On August 1, 2024, Clarus Corp (CLAR, Financial) released its 8-K filing detailing the financial results for the second quarter ended June 30, 2024. Clarus Corp is a designer, developer, manufacturer, and distributor of outdoor equipment and lifestyle products focused on the climb, ski, mountain, sport, and skincare markets. The company operates through the Outdoor and Adventure segments, with brands such as Black Diamond Equipment, PIEPS, Rhino-Rack, MAXTRAX, and TRED.
Performance Overview
Clarus Corp reported a revenue of $56.5 million for Q2 2024, a slight decrease from $57.9 million in the same quarter last year. This figure fell short of the analyst estimate of $58.54 million. The company also reported a loss from continuing operations of $5.5 million, or $(0.14) per diluted share, compared to a loss of $4.3 million, or $(0.12) per diluted share, in Q2 2023. This was below the analyst estimate of $(0.09) per share.
Segment Performance
The Adventure segment saw a 13.6% increase in sales to $20.3 million, driven by higher demand from OEM customers and the TRED Outdoors acquisition. However, the Outdoor segment experienced a decline, with sales dropping to $36.2 million from $40.1 million in the year-ago quarter, primarily due to weakness in North American direct-to-consumer markets and softness in European markets.
Financial Metrics
Gross margin for the quarter was 36.1%, down from 39.0% in Q2 2023. This decline was attributed to increased PFAS-related inventory reserve expenses, unfavorable product mix, and higher inventory and sales return reserve expenses. Adjusted gross margin, excluding PFAS-related inventory reserves, was 37.4%.
Selling, general, and administrative expenses rose to $28.1 million from $26.9 million in the same period last year, driven by higher marketing investments in the Adventure segment and increased employee-related expenses. These were partially offset by cost management initiatives in the Outdoor segment.
Cash Flow and Liquidity
Net cash generated from operating activities was $0.8 million, a significant drop from $14.1 million in Q2 2023. Capital expenditures were $1.6 million, slightly down from $1.8 million in the prior year quarter. Free cash flow for the quarter was an outflow of $0.7 million.
Management Commentary
“Against a backdrop of constrained consumers in the outdoor space, we made incremental progress in the second quarter executing Clarus’ strategic initiatives to seek to create long-term value,” said Warren Kanders, Clarus’ Executive Chairman. “We are pleased to see continued improvement in the Outdoor segment, particularly related to simplification and the rationalization of product lines, combined with continued evidence of stabilizing trends in the North American wholesale market, as we focus on our core products and categories.”
Strategic Initiatives
Clarus Corp has initiated a strategic review for its PIEPS snow safety brand within the Outdoor segment, aiming to simplify the business and rationalize product categories. Additionally, the company appointed three veteran operating and sales executives to support the Adventure segment's growth in the U.S., international, and OEM markets.
2024 Outlook
Clarus Corp reaffirmed its full-year revenue guidance, expecting sales to range between $270 million to $280 million. However, due to increased investments in the Adventure segment, the company revised its adjusted EBITDA expectations to approximately $11 million to $14 million, with an adjusted EBITDA margin of 4.5% at the mid-point of revenue and adjusted EBITDA.
Conclusion
While Clarus Corp faces challenges in the current market environment, the company is making strategic moves to position itself for long-term growth. Investors will be closely watching how these initiatives impact future performance and whether the company can meet its revised financial targets.
Explore the complete 8-K earnings release (here) from Clarus Corp for further details.
