Cody Slach - Internal Director, IR John Walbrecht - President Aaron Kuehne - CFO.

David King - ROTH Capital Partners Jim Duffy - Stifel Nicolaus Michael Kawamoto - D.A. Davidson & Co. Chris Krueger - Lake Street Capital Markets, LLC.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Clarus Corporation Financial Results for the Second Quarter ended June 30th, 2018.

Joining us today are Clarus Corporation's President, John Walbrecht; Chief Administrative Officer and CFO, Aaron Kuehne; and the company's Internal Director of Investor Relations, Cody Slach. Following their remarks, we'll open the call for your questions. Before we go 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..

Thank you. Please note that during this 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 demand on the company's products; general economic conditions and other factors affecting consumer confidence, preferences and behavior; 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 business strategy; the ability of the company to execute and integrate acquisitions; the company's exposure to product liability or product warranty claims and other loss contingencies; the stability of the company's manufacturing facilities and suppliers; 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 carryforwards; changes in tax laws and liabilities, legal, regulatory, political and economic risks; and the company's ability to declare a dividend.

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 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 August 21st, starting at 8:00 P.M. Eastern tonight. 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 would like to turn the call over to the President of Clarus, John Walbrecht.

John?.

Thank you, Cody and good afternoon everyone. It's an exciting time it to be joining you. The record results of our second quarter signaled the momentum in our brands and reinforced that our strategy is gaining strength.

Key metrics that confirm these performance include 50% overall revenue growth for Clarus; 14% sales growth for Black Diamond; and a 32% pro forma growth in Sierra Bullets as well as significantly improved year-over-year gross margin, adjusted EBITDA and free cash flow.

Within Black Diamond's performance, apparel was up 89%, driven by continued strong demand in our new rainwear as well as our climb bottoms, sportswear and logo programs. We grew our Climb category 6%, slightly below our recent double-digit sales growth trend as a wet late winter impacted our spring climbing business.

However, this weather pattern, along with early deliveries for several key accounts helped drive 11% growth in our ski business and highlights the benefits of our diversification across the 30 different product categories.

Our Mountain business was up 15% due to continued growth in trekking poles and building momentum in our glove and pack lines, both of which are focused strategic initiatives that we have begun investing in 18 months ago, but are now showing well in our results today.

The 32% pro forma growth we expected in our Sierra business was the result of being more disciplined with our manufacturing activities and executing a go-to-market strategy that leveraged our key partner relationships.

Following the disciplined path to what we've successfully deployed at Black Diamond over the past 18 months, we are similarly starting to see gains in sales, margin, and fulfillment rates. I'll have more to say about our outlook for the Sierra business after Aaron's remarks. Now, on to the comments by region for Black Diamond.

Sales in Europe grew 15% in the second quarter, due to solid performance in apparel, trekking poles and gloves. We also continued to be impressed by our European team's great efforts in execution and positioning the brand for continued growth.

In fact, we believe the strength of the brand continues to build due to our enhanced sales and marketing efforts. In North America, we grew sales by 14%, driven by footwear, apparel, trekking poles, snow safety gear via growth in our key accounts.

In our independent global distributor market, which covers key regions outside of Europe and North America, including large markets in Asia, sales were up 5%. The second quarter can be seasonally low in this region, so we look to the first half result as an indicator of the performance and the year-to-date region is up 18%.

We are experiencing solid growth in Asia, primarily in Japan, and the strong acceptance of apparel and climbing products.

Over the last 18 months, we have been very focused on repairing and building the long-term relationship with our distributor partner in Japan, who has been with BD from the beginning as one of our initial investors and reinforcing our long-term focus on the ski market.

I am pleased to say that these efforts have begun to pay off, with Japan growing 30% thus far in 2018. We will continue to make Japan an area of strategic focus as we cheer on our amazing athletes as they prepare for the 2020 Games in Tokyo.

As an important, we continue to translate our strong topline results into significantly improved growth margins, profitability, and cash generation. During the second quarter, gross margins improved 510 basis points and we increased year-over-year adjusted EBITDA by $5.5 million.

This helped contribute over $6 million in free cash flow during the first half of 2018 compared to a nearly $9 million cash drain in the comparable period in 2017. It is important to note that our sales results today are partially the result of an SG&A that we made 18 to 24 months ago.

Our SG&A in the second quarter remained elevated compared to the prior year in order to continue our pace of product, research, development, and design. While these investments are being made, we are being prudent with our overall expense structure, taking a calculated approach of allocating dollars, where we believe we will see the greatest returns.

As we continually communicate the foundation of our results, we're driven by the focus on our core consumer through the quality and pace of product innovation, a clear disruptive marketing strategy, the fulfillment of strong order demand at retail, and our strategy of ease of business -- doing business with strategy.

With that, I'd like to turn the call over to Aaron to speak in more detail about our second quarter results.

Aaron?.

Thank you, John and good afternoon everyone. Sales in the second quarter of 2018 increased 50% to $45.9 million compared to $30.7 million in the same year ago quarter. And on a constant currency basis, sales were up 47%.

Along with the strong category and regional growth dynamics John mentioned in his opening remarks, the increase was due to our acquisition of Sierra Bullets on August 21, 2017, which added $10.9 million to our sales in the second quarter.

If we had owned Sierra in the year ago quarter, pro forma sales growth was 18% and included in this figure is 32% year-over-year growth in Sierra. Excluding the Sierra acquisition, Black Diamond sales were up a healthy 14%. Gross margin in the second quarter increased 510 basis points to 34.6% compared to 29.5% in the year ago quarter.

The increase was primarily due to a favorable mix of higher margin products, including strong apparel growth, and distribution channels, the stabilization of our sourcing strategy, and a more normalized levels of discontinued merchandise as we expected.

Selling, general, and administrative expenses in the second quarter increased to $15.8 million compared to $12.9 million in the year ago quarter.

As John introduced in his opening, the increase was expected due to the strategic investments we are making to drive innovation and growth in both Sierra and Black Diamond, partially offset by the prudent management of cost in other areas of the business.

Our strategy to ensure we deliver innovative and unique products to our customers requires these necessary costs to ultimately manifest themselves into future increases in revenue and profitability, much like we reported today.

Net loss in the second quarter improved to $0.8 million or a loss of $0.03 per diluted share compared to a net loss of $3.7 million or a loss of $0.12 per diluted share in the year ago quarter.

Net loss in the second quarter of 2018 included $3.2 million of non-cash items, $0.2 million in transaction costs, and minimal restructuring costs compared to $0.2 million of non-cash items and minimal restructuring costs in the second quarter of 2017.

Adjusted net income, which excludes the non-cash items as well as transaction and restructuring costs, increased significantly to $2.6 million or $0.09 per diluted share compared to an adjusted net loss of $3.4 million or a loss of $0.11 per diluted share in the second quarter of 2017.

Adjusted EBITDA had a positive change of $5.5 million, increasing the $2.8 million compared to a loss of $2.7 million in the second quarter of 2017. Moving on to the balance sheet. At June 30th, 2018, cash and cash equivalents totaled $2.6 million compared to $1.9 million at December 31, 2017.

The company debt balance at June 30th, 2018, was $16.1 million compared to $20.8 million at December 31, 2017. On June 28th, we entered into a new $75 million credit facility agreement plus an uncommitted accordion feature providing for an additional $75 million, for a total of up to $150 million with JPMorgan Chase Bank.

The upside to the agreement, which matures in 2022, significantly enhances our financial flexibility and lowers our financing costs as the facility burns interest at a LIBOR or adjusted LIBOR rate plus an applicable margin generally ranging from 1.5% to 2.2%.

The agreement also provides flexible covenants with structural enhancements for our strategically-important, internationally-based operations. The proceeds borrowed under the agreement were used to fully pay down our previously existing $40 million revolving credit facility and will be used for future working capital and general corporate purposes.

Ultimately, the new facility represents a strong pillar in our overall financial strategy and is supportive of our long-term growth plans. On the capital allocation front, after multiple extensions and increasing the maximum price from $7.20 to $8, on July 12th, we announced the results of our $7.5 million modified auction tender offer.

We accepted for purchase 417,237 shares for an aggregate cost of approximately $3.3 million excluding fees and expenses. The shares accepted represented approximately 1% of our total outstanding shares as of June 30, 2018. We also maintained a $30 million share repurchase program, which still has approximately $14.4 million available.

Also, today, we implemented a quarterly cash dividend of $0.025 per share on our common stock. The dividend will be paid on September 4th, 2018, to shareholders of record on the close of business on August 20th, 2018. These various capital allocation majors demonstrate our confidence in the financial management and strength of our company.

Our belief that we are settling into a more natural and consistent rhythm in our business and provides a platform for a broader investor base.

We still believe our high levels of growth, operating leverage, and attending cash flows from operations will allow us to continue to pursue opportunistic M&A in the consumer and the outdoor industries, while returning capital to stockholders.

Ultimately, this strategic decision reinforces our commitment to delivering value to stockholders, while investing for future growth. I'd now like to address our increased 2018 financial outlook.

We now anticipate fiscal year 2018 sales to grow 20% to 23% to approximately $205 million to $210 million, up from $200 million to $205 million as our prior guidance compared to $170.7 million in 2017.

On a pro forma basis, as if we had owned Sierra for all of 2017, we now anticipate fiscal year 2018 sales to grow 7% to 10% on pro forma sales of $191.2 million in 2017, which still includes high single to low double-digit growth rates at Black Diamond, but now, mid-single-digit growth rates at Sierra given its strong performance.

On a constant currency basis, we now expect sales to range between $202 million to $207 million or up 18% to 21% compared to 2017. We now expect adjusted EBITDA margin to be approximately 8.5%, up from 8% from our prior guidance, which includes $5 million of cash corporate overhead expenditures.

This compares to an adjusted EBITDA margin of 3.6% in 2017. We continue to 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.

We also expect to generate free cash flows from operations of $5 million to $10 million, 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 impair our existing and the significant NOLs for federal income tax purposes. As of June 30, 2018, we estimate that we have available NOL carryforwards for U.S. 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 second quarter results. The parts of our business that we have told our investors to measure our progress are not only on track, but are rapidly building momentum. Sales were up across all major categories, geographies, and channels.

Our gross margin continues to improve considerably and this improvement has also translated into growth in adjusted EBITDA and free cash flow. We strategically invested in sales and marketing campaigns. We have driven enhanced consumer awareness.

We're approaching the one-year anniversary of owning Sierra Bullets, and the early execution of our brand-enhancing playbook is showing the intended results. And our cash flow profile and strengthening balance sheet have us well positioned for other acquisition opportunities.

So, with that as context, now on to the discussion for the remainder of 2018 and other relevant events. Fall 2018. Our Fall 2018 season will feature the introduction of more than 50 new products across our three major categories.

This is on top of more than 40 new products introduced for spring 2018, resulting in approximately 100 new products launched in total 2018. In time, we continued our innovations with ice, launching the industry's lightest ultralight ice screw; the new -- and the new reactor ice tool.

We introduced new innovations in chalk, which were evidenced by the launch of our Pure Gold, a chalk additive that increases moisture absorption by more than 10 times.

We also expect the new developments in bouldering pads and bouldering accessories, along new colors in rock shoe collection, will continue to build momentum in the ever-growing bouldering category.

It is important to recap that spring 2018 was the worldwide launch of BD rock shoes, a new category expansion that so far has exceeded our initial expectations and one we expect to continue to innovate each season.

Finally, this September, BD hosts the 2018 World Climbing Championships in Innsbruck at our BD Diamond Partnership Gym, an event that expects to set the stage for the competition for the 2020 Olympic Games in Tokyo, Japan.

With the increasing popularity of backcountry skiing, Black Diamond continues to push innovations in our ski and snow safety categories, with the new Helio ski collection and the award-winning Boundary Pro series, new BD ultralight bindings, new Black Diamond beacons, the new Whippet ski pole, expanded skins, and the new recon stretch jacket and pants, Helio Active ski touring shell, and the launch of our carbon trekking skis with built-in skins.

Finally, our Mountain category continues to see growth with BD launching numerous different products, including zipped or backpacking light, new packs, and expansion of our award-winning First Light Jacket series.

For spring 2019, as we look to the future, we just attended the Summer Outdoor Retailer Show and they're expecting continued strong bookings.

We plan to launch Black Diamond's most aggressive collection of innovations in the outdoor industry to-date, with a plan to release 177 new and refreshed products across all four categories of climb, mountain, apparel, and footwear.

During the spring 2019 trade show cycle, including the recent completed Outdoor Retailer Show, Black Diamond continued its success in innovation and product award recognition, with more than 500 product awards over the last 10 years, receiving many higher covenant awards, such as the 2018 Outdoor Winter Industry Award for our distance 8L pack, the gearinstitute.com Best New Gear Award for our Camalot C4, menjournal.com Best New Gear and Outdoor Retailer for our distant 8L pack, the Outdoor Retailers Editor's Pick for our Camalot C4 and zone climbing shoes, and the Backpackers' Editor's Choice Award for our new Whippet Ski Pole.

Furthermore, our transcending Deploy Shell was awarded and Editor's Choice Award from Gear Patrol. Black Diamond's deployed was one of only 10 products that was given this honor from the 150 brands and thousands of products that were considered. At $129 resale, Black Diamond's Deploy Wind Shell takes lightweight outdoor clothing to a new extreme.

The windproof outer layer is only 48 grams or roughly 1.7 ounces, which was made possible only through our close collaboration with our material manufacturers. The fabric is a five-denier nylon made by Toray's Japan that is exclusive to Black Diamond, and the zipper is a YKK super lightweight zipper, which is 40% lighter than any other on the market.

Deploy also folds easily into its own pocket. We believe the Deploy Shell also highlights the innovations we are integrating within our apparel offering as well as transcending qualities being developed for the outdoor and mountain enthusiasts. Now on to Sierra.

Regarding Sierra and moving into the second half of 2018, we are well underway in our expected strategy to seek to replicate the playbook we are executing with Black Diamond. Like Black Diamond's category segmentation of climb, ski and mountain, at Sierra, we are focused on compete, hunt, protect, and defend.

In fact, the new tipped GameKing product, which we are calling the GameChanger, launched to retail last week, representing our first real innovation to hunt. This is also the first products in market since acquiring Sierra that we worked on together from day one. A big thanks to our team for making this happen.

In the second half of 2018 and into 2019, we expect to introduce many more products, I mean, our own product development, design and innovation stamp of approval.

In fact, we have recently hired a new VP of Innovation and will work closely with our R&D and manufacturing teams to seek to bring new bullet innovations and potential adjacent products to the market.

In an effort to seek to capitalize on our increased focus on new product introductions, we have also invested in what was non-existent sales and marketing efforts within the hiring of Mayon Sargeant as our VP of Sales, the engagement of Outtech as our national sales agency as well as the utilization of an outside marketing firm.

We are making investments in our go-to-market process, seeking to enhance social and digital capabilities, and the new print campaign launching in more than 12 magazines for this fall.

And of course, we intend to continue to work to strengthen both our retail and OEM partnerships through new product introductions and better fulfillment of our existing successful products.

We believe the continued rollout of our strategy at Sierra Bullets will continue to fuel future growth opportunities, while leveraging the very attractive financial fundamentals the business possesses in terms of profitability and cash flow conversion.

Needless to say, we continue to be quite pleased with the acquisition of Sierra and believe in its strong momentum for the future. Given our success across our brands, and more flexible capital structure, we believe our strategy is both working and well-positioned to create shareholder value.

We still expect to maintain a focus on acquisitions that may benefit from our unique outdoor experience and look forward to updating our shareholders when appropriate. 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. [Operator Instructions] And we'll take our first question from Dave King with ROTH Capital. Please go ahead..

Thanks. Good afternoon guys..

How are you Dave?.

Good. I guess, first on the 32% growth at Sierra. It sounds like you were able to do that even without much in the way of the new product innovation taking hold, at least for last week.

Can you talk about what's driving that? Do you think that's more share gain than end market? And if so, is that just the marketing? Or is there something else that's helping to benefit you? And then, how would you characterize the growth between OEMs and consumer? Thanks..

Okay. So, to answer the first part of that question, as we said, we're following the same playbook that we have done at Black Diamond, which is, first, start to innovate and start to share those innovations.

Secondly, better sales and marketing or what we would call go-to-market focuses, a combination of visiting all the top key accounts as well as our OEM partners and building with them. The addition of Outtech, increased and better-focused marketing, both to our -- to all of our categories of compete, hunt, protect, and defend.

And then, I would say the biggest driver is what we call our ease-to-do-business with strategy, which is better on-time delivery, better fulfillment of the top and most important businesses, and ease to do business with and being share of mind. And that sums up to where the market is today.

We are stealing market share and that we believe is a vote of confidence in the existing portfolio of products and what we're doing, but also in the future of what we're showing them and bringing to market even as of late last week. And to your second question--.

OEMs versus consumer?.

Yes. We're still gaining with OEMs and green box. So, I don't know if we've seen a difference. I think that from an OEM perspective, they probably may see longer into the future of new product innovations because they work with them more in tandem before we take them to market for the consumer.

In regards to green box and our wholesale retailers, I think that's a function of us better marketing; better ease to do business with, better fulfillment, on-time, the like. And I will keep pushing to that.

Subsequently, also, we're seeing continued strong demand in our international business and that scenario that we have put an increased emphasis on over the last six months..

Okay. It's all great to hear. And then, switching gears to the Black Diamond side. The 14% growth there sounds like apparel several categories, but apparel drove -- sounds like it drove a lot of that.

Was that indeed the largest driver? And then, to what extent did new shoes contribute and sort of how do you see that shaking out as we go forward?.

So, to answer your first question, apparel represents about 10% of our business. It is the fastest-growing category. Obviously, mountain's our number one category, and it was up better than 15%. So, that obviously drags on it, and pulls it forward. We'll continue to see strong apparel growth, and that is one of our big initiatives.

And then to your statement of footwear, footwear continues to exceed our expectations. We are chasing it rapidly. We continue to innovate in that product, add to that team, and we think there is a huge future in footwear for BD, rock shoes being an initiative of that..

Perfect. And then, lastly for me, I'll step back.

On the upsides credit agreement, should we take that to mean you're looking to be -- or get more aggressive in the current environment in terms of M&A? And if so, what sort of things are you looking for? And then, more importantly, how are the bid asks currently?.

I think we're always -- and either Aaron and I can answer this. I think we're always looking at the market to see if there are super fan brands that fit our perspective of the marketplace. I think both Sierra and BD represent that well, that they are super fan brands that have significant opportunities to continue to be innovators in product.

We will continue to look at the market and where that opportunity comes, we're going to definitely continue to focus most on the outdoor market, in that space, and that's a driver for us.

And then, obviously, we can't control what people are asking for brands in the marketplace, but we're a believer that we think we bring something unique to these brands. And I think that's most evident when we see how rapidly the performance of Sierra has exceeded expectations since our purchase of it back in August of 2017..

Great. Thanks for taking my questions. Nice quarter and good luck for the rest of the year..

Thank you..

We will now take our next question from Jim Duffy with Stifel..

Thank you. Good afternoon. A couple of questions for me. First on the Sierra business, a great quarter. Based on the way you guys characterized the strength of Sierra in the second quarter, it seems the drivers would be sustainable and in place for future quarters.

Should we expect continued strong growth rates like we saw in the second quarter from Sierra into 2019?.

I think we're always optimistic, but I think at the same time, we're prudent. There is -- obviously, it's a market share game, and therefore, it depends on what our competition does in the second half of the year, and then, how the categories overall does in the second half of the year.

We're going to continue to be disruptive with innovation as well as marketing as we can, and I think we have optimistic views of our strategy. But I think we also have to be prudent and conservative in how we anticipate that will continue to roll out..

Fair enough. As I look to the second half guide and the implied numbers, it does seem to presume a deceleration.

Is there a shift in timing of shipments or something to pull forward into second quarter that we should contemplate when thinking about that?.

No, I think, like I said, unfortunately, in some cases, we entered -- our brand has played in multiple seasons. And so if we have, given an example, if we have a phenomenal winter season, then that can have an even more positive impact.

Last year, as you know, we didn't have a strong winter program and so it relied on other categories to buoyant that mix. I think we continue to execute as best we can against the brand strategy.

And at the same time plan conservatively, realizing that it's all about stealing market share, innovating product, bringing products to market rapidly and being easy to do business with. That, I think -- hopefully, we will continue to meet or exceed expectations..

Great. And then, Aaron, the margin's feeling strong. That suggests you've been successfully able to overcome commodity pressure.

Can you speak for a moment about some of the ways you've been able to offset the commodity pressure, particularly in the Sierra business?.

You bet. So, on the Sierra business, we've been able to do it through, one, certain hedging activities, so we've been opportunistic in layering in certain -- and going on buying copper and lead at certain pricing that's been favorable versus how we expected it to be for the year.

But then, it also really comes down to the efficiency that we're realizing within the manufacturing activities. We've been working very closely with the team, primarily their head of operations in just systematizing and just improving overall efficiencies within the manufacturing activities and it started to manifest itself in Q2.

So, it's really coming just -- it's coming down to how we've been running the business, but also how the -- how we've been looking to -- or how we've been able to mitigate some of the pressures just through layering in certain purchases of copper and lead..

Very good. And then the last one for me, you've -- the objective for the 10% adjusted EBITDA margin.

As we kind of roll the calendar forward here, can you give a better view as to what type of revenue base you would need to achieve that?.

This is something that, obviously, we'll continue to address as the rest of the year plays out and we finalize our plans for 2019. It is definitely a target that we continue to hold on to and that we're comfortable with looking out into the future achieving very soon.

But we're going to save some additional commentary on that when we address 2019's outlook, et cetera..

Very good. Thank you guys..

Appreciate it..

Thank you. We'll now take the next question from Michael Kawamoto with D.A. Davidson..

Hey guys. Thanks for taking my question..

Hey Michael..

Hey. So, you guys talked about this Deploy, with some unique innovations and partnerships with the YKK's zippers in Toray, Japan.

Are you planning on maybe using some of that technology or the things you learned to apply to future offerings in apparel? And then, can you just share a little bit about what you've learned based on your discussions with retailers this season at the Outdoor Retailer Show? Thanks..

Okay. So, the first, I'm definitely -- we believe that what BD does best is innovate equipment. And even in apparel, that's really been our strategy. I don't see it as a Hugo Boss-Esque merchandise line at this point. Our goal is to develop the best equipment, albeit it may be apparel in the outdoor industry.

We really focused on faster, lighter and stronger products. And in every situation, the driver to the products is the why.

Why would we introduce this? Is it lighter than our competition? Is it faster, more breathable than our competition? Is it stronger than our competition? And if we really can build something around it, it will be the trifecta, and Deploy is one of those items that hit that home run.

We will definitely continue to use that development, those materials, those partners to expand that into multi-seasonal type products as well as other categories that use fabric and materials that may not be apparel.

And then, for us, when we started this new chapter at BD, and I would go back to just at the beginning of 2017, our real belief was getting BD back to where we -- the market wanted -- expected BD to perform as a brand for them.

And as we've said, they [technical difficulty] about our innovations, stronger about our sales and marketing strategies, specifically to our accounts in the specialty market, and then, easier to do business with, that the retailers are recognizing that. And so the comment is that BD now back is kind of what we're trying to push towards.

And our belief that if we continue to meet or exceed our consumers' expectations and retailers' expectations, building confidence, consistency with our retailers, that they'll continue to buy into our vision and strategy. And that seems to be working, and that's what we're hearing back from them at Outdoor Retailer.

And I think those who saw the booth at Outdoor Retailer saw that in the reaction from the consumers and the retailers, and the excitement around the number as well as the types of new product innovations that we launched..

Got it, that's helpful. Thanks. And then, just second, you recently opened a store in Alaska.

Can we just get an update on how that's been trending and maybe the potential opportunities you see to open more doors going forward?.

Alaska was a market that we believe is very BD-centric. It is a market that many of our athletes and our consumers travel through in order to hit the mountains or the experiences in Alaska. We felt it necessary that BD be present, and it is -- clearly, Alaska is a market for climb, ski, mountain, trail running, you name it.

In a market that the consumer aligns very much with the ethos of our brand. Retail is a component to what BD does. It is not our major focus. For 2018, anchorage was an opportunity where we aligned well with the consumer in the marketplace. There will be potentially others in the future.

But it -- right now, our drive is focusing on product innovation and successfully meeting and exceeding the expectations of our retailers..

Awesome. Thanks for the color and good luck for the rest of the year..

Thank you guys..

Thank you. [Operator Instructions] We'll take our next question from Chris Krueger with Lake Street Capital Markets..

Good afternoon guys..

Hi Chris..

Hi. Just a couple of questions. You had really good strong growth for both Sierra and Black Diamond in the second quarter.

Was there anything like kind of one-time-ish, like a sell-in to a new chain? Or any sort of thing that like, maybe, pulled sales forward a bit? Or is it just -- just have to be that strong of a quarter?.

I think it was all about execution. We did not have any unplanned surprises in our mix or any outliers that drove the results.

This is as we try to say, is just a dedicated, executed strategy that initiated 18 months ago, which is typically how long it takes new products to grow through the process as well as just some of the financial disciplines that Aaron and his team has instilled that allowed you to see it growth translated to EBITDA, to margins, to free cash flow, and while at the same time, finding efficiencies our leverage on our SG&A.

And it just finally the -- it's all coming together as we hoped and kind of alluded to..

Okay, very good.

I don't know if you provide this type of metric, but do you have like a percent of BD sales that comes from new categories or new products, stuff that's been introduced, maybe in the past two years or whatever the number might -- or timeframe might be?.

We don't typically because of each category being different. And sometimes, a new product, it is literally a new product to a category. You rock shoes as you saw. Sometimes, it is a refresh of an existing product. Something like the Camalot C4 that was there to replace the existing C4.

To be honest, with you, we look at it as the whole collective from a brand perspective, other than just what we give you by categories. Obviously, we build them up as a new product initiative with an ROI or expectation, but then, it really drives by what's happening at the time in the marketplace..

All right, make sense. That's all I got. Thanks..

Thank you..

Thank you. At this time, this concludes our question-and-answer session. I would now like to turn the call over to Mr. Walbrecht for closing remarks..

Thank you. We'd like to thank everyone for listening to today's call and we look forward to speaking to you when we report on the third quarter results. Thanks again for joining us and supporting Black Diamond and Clarus. Appreciate it..

Thank you. That does conclude today's conference. Thank you all for your participation. You may now disconnect..