Good afternoon, everyone, and thank you for participating in today's conference call to discuss Clarus Corporation's financial results for Fourth Quarter and Full Year Ended December 31, 2022. Joining us today are, Clarus Corporation's President, John Walbrecht; CFO, Mike Yates; 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 now 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 information -- important cautions regarding forward-looking statements. Cody, please go ahead.

Thanks, Shannon. Before we begin, I would like to remind everyone that during today's call, we will be making several forward-looking statements. And we make these statements under the safe harbor provisions of the Private Securities Litigation Reform Act. 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. More information on potential factors that could affect the company's operating and financial results is included from time-to-time in the company's public reports filed with the SEC. I'd like to remind everyone this call will be available for replay through February 27, starting at 7:00 pm Eastern tonight. A webcast replay will also be available via the link provided in today's press release as well as on the company website at claruscorp.com. Now, I'd like to turn the call over to Clarus' President, John Walbrecht. John?

Thanks, Cody. It's good to be with everyone. As I reflect on 2022, there is no doubt it will go down as one of the most challenging years in our company's history. An uncertain macroeconomic environment, a tough consumer backdrop, extremely volatile foreign currency exchange markets and inefficient [Technical Difficulty] supply chains presented rough waters for our brands to navigate. We are proud of our team tenacity and dedication in these uncertain times. So I first want to recognize all the people across all of our brands and their great efforts. As the challenges set in, we acted quickly and pivoted towards the areas of our business that weren't facing the most severe headwinds. Areas of focus were precision sports as well the markets outside of North American wholesale in our Outdoor segment. We also prioritized expense reductions, free cash flow generation and debt reduction. On the cash side of this equation, we focused on streamlining inventory and cost reductions. This allowed us to generate over $30 million in free cash flow during the fourth quarter, which we used to pay down $28 million in debt. We ended the quarter at approximately 2 times leverage, which is at the low end of our leverage range and we believe it is a comfortable spot as we enter into 2023. Zooming out on the full year, we have much to be proud of as well. We drove record revenue growth, grew our Precision Sports segment by 21%, deepened our specialty retail presence in our Outdoor segment by increasing sales in this channel by 31% in the second half of the year, grew our apparel by 31% and expanded our direct to consumer business by 26%, all while focusing on decreasing our inventory and paying down debt. However, we weren't totally immune to…

Thank you, John, and good afternoon, everyone. Better jump right into the performance in the fourth quarter. Sales were $104.2 million compared to $118.2 million in the prior year quarter. Sales included revenue contribution of $3.8 million from MAXTRAX, an acquisition completed on December 1, 2021. Reported sales in the fourth quarter were down 12%. Organic sales were down 11% in the fourth quarter, MAXTRAX contributed 2% and foreign exchange was a 3% headwind in the quarter. On a constant currency basis, total sales were down 9% in the quarter. Fourth quarter sales at the Outdoor segment were $55.3 million versus $65.1 million in the fourth quarter of 2021. If you adjust for foreign currency exchange, outdoor sales would have been down 11% as opposed to being down 15% at Outdoor. As John mentioned, while we've done a good job closing the gap on outstanding Black Diamond orders, we are still constrained by lower open to buys from our key North American retail partners due in part to their inventory destocking activities. Partially offsetting this decline was execution in the key pivot areas of direct to consumer European and IGB that John mentioned earlier. Another area of strong execution was apparel, which continues to be our fastest growing category within the outdoor segment. Sales were up 15% at the apparel category level. This is notable as apparel along with footwear and our direct to consumer business represent key strategic growth pillars over the next five years for the corporation. Precision Sports sales increased 10% in the quarter to $30.3 million, strength in the international business continued in the fourth quarter as our Precision Sports team continued to do an excellent job in fulfilling demand, increasing production capacity and navigating a challenging sourcing environment. One thing to note, during the fourth…

Thank you, sir.[Operator Instructions] Our first question will come from Alex Perry with Bank of America. Please proceed.

Hi. Thank for taking my questions. Just first, any color about -- on how we should think about the growth rates between segments for 2023? Should Precision Sports continue to outgrow? Like I think in the past, you have provided a little bit more detail on sort of segment growth. So any help there would be very appreciated. Thanks.

Alex, I'll start and John can add any comments. But we specifically have not given segment guidance this year. We're really proud of the diversification and strength of the entire portfolio across the three very distinctive segments. And each of these segments is really positioned to grow in 2023. We've done -- we put the effort in to grow these segments and make the investments necessary to grow them. But each are in their different phases of growth. And as you may recall, we -- last year, we guided Precision. It was probably an underwhelming guide and outperformed. So we're really looking to 2023 with the challenging macro environment, the impact to the consumer, the higher interest rates, we want to leave ourselves some optionality of where we pivot to. Because like I said, all three businesses are -- we've maybe efforts to grow these businesses. And like I said, they're positioned to grow, but we're going to want to keep some optionality available to, as we move through the year and lean into where we're seeing the best opportunities to grow in light of this difficult environment. So we're going to be super cautious about our capital and where we invest and how we allocate resources. And -- but we're going to lean into the hot segment and whether that's geographically the hot channel, et cetera, and we will -- as we go through 2023. And that's why we've elected to kind of give a guidance at the consolidated level versus trying to predict how each of these businesses are going to perform here as we go through 2023.

Great. That's really helpful. And then just want to clarify. It looks like the $95 million total sales guidance is down a bit from the $113 million you did last year. Any help in terms of how we should think about the margin there versus maybe the 17.4% you did in 1Q 2022? And then my other question was the theme last quarter was retailers were being really cautious with their open-to-buy as they continue to work through inventory levels in competing categories, not necessarily your category. Is this still the case? And is this headwind sort of carrying with you into 2023?

Sure, Al. It's a great question. Yes. No, the main driver of that $95 million in the first quarter is really because, as John alluded to, the difficulties with our North American retail partners, specifically in our Outdoor business, right? As we said in our prepared remarks, their open-to-buys are limited. We're seeing demand for our product, but our big customers here in North America are really taming back and rightsizing their inventory levels. And as long as that's going on, despite the tremendous job at specialty or despite the growth in our international distributors or in Europe or in our new initiatives, right, when North American wholesale is struggling, that's really the headwind we're facing here in Q1. But we think that's transitory in nature, right? Once they rightsize their inventories we see that picking up. But we're sitting here almost 2 months into the first quarter. So we know what's going on here in the first couple of months. So that's really the background to that. From an earnings perspective, I think gross margins and EBITDA margins are both -- should be trending favorable compared to what we just posted here in the fourth quarter because a lot of the initiatives we talked about controlling SG&A, but more importantly, capturing value leakage at the gross margin line, the stabilization of freight, the more favorable FX than we had prior in the back half of 2022. So we're not giving specifics, but I think we highlighted the significant improvement in gross margins at Outdoor. And we think that a lot of that sticks here as we move forward.

Great. And sorry, just to clarify, you said EBITDA margins and gross margins favorable versus 4Q for the first quarter, right?

Yes.

Our next question comes from the line of Randy Konik with Jefferies.

I guess -- just first quickly, I guess, for Mike. Just on the EBITDA margin guidance for next year and for the year, just how much of that is gross margin expansion versus SG&A rate change? Just can you give us -- just clarify that for us first?

No, we haven't been that specific, but it's over 100 basis points of margin improvement compared to where we finished this year on a reported basis. So like I've just mentioned to Alex, those initiatives that we've been driving under Aaron Kuehne's leadership, they're sticky. So I'd say over 100 basis points. Q - Randal Konik 100 basis -- over 100 basis points of gross margin?

Yes.

Got it. Okay. And then, I guess, John, for you. As the leadership bench continues to expand, maybe I know Neil Fiske from his days at Bath & Body Works. He did a good job of kind of elevating the perception of the brand there. He wrote a book Trading Up that I've read. Maybe give us some perspective of the conversations you've had with Niel about what he focused on or going to be focused on in his first year ahead at Black Diamond. Any kind of broad strokes do you think he's going to be attacking for that particular brand in the next 12 months?

Yes. Fantastic question. Thank you, Randy. Good to hear from you again. As we look to 2023, two aspects that Neil will be focusing on, first and foremost, is continuing to accelerate the Innovate and Accelerate strategy across the brand today, continue to innovate in the apparel footwear segment as well as the expansion of distribution within headlamps, tracking poles, gloves, patch, you name it. As we look beyond that, the real goal is how do we continue to think about BD, its place in the market space, brand awareness, new category expansion, new retail, more focused on consumer direct and our community-centric model and the long-term competitive growth of Black Diamond beyond what we've achieved up to 2023.

Got it. I guess my last question is, I think on the guidance, you guys talked about, I guess, the free cash flow generation expectation of $35 million to $40 million. How do you think about the utilization of that free cash? Are you just going to kind of support it in the bank, take a pause on acquisitions for 2023, given the market uncertainty? Change to look at debt paydown or anything like that? Just curious on what you're thinking about in terms of utilization of free cash flow going forward?

Sure, Randy. Let me take that one. We've been very specific about investing in organic growth and doing M&A -- strategic M&A finding in the next Super Fan brand. For the first six months of the year, we're going to focus on generating cash and paying down debt, though this year, right, in rightsizing, improving our working capital, et cetera. So it's going to be kind of an internal book, right, that's focused on paying down debt with that cash flow generation. Now we only have $18 million, in my prepared remarks, outstanding under the revolver. We have about $10 million of required payments under the term loan. So that's $28 million. So we should be building cash at some point throughout -- through the year, right? And that's, in my prepared remarks, I said we'd get back to looking more aggressively at M&A in the back half of the year or in 2024.

Understood. Thanks guys. Really appreciate it.

Thanks Randy.

Thank you. Our next question comes from the line of Joe Altobello with Raymond James.

Thanks. Hey, guys. Good afternoon. I want to talk about Outdoor and the retailer inventory reductions you guys have alluded to throughout the call. Are there any categories in particular that they're heavy on? Or is it pretty much across the board?

Good question, Joe. Good to hear from you. I think that coming out of spring, summer 2022, there was an expectation that some of these new growth categories that have seen explosion during COVID, which can be around family camping, could have been around bike and bike carriers, racks, things like that, it ended up heavy as we went into Q3 and Q4, and we saw a shift in a slowdown. And I think it just manifests itself in too much inventory in the total system, which just limited open-to-buys and made it difficult to chase those categories that we're continuing to see growth, which, for us, were things like tracking poles, headlamps, gloves, packs, apparel in the mix. Now I think apparel, as a whole, was saturated in the market, specifically in the casual side of the business.

Okay. So it was pretty broad-based. On Precision Sport, you mentioned that the nine millimeter inventory liquidation. Is that done? Or is that continuing here in Q1?

No, that's done, that's done. And that was that. We took advantage of the popularity of nine millimeter and two to three in 2021, and thought it would carry over some in 2022. In 2022, the demand was really around the centerfire hunt and precision. And that's where we chased through all of 2023 and are still chasing into 2023.

Got it. Got it. And one last one for me. Vista, as you know, is splitting up into two companies, sporting and outdoor products. Do you anticipate any change in your relationship with the sporting side?

No. We believe we have very good relationships with Federal and the team, Jason and all the way down. We are partners on both sides of -- we supply bullets both from Sierra and Barnes to Federal, both for commercial loading as well as their OEM contracts, and their generous enough to help us with cases and primers.

Okay. Great. Thank you.

Thank you. Our next question comes from the line of Ryan Sundby with William Blair. Please Proceed.

Hi. Thanks for the questions, Maybe a follow-up on Joe's first question there around inventory by category. John, you've got a pretty unique portfolio, and that you've got warm and cold seasonal offerings. Are you seeing any difference in the way retailers are managing or behaving in kind of an end category and active season category like ski and something that will be in demand later in the year?

Yes. I think what we find is that the specialty level where they chase on a weekly basis, they're able to chase whatever the latest, greatest weather trend is. When you have larger accounts who have a normal seasonal cadence, right, it's a little more difficult to chase open-to-buys in those categories because they already have prescribed bookings going out, right? And we pull off of those with trims, but they anticipate certain seasonal and activity trends shifting in their business. And we've seen that impacted in this space, right? Winter that comes later, but is much bigger, longer, or big in the Rockies, but warm and dry in New England, for example, or whatever, makes that difficult for them to chase.

Got it. That's helpful. And then John, you cut out a few positives around demand, whether it be passive currency, 15% in Europe or the D2C outdoor growth of 19%. Is that more reflective of kind of the true underlying demand or POS you're seeing out there? Just help us kind of understand that delta has given some of the dislocation that's happening from the inventory management.

Yes, very astute on that. That's one of the -- obviously, when we look at the year as a whole, there are areas we were form that we couldn't accelerate the business as we had previously hoped and some of it not in our control, which we talk about, whether it's air ship and supply chain or it's FX headwinds or whatever. But as you've caught on, the true demand for the brand typically shows up in key growth categories or it shows up in key growth geographies, which we're seeing in Europe and ICD or it shows up in key growth channels, which could be direct to consumer, it could be specialty. And when you see the mix, the mix gives you a sense of, as you're saying, what is really the demand for the brand today versus the marketplace. And that's why, albeit we're guiding conservatively because we're going to have to in 2023 chase certain channels, certain geographies, certain product lines, right, even certain brands or segments and we will do so, and that's our commitment to it, it won't be an easy layup that every category, every brand, every channel, every geography sees the same upside, right? And that's going to be the challenge for every brand in 2023.

All right. Thanks for the questions.

Thank you. Our next question comes from the line of Matt Koranda with Roth MKM. Your line is now open..

Hi, guys. Good afternoon. So just wanted to spin back to the guidance one more time, just to make sure I understand. So I mean the simple take for me, you're guiding revenue lower by about $30 million, just a tad less than that. EBITDA almost shrinks by about three And I think that implies that you expect some margin improvement, but there's going to be some puts and takes underneath the surface from a segment level, and it feels a little bit like maybe we're relying on a bit more contribution from the Precision Sports segment, just given that higher margin. And so that mix shift should be helpful. Am I thinking about that in the right way? And then are there other areas? You did talk about 100 bps of gross margin improvement. But where do we see, I guess, opportunity to cut on the SG&A front? Because it sounds like the guide also implies a bit of SG&A cut as well.

We're not talking about cutting a lot of SG&A. I mean, there's a few opportunities perhaps maybe in the Adventure segment. But year-over-year, the SG&A from 2021 to 2022 was actually down at the Outdoor and Precision Sports business. So I mean SG&A is pretty tight. We spent back half of last year focused on expense control and generating cash and rightsizing inventory. We're not going to get into the details of where we -- my comments around -- Matt, around where we see that from a segment perspective or there more opportunity or less opportunity for this segment or that segment. We're going to lean -- we think -- we've made investments. All three of them, like I said, have different headwinds, different tailwinds. We're going to lean into that segment where we see -- where we can achieve the growth, right? And with the difficult environment today, whether that's the consumer or the macro interest rates because interest rates do inflate a bigger impact, especially in Australia because of the way their financing works down there. So we're going to lean in where the opportunity is. And we're only 60 days away from reporting Q1 again. So we'll talk. We'll have more to say in 60 days.

We'll say, Matt... Q - Matt Koranda And on the...

Positivity from increases [indiscernible] to be as much a headwind as it was 2022. We don't anticipate having to experience as much air freight. So all those things being positive to the overall EBITDA.

I think -- I'm sorry, John, that's a great point. The FX in the airfreight, right, the freight's behind us, right, that -- for the second half of 2023. And we've seen those container and shipping costs normalize [ and yet ] the FX is built in. I said we were expecting about $2 million headwind compared to last year. But compared to last year, FX overall was a $9 million headwind. Q - Matt Koranda Okay. Got it. Very helpful. On Precision Sport, just wanted a little bit more detail. You mentioned the onetime sale, bulk sale, [ 9 million, ] just what was the EBITDA headwind from that in the fourth quarter, Mike? And then is there any more sort of large amount of loaded ammo inventory that you could be sitting on that you can monetize over the next quarter or 2 that we should be factoring into sort of how we think about the first half of the year?

Well, that's -- we'll that one. We don't have any pistol and revolver ammo large amounts of that, right? John's prepared remarks, we're really leaning into the centerfire rifle, which is what Barnes and Sierra really -- that's really where they play. We were opportunistic in '21 when we did sell some of this pistol and revolver 9-millimeter stuff. We have a couple $3 million of 223 ammo, and that's about it. What I'll say is slower moving stuff. But from a margin perspective, we sold it at cost. So it was a pretty significant impact. That's why margin of 23% for the segment was -- that's the main driver, right, in that we don't expect that to continue. We expect that profitability of the business to bounce back to that 30% to 35% range that we've talked about, our Precision Sports business performing at.

Okay. Great. I just want to sneak one more in on the Adventure segment, if I could. The -- it seems like the issue in that business, especially in Rhino-Rack, has just been channel inventory over the last couple of quarters. Just any update on sort of where you think channel inventory sits? How long do you think it will take to kind of work through over the next couple of quarters? It sounds like some nice developments on the distribution front in North America. How does that play into your growth expectations and maybe just the progression of the revenue for the year in Adventure?

I would say, Matt, that there are two headwinds that we faced, both in Australia and in North America in 2022 that we didn't account as aggressively for. One was the inventory hangover. And the second was really about the new vehicles. And the two are similar, i.e., we expect, typically, 10% to 15% a year type of growth through new product introductions associated with new vehicle launches. And when the vehicles get delayed, whether it's at the Polaris OEM level or it's at the consumer not being able to buy an F-150 or whatever, that has an impact. Now I anticipate -- I think that the impact of the inventories were really heavy in three and four, Q3 and Q4, and rolled over a little bit into Q1. I think as we come into the spring-summer, we anticipate those inventories to get to minimal levels and the business start to see a pickup.

Got you. Thank you guys. Thank you.

Thank you. Our next question comes from the line of Mark Smith with Lake Street. Please proceed.

I wanted to just dig in a little bit more on Precision here for a minute. We've seen a slowdown in 9 millimeter in .223, 556 as well. Are you starting to see some of the beginnings of maybe some slowdown or normalization in the remainder of centerfire rifle, especially as we start to see channel inventory fill up a little better?

Are you -- and your question is, you're seeing that or are you asking..

Yes, asking, are you starting to see any signs of maybe some slowdown in demand, maybe if you speak to what you do in backlog of orders [indiscernible]?

Yes. So we came out of SHOT Show the two trends we saw and continue to hear from both the OEM partners, which is a significant portion of our business, as you're aware, which is loading for either military or law enforcement under contract, or even the commercial side, is continued demand for what we call the big 8 cartridges, which start with a 2 70 and go all the way to 3 0 8s and everything in between. And then for us, the big demand around things like 3 3 8s from a global international conflict perspective. And so as we said in the prepared remarks, we're going to over-index into those products, channels, geographies where the demand is still accelerating and we don't see a slowdown in centerfire rifle. But again, it's caveated by how many shell cases we can acquire as fast as we need them. Our order book is back up to the demand levels we saw coming out of Q3 and Q4. So we're very positive about that. And I think, again, the Super Fan nature of Sierra and Barnes is that we have a unique positioning in the market. And it's super difficult to replace those 2 brands and what they offer in product.

Okay. And then can you talk about any commodity pressures or easing within Precision? And also, are you starting to see any better availability in brass casings or primers or any other components for loaded ammo?

So that message is the same, right? The sourcing of components, specifically the case is, Mark, is critical. That is the wildcard. That store is no different than it's been throughout 2022, right? The more cases we can source, the more conversion of bullets that we can convert over to ammo, right. That's the wild card, right? The demand for the centerfire rifle is seeing strong, as John just alluded to, because of the big eight calibers that we're focusing on. And we're not focusing on pistol and revolver, with nine millimeter. With regards to commodities, copper is about $4 a ton on the LME right now, and that's right around our where we'd expect it to be from a standard standpoint. So we don't see a big headwind or tailwind either way right now from a commodity [indiscernible].

Okay. And the last one, I just wanted to dig into just apparel and footwear. And sorry that I think I missed it. Can you give maybe the growth numbers again that you saw for the full year in those segments or anything else that you can kind of quantify for sales and the strength that we're seeing there.

Yes. We had 31% growth for apparel for the year, 15% in the quarter. We continue to chase demand and growth in footwear, and we don't see either of those categories slowing down in 2023. Obviously, they're not the predominance of our business. But I think even more exciting is the level of apparel growth we saw even through our D2C. D2C was up, and apparel was up even more than our D2C growth. So we continue to see strong interest and strong demand for these new categories.

Excellent. Thank you.

Our next question comes from the line of Linda Bolton-Weiser with D.A. Davidson. Please proceed.

Yes. Hi. So I think that when you were talking about your expectations for inventory, your own inventory at the end of the year, I thought you had said something like $143 million or so. So you got really close to that, but it was still a little bit higher. So I'm just trying to kind of marry that thought with the idea that you had this Precision Sport inventory reduction that impacted gross margin. So was there some other inventory reduction that you had hoped you would do that didn't quite get done in the fourth quarter? Or like, I mean, why wasn't inventory performance even more -- why wasn't it even lower, I guess, at the end of the year?

Linda, good question. I think -- and it's a good observation. Inventory at Outdoor is a little higher than we had hoped for against directly tied into the fact that North American retail, our wholesale partners, aren't taking as much, right? And so we have a little more inventory on hand than we hope to there. But we're working through that. That's a priority here, as I mentioned in the prepared remarks.

And through Adventure as well, Linda, right? I mean, when you look at the overall businesses, we didn't expect to see the headwinds in either Outdoor or Adventure that we experienced.

They're a little closer. John is correct, but they're a little closer to the target, right? And the miss, as you're pointing out, it's a little -- a little stronger at Outdoor.

So I mean, I know that this is not the same channel as what you're supplying into. But I mean, when you look at like Walmart, for example, I think their inventory in the most recent quarter was actually flat year-over-year. Like they've declared the inventory reductions kind of completed. So is there just something different going on among your retail customers that's so different from, say, a Walmart? Like can you just like talk about it? Is your inventory up still year-over-year but just up less at retail? Or can you give us more color on that?

Smart. I would say that our retailers aren't exactly similar to Walmart, but I think they would all tell you that over the last three to six months, they have successfully moved down their inventory towards their targets and their new open to buys. And that's why, as we said in the -- looking into the future, we can't tell you by exactly every channel, every geography, but we expect the businesses to see growth now that the inventories have come down, right? And that was -- that's what impacted Q4 so much was big retailers using -- trying to manage every ounce of inventory at the cost of open to buy.

So you see that growth in second quarter or not until third quarter 2023?

I think we expect it to start accelerating in the second quarter, but we do think that the second half of the year will be stronger .

That's correct.

Okay. All right. Thanks very much.

Great. Thanks Linda.

Thank you. Our next question comes from the line of Jim Duffy with Stifel. Please proceed.

Thanks. Hi, John. A quick one on the cash flow. Mike, what's the gap between the $60 million EBITDA and the $30 million to $40 million cash flow guide? I guess I'm surprised you don't see working capital opportunity in 2023.

We do see some working capital next year, though we're going to be a higher tax -- cash taxpayer, right? We only have $18 million of NOL left, right? We utilized over $40 million this year. So that's the main driver.

Okay. And then next question, I guess, for you, John. With Neil coming on board, you spoke to where he's going to focus his efforts with the Black Diamond brand. Maybe you could talk about what the incremental bandwidth that provides to you and Aaron, what are the areas that are going to attract your attention and where do you see the opportunity for greatest return on your incremental bandwidth?

Yes. I think as we look to 2023 and beyond, this being a year that we're not as focused on M&A, which obviously was an area of our bandwidth in the past, is really accelerating the business, new NPI Innovate and Accelerate side along with the operational plans and strategic planning of accelerating the other categories, which we still believe have strong growth.

Okay. Great. Thank you.

Thank you. [Operator Instructions] Our next question is a follow-up from Alex Perry with Bank of America. Please proceed.

Hi. Sorry about the third question here, but I just wanted to ask. So the guidance implies a sort of reacceleration revenue from, call it, down 16% in 1Q to down 6% for the year. I know you have sort of the open-to-buy impacting BD in the first quarter. Are retailers 2H orders up year-over-year for Black Diamond based on sort of your read on the fall/winter 2023 order book, which is sort of causing the implied acceleration in revenue as you move through the year?

Yes. Great question, Alex. So yes, we're able to look forward and see a strong order book for both spring 2023 as well as fall 2023. Obviously, fall is a higher percentage of our business. It's more like a 55 to 45 as a mix. And then as we know the acceleration of D2C and even our flagship retail, retail does 75% of this business in the back half of the year and 50% in Q4. And we see that often in our direct-to-consumer businesses as well.

Got you. So the fall/winter 2023 order book should be up against this year? Is that sort of right?

Correct. Yes, correct. And obviously, in line with this anticipation that the open-to-buy or inventory overhang that we have seen at our key accounts will not be the case in Q3 and Q4 of this year.

So the 1Q is just 2022 product them not chasing sort of winter 2022 product. It's not necessarily indicative of core momentum or demand for your product. It's more of a factor of that which you see that easy as you move through the year?

Correct. And we believe that we've had a long winter, as you all know, I mean, we get more snow again this week. But as the season changes over from what was the season in Q3 and Q4 and into spring, summer, you're probably now really April as opposed to February or March. We will see that shift of activity accelerate key categories.

So the spring 2023 is up as well. That's just the...

Yes.

Okay. All right. Perfect. Thank you.

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

Thank you. We thank everyone for listening into today's call, and appreciate all your questions, and we look forward to speaking with you when we report our first quarter 2023 results. Thanks again, everyone. Be safe.

Ladies and gentlemen, this does conclude today's teleconference. You may now disconnect your lines at this time. Thank you for your participation. The conference will begin shortly