pressure you're experiencing on that revenue run rate.
Mike I've got three lines of questioning.
Direct and quick first on the precision sports business I'm curious the extent to which the pressure you're experiencing on that revenue run rate is reflective of your exposure to certain calibers or your allocation of capital.
Speaker 8: is reflective of your exposure to certain calibers or your allocation of capital or receiving capacity to certain calibers versus just the general environment.
Excuse me capacity to certain calibers versus just the general environment.
Speaker 8: Like is there a tactical approach that could have yielded better results for you?
Is there a tactical.
Approach that could have yielded better results for you.
Speaker 4: I don't believe so. I think it's a general market. We, you know, I mentioned we built inventory, especially at Barnes and Finnish goods. That inventory consists of what we've referred to our seven or eight.
I don't believe so I think it's the general market, we I mentioned, we built inventory, especially at Barnes and finished goods.
That inventory consist of what we've referred to a seven or eight.
Speaker 4: critical center fire rifle hunting amos That we would have expected to sell here for the fall hunt season
Critical center fire rifle hunting Atmos.
That we would've expected to sell here.
Paul Hunt season.
Like I had mentioned they just.
Speaker 4: There's too much inventory at all levels. So none of that's moving at this point. And we elected that to be promotional and discounted to give that away because it's a premium solution that we opted to hold on to and we'll sell in coming quarters. Once the markets kind of hit some type of equal leverage.
There's too much inventory at all levels. So none of that is moving at this point and we elected not to.
Promotional and discount to give that away because its a premium.
<unk> solution that we.
<unk> opted to hold on to and we will sell in coming quarters once the markets kind of.
Some type of equilibrium.
Speaker 8: understood and on the adventure segment of positive there, I'm particularly confused about the progress that you've made with gross margins. Is that gross margin rate sustainable on a go for basis? And, you know, are there approaches to improving the gross margin in the adventure segment that can be applied to your other division?
Understood and then the adventure segment.
Positive there, particularly enthused about the progress that you've made with gross margins is that gross margin rate sustainable on a go forward basis.
Or are there approaches to improving our gross margin in the adventure segment that can be applied to.
Sure.
Other division.
Speaker 4: No, I think it's sustainable. There may be blips up and down, but I think in Warren's comment, he mentioned P6, the Pioneer 6 platform as a 1200 basis point, better margin. There's other products we're looking at to take cost out of. So over the...
No I think it's.
I think it's sustainable you know.
There may be blips up and down, but but I think it warrants common he mentioned the T. Six the pioneer six platform is at 1200 basis point better margin. There's other products, we're looking at to.
To take cost out of so you know over the over the.
Speaker 4: coming quarters, I think that definitely is an opportunity to continue to maintain or even expand that level of margin.
Coming quarters, I think that definitely the opportunity to continue to maintain or even expand that level of margin at adventure at the gross margin level.
Speaker 8: And then lastly, I just wanted to ask, what if around the quarter of the 2024 or 2023 has been a reset year in any respect?
Okay, and then lastly, I just wanted to ask looking around the quarter to 2020 for 2023 has been a reset year.
Speaker 4: What are the objectives for the business in 2024, and how do you think about that in the context of the uncertain environment? I'm just trying to get a view into kind of the philosophy of your strategic planning for the business into 24. Right, without getting into any financial metrics about 24, because we'll talk about that, you know.
In many respects what are the objectives for the business in 2024, and how do you think about that in the context of the uncertain environment. I was just trying to get a view into kind of the philosophy of your strategic planning for the business into 'twenty four right without getting into any financial metrics.
Orix about 24, because we'll talk about that.
Speaker 4: coming weeks, but you know from a strategic standpoint, it's about getting the right leadership in place, building the teams out, introducing new products across the portfolio, developing new relations with new partners, whether it's distributors or wholesale or retail partners. It's
In the coming weeks, but from a strict strategic standpoint, it's about getting the right leadership in place building the teams out.
Introducing new products across the portfolio developing new relationships with new partners, whether it's distributors or wholesale or retail partners.
Speaker 4: It's about right-size and inventory. And one of the things we've said is to make sure we're just easy to do business with, right? And all those things are the focus of Niels, team at outdoor, Matt's team at adventure, and the same with the team at precision sports under my leadership. Very good, thank you, Mike.
It's about right sizing inventory and one of the things. We've said is to make sure. We're just easy to do business with right and all those things are the focus of neil's team at outdoor Matt.
Matt's team at adventure in the same with the team at precision sports under my leadership.
Very good thank you Mike Okay. Thanks, Jim.
Okay.
One moment for the next question.
Speaker 1: And your next question comes for the line of Mark Smith with Lakes Treat, Here Lines Now.
And your next question comes from the line of Mark Smith with Lake Street. Your line is now open.
Speaker 9: Hi guys, first question for me is we look at the uptick and direct consumer. How much of that maybe was due to promotions and that hurt kind of the profitability of that
Hi, guys.
First question for me as we look at the uptick in direct to consumer how much of that maybe it was due to promotions and did that hurt the profitability of that business.
Speaker 4: Well, like I mentioned earlier, Mark, you know, for the quarter, we did just a little under nine million in our D to C business at outdoor, you know, e-tom, you know, true.
Well like I had mentioned earlier.
Mark.
For the quarter, we did just a little under $9 million in our D to C business at outdoor.
E Com.
Through.
Speaker 4: D to C business, it was up a million, too. Margin kind of held up though. There was some promotion, but we did have a sale around Labor Day, but the business held up. Our bigger profit challenges have been moving older inventory, moving.
D to C business, it was up 1 million too.
Margin kind of held up though there was some promotion, but we did have a sale around labor day, but you know the.
The business held up I think our bigger profit challenges have been you know.
Moving older inventory.
Moving.
Speaker 4: discontinued merchandise, right? And we've made good progress on that. And especially as we missed some opportunity because we didn't have the right inventory where the demand existed. And I think we referred to that as a mismatch an inventory compared to demand. That's where revenue could have even been better. But on the D to C basis, revenue was up and we looked to that to really kind of look at the health of them.
Discontinued merchandise right and we've made good progress on that and especially.
Especially as we we missed some opportunity because we didn't have the right inventory, where the demand exists and I think.
You referred to that as a mismatch in inventory compared to demand that you know that that's where revenue could have even been better.
But on the D to C basis revenue was up and we looked at to that to really kind of look at the health of the brand.
Speaker 9: And then you talk at length about inventory issues, continuing throughout the channel within the precision segment. Can you talk about within outdoor and maybe a bit within adventure? What's your scene from your retail partners, distributors from inventory? Is there continue to be issues or did you see it improve at all during Q3?
Okay, and then you talked at length about inventory issues continuing throughout the channel within the precision segment can you talk about within outdoor and maybe a bit within adventure what youre seeing from your retail partners distributors from from inventory.
There continue to be issues or did you see it improve at all during Q3.
Speaker 4: I mean, there's still continues to be issues and there's pockets of some, you know, pockets of some improvement, but in...
I mean, theres still continues to be issues and there's pockets of some pockets of some improvement but.
Speaker 4: and a whole level of stills challenging. And it's a mixed bag when we look at some of our key in national accounts, how we do get some weekly cell through data. Some are up low 20%, some are down 20%, weak to weak. So it's still pretty volatile out there with some of our key.
And our whole the whole level, it's still a challenging right in it.
It's a mixed bag when we look at some of our key national accounts, how we do get some weekly sell through data.
Some are up.
Low 20% some are down 20% week to week so.
It's still pretty volatile out there with some of our key accounts.
Speaker 9: Okay, and as we look at some continued channel inventory issues, how are you viewing promotional environment here in Q4? I assume this is fully built into your guidance, but do you think that we'll see improvement in inventory throughout this channel in Q4 or is this something that potentially...
Okay and as we look at some continued channel inventory issues.
How are you viewing promotional environment here.
In Q4 I assume this is fully built into your guidance, but do you think that.
We will see improvement in inventory throughout the channel in Q4 or is this something that.
Potentially bleeds further into 2024, yeah, no. So I told him I in the prepared remarks, I mentioned that inventory at outdoor was around $70 million I think that that should be in the sixties.
Speaker 4: Yeah, no, so I told I in the prepared remarks I mentioned it inventoryed outdoors around 70 million. I think that would be you know that should be in the 60s.
Speaker 4: come the end of the quarter. We are focused on continuing to right size our inventory, improve the aging.
Come the end of the quarter, we are focused on continuing to right size, our inventory improve the aging.
Speaker 4: lean into more of what we're calling A products. So we have
Leanne into more of what we're calling a products and.
Speaker 4: So we can meet the demand, right, for the aid products and stuff that the demand's out there for. And we continue to focus on that. In the fourth quarter, we're targeting to move three or four million dollars of older inventory still at outdoors. So. So.
So we have so we can meet the demand rate for the a products and stuff that the demands out there for <unk>.
And we'll continue to focus on that in the fourth quarter, where we're targeting to move three of $4 million of older inventory still at outdoor so.
Speaker 4: that will have an impact or that will continue to put pressure on marks.
That will have an impact or if that will continue to put pressure on margins, but all in the goal all in the objective to kind of reset the business for 24.
Speaker 4: all in the goal, all in the objective to kind of reset the business for 24.
Specifically, if anyone outdoor perspective.
Speaker 9: or you see some of these same issues in the adventure segment.
Sure.
Are you seeing some of the same issues in the adventure segment.
Speaker 4: Not so much. We're introducing new products. You saw the margins holding up. I mean, I feel good about what we have going on there. Adventurers saw the pressure first. They would have you in an outdoor followed. And now precision sports is kind of seeing the pressure from too much inventory in the channel. And adventures just the first one to come out of that and restarting it. I don't see it the same. I do see inventory being pressure at precision. But.
Not so much no where we're introducing new products you saw the margins.
Holding up I mean, I I feel good about what we have going on their adventures saw the pressure first right.
Outdoor followed and now precision sports has kind of seen the pressure from too much inventory in the channel.
<unk>.
Adventures just as the first one to come out of that and we're starting to I don't see it the same I do see inventory being pressure at precision, but we feel confident in being able to hold that finished good ammo because it is like I mentioned to Jim It's in our premium center fire rifle calibers, we're not going to be.
Speaker 4: We feel confident in being able to hold that finish good ammo because it is, like I mentioned, to Jim. It's an op premium center fire rifle calibers. We're not gonna be super...
Speaker 4: Promotional around moving that inventory just to generate cash.
Super promotional around moving that inventory just to generate cash that's that's that's not necessary at this point in time.
Speaker 10: That's not necessary at this point in time. Okay. Great. Thank you. Okay.
Okay, great. Thank you.
Yeah.
Yes.
Again that is star one to ask question.
Please press star one to ask a question.
Okay.
Speaker 1: Your next question comes to the line of Joe Adelbell with Raymond James. Your line is now all.
Your next question comes from the line of Joe <unk>.
And James Your line is now open.
Speaker 11: Good afternoon, this is Action Martin on Ford Joe. I'm just a quick question. I felt like the destocking and heightened promotional environment that's been pretty aggressive as of late and it sounds like we might expect something similar in Ford Q, but just beyond that, how confident are you that this is going to start dissipating? And which segment might have the most pressure just kind of starting into the early part of next year?
Good afternoon. This is actually Martin on for Joe.
Just a quick question I saw that the destocking in heightened promotional environment, that's been pretty aggressive <unk> of late and it sounds like we might expect similar in fourth Q, but just beyond that how confident are you that this is going to start dissipating.
And which segment might have the most pressure just kind of starting into the earth.
Part of next year.
Well.
Speaker 4: This destocking of inventories been going on for a while. So, level of confidence is obviously...
This destocking of inventories thing going on for a while so.
Level of confidence is obviously.
Speaker 4: low because it has been going on for a while, but like I just mentioned with Mark, I think we're starting to see adventure turn the corner of Black Diamond stabilize. I'd say the one I'm most worried about is the precision sports business as it's just starting to see the excess inventory in the channels here over the last couple.
Low because it has been going on for a while but I like I just mentioned with Mark I think we're starting to see adventure turned the corner.
Black Diamond stabilize.
The one I'm most worried about is the precision sports business as it.
It's just starting to see the.
Excess inventory in the channels here over the last couple of months.
Speaker 12: God, thank you. And just looking at the holiday season, you're not going to be kind of a, any opportunity for you to move. Any.
Got it thank you.
And then just looking at the holiday season, do you think it's going to be kind of like any.
Any opportunity for you to move.
Any inventory.
Speaker 4: So, nothing out of the ordinary, you know, outdoor will have its Black Friday specials like it has, you know, every year, but nothing out of the ordinary.
So nothing out of the ordinary outdoor.
Outdoor will have its black Friday.
Specials like it has.
Every year, but nothing out of the ordinary.
Got it thank you Mike sure.
Speaker 1: I have this time. This concludes our question and answer session. I would now like to turn the call back over to Mr. Yates for closing remarks.
At this time. This concludes our question and answer session I would now like to turn the call back over to Mr. <unk> for closing remarks.
Speaker 4: Thank you, Bella. I want to thank everyone for attending the call this afternoon and you continue to support an interest in Claris and we look forward to speaking to you with you.
Thank you Bella I want to thank everyone for attending the call. This afternoon and your continued support and interest in Claris and we look forward to speaking with you.
Speaker 4: Next time we get together. Thanks again for joining. Take care.
Next time, we get together, thanks again for joining take care.
Speaker 1: and jump on this dustbin through today's Cop Tele conference. You may connect your lines at this time. Thank you for your participation.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Speaker 13: ??
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