Clarus(US:CLAR)2019-11-05 03:12Financial Data and Key Metrics Changes - For Q3 2019, sales increased by 8% to $60.2 million compared to $55.7 million in Q3 2018, with a constant currency growth of 10% [21] - Adjusted EBITDA was $6.8 million, down from $7.1 million in the previous year, representing 11.2% of sales compared to 12.7% [29] - Net income decreased to $3.5 million or $0.11 per diluted share from $4.1 million or $0.14 per diluted share in the prior year [28] Business Line Data and Key Metrics Changes - Black Diamond brand sales grew by 14% in Q3, with year-to-date growth of 13% and adjusted EBITDA up 43% [8] - Sierra brand sales declined by 24% due to market softness in bullets and ammunition, contrasting with a 35% growth in the same quarter last year [21][13] - Apparel sales increased by 23% in Q3, driven by men's and women's sportswear and technical outerwear [10] Market Data and Key Metrics Changes - Domestic sales rose by 10%, while international sales increased by 6%, with notable growth in European and Asia-Pacific markets [15][16] - The company faced headwinds from escalating trade wars and a strengthening U.S. dollar, impacting gross margins [17] Company Strategy and Development Direction - The company is focused on innovation and product development, with plans to launch over 150 new products in fall 2019 and an additional 125 in spring 2020 [41][43] - A new performance sports division was created to develop sports-enhancing products, indicating a strategic expansion into personal health products [39] - The company aims to capitalize on the upcoming 2020 Summer Olympics to enhance brand awareness and market presence [54] Management's Comments on Operating Environment and Future Outlook - Management views current market headwinds as transitory and believes the brands are well-positioned for growth [17] - The outlook for 2019 has been adjusted to anticipate a 7% sales growth, with Black Diamond expected to grow in low double digits while Sierra is projected to decline in double digits [34] - Management remains optimistic about the long-term growth potential of Sierra, despite current challenges [49] Other Important Information - The company repurchased 243,873 shares for approximately $2.7 million during the quarter, with $10.8 million remaining on its share repurchase program [33] - The company has approximately $141 million in available net operating loss carryforwards for U.S. federal income tax purposes [37] Q&A Session Summary Question: Strategy for leveraging the Olympics for brand awareness - Management believes the Olympics will elevate athlete profiles and provide significant brand recognition opportunities [54] Question: Specifics on improving fulfillment and replenishment metrics - The company upgraded its ERP system and is implementing continuous improvement initiatives to enhance fulfillment metrics [56] Question: Guidance on gross margin expectations and impacts from Sierra - The reduction in gross margin is primarily driven by Sierra's performance, with expectations for continued pressure from tariffs and foreign exchange [61] Question: Insights on the Sierra business cycle and growth expectations - Management anticipates a return to growth in Sierra within a couple of quarters, driven by cyclical market recovery [69] Question: Tariff impacts and mitigation strategies for 2020 - The company aims to mitigate at least 30% of the tariff impact in 2020, with ongoing efforts to adjust operations accordingly [72]