Q4 2024 Clarus Corp Earnings Call
Unknown Executive: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Clarus Corporation's financial results for the fourth quarter ended December the 31st, 2024.
Good afternoon, everyone and thank you for participating in today's conference call to discuss Clarus Corporation's financial results for the fourth quarter ended December 31st 2024.
Unknown Executive: Joining us today are Clarus Corporation's Executive Chairman, Warren Kanders, CFO, Mike Yates.
Joining us today, I'll Clarus Corporation's executive Chairman Warren Cantor's CFO, Mike Yates.
Unknown Executive: President of Black Diamond Equipment, Neil Fiske, Management Director of Clarus Adventure Segment, Matthew Hayward, and the company's External Director of Investor Relations, Matt Berkowitz. Following the remarks, we'll open the call for your questions.
Neil Fiske: President of Black Diamond equipment, Neil Fiske management director of Claris adventure segment not to Hayward.
Neil Fiske: And the company's external director of Investor Relations, Matt Berkowitz.
Speaker Change: Following the marks following the remarks, we'll open the call for your questions.
Matthew Berkowitz: Before we go further, I would like to turn the call over to Mr. Berkowitz as he reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements.
Speaker Change: Before we go further I would like.
Matt Berkowitz: Like to turn the call over to Mr. Berkowitz as he reads the Companys Safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward looking statements. Matt. Please go ahead.
Unknown Executive: Matt, please go ahead. Thank you.
Matthew Berkowitz: Before we begin, I'd like to remind everyone that during today's call we'll be making several forward-looking statements and we'll make these statements under the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements reflect our best estimates and assumptions based on our understanding of information known to us today. These forward-looking statements are subject to potential risks and uncertainties that could cause the actual results of operations or financial condition of Clarus Corporation to differ materially from those expressed or implied by the forward-looking statement.
Matt Berkowitz: Thank you before we begin I'd like to remind everyone that during todays call well be making several forward looking statements and we make these.
Matt Berkowitz: These statements under the Safe Harbor provisions of the private Securities Litigation Reform Act.
Matt Berkowitz: These forward looking statements reflect our best estimates and assumptions based on our understanding of information known to US today. These forward looking statements are subject to potential risks and uncertainties that could cause the actual results of operations or financial condition of Clarus Corporation to differ materially from those expressed or implied by the forward looking statements or information on potential.
Unknown Executive: 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 followed with the I'd like to remind everyone this call will be available for replay starting at 7 p.m. Eastern Time tonight. A webcast replay will also be available via the link provided in today's press release as well as on the company's website at clariscorp.com.
Matt Berkowitz: 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.
Matt Berkowitz: I'd like to remind everyone. This call will be available for replay starting at seven P. M Eastern time Tonight.
Cast 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.
Warren Kanders: Now I'd like to turn the call over to Clarus's Executive Chairman, Warren Kanders. Good afternoon, and thank you for joining Clarus's earnings call to review our results for the fourth quarter and full year. I'm joined today by our Chief Financial Officer, Mike Yates, as well as Neil Fiske and Matt Hayward, who will discuss our outdoor and adventure segments for spec. In 2024, we remain focused on executing in line with our roadmap and positioning Clarus for profitable growth over the long term. Throughout the year, our businesses continue to deal with significant market headwinds. But we've been pleased with our team's emphasis on managing the factors within our And looking at our goals that we set during our investor presentation back in March of March of 2024, we missed our top line objectives by $10 million.
Warren Tenders: To turn the call over to <unk> Executive Chairman Warren tenders.
Warren Tenders: Good afternoon, and thank you for joining classes earnings call.
Warren Tenders: Our results for the fourth quarter and full year.
Speaker Change: I'm joined today by our Chief Financial Officer, Mike Yates as well as Neil Fiske, and not Hayward, who will discuss our outdoor and adventure segments respectively.
Speaker Change: In 2024, we remain focused on executing in line with our road mapping positioning claris for profitable growth over the long term.
Speaker Change: Throughout the year, our businesses continued to deal with significant market headwinds, but we've been pleased with our team's emphasis on managing the factors within our influence.
Speaker Change: Looking at our goals that we set during our investor presentation back in March of 2024, we missed our top line objectives by $10 million.
Warren Kanders: At the operating company level, we achieved 99% of net sales in our outdoor segment, and 90% of net sales in our adventure segment. While we fell short of certain financial metrics, I'm pleased with the progress we have made towards achieving our longer term strategic goals that we highlighted in our investor day. Specifically, we made considerable progress simplifying and strengthening the core in the outdoor segment. As Neil would detail in greater depth, we've delivered on our commitment to improve the quality and composition of our inventory, focusing on the best and most profitable styles. As a result, outdoor adjusted gross margin improved to 36.9% in the fourth quarter compared to 32.8% in Q4 of last year.
Speaker Change: At the operating company level, we achieved 99% of net sales in our outdoor segment, 90% of net sales in our adventure segment.
Speaker Change: While we fell short of certain financial metrics I am pleased with the progress we have made towards achieving our longer term strategic goals that we highlighted in our investor day.
Speaker Change: Specifically, we made considerable progress simplifying and strengthening the core and the outdoor segment.
Speaker Change: As Neal will detail in greater depth, we've delivered on our commitment to improve the quality and composition of our inventory.
Speaker Change: Focusing on the best and most profitable styles as a result outdoor adjusted gross margin improved to 36, 9% in the fourth quarter compared to 32, 8% in Q4 of last year.
Warren Kanders: While outdoor revenue declined year over year, consistent with market softness and our expectations, full year adjusted EBITDA was up 80%. Our objective has been to build a smaller, more profitable business, and our fourth quarter outdoor results are further evidence that the strategies that we have implemented are delivering. Looking ahead, we believe our success simplifying the business, right sizing inventory and reshaping the organization positions Black Diamond for return to growth as the market stabilizes, and we expect to see the benefits of our strategic initiatives continue to lift profitability. While our revenue growth expectations in 2025 are muted, we see another 350 to 450 basis points of margin improvement possible this coming year.
Speaker Change: While auto revenue declined year over year, consistent with market softness in our expectations full year adjusted EBITDA was up 80%.
Speaker Change: Our objective has been to build a smaller more profitable business in our fourth quarter outdoor results are further evidence that the strategies that we have implemented are delivering.
Speaker Change: Looking ahead, we believe our success simplifying the business right sizing inventory and reshaping the organization positions Black Diamond for a return to growth as the market stabilizes and we expect to see the benefits of our strategic initiatives continue to lift profitability.
Speaker Change: While our revenue growth expectations in 2025 are muted we see another 350 to 450 basis points of margin improvement possible this coming year.
Warren Kanders: Turning to our adventure segment, we always anticipated this past year would require significant investment in R&D and development in order to bring forward a full suite of new products in 2025. Furthermore, we needed to invest in incremental headcount in order to set up North America and EMA for growth. With revenue falling short in the back half of the year, we were unable to cover these incremental fixed investments that we believe are necessary to scale. Following the appointments of three veteran operating and sales executives to support Adventures US, International and OEM channels, we've seen early signs that these organizational changes have helped to drive positive momentum in regions outside of Australia.
Speaker Change: Turning to our adventure segment, we always anticipated this past year would require significant investment in R&D and development in order to bring forward a full suite of new products in 2025.
Speaker Change: Furthermore, we needed to invest in incremental head count in order to set up North America and email for growth.
Speaker Change: With revenue falling short in the back half of the year, we were unable to cover these incremental fixed investments that we believe are necessary to scale.
Speaker Change: Following the appointments of three veteran operating and sales executives to support Adventures U S International and OEM channels. We've seen early signs that these organized organizational changes have helped to drive positive momentum in regions outside of Australia.
Warren Kanders: As Matt will detail shortly, we are excited about a broad spectrum of compelling new product launches that are expected throughout the year. Additionally, after identifying hitch-mounted bicycle racks as a critical product category, we acquired Rocky Mountains in December to further strengthen our adventure offer. This adds immediate scale in North America and a compelling offering in our home market that we believe will resonate with key wholesale customers. As we look ahead, our two segments are in different places, but we are generally encouraged by the steps the teams are taking to seek to unlock new growth opportunities.
Speaker Change: As Matt will detail. Shortly we are excited about a broad spectrum of compelling new product launches that are expected throughout the year.
Speaker Change: Additionally, after identifying hitch mounted bicycle racks as a critical product category.
Speaker Change: We acquired Rocky mounts in December to further strengthen our adventure offering.
Speaker Change: This adds immediate scale in North America, and a compelling offering in our home market that we believe will resonate with key wholesale customers.
Speaker Change: As we look ahead, our two segments are in different places, but we're generally encouraged by the steps. The teams are taking to seek to unlock new growth opportunities.
Warren Kanders: This is supported by a strong balance sheet with no third party bank debt as we continue to move our turnaround forward.
Speaker Change: This was supported by a strong balance sheet with no third party bank debt as we continue to move our turnaround forward.
Michael Yates: With that, thank you for being with us today and I will turn the call over to Mike. Thank you, Warren, and good afternoon, everyone. On today's call, I'll provide a brief update before turning it over to Matt and Neil to review the segment performance.
Mike Yates: With that thank you for being with US today, and I will turn the call over to Mike.
Mike Yates: Thank you Laura and good afternoon, everyone.
Mike Yates: On today's call I'll provide a brief update before turning it over to Matt and Neil to review the segment performance and will then conclude with a more detailed summary of our fourth quarter and full year financial results followed by the Q&A session.
Michael Yates: I will then conclude with a more detailed summary of our fourth quarter and full year financial results, followed by the Q&A session. Beginning on slide five, I'll highlight a few figures. Clarus's fourth quarter revenue of $71.4 million was slightly above our Q4 guidance. While sales declined year over year, as anticipated, as we execute on our simplification strategy, we've been pleased to see continued positive momentum at the gross margin level. Clarus realized consolidated gross margins of 38% or a year-over-year improvement of 330 basis. Overall, Clarus's consolidated fourth quarter financial results continue to be affected by near term pressure on the business.
Speaker Change: Beginning on slide five I'll highlight acute figures.
Speaker Change: Claris is fourth quarter revenue of $71 4 million was slightly above our Q4 guidance, while sales declined year over year as anticipated as we execute on our simplification strategy.
Speaker Change: I'm pleased to see continued positive momentum at the gross margin level.
Speaker Change: Players realized consolidated gross margins of 38% or a year over year improvement of 330 basis points.
Speaker Change: Overall Clarus is consolidated fourth quarter financial results continued to be affected by near term pressure on the business.
Michael Yates: Fourth Quarter 2024 Consolidated Adjusted EBITDA of $4.4 million represents a year-over-year increase, but was short of our guidance range of $5 to $7 million. This was primarily due to higher fixed costs in our adventure segment on lower than expected net sales. free cash flow was $14.4 million in the fourth quarter of 2024. This is consistent with our historically strong fourth quarter performance from a cash flow perspective. Additionally, I would like to note that cash today is approximately $43 million, consistent with our cash balance a year ago after the closing on the sale of Precision Sport.
Speaker Change: First quarter 2020 for consolidated adjusted EBITDA of $4 4 million represents a year over year increase but was short of our guidance range of $5 million to $7 million.
Speaker Change: This was primarily due to higher fixed cost in our adventure segment on lower than expected net sales.
Speaker Change: Free cash flow was $14 4 million in the fourth quarter of 2024.
Speaker Change: This is consistent with our historically strong fourth quarter performance from a cash flow perspective.
Speaker Change: Additionally, I would like to note that cash today is approximately $43 million consistent with our cash balance a year ago. After closing on the sale of precision sport.
Michael Yates: Moving forward, I expect us to generate positive cash flow and Looking closer at our two segments, first, sales at Outdoor were $51.1 million compared to $50.1 in the prior year. Gross margin at Outdoor adjusted for the PFAS reserve was 36.9% compared to 32.8% in the fourth quarter of last year, a 410 basis point improvement. As Neil will outline, this improvement is structural and a direct result of our simplification strategy as we continue to lean into our best products with our best customers. The higher gross margins resulted in a four and a half million dollars of adjusted EBITDA in the fourth quarter of 2024 at Outdoor.
Moving forward I expect us to generate positive cash flow annually.
Speaker Change: Looking closer at our two segments first sales in outdoor were 51 point.
Speaker Change: $1 million compared to 51.
Speaker Change: Prior year gross margin at outdoor adjusted for the P. Fast reserve was 36, 9%.
Speaker Change: Third to 32, 8% in the fourth quarter of last year, a 410 basis point improvement.
Speaker Change: As Neal will outline this improvement is structural and a direct result of our simplification strategy as we continue to lean into our best products with our best customers.
Speaker Change: Higher gross margins, resulting in a $4 $5 million of adjusted EBITDA in the fourth quarter of 2024 at outdoor.
Michael Yates: At Adventure, fourth quarter revenue of $20.3 million and adjusted EBITDA of $1.6 million were short of our expectation. The adventure business was impacted by lower OEM and lower Australian wholesale revenue at Rhin-O-Rat. and higher growth investments that were necessary to scale the business.
At adventure fourth quarter revenue of $23 million and adjusted EBITDA of $1 6 million were short of our expectations.
Speaker Change: The adventure business was impacted by lower OEM, and lower Australia wholesale revenue that Brian Iraq.
Speaker Change: And higher growth investments that were necessary to scale the business.
Michael Yates: After a broad corporate realignment and adventure and the leadership appointments Warren referenced, our team continues to proactively address challenges to drive sustained financial We believe we have established a baseline for both businesses in 2024 that we expect to give us a firm foundation to drive an increase in shareholder returns going forward.
Warren Tenders: <unk> broad corporate realignment at adventure and a leadership appointments warrant referenced our team continues to proactively address challenges to drive sustained financial performance.
Warren Tenders: We believe we have established a baseline for both businesses in 2024 that we expect to give US a firm foundation to drive an increase in shareholder returns going forward.
Matthew Hayward: I'll now pause and turn the call over to Matt Hayward, Managing Director of Clarus's Adventure Segment. Thanks, Mike. I'll begin my remarks on slide six. Our primary objective remains to scale the adventure business globally. While there is significant work outstanding, we believe we made important operational progress in 2024. And we are beginning to see the signs of our investments to date are resulting in accelerated traction for our venture brands, particularly in US and our international markets outside of Australia and New Before I turn to 2025 and key strategic priorities moving forward, I'll touch briefly on our fourth quarter financial results, which were adversely affected by a number of specific factors.
I'll pause and turn the call over to Matt Heyward.
Speaker Change: And director of Claire says adventure segment, Matt.
Warren Tenders: Okay.
Warren Tenders: Thanks, Mike.
Warren Tenders: In my remarks on slide six.
Speaker Change: Our primary objective remains to scale the advent business globally.
Speaker Change: While there is significant work outstanding we believe we made important operational progress in 2024, and we are beginning to see the signs of our investments to date are resulting in accelerated traction for our adventure brands, particularly in U S and international markets outside of Australia, and New Zealand.
Speaker Change: Before I turn to 2025 and.
Speaker Change: <unk> strategic priorities moving forward I'll touch briefly on our fourth quarter financial results, which were adversely affected by a number of specific factors.
Matthew Hayward: Primary among them was a continued slowdown in both our global OEM business and our wholesale market and our home market of Australia. overall market weakness materialized during the latter part of the year and sales soften in the back half of the year. Total 2024 new vehicle sales in Australia of 1.2 million units were up. 1.7 versus 2023. However, vehicle sales declined materially in 2024's second half. Additionally, we spoke previously about an important OEM partner that halted production in September. Operations have since resumed in the first quarter of 2025, but our OEM business felt the impact in the fourth quarter with no material delivery.
Speaker Change: Primary among them was the continued slowdown in both our global OEM business and our wholesale market in our home market of Australia.
Speaker Change: Overall market weakness materialized during the latter part of the sales softened in the back half of the year.
Speaker Change: Titled 2020 for New vehicle sales in Australia of one 2 million units were up.
Speaker Change: One seven versus 2023, however vehicle sales decline materially in 2020 for second half <unk>.
Speaker Change: Additionally, we spoke previously about an important OEM partner that halted production in September operations have since resumed in the first quarter of 2025 at our OEM business about the impact in the fourth quarter with non material deliveries.
Matthew Hayward: context, overall, our quarterly sales were down 23% versus the fourth quarter in 2023. This directly corresponds to peak delivery of our OAM trade platform in the prior year. Challenging market conditions led to year-over-year declines with a key account. As a result, our total wholesale challenge declined. We continue to work in this partnership with our customer to find a path to normalize demand levels over the next 12 months. In the US, new car sales in 2024 continue to rise from their pandemic lows, bolstered by replenished inventories, as well as higher incentives, driving increased demand for vehicles.
Speaker Change: For context overall, our quarterly sales were down 23% versus the fourth quarter and 2023.
Speaker Change: This directly corresponds to peak delivery of RNA and.
Speaker Change: Trading platform in the prior year.
Speaker Change: Challenging market conditions led to year over year declines with the key account as a result, our total wholesale channel declined 10%.
Speaker Change: We continue to work with that partnership with our customer to find a path to normalized demand levels over the next 12 months.
Speaker Change: In the U S. New car sales in 2024 continued to rise from the pandemic.
Speaker Change: Posted by replenished inventories as well as higher incentives driving increased demand for vehicles.
Matthew Hayward: Sales of new vehicles finished at 15.9 million last year, according to Wards Intelligence, up 2.2% from prior year, and the highest since 2019. We believe we're well positioned to capitalize on this positive momentum as we continue to allocate resources to focus on initiatives that are expected to drive market share gains internationally. As Warren alluded to earlier, the key investments we made in 2024 to appoint a general manager of Adventure Americas, a global head of OEM base in the Americas, and head of EMEA sales are important steps forward as we seek to take advantage of immense global growth opportunities.
Speaker Change: Sales of new vehicles finished at $15 9 million last yet according towards intelligence up two 2% from prior year and the highest since 2019.
Speaker Change: We believe we are well positioned to capitalize on this positive momentum as we continue to allocate resources to focus on the initiatives that are expected to drive.
Speaker Change: Market share gains internationally.
Speaker Change: As Warren alluded to earlier the key investments we made in 2020 for two appointed general manager of Adventure Americas, a global head of OEM based in the Americas and head of EMEA sales are important steps forward as we speak that take advantage of our mens global growth opportunities.
Matthew Hayward: In addition, we hired a new head of sales in the US and are actively pursuing 3PL opportunities in Europe in order to better serve local customers and our distribution partners as we add. Furthermore, we are excited about the acquisition of Rocky Mount announced in December. With an innovative product offering and loyal following, we believe that it is an ideally ideal complementary product for Ryner Act. bike racks represent roughly one third of the total market opportunity in the US with hitch mounted racks being especially popular in the US. So we are very pleased to now have a premium offering that we expect to enable us to capture this key segment of the market with the proper investment and Importantly, in addition to helping accelerate our brand penetration in North America, we anticipate Rocky Mountains providing an entry point to serve new products to existing customers in our home market of Australia.
Speaker Change: In addition, we hired a new head of sales in the U S and are actively pursuing <unk> opportunities in Europe in order to better serve local customers and our distribution partners as we add them.
Speaker Change: Furthermore, we are excited about the acquisition of Rocky Mountain announced in December.
Speaker Change: With an innovative product offering and loyal following we believe that it is an ideally ideal complementary product for Ryan.
Bike racks represent roughly one third of the total market opportunity in the U S with hitch mounted rights being especially popular in the U S. So we are very pleased to now have a premium offering that we expect to enable us to capture this key segment of the market with the proper investment and messaging.
Speaker Change: Importantly, in addition to helping accelerate that Brian penetration in North America, We anticipate Rocky mountain, providing an entry point to serve new products to existing customers and our home market of Australia.
Matthew Hayward: Finally, turning to new product introductions, we expect the significant investment made over the last year will begin to deliver benefits in 2025. Consistent with our focus on building out a product ecosystem across our brand portfolio to empower our consumers' outdoor and adventure pursuits, there has been a steadfast focus on returning to our foundational strength of fit. Going from previous annual lows of 20 to 30 vehicles and 120 fits, we have ramped up the fitment process and team. This is showing improved results in Q4 2024 with 13 new vehicles and 63 new fitments in this quarter alone.
Speaker Change: Finally, turning to new product introductions, we expect the significant investment made over the last year will begin to deliver benefits in 2025.
Consistent with our focus on building out our product ecosystem across our brand portfolio to empower consumers to outdoor and adventure pursuits, theres been a steadfast focus on returning to our foundational strength outfits.
Speaker Change: From previous annualized of 20 to 30 vehicles and 125, we have ramped up the fitment process and team.
Speaker Change: This is Sharon improved results in Q4 of 2024 with 13, new vehicles and 63, new equipment in this quarter alone.
Matthew Hayward: Moving into 2025, we're continuing the momentum, targeting in excess of 50 new vehicles that will deliver over 300 fits to our three key regional markets. fitments are the backbone of our go to market strategy. The more vehicles we can fit, the more racks we can sell, the more accessories we can add on to complete a lifestyle. As we have added these fitments, I'm also excited by the recent relaunch of the Sports Bar and our new RX series offering, which simplify the new number of SKUs necessary to fit any roof type, be it bare roof, fixed point mounts, flush rails, raised rails or gutters.
Speaker Change: Moving into 2025, we're continuing that momentum targeting in excess of 50, new vehicles that will deliver over 300 fits throughout three key regional markets.
Speaker Change: Shipments are the backbone of our go to market strategy.
More vehicles, we can fit the mold racks, we can south to more accessories, we can add on to complete our lifestyle offering.
Speaker Change: As we've added these fitments I'm also excited by the recent relaunch of a sports bar and our new Rx series offering.
Speaker Change: Which simplify the new number of skus necessary to fit any rooftop via Belarus.
Speaker Change: <unk> six point mounts flush browse raise rounds or got amounts.
Matthew Hayward: For context, the Sports Series is a Ryanarack legacy offering that has been reinvigorated to overhaul an existing and complex crossbar program to create a simplified solution for all of our customers. We are currently mid-launch of our full campaign rollout for March across APAC and EMEA, with the Americas launching in April of this year. As part of our focus, embracing the community that brings our product to life, the campaign series invited seven everyday adventurers to share their stories with us in terms of the brand and product, and what it meant to them, and what adventures it enabled.
Speaker Change: For context, the sport series <unk> legacy operating that has been reinvigorated to either hold on existing and complex cross buy program to create a simplified solution for all of our customers.
Speaker Change: We are currently mid launch of our full campaign rollout months' across APAC and EMEA with the America is launching in April of this year.
Speaker Change: As part of our focus embracing a community that brings that product to launch a campaign series inviting seven everyday adventurous to share. This story with up in terms of the brand and product and what it means to them and what adventures in the neighborhood.
Matthew Hayward: This campaign has been promoted across all our channels, both digital and through our dealers and in their stores, and has been well received by our target audience. I must also mention that this product has been manufactured and supported across two supply chain streams to empower both the AIPAC and EMEA regions and support the Americas through some of the external factors challenging many of us right now. I'm very proud of the team being able to establish this mid-development through 2024. In addition to these core offerings, we expect to roll out more than 50 new product introductions across 2025 across racks and accessories for our adventure brand.
Speaker Change: This campaign is being promoted across all our channels, both digitally and throughout dealers and in their stores and has been well received by our target audience.
Speaker Change: <unk> mentioned that this product has been manufactured and supported across two supply chain streams to empower both APAC and EMEA region and support the Americas through some of the external factors challenging many of US right now.
Speaker Change: I am very proud of the team being able to establish that mid development through 2024.
In addition to these core offerings, we expect to rollout more than 15, new product introductions across 2025 across racks and accessories for our adventure brands.
Matthew Hayward: In summary, while our results in 2024 reflect acute challenges, we continue to invest in the building blocks to execute in line with our multi-year strategic roadmap. Given macro conditions, potential tariff implications, and overall consumer sentiment, we are planning for modest growth. We see incremental progress establishing a new product and sourcing engine that can support profitable growth and look forward to providing additional updates as we take the next steps in our continued turnaround.
Speaker Change: In summary.
Speaker Change: While our results in 2024 reflect acute challenges we continue to invest in the building blocks to execute in line with our multiyear strategic road map.
Speaker Change: Given macro conditions potential tariff implications and overall consumer sentiment, we are planning for modest growth.
Speaker Change: We see incremental progress, establishing a new product and sourcing engine that can support profitable growth and look forward to providing additional updates as we take the next steps in our continued turnaround.
Neil Fiske: I'd like to now turn the call over to Neil Fiske, President of Black Diamond. Neil, over to you. Thanks, Matt. Turning to slide 7, I'll review the outdoor segments, Q4 and full year results, and our expectations for 2025. Let me start by recapping our goals for the prior year, which we laid out in our investor day last March. We said we would seek to simplify the business, strengthen the core, exit unprofitable categories and styles, improve gross margins, right size inventory, reshape the organization, revamp the supply chain, and lower our cost structure. We said we would seek to build a smaller, healthier, more profitable business.
Neil Fiske: I'd like to now turn the call over to Neil Fiske President of Black Diamond Neil over to you.
Speaker Change: Yeah.
Speaker Change: Thanks, Matt.
Speaker Change: Turning to slide seven I'll review, the outdoor segments Q4, and full year results.
Speaker Change: Our expectations for 2025.
Speaker Change: Let me start by recapping our goals for the prior year, which we laid out in our Investor Day last March.
Speaker Change: We said, we would seek to simplify the business strengthening the core.
Speaker Change: Unprofitable categories and styles improved gross margins right size inventory reshape the organization.
Speaker Change: Revamped the supply chain and lower our cost structure.
Speaker Change: We said, we would seek to build a smaller healthier more profitable business.
Neil Fiske: Now, after 24 months of hard work, I'm pleased to report that we have completed our restructuring, dramatically reshaped the business, delivered on our strategic objectives, and set the foundation expected for long-term growth with double-digit EBITDA margins. For the fourth quarter, we saw a return to growth for BD, a much healthier gross margin rate, lower costs, lower inventory levels with a better quality of inventory, and a big lift in adjusted EBITDA. We enter 2025 in great shape. 2024 revenue came in at $183.6 million and adjusted EBITDA for the year was $11.4 million. In line with our direction of a smaller, more profitable business, revenues for the year were down 9.9%, but adjusted EBITDA was up 80%.
Speaker Change: Now after 24 months of hard work.
Speaker Change: I'm pleased to report that we have completed our restructuring dramatically reshaped the business delivered on our strategic objectives and set the foundation expected for long term growth with double digit EBITDA margins.
Speaker Change: For the fourth quarter, we saw a return to growth for BD.
Speaker Change: Healthier gross margin rate lower costs, lower inventory levels with a better quality of inventory and a big lift in adjusted EBITDA.
Speaker Change: We entered 2025 in great shape.
Speaker Change: 2024 revenue came in at $183 6 million and adjusted EBITDA for the year was $11 4 million.
Speaker Change: In line with our direction of a smaller more profitable business revenues for the year were down nine 9%, but adjusted EBITDA was up 80%.
Neil Fiske: In downmarket, we gain share in most of our important categories and with our most important retailers. Revenue of $183.6 million was down from $204.1 million in 2023. But this was expected as we executed on our simplification strategy. I'd like to highlight that revenue from our high margin A and B styles was $11 million higher in the full year 2024 versus the prior year. Fossett by a $32 million less revenue from our low-margin C&D style. This was deliberate and consistent with our focus on building an outdoor business with higher gross margins, higher profitability, and inventory that will turn more and help improve our working capital.
Speaker Change: In down market, we gained share in most of our important categories and with our most important retailers.
Speaker Change: Revenue was $183 6 million was down from $204 1 million in 2023, but this was expected as we executed on our simplification strategy.
Speaker Change: Like to highlight that revenue from our high margin <unk>.
Speaker Change: And these styles with $11 million higher than the full year 2024 versus the prior year.
Set by a 32 million less revenue from our low margin C&D styles.
Speaker Change: This was deliberate and consistent with our focus on building an outdoor business with higher gross margins higher profitability and inventory that will turn more and help to improve our working capital.
Neil Fiske: Notably, as we annualize the gains from all our restructuring work, we see a run rate that can sequentially build towards double-digit EBITDA margins on the existing level of sales. Gross margins are lifting and are expected to continue to expand. Our inventories are in much better shape, both lower in the aggregate and higher in the quality of the inventory we have against our ACE tiles. service levels and fill rates are up. Feedback from our retail partners continues to improve, particularly in the critically important specialty channels. As we look at the fourth quarter in more detail, revenues grew 2.0% globally.
Speaker Change: Notably as we annualize the gains from all our restructuring work, we see a run rate that came sequentially build towards double digit EBITDA margins on the existing level of sales.
Speaker Change: Gross margins are lifting and are expected to continue to expand.
Our inventories are in much better shape, both lowering the aggregate and hire and the quality of the inventory we have against Harry styles.
Speaker Change: Service levels and fill rates or fees.
Speaker Change: <unk> back from our retail partners continues to improve particularly in the critically important specialty channel.
Speaker Change: As we look at the fourth quarter in more detail revenues grew two point.
Speaker Change: Oh percent globally.
Neil Fiske: By region and channel, North America Wholesale, our largest market, increased 6.5 percent. North America Digital D2C declined 3.2 percent, with growth in the consumer segment offset by a reduction in the pro business as we tightened up the discounts and availability of our pro program. Overall, we believe this was a healthy rebalancing of our direct channel net. In Europe, wholesale was down 1.8% while digital D2C was up 22.1%. In international markets, we're up 90.4%, largely driven by a more optimal timing of deliveries, which we expect to be a permanent shift. Importantly, though, we are also starting to see recovery and organic growth take hold in these markets after a couple years of contraction.
Speaker Change: By region or channel North America wholesale our largest market increased six 5%.
Speaker Change: North America digital DTC declined three 2% with growth in the consumer segment offset by a reduction in the <unk> business as we tightened up the discounts and availability of our of our pro program.
Speaker Change: Overall, we believe this was a healthy rebalancing of our direct channel mix.
Speaker Change: In Europe wholesale was down one 8%, while digital DTC was up 22, 1%.
Speaker Change: In the international markets were up 94% largely driven by a more optimal timing of deliveries, which we expect to be a permanent shift.
Speaker Change: Importantly, though we are also starting to see recovery in orders.
Speaker Change: <unk> growth take hold and these markets after a couple of years of contraction.
Neil Fiske: Gross margin for the fourth quarter reflected the benefit of our product inventory and simplification initiatives. On an aggregate basis, adjusted gross margins, adjusted for PFAS and other inventory reserves in both 24 and 23 were up 410 basis points. Operating expenses were down 15.6% for the year on a year over year basis. Excluding restructuring and legal expense in both the current and prior year, operating expenses were down 12.7%. Restructuring costs were $789,000 as we completed the remainder of our restructuring program. We expect very little restructuring costs in 2025. Adjusted EBITDA for the fourth quarter came in at $4.5 million versus zero in the prior year period.
Speaker Change: Gross margin for the fourth quarter reflected the benefit of our product inventory and simplification initiatives.
Speaker Change: Aggregate basis, adjusted gross margins adjusted for <unk> and other inventory reserves in both 'twenty four and 'twenty three.
Speaker Change: 410 basis points.
Speaker Change: Operating expenses were down 15, 6% for the year.
Speaker Change: On a year over year basis.
Speaker Change: Excluding restructuring and legal expense in both the current and prior year operating expenses were down 12, 7%.
Speaker Change: Restructuring costs were 789000, as we completed the remainder of our restructuring program.
Speaker Change: We expect very little restructuring costs in 2025.
Speaker Change: Adjusted EBITDA for the fourth quarter came in at $4 5 million versus zero in the prior year period.
Neil Fiske: Looking ahead to 2025, we expect to see the benefits of our strategic initiatives continue to lift profitability. Feedback on our new product and overall assortment has been very strong for both the spring, summer and fall winter seasons. Our forward order book looks to have upside potential based on these initial reads, although our overall top-line expectations remain cautious. Response to our new apparel line, in particular, has been better than we anticipated, and we are working to chase the demand. Our mountain and climb divisions, which represent the core of our assortment, have sold in well, and we believe that at-once fill-in could provide additional lift as retailers return to more normalized levels of ASAP orders.
Speaker Change: Looking ahead to 2025, we expect to see the benefits of our strategic initiatives continue to lift profitability feedback.
Speaker Change: Feedback on our new product and overall assortment has been very strong for both the spring summer and fall winter seasons.
Speaker Change: Our forward order book looks to have upside potential based on these initial reads, although our overall top line expectations remain cautious.
Speaker Change: Response to our new apparel line in particular has been better than we anticipated and we are working to chase that demand.
Speaker Change: Our mountain and climb divisions, which represent the core of our assortment has sold as well and we believe that <unk> could provide additional lift as retailers returned to more normalized levels of a soft orders.
Neil Fiske: On the margin front, we see an opportunity to increase gross margins. and decrease operating expenses in 2025 as a result of our prior restructuring and realizing the benefits from changing the way we work and improved simpler processes.
Speaker Change: On the margin front, we see an opportunity to increase gross margins.
Speaker Change: And decreased operating expenses in 2025, as a result of our prior restructuring and realizing the benefits from changing the way, we work and improved simpler processes.
Neil Fiske: The one caution in all of this, however, is tariffs. There's tremendous uncertainty and chaos in the market right now, following the initial Trump tariff outline. At the levels most recently proposed, there is no question prices will have to go up for consumers. The outdoor industry has absorbed inflationary pressures for too long. Prices will simply have to go up. It's difficult at this point to understand what impact that may have on consumer sentiment and demand. Our focus remains on controlling what we can, and in that regard, I feel confident. both about our progress and our position for the year ahead.
Speaker Change: The one caution and all of this however is tariffs.
Speaker Change: Tremendous uncertainty and chaos in the market right now following the initial Trump tariff outlines.
Speaker Change: At the levels for most recently proposed there is no question.
Speaker Change: Prices will have to go up for consumers.
The outdoor industry has absorbed inflationary pressures for too long.
Speaker Change: <unk> will simply have to go up.
Speaker Change: It's difficult at this point in time understanding what impact that may have on consumer.
Speaker Change: Sentiment and demand.
Speaker Change: Our focus remains on controlling what we can and then in that regard I feel confident.
Speaker Change: About our progress.
Speaker Change: Positioning for the year ahead.
Neil Fiske: Once again, I'd like to acknowledge the hard work of our teams and the success of the organization in executing on so much transformational change in such a compressed timeframe. I'm grateful and proud to be part of such a dynamic and creative organization and such a powerful brand.
Speaker Change: Once again I'd like to acknowledge the hard work of our teams and the success of the organization and executing on so much transformational change in such a compressed timeframe.
Speaker Change: Grateful and proud to be such be part of such a dynamic and creative organization and such a powerful brand.
Michael Yates: With that, Michael, I'll turn it back to you. Thanks, Neil. Turning to slide nine, I'll begin with a summary of our financial performance in the fourth quarter.
Mike Yates: With that Mike I'll turn it back to you.
Mike Yates: Thanks, Neal turning to slide nine.
Speaker Change: I'll begin with a summary of our financial performance in the fourth quarter.
Michael Yates: As a reminder, and as we noted previously, given the sales precision sport segment for approximately $175 million, which closed in the first quarter of 2024, our U.S. GAAP results are comprised of our outdoor and adventure segments, and results are referred to as continuing operations, except for the cash flow statement, which includes both continuing and discontinued operations. Fourth quarter sales were $71.4 million compared to $76.5 million in the prior year fourth quarter. The 7% decline in total sales was driven by a decrease in the adventure segment of 23%, partially offset by the outdoor sales growth Neil just highlighted.
Speaker Change: As a reminder, and as we've noted previously given the sale of precision sport segment of approximately $175 million.
Speaker Change: Which closed in the first quarter of 2020 for our U S. GAAP results are comprised of our outdoor and adventure segments and results are referred to as continuing operations, except for the cash flow statement, which includes both continuing and discontinued operations.
Speaker Change: Fourth quarter sales were $71 4 million compared to $76 5 million in the prior year fourth quarter.
7% decline in total sales was driven by a decrease in the adventure segment of 23%, partially offset by the outdoor sales growth Neil just highlighted.
Michael Yates: Moving to consolidated gross margins in the fourth quarter, gross margins was 33.4% compared to 28.9% in the year ago quarter. The improvement was primarily a result of the product simplification and SKU rationalization efforts in the outdoor segment that Neil just discussed, as well as lower PFAS inventory reserves. Margins were further helped by favorable channel mix at the adventure segment due to lower OEM sales and higher Max Trax revenue. Improvement was partially offset by a $2.3 million increase in adventure inventory reserves to address slow-moving and obsolete inventory. Consolidated Adjusted Gross Margin reflects a PFAS reserve, which was $900,000 in the fourth quarter, as well as an inventory reserve increase in adventure of $2.3 million, and inventory fair value adjustments relating to the Rocky Mountains acquisition.
Speaker Change: Moving to consolidated gross margins in the fourth quarter gross margin was 33, 4% compared to 28, 9% in the year ago quarter.
Speaker Change: The improvement was primarily the result of the product simplification and SKU rationalization efforts in the outdoor segment that Neil just discussed as well as lower P. Fast inventory reserves margins were further helped by favorable channel mix at the adventure segment due to lower OEM sale sales.
Speaker Change: Higher <unk> revenue.
Speaker Change: Improvement was partially offset by $2 3 million increase in adventure inventory reserves to address slow moving and obsolete inventory.
Speaker Change: Consolidated adjusted gross margin reflects a <unk> reserve, which was.
Speaker Change: $900000 in the fourth quarter as well as inventory reserve increase and adventure of $2 3 million.
Speaker Change: And inventory fair value adjustments related to the Rocky Mountain acquisition.
Michael Yates: Adjusted Consolidated Gross Margin was 38% compared to 34.7% in the year-ago quarter. A 330 basis point improved Adjusted gross margin by segment was as follows. Outdoor was 36.9% up 410 basis points and 40.6% at Adventure up 230 basis points compared to last year. Q4 selling general and administrative expenses were $27.8 million compared to $30 million in the same year-ago quarter. The decrease was primarily due to lower retail expenses at the outdoor because of our decision to close unprofitable retail stores, as well as the successful implementation of other expense reduction initiatives to manage costs at the outdoor segment.
Speaker Change: Adjusted consolidated gross margin was 38% compared to 34, 7% in a year ago quarter.
Speaker Change: 330 basis point improvement.
Speaker Change: Adjusted gross margin by segment.
Speaker Change: This follows outdoor.
Speaker Change: Outdoor was 36, 9% up 410 basis points, and 46% and adventure up 230 basis points compared to last year.
Speaker Change: Q4, selling general and administrative expenses were $27 8 million compared to $30 million in the same year ago quarter. The decrease was primarily due to lower retail expenses at the door because of our decision to close unprofitable retail stores as well as the successful.
Speaker Change: The limitation of other expense reduction initiatives to manage costs at the outdoor segment. This was partially offset by investments at the adventure segment and global marketing.
Michael Yates: This was partially offset by investments at the adventure segment in global marketing, research and development, and e-commerce initiatives to accelerate growth. Adjusted EBITDA in the fourth quarter was $4.4 million or an adjusted EBITDA margin of 6.1% compared to adjusted EBITDA of $1.6 million or an adjusted EBITDA margin of 2.1% in the same year-ago quarter. Our adjusted EBITDA is adjusted for impairment charges relating to goodwill and intangible assets, restructuring charges, transaction costs, stock compensation expenses, inventory fair value of purchase accounting, as well as the PFAS inventory reserves and other inventory reserves at Adventure. Additionally, beginning the first quarter of 2024, we adjusted for legal costs associated with the Section 16B litigation and the Consumer Product Safety Commission, known as the CPSC matter.
Speaker Change: Research and development and e-commerce initiatives to accelerate growth.
Speaker Change: Adjusted EBITDA in the fourth quarter was $4 4 million or an adjusted EBITDA margin of six 1% compared to adjusted EBITDA of $1 $6 million or an adjusted EBITDA margin of two 1% in the same year ago quarter.
Speaker Change: Adjusted EBITDA is adjusted for impairment charges related to goodwill and intangible assets restructuring charges transaction costs stock compensation expenses inventory fair value purchase accounting as well as the <unk> inventory reserves and other inventory reserves and adventure.
Speaker Change: Additionally, beginning in the first quarter of 2024, we adjusted for legal costs associated with the fixed should <unk> be litigation and the consumer product Safety Commission known as the CPUC matter. These legal costs were only $47000 in the fourth quarter.
Michael Yates: These legal costs were only $47,000 in the fourth quarter. Fourth quarter adjusted EBITDA by SegWit was $1.6 million at adventure and $4.5 million at outdoor. Adjusted corporate costs was $1.8 million in the fourth quarter.
Speaker Change: Fourth quarter adjusted EBITDA by segment.
Speaker Change: $1 6 million, an adventure and $4 $5 million at outdoor adjusted corporate costs was $1 8 million in the fourth quarter.
Michael Yates: Next, let me shift to liquidity. At December 31, 2024, cash and cash equivalents were $45.4 million compared to $11.3 million at December 31, 2023. Total debt on December 31, 2024 was $1.9 million related to an obligation associated with the Rocky Mount acquisition compared to $119.8 million at the end of 2023. As a reminder, our reduced debt and substantially improved cash position reflects the closing of the Precision Sports sale in February of 2024 and the termination repayment in full of our credit agreement. Consolidated cash taxes for the full year 2024 was $2.5 million, which has allowed us to maintain most of the net cash realized from the sale of Free cash flow defined as net cash provided by operating activities less capital expenditures for the fourth quarter of 2024 was $14.4 million compared to $13.3 million in the prior year quarter.
Speaker Change: Next let me shift to liquidity at December 31, 2024, cash and cash equivalents were $45 4 million compared to $11 3 million at December 31, 2023.
Speaker Change: Total debt on December 31, 2024 was $1 9 million related to the obligation associated with the Rocky Mountain acquisition compared to $119 8 million at the end of 2023.
Speaker Change: As a reminder, our reduced debt and substantially improved cash position reflects the closing of the precision and sports sale in February of 2024, and a termination repayment in full of our credit agreement.
Speaker Change: Solidago cash taxes for the full year 2024 was $2 5 billion, which has allowed us to maintain most of the net cash realized from the sale of precision sport the gain on the sale of pursuing a sport was essentially tax free except for some minimal state taxes that were due.
Speaker Change: Free cash flow.
Speaker Change: <unk> net cash provided by operating activities less capital expenditures for the fourth quarter of 2024 with $14 4 million compared to $13 3 million in the prior year quarter.
Michael Yates: Regarding our cash balances as of the first week of March of this year, it is essentially the same as a year ago, subsequent to the closing of precision sport and the disposal of that segment.
Speaker Change: Regarding our cash balances as of the first week of March of this year. It is essentially the same as a year ago subsequent to the closing of precision sport and the disposal of that segment as.
Michael Yates: As we have discussed previously, Clarus has historically had net operating loss carried forward for U.S. federal income tax purposes. During 2024, the remaining NOLs were fully utilized. However, in the fourth quarter of 2024, we established a valuation allowance against certain deferred taxes. through an increase to tax expense. Many of these deferred tax assets will reverse in the coming years and create taxable losses that will generate additional NOLs. Therefore, it is our expectation that we will have NOLs in the future to offset any U.S. federal taxable income during the next few years.
As we have discussed previously claris has historically had net operating loss carry forwards for U S. Federal income tax purposes. During 2020 for the remaining Nols were fully utilized however in the fourth quarter of 2024, we established a valuation allowance against certain.
Speaker Change: Taxes.
Speaker Change: Through an increase to tax expense many of these deferred tax assets assets will reverse in the coming years and create taxable losses that will generate additional nols. Therefore, it is our expectation that we will have nols in the future to offset any U S federal taxable income.
During the next few years.
Michael Yates: I would also like to comment on tariffs. To add to what Neil mentioned in his remarks, we are working with our vendors and shipping partners in real time to mitigate the impact on our P&L. While the situation remains fluid and subject to further change, we estimate as of today that the current tariff posture could affect our gross margins by up to two and a half million dollars. This is a moving target and we will continue to focus on what we are able to control and attempt to mitigate as much as possible as we proceed through 2025.
Neil Fiske: I would also like to comment on tariffs to add to what Neil mentioned in his remarks, we are working with our vendors and shifting partners in real time to mitigate the impact on our P&L.
While the situation remains fluid and subject to further change we estimate as of today that the current tariff posture could affect our gross margins by up to $2 $5 million. This is a moving target and we will continue to focus on what we are able to control an attempt to mitigate as much as possible as we proceed through 2020.
Neil Fiske: <unk> bye.
Michael Yates: For turning to our Outlook, I'd like to provide an update on the upstanding 16b securities litigation matters that the company is pursuing. We continue to proceed in our lawsuit against Hap Trading, LLC, and Mr. Harish A. Padilla. Both fact discovery and expert discovery have now been concluded. The court received a summary judgment from the defendants, a motion for a summary judgment from the defendants, as well as motions challenging our expert. We are waiting for the court to rule on this request for summary judgment. If this matter goes to trial, we expect a trial to commence towards the end of 2025.
Neil Fiske: Before turning to our outlook I would like to provide an update on the outstanding 16, B Securities litigation matters that the company is pursuing.
Neil Fiske: We continue to proceed in our lawsuit against half trading LLC and Mr have reached a padilla.
Neil Fiske: Both fact discovery and expert discovery has now been concluded.
The court received a summary judgment from.
Neil Fiske: From the defendants a motion for summary judgment from the descendants as well as motions challenging our expert.
Neil Fiske: Waiting for the court to rule on this request for summary judgment is this matter goes to trial, we expect the trial to commence towards the end of 2025.
Michael Yates: We also filed a lawsuit against Caption Management and its related entities and control personnel. Those defendants filed a motion to dismiss on June 27th, 2024. We filed opposition papers on July 25th of 2024 and reply papers were filed on August 15th, 2024. We are still waiting for the court to opine on the motion.
Neil Fiske: We also filed a lawsuit against caption management and its related entities and control persons.
Neil Fiske: Those defendants filed a motion to dismiss on June 27, 2024, we filed a position paper centralized 25 2024 and reply papers were filed on August 15th 2024, we are still waiting for the court to opine on the motion to dismiss.
Michael Yates: On November 7th, 2024, the company was notified by the CPSC that they referred the unresolved matter with Black Diamond to the Department of Justice. In January of 2025, the Department of Justice served the company and Black Diamond with grand jury subpoenas, requesting various categories of documents related to Black Diamond's avalanche beacons. We are cooperating with the request.
Neil Fiske: On November 7th 2024, the company was notified by the CPUC that they referred unresolved matter with Black Diamond to the department of Justice in January of 2025.
Neil Fiske: Apartment of Justice served the company and Black Diamond with Grand jury subpoenas requesting various categories of documents relating to black Diamond's Avalanche Beacon, we are cooperating with the request.
Michael Yates: Moving on to our 2025 outlook.
Neil Fiske: Moving on to our 2025 outlook.
Michael Yates: I'm on slide 10. We expect full year 2025 sales to range between $250 and $260 million. An adjusted EBITDA from continuing operations is expected to be in the range of $14 to $16 million, or an adjusted EBITDA margin of 5.9% at the midpoint of revenue and adjusted EBITDA.
Neil Fiske: On slide 10.
Neil Fiske: We expect full year 2025 sales to range between 250 and $260 million and adjusted EBITDA from continuing operations is expected to be in the range of $14 million to $16 million or an adjusted EBITDA margin of five 9% at the midpoint of revenue and adjusted EBITDA.
Michael Yates: From a segment perspective, we are being cautious, particularly as it relates to venture sales and EBITDA guidance. We are assuming approximately flat top line year over year due to weak auto sales in the core Australian and New Zealand market and unfavorable effects partially offset by new product development and geographic expansion that Matt referred to. We are initiating our 2025 segment guidance as follows. Adventure, 80 million, and outdoor, 175 million of sales. This total of 255 million is the midpoint of the consolidated sales guide. The guidance also includes an FX headwind of approximately 8 million as compared to 2024, approximately 4 million per segment driven by the recent strength in the US dollar.
Neil Fiske: I'm a segment perspective, we are being cautious, particularly as it relates to Incent your sales and EBIT EBITDA guidance.
Neil Fiske: We're assuming approximately flat top line year over year due to weak auto sales in the core.
Neil Fiske: Australia, and New Zealand market and announced and unfavorable FX, partially offset by new product development and geographic expansion that Matt referred to.
Neil Fiske: Our initiate initiating our 2025 segment guidance as follows adventure $80 million and outdoor $175 million of sales. This total off of $255 million at the midpoint of the consolidated sales Guy.
Neil Fiske: The guidance also includes an FX headwind of approximately $8 million as compared to 2020 for approximately $4 million per segment driven by the recent strength in the U S dollar.
Michael Yates: From a segment EBIDTA perspective, we are guiding 17 million and 7 million of EBIDTA at outdoor and adventure respect. along with $9 million of cost at corporate, which is equal to $15 million of EBITDA on a consolidated basis, or the midpoint of our guide.
Neil Fiske: From a segment EBITDA perspective, we are guiding $17 million and $7 million of need that at all.
Neil Fiske: Outdoor and adventure respectively.
Neil Fiske: Along with $9 million of cost at corporate which is equal to $15 million of EBITDA on a consolidated basis or the midpoint of our guide.
Michael Yates: We expect capital expenditures to range between four and five million and free cash flow to rate range between 8 million to 10 million for the full year 25. First quarter sales are expected to be between 55 and 57 million and adjusted EBITDA is expected to be breakeven.
Neil Fiske: We expect capital expenditures to range between four and $5 million and free cash flow to rate range between 8 million.
Neil Fiske: $10 million for the full year 'twenty five first quarter sales are expected to be between 55% and $57 million and adjusted EBITDA is expected to be breakeven.
Michael Yates: I want to reiterate that our outlook does not include any expense for ongoing litigation specifically relating to Section 16B matters, the CPSC matter, or the DOJ investigation. A quick update on PFAS-related inventory. The team at Black Diamond has done a great job dealing with this unfortunate situation, and I don't expect further reserves associated with this inventory going forward. Since Q4 of last year, we have reserved approximately $4.2 million for PFAS, which is consistent with how we frame this exposure back during our year-end call in early March of last year. And I don't expect the need for any additional reserves related to PFAS inventory at this point in time going forward.
Neil Fiske: I want to reiterate that our outlook does not include any expense for ongoing litigation specifically related to section 16 D matters, the CPUC matter or the Doj investigation.
Neil Fiske: Quick update on <unk> SaaS related inventory.
Neil Fiske: Team at Black Diamond has done a great job dealing with this unfortunate situation and I don't expect further reserves associated with this inventory going forward since Q4 of last year, we have reserved approximately $4 $2 million for PFS, which was just consistent with how we frame. This exposure factor in our year end call in early.
Neil Fiske: In March of last year, and I don't expect the need for any additional reserves related to <unk> inventory at this point in time going forward, we have sold over $20 million of PFS inventory in 2024 and believe our future exposure on the remaining inventory is covered via our existing reserves.
Michael Yates: We have sold over $20 million of PFAS inventory in 2024 and believe our future exposure on the remaining inventory is covered via our existing reserves.
Michael Yates: Finely.
Neil Fiske: Finally.
Michael Yates: I want to provide an update on the strategic alternative review for our PEATS snow safety brand that we launched during the second half of 2024, with the intention of soliciting interest from potential acquirers. While we have nothing to announce at this time, we are encouraged by the process to date.
Neil Fiske: I want to provide.
Neil Fiske: An update on the strategic alternatives review for our Peeps Snow safety brand that we launched during the second half of 2024 with the intention of soliciting interest from potential acquirers.
Neil Fiske: We have nothing to announce at this time, we are encouraged by the process to date.
Michael Yates: As we look towards the future, we see Claire's today's far better position to drive sustainable, profitable growth, supported by talented teams globally, and a strong balance sheet. We look forward to taking the next steps to advance our turnaround in 2025 and deliver significant long term value for Claire shareholders.
Neil Fiske: As we look towards the future we see claire's today is far better positioned to drive sustainable profitable growth.
Neil Fiske: <unk> by talented teams globally and a strong balance sheet, we look forward to taking the next steps to advance our turnaround in 2025 and deliver significant long term value for <unk> shareholders.
Unknown Executive: At this point, I'd like to take questions. Thank you.
Neil Fiske: At this point.
Neil Fiske: I'd like to take questions. Thank you.
Neil Fiske: Thank you.
Unknown Executive: Ladies and gentlemen, to ask a question, please press star 1-1 on your telephone. Then wait for your name to be announced. To withdraw your question, please press start one more time. Please stand by while we compile the Q&A roster.
Speaker Change: Ladies and gentlemen to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: Withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A Ross roster.
Anna Glaessgen: Our first question comes from the line of Anna Glaessgen with B Raleigh Securities. The line is open. Good afternoon. Thanks. Hi. Hey, how's it going? Thank you for taking my question. There was a comment in Neil's prepared remarks, I think something to the effect of on the current level of sales and getting to double-digit EBITDA margin. I just want to clarify, was he saying that, you know, on the current outdoor revenue base there's a path to double-digit EBITDA margin? And if I'm misunderstanding, if you could clarify the information behind that? No, that's, yeah, you're understanding that correctly.
Speaker Change: Our first question comes from the line of Anna.
Anna Gladstone: Gladstone with B Riley Securities. Your line is open.
Speaker Change: Hello Anna.
Anna Gladstone: Alright.
Anna Gladstone: Thanks for taking my question.
Speaker Change: There was a comment in your prepared remark I think something to the effect of the current level of sales.
Speaker Change: And getting to double digit EBITDA margin.
Speaker Change: I just want to clarify what he is saying that on the current outdoor revenue base. There is a path to double digit EBITDA margin.
Speaker Change: Understanding if you could clarify.
Speaker Change: No.
Speaker Change: Sure.
Speaker Change: Yes, you are.
Michael Yates: You know, we guided $175 million and we think we'll work towards a double-digit margin of EBITDA. It'll be lower in the first half of the year and it'll be hopefully higher than double digits in the back half of the year.
Speaker Change: I understand that correctly, we guided $175 million and we think.
Speaker Change: It will work towards a double digit margin.
Speaker Change: EBITDA it'll be lower than the first half of the year.
Speaker Change: It'll be hopefully higher than double digits in the back half of the year. So on a consolidated full year basis, we are targeting double digit or 10% type EBITDA or the outdoor segment specifically.
Michael Yates: So on a consolidated full-year basis, you know, we're targeting a double-digit or 10% type EBITDA for the outdoor segment specifically. on that $175 million of revenue.
Speaker Change: On the on that $175 million of revenue.
Unknown Executive: Perfect, thanks.
Speaker Change: Perfect and then wanted to touch on.
Neil Fiske: And then I want to touch on sentiment within the North American retail base. Given the dynamism of the current environment with tariffs, et cetera, to what extent has ordering behavior been disrupted? in one cue and to what extent are you kind of bracing for disruption over the next? a few months or so.
Speaker Change: With the North American.
Speaker Change: Retail base.
Speaker Change: Given the burden that some of the current in procurement with tariffs et cetera.
Speaker Change: Expense has ordering behavior have been disrupted.
Speaker Change: <unk> and <unk>.
Speaker Change: Are you kind of bracing for disruption over the next.
Speaker Change: 10 months or so.
Neil Fiske: Neil, do you want to you want to address that from a standpoint of our exposure to large retail? Um, sure. I think it's too early to tell because the short answer, um, I think we feel good about where we are through the first two months of the year. Um, and probably a little bit ahead of our expectation. Um, but, uh, But I think the effect of all of this is really yet to hit, and I would say both at a retailer level and a consumer level. We have started to pick up some signals that consumer sentiment has been a little bit rattled by kind of the macroeconomic trade issues and tariffs.
Neil Fiske: Neil do you want to you want to address that from a standpoint with our exposure to large retail.
Speaker Change: Yeah.
Neil Fiske: Sure I think it's too early to tell because the short answer.
Neil Fiske: I think we feel good about where we are through the first two months of the year.
Neil Fiske: And probably a little bit ahead of our expectation.
Neil Fiske: But.
Neil Fiske: But I think the effect of all of this is is really yet to hit.
Neil Fiske: And I would say both at a retailer level.
<unk> level.
Neil Fiske: We have <unk>.
Neil Fiske: Started to pick up some signals that consumer.
Neil Fiske: Sentiment.
Neil Fiske: Has been a little bit rattled by kind of the macroeconomic.
Neil Fiske: Trade issues and tariffs.
Michael Yates: But I think at this point, we can't really see any material impact yet on our order book or the rate of sales relative to our expectation. I just think it's too early. Got it.
Neil Fiske: But.
Neil Fiske: I think at this point.
Neil Fiske: We can't really see any material impact yet on our order book.
Neil Fiske: The rate of sales relative to our expectation.
Neil Fiske: I think it's too early.
Neil Fiske: Got it and then a related question, but similar.
Michael Yates: And then a related question, but similar. Could you comment, Mike, on kind of where inventory levels are in the IGD business or among the distributors and to what extent Their ordering has potentially been disrupted as we navigate the current Yeah, no, I think, you know, over the last year, I kind of said, you know, we've talked about stability in the North American market for the outdoor space. And I've also mentioned that I felt like IGD was about a year behind. I think in the fourth quarter, the IGD business exceeded our expectation was in was up, right.
Speaker Change: Could you comment Mike on kind of where inventory levels are.
Speaker Change: T D.
Speaker Change: Business or among the distributors and what expense.
Speaker Change: Yeah.
Speaker Change: Oh, they're ordering as it has been disrupted.
Speaker Change: At the current environment.
Speaker Change: Yes no.
Speaker Change: I see.
Speaker Change: Last year it kind of just said we've talked about stability in the north American market for the outdoor space.
Speaker Change: I also mentioned that I felt like IGD was about a year behind.
Speaker Change: I think in the fourth quarter on the IGD business.
Speaker Change: Seeded our expectation was in was up right.
Neil Fiske: And as a result, I think inventories are normalizing there, like, like we said, they would, or that we hope they would. And, Neil, you can add to that if you'd like, but I think that's what is going on. I think that the Asian markets that we go through are stabilizing as Yeah, I think that's right, Mike. The recovery process has started. We haven't yet sort of got back to the peak year by any stretch of the imagination. And Mike's right, given that we go through another layer of distribution, and it takes an extra year to work all its way through, but we do see the IGD market starting to stabilize and come back.
As a result, I think inventories are normalizing there.
Speaker Change: Like we said they would that we hope they would and Neil you can add to that if you'd like but I think thats what is going on I think that the.
The Asian markets that we go through are stabilizing as well.
Mike Yates: I think the I think thats right Mike.
Mike Yates: Recovery processes has started.
Mike Yates: We haven't yet sort of got back to the peak year by any stretch of imagination, and Mike's right given that we go through another layer of distribution.
Mike Yates: It takes an extra year to work all its way through but we do see.
Mike Yates: The IGT market starting to.
Neil Fiske: The one thing I might clarify with regard to the fourth quarter is I mentioned in my remarks that there was a timing shift into the fourth quarter for IGD, relatively small in the scheme of all of Black Diamond and outdoor, but significant to the IGD business. And that was really to align our deliveries with when our vendors would ideally like to receive them. And that will be a permanent shift in our ordering pattern.
Mike Yates: Stabilize and come back the one thing I might clarify with regard to the fourth quarter is.
Mike Yates: I mentioned in my remarks that there was a timing shift.
Mike Yates: Into the fourth quarter.
Mike Yates: For IGT relatively small in.
In the scheme of Apollo's, black Diamond and outdoor but significant to the IGT business.
Mike Yates: That was really.
Mike Yates: To align our deliveries with when our vendors.
Mike Yates: I would like to receive them.
Mike Yates: That will be.
Mike Yates: Hey.
Mike Yates: Permanent shift.
Neil Fiske: We'll see a similar effect towards the end of the first half of this year, and then we'll annualize that same shift in December of next year.
Mike Yates: The ordering pattern, we'll see a similar effect towards the end of the first half of this year and then we'll annualize that same shift.
Mike Yates: December of next year.
Unknown Executive: Hey, thanks guys. Thanks, Anna. Thank you.
Thanks, guys.
Thanks Anna.
Mike Yates: Thank you.
Unknown Executive: Please stand by for our next question.
Mike Yates: Please standby for our next question.
Matt Koranda: Our next question comes from the line of Matt Koranda with Roth Capital. Your line is open. Hello, Matt. Good afternoon. Hey, Mike. So just, I guess, wanted to talk about the 25 guidance. It does suggest there's still some structural cost savings that you guys have to go get with revenue sort of guided down, but it looks like it's up about 8 million at the midpoint.
Mike Yates: Our next question comes from the line of Matt Koranda with Roth Capital. Your line is open.
Matt Koranda: Hello, guys good afternoon.
Mike Yates: Hey, Mike.
Mike Yates: So just I guess wanted to talk about the 25 guidance.
Speaker Change: It does suggest there's still some structural cost savings that you guys have.
Speaker Change: To go get with revenue sort of got it down but the EBITDA it looks like its up about 8 million at the midpoint.
Matthew Hayward: Maybe just wanted to hear Neil and Matt separately break down where they see the biggest opportunities in their segments. And then, is this more of a cost-cutting exercise in 25 for each of you or a product mix improvement exercise? Just trying to get a sense for sort of how we should be thinking about the margin expansion. That sounds like it's pretty back end weighted. Matthew, do you want to go first?
Speaker Change: Maybe just wanted to hear Neal and Matt separately break down where they see the biggest opportunities in their segments. And then is this more of a cost cutting exercise in 'twenty five for each of you or a product mix improvement exercise just trying to get a sense for sort of how we should be thinking about the margin expansion. It sounds like it's pretty back end weighted.
Speaker Change: Matt do you want to go first.
Neil Fiske: Neil Fiske. Yeah, look, from a full year point of view, as mentioned, we do see the back half of the year being crucial to the adventure segment. It is the peak of our business as it relates to the home market, Q4 especially. And it's also when we start to realise a lot of the investments into our NPD. So a lot of new products kicking in from July through to December. And this does align specifically with our home market, but also in relation to the timing it takes to get this new product to market. So we do have that.
Matt Koranda: For pre owned vehicle.
Speaker Change: Yes.
Speaker Change: From a full year point of view.
Speaker Change: As mentioned, we do see the back half of the year.
Speaker Change: Been crucial to the adventure segment. It is the peak of our business as it relates to high market Q4, especially and it's also when we start to realize a lot of investments into our MBT NPD. So a lot of new products kicking in from July through December on this Doug the lines, specifically without without a high market, but also under the license.
Speaker Change: The timing it takes to get this new product to market. So we do have that in addition, there has been investments as Mike called out and as you've touched on into the U S and EMEA markets and we see early signs of <unk>.
Neil Fiske: In addition, there has been investments, as Mike called out, and as you've touched on into the US and EMEA markets, and we see early signs of growth in EMEA, with our new head of sales, you know, going into new markets with a big focus on Middle East. So there is further work to be done in terms of the delivery of that and our focus on execution. Our home market of Australia, we are yet to realise investments into DDC, so there is a heavy weight on that back half and looking for continual improvements in our operating baseline.
Speaker Change: Growth in EMEA.
Speaker Change: We'll then you hit a sales.
Speaker Change: Getting into new markets is a big focus on middle East.
Speaker Change: So there is further work to be done in terms of the delivery of that and our focus on execution, our home market of Australia.
Speaker Change: We have yet to realize investments and the BDC. So there is a heavy weighting on that back half and looking for continued improvements in our operating by baseline.
Speaker Change: Yeah.
Neil Fiske: And I would just say from the outdoor perspective, maybe frame the profitability improvement this way, we see OPEX on a run rate basis down 180 basis points on sales. So clearly a good lift there, but the real profit expansion in 2025 is from continued lift in our gross margin. As Warren said, we expect that to be up year over year in the range of 350 to 450 basis points. So there's, there's definitely flow through. and and sort of annualization of the cost initiatives that we've undertaken that will benefit us in 2025. And likewise, the annualization of the work we've done to improve the mix and and our gross margin will give us another lift on the margin line in 2025.
Speaker Change: And I would just say from the outdoor perspective.
Speaker Change: Maybe maybe frame.
Speaker Change: Profitability improvement the strike, we see opex on a run rate basis.
Speaker Change: 180 basis points on sales.
So clearly a good lift there, but the real.
Speaker Change: Profit expansion in 2025 is from <unk>.
Speaker Change: Continued lift in our gross margin.
Speaker Change: <unk> said, we expect that to be up year over year in the range of 350 to 450 basis points. So there is.
Speaker Change: There is definitely flow through.
Speaker Change: And sort of annualized nation of the cost initiatives that we've undertaken that will benefit us.
2025 and likewise.
Speaker Change: The annualized <unk> of the work we've done to improve the mix and our gross margin will give us another lift.
Speaker Change: On the margin line in 'twenty five.
Michael Yates: Okay, that's helpful from both of you guys. Thank you. And then maybe Matt, if I can reconcile that to the consolidated guide, right? I guided segment right 175 in 17 million of EBITDA, so almost 10% you know, approaching double digit like Anna's question for outdoor. And then obviously the the 80 million at adventure. I guided that around. I guided that at 7 million, right, 80 million. So a little north of 8% EBITDA, the 17 and the seven is the 24 less than 9 million of corporate cost is the 15 million of consolidated full year guidance at the Yep, understood.
Speaker Change: Okay. That's helpful from both of you guys. Thank you and then maybe Matt if I can can I sort of reconcile that to the consolidated guide right.
I guided segment right $1 75 in $17 million of EBITDA, So almost 10% of.
Speaker Change: Protein double digit like Anna's question for outdoor and then obviously the the $80 million at adventure.
Speaker Change: I guided that around.
Speaker Change: Yes.
Speaker Change: Again is that at $7 million $80 million, so a little north of 8% EBITDA to 17 in the seven is the 24 less the $9 million of corporate cost is the $15 million of consolidated full year guidance at the midpoint.
Michael Yates: Appreciate you tying that together, Mike. And then on the, I was unclear, I guess, one thing I wanted to clarify was that the tariff impact that you guys mentioned, the potential tariff impact of $2.5 million to the gross margin line, is that in the guidance for the year? Or is that incremental to the guidance? That would be a headwind to the guidance, right? We're saying it could be zero to up to $2.5 million. As Neil mentioned, and as I reconfirmed, you know, the things are changing daily, right? From the, you know, the commentary from the White House.
Speaker Change: Yep understood appreciate you're tying that together.
Speaker Change: Okay and then.
Speaker Change: On the I was unclear I guess, one thing I wanted to clarify was that.
Speaker Change: The tariff impact that you guys mentioned the potential tariff impact of $2 5 million to the gross margin line is that in the guidance for the year or is that incremental to the guidance that would be a headwind to the guidance right. We're saying it could be zero to up to $2 5 million as Neal mentioned in his I reconfirm.
Speaker Change: The things are changing.
Speaker Change: Daily right from the commentary from the White House.
Michael Yates: You know, we are working with, you know, our partners, whether that's our shipping partners, our vendors, and as Neil referred to, we're also looking at pricing, right? So we're going to try to mitigate this, you know, but you know, the ball is kind of moving. And, you know, that's why we're kind of, we didn't want to be silent when we spoke about tariffs, but we think it could be anywhere from zero to two and a half million bucks. Yeah, it's not in the numbers. But it's not in the numbers, there's nothing in the numbers that's supposed to be clear.
Speaker Change: We are working with.
Speaker Change: Partners.
Speaker Change: That's our shipping partners, our vendors and as Neil referred to we're also looking at pricing right. So we're going to try to mitigate this.
Speaker Change: But.
Speaker Change: The ball is kind of moving and.
It's why we've kind of we didn't want to be silent when we spoke about tariffs, but we think it could be anywhere from zero to $10 5 million Bucks, it's not in the numbers.
Speaker Change: But it's not an <unk> got yes, that's correct.
Speaker Change: Understood just to be clear okay, yes.
Unknown Executive: Okay. Yeah, I appreciate that, that clarity.
Speaker Change: Yes, I appreciate that.
Michael Yates: And then maybe just any thoughts on, initial thoughts on Rocky Mounts and what that does for you guys in the adventure segment. Curious kind of how to think about scale there and how it might be built into the 25 Outlook and some of the synergies you might see there. Yeah, no, we were excited. We're excited about Rocky Mountains. We think that's an excellent Entree into the North American market, right? I've told several folks that the North American market is a little different than the Australian market, meaning, you know, a third of the market here in North America is bike racks.
Speaker Change: And then.
Speaker Change: Maybe just any thoughts on initial thoughts on Rocky Mountains, and what that does for you guys. In the adventure segment curious kind of how to think about the scale there and how it might be built into the 25 outlook and some of the synergies you might see there.
Speaker Change: Yes no.
Speaker Change: We're excited we're excited about rocky Mount.
Speaker Change: We think thats an excellent.
Entree into the North American market right.
Speaker Change: Told several folks that the north American market is a little different in the Australian market, meaning.
Speaker Change: A third of the market here in North America's bike racks, and the other third is cargo boxes luggage boxes and the other third is racks and necessity right and.
Michael Yates: The other third is cargo boxes, luggage boxes, and the other third is racks and accessories, right? And Starting here in 24 and 25, we're going to be, you know, a player in the luggage boxes and the bicycle rack. So from a North American market, I think it's critical to unlock that growth that we've been chasing, you know, the last three years since, you know, so, so super excited about Rocky Mount here. I also think it opens up opportunities in our Australian wholesale market, because several of our wholesale partners in Australia are excited about the product and, you know, want to place orders as well.
Speaker Change: Starting here in 'twenty, four and 'twenty five we're going to be a player.
Plenty of it the luggage boxes and the bicycle rack so from a north American market I think it's critical to unlock that growth that we've been chasing.
Three years since that so so super excited about rocky Mount.
Speaker Change: I also think it opens up opportunities.
Speaker Change: Our Australia.
Speaker Change: Wholesale market because <unk>.
Speaker Change: Several of our wholesale partners in Australia are excited about the product and want to place orders as well, Matt what did I Miss what would you add.
Matthew Hayward: Matt, what did I miss? What would you add? No, Mikey, that's gone out of key now. But look, the great thing is that immediately upon acquisition, we got a larger distribution footprint. We've been present in the US market for some time. And what this brings is a critical product category to our entire industry, as Mike mentioned, but it also gave us almost double the footprint of distribution for the US. So that's probably the most important call out. The other thing is, with the infrastructure we've got there, being able to invest with a, you know, now a robust and solid sales team and marketing team based in Denver, we can accelerate that.
Matt Koranda: Mike you touched on <unk> it looks.
Matt Koranda: The great thing is that immediately upon acquisition, we got lots of distribution footprint.
Matt Koranda: President in the U S market for some time and what this brings is a critical.
Product category to our entire industry as Mike mentioned, but it also gave us almost double the footprint of distribution for the U S. So that's probably the most important call outs. The other thing is with the infrastructure. We have got they are being able to invest where that now are robust and solid sales team and marketing team based in Denver, we can access.
Matthew Hayward: On the flip side, the one other call out I'd say is, it was a distributor presence in all of the markets. It was very much a US focused brand and product line with great partners around the world, one of which was in Australia. We've been able to take that over. And so having direct control and really being able to ramp it up in our home market where we do have the brand presence and distribution already for Rhino-Rack and Maxtrax and Tread. So on that side, pretty exciting to be able to get a fantastic brand with an incredible product that has great product reviews under control and into the hands of our sales and marketing team.
Speaker Change: Alright that on the flip side. The one other call that I'd say is it was a distributor presence in all of the market. It was very much a U S focus brand and product line with great partners around the world one of which was in Australia with being able to take that over and so having direct control and really being able to ramp it up.
Speaker Change: Our home market, where we do have the brand presence and distribution already for <unk>, so on that side pretty exciting to be able to get.
Speaker Change: Tastic brand with incredible product that has great product reviews under control and into the hands of our sales and marketing teams. So that's really helping lead the way and open doors across both markets and 25.
Matthew Hayward: So that's really helping lead the way and open doors across both markets in 2025.
Michael Yates: Okay, great. Maybe just if I could ask one more on the front quarter here, it just it seems like The top line guide at least applies some erosion in the business since the beginning of the year. So maybe just wanted to see if you could talk about trends you're seeing in each segment. It sounds like adventure is probably still the bigger drag in the near term. I'd be also curious to hear about sort of trends year to date and outdoor because, you know, you just kind of flip positive in the fourth quarter. But I guess the guide for the first quarter implies maybe some more negativity in the near term.
Speaker Change: Okay great.
Maybe just if I could ask one more on the front quarter here just it seems like.
Speaker Change: The topline guide at least supply some some erosion.
Speaker Change: In the business since the beginning of the year. So maybe just wanted to see if you could talk about trends youre seeing in.
Speaker Change: And each segment it sounds like adventure is probably still the bigger drag in the near term.
Speaker Change: That would be also curious to hear about sort of trends year to date and outdoor because you just kind of flip positive in the fourth quarter, but I guess the guide for the first quarter.
Speaker Change: <unk>, maybe some more negativity.
Speaker Change: In the near term.
Michael Yates: Well, I think we are seeing some weakness in the adventure business in the whole, you know, it, I kind of gave that as an assumption of why we're kind of trying to be conservative around the 80 million full year guide for adventure, we are seeing some weakness in the wholesale market in Australia, to direct result of lower car sales, you know, auto sales and in adventure in Australia are down, they were started to go down in the back half of last year, and they continue to underperform. And so we are seeing that weakness in our whole market.
Speaker Change: Well I think we are seeing some weakness in the adventure business in the hole.
Speaker Change: I kind of gave that is an assumption of LIBOR kind of tried to be conservative around the $80 million full year guide for adventure, we are seeing some weakness in the wholesale market in Australia.
Speaker Change: <unk> is a direct result of lower car sales.
Speaker Change: Auto sales and an adventure.
Speaker Change: In Australia are down.
Speaker Change: They were started to go down in the back half of last year and they continue to underperform and so we are seeing that weakness in our home market.
Michael Yates: And so that's part of the reason for the year over year decline in the first quarter revenue guide. You also have to consider at Outdoor though, we have started the year pretty strong, stronger than we anticipated. So, you know, we are kind of fighting a couple different dynamics in the markets right now. So, but Neil mentioned that he has seen some strength across his markets here as we start the new year.
Speaker Change: And so that's part of the reason for the year over year decline in the first quarter revenue guide.
Speaker Change: Also have too.
Speaker Change: Consider at outdoor though we have started the year pretty strong stronger than we anticipated. So we.
Speaker Change: We are kind of fighting a couple of different dynamics.
Neil Fiske: The market is right now so, but Neil mentioned that <unk> seen some strength.
Speaker Change: <unk> crossed his markets here as we start the new year.
Neil Fiske: And Mike, if I could just add one point of clarity to that, please. So there is a little bit of a non-comp factor at Outdoor in Q1, which is that IGD shift I talked about, where we shifted to a better timing for our distributors into November and December of 24. So that sort of comes out of the first quarter. We'll see that basically get a pickup in the second quarter as we shift, as we make a comparable shift from Q3 into Q2. So, again, on a run rate basis, it sort of evens out, but there's a little bit of a step back just from that shift alone.
Speaker Change: And Mike if I could just add one point of clarity does that play certainly.
So there is a little bit of a non comp factor at outdoor in Q1, which is that <unk> shift I talked about where.
Speaker Change: We shifted to a better timing for our distributors into November and December 24, so that sort of comes out of the first quarter well see that.
Speaker Change: Basically get a pick up in the second quarter as we shift.
Speaker Change: Make a comparable shift from Q3 into Q2.
Speaker Change: So again.
Speaker Change: On a run rate basis, it evens out, but theres a little bit.
Yeah.
Step back.
Speaker Change: Just from that shift alone and then we think there is some other timing issues between Q1 and Q2, but we don't see.
Neil Fiske: And then I think there's some other timing issues between Q1 and Q2, but we don't see a run rate decline on a comparable basis in Q1. Yeah, I think that as I look at the, as I look at the phasing of the outdoor business, the first half in 25 looks to be about similar to the first half of 24. I think my point of view, just to balance it. So, with the new team led by TRIP in the US, we are seeing a positive start to the year. And this has really been aided by Rocky Mountain, as discussed.
Speaker Change: We don't see it run rate.
Speaker Change: Decline on a comparable basis.
Speaker Change: In Q1.
Speaker Change: Yes, I think that as I look at the as I look at the phasing of the outdoor business. The first half and 25 looks to be about similar to the first half of 2004.
Mike Yates: I think Mike go ahead.
Mike Yates: The point of view just to balance it so.
Speaker Change: With the new team led by trip in the U S. We are seeing a positive start to the year and this is really being either by rocky mounts as discussed we're also seeing growth across the <unk> region.
Neil Fiske: We're also seeing growth across our AMEA region. But the challenge we've got is that is offset in the largest part of our business in our home market. There are two key factors that we are basically wanting to be reasonably conservative on. One, whilst our OEM partner is ramping up in Q1 and Q2, we're taking a very pragmatic approach to that, and we don't want to bank on it too much. We can see the fruits of that startup come in. And so we're lowering our expectations on that. Secondly, as we work through in partnership with one of our largest wholesale partners here, we have looked to see how we can get them back on track from a brand and inventory point of view.
Speaker Change: The challenge we've got is that is offsetting the largest part of our business and our high market. There are two key factors that we are basically wanting to be reasonably conservative on one while salary and partner is ramping up in Q1 and Q2, we're taking a very pragmatic approach to that and we don't want to bank on it too much where you can see the fruits.
Speaker Change: Of that startup comment and so where we're lowering our expectations on that secondly, as we worked through in partnership with one of our largest wholesale partners here.
Speaker Change: We have looked to see how we can get them back on track from a brand and inventory point of view, it's not a direct impact of that was not directly related to us per se as a brand and products it's across the entire category for them.
Michael Yates: It's not a direct impact, or it's not directly related to us per se as a brand and product. It's across the entire category for them as they kind of restructure their own business. So I think it's a tale of two halves. Our international investments are paying off and we're seeing early fruits. But the challenges at the size at the moment versus our home market, it is a very conservative approach to Q1 and Q2.
Speaker Change: I kind of restructured our business. So I think it's a pilot two halves our international investments are paying off and we're seeing early fruits, but the challenges at the size at the moment versus a hard market. It is a very conservative conservative approach to Q1 and Q2.
Unknown Executive: Yeah, appreciate all the color guys, so I'll leave it. Thank you. Please stand by for our next question.
Speaker Change: Okay. Appreciate all the color guys sell a leave it over.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Laurent Vasilescu: Our next question comes from the line of Laurent Vasilescu. With BNP Paribas, your line is open. Oh, good afternoon. Thank you very much for taking my question. Mike, I wanted to ask, since 60% of your revenues was overseas, and FX has moved quite violently over the last, you know, six months, three months, excuse me. I'm curious to know what's embedded in your guide down most single digits for reported revenues. Should we assume that FX is like a 300 basis point that went to your top line for fiscal year 25? Well, it's it's right, I in my prepared remarks, I commented it was about $8 million on the on the full year of about $4 million per each segment.
Speaker Change: Our next question comes from the line of not Basilisk.
Speaker Change: With BNP Paribas Your line is open good.
Speaker Change: Good afternoon, and thank you very much for taking my questions. Mike I wanted to ask since 60% of your revenues was overseas.
Speaker Change: Effects has moved quite violently over the last six months three months gives me.
Speaker Change: I'm curious to know what's embedded in your guide down low single digits for reported revenues and should we assume that FX is like a 300 basis point headwind to your top line for fiscal year 'twenty five.
Speaker Change: Well it's.
Speaker Change: Right in my prepared remarks, I commented it was about $8 million on the on the full year.
Speaker Change: About $4 million per each segment and you are right.
Michael Yates: And you are right that the dollar has strengthened significantly and both against the euro in in the Aussie dollar. So we think it's about $4 million of head with, you know, headwind that we're facing this year, but for each segment.
Speaker Change: The dollar has strengthened significantly in both against the Euro and the Aussie dollar. So we think it's about $4 million of headwind.
Speaker Change: Headwind that we're facing this year, but for each segment.
Michael Yates: Okay, thank you, Mike, for clarifying that. And then Rocky Mountains, it looks like from the 10K the purchase price is about $6 million. Curious to know how much in terms of revenue should it contribute to fiscal year 25? You know, I. It that is that is a great question, right? I mean, I think if you just heard Matt describe, you know, what we've taken over the Australian distribution into that market. We see that as a huge opportunity. It's been favorably received here in the U.S. as we've introduced it into our distribution network. Historically, that business had only done $4 or $5 million of revenue annually.
Speaker Change: Okay. Thank you Mike.
Speaker Change: For clarifying that and then.
Speaker Change: And then rocky Mount it looks like from the 10-K.
Purchase price is about $6 million I'm curious to know how much how much in terms of revenue should contribute to a fifth.
Speaker Change: Fiscal year 'twenty five.
Speaker Change: Hi.
Speaker Change: It does that is a great question right I mean, I think as you just heard Matt described.
Speaker Change: <unk> taken over the Australian.
Speaker Change: Distribution into the into that market, we see that as a huge opportunity.
Speaker Change: It's been favorably received here in the U S.
Speaker Change: As we've introduced it into our distribution network.
Speaker Change: Historically that business had only done for $5 million of revenue annually. So we are.
Michael Yates: So we're excited, but we're trying to be cautiously conservative with what we expect from that here. But we have plenty of opportunities to grow that business because of the importance of, like Ed mentioned, the bike rack and how important that is here in the U.S. I don't have an exact number for you, but that historically, you know, it's been a relatively small business. You're right, we paid about $6 million for it. But we think with, you know, the founder has trusted us, you know, with kind of with his baby to, you know, try to expand his business and grow it across across globally, both here in the US and in Australia.
Speaker Change: We're excited but.
Speaker Change: We're trying to be cautiously conservative with with what we expect from that here, but we have plenty of opportunities to grow that business.
Speaker Change: Because of the importance of like Ed mentioned, the bike rack and how important that is here in the U S market.
Speaker Change: So I don't have an exact number for you, but but that historically.
Speaker Change: It's been a relatively small business you're right, we paid about $6 million for but we think with the <unk>.
Speaker Change: Founder as trusted us.
Speaker Change: With kind of with his baby.
Speaker Change: To.
Speaker Change: Tried to expand his business and grow it across.
Speaker Change: Across.
Speaker Change: Globally, both here in the USA and in Australia.
Michael Yates: Okay, very helpful. And then gross margins, adjusted gross margins for the year in 24, it reached 37.5, trying to understand the bridge to get to the EBITDA margin. It sounds, is that, is it driven by gross margins? I know FX, sorry, FX tariffs could be an impact, but trying to understand how to put together the P&L here. For 25, right? Yeah, that's right, Mike. Thank you. I think for 25, you know, reinforce what Warren said, you know, they're targeting a lot of the improvement at outdoor is driven by enhanced gross margin. We're targeting 350 to 450 basis points of gross margin improvement.
Speaker Change: Okay very helpful and then.
Speaker Change: Gross margins adjusted gross margins for the year and 'twenty four.
Speaker Change: Reached 37 five.
Speaker Change: And I understand the bridge to get to the EBITDA margin.
Speaker Change: It sounds like is that is it driven by gross margins.
Speaker Change: FX, sorry, FX tariffs could be.
Speaker Change: It impact, but trying to understand how to put together the P&L here.
Speaker Change: Alright.
Mike Yates: Yeah, that's right Mike.
Speaker Change: I think for 'twenty five.
Speaker Change: Yes.
Speaker Change: Neil reinforce what Laurence said, they're targeting a lot of the improvement at.
Speaker Change: Outdoor is driven by enhanced gross margin, we're targeting $350 to 450 basis points of gross margin improvement. So if you kind of split that right.
Michael Yates: So if you kind of split that, right, that 36% margin, you know, in the back second half of the year would be a lot closer to 40% for outdoor. And same with adventure, adventure. Ventures adjusted growth margin this fourth quarter was 40%. We will continue to, I think if you model that at 40%, that's probably reasonable as well. because we will continue to invest and grow the business, invest in the business. and Ed Ventrocchio.
Speaker Change: Is that 36% margin.
Speaker Change: In the back second half of the year would be a lot closer to 40% for outdoor and same with.
Speaker Change: Adventure adventure.
Speaker Change: Adventures.
Speaker Change: Adjusted gross margin in this fourth quarter was 40%.
Speaker Change: We will continue to I think if you model of that at 40%, that's probably a reasonable as well.
Speaker Change: Because we will continue to invest in and grow the business.
Speaker Change: Invest in the business.
Speaker Change: Get adventure.
Michael Yates: Very helpful. And the last question is, you mentioned about Peeps. How big is Peeps? And just in case, like, we see a press release at some this year, obviously too small for you guys to really make a like, have a call for this. But like, how big is that business? So yeah, we haven't, we haven't. Yeah, we haven't broken it out.
Speaker Change: Okay very helpful. And then last question is you mentioned about how big its Pete.
Speaker Change: And just in case like we see a press release at some this year.
Speaker Change: Obviously too small for you guys didn't really make a call for this but like how big is that business. So yes, we have.
Speaker Change: We haven't we haven't broken it out, but we will put out a press release on that.
Michael Yates: But we will put out a press release. Okay, wonderful.
Unknown Executive: Thank you very much and best of luck. Okay, thank you. Thank you.
Speaker Change: Okay wonderful. Thank you very much and best of luck. Okay. Thank you. Thank you.
Unknown Executive: Please stand by for our next question. Our next question comes from the line of Peter McGoldrick with Stiefel. Your line is open. Thanks, guys. Neil, a question for you, you pointed to solid growth in A and B styles in the fourth quarter. Can you update us on the mix of these styles versus your overall aspirations in 2025 as you move towards an optimal product mix? And how are you planning the progression across 2025 on a product tiering perspective? Sure, Peter. So, In the fourth quarter, the A-styles were about 73% of our inventory. And I think a comparable number last year would have been in the low 60s or high 50s.
Speaker Change: Ladies standby for our next question.
Speaker Change: Our next question comes from the line of Peter <unk> with Stifel. Your line is open.
Speaker Change: Thanks, guys neatly.
Speaker Change: A question for you you pointed to solid growth in A&P styles in the fourth quarter can you update us on the mix of these styles versus your overall aspirations in 2025 as you move towards an optimal product mix and how are you planning the progression across 2025 on a product hearing perspective.
Speaker Change: Sure Peter so.
Speaker Change: In the fourth quarter the styles.
Speaker Change: We're about <unk>.
Speaker Change: 73% of our inventory.
Speaker Change: And I think the comparable number last year would have been.
Speaker Change: <unk> and low <unk> high <unk>.
Neil Fiske: So much more of our inventory stacked against the A-styles. Clearly that helped drive the growth that we saw. And we've seen every quarter the percentage of our inventory against the A-styles go up sequentially. I think it's about where it needs to be now at around 73%. It's never going to be a dollar for dollar, 80% of inventory, 80% of sales, just because they do turn faster and you need some of the other assortment to complete the mix. But it's pretty close to optimal now. I think that was part one on inventory. Did I answer that?
Speaker Change: So.
Speaker Change: Much more of an inventory stacked against the PE style clarified.
Speaker Change: Driving the growth.
Speaker Change: That we saw.
Speaker Change: And we've seen every quarter.
Speaker Change: The percentage of our inventory again.
Speaker Change: <unk> go up sequentially I think it's about.
Speaker Change: It needs to be now of around 73%, it's never going to be.
Speaker Change: <unk> per dollar 80% of inventory.
Speaker Change: The percent of sales just because they do turn it faster than unique some of you have their assortment and to complete the mix but.
It's pretty close to optimal Tao.
Speaker Change: I think that was part one on inventory did I answer that.
Neil Fiske: Well, it's just like how you were playing it across 2025. But it sounds like you're nearing your optimal product mix. Yes, we are.
Speaker Change: Just like how you were planning to that across a 20 to 25, but it sounds like you're nearing your optimal product mix.
Speaker Change: Yes, we are.
Michael Yates: Okay, then, then Mike, I've got one for you. Just a clarification question on the first quarter guidance. Revenue down, high teens, and there's a shift factor from the IGD business and outdoor. Could you be more deliberate on the numbers, what we should expect for outdoor and adventure revenue in the first quarter? Well, we haven't given that number, but we did give this, you know, 55 to 57 and break even even that right for the first quarter. You know, I think that shift is, you know, that Neil talked about at IGD, it's probably closer to 37, 38 million of in, in the remainder, right, 18, 20 million at Venture.
Speaker Change: Okay. Then then Mike I've got one for you just a clarification question on the first quarter guidance.
Speaker Change: Sure.
Speaker Change: Revenue down high.
Speaker Change: Teens and there is a shift factor from the IGD business and outdoor could you.
Speaker Change: To be more deliberate on the numbers, what we should expect for outdoor and adventure revenue in.
Speaker Change: In the first quarter.
Speaker Change: So we will.
Speaker Change: We haven't given that number but we did get the <unk>.
Speaker Change: 55% to 57 and breakeven EBITDA for the first quarter.
Speaker Change: I think that shift is.
Speaker Change: Yes.
Speaker Change: Dean.
Speaker Change: <unk> talked about at IGD.
Speaker Change: It's probably closer to $37 $38 million in.
Speaker Change: And the remainder right.
Speaker Change: $18 million to $20 million.
Speaker Change: Sure.
Michael Yates: Okay, thank you very much.
Speaker Change: Okay.
Unknown Executive: I'll pass it on. Thank you.
Speaker Change: You very much I'll pass it on.
Speaker Change: Thank you.
Michael Yates: Ladies and gentlemen, at this time, I would now like to turn the call back to Mike Yates for closing remarks. Great, thank you. Thank you, Tawana. I just want to thank everyone very much. I appreciate everyone attending the call this afternoon, and your continued support and interest in CLARIS. We look forward to updating you on our results again next quarter. Thank you again. Appreciate it.
Mike Yates: Ladies and gentlemen at this time I would now like to turn the call back to Mike for closing remarks.
Mike Yates: Great. Thank you. Thank you.
Mike Yates: Just wanted to thank everyone very much I appreciate.
Everyone attending the call. This afternoon and your continued support and interest in Claris, we look forward to updating you on our results again next quarter.
Mike Yates: Thank you again I appreciate it bye bye.
Unknown Executive: Bye bye.
Unknown Executive: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
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Speaker Change: Yes.
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Okay.
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