John Walbrecht - President Aaron Kuehne - Chief Financial Officer Cody Slach - Investor Relations.

Andrew Burns - D.A. Davidson Peter McGoldrick - Stifel.

[Starts Abruptly] …the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based upon 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 and credit markets; the financial strength of the company's customers.

The company's ability to implement its 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 acquisition strategy; the company’s ability to successfully execute its acquisition strategy or that any such strategy 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 successfully integrate Sierra Bullets, changes in governmental regulation, legislation or public opinion relating to the manufacture and sale of bullets by our Sierra segment, and the possession and use of firearms and ammunition by our customers.

The company’s ability to protect patents, trademarks and other intellectual property rights; any breaches of or interruptions in our information systems; 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 in 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 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’d like to remind everyone this call will be available for replay through March 26 starting at 8.00 p.m. Eastern toning. 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 claruscorp.com.

Any redistribution, retransmission or rebroadcast of this call in any way without the expressed written consent of Clarus Corporation is strictly prohibited. Now, I'd like to turn the call over to the President of Clarus, John Walbrecht. John..

First, we have returned our focus to Black Diamond brand and specifically our new product innovations, and second, we are striving to enhance our brand equity through targeted marketing and PR campaigns, centered around the brand experience and national advertising.

This includes the regular creation of new digital content that we use on our website and throughout social media, as well as the launch of our first ever television campaign for the Black Diamond brand, which aired during the 2018 winter Olympics in mid-February. We also had a banner year on the PR front.

During 2017 we had 5.9 billion total media impressions, up more than 50% over 2016, expanding major outdoor publications like Alpinists, Climb, Backcountry, BackPacker, Trail Runner, Outside Magazine and Men’s Journal to more mainstream publications like CNN and National Geographic, to core outlets like GearJunkie, Teton Gravity Research, Adventure Journal, etcetera.

We were also awarded 35 industry trade awards in North America and 18 in Europe throughout 2017 from publications ranging from Outside Magazine to Back Country Magazine, Men’s Journal to Powder Magazine.

These awards were given to products that span all of our major categories, further supporting my earlier comment about the power of our product diversification. Now a few comments on our performance by region.

In North America we grew our fourth quarter business due to broad based growth in all product categories and by continued higher levels of sports with our specialty retailers. In Europe, very strong At Once or ASAP orders, particularly in snow safety, harnesses, gloves, trekking poles and ski drove double digit Q4 sales growth in that region.

It has been over a year since we reallocated our European Headquarters to Innsbruck, Austria and we continue to be impressed by our team’s great efforts in execution and positioning the brand for continued growth.

In our Independent Global Distributor business which covers the rest of the world regions, including large markets in Asia, we experienced relatively flat results due to lower preseason orders, particularly in the mountain category. However, the climb and ski categories were strong.

In this region we have returned our focus to growing the key territories of Japan, Korea, Australia and China. In the fourth quarter we translated our strong sales into robust gross margin improvements.

Continued enhancement in our products, channel mix and the stabilization of our sourcing strategy, particular in-house manufacturing, better product fulfillments and lower levels of discontinued merchandise drove a 670 basis point increase in adjusted gross margins. Now on to, Sierra.

Our fourth quarter was the first full quarter owning the brand and spent most of the quarter focusing on its integration on to the Clarus platform, meeting with key customers and mapping out our strategy for 2018.

Sierra has experienced some softness is the domestic market place, especially at retail, but we are experiencing a stable book of business with our domestic OEM partners and we are active in executing the sales and marketing plans with our domestic retail accounts.

I will have more to say about strategic outlook with Sierra as well as additional business commentary after Aaron Kuehne, our Chief Administrative Officer and CFO walks through our financial results in more detail. Thanks Aaron. .

Thank you John and good afternoon everyone. Sales in the fourth quarter of 2017 increased 27% to $52.7 million compared to $41.4 million in the same year-ago quarter and on a constant current basis sales were up 25%.

Along with the strong category growth John mentioned in his opening remarks, particularly in climb and ski, the increase was due to our acquisition of Sierra Bullets on August 21, which added $6.8 million to our sales in the fourth quarter. Excluding the acquisition however sales still increased organically by a healthy 11%.

In fact, the fourth quarter of 2017 benefited from a 10% year-over-year increase in pre-season orders, while improved fulfillment rates and healthier inventory levels drove a solid 28% increase in At Once orders. As a result, our inline business grew in the fourth quarter by 15%.

These increases were partially offset by a 46% decrease in the amount of discontinued merchandise sold during the quarter, further reflecting the improvements being made on our supply chain, inventory management and streamlined apparel initiative. In fact this point also ties it nicely to our gross margin performance.

Gross margin in the fourth quarter increased 350 basis points to 32.6% compared to 29.1% in the year-ago quarter.

The increase was primarily due to a favorable mix of higher margin products, the stabilization of our sourcing strategy, particularly in our in-house manufacturing and reflected more normalized levels of discontinued merchandise as we expected.

Excluding a fair value inventory step-up associated with the Sierra acquisition of $1.7 million, adjusted gross margin increased 670 basis points in the fourth quarter to 35.8%. Excluding the acquisition, gross margin was up 630 basis points to 35.4%.

Selling, general and administrative expenses in the fourth quarter increased to $16.5 million compared to $12.6 million in the year-ago quarter.

The increase was due to the continued strategic initiatives around new product introductions and increase in Black Diamond’s brand equity, as well as approximately $1.7 million of incremental expenses due to the inclusion of Sierra, which includes $900,000 of amortization expense associated with the allocation of the Sierra purchase price.

Now moving on to taxes. As you may recall, in 2015 we fully valued our net operating loss carried forwards, effectively leaving the company in a differed tax liability position.

As a result of the recently enacted tax law, the revaluation of the our differed tax assets and liabilities other than our net operating loss carry forwards drove an increase in the year-over-year tax benefit. As such, an income tax benefit of $6.1 million was recorded in the fourth quarter of 2017 compared to $400,000 in the year ago quarter.

Net income in the fourth quarter improved to $6 million or $0.20 per diluted share compared to the net loss of $1.4 million or a loss of $.05 per diluted share in the fourth quarter of 2016.

Net income in the fourth quarter of 2017 included $1.7 million of non-cash items, $200,000 in transaction costs, $100,000 in merger and integration costs, and minimal restructuring costs, compared to $1.7 million of non-cash items, $100,000 in restructuring costs, and minimal transaction costs in the fourth quarter of 2016.

Adjusted net income, which excludes the non-cash items, as well as restructuring, merger and integration and transaction costs increased significantly to $4.6 million or $0.15 per diluted share, compared to adjusted net income of $400,000 or $0.01 per diluted share in the fourth quarter of 2016.

Adjusted EBITDA increased significantly to $5.1 million compared to $300,000 in the fourth quarter of 2016. Moving on to the balance sheet. Due to the acquisition of Sierra and repayment of our subordinated notes, at December 31, 2017 cash and cash equivalents declined to $1.9 million compared to $94.7 million at December 31, 2016.

To help finance the acquisition we drew down on our line of credit in the third quarter of 2017 by $27.4 million. During the fourth quarter of 2017 we generated free cash flows of $6.5 million, which were used to pay down the line ending the year with $20.8 million in debt compared to $21.9 million at the end of 2016.

Despite adding $10.1 million worth of Sierra inventory, we ended 2017 with inventory outstanding below our target and believe we begun 2018 with healthy inventory levels across most of our business. I would now like to introduce our 2018 financial outlook. We started our planning process for 2018 in the fall of 2017.

There are certain trends lift in the market place at retail and even more generally, such as those associated with the political environment, commodities, foreign currency, taxes and duties, that all play into how we think and plan for the future. As these variables unfold, we plan to continue to provide updates along the way.

We anticipate fiscal year 2018 sales to grow 17% to 20% to approximately $200 million to $205 million compared to actual sales of $170.7 million in 2017.

On a pro forma basis, as if had owed Sierra for all of 2017, we anticipate fiscal year 2018 sales to grow 5% to 7% on pro forma sales of $191.2 million in 2017, which includes high single to low double digit growth rates at Black Diamond and low single digit growth rates at Sierra.

On a constant currency basis we expect sales to range between $197.5 million to $202.5 million or up 16% to19% compared to 2017. We expect adjusted EBITDA margin to be approximately 8%, which includes $5 million of cash corporate overhead expenditures. This compares to an adjusted EBITDA margin of 3.6% in 2017.

While we have provided a gross margin outlook in the past, we believe presenting adjusted EBITDA will best capture our progress, not just on gross margin expansion, but also leveraging our SG&A to increase free cash flow, which we believe positions us to act if another attracted M&A opportunity like Sierra arises.

With that being said, we thought it would be helpful to provide some specific commentary related to our gross margin and SG&A expectations in 2018.

Excluding a fair value inventory step up charge expected in Q1 of 2018 of $1 million which is associated with the Sierra acquisition, we expect full year adjusted gross margins to continue to improve on a year-over-year basis.

This is expected to be driven by an improvement in our overall channel and product mix and operational efficiencies associated with our supply chain and in-house manufacturing. As a result of the Sierra acquisition, we expect amortization expense in SG&A to increase from $2.4 million in 2017 to $4 million in 2018.

Depreciation expense is also expected to increase from $2.9 million in 2017 to approximately $4.5 million in 2018.

As part of implementing a long term incentive plan for the executive team, non-cash stock based compensation is expected to increase from $1.2 million in 2017 to approximately $2.5 million in 2018, and as I stated, we expect $5 million in cash corporate overhead expenditures.

Taking this into consideration we expect to generate free cash flows of $5 million to $10 million in 2018 after approximately $3 million in capital expenditures, which is dependent upon any necessary increases in inventory to support growth opportunities in the marketplace for Spring 2019.

Before passing the call back over to John, 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 a possible change of ownership to maximize the value of our NOLs.

Any such change of ownership under these rules would imperious existing and significant NOLs for federal income tax purposes. As of December 31, 2017 we estimate that we have available NOL carry forwards for US federal income tax purposes of approximately $157 million. This concludes my prepared remarks. Now I’ll turn the call back over to John..

Thanks Aaron. Before moving to our strategic outlook, I’d like to recap our fourth quarter results. The parts of our business that we used to measure execution are all on track. Sales were up across all major categories, geographies and channels and our gross margins have continued to improve significantly.

On a full year basis these metrics for the most part were directionally the same.

We are investing in sales and marketing campaigns that are driving enhanced consumer awareness, which have driven both strong ASAP orders and strong bookings for 2018 and we are well on our way to integrating Sierra and building cash flow to help further our acquisition capabilities. Now pivoting to product and a few comments on our fall ’18 line-up.

We are very excited about the brand’s momentum heading into the fall ’18 season, which we expect will feature the interdiction of more than 15 new products across all three categories. Now having recently finished trade shows in both the U.S.

and Europe, we continue to see strong brand momentum both in product innovations, as well as our aggressive marketing on lighter, faster, stronger. In Climb we continued our innovations with ICE, launching the industry’s lightest UL Ice Crew and the new Reactor ice tool.

New innovations in [Chalk][ph] with the launch of Pure Gold, a Chalk additive that increases moisture absorption by 10X; we also expect new developments in bouldering pads, bouldering accessories alongside new colors of our rock shoe collection. We’ll continue to build momentum in the ever growing bouldering category.

Within the growing popularity of backcountry skiing and boarding, BD continued to push the innovations in our ski and snow safety category with the new Helio Ski Collection and in the award winning Boundary Pro series, new Ultra Light Bindings, new Black Diamond Beacons, new Whippet Ski Poles, Expanded Skins, the new Recon Stretch Jacket and Pants, [inaudible] Ski touring Shell, expanded gloves and finally the launch of Snow-Trekking Carbon Skis with built in skins.

Finally, Mountain saw BD launch numerous different new products, including the zipped backpacking light new packs and the expansion of our award winning First Light jacket series. As we look to the future in Spring ’19, we plan to launch Black Diamond’s most aggressive collection of innovations in the outdoor industry to-date.

Along our aggressive marketing and the addition of TB ads, our goal is to strengthen our awareness both amongst our super fans, as well as our growing outdoor athletic community. Now moving to Sierra, in 2018 we will seek to replicate the playbook we are executing with Black Diamond.

We can do this because like Black Diamond, Sierra has an authentic brand with a product rooted investing class performance. So in 2018 we expect to leverage our various strategic and financial resources to establish our foundation of growth.

Focused on category segmentation of compete, hunt, protect and defend, Sierra plans to make investments that will seek to enhance both sales and marketing, including social and digital capabilities, a new print campaign, strengthen our retail partnerships, improve fulfillment, expanding with both law enforcement and military channels and of course continue to innovate new products like the new Spectra Bullet we launched this past January at the Shot Show.

In support to the new attention to Sierra, we successfully launched new bullets at both the Shot Show and the IWA Show in Germany putting the industry on notes that we are going to be disrupted in both our product innovations, as well as our marketing initiatives. Before I conclude I’d like to say a few words about the current environment.

We are stricken by the grief over the inconsolable school shooting that took place in Parkland, Florida. It is impossible to grasp the senseless loss of life, both in Parkland and in other recent incidences. Our hearts go out to the victims and to their families and we share a strong desire of our community to make this nation safer.

At Clarus Corporation, including Black Diamond, Sierra and PIEPS brands, safety and responsibility are our core values. We do not produce firearms of any kind.

Our products foster experience and that enrich the lives of our enthusiast user base across the world and we are dedicated to the mission that enhances this experience through training, education, safety and social responsibility.

As a company, our position is that every civil agent who engages in the use of firearms should be extensively trained in their safe use and care in both the outdoors and in the range. There are a number of organizations that provide certification and training in the use of firearms and we support all of them.

Furthermore our Board of Directors and management are regularly evaluating the causes of great importance that we support through the brands we own. This includes corporate and social responsibilities and the continuous evaluation of our respective business partners, which includes our entire supply chain and wholesale and distribution partners.

We believe these important partners understand the differentiation of our brand and our support of our mission. So in closing, the fourth quarter culminates a very important year of transition in our business, positioning the company for what we feel would be a record 2018.

We believe the proactive steps we have taken to invest behind their brands and in these best-in-class products, all the while supporting this innovation with a clear marketing strategy that speaks to our core consumer is resonating well with our retailers and building the level of trust that we believe forges long term relationships.

As such, we expect our momentum to continue and look forward to reporting on our progress along the way. I’d now like to turn the time and the call back over to our operator for Q&A before my closing remarks. Operator..

Thank you, sir. [Operator Instructions] And we will take our first question from Andrew Burns with D.A. Davidson..

Thanks. Good afternoon guys. Just a quick one on the weather. Clearly a bit of a headwind in the Western U.S. but beneficial in Europe.

Would you say when you sum up all the different parts, categories and regions the weather materially impacted results one way or the other in 4Q? Hello?.

Caller, your line is open..

Hi, good afternoon guys. Just a quick question on weather, not sure what happened there, but when you look at the various regions and categories, it was tough in the Western U.S., beneficial in Europe.

Would you say that rolling it all up weather had an impact one way or the other material on the results for 4Q?.

Ladies and gentlemen, please stand by. Looks like we’re having technical issues. Speakers, please resume. [Technical Difficulty].

And we will take a question from Jim Duffy of Stifel..

Hi, this is Peter McGoldrick on for Jim. Thanks for taking my question. I was curious, as you looked forward to high single digit Black Diamond growth.

Could you size the opportunity between your categories and channels? Hello?.

If you could please re-ask your question?.

Hi, thanks for taking my question. This is Peter on for Jim.

I was curious if you could break down the drivers of the high single digit Black Diamond brand growth between channels and categories?.

Sure, if you want me to take it John..

Yep..

So, this is Aaron, Peter. First of all at the channel level what we saw was our domestic business grew 10%, our international business was up 12%, the North American business was up 9%, Europe was up 17% and as communicated our rest of the world was a bit flat.

Now the primary drivers here was in North America in particular was associated with our client business, the continued roll out of our climbing shoes, ropes, harnesses, but also some early launch products for Spring ’18 such as trekking poles.

We also had a very strong initiative around our gloves and also our snow safety and in Europe with the weather the way that it was, it was strongly driven by snow safety that of beacons and also [indiscernible]..

Okay, and regionally with the weather in the Rockies and then in American west, was that an impact or did that catch up as fourth quarter progressed. .

It was definitely an impact and I think everybody felt that.

As we said in the report, I think it is both a blessing and the curse of BD as the 33 categories of products that we perform in, when its bad we were able to balance our business into other areas that are growing and likewise if it was really huge you know we may not get a full impact of it, because its only partial of our business, win some.

I mean I will say it’s probably in total balance because Europe was up so strong when the U.S. West was down. But in the Backcountry Ski brand, we are more of a Rocky Mountain to North West brand than we are a Mid-West Ski brand. .

Okay, and then on previous calls you discussed the lifestyle apparel opportunity.

Can you speak a little bit about how that is progressing?.

We feel very strong on apparel. As we said, what you saw in the third and fourth quarter of last season was the start of our execution of the new apparel program, lifestyle being a part of that and mainly around Climb, and specifically you will see that as we move into Spring and Summer aspects of it.

Our business is predominately in the fall and winter based on outerwear, typically driven along the west, the ski market and so our apparel didn’t have as much lift as was potential given the western winter. .

Okay, thank you. And then finally I was just curious on your gross margin outlook. You mentioned channel mix and supply chain being opportunities for continued expansion. Especially with Sierra Bullets are you seeing input costs pressures and if you could dimensionalize those that would be great thanks. .

You bet, so as communicated you know we are focused more on the adjusted EBITDA percentage this time around. This is where we want to focus our investors but also provide us with the flexibility as we continue to grow and scale the business. We are expecting an expansion of gross margins.

At the BD level it is due to the channel mix and also continued improvements in our sourcing and supply chain activities, as well as our in house manufacturing. At the Sierra business we are seeing some headwinds or pressures on the business due to its reliance on certain commodities such as copper and lead.

For example, you know about 50% of its overall cost of goods sold is a component of copper and lead and with the increase in those two commodities on the combined basis of about 30%, we are seeing some pressures of about 500 basis points on that businesses gross margins that we are actively looking at of how we can mitigate, but also improve from here, whether it be through higher levels of throughput and you know maximizing the output of our manufacturing facility, but also through new innovation and being able to reset pricing along the way as well.

.

Thank you..

[Operator Instructions]. And our next question will come from Andrew Burns of D.A. Davidson. .

Hey guys, can you hear me this time?.

Yes, we can.

How are you?.

Excellent! Great! John I know you talked about from distribution opportunities in some of your more popular categories, whether it’s lighting or trekking poles. Is there any distribution expansion in ’18 that’s going to be helping out, whether it’s run specialty or something broader in the lighting category? Thanks. .

Yes, we are definitely expanding our lighting into broader distribution as well as broader categories as you mentioned, specifically trail running is a strong initiative for Black Diamond into 2018 and beyond.

We will see growth not only in the distribution opportunities, but also in expansion of both the skew level and the door level in lighting amongst our top retailers. I think head lamps have proven to be here for the future. .

Great. Thanks and I appreciate the commentary on the M&A strategy and I’m just curious, I understand it’s a very different business than it was a few years ago. When there was sort of a more industry focus to the acquisition strategy, valuation was frequently a sticking point.

Is that still the case or do you see valuation at more sensible levels for potential acquisition targets. Thanks. .

We’ll continue to be focused on valuation, but more importantly on the opportunities. You know every time we evaluate a potential detail it’s all about how it would fit into the current organization, but also how we’d be able to leverage our time as management and also what it contributes to the overall ecosystem of Clarus.

And so we’ll continue to be once again mindful of the valuation.

We expect every deal to be accretive from the get go, but we also recognize as we continue to focus on the outdoor and consumer industries specifically that those you know opportunities come with a certain type of valuation or certain type of theses along with it and we recognize it and we are embracing that. .

Best of luck in ’18. .

Appreciate it. .

And there’s no further question is the queue. I’d like to turn the call back over to Mr. Walbrecht for closing remarks..

Thank you, Britney. We like to thank everyone for listening today’s call and we look forward to speaking with you when we report our first quarter results. Thanks again for joining in. Bye. .

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation..