Cody Slach - Director, IR John Walbrecht - President Aaron Kuehne - Chief Administrative Officer, CFO, Secretary & Treasurer.

David King - Roth Capital Partners James Duffy - Stifel, Nicolaus & Company Michael Kawamoto - D.A. Davidson & Co. Matthew Campbell - Laridae Capital.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Clarus Corporation's financial results for the third quarter ended September 30, 2018.

Joining us today are Clarus Corporation's President, John Walbrecht; Chief Administrative Officer and CFO, Aaron Kuehne; and the company's external Director of Investor Relations, Cody Slach. [Operator Instructions]. 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..

Thanks, Hayley. 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 currency, capital and credit markets; 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, contracted products as well as foreign currency fluctuations; the company's ability to utilize its net operating loss carry-forwards; changes in tax laws and liabilities, tariffs, 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 Securities and Exchange Commission, 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 that this call will be available for replay through November 19 starting at 8 p.m. Eastern Time tonight. 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 express 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?.

Thank you, Cody, and good afternoon, everyone. It's a pleasure to be joining you. The record results of the third quarter continue to prove the momentum of our brand and reinforce that our strategy is again gaining strength.

We realized 12% growth from Black Diamond, driven by 17% growth in mountain, 14% growth in climb, and a 40% growth in apparel as well as 35% pro forma growth in the Sierra brand. These results were due to our continued focus on, first, product innovation, and second, an accelerated go-to-market strategy supported by strong order fulfillments.

We leveraged these strong top line results into even higher profitability growth and increased adjusted EBITDA by more than twofold to $7.1 million. In addition, we improved the free cash flow during the first 9 months of 2018 by approximately $24 million to $5.8 million compared to a negative of $18.5 million during the same period in 2017.

We expect the momentum of our business to continue through 2018 and have increased our outlook as a result.

The momentum in our business is supported by key product initiatives across all of the Black Diamond's primary products categories, particularly within climb and apparel, and executing a go-to-market strategy at Sierra focused on new product introductions and consumer engagement.

Within Black Diamond's performance, apparel was up 40%, driven by continued strong demand for our new rainwear line, the increased fulfillment of our bottoms program as well as gaining traction in both sportswear and logo wear.

Our mountain business was up 17% due to continued growth in trekking poles and gloves, which are focused strategic initiatives that we have begun investing in nearly 2 years ago and are beginning to show well in the results as of today.

We grew our climb category by 14% due to continued success in our new footwear line, which is an important product segment that we continue to expand with additional styles and colors and growth in our core climbing product categories of protection and cams, helmets, ropes as well as climbing accessories.

Our ski business was down in the third quarter due to the timing of early deliveries in the third quarter of 2017 that created a difficult comparison.

We fully anticipate that our ski business will experience a solid rebound in Q4, as we expect to deliver for the first time the new family of Black Diamond Beacons that feature both Bluetooth capabilities, leveraging the technology of PIEPS.

We believe this provides us with a great opportunity to segment the marketplace and gain even more market share within the snow safety category.

The 35% pro forma growth we expected and experienced in Sierra business was the continued result of executing a go-to-market strategy that leveraged our key partner relationships while being more disciplined with our manufacturing activities, ensuring higher levels of commercialization and fulfillment.

Following the disciplined path to what we successfully deployed at Black Diamond over 21 months ago, we are similarly starting to see gains in sales, margin and fulfillment rates. More to come on this after Aaron's remarks. Now to some of the regional comments for Black Diamond.

Sales domestically were up 5% in the third quarter, again due to solid performance in climb and mountain categories. In our international regions, sales were up 17% due to our European team's continued great efforts positioning the brand for continued growth. We experienced solid preseason bookings and increased ASAP orders as well.

We believe the strength of the brand continues to build due to our enhanced sales and marketing efforts, and we also experienced strong performance in both Japan and Korea.

As we continue to communicate, the foundation of our results is being driven by the focus on our core consumer through the quality and pace of product innovation, a clear marketing strategy, the fulfillment of strong order demand at retail and our ease to do business with strategy.

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

Aaron?.

based upon the tariffs enacted to date, we will face a negligible impact in 2018 and an estimated impact of $450,000 in 2019, which we are in the process of seeking to mitigate. While it is still unclear if additional tariffs will be levied, we are focused on 4 primary mitigating activities. First, resourcing.

We are working with our supply chain to come up with different sources for the product coming out of China. Second is repricing. We are working with our retailers to pass along some of the costs. Given our pace of recent product innovation, however, these conversations are a natural progression, and we believe will have a positive outcome.

Third is recosting. We have been working with our vendors to renegotiate costing to offset some of the impacts. And finally, we are optimizing logistics to avoid the U.S. on international shipments. Selling, general and administrative expenses in the third quarter increased to $15.8 million compared to $14.4 million in the year-ago quarter.

The increase was due to the strategic investments we are making to drive innovation and growth in both Sierra and Black Diamond as well as higher stock-based compensation and purchase accounting amortization associated with Sierra.

This was partially offset by the prudent management of cost in the other areas of the business, particularly given the quarter's strong revenue growth. Net income in the third quarter improved significantly to $4.1 million or $0.14 per share compared to a net loss of $1.6 million or $0.05 per share in the year-ago quarter.

Net income in the third quarter of 2018 included $2.8 million of noncash items and minimal transaction and restructuring costs compared to $2.7 million of noncash items, $1.9 million in transaction costs and minimal restructuring costs in the third quarter of 2017.

Adjusted net income, which excludes the noncash items as well as transaction and restructuring costs, increased significantly to a record $7 million or $0.23 per share compared to $2.9 million or $0.10 per share in the third quarter of 2017.

Adjusted EBITDA also increased significantly to a record $7.1 million compared to $3 million in the third quarter of 2017. As a percentage of sales, adjusted EBITDA increased approximately 500 basis points to 13% compared to 7% in the year-ago period.

Free cash flow during the first 9 months of 2018 was $5.8 million compared to a utilization of $18.5 million in the same period in 2017. Now moving on to the balance sheet. At September 30, 2018, cash and cash equivalents totaled $3 million compared to $1.9 million at December 31, 2017.

After multiple extensions and increasing the maximum price from $7.20 to $8.00, on July 12 we announced the results of our $7.5 million modified Dutch auction tender offer. We accepted for purchase 417,237 shares of the company's common stock 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 the $30 million share repurchase program, which still has approximately $14.4 million available.

On August 6, 2018, we announced that our Board of Directors approved the initiation of a quarterly cash dividend program of $0.025 per share or $0.10 per share on an annualized basis. On October 26 we announced our quarterly dividend will be paid on November 16, 2018, to shareholders of record as of the close of business on November 2, 2018.

These various capital allocation measures 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.

Our debt balance at September 30, 2018, was $22.7 million compared to $20.8 million at December 31, 2017. As a reminder, on June 28 we entered into a new $75 million asset-based revolving credit facility agreement plus an uncommitted accordion feature providing an additional $75 million with JPMorgan Chase.

We still believe our high levels of growth, operating leverage and attendant cash flows from operations will allow us to continue to pursue opportunistic M&A in the consumer and 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 discuss our 2018 financial outlook. We now anticipate fiscal year 2018 sales will come in at the upper end of our previously stated range of $205 million to $210 million.

This compares to $170.7 million in 2017 or $191.2 million if we had owned Sierra for all of 2017. Given our ability to drive strong adjusted EBITDA growth so far in 2018, we're also increasing our expectation for adjusted EBITDA margins.

We now expect adjusted EBITDA margin for the full year to be approximately 9.5% compared to 8.5% in our prior outlook, which includes $5 million of cash corporate overhead expenditures. This compares to an adjusted EBITDA margin of 3.6% in 2017. Long term, we are targeting an adjusted EBITDA margin of greater than 10% for our consolidated business.

We continue to expect full year adjusted gross margins to continue to improve on a year-over-year basis.

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 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 significant NOLs for federal income tax purposes. As of September 30, 2018, we estimate that we have available NOL carry-forwards 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 third quarter results. The metrics that we have communicated to measure our progress continues to build momentum. Sales achieved a new record high for a third quarter, and our gross margin continues to improve considerably.

This has been driven -- driven leverage in adjusted EBITDA and free cash flow growth. We strategically invested in sales and marketing campaigns that have driven enhanced consumer awareness, and they are showing their effectiveness in our results.

August marked our 1-year anniversary of owning Sierra, and the execution of our brand-enhancing playbook grew stronger in the third quarter. Combining these results with our strengthening balance sheet, and we believe that we are well positioned for future organic growth as well as acquiring additional super fan brands.

Now on to the discussion of product for the upcoming seasons. Fall '18. Our current fall '18 seasonal lineup features the introduction of more than 50 new products across our 3 major categories. This is on top of more than 40 new products introduced since spring '18, resulting in almost 100 new products launched in 2018 in total.

As a signal of our product strength, so far for fall 2018, Black Diamond has won 28 awards from various leading trade and media organizations, from Back Country magazine to Ski magazine to even Runner's World. In fact, a few of these awarded products have driven our strong Black Diamond growth in this quarter.

In climb, we continue to add innovations with ice, launching the industry's lightest ultra-light ice screw and the new Reactor ice tool. The new developments in bouldering pads and bouldering accessories, alongside new colors in our rock shoe collection, continue to build momentum in the ever-growing bouldering category.

Our BD Rock Shoe program continues to exceed our initial expectations and the initiative we expect to continue to innovate each season. In addition, this past September BD hosted the 2018 World Climbing Championships in Innsbruck at our Black Diamond Partnership Gym.

This event helped set the stage for the competition for the 2020 Olympic Games in Tokyo, Japan, and the event we expect to expose the great sport of climbing to millions of viewers. We are proud of how well it went off.

With the increasing popularity of backcountry skiing, Black Diamond continues to push the innovations in our ski and snow safety categories with the new Helio ski collection and the award-winning Boundary Pro series, the new ultra-light bindings, the new BD Black Diamond Beacons, the new Jetforce Tour avalanche pack, the new Whippet ski poles, expanded skin collections, the new Recon stretch jacket and pant, the 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 the zipped backpacking light, new packs and the expansion of our award-winning First Light jacket series. Spring '19.

For Black Diamond, as we look into the future of spring '19, we plan to launch the most aggressive collection of innovations in the outdoor industry to date, with a plan to release 177 new and refreshed products across all 4 categories of climb, mountain, apparel and footwear.

Black Diamond continues its success in innovation and product award recognition, receiving many highly coveted awards such as the 2018 Outdoor Winter Industry award for our distance 8L pack, the gearinstitute.com Best New Gear Award for our Camelot C4, Men's Journal's Best New Gear at Outdoor Retailer for our distance 8L pack, the Outdoor Retailer's Editor's Pick for our new C4 and Zone climbing shoes, and the Backpacker's Editor's Choice Award for our Whippet ski poles.

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

The windproof outer layer is only 48 grams or roughly 1.7 ounces, which was made possible through our close collaboration with our materials manufacturer.

The fabric is a 5-denier nylon made by Toray Japan that's exclusive to Black Diamond, and the zipper is a YKK super lightweight zipper, which is 40% lighter than any other available on the market today. And the Deploy also folds easily into one of its own pockets in the back of its neck.

We believe the Deploy Shell also highlights the innovation we are integrating within our apparel offerings as well as transcending qualities being developed for the outdoor and mountain enthusiast. You will see additional developments using the Deploy technology in other categories in the near future. Sierra.

Regarding Sierra, 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 at retail in August, represented our first real innovation in hunt. We are pleased with the initial reception of this new product and seen strong well-through and replenishment orders.

This continues to reinforce Sierra's hunt heritage and provides us with greater confidence as we look to expand our hunt-focused product offerings. This is also the first product to market since acquiring Sierra that we worked on together from Day 1.

Over the next several months we expect to introduce many more products, having our own product development, design and innovation stamp of approval. In fact, during Q3 we hired Tim Janzen as our VP of Innovation at Sierra Bullets, a similar position he held while at Barnes Bullets, a subsidiary of Remington.

He will help drive and accelerate new product innovation and support scaling the business operationally and from a product perspective as well. We continue to make investments in our go-to-market process, seeking to enhance social and digital capabilities and a new print campaign launching in more than 12 magazines for this fall.

And of course, we intend to continually work to strengthen both our retail and OEM partners through new product introductions and better fulfillment of existing seasonal products.

We believe the continued rollout of our strategic playbook at Sierra 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.

We continue to be quite pleased with the acquisition of Sierra and believe it is in strong momentum for the future. Investor Relations. During the third quarter we were actively out on the road, telling you our story to both new and existing shareholders, and we're also active on the conference circuit.

It was invigorating to share in our progress and laying out our many opportunities to come. We enjoy the process and look to continue our active investor relations strategy through the remainder of 2018 and well into 2019.

In summary, given our recent financial momentum, our brand outlook 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 of super fan brands that may benefit from our unique outdoor experience and look forward to updating you and our shareholders when appropriate I'd now like to turn the call back over to our operator for Q&A before my closing remarks.

Operator?.

[Operator Instructions]. And our first question will come from Dave King of ROTH Capital..

First, on the 35% pro forma growth at Sierra, it looks like that was an acceleration from prior quarters.

I guess can you talk a little bit about what's driving that? Are you able to share how much of that growth was on the green box side, whether that's from new products, what out of your -- and how much was from the OEM side through better fulfillment, et cetera?.

As discussed previously, we continued to follow the same playbook as we have on Sierra. We believe that, A, it first comes from product innovation. The launching of the GameChanger was a driver in that process. And then subsequently, better partnerships with our OEM business, without question.

And we continue to invest strong in those opportunities with them both in new bullet technology as well as sharing with them the strength of the brand. We haven't broken it out specifically between green box and OEM, and our belief being that for both of them, they both have their own requirements for how we grow the business.

But in the end, it still comes down to product innovation and building better fulfillment and brand awareness consumer demand..

Okay, fair enough. And then on the guidance, I look at it and maybe start with revenue -- you've had double-digit growth there for the past couple of quarters. It looks like it's sort of implied at decelerating to, say, 5% growth in the fourth quarter.

Can you talk about the puts and takes there? Is that just conservatism? And then on the margin side, similarly, looks a little bit like a deceleration in terms of the amount of margin improvement because the margin improvement story has been fantastic, frankly.

Can you just talk about how we should be thinking about that and gross margins, expenses, et cetera?.

So first of all, as we head into Q4, there's a couple of different elements that come into play that caused us to point us towards the upper end of the outlook when it comes to revenue. And that's at the BD side. Remember, Q4 is a heavy-laden replenishment or ASAP quarter for us. There is a certain level of reliance on weather as well.

And then also on the Sierra side, that's traditionally, from the seasonal basis, a lower quarter. But we do anticipate that we'll continue to gain traction or continue to see the momentum within the brands.

And so from our perspective, we just want to be prudent with how we continue to provide guidance or outlooks to the Street, but also recognizing that Q4 does present some dynamics that we just need to be aware of.

Similar to that of the adjusted EBITDA margin outlook, we have seen great performance or improvement every quarter in this regard, and we continue to expect that that will continue into the future. We are continuing to be opportunistic in the way that we think about certain investments.

And so as we just think about what Q4 can bring, we do anticipate that momentum will continue, but we do want to continue to be fairly cautious in terms of how we provide the communication or the guidance for the outlook in general..

Confidence and consistency, Dave..

And our next question will come from Jim Duffy of Stifel..

The first question is, obviously, a very nice quarter on the top line. In the BD business, the difference between international and domestic growth rates, notable.

Are there any kind of unique things going on with the compares in the regions that would cause that?.

No, I think it's a combination of two things, that in certain regions, people want more of their preseason bookings early. In other regions, they want it spread out over the length of the quarter and the second half of the year. That's part of it. Always a function of mix. The third quarter ending in September.

In Europe, ski goes earlier than it does in North America, for example. So it's just we manage against all expectations of preseason bookings and, like I said, a combination of it is when you receive your orders and inflow of the product for fulfillment..

Fair enough.

And then, Aaron, is there any sort of geographic mix impact on the gross margin?.

No, nothing out of the ordinary..

Okay.

And then how are you guys positioned on inventory? Do you have inventory enough to cash in on upside capacity if the ASAP materializes in the fourth quarter?.

Yes, specifically in the core products..

Okay, good. And then the last one for me, John. Maybe just digging in more on Sierra, you've owned it for a year now.

Are the opportunities what you thought there would be? Are there any incremental opportunities after having been able to spend a year managing the business that have revealed themselves? We're very pleased with what we're seeing from growth there in what is a challenged industry.

Can you share some thoughts on where you might see incremental opportunities?.

Yes, I think for first, I think as we have said previously, we saw Sierra as a super fan brand, and I think maybe others saw it as a bullet manufacturing plant.

And so as we've followed the same script at BD, which is to innovate first and invest in innovation and product innovation, both in the teams as well as new products, and then once upon innovating, accelerating the market and the go-to-market process with our sales reps, with marketing, with our OEM partners, with our best retail partners, I think that every season we see more opportunities for product innovation in that mix.

And then as we look into 2019 and beyond, we will look at product extensions within that. And so we'll see announcements coming out of shot shell as we extend into other areas. And clearly, that opens up more potential. But definitely, no shortage of bullet innovation opportunities.

And then as we have said to the marketplace, we see ammo opportunities as the extensions as well..

Our next question comes from Michael Kawamoto of D.A. Davidson..

Just to build on the Sierra line of questioning, you guys launched GameChanger around, I think, the time of the last call that you talked about.

Can you maybe talk about how you're thinking about expanding that hunting category for Sierra going forward? Is it fair to say that's one of your bigger opportunities there, is just the level of innovation you guys have going on?.

Yes. So we think that this combination of tipped compete interfaced with terminal impact has a great opportunity within the hunt business. And so we'll continue to innovate in bullet technology beyond the first five calibers that we launched as the GameChanger, which have exceeded our expectations in this first hunt season.

And then as we go into shot shell and beyond, turning that into ammo specifically for the hunt market, which is quite a bit bigger than the 1.8 size of the reloading market, so we see opportunities in there.

But we believe very strongly in the whole innovate and accelerate strategy -- constantly innovate product and then look to accelerate that once you've innovated. And we believe that that playbook is one that Sierra and BD continue to execute well on.

And then once you've done that, as we focused on in the last 18-plus months with BD and now the last, I would say -- heavily, the last 6 months with Sierra -- it's all about fulfillment. Once you've innovated and accelerated, make sure you can fulfill -- on-time delivery and better fulfillment and maximize the consumer demand that you build..

Awesome. And then was hoping to spend a little more time on the footwear initiatives. It sounds like that business is doing well with some momentum.

What are your expectations for the new rock shoe styles you have coming out next year, and maybe your thoughts on '19?.

We're bullish about footwear as a category. It has been one of the fastest-growing categories within the climb segment, and it's an area that we've really focused our innovation on in specifically rock shoes. We have launched new styles for fall '18, we launched new styles for spring '19 and we have new styles for fall '20.

So we continue to keep the gas on that category and think that it will continue to see strong growth rates for us. And again, in that category, fulfillment is critical. It's inventory on hand is repeat orders..

Great. And then just the last one, maybe for Aaron. You've got a tougher comp for gross margin in 4Q.

How should we be thinking about that for next quarter?.

Yes, it is a little bit of a tougher comp, and we've been able to see a lot of gross margin improvements through year-to-date, September 30. We do anticipate that we'll be able to continue to see improvements, but it is a bit of a tougher comp.

And that's where we get back to our adjusted EBITDA guidance, in that there's a couple of different puts and takes that we're still working through, especially as it relates to some of our continuous improvement programs. But we do anticipate that we'll be able to continue to see improvements in gross margin.

And so I wouldn't expect Q4 to be much different than that..

[Operator Instructions]. And our next question will come from Matt Campbell of Laridae Capital..

How would you characterize the inventories at your retail channels and your OEM partners at this point for BD product?.

I think as you go through seasonal transitions from summer into winter, at this point, given our ASAP orders, I would say the channel has been very positive and relatively clean. Obviously, every brand can play differently into that.

For BD, we've really focused on the last 12 months to having better fulfillment of the core product and eliminating the DMs issue that had plagued us of the past. And so we've got -- we're really tight on our DM inventory and strong on the key drivers that we continue to market. And our ASAP rates and quarterly results show that.

I think it's also a function of having a tight distribution for BD and being heavily focused on the specialty market..

Got it. And just a couple of quick ones.

In regard to commodity prices, what are you seeing there? Any headwinds there, or are you seeing some tailwinds from the commodity pricing?.

It's a bit moderate right now. We've been able to benefit from some of the tailwinds that occurred throughout the course of the year. As we sit here today, it's a bit moderate, but we are still looking at ways how we continue to mitigate that exposure and take advantage of some of the opportunities that surface from time to time..

Got it. And just remind me, if you can -- last year the winter quarter was -- it was a really tough quarter in the U.S. for snow. Is that right? I just can't remember..

It was, yes..

At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Walbrecht for any 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 our fourth quarter results next. And thanks for joining in. Appreciate it. See you on the road..

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