Clarus(US:CLAR)2020-08-11 02:55Financial Data and Key Metrics Changes - Total sales for Q2 2020 were $30 million, with Black Diamond sales down 47% and Sierra sales up 7% [23][24] - Consolidated gross margin increased by 140 basis points to 35.4% compared to 34% in the previous year [24] - Net loss for Q2 was $2.7 million or a loss of $0.09 per diluted share, compared to a net loss of $700,000 or a loss of $0.02 per diluted share in the prior year [28] - Adjusted EBITDA for Q2 was a loss of $1.3 million compared to income of $1.6 million in the same quarter last year [29] Business Line Data and Key Metrics Changes - Black Diamond experienced a significant decline in sales due to COVID-19, with expectations of down 80% in April, 60% in May, and 40% in June, but actual results exceeded expectations by approximately 10 percentage points each month [12][23] - Sierra's domestic sales grew by 36%, driven by increased demand for bullets, while international sales decreased by 55% due to prolonged retail closures [14][24] - Direct-to-consumer sales increased by 7% overall, with a 25% growth on blackdiamondequipment.com [10] Market Data and Key Metrics Changes - The company noted improved sales trends in both Sierra and Black Diamond since the end of Q2, with Black Diamond expected to benefit as retail partners reopen [15][36] - The Sierra business has seen significant growth in the domestic market, particularly in the ammunition segment, which has grown over 300% in the first seven months of 2020 [16][36] Company Strategy and Development Direction - The company has focused on three pillars during the pandemic: the safety of employees, preservation of brand equity, and maximization of liquidity [8] - The strategy includes investing in product innovation, sales, and marketing while pursuing new long-term revenue opportunities [19][22] - The company aims to maximize organic growth and profitability while maintaining a strong balance sheet and liquidity [37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of consumer demand and the strength of their diversified brand portfolio [7][19] - The company anticipates continued improvement in the Sierra business and a gradual recovery in international markets [36][60] - Management acknowledged the uncertainty created by the pandemic but remains focused on long-term brand strength and market share gains [35][37] Other Important Information - The company ended Q2 with $21.5 million in cash and access to $50.4 million on a revolving line of credit, with a leverage ratio of 0.6x [11][30] - Selling, general, and administrative expenses decreased by 16% to $14.5 million due to cost-saving initiatives [27] Q&A Session Summary Question: Can you elaborate on the wholesale trend and inventory levels? - Management noted that retailers experienced a similar decline in sales but have begun to see positive momentum as they reopen and consumers return to outdoor activities [40] Question: How is the company meeting the increasing demand for ammunition? - The company has increased capacity by over 30% and is working to fulfill high demand, with 100% sell-through in less than seven days for shipped products [44] Question: What is the outlook for end market demand across Black Diamond's categories? - Management indicated that while climbing gyms were closed, outdoor climbing saw increased demand, and backcountry skiing is expected to grow due to social distancing measures [50][51] Question: Why was the digital business growth more modest compared to others? - The company chose to maintain brand equity by avoiding aggressive discounting, which may have limited short-term digital sales growth [55] Question: What is the current status of the company's retail locations? - The company has reopened its retail locations and plans to open more stores while prioritizing wholesale fulfillment [84]