Aaron Kuehne - Chief Administrative Officer and CFO John Walbrecht - President, Diamond Equipment President Cody Slach - Director, IR.

Dave King - ROTH Capital Partners Andrew Burns - D.A. Davidson Jim Duffy - Stifel Mark Smith - Feltl and Company.

Good afternoon, everyone, and thank you for participating in today’s Conference Call to discuss Black Diamond, Inc.’s Financial Results for the Third Quarter ended September 30, 2016.

Joining us today are Black Diamond Inc.’s Chief Administrative Officer, and CFO, Aaron Kuehne; Black Diamond Equipment’s President, John Walbrecht, and the Company’s Director of Investor Relations, Cody Slach. Following the remarks, we will open the call for your questions. Before we go any further, I would like to turn the call over to Mr.

Slach, 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. Cody, please go ahead..

Thanks Kelly. Please note that during this conference call, the Company may use words such as appears, anticipates, believes, plans, expects, intends, future and similar expressions, which constitute forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are made based on the Company’s expectations and beliefs concerning future events impacting the Company, and therefore, involve a number of risks and uncertainties.

The Company cautions you that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.

Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements used in this call include, but are not limited to, the overall level of consumer spending on the Company’s products; general economic conditions and other factors affecting consumer confidence; disruption and volatility in the global capital credit markets; the financial strength of the Company’s customers; the Company’s ability to implement its reformation and growth strategy, including its ability to organically grow each of its historical product lines; the ability of the Company to identify potential acquisition or investment opportunities as part of its redeployment and diversification strategy; the Company’s ability to successfully redeploy its capital into diversifying assets or that any country redeployment will result in the Company’s future profitability; the Company’s exposure to product liability or product warranty claims and other loss contingencies; the stability of the Company’s manufacturing facilities and foreign suppliers; the Company’s ability to protect, patents, trademarks and other intellectual property rights; fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations; the Company’s ability to utilize its net operating loss carry forwards and legal, regulatory, political and economic risks in international markets.

More information on potential factors that could affect the Company’s financial results is included from time-to-time in the Company’s public reports filed with the SEC, including the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

All forward-looking statements included in this conference call are based upon information available to the Company as of the date of this call, and speak only as of the date hereof. The Company assumes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this call.

I would like to remind everyone the call will be available for replay through November 14th, starting at 8:00 pm Eastern tonight and 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 blackdiamond-inc.com.

Any redistribution, retransmission or rebroadcast of this call in any way without the expressed written consent of Black Diamond Inc. is strictly prohibited. Now, I would like to formally introduce Black Diamond Equipments newly appointed President, John Walbrecht. John is an industry veteran with extensive experience that spans over a 30-year career.

Prior to joining Black Diamond, he served as the President and CEO of the Mountain Hardware, a manufacturer of hi-tech, active outdoor closing, equipment and camping accessories, and a subsidiary of Columbia Sportswear.

Prior to his role at Mountain Hardware, John served as President and CEO of Phoenix Outdoor, an international group of clothing and equipment brands. He also served in senior leadership roles at Spyder Active Sports, Timberland and Dr. Martens among other.

So with that, I will now turn the call over to John, who will provide some high-level commentary on the third quarter.

John?.

Thank you, Cody, and good afternoon, everyone. It’s a pleasure to be joining you today, and I’m honored to be part of the Black Diamond team. At the close of the market today, Black Diamond, Inc. released its earnings for the third quarter ended September 30, 2016.

Following my brief opening remarks, our Chief Administrative Officer and CFO, Aaron Kuehne will review the Company’s third quarter 2016 financial performance and our outlook for the remainder of 2016 year. Following Aaron’s remarks, I will provide some additional commentary and we I will leave some time for questions and answers at the end.

The third quarter was once again highlighted by healthy demand for our climbing and mountain equipment across all geographic regions.

The quarter was also characterized by stability within our independent global distributor business, solid execution of pre-season orders for fall, improved fulfillment rates and healthier inventory levels, which drove strong at-once orders.

Our third quarter was also impacted by a weaker euro, higher costs associated with manufacturing we repatriated from China back to our U.S. headquarters.

That said, the Company made steady improvements during the quarter in efficiency, quality and output, and we believe that the repatriation has us well-positioned to achieve higher gross margins in 2017 and beyond, along with improved levels of services to our customers and better working capital management.

Before going any further, I would like to turn the call over to our Chief Administrative Officer, and CFO, Aaron Kuehne, for a detailed financial overview of the third quarter.

Aaron?.

Thank you, John, and good afternoon, everyone. For clarity, any comparisons made to prior periods are from continuing operations and exclude the results of POC through sale we completed last October. Sales in the third quarter of 2016 increased slightly to $39.4 million compared to $39.3 million in the same year-ago quarter.

Excluding the impact of foreign exchange, sales were up 3% due to strong climb and mount equipment products growth across all of our geographic regions. Gross margin in the third quarter was 31.3% compared to 36% in the same period last year. Foreign currency headwinds accounted for 190 basis points of this decline.

Excluding the impact of foreign currency exchange, gross margin was 33.2%.

The 280 basis-point year-over-year decline in gross margin on a constant currency basis was the result of a combination of an unfavorable mix of lower margin products and additional cost associated with the continued ramp of Black Diamond’s recently repatriated manufacturing activities from Asia to the U.S.

As a reminder, our overall sales and gross margin are impacted by unfavorable foreign currency changes on a transactional basis. The primary cost of our inventory is denominated in U.S.

dollars, while approximately 40% of our global sales are denominated in foreign currencies, primarily the euro, Canadian dollar, Swiss franc, British pound, and Norwegian krone. We attempt to manage our foreign currency risk on a continuous basis through natural hedges and foreign currency hedge contracts.

Although we have hedges in place for the different cash flows denominated in foreign currencies, these hedges will never be a perfect offset to the actual currency movements, especially with the currency volatility we’ve experienced in recent quarters.

These hedges also do not protect our financial statements from the translation impact we experienced from these weaker currencies. Third quarter SG&A, which excludes restructuring, merger, and integration and transaction costs was down 19% to $11.5 million compared to $14.2 million in the same period last year.

This decline is a direct result of the reformation information that we announced last year and the realization of the savings that we forecasted for that restructuring. During Q3, we incurred restructuring charges of $282,000 associated with our European headquarter relocation, and the formal closure of our manufacturing operations in China.

We expect only modest incremental restructuring charges for the remainder of the year. Net loss from continuing operations in the third quarter was $400,000, or a loss of $0.01 per diluted share compared to a net loss from continuing operations of $50.8 million, or a $1.55 per diluted share in the year-ago quarter.

Please recall the third quarter of 2015 included a discreet charge to income tax expense of $49.9 million related to an increase in our valuation allowance on deferred tax assets.

Adjusted net income from continuing operations, which excludes non-cash charges as well as restructuring costs, was $1.7 million, or a $0.06 per diluted share in the third quarter of 2016, compared to an adjusted net income from continuing operations of $700,000 or $0.02 per diluted share in the year-ago quarter.

Adjusted EBITDA increased 61% to $1.7 million compared to the third quarter of 2015, primarily due to lower estimate. Moving on to the balance sheet and cash flows. Cash at September 30, 2016, totaled $96 million compared to cash and marketable securities of $98.2 million at December 31, 2015.

During the third quarter, we repurchased approximately 278,000 shares of our outstanding common stock for a total cost of approximately $1.3 million at an average price of $4.52 per share. For the nine-month period, the Company has repurchased a total of 1.2 million shares of common stock for a total investment of $5.1 million.

This meaningful increasing cash at September 30 is largely the result of the Company’s continuing focus on inventory control and improved working capital management. September 30th is typically our higher water mark for inventory. Yet current levels are tracking 17% below Q3, 2015 or approximately $9 million lower.

The Company has now permanently eliminated safety stock levels of inventory that we carried in 2015 through the repatriation of manufacturing from China. Needless to say, we believe that we are well on track to achieving the targeted $5 million inventory reduction in 2016.

As of today, approximately $17.8 million remains on our $30 million stock repurchase program, and we expect to continue to be opportunistic in accumulating additional shares.

As a reminder, our common stock continues to be subject to a rights agreement that is intended to limit the number of 5% or more owners and therefore, reduce the risk of the possible change of ownership in order to maximize the value of our NOLs.

Any such change of ownership under these rules would impair our existing and significant NOLs for federal income tax purposes. As of September 30, 2016, our NOL balance remained at approximately $166 million.

Total debt was $21.4 million, which includes $22.6 million of 5% subordinated notes due in 2017 and $108,000 in foreign term notes, compared to total debt of $20.1 million at December 31, 2015. For flexibility, we continue to maintain at $20 million revolving credit facility which matures on April 1, 2017. Our 2016, sales outlook remains unchanged.

We expect sales on a reported basis to be approximately $145 million to $150 million compared to $155.3 million in 2015. On a constant currency basis however, we expect sales to increase slightly to approximately $155 million to $160 million or a flat to up 3% compared to 2015.

As a result of the repatriation of our Chinese manufacturing assets and ramp up in Salt Lake City during 2016, we expect gross margin on a reported basis to be around 30% compared to 34.9% in 2015. On a constant currency basis, we expect gross margin to be approximately 33.5%.

We expect SG&A in 2016 to be around $49 million, which is a decrease of $9.5 million or 16% from 2015. The $49 million includes approximately $4 million of cash corporate overhead expenditures. Finally, all of this guidance assumes the euro will trade around 1.08 for the remainder of the year.

At this point in time, it continues to be too early to provide any specific guidance or details around the redeployment of our capital. It remains our intention to, at the appropriate time acquired high-quality, durable, cash flow producing assets with expected enterprise values in the range of $250 million to $500 million.

At this time, we expect to invest in assets unrelated to outdoor equipment in order to diversify our business. This concludes my prepared remarks.

Now, I’ll turn the call back over to John?.

On the PR front, Black Diamond Equipment continues to win multiple awards. This time for our innovative fall 2016 equipment in apparel. In North America, we won two prestigious backpacker editor choices award for our First Light Hoody and the Helio carbon ski pole.

We won three back country magazine Gear Guide select awards for the Boundary 107 ski, the Helio 116 ski and the Helio 95 ski. Our PIEPS micro avalanche beacon was awarded Freeskier’s editor’s pick. We won POWDER Magazine’s skiers’ choice award for the Boundary 107 and the Helio 105 skis.

We are awarded TransWorld SNOWboarding’s Tested and Approved for Saga 40 JetForce air pack and the new Crew glove. We’re awarded best in show for our Iota headlamp from GearJunkie.com at the Summer Outdoor Retailer show.

And finally, five of our products were featured in Outside Magazine’s buyer guide, the Carbon ski pole, the Helio shell jacket, Cirque 45 Pack, our HeavyWeight waterproof gloves and our Razor Carbon Ski poles. In the UK, our Hot Forge Hybrid Hoody and Cosmo headlamps received the editor’s choice award from Outdoor Enthusiast.

We moderate web featuring focus on our Helio 88, Helio 105 and Boundary 115 skis on France’s skipass.com. And our Vapor helmet received best in class recognition from Mountain Magazine in Germany, as we continue to connect with grassroots climbing and backcountry skiing audiences through our sports and our community efforts.

In addition, three new Black Diamond Equipment branded gyms opened in the United Kingdom, one in Germany and two in Sweden, all featuring Black Diamond branded concept shops. From a retail marketing perspective, in North America, we are supporting fall 2016 sell-through with our key distributors through point of purchase kits to our top 150 dealers.

We installed 11 Black Diamond Equipment branded windows in the U.S. in built six custom shop in shop installations in key specialty retailers and climbing gyms around the country.

The fall 2016 Black Diamond Tour was confirmed for 12 ski mountaineer and climbing athletic tour staffs, which would support key ski dealers and climbing gyms during the U.S.

In Europe, we installed new in-store imagery window display, headlamp displays and apparel tables across Europe in Austria, Switzerland, Germany, France, Italy, Slovakia and Norway. Connecting with our community and supporting our e-commerce business with a solid media and advertisement strategy continues to make real progress.

We experienced an approximate 15% in Instagram followers during quarter three to nearly 335,000 and engagement continues to rise. We began BD employees Instagram campaign to share our internal stoke and brand point of view.

Our live, climb repeat Instagram hash tag, now has over 55,000 photos and 86% increase in just the last five months, driven by our social media strategy. We launched the women’s addition of the Black Diamond Bootcamp with four video installments, featuring some of the best female climbers in the world. And this has created already over 50,000 view.

Finally, our fall 2016 advertising campaigns have begun to support apparel, our first light hoody and our Helio shell and equipment with skis and our beacon in major outdoors and ski publications across North America and Europe.

Before I conclude and open up for questions, please keep in mind that I assumed my leadership responsibility for Black Diamond equipment in PIEPS just four weeks ago. During this time, I’ve emerged myself in most aspects of the business in both North America and in Europe.

Among other things, I spent time in factory and some supply chains with some of our largest retailers and attended our North American and international sales meetings. From a timing prospective, I’m enthusiastic and fortunate to join Black Diamond at this time.

We believe that the Company’s completing its reformation and restructuring associated with the repatriation from China, and with the sale of the Gregory Mountain POC assets. I’ve also recently launched its 2017 budgeting process, and this will be as well -- as we will be completing our three-year strategic plan cycle.

We expect to complete those processes and provide an update early next year. In the interim, we hope to continue to drive Black Diamond Equipment and PIEPS business towards a targeted year-end adjusted EBITDA rate of approximately 10%, setting this up for what we expect to be a strong and growing and profitable 2017.

I would now like to turn the call back over to our operator for questions, before closing my remarks..

We’ll go first to Dave King with ROTH Capital Partners..

First of congrats on a pretty decent quarter. I guess in terms of the outlook, particularly in the context of fourth quarter, I guess the implied guidance is kind of $41 million, call it at the midpoint.

I guess that declined, or that implied declining revenue, I think versus some of the flat trends you reported in the quarter, constant currency growth even.

I guess can you talk about what’s reflected in that, any color you can share in terms of October trends, anything to be concerned about from an in demand perspective? I mean, it sounds like climb has undergone pretty well especially domestically, may be you could just give us some color in terms of how to think about that?.

You bet. So, you’re exactly right with the way to putting this up as far as the fourth quarter and our expectations that does imply that we will see a slight decline in the fourth quarter. And that is consistent with what we are seeing. And this is primarily due to this continued recalibration or focused effort with our apparel initiative.

We’ve been very open about, as we headed into 2016 that we would be ticking on that initiative or that activity as far as just rightsizing the apparel initiative and making it more focused on the core consumer. And so that’s primarily what’s being reflected in our guidance and expected results for Q4..

Okay. So, then, assumingly the offset is those climb and mountain equipment is still growing. And I would think that’s a bigger piece of the business, the climb and mountain in terms of equipment.

So, is it -- am I just not thinking about the right way as apparel just was a big contributor in terms of comparison -- for comparison sake or what’s the right way?.

You are exactly correct. We are seeing continued -- we are seeing solid momentum or solid performance within our core business, primarily that of climb and mountain products. It’s just that apparel still represented a good portion for comparison reasons last year versus what we’re expecting this year..

And then maybe switching gears a bit in terms of uses of capital, obviously we’re deploying cash, I mean any thoughts in general that whether you can share in terms of M&A conversations in terms of how are those evolving? And then, I guess more importantly, I was encouraged to see further buyback activity during the quarter.

Any willingness there or is there anything that would cause you to maybe think about your diversification strategy a little bit and maybe consider more aggressive repurchases at this juncture, anything excluding you from doing that? I mean stock’s still trading at a discount to book.

Is it mainly a function of you wanting to monetize the NOLs; what are the thoughts there? Thanks..

Very good question, Dave. And I’ll talk that one as well. So, first of all, as it relates to the redeployment, as communicated in our prepared remarks, it’s still too early to really dive into the specifics as it relates to that activity. We are definitely still pursuing a redeployment strategy. We’ve looked at a lot of different opportunities.

However, as we all know, it takes time for these things to develop. As it relates to the share repurchase program, we continue to be opportunistic. We are not going to limit ourselves as far as -- or put up certainly guard [ph] as far as that activity.

We will continue to be opportunistic, but more importantly we are very focused on the redeployment strategy as well as monetizing or utilizing the NOLs. So, it’s right in line with what you just described and that’s the overall strategy..

Okay, that helps. I will step back, and good luck as you close the year..

We’ll hear next from Andrew Burns with D.A. Davidson..

John, congratulations on your new position. I understand you just arrived, I just wanted to ask a high level question. Looking at your background, you do technical outerwear experience. And Black Diamond here is just resetting that category.

As you look into 2017 and beyond, do you see any growing fruit there to actually drive some incremental growth or put your stamp on from the upcoming season?.

I think we believe that apparel is a long-term opportunity for Black Diamond. It fits nicely into both our core category of climb and mountain, and we look forward to the future of developing the right team and product mix to be successful with both our specialty and our key accounts in that arena..

And any thoughts on new mountain category opportunities? I think I read in article with the quote from you about sleeping bags? But just expanding the Black Diamond brand in adjacent mountain categories would, what’ the opportunity there?.

As we look to development at 2018 and the spring season, we will look at potential other opportunities that are either adjacent to or complementary to what we’re already doing in climbing and mountain. As the season kicks off here this week with tradeshows and calls, we will start to share some of those ideas with our best retailers.

And based on the response, the feedback we get, will look at opportunities that our retailers believer are right for Black Diamond and for them..

One more for Aaron if I can, just in terms of the regional margin profile, now that you have the Europe headquarters and in Austria, just the thoughts in terms of the margin potential there versus U.S.

to maybe parity and what’s going drive the expansion going forward, just more from a regional perspective?.

Yes, you bet. So, first and foremost, the team over there, the Black Diamond European team has just done a fantastic job with that transition. It’s gone according to plan and it’s actually exceeded our expectations.

It really has -- we have a young enthusiastic team that is pursuing a lot of different opportunities for the business, and it is very focused on the sales and marketing activities.

One of the reasons for the move from Basel, Switzerland to Innsbruck, Austria was to provide us with a better cost model and mitigate some foreign currency of risks that exist over in Europe, especially when prior to this transition we were -- we had a cost basis denominated in francs whereas now we are denominated in euros.

We have been able to realize a lot of the benefits associated with that move in terms of a lower cost basis and also creating a more natural hedge. And actually in Q3 we already saw some profitability peak its head in that region and that is encouraging.

We will continue to see some margin pressure at the gross margin level, just because of the way that the currencies are trading right now, primarily the euro.

However, with the rightsizing of the business and transition that to a euro-based functional currency, if you will, we are optimistic that that region will no longer be a drag in terms of overall profitability but actually be accretive..

We’ll hear now from Jim Duffy with Stifel..

Thanks. Hi guys. John, welcome to you. Aaron, I have a couple of questions for you on the gross margin.

Can you isolate the mix factors impacting gross margin?.

You bet. So, the mix was about a 180 basis-point impact, both in terms of product and geographic mix. From a geographic standpoint, we saw our independent global distributors actually stabilize and increase. They had a good year-over-year quarter.

As well as we continue to see an increase in demand for our climbing and mountain categories with climbing still facing some challenges when it comes to gross margins associated with the ramp up of our manufacturing activities here in the Salt Lake.

And so, the combinations of those two cause a decline of about as I say about a 180 basis points on a year-over-year basis. The remaining 100 basis-point decline outside of the foreign currency is associated with the movement of discontinued merchandise or inventory that we’re cleaning off the books..

And then any updates on when you expect to be adequately supplying demand in the categories challenged by the Salt Lake manufacturing?.

We continue to work monthly as we strengthen our team, both in output and efficiency. We’re optimistic that by the end of the fourth quarter and going into the new year that we will be back on trend. Suffice it that the demand doesn’t further ahead of where we’re at from a supply plant. And that was the perfect storm this season..

Got it, okay.

And then last one, Aaron, the currency assumptions, how do you see the influence on gross margins progressing; when we could we expect gross margin to possibly inflect positive?.

If you would have asked me this couple of weeks ago, I would have said, we were going to start to see that already. But then, the foreign currencies have weakened again.

As you’re aware, 40% of our business is denominated in foreign currencies with about 25% or so percent being euro-denominated, 7% being Canadian-dominated and the balance being denominated in pounds NOK, and Swiss francs for the most part equally weighted.

Of course enough, we have seen some strengthening of the Canadian dollar compared to the dollar over the last nine months and we also continue to be fairly opportunistic with our hedging strategies.

So, as we head into 2017, I’m hopeful that we can start to see some gains there, however a bit cautiously optimistic depending on what happens over to the next couple of months with the currencies themselves.

But I do not expect them to be a drag like they have been on a year-over-year or on a comparative basis, similar to what we’ve experienced in 2016..

[Operator Instructions] And we’ll move on to Mark Smith with Feltl and Company. .

First off, could you just tell us where you are at kind of in the process of lowering apparel inventory and when do you feel like you’ll have that right sense?.

Yes. So, we came into 2016 with a bit of a overhang from 2015 and even a little bit of 2014. But the team has been actively involved in moving that product. We’ve been developing other channels, primarily outside of North America to help facilitate to bring down all that inventory.

And as we look at it right now, we feel like we’re in a pretty good shape. Obviously there is still little bit more than we’d like to burn off. But we’re expecting at the end of this year, first part of next year that we’ll be in a really solid position as it relates to apparel inventory..

And then second, can you just give us a reminder of kind of winter -- fall versus winter versus spring summer, what the impact maybe would be if we were to see a good snow year this year?.

We’re very fortunate that we’re approximately a 50-50 business with core climbing and core mountain, both sustaining year around. Obviously, every brand in the business hopes and prays for a big winner and that will have a positive impact on categories like ski and apparel for us. So, we are optimistic about that.

But we plan our business on stable retail partnerships and the estimated of the normal flow of products..

And with no further questions at this time, I’d like to turn the conference back to Mr. Walbrecht for closing remarks..

Thank you. We’d like to thank everyone for listening today’s call. We look forward to speaking to you more when we finish our and report our fourth quarter results, early in the next year. Thanks again for calling in today and for all the support for Black Diamond..

And ladies and gentlemen, this does conclude today’s teleconference. You may now disconnect your lines and thank you all for your participation..