Clarus(US:CLAR)2022-05-10 02:59Financial Data and Key Metrics Changes - Sales in Q1 2022 increased by 50% to $113.3 million compared to $75.3 million in Q1 2021, driven by growth in the Precision Sport segment and contributions from acquisitions [22][30] - Consolidated gross margins increased by 320 basis points to 39.1% compared to 35.9% in the prior year [27] - Net income for Q1 2022 was $5.3 million, or $0.13 per diluted share, compared to $5.7 million, or $0.17 per diluted share in the year-ago quarter [30] Business Segment Performance Changes - Precision Sport segment sales increased by 41% to $33.1 million, with significant growth in ammo and OEM business [25][30] - Outdoor segment sales were roughly flat at $51.5 million, impacted by supply chain challenges, although apparel sales grew by 53% [23][30] - Adventure segment sales were $28.7 million, with Rhino-Rack sales in North America increasing by 42% [26][30] Market Data and Key Metrics Changes - The company experienced strong demand in North America, particularly for Rhino-Rack, despite challenges in Australia due to floods and COVID-19 [19][18] - Direct-to-consumer sales grew by 38% in Q1 2022, indicating a strong shift towards e-commerce [11][24] Company Strategy and Industry Competition - The company is focused on its "Innovate and Accelerate" strategy, particularly in the Adventure segment, to capture market share [18][20] - The company aims to increase its direct-to-consumer sales to approximately 30% of total sales in the long term [86] Management's Comments on Operating Environment and Future Outlook - Management noted that supply chain costs are stabilizing, and they expect improvements in lead times and inventory flow in Q2 2022 [43][46] - The company anticipates consolidated sales growth of 25% for 2022, with expectations for all segments to contribute positively [35][36] Other Important Information - The company has upsized its credit agreement to $425 million to support future acquisitions and growth initiatives [34] - Inventory levels were at $152.7 million, up 18% from the end of 2021, reflecting proactive buying to meet demand [31] Q&A Session Summary Question: Supply chain cost trends and lead times - Management indicated that supply chain costs are starting to stabilize, and lead times are improving, with inventory beginning to flow back into warehouses [43][46] Question: Apparel penetration and channel mix - Apparel currently represents about 15% of global sales, with expectations to reach 30% in direct-to-consumer channels, driven by strong performance in key categories [50][51] Question: Drivers of gross margin improvement - The increase in gross margins was primarily driven by the Precision Sport segment, while the Outdoor segment faced some margin pressure [56] Question: Current posture on raw materials and inventory - Approximately $5 million of raw materials are included in the higher inventory levels, which are being managed to optimize production capacity [77] Question: Performance of the Precision Sport segment - Strong order books and demand for both ammo and OEM products were noted, with management remaining cautious about future capacity constraints [79][82]