Good afternoon, everyone. And thank you for participating in today’s conference call to discuss Clarus Corporation’s financial results for the second quarter ended June 30, 2019. Joining us today are Clarus Corporation’s President, John Walbrecht; Chief Administrative Officer and CFO, Aaron Kuehne; and the company’s external Director of Investor Relations, Cody Slach. Following their remarks, we’ll open the call for your questions. Before we go further, I would like to turn the call over to Mr. Slach 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. Cody, please go ahead.

Thanks, Liz. Please note that during this call, the company may use words such as appears, anticipates, believes, plans, expects, intends, future and similar expressions which constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on the company’s expectations and beliefs concerning future events impacting the company and therefore, involve a number of risks and uncertainties. The company cautions you that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Potential risks and uncertainties that could cause the actual results of operations or financial condition of the company to differ materially from those expressed or implied by forward-looking statements used in this call include, but are not limited to, the overall level of consumer demand on the company’s products; general economic conditions and other factors affecting consumer confidence, preferences and behavior; disruption and volatility in the global currency, capital and credit markets; the financial strength of the company’s customers; the company’s ability to implement its business strategy; the ability of the company to execute and integrate acquisitions; the company’s exposure to product liability or product warranty claims and other loss contingencies; the stability of the company’s manufacturing facilities and suppliers; changes in government regulation, legislation or public opinion relating to the manufacture and sale of bullets and ammunition by our Sierra segment and the possession and use of firearms and ammunition by our customers; company’s ability to protect patents, trademarks and other intellectual property rights; any breaches of, or interruptions in our information systems; fluctuations in the price, availability and quality – excuse me of raw materials and contracted products as well as foreign currency fluctuations; the company’s ability to utilize its…

Thank you, Cody, and good afternoon, everyone. It’s a pleasure to be joining you. Our results in the second quarter of 2019 capped an excellent first half season with sales up 9% for the first six months of the year fueled by 13% growth at Black Dimond. We also continue to drive operational improvements and profitability gains across the business with the adjusted EBITDA margin in the first six months of 2019, increasing to 8.2%, up 100 basis points compared to that of last year. It is important to note that historically the second quarter is our lowest sales quarter of the year and we both still believe that we will remain on track to exceed our 10% EBITDA margin target for the full year. Our results in the second quarter are a proof that the innovation and acceleration strategy we have been implementing at Black Diamond is driving both brand awareness and market share gains across all categories. However, performance in the quarter was somewhat offset by a protracted winter season which impacted Black Diamond’s spring product sell-throughs, and our at-once orders, as well as the difficult bullet and ammunition marketplace, which impacted Sierra, both of which we’ll cover later in this call. Turning to Black Diamond, during the first half of 2019 the brand has invested in its people by either hiring or promoting several individuals into key category roles including footwear, snow, mountain, hard goods, as well as key R&D and design roles. Additionally, we have added or promoted individuals into critical sales roles including the VP of Sales for North America and directors for both national accounts and key accounts. These roles add significant experience and expertise to an already strong team that is making significant strides in designing and developing an expanded product offering focused…

Thank you, John. And good afternoon everyone. Jumping into our results for the second quarter of 2019, sales increased 2% to $47 million, compared to $45.9 million in the same year ago quarter. And on a constant currency basis sales were up 3%. Sales were driven by 8% growth in Black Diamond, which saw strong performance across all categories and channels. This was offset by headwinds in the bullet and ammunition marketplace, which led to a 16% decline in Sierra. Gross margin in the second quarter was 34%, compared to 34.6% in the year ago quarter. The slight decline was primarily due to channel and product mix via our international distributor network, as well as foreign exchange headwinds from the strengthening U.S. dollar. This was partially offset by the continued benefits of our productivity programs focused on value enhancing activities within its supply chains and operations. Overall, our sales and gross profit in the second quarter were negatively impacted by unfavorable foreign currency changes on a transactional basis by $400,000. The primary cost of our inventory is denominated in U.S. dollars, while 32% of our global sales are denominated in foreign currencies, primarily the Euro, Canadian Dollar, Norwegian Kroner, and Swiss Franc. We attempt to manage our foreign currency risk on a continuous basis through natural hedges and foreign currency hedge contracts. Although we have hedges in place for the different cash flows denominated in foreign currencies, these hedges will never be a perfect offset to the actual currency movements, especially with the currency volatility we’ve recently experienced. These hedges also do not protect our financial statements from the translation impact we experienced from these foreign currencies. In our reported sales and gross profit, our hedges offset approximately $300,000 of foreign currency exposure in the second quarter. For the full…

Thanks, Aaron. Now that we’ve highlighted our strong results, I’d like to transition to a product discussion for the upcoming fall 2019 and spring 2020 seasons. For both seasons, we have an innovative and comprehensive suite of new product offering that have already garnered significant positive response with a retail partners and our industry publications. For fall 2019, we expect to have over 150 new products slated for launch, and for spring 2020 we expect to have an additional 125 new products slated for launch. Turning to fall 2019. As discussed in our last call, Black Diamond’s fall 2019 offerings received significant attention and awards from the industry. Our new product introductions will encompass footwear, apparel, headlamps, trekking poles and packs. And I am particularly encouraged with our fall pro line with sales like the Deploy Jacket, the Rhythm Wool Tee and the Stretch Rainwear. Within our ski category, backcountry skiing and snow safety continues to be a significant emphasis of Black Diamond with the expansion of the most innovative collection of JetForce packs to-date, featuring the JetForce Pro, the Tour and the Ultralight. These offerings will be alongside an expanded suite of beacons, gloves, ultralight ski-alpinisme, and the new snow outerwear program. Additionally, we recently won Editor’s choice for Runner’s World Magazine for our new Distance 15 pack for trail running, hiking and climbing. This innovative pack incorporates the best technology from both running vest and alpine peaks and has enough capacity for multi-day adventures. Finally, this fall’s offering is the combination of the innovate and accelerate strategy we’ve been implementing over the last two years. Due to the length of a product development cycle, this is the first season where from start-to-finish we have one consistent strategy starting with the line plan, to the catalog, to the trade…

Thank you, sir. [Operator Instructions] And our first question will come from Jim Duffy with Stifel. Please proceed.

Thank you. Good afternoon.

Hi, Jim.

Hope you doing well. If I’m interpreting the outlook appropriately, it sounds like a more optimistic view for the BD business. Maybe thinks pacing ahead of the views communicated in the previous guidance. What are the categories or products that are really driving that more confident view as you look across the remainder of the year?

I think we continue to see more momentum in climb and the combination of both the hard goods and the soft goods side obviously with footwear addition, both in rock-shoes as well as approach shoes, then the new products within climb. We’ve had and continued to see strong pick-up and the excitement around the whole winter direction. The new skis and skins and that aspect but more and more around snow safety specifically the new JetForce and beacons. And then we continue to see market share gains in trekking poles, headlamps, packs, and in the mountain category. We believe the activity based model is working and that the product, the innovations across all categories simultaneously has balanced the business and shown growth in every category.

And John does that concentrated in any one region or is it really balanced across the globe?

No, it’s been balanced across the globe.

Okay. And then Sierra a little softer in the guidance, is this a reflection of the ammunition launch being more sluggish than you anticipated or is it really just category specific – the headwinds for the category as a whole? And then related to that, John, I guess I’d be curious your views on the category and when you think it might be potential for a turn in the category?

I would say that it’s been category as a whole. Obviously for us it’s been more driven by what we would call the softness of our OEM side of the business, than it is the – the consumer or green box side of the business. And I think that’s a reflection of what’s taking place in law enforcement, military and that aspect of the business. I think everybody came out of SHOT Show believing the market would be relatively flat in the first and second quarter and see more growth in the third and fourth. And what the market experience was softness in the first and second quarters and hoping to see more flat growth in the – flat maintenance of the business in the third and fourth and hoping to see growth again in 2020. I think that’s kind of the view in the marketplace. We continue to play it as a market share story and believe that it’s – this market will just like it had a going out tide, will have a going in tide again.

Okay. Good. And then one more for me, can you guys comment on the recent news that’s been out there about your decision to relocate to manufacturing, as you do so some other strategies to mitigate operating risk and how you’re thinking about that in terms of like its financial implications with the P&L?

Okay. So the first thing we would say is that the termination, manufacturing we’ll start from around September 1 and through the rest of this year. The decision was not a reflection on the capabilities, abilities, progress, efforts of the team downstairs in manufacturing, but as we said in our discussions, this has really been driven off of a multi-tiered strategy and the biggest being that for Black Diamond to be able to innovate and design the most disruptive equipment in the marketplace. And that’s really what drives us becoming a design house. We have been very focused on those individuals, we see them – the operators downstairs as part of the BD family, and so we have been very cognizant to work with them both in severance agreements as well as in job placement here in the Salt Lake Valley to ensure that the easiest transition from a pickup of margin in long-term. We believe that we will be able to see some margin enhancement from that, and obviously, from a quality perspective that is first and foremost the most important thing to us is to ensure that always our product, which is personal protection equipment is certified, watched and meets or exceeds the expectations of Black Diamond wherever it is made.

Thank you.

Our next question will come from Dave King with ROTH Capital Partners. Please proceed.

Thanks. Afternoon, guys.

Hi Dave.

I guess, first on the BD side maybe sticking with some of other line of question on guidance. Do you have what the growth cadence was by month relative to that sort of 8% number? It sounds like May might have been tough, just curious about the trend in the June and July, and how that sort of fits in with the guidance and the trajectory as we head into Q3?

So what I would say is that we all saw winter longer than anticipated, which definitely impacted spring as we saw it. And so spring being the second quarter was impacted and we saw that in the growth being tougher in earlier months and then starting to pick up. We are positive and optimistic given the signs we’ve seen going into fall, that momentum has rechanged and is stronger, and we will continue on that as well as the drive to the number of new products that we launched in fall 2019, we continue to see that gaining momentum, as our most successful season of launch to date. And so I – unfortunately it was a weather issue and that obviously drives to a later summer or spring. And then as we move into fall just strong optimism and execution on that front.

Okay. And then, so maybe along those lines, as you move into fall, it sounds like 150 or so new products. How should we think about the magnitude of the revenue impact from those new products versus sort of the revenue benefit you got last year? Just to, what sort of the delta there in terms impact or expected impact that you’re thinking in guidance?

I think what we would say from the notes earlier today that you saw is that originally we were thinking it was going to be a high single-digit growth for the year. And you can see where the first half of the year came in and we believe that double-digit – low double-digit number that achieved in the first half of the year is more in line with our direction for the second half of the year.

Okay. So it sounds like a fair amount of that is coming from the new, that delta is coming from the new product launches then in terms of that benefit?

Yes.

Okay. Last one for me, switching to Sierra. Do you see any noticeable lifts? I guess probably on the green box side is where you’d see at most, but from the California background checks, either in June or in terms of more recent replenishment orders, is it – was it enough to notice frankly?

No, I think our business is a combination of the green box business and the OEM partnership that we’ve had being specifically bullet, even though, we launched in the ammo this year, we’ve been clear to everybody to saying that of all the bullets we do, we’re launching 8 calibers into ammo. We’re excited about and we think ammo has a great future for the brand, given the response to those 8 calibers. But it is just 8 calibers, we are a brand that is focused on the bullet innovation side both what we provide in unique opportunities for the OEM partners, but also the green box. We haven’t seen that, we’re starting to hear rumblings of it coming more in the third and the fourth. We do continue to see – maintain, what I would call market share gains in the green box side. And as we said in our report, we’ll now focus more and more on the international businesses as well because we think that’s got more opportunity. And our goal is – we believe strongly in innovate and accelerate, just double down the tie does out, it will come back in.

Okay, perfect. Well, thanks for taking my questions. Good luck for the rest of year.

Great.

Our next question will come from Laurent Vasilescu with Macquarie. Please proceed.

Good afternoon. Thanks for having me on the call. I wanted to follow-up on the footwear and apparel initiatives. I think last quarter it was noted that our footwear grew 60% for quarter. Just curious, I think I’d missed the growth rate for the second quarter. And how should we think about footwear and apparel growth overall for FY 2019?

Footwear and apparel are both important initiatives to us, they will have some ebb and flows, as you are seeing by seasons. I would say that climb footwear in the second quarter was up high single-digits and that’s driven again by a late spring initiative on that. Apparel continues to gain ground and as we move into fall 2019 outerwear, sportswear opportunities and we continue to see long-term future growth with both outerwear and footwear, recently winning the Gold ISPO Award for our highline jacket at ISPO, which is a covered award for a jacket, that is a three layer fully recyclable jacket and then the overwhelming response to our new approach shoes, and those are just two more initiatives on a long pathway of product innovations to continue to drive growth and consumer experience through footwear and apparel.

Very helpful. Thank you. And then switching to gross margins, the press release notes that GM was slightly pressured in second quarter from channel and product mix as well as FX. Aaron, maybe could you possibly parse those out in better terms and how should we think about those factors for the remaining two quarters of the year?

You bet. So FX represented anywhere from 55% to 60%, while channel and products mix was 65 basis points, offset by, as I say, some of the productivity programs that we implemented that generated a favorable variance of 110 basis points on a year-over-year basis. As we think about the remainder of the year, we are looking at FX impact of about $2.3 million. And so obviously that continues to be a headwind that we’re experiencing, however, we have implemented a series of hedge contracts to help offset that. We feel like we’re in a fairly good spot as it relates, especially to the year on the Canadian dollar in terms of mitigating our exposures there and having decent rates in place to help offset some of the headwinds. But we are looking at a $2.3 million negative impact associated with gross margins for the entire year of 2019.

Okay. Very helpful. And then switching to SG&A, I think the press release notes are $400,000 in costs associated with the warehouse in Europe. Is that one time in nature, or should we think of that increased for the next two quarters?

Most definitely one time in nature, this is a move that we decided to activate coming into the year as we looked at the needs of our European office primarily focused around having high levels of fulfilment easier to do business with type activities and just being quicker to market, but also enhancing our direct-to-consumer business in that market. And so that was a need for us to be able to move into a higher performing facility and with a different partner and so the most definitely one time in nature.

Okay. Thank you very much for that.

And also one of the major impacts of the season is like I said, the shift up of the trade show. So we saw a trade show impact that would have happened in the third quarter and now roll into the second quarter in comparison.

Okay. Thank you for that. And then my last question is on Sierra. I know you guys don’t get quarterly guidance, but any high level thoughts about the third and fourth quarter. And then with tonight’s 10-Q, it looks like both Sierra domestic and international declined at the same rate. Should we think of those declined across the regions for the next three quarters, excuse me, two quarters?

As we look to fall, I think our view is to focus on each of the markets individually and drive through innovation and acceleration each of the markets. We don’t give guidance on the quarterly more on an annual. We now see that we will see high single-digit decline across Sierra, as our outlook, obviously we’ll do our best to exceed on that as a team, but we see those trends kind of maintaining, as we go through the rest of 2019.

I think it’s also important to note that in Q2 of last year, the Sierra business grew 32% and in Q3 of last year the Sierra business grew 35%. And so, as we continue to see the market headwinds that we’re experiencing to date, we’ll see a more magnified impact in Q3 versus in Q4, where Q4 grew 14%.

Very helpful. Thank you very much and best of luck.

Thank you.

And our next question will come from Michael Kawamoto with D.A. Davidson. Please proceed.

Hi, Michael.

Hey, yes. Hey, guys. How was it going?

Good.

Just building on Sierra, can you just talk about what your expectations are for year one of ammunition mission and understand the industry headwinds, but how quickly can you ramp that piece of the business?

We launched into GameChanger, the launch to start which was 8 calibers by this fall, now this 8 calibers is 8 of multiple dozens of different calibers we offer within the Sierra bullet range. We believe long-term that ammo was the right process, we launched into the GameChanger because of our history in hunting, as well as our long-term market share view in long range competition bullets in combining the two. We will continue to escalate the GameChanger and have new – additional calibers being launched within the GameChanger collection. And as we get to shot 2020, we’ll continue to expand into new offerings of ammunition and other categories, in partnership with our OEM partners. Long-term we think it’s exactly the right strategy for the brand. As we said, we are doing it in partnership with our OEMs. And we think that it is a growth option but it’s not planned to offset whatever is taking place in the bullet business in the short-term.

Got it. That’s helpful. And then maybe I missed this, but do you have any visibility into inventory levels, what they look like in the channel for your retail partners for Sierra?

I think we can only speculate to be honest, I think our view is that there’ve been a lot of opportunities for our retailers to buy over the last six months, given the weakness of the market and the promotional nature of all the players in it. I think we’re starting to see at their level some movement as we go into the fall season and a little hope it’ll translate around. Again for us, only part of our business is driven through retail and the green box, where the other side of our business is the OEM partnerships relative to military and law enforcement. And I think those have been softer than even the retail side.

Got it. Thanks guys.

Thanks.

[Operator Instructions] Our next question will come from Mark Smith with Lake Street Capital. Please proceed.

Hi guys. Just a couple other little things here on Sierra. Do you feel that weather had an impact on Sierra business during the quarter?

To be honest, I don’t think we’ve owned Sierra long enough that weather was an impact, it’s not what we heard, as a driver that it was really just more the aftermath of the stockpiling of both inventories and stockpiling by consumers with the new presidential process. So we haven’t seen that. It didn’t impact, but that we could clear, we still believe that innovation and acceleration is the best way to gain market share. And in a soft market time, sometimes it’s the easiest and even though you gained market share, the results that you have may not be as ambitious as people would love to see.

Okay. And then second on Sierra, what was the impact? Can you speak to the impact just on the launch of ammunition during the quarter? Is it still too small to really speak to? Or any guidance you can give would be great.

Yes. I mean ammunition, we have quite a few of calibers that we make in bullets across the whole line, across what we would call hunt, compete, defend and protect the four different categories. We launched ammo 8 calibers by this fall in just the hunt segment, the response has been very positive and so it led us to direction of working on new ammunition launches with our OEM partners again, for a shot shell. But our goal was never that ammo was going to be able to fill the hole if the market saw steep headwinds in the bullet business. It is a long-term strategy and we’ll continue to go towards that, but as we say we sell a lot of bullets.

Okay, that’s fair. Thank you.

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Walbrecht for closing remarks.

Thank you. We’d like to thank everyone for listening in today’s call and we look forward to speaking with you again when we report our third quarter results. Thank you for attending.

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.