Clarus Corporation Aktie

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.

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, 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. Following their remarks, we will open the call for questions.

Before we go further, I would now 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 caution regarding -- that provides important cautions regarding forward-looking statements. Matt, please go ahead.

Thank you. Before I 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 second quarter of 2025. I am joined today by our Chief Financial Officer, Mike Yates, who will cover our overall performance and our Adventure segment as well as Neil Fiske, who will discuss our Outdoor segment.

During the second quarter, we experienced a mix of positive and negative trends across our individual segments, selling channels and geographies. As we continue to manage through the realities of the current global consumer landscape. Overall, I am pleased with our progress against our operational initiatives as we simplify our organizational structure and streamline our product offering.

We generated net sales of $55.2 million, consistent with our quarterly expectations, with a slight increase over the same period last year. Mike and Neil will touch on the figures in more detail, but at a high level, the increase reflected solid performances in both European and North American wholesale at Outdoor and improvement to North American wholesale and direct-to-consumer channels at adventure.

On the other hand, our direct-to-consumer performance and overall site traffic at Outdoor softened as consumers continue to pull back following Liberation Day and we saw continued deterioration of our legacy OEM accounts at Adventure. While the macro environment remains uncertain, particularly with respect to evolving tariff policies and consumer behavior, our focus is controlling what we can to position Clarus for sustainable, profitable growth as market conditions normalize.

We continue to reduce complexity at Outdoor as evidenced by our improved financial results year-over-year. Sales, margins and adjusted EBITDA all increased in Q2 at Outdoor despite choppy consumer sentiment.

We delivered on our commitment to raise our going-in product margins while improving the quality of our inventory and revenue. Specifically, the team has done an outstanding job enhancing our inventory composition with less exposure to discounted merchandise and a healthy concentration in our most profitable A styles, which we believe will position Black Diamond to grow its full price business in the back half of the year.

I would also highlight that we completed the sale of our PIEPS snow safety brand and intellectual property rights associated with Avalon Safety Equipment in July for $9.1 million, representing a highly successful outcome after a comprehensive strategic review and competitive process.

The divestiture is aligned with Claris' simplification strategy and further bolsters our balance sheet.

Turning to our Adventure segment. I am pleased with our progress since we reported our last quarter amid personnel changes within the team. We've reengaged with each key customer and believe we have a good sense where our best-in-class brands can win prospectively. We have taken key measures to simplify the cost structure and flatten the organizational reporting in light of slower demand trends. Our global wholesale and direct-to-consumer businesses increased by approximately 8%, partially driven by [ bike rack ] sales and was offset by the continued soft demand at certain legacy retailers.

Our sales declined over the prior year quarter, due in part to the drop-off in customer-specific OEM sales, which were down by approximately $3.1 million. We have emphasized reducing overhead, eliminating R&D projects on lower-margin categories and supporting a handful of key product launches that we believe will yield results in the second half of 2025.

As we look forward, we are focused on unlocking value at each of Outdoor and Adventure. In connection with the development of 3-year plans for our businesses, we have initiated an internal review to ensure we are evaluating all possible opportunities to create value for shareholders. This includes, but is not limited to, further simplification and further cost reductions, incremental to those taken in July, which Mike will outline. Additionally, we believe that the sum of the parts of our 2 segments exceeds today's market valuation, and we are committed to seeking to maximize long-term value.

In terms of near-term capital allocation priorities, we are focused on reinvesting in our existing 2 segments to seek to drive organic growth. Supported by a nearly debt-free balance sheet and our current cash position, our goal is to maintain flexibility and discipline in how we deploy capital with an emphasis on the highest return opportunities.

Zooming out the primary question for Clarus and the Outdoor market as a whole continues to be how macro conditions will evolve during the remainder of the year. We have begun implementing countermeasures to mitigate a portion of the impact from tariffs as you will hear more about shortly, but uncertainty around consumer sentiment and demand in the back half of the year makes it very difficult to confidently forecast. In the face of these challenges, we continue to take decisive actions to strengthen our cash position and improve our profitability while maintaining our competitive position in the market.

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 Q2 performance and our expectations for the remainder of 2025. Overall, we delivered solid results in Q2 that were affected by wavering consumer sentiment in a chaotic macro environment. I'm pleased with our progress, the strengthening of the Black Diamond brand and the continued transformation of the business.

Revenue, gross margin and adjusted EBITDA were all up as we continue to simplify move toward a more full-price model and improve the quality of revenue along with the quality of our brand execution. We have now completed the sale of our PIEPS snow safety brand, as Warren mentioned, which will further simplify and narrow our focus.

My remarks for the quarter, therefore, exclude PIEPS. In addition to the divestment of PIEPS, we're dealing with 2 unusual and somewhat unpredictable factors impacting our results, tariffs and currency. I'll address those at the top of my remarks and then turn to the operating results.

First, currency, with 33% of our revenue coming from Europe, the euro dollar exchange rate has a significant impact on our financials. We began the year at EUR 1.035 to the dollar and hedged about half of our revenues for the year at $1.08. Few would have predicted the rise to $1.18 following the initial April tariff announcements. That sharp rise in the euro put our hedge position underwater for the quarter and likely for the remainder of the year. For the quarter, the loss on FX contracts was about $447,000 in both reported revenue and EBITDA. For the year, assuming an exchange rate of $1.15, that loss would be $1.4 million. These FX contracts roll off by year-end.

On the flip side, we get a gain from the FX on the translation of our European operating results. For the quarter, FX lifted EU revenues by $1.4 million and EU EBITDA by $64,000. The net of these 2 factors, the negative from FX contracts and the positives of earnings translation is a hit to earnings of $383,000 for the quarter.

The second unusual factor is tariffs. In early May, we initiated our tariff mitigation plan, which included raising prices, negotiating vendor concessions, airfreighting products were necessary and accelerating our exit out of China. Due to these actions and the lag effects of tariffs running through the supply chain, we did not see a material impact from tariffs in Q2. However, looking ahead for the year, we expect the current tariffs, which include the 10% reciprocal tariffs on most countries, 50% on steel and aluminum and 55% on China to have a $3.4 million impact on earnings even after our mitigating measures. And of course, we are all waiting to see how the reciprocal tariff situation plays out. Should these tariffs land above the current 10% level, we expect to see an additional drag on earnings in 2025.

Now looking at Black Diamond operating results. Q2 revenue came in at $36.5 million, up 2.1% from prior year. Excluding the impact of FX contracts, revenue is up 3.9% from prior year in current dollars and up 2.3% in constant currency. By region and channel, excluding the impact of FX contracts, North American wholesale, our largest market, was up 1.6%. North America digital direct-to-consumer, which represents about 17% of the region's revenue was down 20.1%. The result reflects our strategy to tighten up discounting in the pro channel, which was down 27.8%, and reducing off-price sales in e-commerce.

We also saw an immediate pullback by consumers post Liberation Day and then softness in May and June as we rolled out our new tariff prices ahead of much of the market. Full price sales for digital D2C were up slightly, while discounted sales were down substantially, a mix shift to full price we expect to build upon in the back half.

Europe wholesale was up 4.8% and flat in constant currency. Europe digital D2C was down 10.1% year-over-year and down 14.6% in constant currency. International distributor markets, which represent about 8% of total revenue, were up 81.3%, reflecting a permanent shift in the timing of deliveries as we discussed in our last update.

Black Diamond operating gross margin for the quarter came in at 34.9%, up 80 basis points. Excluding the impact of FX contracts, gross margins would have expanded even more, and we expect gross margin to continue to improve relative to last year in the back half even after absorbing the current level of tariffs. The progress we've made in simplifying the business, improving product margins and cleaning up our inventory gives us some cushion against the tariff impacts versus our position a year ago.

Black Diamond operating expenses, excluding restructuring charges, were down 0.8% and down even more in constant currency. Inventories ended the quarter in good shape with much less exposure to discounted merchandise and a healthy concentration in our A Styles. We ended Q2 at $64.2 million, up 4.5% to prior period due to our pull forwards for the fall season as part of our tariff mitigation plan. As we look to the back half, we expect that our better inventory composition will position us to grow our full-price business as we continue to shrink discounted sales, both in absolute terms and as a percentage of the mix.

Adjusted EBITDA for Outdoor was a loss of $213,000. Excluding the adjusted EBITDA loss from PIEPS in the quarter of $516,000, adjusted EBITDA for Black Diamond in Q2 came in at $303,000 versus a small loss in the same period last year.

In sum, we've made good progress this quarter. Sales margin and adjusted EBITDA were all up in the face of a particularly uncertain consumer and market environment. We simplified the business with the sale of our PIEPS snow safety brand. We continue to improve the quality of our inventory and revenue progressing to a more full-price business. Our apparel initiative accelerated with 11.3% growth in the category and a 21% reduction in sales from discontinued merchandise. We continue to reduce our SG&A costs. We implemented our tariff mitigation plan to offset nearly half of the projected tariff impact in 2025 at current levels.

We launched our new e-com site on a more cost-effective and scalable Shopify platform and into a more connected digital ecosystem. And we published our annual impact report outlining our 2030 sustainability goals and our progress towards them.

As we look to the second half, the greatest challenge remains uncertainty on tariffs, consumer sentiment and macroeconomic conditions. That said, I think we're much better positioned than a year ago to deal with all those factors.

I'd like to thank our teams around the world who remain focused on building the brand, serving our sports and winning with our customers. With that, I'll turn it over to Mike.

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

Beginning on Slide 7. Our second quarter inventory results continue to be affected by near-term pressure on the business. The top line softness at the Adventure segment reflects significantly reduced demand from a global OEM customer and a challenging wholesale market in Australia for Rhino-Rack specifically. These headwinds are partially offset by higher sales in the North American market from RockyMounts, higher sales from D2C revenues including our Amazon channel and higher sales of our promotional slower-moving inventory. While overall market headwinds continue to pose a challenge, we see signs of momentum under the new leadership of Tripp Wyckoff. Tripp and his team recognize the importance of the home market to the success of our adventure business. And our teams continue to take steps with new customers in Australia and New Zealand across all product categories beyond legacy accounts.

We are pleased to highlight a key win with a large new retail customer with 300-plus locations across Australia and New Zealand, which will roll out beginning in the third quarter.

We've also taken important action to capitalize on our global brand awareness. In Europe, we are onboarding new OEM and aftermarket customers in the U.K., Sweden, Poland and the Netherlands for the third quarter. We have established a new legal entity and we'll open a third-party warehouse shortly in the Netherlands, which will allow us to better serve EU and U.K. customers directly.

MAXTRAX just won a large contract with the German military, and another bright spot has been the positive reception we received regarding our newly launched [indiscernible] with BMW. Additionally, we are pleased to announce 2 new distribution partners in China, which also provides local access to vehicle fitments for emerging Chinese car brands that are prevalent outside the U.S. The new global opportunities are a direct result of some of the prior investments we have made in opening new markets for our venture brands.

As we have mentioned previously, the Americas is our largest addressable region, and we believe that we are only scratching the surface of potential growth opportunities in the U.S., Canada and Latin America. The addition of [indiscernible] via RockyMounts to our product portfolio has already provided introductions to hundreds of specialty dealers in new key accounts.

Recent highlights include: the opening of 172 new dealers year-to-date with $420,000 of revenue so far, expanding Latin American sales coverage and adding 3 bicycle channel distributors in launching a nationwide rep force of independent agents to cover specialty outdoor channels. Consistent with our strategic focus on expanding our customer base, we are excited to also announce that MAXTRAX products are now available in Academy Sports and past pro shops online, and we are gaining ground at REI, America's largest specialty [indiscernible] seller. We've taken control of our brands in the Amazon marketplace and segment-wide revenue recently hit approximately $200,000 per month.

In terms of new product development and product launches, we have tightened our funnel and our focus on foundational base racks and fits. Most importantly, we are prioritizing our highest return initiatives for [ NPD ] and increasing the number of fitments we offer. As we have discussed previously, [ shipments ] are the backbone of our go-to-market strategy. The more vehicles we can fit, the more racks we can sell. By comparison, in 2024, we delivered an incremental 113 vehicle fitments, versus year-to-date, we have increased vehicle fitments to 579 in 2025.

From an organizational standpoint, the team has undergone significant changes this year as we work towards an optimal structure to allow us to effectively scale our brands in Australia. The U.S. and international markets while also driving profitability in a lower demand environment. We've taken these steps to flatten the organization to be nimbler and more effective in these challenging times. Specifically, earlier this month, we took action to reduce head count across adventure with an annual run rate savings of over $1 million. But to be frank, our objective to scale the Adventure segment globally has not come to fruition. However, we are encouraged by the steps Tripp is taking to immediately improve profitability and reduce complexity moving forward.

Regarding tariffs and the effects on the Adventure business, I would note that nearly all of the Adventure products are sourced from Australia and China. Based on our full year 2024 revenue, over 80% of Adventure revenue is outside the United States. So the tariffs have a limited impact on a relative basis. However, recently, we have imported additional RockyMounts inventory into the United States to ensure we have inventory to meet demand. Currently, based on information available, we estimate that the tariff impact to Adventure is $0.5 million in 2025.

Let me now turn to the consolidated and segment financial review on Slide 8. Second quarter sales were $55.2 million compared to $56.5 million in the prior year second quarter. The 2% decline in total sales was driven by the decrease in Adventure segment of 8% and an increase in the outdoor segment of 1%. FX was a $0.5 million headwind and the acquisition impact from RockyMounts was a $2.1 million tailwind. The consolidated gross margin rate in the second quarter was 35.6%, compared to 36.1% in prior year quarter. Gross margin was adversely impacted in the quarter by lower sales volumes and an unfavorable product mix at Adventure, driven primarily by promotional sales efforts in North America. This, combined with lower wholesale volume at Rhino-Rack in Australia drove the decline in gross margin. These decreases were partially offset by higher volumes and favorable mix in Outdoor.

Adjusted gross margin, which reflects an inventory reserve adjustment of $490,000 at Black Diamond associated with excess inventory related to our snow safety category was 36.5% for the quarter, compared to 37.4% in the year-ago quarter. Adjusted gross margin at Outdoor was 36.1% for the quarter, compared to 35.8% in the year ago quarter. Adventures adjusted gross margin was 37.3% for the quarter, compared to 40.3% in the year ago quarter.

Second quarter selling, general and administrative expenses were $26.9 million compared to $28.1 million or down 4% versus the same year ago quarter. The decrease was primarily due to lower marketing, amortization and employee-related costs, combined with other expense reduction initiatives to manage costs across both segments and at corporate.

Adjusted EBITDA in the second quarter was a loss of $2.1 million or an adjusted EBITDA margin of a negative 3.8%. Our adjusted EBITDA is adjusted for restructuring charges, transaction costs, stock compensation expense, impairment of indefinite-lived intangible assets 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 16B litigation and the Consumer Product Safety Commission DOJ matter known as the CPSC DOJ matter. These legal costs were $1.8 million in the second quarter of 2025 and $2.5 million in total for the first half of 2025.

The second quarter adjusted EBITDA by segment was $311,000 at Adventure and a negative $214,000 at Outdoor. Adjusted corporate costs were $2.2 million in the first -- in the second quarter. The decline in free cash flow -- the adjusted corporate costs were $2.2 million in the second quarter.

Next, let me shift to liquidity. Free cash flow, defined as net cash provided by operating activities plus capital expenditures for the second quarter of 2025 was a use of $11.3 million, compared to a use of $744,000 for the 3 months ended June 30, 2024. The decline in free cash flow is due to poor working capital performance primarily inventory and AR in the quarter compared to the prior year. Total debt on June 30, 2025, was $1.9 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.

As of June 30, 2025, cash and cash equivalents were $28.5 million, compared to $45.4 million at December 31, 2024. We used $11 million of free cash flow in the second quarter. Additionally, we grew consolidated inventory to $91.5 million at the end of the second quarter. This increase was intentional as we pulled forward some inventory purchases to mitigate tariffs at both segments. Additionally, in early July, we closed on the sale PIEPS snow safety brand and realize the cash proceeds from the sale of the brand.

Finally, consistent with the seasonal nature of our cash flow, [indiscernible] historically generates most of our positive cash flow for the year. At this point in time, the accumulation of these data points gives us confidence that our cash balance will grow during the remainder of the year.

A few final words on tariffs. As I mentioned already, Adventure sources nearly all of its products from China and Australia. Black Diamond sources approximately 25% from China, 31% from Taiwan, 15% from Vietnam and 12% from the Philippines and the remainder from elsewhere. As of today, we estimate that we have a [ $3.9 million ] consolidated headwind. Net of our mitigation efforts from tariffs in 2025 compared to our original guidance issued in March of this year.

Now let me spend a moment on our outlook and guidance. Regarding guidance, we have elected to not provide guidance for the third quarter or the full year 2025, consistent with our position last quarter. 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 related to tariffs, consumer sentiment and the overall macroeconomic conditions, we believe it is best to remain cautious and not provide guidance at this time due to the difficulty to effectively forecast in this current environment.

I now would like to provide an update on the outstanding Section 16(b) securities litigation -- 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. 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's opposition brief is due this fall, with our reply brief to fall shortly after. The court is expected to schedule oral arguments once briefing is complete, likely in the first quarter of 2026.

We also filed a lawsuit against Caption Management, and its related entities and control persons. The defendants filed a motion to dismiss, which we opposed and briefing was completed during the summer of 2024. In early 2025, the court denied the motion and instructed the parties to proceed with Discovery, which is currently ongoing and expected to continue through the remainder of the year.

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 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 beacon. We are cooperating with the DOJ and responding to discovery request.

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 Black Diamond sold products that were subject to a recall. The company is cooperating with this investigation and responded to the CPSC document request.

Now turning back to our core 2 segments. We remain confident that we can deliver long-term value for the Clarus shareholders as we continue to progress our goal of building a smaller, more profitable outdoor business and take steps to turning Adventure business around. Despite this uncertain macro environment, we see Clarus today is far better structured to withstand market headwinds and emerge in a stronger position on the other side of the current disruptions. Supported by an incredibly talented team globally in a strong balance sheet, we remain focused on execution and positioning Clarus for long-term sustainable growth.

At this point, operator, we are ready to take questions.

[Operator Instructions] Our first question comes from Aaron Kuehne from B. Riley Securities.

I guess I'd like to start on Adventure. You talked about some actions to rationalize the head count, but also we're growing [indiscernible] expanding the line. I guess where are we in terms of growing the applicable vehicles that can have the [indiscernible] and what's our line of sight into getting to a more stable platform to grow off?

Thanks, Anna. This is Mike. Thanks for the question. Very good question. I mean we are focused on the basics. And one of the basics is fit, right? And in my prepared remarks, I talked about increasing the number of new fits to 579 vehicles. We're also focused on fitting the top 10 vehicles, both in the Australian market and the U.S. market. So that is a priority that Tripp is focused on. Obviously, with the goal of fitting more vehicles and fitting the vehicles that sell the most. So again, more of an 80/20 concept there that we're trying to drive into the Adventure mindset, right? But again, very basic.

We're also focused on rationalizing [indiscernible]. Over the prior quarters, we spoke a lot about investing to scale and a lot of money was being spent on [ NPD ]. We're trying to really rein some of that in and focus on specific [ NPD ] that we believe has the highest returns.

And then the other thing that we're really focused on is the team, right? We've taken some of the head count actions that I mentioned with the annual savings rate of $1 million, a couple of weeks ago that was done. We're trying to really focus on instead of professional managers and more of a structure that was built or being built for a $200 million business. We're trying to focus on a structure where we have player coaches, people who can telescope out and lead and then dive into the detail and kind of bring a little -- the entrepreneurial spirit, the nimbleness back to the business and really plan for the business to be a $50 million, $70 million business and have people getting their hands dirty in the details. So we're trying to be a little more nimble, a little more entrepreneurial.

So those are the real priorities that Tripp is focused on. And that's what we're trying to get reset that foundation. I think once we have that done, that's when we'll be in a position to really start to grow again.

Got it. And then following up on 1 of the comments. It was nice to see the domestic sales and collect an adventure. Can you expand a little bit more on the promotional actions you took in the quarter and the consumer retailer response?

Yes, sure. So if you go back and look at the fourth quarter release, we rolled off a couple of million dollars of Adventure inventory back at year-end, right? And we've taken the effort to actually dispose of that inventory, right? As inventory that had built up over since COVID, since middle of COVID that never sold and we wrote that off. During that process, though, last December and early in January, we identified a couple of million dollars of additional inventory that we said, "Hey, no, this is -- we're selling this stuff. We just have a lot of it. We're selling it above our cost, but we have a lot of it.

So I challenged the team last January to say, we have to move that inventory, right? Let's turn that into cash. So the team has done a great job moving some of that inventory. I think we've moved about half of it here through the first 6 months, a lot of it going in April and May when the season started here in North America. And that's -- but -- it is a drag on margin. We're recovering our costs, but it's not normal price inventory or full price margin.

Got it. And then just one follow-up for me on Outdoor. Just trying to parse the year-over-year commentary unless discontinued merchandise sales. To what extent is that a like-for-like comparison? Or was that impacted by PFAS inventory clearance in the prior year quarter?

It definitely is impacted by the PFAS, right? We sold the last -- we have a little PFAS inventory left, but we sold the vast majority of it -- the last of it in Q1. So we didn't nearly move as much in Q2, that's compared to what we sold a year ago in Q2 from PFAS. But the other point though, and I'll let Neil comment is our mix of our inventory is in much better shape here as of June 30. Our DM inventory is down significantly compared to a year ago. So we're just selling less discount. And that's consistent -- we're selling less discontinued merchandise, and that's consistent with Neil's statements where he was saying, hey, we're moving towards a full price model. We want to -- we don't want to sell a lot of discounted inventory, obviously. So that's our objective, and the team is executing on that.

Neil, anything you want to add to that? Anything you can add?

No, I think you captured it well, Mike. So a big chunk clearly was less -- less PFAS this year than in the prior year, but also [indiscernible] is down year-over-year versus the same period. And also, the depth of our promotions on things like map breaks and holiday windows are much shallower than they were a year ago. So really, all 3 of those factors. And I think one of the things we're thinking about is as we go forward in a world of higher tariffs moving towards full price margin as much as we can. It's going to be really important to give us more buffer to offset any or some of the impact of tariffs.

Our next question comes from Matt Koranda from ROTH Capital.

So just trying to get a better sense for the outdoor revenue trend and maybe trends in growth for the rest of the year for outdoor. So I guess if I take it apart for the second quarter, it sounds like the bulk of the growth was probably driven by the international distribution shift, the core direct channels are maybe down high single digits to low double digits year-over-year, just given sort of the lower promotional posture, but you're getting, I guess, lift in full price selling. Maybe could you confirm that, that's sort of the right way to think about what happened in the second quarter and then for the back half of the year as we think about getting back to growth in those scores. How do we think about that and sort of I guess, what's the reaction from your wholesale customers then in terms of your price actions that you've taken recently? .

Yes, number of [indiscernible].

Go ahead, Neil.

Thanks Matt. Good questions. I think maybe let me just break down the channels and sort of our view of H1 and H2, really zooming out for a little bit, the business is still primarily a wholesale-based business. And roughly 80% of our business is wholesale and distributor markets. And so start there, wholesale is in very good shape. Wholesale was up for the first half, and we expect wholesale to be up low single digits in the second half. In particular, if you look at North America wholesale, which is kind of our largest wholesale segment, saw pretty good growth there, 1.9% year-over-year. Europe was flat on a constant currency basis. And then IGD, as you pointed out, the distributor markets had a little bit of a shift from Q3 into Q2, but that's not really the factor driving the overall growth in wholesale. It's a relatively minor impact, about $0.5 million.

So we feel pretty good about the [indiscernible] return to organic growth in wholesale. And then as we look forward, based on the order book that we're seeing, we feel pretty confident in the order book as it stands now versus a year ago. So the order book in Europe is up about 5% year-over-year to the same point last year and up double digits in North America.

Now the order book is one thing, what we actually realized from that order book is another. And that latter factors, particularly in North America, critically dependent on how the market plays out, how the consumer holds up. But I would say the wholesale business is quite healthy. The margins are up. And we feel good about the back half based on the order book.

With regard to the -- and I'll come back to DTC in a minute. With regard to how the wholesale channel has reacted to our price changes, you may recall, our philosophy on this was to be transparent, get out early, give the wholesale channel enough time to adjust. So we went with our price increases in early May, which was well ahead of most of the competition. And I think in the end, that was a good move and benefited us with our wholesale accounts. I think it's been as well received as to possibly have been. And while they didn't all take prices up immediately, that extra bit of time gives them time to plan, adjust and also confirm their fall 2025 orders. Whereas now, I think, with a lot of our peer group, they've taken prices up in July, and there's quite a bit of commotion now in the wholesale channel about how to adjust to those price changes right at the beginning of the season.

So all in all, I think the price increases have gone as well as we could have hoped, but we really are at the beginning -- the beginning to see how that plays out. And frankly, we remain cautious about the price increases in this consumer environment. Nobody has a crystal ball on that. But at least from an underlying order book, across all the regions. We feel confident that we can deliver some low single-digit organic growth in the back half.

Then turning to DTC. It's quite a different story DTC, one from a strategy standpoint, two from a timing perspective. From a strategy standpoint, we have moved DTC even more aggressively to a full price position. And we rolled out prices early -- new prices early in North America on DTC. And so the combination of less discounting and less promotion and higher prices, we saw a pretty sharp pullback in the DTC channel, 20% in North America, a little bit more modest in Europe. And it's always difficult to gauge how much volume you're going to lose when you take prices up and you reduce discounting. I think that because we went ahead of the market with our prices and Amazon and other retailers didn't go as quickly, that naturally tended to suppress the sales in our DTC channel.

That being said, I think the outlook for the back half in DTC is still going to be soft, likely will be down year-over-year, but deliberately so as we really try to move that channel to much more full price. And then lastly, within DTC, as you know, there's a pretty big component of that, that is our pro channel. And we've really tightened up the discounting in the pro channel, given that discount out to fewer [indiscernible] and then shallowing out the amount of discounting overall that goes to anybody who's in the program. So quite a different set of dynamics, I think, in DTC versus wholesale. But again, in kind of an 80-20 perspective, we're also still 80% of our business, we feel quite good about the strength of our relationships with key retailers or growth in big accounts as well as specialty and our position heading into what we think is going to be a pretty turbulent second half.

Okay. I appreciate you unpacking a pretty complicated question there, Neil. Very clear. The other thing I was curious about was just on the PIEPS front, was that included in the first and second quarter results, remind me sort of what was included for this year before the sale? And then what's the full year headwind, I guess, if you were to think about what it contributed in '24, what we're missing out on for '25?

Matt, it's Mike. So in the 10-Q, the published results today in our press release and earnings release, that all includes PIEPS, okay? So the assets and liabilities have been pulled out of the balance sheet and added as of June 30 -- presented as assets held for sale and liabilities held for sale on the balance sheet. But the P&L for the quarter and for the 6 months includes PIEPS.

Neil's commentary today in the prepared remarks, he spoke just to BD because that's the way he's been managing the business, right? So -- but the official filings in the numbers presented include PIEPS. From a headwind perspective, there is no headwind. The sale of PIEPS is accretive. I think in my prepared remarks, I highlighted that PIEPS lost $600,000 of EBITDA in the quarter, right? So it will be accretive by addition through subtraction. And in '24 numbers, we lost money as well.

Yes. Okay. No, I understood. I was just trying to make sure we didn't, I guess, over model revenue in the back half as we kind of compare to last year. Any help on what PIEPS, I guess, contributed from a sales perspective in the second half of '24. That way we can kind of strip that out?

It's a couple of million dollars.

Yes. Okay. Not a huge contribution. Got it. Understood. And then maybe just if I could ask another one on the Adventure segment. I guess we've been going through this downturn, especially in the Australian market with the OEM customer? And then I think a retailer that you guys have called out a few times as sort of a bit of a headwind on results in the Australian market. But just remind us, when does that headwind -- when do we start to lap that headwind? It's been a few quarters now, I think, I'm trying to remember if it was third quarter from last year where it started or if it was more of a fourth quarter event? I'm just trying to get a beat on sort of when we kind of see inflection in the Australian market?

I think we've done -- this quarter, we anniversary, meaning the third quarter, we anniversary the OEM sales. So just to be specific, the OEM sales Q2 of '25 versus Q2 of '24 were down $3.1 million. In the third and fourth quarter, OEM sales last year were less than $1 million, I believe. So you're not going to see nearly as large impact. So I think we've essentially anniversaried that here as June 30, right?

With regards to the weakness in the other large customer, we're probably able to anniversary that here in the back half of this year, right? That was a very significant customer in '22 and '23, shrunk '24, it's getting even smaller here in '25.

Yes. Okay. All right. Got it. So that anniversary is probably a third into the fourth quarter, I would assume.

Yes.

Okay. That helps a bit. And then maybe just lastly, just can you talk about sort of cash flow for the remainder of the year. It sounds like the message was working capital source of cash for the back half, most likely. So it seems like an opportunity to flush some inventory and build a little cash from working capital, then you get the net proceeds from PIEPS, which I assume there's not too much friction from the total amount that you guys quoted from the press release, but maybe just talk about if there's any gap in terms of the headline number and maybe some net cash proceeds from that.

And maybe just lastly, if you could speak to sort of priorities for the rest of the year in terms of cash. It sounds like organic reinvestment was kind of the main message from the prepared remarks, but any consideration given the sort of share buyback, more deployment on that? Just kind of given you guys talked about the sum of the parts being undervalued, maybe just thought process there.

Okay. So from a cash standpoint, yes, cash is a priority for us will be very -- I don't anticipate us doing a buyback because we want to protect our cash and invest it organically back into the business in the best opportunities. So with regards to the sales proceeds from PIEPS, there is a little bit of friction there, about $1.5 million. So the $9.1 million probably feels a little bit more like $7.5 million, actually hitting the count here in July because some of that cash was on their balance sheet and that got sold as part of the transaction.

With regards to working capital being a use in the second quarter, it was, right? About $4 million of working capital was negative and was directly result of inventory. I highlighted that we -- inventories are over about $91 million. We pulled some inventory in at both Adventure for RockyMounts and at Black Diamond in advance to mitigate some of the tariff impact on both those businesses, right? So it's more of a timing that we received some inventory in June that we would normally get in July or August, right?

So with that being said, I think cash is a priority. We'll be very disciplined around [ FX ], right? We'll invest in CapEx that will help grow the business, necessary CapEx. CapEx that would be nice to have. We're going to be very prudent with. So going forward, consistent with the prepared remarks, our objective is to definitely see cash grow in the back half of the year.

Our next question comes from Mark Smith from Lake Street.

First, Mike, just wondering if you can just clarify and go through quickly the country exposure on tariffs again and kind of your mix?

Sure. Sure. In Adventure, most of -- they source everything from China with a little bit coming from Australia -- made in region in Australia, okay? For Black Diamond, the majority of our inventory comes from Southeast Asia, and looking for the exact piece here and 25% from China, 31% from Taiwan, 15% from Vietnam and 12% from the Philippines with the remainder coming from elsewhere. We've moved all manufacturing essentially out of the U.S. effective at the beginning of this year.

So the team is still focused on moving inventory out of China, like we talked about in our last call, our production out of China, sourcing out of Chine, but that won't take place until 2026.

Okay. And that was my next question, just if there's any other near-term moves in the mitigation plans that we should expect? Or is this just kind of wait and see where things end up for everybody before we see any movement?

Right. I think that is our strategy. The stuff that we make in China is mostly our electronics, I think our BD headlamps. We're waiting for that to -- everything to settle to see what the proper move is with regards to that because -- with the update -- with the tariffs update on Vietnam, we thought that was going to be a solution. As we dug into that further, I think we're less enamored with that as a solution, but we're waiting to see.

Okay. And then the other question I had was just on RockyMounts. Just curious, thoughts here on that performance, how that business has been operating?

We're thrilled with it. We think, a $2.1 million of revenue here in the quarter. It's a fantastic product. It's just a matter of getting more traction with the specialty distributors, specifically the bike shops because historically, we haven't had that relationship, but we're building on that. I highlighted that in the prepared remarks. So we think there's -- we're excited about what that can bring in coming years.

Our next question comes from Peter McGoldrick from Stifel.

This is Alex Douglas on for Peter. A couple for me. I think -- so the first one is on gross margin. It's down close to 100 bps of gross margin in 2Q. You mentioned tariffs didn't really impact the second quarter. So then is it fair to assume that there would be more gross margin headwinds in the back half than the first half? Or are there other kind of like tailwinds that would kind of like offset from that? I know you said you can mitigate some of the tariff exposure, but not all of it. I would just like your thoughts there.

Sure. So if you look at our gross margin, our consolidated gross margin was down. I gave the details by segment. I think the Adventure segment was down 300 basis points on an adjusted basis quarter-over-quarter. Black Diamond was up 30 basis points on an adjusted basis. And I should say Outdoor, the full segment was up 30 basis points, inclusive of the drag from PIEPS. Part of the -- included in that 30 basis points up is a $0.5 million loss from FX. So it would have been up even more if kind of in a constant currency without the FX headwind that Neil mentioned.

Over at Adventure, so it's -- so tariffs didn't hit yet in Q2, but we did have that headwind from FX. We also had a headwind from PIEPS in the published results. Over at Adventure, we're down 300 basis points, and that is volume specifically from the OEM business in Australia and the wholesale business in Australia, compounded, frankly, by some of the lower margin sales that Anna had just asked about the promotional sale activity in North America that occurred. I mentioned that we sold that above cost, but not much above cost. So those things all combined brought adjusted margins at Adventure down 300 basis points. So that's the headwind.

Going forward, yes, we have the tariff impact in the back half, but we don't have the PIEPS, et cetera. So gross margin will be challenging compared to our original plan at the beginning of the year and prior to the Liberation day. But all of the work that we had done in advance of tariffs being announced in April. A lot of that good work is going to be offset by the tariffs. But I believe, and I think in Neil's prepared remarks, he -- we still believe margins on a year-over-year basis in the back half for Black Diamond will be up regardless of that.

[indiscernible] one other point just to add. So the other factor here is we push pretty hard to get inventory clean in the first half, and we were actually ahead of our pace in terms of clearing discontinued merchandise. So that obviously was a little bit of a drag on the margin in H1, but we should get some pickup from that in H2. So that would be the -- I think the other thing to keep in mind.

[indiscernible] more so in the first quarter than the second quarter, but yes, I totally agree with that.

And then just kind of a question on the longer-term margin structure. It looks like pre-COVID, you guys -- gross margin was kind of like around 35%, adjusted EBITDA margin was like high singles, once we get past some of these transitory headwinds, is that kind of the right way to think about kind of the margin structure in the midterm?

It's reasonable. It might be -- I would think it's a little higher than that, but it's reasonable.

Okay. Got it.

[indiscernible] point higher, right? That's kind of how -- like I said, I would have thought we'd be closer to the high 39% -- 39%, but some of the tariff pressures bringing us back down to that 36% -- 36.5% type percent.

Okay. That's helpful. And then I guess my last question if there's time would just be on inventory. As we're kind of modeling inventory, how should we think about inventory growth through the remainder of the year and specifically like related to sales?

Well, I'll comment on inventory with regards to the -- I mentioned it was over $91 billion here at the end of June. I expect that to be $10 million lower by the end of the year, right? That's what we're managing towards, right? So that will help drive the positive cash flow, I've mentioned. That's also consistent with historical performance, including our historical performance where our revenue is much stronger in the back half of the year. Of course, we are a little cautious on revenue right, consumer sentiment, the macroeconomic, all the reasons we're not giving guidance, right? But I would add, I still -- we still believe that the historical trends on the top line hold, right? We did -- we still believe that there's a 45%, 55% split between first half and second half in revenue.

So, I think as you look at your model or as you kind of look at the business, those historical truths, I think, are still reasonable as we progress here in 2025, the 45-55 split first half, second half on a consolidated basis and actually by segment basis, both these businesses, Adventure and the Outdoor, the second half of the year is 55% of the full year revenue.

The question-and-answer session is now closed. I will now turn it over to Mike Yates for closing remarks.

Thank you. Thank you, everyone. Thank you very much. I want to express our appreciation for your continued interest in Clarus and spending this time this afternoon on the call. We look forward to updating you on our results again next quarter and [indiscernible] out at the conferences and any other questions. We look forward to spend time with you. So take care, and thank you again. Bye.

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