Clarus(US:CLAR)2025-07-31 20:36PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Clarus Corporation's unaudited condensed consolidated financial statements, detailing balance sheets, comprehensive loss, cash flows, and notes, with key events including the PIEPS business classification as held for sale and the Precision Sport segment sale Condensed Consolidated Balance Sheets The balance sheet shows total assets decreased to $286.5 million, total liabilities remained stable at $61.4 million, and stockholders' equity decreased to $225.1 million, with PIEPS assets and liabilities classified as held for sale Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $286,510 | $294,094 | | Total Current Assets | $175,927 | $177,780 | | Cash | $28,474 | $45,359 | | Inventories | $91,527 | $82,278 | | Assets held for sale | $9,330 | $- | | Total Liabilities | $61,390 | $61,001 | | Total Current Liabilities | $38,626 | $36,037 | | Liabilities held for sale | $980 | $- | | Total Stockholders' Equity | $225,120 | $233,093 | Condensed Consolidated Statements of Comprehensive Loss The company reported a Q2 2025 net loss of $8.4 million, increasing from $5.5 million year-over-year, and a six-month loss from continuing operations of $13.7 million, contrasting with prior year's net income due to discontinued operations Q2 Financial Performance (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Sales | $55,247 | $56,484 | | Gross Profit | $19,680 | $20,406 | | Operating Loss | $(10,901) | $(8,137) | | Net Loss | $(8,434) | $(5,493) | | Diluted Net Loss Per Share | $(0.22) | $(0.14) | Six-Month Financial Performance (in thousands, except per share) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Total Sales | $115,680 | $125,795 | | Gross Profit | $40,474 | $45,257 | | Operating Loss | $(17,663) | $(14,911) | | Loss from Continuing Operations | $(13,678) | $(11,955) | | Income from Discontinued Operations | $- | $28,346 | | Net (Loss) Income | $(13,678) | $16,391 | - An impairment charge of $1.565 million on indefinite-lived intangible assets was recorded in Q2 2025, contributing to the increased operating loss1315 Condensed Consolidated Statements of Cash Flows Net cash used in operating activities for H1 2025 was $11.5 million, while investing activities used $3.0 million, a significant shift from the prior year's $172.2 million provided by the Precision Sport segment sale Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(11,497) | $(15,527) | | Net Cash (Used in) Provided by Investing Activities | $(2,990) | $172,162 | | Net Cash Used in Financing Activities | $(1,962) | $(121,602) | | Change in Cash | $(15,929) | $34,897 | - The significant variance in investing and financing cash flows year-over-year is primarily due to the $175.7 million proceeds from the sale of a business in H1 2024, which was subsequently used to repay over $150 million in debt16 Notes to Condensed Consolidated Financial Statements The notes detail key events including the RockyMounts acquisition, the Precision Sport segment sale, the PIEPS business classification as held for sale with a related $1.565 million impairment, and a $2.5 million accrued liability for ongoing CPSC legal matters - On February 29, 2024, the company completed the sale of its Precision Sport segment (Sierra and Barnes) for $175 million in cash, with activities reported as discontinued operations and a pre-tax gain on sale of $40.6 million32 - On May 8, 2025, the company entered an agreement to sell its PIEPS business, resulting in PIEPS assets and liabilities being classified as held for sale, with the sale closing subsequent to the quarter end on July 11, 202537119 - A triggering event in Q2 2025 led to a quantitative assessment and a resulting impairment charge of $1.565 million for the PIEPS trademark3847 - The company is under investigation by the CPSC and Department of Justice regarding product recalls, and believing an unfavorable outcome is probable, recorded a liability of $2.5 million, representing the low end of its estimated exposure95 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 financial results, noting a 2.2% sales decrease and gross margin contraction to 35.6%, driven by Adventure segment weakness, while liquidity is supported by cash and prior asset sales after credit facility termination Results of Operations Q2 2025 sales decreased 2.2% to $55.2 million, and H1 2025 sales decreased 8.0% to $115.7 million, primarily due to Adventure segment weakness, while gross margin contracted and operating loss widened to $10.9 million due to impairment and legal costs Q2 2025 vs. Q2 2024 Sales (in thousands) | Segment | Q2 2025 Sales | Q2 2024 Sales | Change (%) | | :--- | :--- | :--- | :--- | | Outdoor | $36,661 | $36,187 | +1.3% | | Adventure | $18,586 | $20,297 | -8.4% | | Total | $55,247 | $56,484 | -2.2% | - The Adventure segment's sales decrease was due to lower demand from global OEM customers and a challenging Australian wholesale market, partially offset by the RockyMounts acquisition147 - Q2 2025 gross margin fell to 35.6% from 36.1% year-over-year, primarily due to lower volumes and an unfavorable product mix at the Adventure segment, driven by promotional sales in North America and lower wholesale volume in Australia151 - Operating loss for Q2 2025 increased to $10.9 million from $8.1 million in Q2 2024, largely due to a $1.6 million impairment of the PIEPS trademark and a $1.4 million increase in legal costs143 Liquidity and Capital Resources As of June 30, 2025, cash decreased to $28.5 million, with $11.5 million net cash used in operating activities for H1 2025, following the termination of credit facilities and debt repayment from prior asset sales Cash and Liquidity (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $28,474 | $45,359 | - The company terminated and settled all outstanding borrowings on its revolving credit facility and term debt in February 2024 upon closing the sale of the Precision Sport segment187198 Free Cash Flow Reconciliation (Non-GAAP) - H1 2025 (in thousands) | Metric | Amount | | :--- | :--- | | Net cash used in operating activities | $(11,497) | | Purchase of property and equipment | $(3,044) | | Free cash flow | $(14,541) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reported no material changes to its market risk disclosures compared to its Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to market risk were reported for the period200 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of June 30, 2025201 - No material changes in internal control over financial reporting were identified during the quarter ended June 30, 2025202 PART II OTHER INFORMATION Item 1. Legal Proceedings The company details ongoing legal proceedings, primarily CPSC and Department of Justice investigations regarding avalanche transceivers, for which a $2.5 million liability has been accrued, with potential for materially adverse outcomes - The company is under investigation by the CPSC and the U.S. Department of Justice regarding avalanche transceivers distributed by its subsidiary, BDEL209217 - CPSC staff recommended civil monetary penalties of $16.1 million and $9.0 million for two separate matters related to the transceivers, with the matter referred to the U.S. Department of Justice for further proceedings214215 - The company believes an unfavorable outcome is probable and has accrued a liability of $2.5 million, though it cannot reasonably estimate the final terms of resolution, and any penalties could have a material adverse effect219222 Item 1A. Risk Factors The company reported no material changes to its risk factors compared to its Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported for the period223 Item 5. Other information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the second quarter of 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the quarter ended June 30, 2025224 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including the Amended and Restated 2015 Stock Incentive Plan and Sarbanes-Oxley officer certifications - Key exhibits filed with this report include the Amended and Restated 2015 Stock Incentive Plan and various Sarbanes-Oxley certifications227