Clarus Corporation Aktie

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, 2026. Joining us today are Clarus Corporation's Executive Chairman, Warren Kanders; CFO, Michael Yates, President of Black Diamond Equipment, Neil Fiske; and the company's External Director of Investor Relations, Matt Berkowitz. Following the remarks, we'll open the call for your questions.

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. Matt, please go ahead.

Thank you. Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements, and we will 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 our financial condition at 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 starting at 7:00 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 claruscorp.com.

Now I'd like to turn the call over to Clarus' Executive Chairman of Warren Kanders.

Good afternoon, and thank you for joining Clarus' earnings call to review our results for the second quarter. I am joined today by our CFO, Mike Yates, who will provide a financial update including inventory segment performance as well as Neil Fiske, who will discuss our Outdoor segment.

Overall, our second quarter performance reflected continued operational execution and simplification. Mike will discuss the IEEPA tariff refund, which we recognized during the quarter, which lifted earnings and gross margin. Excluding that benefit, our underlying results across both Outdoor and Adventure were solid and reflect progress across our overall earnings profile.

At Outdoor, second quarter revenue, margin and EBITDA all increased year-over-year, evidence of the team's hard work concentrating inventory on our highest-volume, highest-margin products. Our big 3 outdoor categories of Mountain, Climb and Apparel drove 95% of total segment revenues.

Apparel is a key pillar of our long-term strategy. Our product continues to resonate with the consumer as we delivered Apparel sales growth for the fifth consecutive quarter. With cleaner inventory, less discounting and a shift toward a full price model, we are well positioned to drive improved profitability at Outdoor.

At Adventure, we've improved the organizational shape to capture more margin as the business rescales. While second quarter sales did not meet our expectations, ongoing pricing actions and cost controls have paid off. Second quarter gross margin improved 420 basis points year-over-year.

We continue to balance rigorous cost discipline with targeted investments. During the second quarter, we completed the bolt-on acquisition of certain assets and liabilities of ONWRD supply company, enhancing our portfolio mix with complementary high-margin in-vehicle accessories.

I would also like to highlight that we executed share repurchases during the second quarter under our $50 million buyback program. We bought back 153,331 shares for approximately $400,000 or $2.92 per share.

We believe these repurchases represented an attractive use of capital. We maintain approximately $42.4 million under our program, and we'll continue to assess buyback opportunities while preserving financial strength and flexibility to make strategic investments.

Turning to guidance. Despite continued geopolitical and macro uncertainty across the global outdoor market, we still expect Clarus full year revenue to fall within our previously provided guidance range. Including the IEEPA refund and certain other factors, Mike will detail shortly, we now expect 20 adjusted EBITDA to range between $12 million and $13 million.

Before passing it over to Neil, I will briefly touch on the review of strategic alternatives we announced in May. We continue to explore a range of potential actions aimed at unlocking value more effectively than the market is currently recognizing today. We have retained Jefferies as our financial adviser to assist in this process. Potential alternatives could include the sale of all or part of the business or other strategic or financial transactions involving the company.

Please note that we will not be answering any questions or commenting further on our strategic review process until additional disclosure is appropriate or required.

With that, thank you for being with us today, and I will turn the call over to Neil Fiske.

Thanks, Warren. Turning to Slide 6. I will review the Outdoor segment's second quarter performance and our expectations heading into the remainder of 2026. Overall, Black Diamond had a strong Q2 with revenue margin and EBITDA, all well ahead of prior year as our strategy of simplification, focus and business free shaping continues to pay off.

Note, my remarks exclude our divested PIEPS business from the prior year to provide more comparable results.

Total revenues for the quarter were up 9.1%, reflecting growth in all regions and across our major categories. Our big 3 segments of Mountain, Climb and Apparel drove 95% of total revenues and grew 9.5%. The takeaway is clear. The core of our business is healthy and growing.

For the quarter, Mountain was ahead 7.4% versus prior year. The Climb segment posted a very strong 13.5% growth rate. Apparel was up 7.4% for the quarter. Notably, for Apparel, in-line sales were had a robust 22.9% while clearance and discontinued merchandise was down 61%, showing a much healthier full-price business and fewer markdowns. We're seeing excellent response and building momentum for our revamped Apparel offering.

Gross margin is also a good story for the quarter, although a more complicated one with the ever-changing situation on tariffs. We received $6.1 million in tariff prefunds a which looked at our gross margins to 52.0% versus 34.9% in the prior year. Even without the tariff refund, however, gross margins improved 160 basis points to 36.5% compared to the prior-year period.

The improvement reflects the progress we've made in the quality of our inventory, our focus on our most profitable categories, less discounting and a more full-price premium business model.

Second quarter selling, general and administrative expenses were $13.8 million compared to $13.7 million in the same year-ago quarter. Second quarter 2026 expenses reflect higher marketing costs. Other operating expenses for the quarter included a benefit of $1.4 million for CPSC legal adjustments, which Mike will address shortly.

Adjusted EBITDA for the second quarter came in at $9.0 million. Putting aside the tariff refund and the CPSC legal adjustment, adjusted EBITDA for the quarter would have been $1.5 million compared to $0.3 million in the prior-year period.

Inventory ended the quarter at $72.2 million, up 12% versus the prior-year period. The increase reflects the growth of the business and the [ build ] for what we expect to be a strong second half.

Now turning to results by region and channel. North America wholesale grew 0.5% on top of 4.8% growth in Q1. North America digital direct-to-consumer, which represents 17.7% of the region's revenue, was up 5.7% on the top line, with much healthier margins and less discounting.

EU wholesale was up 25.3% in dollars and 16.7% in constant currency. EU digital D2C, which represents 5.3% of the region's revenue, was down 10.6% in constant currency as we pulled back on promotional activity and less profitable transactions. Our international distributor channel was up 10.6% for the quarter.

In sum, we are pleased with our results in Q2 and for the first half. Our strategy is paying off. Execution continues to improve, product and marketing are resonating with the consumer. Our relationships in the wholesale channel have never been stronger. Our big 3 categories have real momentum. We feel confident going into the second half, mindful that the conflict in the Middle East remains a major geopolitical and business risk. I'd like to congratulate and thank our teams around the world for all their hard work, passion and skill in driving these results.

With that, I'll turn it over to CFO, Mike Yates.

Thank you, Neil, and good afternoon, everyone. On today's call, I'll provide an update on the Adventure segment and then conclude with a summary of our Q2 financial results, followed by the question-and-answer session.

Starting with Adventure, as expected, our top line results in Q2 were pressured by a challenging market in both North America and Australia. In North America, initiatives to reach new customers have not met expectations. The one positive in the North American market remains the [ Rocky bounce ] business, where we continue to see solid demand. With a new product introduction, we expect [ Rocky Mount ] to remain on a growth trajectory.

In Australia, where we had previously noted a difficult outlook, sales were better than forecast despite consumers dealing with higher fuel prices and elevated interest rates. Rocky Mount continues to be a bright spot in Australia, showing increased traction.

In Europe and Asia, brand penetration is also improving as we delivered double-digit growth in France, Germany, the U.K. and Japan. Although that strength was not sufficient to offset weaknesses in our larger markets, an important point to make about the softer sales is that we believe that the decline has been market-driven rather than share driven.

Against this backdrop, we continue to focus on what we can control, driving margin expansion, maintaining cost discipline and improving operational efficiency. Gross margin hit 41.5% in Q2, up 420 basis points compared to the prior period. Our SG&A continues to be managed tightly and was down $0.6 million compared to the prior period. Specifically, headcount is down 20% and the cost base is 11% lighter. The business is above breakeven on materially lower revenue.

As Warren mentioned, we acquired certain assets and liabilities of ONWRD Supply Co., a small in-vehicle accessory business that enhances our portfolio mix. These are high-margin products and immediately add new, exciting product SKUs to our offering. We are committed to investing with discipline and building for the next cycle.

The first of a new series of [ refrac legs ] launches in September, alongside ONWRD in Australia in time for spring/summer season. And our recently launched MAXTRAX integrated shovel has outsold forecast in every market. We will be presenting at [ Automechanika and SEMA ] this fall, and we are bringing an exciting assortment of new products across all 4 brands for the Northern Hemisphere spring 2027 season.

We expect a double-digit growth in Europe and Asia to accelerate further with OEM interest from multiple European carmakers. We continue to take decisive actions on the cost side Well, we rebase our product initiatives to drive newness and growth.

We have expanded Rocky Mount via a new U.S. and Australian accounts, increased Rhino Rack and MAXTRAX brand penetration across Asia, Europe and the U.K. and begun to introduce ONWRD to the broader market. We see a path to maintaining the margin improvement realized in Q2 moving forward despite moderate sales expectations for the remainder of the year at Adventure.

With that, let me now turn to the consolidated and segment financial review on Slide 8. Consolidated Clarus second quarter sales were $56.2 million compared to $55.2 million in the second quarter of the prior year. Sales were up 1.6% compared to the prior year. On a reported basis, from a segment perspective, Outdoor was up 8.5% and Adventure was down 11.9%, as Neil mentioned, sales were up in nearly every market and the weakness at Adventure was primarily in the North American and Australian wholesale markets for Rhino Rack.

The consolidated reported gross margin rate in the second quarter was 48.9% compared to 35.6% in the prior-year quarter. We received that IEEPA tariff refunds associated with the Outdoor segment during the quarter.

Specifically, Outdoor received a total of $6.4 million, which represented $6.1 million of refunds of tariffs previously paid and $3 million of interest income. The $6.1 million of tariff refunds were recorded as a reduction in the cost of goods sold and the interest income is recorded in other income and expense in our income statement.

From a segment perspective, gross margin was 52% in outdoor and 41.5% at Adventure. Excluding the tariff refunds, Outdoors gross margin would have been 36.5% while the consolidated Clarus gross margin would have been 38%. Gross margin improvements, excluding the tariffs were attributable to price capture and favorable product mix at both the Outdoor and Adventure segments.

Second quarter selling, general and administrative expenses were $24.3 million compared to $26.9 million in the same year-ago quarter. Second quarter 2026 expenses reflect lower marketing costs and other expense reduction initiatives at Adventure to manage cost and the removal of peaks due to its sale last year, partially offset by higher marketing spend at Outdoor.

Adjusted EBITDA in the second quarter was $7.6 million or an adjusted EBITDA margin of 13.6%. The second quarter adjusted EBITDA by segment was $0.5 million at Adventure and $9 million at Outdoor. Adjusted corporate costs were $1.9 million in the second quarter.

Let me shift over to liquidity in the balance sheet. Free cash flow, defined as net cash provided by operating activities less capital expenditures for the second quarter 2026, was $0.6 million compared to a $11.3 million outflow for the 3 months ended June 30, 2025. At June 30, 2026, total debt was zero. At June 30, 2026, cash and cash equivalents were $28.9 million compared to $36.7 million at December 31, 2025. As Warren mentioned, we repurchased 153,331 shares of common stock during the quarter for approximately $448,000 or $2.92 per share.

With that, let me move on to our 2026 outlook. I'm on Slide 9. We continue to expect fiscal year 2026 sales to be between $245 million and $255 million. We now expect full year revenue at Adventure to be approximately $68 million and full year Outdoor revenue to be approximately $182 million.

We have revised our full year 2026 adjusted EBITDA to be in the range of $12 million to $13 million or an adjusted EBIT margin up 5% at the midpoint of our revenue and adjusted EBITDA ranges.

The revision to our full year adjusted EBITDA guidance compared to our prior guidance of $3 million to $5 million is as follows: Assuming the midpoint of the 2 guides, the primary difference between the $4 million and the $12.5 million is the benefit of the $6 million of tariff refunds and the elimination of $2 million of estimated legal expenses that will not be incurred during the remainder of the year.

As a reminder, last quarter, we assumed $1 million a quarter for each quarter for the remainder of the year. We incurred $1.2 million of legal expenses in the second quarter, slightly higher than expected. But we now expect to avoid these types of legal expenses in the back half of the year. I will explain further in a moment.

Turning to the third quarter. Sales are expected to range between $66 million and $68 million and adjusted EBITDA is expected to be approximately $3 million in the third quarter of 2026.

Now I'd like to discuss our legal update. Specifically, I will cover updates with regards to the company's Section 16B litigation and the CPSC and DoJ matters involving Black Diamond Equipment Limited,

The company's action against [ half trading LLC]; and Mr. Arshad for disgorgement of short-swing profits under Section 16B the District Court granted summary judgment to the defendants on March 14, 2025, based on the market-making exemption under 16B. The company's timely appealed, and the appeal was argued before the second circuit on February 12, 2026. The SEC has declined the court's invitation to submit an [ Amicus ] brief, and the company is awaiting the second Circuit Court's decision.

The company's Section 16B action and gets captured management and its related entities and controlling person was resolved under February 24, 2026 settlement agreement pursuant to which [ Caption ] paid the company and undisclosed some in exchange for among other things, mutual releases and dismissal of the claims with prejudice without any mission or liability of [indiscernible].

The related stockholder action was dismissed without prejudice on February 10, 2026, as duplicative of the company's direction. On April 11, 2026, the stockholders' attorney filed and action against the company in the New York State Supreme Court seeking legal fees. The company intends to defend that action, argue that any recoverable fees are limited to services performed before the company filed its direct action.

With respect to the CPSC and DoJ matters, the CPSC previously referred to the DoJ the unresolved matters concerning Black Diamond's reporting obligations relating to certain [ Avalanche ] transceivers.

On June 4, 2026, the DoJ advised the company and Black Diamond that it had closed its criminal instigation as to them. On the same date, the Department of Justice separately advised John C. Walbrook and [ Rick Van ] that it had also closed the investigation as to each of them. The company has heard nothing further from the CPSC or the DOJ regarding these matters.

In addition, on January 28, 2026, the CPSC closed without further action is separate investigation into whether Black Diamond sold products subject to a recall. As such, we expect to save on legal expenses in the back half of the year per my comments around the 2026 guidance.

In closing, we are focused on unlocking the intrinsic value of our Outdoor and Adventure segments and maximizing long-term value for our shareholders. With a more focused business, a simplified operating structure and a debt-free balance sheet, we believe we are well positioned to execute the next phase of our transformation.

At this point, operator, we're ready to take questions.

[Operator Instructions] Our first question comes from Laurent Vasilescu with BNP Paribas.

I was curious to know about in the context of a potentially very warm winter, what your conversations are like with your retail partners, if you're having those discussions with potentially trimming any wholesale orders? Or is that not in the cards just yet? .

Well, right. You're referring to the coming winter, I assume, right -- want to handle that. Yes, Neil, why don't you go ahead?

Sure. I would say, overall, there may be a little bit of a dampening effect from last year, but not a major concern for us at this time. We feel good about our fall order book and the sales outlook for the second half and feel good about our product lineup.

So I'd say to the extent there is an impact. It's been relatively modest and overcome by the strength of our product as we're heading into the back half.

Very, very clear. And then I would love to hear more about how we should think about modeling potentially 3Q, 4Q gross margins. There's a lot of noise, right, with your tariff rates. And so first of all, just curious to know maybe if you guys can maybe unpack that a little bit. as we think about this year with the new Section 301.

Yes, Laurent, I can help you with that. In my prepared remarks around the Adventure, I mentioned, that the 41.5% margins that we realized here in the second quarter, we're doing everything we can to maintain those. So I think it's reasonable to kind of hold around that 40% margin at Adventure and at Black Diamond.

When you back out all the tariffs and the impact that we talked about there, the adjusted margin, not that we published an adjusted margin. But if you back out the tariffs, it was like 36.5%. I think in the back half of the year, you'll see that even a little higher I think you could model 37%, 37.5%

Very helpful. That's -- and then the last question here is really around inflation in terms of raw materials. Just love to get your take. I mean we've heard some other sporting goods names to talk about potential inflation in raw materials. Curious to get your take on how we should think about -- I know you're not guiding for fiscal year '27 yet, but how do we think about the context of your conversations with your upstream suppliers? That would be very helpful. .

Neil, do you want to talk about our factory costs and the impact the wars had on driving inflation?

Yes, it's a great question, and it's something we're we're watching very closely and are concerned about. I'd say, at this point, we've seen some cost factor inflation coming through for spring '27. But frankly, I think a lot of people are still watching to see if this conflict in the Middle East is prolonged or oil will start flowing again.

And I don't think we're going to know the picture on '27 for another couple of months. And it all depends, of course, on the situation starting to normalize again. But there has been some inflationary impact already. I think the potential that we all feared when this conflict broke out hasn't yet fully materialized, but everybody's bought shot in waiting.

I'm showing no further questions at this time. I'd now like to turn it back to Mike Yates for closing remarks. .

Thank you very much. I want to thank everyone for attending the call this afternoon and your continued support and interest in Clarus. We look forward to updating you on our results again next quarter. Thank you again. .

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

Hello, and welcome to the Clarus Corporation Annual Meeting of Stockholders. Please note that this meeting is being recorded. [Operator Instructions]. The meeting is about to begin.

Welcome to Clarus Corporation's 2026 Annual Meeting of Stockholders. Today's annual meeting is being broadcast live over the Internet. I would like to turn today's webcast over to Mr. Warren B. Kanders, Executive Chairman of the Board of Directors of Clarus Corporation. Please go ahead, Mr. Kanders.

I am Warren B. Kanders, Executive Chairman of the Board of Directors of Clarus Corporation, and I will act as Chairman of this annual meeting of the company's stockholders. I would like to introduce to you the other directors of the company participating in this annual meeting, Nicholas Sokolow, Susan Ottmann, Roger Werner, Mark M. Besca, Directors of the company.

Also present at this meeting by means of remote communication via live webcast are Michael J. Yates, Chief Financial Officer, Secretary and Treasurer of the company; and Wes Yeomans of Deloitte & Touche LLP, the company's independent auditors for the year ended December 31, 2025. Mr. Yates will act as Secretary of the meeting. Mr. Yates, would you please present the notice of annual meeting?

The Notice of Annual Meeting dated April 24, 2026, was mailed on or about April 24, 2026, to all of the stockholders of record as of the close of business on April 7, 2026, the record date for this meeting.

Is there a motion to order the notice of annual meeting filed with the records of this meeting?

I move that the notice of annual meeting be filed with the minutes of this meeting.

I second the motion.

All in favor, say aye.

Aye.

There being no objection, the notice of annual meeting is ordered filed with the minutes of this meeting. Will the Secretary present the certificate of mailing of the Notice of Annual Meeting?

The certificate of mailing indicates that a copy of the notice of the annual meeting, proxy statement, form of proxy card and the 2025 annual report were duly mailed to each stockholder of record on or about April 24, 2026.

The Secretary is directed to file the certificate of mailing with the minutes of this meeting.

Mr. Yates, will you please present a certified list of stockholders of the company?

This is a certified copy of the list of stockholders of the company.

I will entertain a motion to dispense with the calling of the role.

I move that the calling of the role be dispensed with.

I second that motion.

All in favor, please say aye.

Aye.

Hearing no objection, it is ordered that the calling of the role be dispensed with. In order to save time, I will entertain a motion to dispense with the reading of the minutes of the last Annual Meeting of Stockholders.

I move that the reading of the minutes of the last Annual Meeting of Stockholders be dispensed with.

I second that motion.

All in favor, please say aye.

Aye.

Hearing no objection, it is ordered that the meeting -- the reading of the minutes of the last meeting of stockholders be waived. Under the powers granted to me by the bylaws of the company, I hereby designate Mr. Jonathan Zalkin as Inspector of Elections to count the votes presented to the meeting or by proxy. I've requested the Inspector of Elections to submit his oath as Inspector and direct the Secretary to attach the same to the minutes of the meeting.

Copies of the 2025 annual report to stockholders have already been sent to all stockholders, and I therefore ask for a motion to dispense with the reading of the annual report and to order that it be accepted and filed.

I move that the reading of the annual report be dispensed with and that the annual report be accepted and filed with the minutes of this meeting.

I second the motion.

Is there any objection? There being no objection, it is ordered that the reading of the annual report be waived and that the annual report be accepted and filed with the minutes of this meeting.

The first item of business to be acted on at this meeting is the election of directors for the coming year. The proxy statement named as the directors to be elected at this meeting, 5 directors to hold office until the next Annual Meeting of Stockholders and until his or her successor shall have been duly elected and qualified.

Will the Chairman of the Board's Nominating Corporate Governance Committee submit the names of the nominees of the Board of Directors for election as directors?

On behalf of the Board's Nominating Corporate Governance Committee, I nominate the following persons to be elected as directors of the company to hold office until the next Annual Meeting of Stockholders and until his or her successors shall be duly elected and qualified: Warrant B Kanders, Nicholas Sokolow, Susan Ottmann, Roger Werner, Mark M. Besca.

I second the motion.

I order the nominations for the election of directors are closed. We will now proceed with the next order of business, which is to consider and vote upon an advisory resolution on executive compensation. The Board of Directors recommends that you vote for the approval of the advisory resolution on executive compensation.

We will now proceed with the next order of business, which is to consider and vote upon the ratification of the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2026. The Board of Directors recommends that you vote for ratification of the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2026.

Will any stockholder who desires to vote on the matters to be voted upon at the meeting, please do so now by accessing the annual meeting web page and following the on-screen instructions. Please note that you must enter the control number found on your proxy card that you previously received.

[Voting]

The polls are now closed for each of the following matters voted upon at the meeting, the election of directors, the approval of an advisory resolution on executive compensation and the ratification of Deloitte & Touche LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2026.

Will the Secretary report on how many stockholders are present or by proxy?

There are now present or represented by proxy holders of 32,544,653 shares of common stock out of a total of 38,441,486 shares of common stock issued and outstanding as of the record date. This constitutes more than a majority of the shares of the company's issued and outstanding common stock entitled to vote at this meeting, and therefore, a quorum is present.

I understand that the Inspector of Elections has tabulated the votes. Will the inspector of elections please report the results?

A plurality of the votes cast at this meeting has voted for the election of each of the 5 nominees of the Board of Directors. Accordingly, Mr. Kanders, Sokolow, Werner, Besca and Ms. Ottmann have been duly elected as directors of the company to serve until the next Annual Meeting of Stockholders and until his or her successor shall be duly elected or qualified.

Holders of shares of common stock of the company constituting a majority of the shares of common stock present or represented by proxy at this meeting with respect to such proposal and entitled to vote thereon voted to approve the advisory resolution on executive compensation, and accordingly, such proposal was duly adopted.

The holders of shares of common stock of the company constituting a majority of the shares of common stock present or represented by proxy at this meeting with respect to such proposal and entitled to vote thereon voted to ratify the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for the year ending December 31, 2026, and accordingly, such proposal is duly adopted.

That concludes the technical requirements of our meeting. Having concluded the formal business of the meeting, I will now entertain a motion to adjourn the formal portion of the meeting.

I move that the meeting be adjourned.

I second that motion.

All in favor, please say aye.

Aye.

Hearing no objection, the meeting is adjourned. Thank you, ladies and gentlemen, for participating in the annual meeting.

We will now proceed to the question-and-answer session, which will not constitute part of the formal business of the meeting. Should any stockholder wish to submit a question, please click on the questions box to the right of your screen, type your question into the text box, then click the submit button. Please note that in the interest of all stockholders, we will only address those questions that are pertinent to the business of the meeting.

Mike, there are no questions.

Thank you. And thank you to all, and that concludes today's webcast. Operator, you may disconnect at this time.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Thank you.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Clarus Corporation's financial results for the first quarter ended March 31, 2026. Joining us today are Clarus Corporation's Executive Chairman, Warren Kanders; CFO, Mike Yates; President of lap Diamond Equipment, Neil Fiske; and the company's External Director of Investor Relations, Matt [ Berkowitz ]. Following the remarks, we'll open the call for your questions. Before we go further, I would like to turn the call over to Mr. Berkowitz, as you read 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. Matt, please go ahead.

Thank you. Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements, and we will 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. During this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in today's press release and the accompanying presentation.

I'd like to remind everyone this call will be available for replay starting at 7:00 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 claruscorp.com.

Now I'd like to turn the call over to Clarus' Executive Chairman, Warren Kanders.

Good afternoon, and thank you for joining Clarus' Earnings Call to review our results for the first quarter. I am joined today by our Chief Financial Officer, Mike Yates, who will provide a financial update, including Inventure segment performance as well as Neil Fisk, who will discuss our Outdoor segment.

Overall, our first quarter results reflect disciplined execution of our simplification strategy. Despite continued geopolitical and macro uncertainty across the global outdoor market -- we grew revenue and adjusted EBITDA year-over-year and expanded gross margin 240 basis points. Mike and Neil will walk through the details, which reflect the structural actions taken across both segments over the past several quarters.

At Outdoor, the team's work prioritizing Black Diamond's best and most profitable styles continues to pay off. Sales margins and adjusted EBITDA were all up against a difficult backdrop. We continue to improve the quality of our inventory and revenue shifting toward a sustainable full-price model.

Growth in our core big 3 categories, Mountain Klein and apparel, reflects deliberate actions to concentrate inventory on our highest volume, highest margin products. Apparel, a key pillar of our long-term strategy grew 10% year-over-year on a full-price basis in Q1. Turning to Adventure. We delivered solid first quarter results with growth in both -- with growth in both revenue and gross profit.

Sales growth was driven by a favorable wholesale market in Australia for rental rack and MAXTrak. We saw new international customer wins in China, Japan, Scandinavia and the U.K. and we strengthened relationships with rack specialty retailers in North America. We are filling product and price gaps not addressed by competitors.

Counterbalancing these positive developments, we've seen macro, trade and consumer headwinds weighing heavily on Adventure segment results in the back half of the year. In response, we have implemented targeted pricing actions and additional cost controls to protect margins. Building global penetration for our venture brands will take time, but we have a clear framework in place and a pipeline of new products on the horizon.

Before I turn the call over to Mike, I would like to briefly discuss the review of strategic alternatives we announced today. As we had previously stated, we do not believe our current stock varies reflects the sum of the part value of our 2 segments for the long-term potential of our businesses.

The Board is confident in Clarus' future and the undervalue of our iconic brands, which is why we have initiated this review to enhance shareholder value. Potential alternatives include the sale of all or part of the business or other strategic or financial transactions involving the company. We are committed to exploring a range of potential strategic alternatives designed to unlock value more effectively than the market is recognizing today.

We have retained Jefferies LLC as our financial adviser to assist in this process. This review will run in parallel with our continued execution of the simplification strategy. Please note that we will not be answering any questions or commenting further on our strategic review process until further disclosure is appropriate or required.

With that, thank you for being with us today, and I will turn the call over to Neil.

Thanks, Warren. Turning to Slide 6. I will review the Outdoor segment's Q1 performance and our expectations heading into the remainder of 2026. We Overall, we delivered solid results in Q1 with revenue margin and EBITDA, all well ahead of the prior year period as our strategy of simplification, focus and business free shaping continues to pay off. Note my remarks exclude our divested PEEPS business from the prior year to provide more comparable results.

Total revenues for the quarter were up 5.4%. That top line growth number is a blend of our go-forward categories and those that we are exiting, such as binding, lifestyle footwear and Avalon airbags. Importantly, our core go-forward styles and categories grew 7% versus Q1 of last year. Similarly, our big 3 business units, mountain, climb and apparel were up 6.7% versus the prior period and now account for over 90% of total revenue. .

For the quarter, Mountain was ahead by a healthy 7.7% versus prior year. The client segment rebounded nicely with a 6.6% gain. Apparel was up 4.3% as we were lapping the high level of clearance on PFAS inventories from the prior year. Bulk price apparel sales were ahead 10.1%. Cross margins lifted 190 basis points year-over-year, even though Q1 of last year had not yet been impacted by tariffs. The improvement reflects the progress we've made and the quality of our inventory, our focus on our most profitable categories, less discounting and a more full-priced premium business model.

Operating expenses, excluding restructuring, were up 11.6% for the quarter. OpEx for the quarter included $802,000 for CPSC legal costs and $425,000 for consulting work to improve the logistics fulfillment costs and profitability of our European operation.

Stripping out these 2 items, SG&A was up 7.3% versus prior period. Restructuring costs of $793,000 for Q1 reflect the actions taken at the end of 2025 and early 2026 to further streamline our cost structure, including head count reductions, store closure and slimming down our athlete roster.

These restructuring costs have been added back to adjusted EBITDA, but the cost of the Europe consulting project have not. We do not anticipate any further restructuring or consulting costs in 2026. Adjusted EBITDA for the quarter came in at $1.4 million, a 15.2% improvement versus prior period. This includes $802,000 for CPSC legal costs and $425,000 for our Europe consulting project. Inventory ended the quarter at $61.9 million, up 10% versus prior period. This increase reflects the higher cost of tariffs in our base as well as strategic investments we've made in our franchise styles to protect upside growth from strong demand.

Regarding tariffs, we could see some benefit from the new tariff schedule that has been put in place post the Supreme Court ruling. We're mindful that those tariffs are subject to ongoing review and potential changes. At the same time, we are seeing substantial cost pressure from the Iran war and everything from aluminum and other metals to polyester and nylon to printed circuit boards to freight and logistics costs.

At this still uncertain stage, we see these 2 effects lower tariffs and higher factor costs, roughly canceling each other out for the balance of the year. That said, a prolonged conflict would lead to factor price increases that outweigh any gains from lower tariffs. In that case, we would look at price increases beginning in July of 2026 to mitigate any potential margin compression.

Regarding tariff refunds, we have followed the applicable process to claim our tariff IEEPA credit which we estimate to be $6.2 million coming back to Black Diamond subject to approval. Now turning to results by region and channel. North America wholesale grew 4.8%. North America digital D2C, which represents 18.2% of the region's revenue was down 9.7% due to less promotional volume and clearance activity.

EU wholesale was up 16.2% in dollars and 4.9% in constant currency. EU digital D2C, which represents 5.3% of the region's revenue was down 43.6% in constant currency as we pulled back on both promotional activity and less profitable transactions. Our international distributor channel was up 7.9% for the quarter. Looking ahead, we have a strong order book for the second half of the year, which should support growth for the full year 2026 compared to 2025.

The wildcard, of course, is substantial -- is the substantial risk posed by a prolonged Iran war to consumer discretionary spend as well as factor costs, supply chain and deliveries. In the event of an extended conflict we will be forced to raise prices to offset escalating factor cost inflation potentially as soon as the pulse season shipments, which begin in July.

External factors aside, we are pleased with our continued progress on the fundamentals for Black Diamond. This quarter's results show it. I'd again like to thank our teams around the world for their dedication, creativity, focus and skill.

With that, I'll turn it over to our CFO, Mike Yates.

Thank you, Neil, and good afternoon, everyone. On today's call, I'll provide some brief comments on the Adventure segment, and will then conclude with a summary of our first quarter financial results, followed by the Q&A session. .

Let's take a closer look at Adventure. Following multiple quarters of corrective steps, including pricing, resets and further cost controls, our first quarter results reflect incremental progress. Q1 revenues increased 5.9%, driven by strong growth in Australia and new partner relationships in Japan, Scandinavia, China and the U.K. This growth was partially offset by a slow start to the year in the Americas where market softness adversely affected results.

However, we remain excited by the growth opportunity in this region supported by strong long-term fundamentals in a large and growing addressable market of adventure oriented customers across multiple verticals. Notably, adjusted EBITDA at Adventure improved year-over-year, shifting from a loss of $200,000 in the first quarter of 2025 to a profit of $200,000 in the first quarter of 2026.

Gross margin increased by 260 basis points, driven by price capture, customer mix and improved terms. We are positioned going forward to benefit from steps we have taken to streamline our footprint to reduce costs and overhead and improve scalability. Q2 2026 will be our first full quarter with consolidated operations for our MaxTrax and Binola businesses under 1 roof in Australia.

Other Q1 wins include a $600,000 MaxTrax ordered by a large Australian automotive parts and accessories retailer, which will be invoiced in the second quarter. Overall, recent MaxTrax product launches have been well received with sales of the core MK2 board up 22% year-over-year.

Rocky Mounts continues to be a bright spot in the venture segment. in addition to 111 new bike shop placements in the U.S., representing $0.5 million of revenue in the first quarter. We have seen positive signs that the brand is steadily gaining traction in the Australian market with a comprehensive portfolio of root and hitch-mounted bike frac solutions. We are encouraged by our progress reaching new customers in North America, Australia and New Zealand with the Rocky Mount brand.

I'd also like to highlight the success of the price increases we execute across all the brands that became effective in Q1 2026. We saw minimal retailer resistance underscoring the strength of our brands. While the first quarter represented a period of improved profitability year-over-year, the outlook for Adventure segment during the remainder of 2026 is challenging due to geopolitical and macro factors, including a difficult consumer environment in Australia.

Beginning in April of 2026, we receive feedback from several retail accounts, large and small, that they have significantly reduced their demand expectations for the remainder of the year. The Warner ran driving higher energy prices is a major factor behind this decline. Some of our retail partners are indicating a decline of 30% in the Australian market compared to last year.

Consumer sentiment in Australia is negative. Retailer inventory is growing due to the sudden decline in the market. Higher fuel prices and higher interest rates are affecting the Australian consumer and low vehicle sales are driving the expectation of an overall contraction in our core market of Australia and New Zealand.

Against this backdrop, our focus remains squarely on what we can control, driving margin expansion, maintaining cost discipline and improving operational efficiency. While we navigate softer demand, we are taking decisive actions with a clear emphasis on incremental revenue and EBITDA growth.

Key initiatives include U.S. expansion by the new Rocky Mount storefronts, increased RhinoRac and Maxtrack brand penetration across Asia, Europe and the U.K. We see a path to maintain the margin improvement realized in Q1 moving forward despite the challenging top line expected for the remainder of the year at Adventure.

Continued price capture, reduced promotional activity and continued optimization of our customer and product mix and a significant focus on cost control and certain cost-out activities will all be necessary for the remainder of the year in this challenging market environment to achieve our goals.

So with that, let me turn to the consolidated segment financial review. I'm on Slide 8. Consolidated Clarus first quarter sales were $61.9 million compared to $60.4 million in the first quarter of the prior year. The 2.5% increase in total sales was due to favorable wholesale market in Australia for RynoRack and MaxTrac in the Adventure segment, and increases in the global wholesale and independent global distributor revenue for the Outdoor segment.

The increase in outdoor segment was partially offset by lower piece revenue due to its sale last July and lower global direct-to-consumer revenue. The consolidated gross margin rate in the first quarter was 36.8% compared to 34.4% in the prior year quarter. Gross margin benefited by higher volumes and favorable product mix at both Adventure and Outdoor.

As I noted during our last call, gross margin expansion is critical, and we were pleased with the first quarter's performance at both outdoor and adventure. Specifically, Outdoor's actual gross margin for Q1 2026 was 36.0% compared to 33.8% in Q1 of 2025, a 220 basis point improvement. Adventures actual gross margin for Q1 2026 was 38.8% compared to 36.2% in Q1 of 2025, a 260 basis point improvement.

First quarter SG&A expense were $26.6 million compared to $26.6 million in the same year ago quarter. So SG&A was flat. First quarter expense reflects lower marketing costs and other expense reduction initiatives across both segments to manage costs and the removal of peaks due to sale in 2025, offset by higher outside service expenses.

Adjusted EBITDA for the first quarter was a $1.1 million loss or an adjusted EBITDA margin of a negative 1.8%. Our adjusted EBITDA is adjusted for restructuring charges, transaction costs, stock-based compensation, disposal internally developed software and inventory fair value purchase account.

Additionally, beginning in the first quarter of 2026, we will no longer be adjusting and adding back the costs associated with the Section 16B litigation and the consumer Product Safety Commission, DOJ matter known as the CPSC and DOJ matters. These legal costs were $1.4 million in the first quarter of 2026.

With this change, the $1.1 million loss for adjusted EBITDA would have been a positive $300,000 of adjusted EBITDA if we did not make this change and the $0.3 million would have been above our prior guidance. The first quarter adjusted EBITDA by segment was $200,000 in Adventure and $1.4 million at Outdoor.

Adjusted corporate costs were $2.8 million in the first quarter, and that includes $600,000 of legal and regulatory matter expenses. Let me shift to liquidity in the balance sheet. Free cash flow, defined as net cash provided by operating activities less capital expenditures for the quarter first quarter of 2026 was $5.7 million outflow compared to a $3.3 million outflow for the same 3 months ended March 31, 2025.

Total debt on March 31, 2026, was 0. At March 31, 2026, cash and cash equivalents were $29.8 million compared to $36.7 million at December 31, 2025. Moving to our 2026 outlook. I'm on Slide 9. We have revised our full year 2026 sales range to be between $245 million and $255 million and adjusted EBITDA to be in the range of $3 million to $5 million or an adjusted EBITDA margin of $1.6 million at the midpoint of revenue and adjusted EBITDA.

The revision to our full year guidance relates to the challenging environment realized in April and the fact that we expect these challenging conditions to continue for the remainder of the year at Adventure. Specifically, the $10 million drop in our revenue guide at the midpoint from $260 million to $250 million is entirely at the Adventure segment.

We now expect full year revenue Adventure to be approximately $70 million and full year outdoor revenue to remain as previously guided, to be $180 million. From an adjusted EBITDA perspective, we have decreased our previous guide of $9 million to $11 million to $3 million to $5 million. At the midpoint, the decrease in adjusted EBITDA is $6 million.

That $6 million change is comprised of 2 components. Specifically, we expect Adventures businesses decline in the top line from $80 million to $70 million to have a $3 million net impact on profitability. The additional $3 million decline in our adjusted EBITDA guidance stems from the fact that we will no longer be treating the legal cost and regulatory matter expenses as an add back to adjusted EBITDA. Therefore, based on our historical run rate, we have now included approximately $1 million of legal costs related to these matters for each of the 3 remaining quarters in 2026 or a $3 million impact for the remainder of the year.

Second quarter sales are expected to range between $51 million and $53 million and adjusted EBITDA is expected to approximately be a $3 million loss in the second quarter of 2026. I want to reiterate that our outlook now does include estimated costs for the ongoing litigation specifically relating to the Section 16 matter with HP and the CPSC matter along with the DOJ investigation.

I have assumed we incur approximately $1 million a quarter for each of the 3 remaining quarters in 2026. With that, I'll turn to an update on legal. I'd like to provide this update on the outstanding Section 16B securities litigation matter that the company is pursuing as well as an update on the open matter with the CPSC and DOJ.

We continue to proceed in our lawsuit against HAP trading LLC; and Mr. Harsh -- at Media for disgorgement of short-swing profits under the securities laws. In early 2025, the district or granted summary judgment in favor of the defendants. We filed a timely appeal and the oral arguments held on February 12, 2026 before the second Circuit Court of Appeals.

The court invited the SEC to file an amicus brief, but the SEC declined to do so. We are now awaiting a decision on the appeal. We also filed a lawsuit against caption management and its related entities and controlling persons.

On February 24, 2026, we entered into a settlement agreement with Caption to resolve the company's claim. And on March 2, 2026, Caption paid the company an undisclosed some in exchange for and among other things, mutual releases and dismissal of the claims with prejudice.

A shareholder -- a shareholders' lawyer brought an identical accident goods caption, which we successfully moved to dismiss is duplicative. That lawyer has now sued for legal fees. With respect to the open matter with the CPSC and DOJ, in late 2024, the company was notified by the CPSC that the unresolved matter involving fines, against Black Diamond had been referred to the Department of Justice. To date, the DOJ has not pursued a civil lawsuit regarding this matter.

However, in early 2025, the DOJ served the company and Black Diamond with grand jury subpoena in connection with a criminal investigation requesting various categories and documents related to Black Diamond's Avalanche Beacon. We have cooperated with the DOJ in responding to its discovery request and have produced substantially all of the documents requested.

The DOJ has sent letters to John Walbrecht, Black Diamond's former President; and Rick Vans, Black Diamond's Former Director of Quality, advising them that their targets in its investigation. And the DOJ has also served subpoenas for grand jury testimony on a current and a former employee. The DOJ recently interviewed the former Director of Quality Insurance and requested an interview with his successor.

In closing, we continue to execute our strategic road map to support long-term profitable growth supported by a more focused business, a simplified operating structure and a debt-free balance sheet. As we move through 2026, we remain committed to executing on the next phase of our transformation and delivering value for our shareholders.

At this point, operator, we're ready to take questions.

[Operator Instructions] Your first question comes from the line of Mark Smith of Lake Street Capital Markets. Please go ahead.

Want to start with kind of a big question first off. Just as we look at really all of the profitability and EBITDA in the guidance is coming second half here. What gives you as far as order books? Or what gives you the confidence in second half EBITDA producing to be able to hit that number? .

I can start. Obviously, we have -- as you're aware, we have a real decent visibility with our -- at the outdoor space with the preseason orders in our back half order book that Neil can comment on is extremely strong, right? And along with the strength in our apparel, apparel has been gaining traction, both string summer lines as well as the fall/winter line. So we do have some visibility both on our order book and with some of the feedback from our top retailers that we've been growing our business with over the last couple of years.

And you guys talked a bit about some of the pressures on the Adventure segment just due to consumers being squeezed primarily in Australia, interest rates, gas prices, et cetera. What have you seen domestically as well as internationally as we think about the outdoor segment retail, are we starting to see some pullback in consumer spend or especially domestically is the consumer holding up? .

Neil, you want to address Black Diamond and then I can add some comments around adventure. .

Yes. Mark, thanks for the question. I think the good news is so far, consumers hanging in there in the outdoor in North America. -- we're pretty happy with what we're seeing in sell-through and turn right now. I would add in addition to Mike's comments about a strong fall order book -- we're seeing very good results in our big accounts in our most important specialty accounts year-to-date.

So it's and certainly a volatile uncertain environment. But so far, at least through April, I think we're pretty pleased with the sales results and and the resilience of the consumer thus far. Obviously, if this conflict drags on and gas prices keep going up it's a whole different story. But year-to-date, consumers hanging in there.

Yes, Mark, over on the Adventure side, we are seeing directly shortly after the Iran conflict and the impact that, that's had on oil getting from Iran to Southeast Asian refineries and then ultimately on to Australia. -- that's had a big -- I don't want to say a bigger impact, but almost a bigger impact in Australia than maybe what we're seeing here.

We are seeing higher gas prices in the U.S., but the environment in Australia has the economy is really slowing with the higher fuel cost. Interest rates are raised. And I think we've talked about this, mortgages in Australia aren't fixed. They do adjust with the interest rate movement. There's even been communications from the government to work from home 2 days a week to save on gasoline. And -- we also -- I saw a headline in a story where the government suggested removing your roof rack from your vehicle to improve your miles per gallon as well.

So environment in Australia is much more challenging and the consumer is really feeling that and our big partners there, even though we had a great first quarter, right? We saw the strength of the brand carried through. We really saw a slowdown in April. And now as I said in the prepared remarks, we're expecting that business to slow up $10 million for the remainder of the year on the top line.

Okay. And the last 1 for me is just -- can you walk us through the price increases that you took here in Q1 and how much of the 2.5% revenue growth came purely from the price increases versus mix and increased orders, other things that maybe drove that growth? .

Well, an adventure -- I'll start with adventure. Adventure, we took price up around $2 million is what we forecasted back at the beginning of the year. The amount that, that realized, I think in an in the prepared remarks, I mentioned that we really didn't get a lot of pushback on any of our pricing actions that we took across the Adventure segment. So I'd say is it .

Evenly going to be realized, I think that's probably a safe assumption. So probably about $0.5 million in the first quarter. .

Neil, do you want to comment on -- I know Neal's pricing actions were more targeted. We will take price where we were definitely the market leader and where we're allowed to had the ability in certain other spots, we didn't take price. But the realization of that, I'm not sure we have that number. I don't think we do, to be honest with you. .

Maybe just a feel for it, Neil, as we think primarily in apparel, was a bigger factor in growth in apparel, just the lack of discounting and kind of clearance of some of that PFAS apparel a year ago? Or did the price increases. I don't know how much of that was in apparel, how much that maybe helped drive that segment. .

Sure. Well, a couple of things just as a sort of macro comment on the way the planned our price increases and forecasted that into revenue. We assumed a one-for-one elasticity rule that every percent increase in price, we'd lose corresponding percent in units, and that the 2 would offset. So we didn't plan on getting any net revenue growth from price increases. I think that, that has largely played out. Maybe it's been a little bit better. But the real driver of growth for us has just been growth in market share. And I think, in particular, in apparel, expanded distribution, retailers have seen very good sell-through rates and velocity on Black Diamond Apparel, so the reorders have been really strong. And I think it's much more driven by the performance of the line itself and any price increase. .

And Mark, just to clarify some of the prepared remarks, we mentioned that apparel is up a little over 4% in the quarter. That's year-over-year. But when you take out the change in the discontinued merchandise, that's where we got on full-line apparel, it was up over 10%. So yes, we're selling less DM this year in apparel compared to last year. .

Your next question comes from the line of Peter McGoldrick of Stifel.

I wanted to follow up on apparel here. You mentioned distribution expansion and favorable sell-through. Could you give us a little bit more on the products that are driving the increased full price growth in apparel and then how that contributes to the Outdoor segment's margin profile through 2026?

Sure. I can take that. So generally, we think about 2 segments in apparel, sportswear and technical outerwear and technical apparel. And the good news is we're seeing growth in both our sportswear and our technical outerwear. I think maybe the thing that has really helped propel our success in the apparel category besides just having a much stronger assortment year-over-year and continued improvement there is the marketing we put behind it, in particular, last year, we launched our first sort of reboot of the catalog with a theme called born from the climbing life, that really featured apparel as the hero in that story, and it led to a rapid acceleration of sportswear apparel and some technical apparel.

We then followed that up in the winter season with another catalog, again, where I think apparel played a key role. It's called Design for the Deep, is very much focused on ski category or the support of ski and winter sport, and we saw phenomenal results to that catalog really lifting our outerwear and technical apparel in the winter season. So we have a really nice mix of sportswear that tends to perform very well in the spring and summer and is growing double digits. And then our technical outerwear, which kicks in, in the colder weather and it's been a nice balance and helped us sustain the growth. And we expect, again, what we're seeing in the fall order books apparel to pay up again, double digits in the back half of the year.

Very helpful. And then, Mike, 1 for you on the cost pressures you mentioned for aluminum and some other inputs. Are these having an influence on guidance? Or can you help us think about what is fixed for the year or perhaps the timing on the run rate, if we turn the page into 2027 as those products flow through the income statement. Any guardrails on that side? .

No, sure. So again, as a direct result of some of the Iran war and the higher energy prices, Neil referred to higher factor costs, right? Input costs are escalating, right, whether that's a printed circuit board, aluminum, any tungsten, all types of inflation, material inflation is being presented to us. .

Now with the change from the Supreme Court, we are also seeing some relief from tariffs, right? Now we see those kind of offsetting. So the impact on guidance is a net 0, but it's is very different than what we even spoke to 60 days ago, right, with the Supreme Court ruling in now with the war.

So right now, I'd say they offset, but Neil also referred to the fact that it inflation and material inflation continues to escalate, we're going to have to look at taking price as early as in the third quarter related to our fall/winter line.

So right now, our best estimate is that they're offsetting the benefits from tariff relief and is being offset by higher material inflation. guidance.

I just clarify. The tariff relief excludes the tariff refund. And Mike -- Mike said they balance each other out. So the tariff refund would be over and above that, which obviously would be sort of a one-off if we get it. But we're really -- when we talk about the 2 factors balancing each other out, it excludes the 6.2 tariff rebate that might be coming our way.

That will conclude our question-and-answer session. I will now turn the call back over to Mike Yates for closing remarks. .

Okay. I want to thank everybody for your continued interest in Clarus and attending the call this afternoon. We look forward to updating you on our results again next quarter. Again, thank you, everyone. .

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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 31, 2025. Joining us today are Clarus Corporation's Executive Chairman, Warren Kanders; CFO, Mike Yates; President of Black Diamond Equipment, Neil Fiske; and the company's External Director of Investor Relations, Matt Berkowitz. [Operator Instructions] 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 Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Matt, please go ahead.

Thank you. Before we begin, I'd like to remind everyone that during today's call, we'll be making several forward-looking statements, and we will 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 conditions 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 starting at 7:00 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 claruscorp.com.

Now I'd like to turn the call over to Clarus' Executive Chairman, Warren Kanders.

Good afternoon, and thank you for joining Clarus' earnings call to review our results for the fourth quarter and full year. I am joined today by our Chief Financial Officer, Mike Yates, who will cover our Q4 results, including Adventure segment performance as well as Neil Fiske, who will discuss our Outdoor segment.

In 2025, we remained focused on positioning Clarus for sustainable growth over the long term, prioritizing our most profitable products and styles in the Outdoor segment and executing incremental operational progress in the Adventure segment. Our financial results reflect a challenging market, characterized by weaker consumer demand, tariff impact, supply chain disruptions and broader macro headwinds. As you will hear from Neil, during the fourth quarter, we experienced the most unfavorable seasonal conditions in 50 years in key ski destinations in the United States. Against this backdrop, we continue to advance our overall strategic plan to simplify our businesses to drive share gains as market conditions normalize.

Across both segments, we implemented targeting cost-outs and tariff countermeasures that will enhance profitability on an annualized basis and set the stage for long-term value creation. At Outdoor, we have fundamentally reshaped the business over the last 2 years, simplifying the portfolio, exiting low-margin categories and rationalizing SKUs while upgrading leadership and reallocating investment toward higher growth areas. At the same time, we have meaningfully reduced our cost structure, modernized our systems and sourcing capabilities, and expanded product margins by more than 300 basis points before factoring in the impact of tariffs. Together, these actions have positioned the business to operate more efficiently and profitably moving forward.

I would also like to highlight the continued success of the Black Diamond apparel line, which saw sales growth of 10% in the fourth quarter despite unusually adverse seasonal conditions in both the U.S. West and Europe. We see very strong momentum in key businesses unit heading into 2026.

Turning to Adventure. Our results continue to be affected by market pressures. Q4 gross profit was impacted by several onetime and external factors that Mike will discuss in greater detail. While 2025 was a challenging year for the segment, we have taken corrective action to position the business for a stronger, more innovative future. Importantly, as we discussed last quarter, we identified the pricing in several of our markets, particularly Australia, had not kept pace with inflation or our cost base, contributing to market -- margin erosion, and we have moved forward with price increases across all brands and markets effective Q1 2026.

We continue to believe that Adventure is only beginning to tap into significant growth opportunities around the world, and we have begun to see green shoots, particularly in Europe and Japan, where the steps we have taken to improve service levels and shortened lead times have helped to accelerate growth and drive new customer wins. Additionally, our commitment to fitting more vehicles led to a record number of new fitments delivered in 2025, strengthening our competitive positioning supporting future revenue growth. There is certainly more work to be done, but we have been pleased with the continued progress on our strategic initiatives at Adventure.

Overall, Clarus is far better positioned today to navigate uncertainty and market weakness than we were a year ago. Supported by a debt-free balance sheet and a streamlined organizational structure, we will continue to advance our multiyear growth plans while maintaining a disciplined approach to capital allocation and a clear focus on maximizing shareholder value.

With that, thank you for being with us today, and I will turn the call over to Neil.

Thanks, Warren. Turning to Slide 6. I will review the Outdoor segment's Q4 performance and our expectations heading into the remainder of 2026. Overall, Q4 came in somewhat softer than our expectations due primarily to adverse seasonal conditions affecting our ski segment that Warren mentioned. That said, our more focused, simplified business showed growth and resilience in our core go-forward priority categories. The aggressive reshaping of Black Diamond over the last 3 years has allowed us to weather a year of tremendous disruption, tariff impact, supply challenges and macro headwinds. It's worth putting that multiyear effort in perspective.

Since 2023, we've dramatically simplified and narrowed our focus, exited low-margin, underperforming categories, PIEPS, bindings, JetForce, to name a few. Rationalized styles and SKUs reduced headcount versus the 2023 baseline by 38% in total and 30%, excluding changes in manufacturing. We've upgraded key leadership positions, reallocated headcount and investment to support apparel growth. We've set up Black Diamond Asia sourcing and product development, launched a new e-comm platform and supporting martech stack, launched a new S&OP system to support better supply/demand alignment, modernized our ERP in EU with a new North American ERP and process.

We've substantially improved the quality of inventory, concentrating our mix into high-volume A styles while reducing markdown exposure and the level of discontinued merchandise. We've moved BD to a more full-priced lower discount model, and we've engineered more than 300 basis points of improvement in product margin pre-tariff through line simplification, new product introductions, mix management, sourcing and supply chain improvements.

In short, we are leaner, more focused, more agile and more competitive. The core of the business is strong. Thanks to the hard work of our teams over the last few years, we've set the stage for sustainable, profitable growth and operating margin expansion in the years ahead.

Now let's turn to Q4 results. As with my last update, I'll address tariffs and currency at the top of my remarks and exclude the PIEPS brand, which we divested in Q3 and year-over-year comparisons. First, tariffs. In early May, we initiated the first phase of our tariff mitigation plan, which included raising prices, negotiating vendor concessions, air freighting products where necessary and accelerating our exit out of China. By moving quickly and decisively, we were able to offset about half of the impact of tariffs in 2025. We estimate that the net unrecovered impact from tariffs and duties for the year was approximately $3.4 million to adjusted EBITDA.

As we roll forward into 2026, we've now offset nearly 75% of the tariff impact as best we can estimate today, leaving a $2.8 million unrecovered gap in this coming fiscal year. Over time, we believe we can reduce that gap still further through pricing, sourcing, new product introductions and value engineering.

In the event that we are able to recover tariffs as a result of the recent Supreme Court decision, Black Diamond would receive approximately $6.5 million for the reciprocal IEEPA tariffs we paid in 2025. Note that the most punitive tariffs on our business, the 50% Section 232 tariffs on steel and aluminum, are not covered by the Supreme Court decision and remain in effect. And of course, the IEEPA tariffs have largely been replaced by new ones under a different claim authority.

Now let me address currency. As noted last quarter, while we benefited from the translation of the higher euro to the dollar, we incurred significant losses on FX contracts in 2025. These losses, which amounted to a $2.2 million EBITDA swing year-over-year flowed through and suppressed product margins. We've now rolled off these contracts and expect a run rate pickup of $1.6 million in EBITDA in 2026 at the current exchange rate.

Turning to operating results. Revenue for the quarter was down 2.1% to prior year, down 2.9% in constant currency, excluding FX contracts. The largest drag on the top line was our ski business unit, which was down 30% to prior period due to a combination of our rotation out of low-margin categories like bindings, beacons and airbags, and the most unfavorable seasonal conditions in 50 years in ski -- in key ski destinations in the U.S.

Moreover, while our ski apparel line started strong through October and November, the growth trend tapered in December with the unusually poor conditions in both the U.S. West and Europe. Still, apparel for the quarter was up 10% compared to Q4 2024, and we continue to see very strong momentum in that business into 2026. Meanwhile, our mountain and climb business units were both up for the quarter, 0.4% and 4.3%, respectively. Taken together, these 3 categories of apparel, mountain and climb grew 3.7% in Q4, accounting for 86% of our sales in the quarter and 90% for the full year. This is where our simplification strategy is paying off, and we expect this strategy to drive profitable growth at BD in the future.

By channel and region, North America wholesale, excluding FX contracts, was down 10.4% due to planned exits in the ski category and somewhat softer replenishment orders in December. North America digital D2C was down 0.8% compared to the fourth quarter of last year, which was a significant improvement in the run rate from previous quarters.

Europe wholesale, excluding FX contracts was up 12.1% in U.S. dollars and 3.2% on a constant currency basis. Europe digital D2C, which is a relatively small part of the region's revenue at 7.3% of total sales, was down 29.9% or 36% in constant currency.

Our international distributor channel was up 19.3% for the quarter. In 2024, we realigned our deliveries to better suit the needs of our international market. That means our year-over-year results are now comparable in timing.

I'd also like to highlight results of our design for the deep winter catalog, which far exceeded our expectations and validated an important new part of our marketing mix. We had taken a break from marketing via the catalog this -- and this past winter success gives us confidence, and we expect to continue with the catalog marketing program going forward.

Turning to gross margin. Q4 gross margin rate declined 280 basis points versus prior period due to the impact of unrecovered tariffs and FX contracts as well as write-downs for exiting inventory. Breaking that down, tariffs had a 390 basis point impact in the quarter while FX contracts accounted for another 240 basis points of drag and inventory exits cost 80 basis points.

Stripping out these noncomp factors, our comparable underlying gross margin showed a 450 basis point improvement, reflecting the progress we've made in simplifying the line and focusing on higher-margin sales and categories. This helped reduce the impact of what would have otherwise been a 730 basis point decline in margin.

Operating expenses, excluding restructuring and legal costs from both periods, were essentially flat year-over-year. Adjusted EBITDA came in at $2 million for the quarter, down $2.1 million to prior period with unrecovered tariffs and loss on FX contracts amounting to a $2.4 million drag on earnings versus the prior year period.

Adjustments to EBITDA reflect the latest phase of our restructuring efforts, which have been designed to help offset the higher cost of tariffs and trade in this environment. These actions occurred in Q4 in January of 2026 and include continued streamlining of our organization and overall headcount, completing the exits of PIEPS, JetForce and binding businesses, exiting our 3PL in Canada, initiating a project to restructure our logistics and fulfillment operations in Europe, closing additional Black Diamond stores and slimming down our athlete roster.

For Q4, these actions resulted in approximately $0.9 million of restructuring charges. We also expect to incur another $1.5 million in 2026, which will be reflected in our Q1 results. We do not anticipate any further restructuring at this point yet remain mindful of the dynamic and changing macro environment.

Finally, inventory ended the year at $64.9 million. On the surface, that looks like a significant increase versus last year's ending position, excluding PIEPS at $53.5 million. However, the biggest factor in the increase was a change of inventory recognition from Delivered at Place, or DAP, to recognition at FOB shipment this year, meaning our in-transit inventory on the books appear much larger this year than last. This $7.9 million -- this is $7.9 million of the difference to prior year and is strictly a matter of timing.

The 2 other factors raising this year's number are tariffs and currency, which together inflate the value of inventory approximately $5 million. We've made great progress in improving the quality and composition of the inventory over the last few years and enter 2026 in good shape.

In closing, I will again thank our teams around the world for their incredible perseverance, creativity and drive in the face of this turbulent, often chaotic and unpredictable global environment.

With that, I'll turn it over to our CFO, Mike Yates.

Thank you, Neil, and good afternoon, everyone. On today's call, I'll provide some brief comments on the Adventure segment, and then we'll conclude with a summary of our Q4 financial results followed by the Q&A session. Let's take a closer look at Adventure.

Q4 revenue declined $2.1 million year-over-year or 10.4%, driven primarily by reduced demand from 2 OEM customers compared to the prior year quarter. Also contributing were weaknesses in the U.S. bike market and customer transitions in our home markets of Australia and New Zealand. Offsetting this pressure, our European expansion continues to gain traction. The new 3PL warehouse we opened in the Netherlands has improved service levels and shortened lead times, enabling accelerated growth in new customer wins in Sweden, Norway, the U.K., Spain and Eastern Europe.

We also expanded our international distribution footprint, adding a new partner in Japan and multiple partners serving key off-road markets in Africa. In our home markets of Australia and New Zealand, we secured a chain-wide placement of Rhino-Rack product with a large retail customer across all 300 locations in Australia and New Zealand. This partnership is expected to become a top 5 customer in 2026. In North America, strengthened relationships with rack specialty retailers and upgraded point-of-sale displays have driven new placements for Rhino-Rack and RockyMounts, filling product and price gaps not addressed by competitors.

While we continue to set ourselves up to grow the right way, fourth quarter gross profit in addition to being pressured by lower sales volume was impacted by several onetime and external factors including a significant inventory reserve write-down adjustment of $3.4 million relating to excess and old inventory, including some old packaging for in-house assembled goods. We also incurred higher customer rebates in the fourth quarter and higher impacts from U.S. tariffs.

Corrective actions are underway. Specifically, the group has implemented price increases on fast turning RockyMounts SKUs in November, is renegotiating unfavorable customer contracts in our home markets of Australia and New Zealand and has now executed price increases across all brands and markets effective Q1 of 2026. These important actions position the business to restore margin performance moving forward.

Operationally, we are streamlining our footprint to reduce costs and overhead and improve scalability at Adventure. In the fourth quarter, we closed the high-cost Wellington, New Zealand facility and transitioned to a 3PL in [ Auckland ] that is closer to customers and will better support growth. We also closed Brendale in Queensland on March 1, 2026, consolidating the former MAXTRAX operations into our Eastern Creek headquarters. What this means is we've combined MAXTRAX and Rhino-Rack businesses under one roof.

Product development remains a core focus. Our investment in vehicle fitments delivered a record year in 2025 with more new vehicle fits completed than in any of the prior 10 years. This strengthens our competitive position and supports future revenue growth. Beyond fits, we expect multiple new innovations and product platforms will be launching in the next 18 months.

With that, now let me turn to the consolidated results and detailed review of the segment financial review. I'm on Slide 8. Fourth quarter sales were $65.4 million compared to $71.4 million in the fourth quarter of the prior year. The 8% decrease in total sales was due to softness in the North American wholesale market at Outdoor, lower global D2C revenues and lower PIEPS revenues due to its disposal in July of 2025, and significantly reduced global demand from 2 OEM customers in a challenging wholesale market in Australia and Rhino-Rack in the Adventure segment. The decrease in the Adventure segment was partially offset by increased contributions from the acquisition of RockyMounts.

The consolidated gross margin rate in the fourth quarter was 27.7% compared to 33.4% in Q4 of 2024. Gross margin was impacted by higher inventory reserves at both segments, $3.4 million and $0.5 million, respectively, at Adventure and Outdoor. The $0.5 million Outdoor addressed slow moving obsolete inventory. The $3.4 million, as I mentioned, also dealt with slow moving in old obsolete inventory at Adventure.

Tariffs impacted gross margin at both segments. Lower volumes at the Outdoor segment due to the sales PIEPS along with unfavorable foreign currency impact at the Outdoor segment were a drag on margins. These decreases were partially offset by favorable product mix and lower PFAS inventory reserves at the Outdoor segment compared to 2024. Consolidated adjusted gross margin, reflecting PFAS-related and other inventory reserves and inventory fair value adjustments as a result of purchase accounting, was 33.6% for the quarter compared to 38% in the year ago quarter.

I want to note that actual gross margin includes significant headwinds from tariffs and FX and inventory reserves in the quarter. That's a key point to make sure everyone understands as they look at our financials here for the quarter.

Outdoor's actual gross margins for Q4 2025 was 32.3% compared to 35.2% in Q4 of 2024. The significant efforts at Outdoor under Neil's leadership to improve our gross margins are being realized as he outlined earlier, but these improvements were completely wiped out in Q4 2025 due to tariffs and FX, which were approximately a 630 basis point headwind in the current quarter compared to last year.

Adventure's actual gross margins for Q4 2025 were 16.0% and compared to 28.9% in Q4 2024. Actual Q4 2025 gross margins include the $3.4 million of inventory reserves I mentioned earlier. Excluding this inventory reserve, our gross margin at Adventure for Q4 2025 would have been 34.5%. With this inventory reserve, we believe we've taken a significant step in improving the quality of our inventory at Adventure.

Fourth quarter consolidated selling, general and administrative expenses were $25.5 million compared to $27.8 million or down 8% versus the same year ago quarter. The decrease was primarily due to lower employee-related costs, lower costs from PIEPS due to the divestiture and other expense reduction initiatives to manage costs across the segments and at corporate. Adjusted EBITDA in the fourth quarter was $1.2 million or an adjusted EBITDA margin of 1.8%. Our adjusted EBITDA is adjusted for restructuring charges, transaction costs, stock compensation expense, contingent consideration benefits and other inventory reserves.

Additionally, as noted in prior quarters, beginning in the first quarter of 2024, we adjusted legal costs associated with the Section 16(b) litigation and the Consumer Product Safety Commission, DOJ investigation known as the CPSC and DOJ matter. These legal costs were $1.2 million in the fourth quarter of 2025 and $4.7 million in total for the full year 2025.

The fourth quarter adjusted EBITDA by segment was $300,000 at Adventure and $2 million at Outdoor. Adjusted corporate costs were $1.2 million in the fourth quarter.

Let me shift over to liquidity and the balance sheet. Free cash flow, defined as net cash provided by operating activities less capital expenditures for the fourth quarter of 2025, was $11.6 million compared to $14.4 million for the 3 months ended December 31, 2024. This strong cash flow generation was expected and is consistent with our historical practice, the decrease versus the prior year due to the timing of the inventory receipts at Outdoor that Neil walked us through.

Total debt at December 31, 2025, was 0. At December 31, 2025, cash and cash equivalents were $36.7 million compared to $45.4 million at December 31, 2024. The $36.7 million balance is consistent with the expectations I shared last quarter that our consolidated cash balance would be in the range of $35 million to $40 million by the end of the year.

Let me move on to our outlook. I'm on Slide 9. In 2026, we expect full year sales to range between $255 million and $265 million and adjusted EBITDA to be in the range of $9 million to $11 million or an adjusted EBITDA margin of 3.8% at the midpoint of the revenue and adjusted EBITDA. We have tried to take a reasonable approach to guidance, and we have a decent understanding of our revenue. The key for us this year will be improving gross margins. We have our SG&A costs under control, but to achieve our guided adjusted EBITDA, we need to hit our gross margin targets.

We are initiating our 2026 segment guidance as follows: Adventure, $80 million for the full year; and Outdoor, $180 million of sales for the full year 2026. This totals of $260 million is the midpoint of the consolidated sales guide range I gave above. Adjusted corporate costs should be around $8 million or $2 million per quarter. We expect capital expenditures to range between $6 million and $7 million for the full year and free cash flow to range between $3 million and $4 million for the full year 2026.

First quarter sales are expected to be between $60 million and $62 million, and I want to reiterate, our outlook does not include any expense for the ongoing litigation, specifically relating to Section 16(b) matters, the CPSC matter or the DOJ investigation.

With that, let me give an update on legal. I'd like to provide an update on the outstanding Section 16(b) securities litigation matters that the company is pursuing as well as an update on the open matter with the CPSC and DOJ. We continue to proceed in our lawsuit against HAP Trading, LLC; and Mr. Harsh A. Padia for disgorgement of short-swing profits under the securities laws. In early 2025, the District Court granted summary judgment in favor of the defendants. We filed a timely appeal, and an oral argument was held on February 12, 2026, before the Second Circuit Court of Appeals in New York City. The court has invited the SEC to file an amicus brief within 60 days or by April 17, 2026. By March 10, 2026, the SEC is to advise the court if it does not intend to submit a brief; and if it does, the parties have 21 days to respond to it.

We also filed a lawsuit against Caption Management and its related entities and controlling persons. On February 24, 2026, we entered into a settlement agreement with Caption to resolve the company's claims. And on March 2, 2026, Caption paid the company an undisclosed sum in exchange for, among other things, mutual releases and dismissal of the claims with prejudice.

With respect to the open matters with the CPSC and DOJ, in late 2024, the company was notified by the CPSC that the unresolved matters involved in binds against Black Diamond have been referred to the Department of Justice. To date, the DOJ has not pursued a civil lawsuit regarding this matter. However, in early 2025, the DOJ served the company and Black Diamond with grand jury subpoenas in connection with a criminal investigation, requesting categories of documents related to Black Diamond's avalanche beacon. We have cooperated with the DOJ in responding to its discovery request and have produced substantially all of the documents requested.

The DOJ has sent letters to John Walbrecht, Black Diamond's former President; and Rick Vance, Black Diamond's former Director of Quality, advising them that they are targets in its investigation. And the DOJ has also served subpoenas for grand jury testimony on a current and a former employee of Black Diamond.

In conclusion, we see Clarus today is a far better position to drive sustainable profitable growth supported by simplified and narrowed business focus as well as a strong balance sheet with 0 debt. We look forward to taking the next steps in our transformation in 2026 and delivering significant long-term value for Clarus shareholders.

At this point, operator, we're ready to take questions.

[Operator Instructions] And our first question comes from the line of Matt Koranda of ROTH Capital.

Just wanted to hear a little bit more about the pricing actions that you guys took, I guess, at the end of the year and then in January. So maybe just between breaking them out between Outdoor and Adventure, could you just talk about sort of the magnitude of pricing that was taken and how that impacts the outlook for growth for '26 between the 2 segments?

Certainly. Neil, you want to talk about BD, and I'll cover Adventure?

Yes. Sure. Thanks for the question. So maybe give you a sense of the magnitude on the pricing actions we've taken at Black Diamond, really, with the goal, of course, of offsetting the impact of tariffs. If you look at the gross impact of tariffs on the Black Diamond business, it would be about $11 million to $12 million a year impact on margin and earnings. With pricing and with some sourcing work that we've done, we're able to offset all but $2.8 million of that, so something around 75%, 80%. And so I think you can assume that there's about $7 million to $8 million of pricing that we've taken in the Black Diamond business in order to offset tariffs.

Obviously, that's not the whole amount. We didn't get all the way back to $11 million, but we pushed it as far as we thought we could push it relative to what competitors were doing and what we thought the consumer would accept in this environment. And then over time, our goal is to continue with smaller price adjustments, product line reengineering, remixing to close that remaining $2.8 million gap, but about a $7 million to $8 million overall price increase.

Okay. That's helpful. Before Mike answers the Adventure, I guess, just clarify, the $7 million to $8 million, was that taken in 2 tranches? Because you mentioned some May actions from '25. I just want to make sure I understand the impact of '26 and how that feeds into sort of the growth outlook for -- especially for Outdoor.

Yes. Thanks. Good clarifying question. That's the result of both sets of actions. We've now taken the initial price ups we took in May and then the ones we took at the beginning of 2026. It's both of those.

Okay. Should we think half and half in terms of impact? Or any breakout, I guess, between those 2 actions that were taken?

I don't think I have an accurate estimate off hand of this split. Yes, we hope to get back to you on that soon.

Let me take it offline. Yes. Okay. That's fair. And then Mike, go ahead on Adventure.

Yes. So Matt, at Adventure, we took price specifically at RockyMounts back in November from my prepared remarks. That's a nice bump, probably around 5% price increase there. And then here in the first quarter across the Rhino-Rack business, we took price up as well pretty much on the primary, Pioneer, the platform, racks, our primary categories that we sell. All in, I think we would expect to get about $2 million to $3 million of price this year.

Got it. Okay. All right. Very clear. That helps.

We are fighting volume. The market's challenging as we've talked about and as some of our competitors have reported.

Yes. Okay. Understood. And it seems like embedded in the expectation for '26, especially as it pertains to Adventure, is a pickup in growth and unit volume as the year moves on. I guess, just maybe what are the components that you're assuming there that give you confidence in that return to growth?

Yes. No. So it's volume. It's price, and then there's an FX tailwind as well. It's really -- it's -- some of that volume should recover in the Australian -- in the home market but also through some of the expansion I talk about, right? We have some growth in Europe and elsewhere specifically when you think about the bike business here in North America and some of the other things I mentioned in Japan and so forth. So that's where it comes from, is a combination of all 3 of those things.

Okay. Got it. And then maybe just any commentary from you guys on how we plan to use the balance sheet this year? Obviously, you're in a much better position from a cash perspective, no debt. Access to capital, I assume, is solid. Are you finding anything in the funnel in terms of M&A that's interesting? It's just a really dynamic time in the markets, I guess, and maybe there's more stuff shaking loose, but I'd love to hear your perspective or maybe Warren's on there.

Yes. I think, yes, that's a good question. For right now, I think we're really focused internally on our 2 respective businesses and making sure they're well positioned for the future and that we can grow those businesses. So I think we're just going to sit on our cash for the first half of the year.

Our next question comes from the line of Anna Glaessgen of B. Riley Securities.

I'd like to start on the category breakdown within Black Diamond. You used to disclose the breakdown between mountain, climb, ski in the Ks. It's been a while. I think by the prepared remarks have implied that ski was roughly 10% of the business. Was that accurate? And is that the right number going forward to expect? Or should we expect some compression as we fully lap the exit of bindings, et cetera?

Well, I think what we talked about here, and Neil can follow up, but we talked about 86% of our revenue coming from apparel, climb and mountain, right? And that's a direct results of our simplification strategy leaning into our best products that are our most profitable products and that are core to our business. So skis is -- we're not disclosing those categories in the 10-K. We just filed it. But we're really focused on those 3 categories going forward. And that's where the growth's going to come from, and that's what we're focused on, Anna.

Got it. I guess...

Yes, and...

Go ahead. Go ahead, Neil.

I could add just a little bit of this, appreciating, Mike, you don't want to break out specifically the categories themselves yet. But basically, mountain, climb and apparel for the year were 90% of our sales. Ski is less than 10% because we also have a little footwear segment in there that we don't normally talk about. It's primarily focused on rock shoes. So ski is less than 10%, and we expect that to drop by a couple more percentage points on the mix as we complete the rotation out of PIEPS and JetForce and bindings. So I think if you think about the go-forward business, mountain, climb and apparel, it will get pretty close to 93%, 94%, 95% of the business going forward. That's helpful.

Got it. Yes, that's really helpful. And then shifting to broader market expectations. Understand you've talked about but it continues to be a challenging environment. But just wondering general tone you're hearing from retailers and expectations for sell-in versus sell-through. Should we expect those to be more aligned? Or are there still pockets of destocking that you expect in this year?

Do you want me to take that, Mike?

Yes, go ahead, Neil. You can talk about...

Yes, I can certainly speak to Outdoor on that and Mike can comment on Adventure. I would say it's really hard to read. I don't think there's a clear trend or a clear pattern that's yet emerged, and the only constant is change, as they say. And so I think we're just in that environment.

As a result, I would say retailers are being cautious and maybe keeping their powder dry in terms of where they spend their money, deferring open-to-buy decisions into the latest possible moment, trying to keep a little bit more of their open-to-buy in the at-once versus the preseason category. And I think particularly with the winter that we had this year in the Mountain West that in that particular segment, the retailers, I think, will probably be a little bit more conservative next year.

But for the most part, we're pretty happy with our order book for 2026 and how it's holding up and very happy with the strength of our wholesale relationships from the big accounts like [ REC ] and MEC to a very much revitalized and rebuilt specialty business for us. I think our wholesale relationships are the strongest they've been in more than 5 years. So I think that will keep us in good stead this year.

Our next question comes from the line of Laurent Vasilescu of BNP Paribas.

This is Leah on Laurent. Just following up on the overall trend, can you talk about the recent trends in the Outdoor segment particularly? Like what are you seeing in terms of consumer demand and also channel inventories?

So I can -- do you want me to take that, Mike?

Please.

Well, sorry, let me be clear on the channel inventory. I think we're through the kind of heavy days of the destocking trend that came in the post-COVID correction. And now I'd say, for retailers, it's more fine-tuning and ongoing rebalancing of their inventory in normal course. So I don't see any kind of major overhang right now, at least from the Black Diamond business as we see it in retail. And that gives us some good confidence for where we are in our inventory and where our retail partners are in their inventory in the year ahead.

And I would say trends in our business, apparel has the most momentum right now. It's up 10% in Q4. It was up 25% in Q3. We expect it to be up again double digits in 2026. We have seen mountain, our big mountain category, which includes trekking poles, lighting, gloves and some of our real power categories return to growth in 2026 and even a little bit in Q4. And interestingly, we're seeing a bit of a rebound in climb right now. I'm not sure I'd call that a trend yet, but what I would say is if you take those 3 big business units together, mountain, climb and apparel, they grew in the fourth quarter. We're seeing that they'll grow again in 2026.

Our next question comes from the line of Alex Sturnieks of Lake Street Capital Markets.

You got Alex on for Mark Smith today. First one for me, looking at the RockyMounts contribution in the quarter, could you just talk about how that business is performing so far? How meaningful do you expect it to become within that Adventure segment over time?

Well, it is meaningful. It's an excellent product. It's specifically here in the North American market. It did about $5 million, a little more than $5.5 million, I think, of revenue here in 2025. We continue to expect that growth. And I mentioned the point of sale. We've made some investments in point-of-sale marketing that's been specific to the RockyMounts business. That's out at our bike shop distributors, the wholesalers that we work with. So we're excited about that. I think it's a good business. It's a great product, and we expect that to drive -- be part of our growth story going forward.

Okay. That's great. And then last one for me. You've highlighted encouraging traction in Europe following the opening of the Netherlands warehouse. Could you expand on how meaningful Europe has become for the Adventure segment? And then how do you see that opportunity developing going forward?

So what the warehouse in the Netherlands is giving us the opportunity to do is just expand our footprint and serve some of our smaller customers, right? Our bigger customers in Europe who are -- who've been our legacy customers, they would -- they're still taking inventory from our business in Australia. They're ordering a full container, right, and it's shipping. The warehouse in Netherlands is allowing us to fulfill orders that are smaller than a full shipping container, and that's where you see growth in Spain, growth in the Nordic region, growth throughout Europe, where we weren't penetrating at all in the past. So I'd say that's going to be about $1 million this year of incremental revenue for the Adventure business.

I'm showing no further questions at this time. I will now turn it back to Mike Yates for closing remarks.

Thank you for participating in today's conference. This does conclude the program. You may now disconnect.

I'm sorry I was muted. Thank you, everyone. I want to thank everyone for attending the call this afternoon and your continued support and interest in Clarus. We look forward to updating you on our results again next quarter. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Clarus Corporation's financial results for the third quarter ended September 30, 2025. Joining us today are Clarus Corporation's Executive Chairman, Warren Kanders; CFO; Mike Yates; President of Diamond Equipment, Neil Fiske; and the company's External Director of Investor Relations, Matt Berkowitz. Following the remarks, we'll open the call for your questions. 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. Matt, please go ahead.

Thank you. Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements, and we will 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 starting at 7:00 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 claruscorp.com. Now I'd like to turn the call over to Clarus' Executive Chairman, Warren Kanders.

Good afternoon, and thank you for joining Clarus' earnings call to review our results for the third quarter of 2025. I am joined today by our Chief Financial Officer, Mike Yates, who will cover our third quarter results, including Adventure segment performance as well as Neil Fiske, who will discuss our Outdoor segment. During the third quarter, despite a difficult global consumer market, we made progress executing against our strategic plan. Our quarterly results reflected incremental financial improvement as we continue to reshape our organizational structure, product offering and go-to-market approach while also balancing the real-time evolution of global demand trends and consumer sentiment. Clarus generated net sales of $69.3 million, in line with our expectations, which was a 3% increase over the same period last year and quarterly adjusted EBITDA increase of 15%.

Mike and Neil will detail the segment figures, but at a high level, these increases were driven by strong outdoor demand in North American wholesale, our largest channel, and success with the new adventure customer in Australia and sales from RockyMounts. A key highlight in the Outdoor segment has been the success of the revamped Black Diamond apparel line, which saw sales growth of 29%. Apparel is critical to our growth strategy, and we continue to be encouraged by positive signs that our new approach to apparel and enhanced creative direction is resonating with customers in both the retail and direct-to-consumer channels. Neil and his team have done an outstanding job prioritizing our best customers and our most profitable products and styles, evident in the stronger quality of revenue. Full-price product sales increased, sales from discontinued merchandise declined significantly, and the highest margin A styles represent approximately 70% of our inventory, which is a figure that has continued to trend upward in recent quarters.

Now turning to our Adventure segment. We continue to make operational progress during the third quarter and have been pleased with the direction of the business under the new leadership team. There is significant work to do, but our simplified organizational structure is a step in the right direction. Of note, Q3 SG&A was down $600,000 year-over-year, driven by the reorganizations we completed in November 2024 and July 2025 as well as other expense reduction initiatives. On an annualized basis, we have taken out $1.1 million of fixed costs from the business in our most recent reorganization. Counterbalancing these positive developments, macro trade and consumer headwinds continue to weigh on near-term financial results across both segments. While the latest trade deal should ease some of the tariff burden, Outdoor and Adventure margins and cash flows were again pressured by increased tariff costs and cash outlays in the third quarter. Our Outdoor segment also dealt with significant losses on FX contracts in 2025, which amounts to $600,000 EBITDA impact in the third quarter.

When these contracts roll off in 2026, we will see a lift in product margins. At Adventure, margins came in below expectations, primarily due to a combination of tariff-related headwinds on products sold in the United States, higher freight costs to customers and aggressive pricing of slow-moving inventory as we work through SKU rationalization and overall inventory simplification. In addition, pricing in several of our markets, particularly Australia, has not kept pace with inflation or our cost base, which has contributed to margin erosion. We will continue to take proactive steps to address these issues, including price increases in our U.S. RockyMounts line and a planned pricing reset in ANZ to restore profitability. Overall, in the face of a challenging macro environment, we continue to take decisive actions to enhance margins and set the stage for sustainable growth and profitable growth over the long term. With that, thank you for being with us today, and I will turn the call over to Neil.

Thanks, Warren. Turning to Slide 6, I will review the Outdoor segment's Q3 performance and our expectations for the remainder of 2025. Overall, we delivered solid results for Q3 in the face of stiff macro trade and consumer headwinds. I'm pleased with our continued progress, the strengthening of the Black Diamond brand and reshaping of the business to be more focused, more profitable and more competitive. Revenue, gross margin and EBITDA were all up for the third quarter compared to prior year's third quarter, excluding PIEPS. Costs were down and inventories ended the period in great shape. As with my last update, I'll address tariffs and currencies at the top of my remarks. My remarks exclude the PIEPS brand, which we divested on July 11, 2025, in the year-over-year comparisons.

First, tariffs. In early May, we initiated the first phase of our tariff mitigation plan, which included raising prices, negotiating vendor concessions, airfreighting products where necessary and accelerating our exit out of China. On our last call, we estimated that in 2025, we could offset roughly half of the tariffs that were in place at the time, which included 50% on steel and aluminum, 54% on China and a 10% reciprocal tariff on most other countries. Since then, reciprocal tariffs have increased from the original 10% to a range of 20% to 35% or more. We estimate the unrecovered impact of tariffs on EBITDA will be $2.5 million to $3.5 million in 2025. With the second round of tariff mitigation actions going into effect in 2026, we expect to offset about 70% of the annualized tariff impact next year or approximately $7.8 million out of the $11 million in tariffs, leaving us again with approximately $3.2 million in unrecovered tariffs. We believe that $3.2 million represents the downside as we see it today.

Further reductions in the tariff burden will come over time from sourcing, product reengineering and new product introductions, but those initiatives will take time to fully materialize. Next, let me address currency. While we benefited from the translation of the higher euro to the dollar, we also incurred significant losses on FX contracts in 2025. Year-to-date, these losses, which amount to $1.3 million swing year-over-year flow through and suppressed product margins. We roll off these contracts at the end of 2025. Now let's turn to operating results. Revenue for the quarter was ahead of the prior year by 0.7%. But breaking that number down further, we showed a solid growth of 4% in our full price in-line business and a 37% reduction in sales from discontinued merchandise, again, reflecting a healthier business and stronger quality of revenue. By region and channel, North America wholesale, our largest channel, had a very strong quarter, up 15.6% from the prior year period.

North America digital D2C, which represents 13.6% of the region's revenue, was down 16.5% as we continue to pull back on pro channel sales. We also saw some sales pullback from our price increases as we are generally ahead of the market in implementing tariff-impacted prices. Margins, however, lifted 820 basis points, and we were actually ahead of the prior year period on channel contribution margin dollars, reflecting a much improved profitability equation for the channel. In total, North America was up 9.1% versus prior period. Europe wholesale without the impact of FX contracts was up 2.9% in dollars and down 3% on a constant currency basis. Europe digital D2C, which is 5.8% of the region's revenue was down 16% in dollars and 21% in constant currency. Here again, we pulled back on pro sales and discounting, which resulted in a 570 basis point improvement in margin. In Europe, without the impact of FX contracts, the region was down 1.9% in revenue, 4.0% in constant currency.

Our international distributor channel was down 28.9%, reflecting the timing shift discussed on our last call, wherein we have realigned our deliveries to better suit the needs of our international markets. We have now fully cycled those 2 shifts from Q1 into Q4 and from Q3 into Q2 and expect normalized comps going forward. Within our business units of apparel, mountain, climb, ski and footwear, we saw breakout growth in apparel and solid sales in mountain, offset somewhat by softness in climb, a strategic pullback in ski and narrowed focus in footwear. The decline is consistent with broader industry trends based on point-of-sales data. I want to call out, in particular, the strong momentum we are seeing in apparel across channels and regions. Apparel was 23% of our mix in Q3, up 490 basis points from a year ago. Total apparel sales were ahead by 29% versus the prior period, with in-line sales up 40.5% and discontinued merchandise down 24%. Margins meanwhile were up 650 basis points for the apparel business unit.

Overall, a great story upon which we expect to build. Turning to gross margin. Our results reflect the progress we are making in building a healthier full-price premium brand. Gross margin was ahead of prior year by 320 basis points. Excluding the impact of FX contracts, comparable gross margins were up by 410 basis points. Operating expenses, excluding restructuring and legal costs from both periods, were down 4.6%. Adjusted EBITDA came in at $4.7 million for the quarter, up 9% to prior year period. Inventories ended the quarter in great shape. We were up 2.1% compared to the prior period at $62.8 million, largely due to increases in capitalized duties from higher tariffs. Inventories of discontinued merchandise is down $2.1 million or 25% at quarter end. We are now near our target of having 70% of our inventory against our best-selling A styles.

Operationally, we've made great strides in rebalancing our supply chain in response to the current tariff environment and expect to see new country of origin production up and running in 2026 for headlamps, climbing helmets and other categories historically sourced from China. We have also deployed a new state-of-the-art sales and operation planning capability, which is expected to better match supply and demand globally and within each channel. Organizationally, the company is leaner, more focused and more productive. Lastly, I want to give a big shout out to our creative teams. We have elevated the creative expression of the brand through our new website, recently launched catalog and refreshed marketing assets. While our product line exudes that rare alchemy of beautiful design and superior engineering that has always set BD apart. The brand looks better than ever, and our creative just keeps getting stronger, fresh, original, progressive and true to who we are.

Looking ahead to the fourth quarter, our outlook is more cautious. Consumer sentiment remains low. Promotional activity seems to be on the rise as the broader market struggles to balance cash and working capital requirements. Macro factors continue to cause uncertainty and disruption. Tariff impacts are not yet fully understood nor manifested. Retailers are taking a conservative stance. And so against this backdrop, we'll continue to simplify, reduce costs and stay laser-focused on the fundamentals of our strategy. In closing, I'd like to thank our teams around the world for their incredible perseverance, creativity and drive in the face of this turbulent often chaotic and certainly unpredictable global environment. With that, I'll turn it back to Mike.

Thanks, Neil, and good afternoon, everyone. On today's call, I'll provide a brief comments on the Adventure segment and we'll then conclude with a summary of the third quarter financial results followed by the Q&A session. Let's take a closer look at Adventure. Our team delivered 15.9% year-over-year growth versus the third quarter of last year. Excluding the RockyMounts acquisition, organic growth was 7.4%, which is a solid step forward. Consistent with our strategic focus on expanding our customer base, a strong pipeline filled with a new Rhino-Rack customer in Australia drove much of the growth, which was partially offset by declines in the recovery product line. Adventure's adjusted EBITDA came in at $349,000, which is about $100,000 ahead of last year. Gross margin at Adventure continues to be pressured, mainly due to additional tariffs in the U.S., inventory clearouts and cost of freight to customers.

We made price adjustments to the RockyMounts line in the U.S. at the end of the third quarter, which will help offset the tariff impact and protect our gross profit dollars moving forward. In Australia, we haven't done a good job capturing price on an annual basis. The lack of price capture has meaningfully contributed to margin erosion, and we are implementing an updated pricing strategy for ANZ that will be one of our near-term actions to recover profitability. With that said, we do expect gross margin percentages to stay below historical levels as these changes work through our P&L. On a more positive note, we reduced SG&A by $600,000 versus third quarter of last year. That improvement came from the reorganizations we've completed in November of 2024 and July of 2025 as well as tighter control over travel, marketing and event spending. As Warren noted, on an annualized basis, we have taken out $1.1 million of fixed costs from the business from our most recent rightsizing actions.

Under the new leadership of Trip Wyckoff, there's a renewed focus on executing the next phase of the Adventure growth strategy. As detailed in prior calls, we've previously identified investment opportunities to expand Adventure's global presence. While making these investments, we have experienced declining sales and profitability trends. We are not abandoning these initiatives. However, as we balance growth objectives and operational improvements, our focus is on serving our existing customer base with better products and more fitments that should drive improved profitability. The past few months have been about getting clear on our challenges and resetting our direction, both in the short term and on the longer-term horizon. We're focused on getting leaner, more efficient and setting ourselves up to grow the right way. In August, we opened our 3PL warehouse in the Netherlands.

We started conservatively with the inventory position, and we anticipate new customer orders shipping from the facility in the fourth quarter of this year. The new facility helps us serve customers more effectively in the Nordic, U.K. and European markets, and it opened doors with smaller and midsized accounts that previously couldn't import full containers from Australia. This is exactly the kind of strategic growth we want to see. On the U.S. tariff front, while the added costs are a headwind, we've determined it still makes sense to maintain production in Australia and China for now. About 75% of our total volume isn't impacted by these tariffs. So it wouldn't make sense to increase FOB costs across the board just to avoid tariffs on a smaller portion of our sales. We're constantly challenging our supply chain to move production when it's financially sound to do so. In the meantime, we've invested in sourcing some high-volume MAXTRAX traction board production in Salt Lake City, a big step towards greater control and reliance.

Our Asian supply partners have also stepped up, helping offset some tariff costs with unit price reductions. We'll be adjusting Rhino-Rack pricing in the U.S. on December 1 to stay ahead of further pressure. Right now, we're in the high season of our core Australian market, and we're seeing healthy early spring sell-through. For the rest of the year, our priorities are clear: drive profitable top line growth while keeping SG&A and personnel expenses tightly managed. Looking ahead, our biggest opportunity lies in product innovation. This has been an underperforming area for a few years, and it's where we're focusing our energy. We're adding resources, expanding our vehicle fit team to move faster and bringing in experienced product developers with deep category knowledge. We've built a 3-year innovation road map that we're confident will disrupt multiple product categories and help us maintain leadership in the Australian market while breaking through with share gains in the Americas and rest of world. This has been a challenging year for Adventure.

There's no doubt about that, but it's also been a pivotal one. We face the hard truths, we're taking meaningful actions, and we're positioning the Adventure business for a much stronger, more innovative future. So with that, now let me turn to the consolidated and segment financial review on Slide 8. Third quarter sales were $69.3 million compared to $67.1 million in the prior year third quarter. The 3% increase in total sales was driven by the increase in the Adventure segment of 16% and a decrease in the Outdoor segment of 1%. However, as Neil noted, Outdoor revenue was actually up 1% when you exclude PIEPS from both periods. The consolidated gross margin rate in the third quarter was 35.1% compared to 35% in the prior year quarter. Gross margin was impacted by higher sales volumes at Adventure and a favorable product mix at Outdoor.

These increases were partially offset by an unfavorable product mix within Adventure, primarily driven by higher RockyMounts sales in North America, U.S. imposed tariffs impacting both segments and lower volumes at Outdoor after the sale of PIEPS in July along with the headwinds caused by losses on the foreign exchange contracts at Outdoor. Adjusted gross margin was 35.1% for the quarter compared to 37.8% in the year ago quarter. We did not adjust gross margin in the third quarter of 2025, but I want to note that actual gross margins include significant headwinds from tariff and FX, a couple of items that have been outside of our control. The significant efforts at Outdoor under Neil's leadership to improve gross margins are being realized, but were partially offset by the tariffs and FX this quarter. Gross margin at Outdoor was 36.0% for the third quarter of 2025 compared to 33.2% in the prior year. This performance is outstanding and is exactly what we were expecting to see prior to tariffs and the change in the euro rate.

The results at Adventure are much more challenging due to the gross margin headwinds I just discussed. Adventure's gross margin was 33.2% for the third quarter of 2025 compared to 40.1% in the prior year. Now on to SG&A. Third quarter SG&A expenses were $26.2 million compared to $27.9 million or down 6% versus the same year ago quarter. The decrease was primarily due to lower employee-related costs, lower costs from PIEPS due to the divestiture and other expense reduction initiatives to manage costs across the segments and at corporate. Adjusted EBITDA in the third quarter was $2.8 million or an adjusted EBITDA margin of 4.0%. Our adjusted EBITDA is adjusted for restructuring charges, transaction costs, stock compensation expenses, contingent consideration benefits and other inventory reserves. Additionally, as noted in prior quarters, beginning in the first quarter of 2024, we adjusted legal costs associated with the Section 16(b) litigation and the Consumer Product Safety Commission DOJ matter known as the CPSC and DOJ matters.

These legal costs were $1.0 million in the third quarter of 2025 and $3.5 million in total for the first 9 months of 2025. The third quarter adjusted EBITDA by segment was $349,000 at Adventure and $4.7 million at Outdoor. Adjusted corporate costs were $2.3 million in the third quarter. Let me shift over to talk about liquidity and the balance sheet. Free cash flow defined as net cash provided by operating activities less capital expenditures for the third quarter of 2025 was a use of cash of $7.0 million. This compares to a use of cash of $9.4 million for the 3 months ended September 30, 2024. Total debt on September 30, 2025, was $2 million. As a reminder, this debt is related to an obligation associated with the RockyMounts acquisition and will be paid in December of 2025. We have no other third-party debt outstanding. At September 30, 2025, cash and cash equivalents were $29.5 million compared to $45.4 million at December 31, 2024. We used $7 million of free cash flow in the third quarter.

In early July, we closed on the sale of the PIEPS snow safety brand and realized the cash proceeds from the sale of the brand. I do expect the business to generate free cash flow during the fourth quarter consistent with our historical performance, and I expect our consolidated cash balance to be in the range of $35 million to $40 million by the end of the year. Let me spend now a brief moment on guidance. Regarding our full year outlook, we have again elected to provide -- to not provide 2025 guidance consistent with our position over the last few quarters. While we believe we have handled on the tariffs with effective countermeasures in place, ongoing uncertainty related to trade, consumer sentiment and the overall macroeconomic environment make it really difficult to confidently forecast the business. And currently, based on what we know about our order book and tariffs, we are satisfied that our actions to date are consistent with market conditions. However, due to the ongoing uncertainty, we believe it's best to remain cautious and continue to not provide guidance.

In addition to my comments about our cash balance, our business historically has been seasonal with a 45%, 55% revenue split between the first half and second half of the year, and I believe we will continue to see that in the second half of 2025. Finally, I will add that revenue for the month of October exceeded our forecast for both segments. Let me move on to Legal. I'd like to provide an update on the outstanding Section 16(b) securities litigation matters that the company is pursuing as well as an update on the open matter with the CPSC and the Department of Justice. We continue to proceed in our lawsuit against HAP Trading, LLC and Mr. Harsh A. Padia. In early 2025, the court granted summary judgment in favor of the defendants. We subsequently filed a notice of appeal and are opening appellate brief. HAP has filed its opposition brief and our replied brief will be filed this Friday, November 7. Oral arguments will likely be scheduled in the first quarter of 2026.

We also filed a lawsuit against Caption Management and its related entities and controlling persons. The defendants filed a motion to dismiss, which was denied. The case is in discovery phase with documents having been exchanged and depositions likely to be held during the first quarter of next year. In the meantime, a mediation is scheduled for November 25, 2025. With respect to the open matters with the CPSC and DOJ, in late 2024, the company was notified by the CPSC that the unresolved matter involving Black Diamond had been referred to the Department of Justice. In early 2025, the DOJ 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 DOJ in responding to its discovery requests and have produced substantially all the documents requested.

Additionally, in early 2025, the company received a letter from the CPSC requesting various categories of documents and information in connection with a new investigation into whether BDEL sold products that were subject to a recall. The company has cooperated with the investigation, responding in full to the CPSC's document request and has heard nothing further. In conclusion, turning back to our 2 core segments, we believe the actions we've taken to prioritize our best customers and our most profitable outdoor products and styles, together with a simplified organizational structure with an emphasis on product and fitment and adventure position Clarus for long-term success. Supported by a balance sheet with 0 third-party bank debt, we are committed to taking a prudent approach to capital allocation and managing our business to drive long-term market share gains while delivering sustainable value for our shareholders. At this point, operator, we're ready to take questions.

[Operator Instructions] Your first question comes from the line of Laurent Vasilescu with BNP Paribas.

This is William Dossett on for Laurent. So my first question was just parsing out the Outdoor segment sales, they were flat in the quarter, but Black Diamond apparel was up 29%. And so can you just parse out what was the offset to the Black Diamond strength?

Well, I'll let Neil expand too, but this -- PIEPS was essentially 0 in the quarter. So that's a year-over-year a headwind. The real challenge, and I think Neil covered in his remarks, was the D2C business. The North American D2C business was down 16.5% and the European D2C business was also down 16%. So the short answer is no PIEPS, D2C was weak across the globe and that offset the North American wholesale strength. And the apparel business is part of the North American wholesale, that's where we capture that as part of the wholesale business.

Okay. I appreciate that. And congrats on the success of Black Diamond. And my other question would be on just how your retail partners are ordering for the spring of 2026 in the Outdoor segment. How much more conservative are they going to be in this backdrop? And as well while we're looking forward, just wanted to get any thoughts that you had on the holiday this year. I appreciate it.

Well, I would I can start with that. I think the holiday is always kind of a little bit of an unknown, right? The coming net...

Mike, why don't you let Neil answer that question?

Yes, sure.

Yes. Let me -- on the first question, William, regarding spring, our order books look pretty good for spring and certainly reflects some caution on the part of our retail partners. But we -- our order book is up. And of course, ultimately, it comes down to how much of that sticks. But I think the indications are quite positive. And we feel like we have really good momentum in the wholesale channel, both with our big national accounts, REI and MEC as well as Amazon and real strength in specialty. So I think looking ahead to spring, we feel as good as we can in this environment about the strength of the wholesale channel. And so that's part one. Regarding the fourth quarter, I think that we're just cautious. And as Mike said, it's too early to tell. We do see the environment being more promotional. We see retailers being cautious and not wanting to take on too much inventory. But I would say 90% of the game is still to be played in the fourth quarter. So we're cautious. I think it's prudent to be cautious in this environment, but it's really hard to find a trend line at this point for Q4.

[Operator Instructions] There are no further questions at this time. I will now turn the call back over to Mike Yates for closing remarks.

Okay. Great. Thank you very much. I want to thank everyone for attending the call this afternoon, and your continued support and interest in Clarus. We look forward to updating you on our results again next quarter. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect. Everyone, have a great day. Bye.