Good afternoon, everyone and thank you for participating in today's conference call to discuss Clarus Corporation's financial results for the fourth quarter and full year ended December 31, 2018 and its outlook for 2019. 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. Following their remarks, we will open the call for 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.

Thanks, Sonya. 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, the financial strength of the Company's customers, 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 and ammunition 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…

Thank you, Cody, and good afternoon to everyone listening in. It's an exciting time to be joining you what for us will be the culmination of our first two-year strategy. As communicated in our earnings release today, the fourth quarter continued the solid momentum of our overall business and with our brands showing sales up 9% to $57.3 million compared to the same year-ago quarter. Both Black Diamond and Sierra saw strong growth again, up 8% and 14% respectively. The solid performance was a result of the dedication to product innovation, as well as providing our consumers a compelling product offering across all of the various categories. For example, Black Diamond's apparel category grew 60% in the quarter with strong results from nearly all segments including Stretch Rainwear program, bottoms, logo wear and sportswear. Additionally, we launched first-to-market with an innovative and redesigned line of lighting products and saw continued success across both gloves and footwear. Accompanying strong top line results in the quarter was a 300 basis point improvement in our gross margin as we saw higher proportion of full price selling and a favorable product mix and channel mix. Transitioning to the full year of 2018, we more than tripled adjusted EBITDA and generated $20 million increase in free cash flows versus 2017, which allowed us to enhance our shareholder-friendly capital allocation measures including the initiation of a quarterly dividend and share repurchases. It has also afforded us the means to continue to accelerate product R&D and innovation strategy, which we believe sets us up well for the rest of 2019. In fact, we expect that 2019 will see the introduction of over 300 new products across all of Black Diamond primary product categories and the continuation of our enhanced go-to-market strategy at both Sierra and SKINourishment, which…

Thank you, John, and good afternoon everyone. Sales in the fourth quarter of 2018 increased 9% to $57.3 million, compared to $52.7 million in the same year-ago quarter. And on a constant currency basis, sales were up 9%. Along with the strong category and regional growth dynamics John mentioned in his opening remarks, the increase was driven by 8% growth from Black Diamond, with significant contributions from both apparel and hard goods, as well as the 14% growth from Sierra. Gross margin in the fourth quarter increased 300 basis points to 35.6%, compared to 32.6% in the year-ago quarter. The increase was primarily due to a favorable channel, and product mix across the portfolio, including strong product margins at Black Diamond apparel and Sierra. Another point on gross margin specifically surrounding the current trade war. The impact in 2018 was negligible. Based upon the tariffs enacted to date, we expect we will face an estimated $450,000 impact 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 four primary mitigating activities. First is resourcing. We are working with our diversified supply chains and coming 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've been working with our vendors to renegotiate costing to offset some of the impacts of the tariffs. And finally, we are optimizing logistics to avoid the US on international shipments. Selling, general and administrative expenses in the fourth quarter were flat at $16.5 million, compared to…

Thanks, Aaron. Before moving to review of the new and innovative Black Diamond products which will be released for spring and fall of 2019, I would like to quickly mention how encouraged I am with the fourth quarter and the full-year 2018 results. The double-digit revenue growth from both Black Diamond and Sierra in 2018 are proof that our dedication to a consumer-centric product innovation strategy is paying off. This was met with increased gross margins across the portfolio as well as throughout the majority of our product segments. We will continue to look to innovate and accelerate in our existing businesses, bringing to market new product introductions, expanding our distribution and increasing consumer engagement. In fact in 2019, we opened our second retail location in Anchorage, Alaska, and in the fourth quarter, established a pop up outlet in Park City, Utah. Both of these test cases have proven our ability to activate core market and effectively move inventory through an outlet format, which we'll expect to continue to pursue in 2019. We will also continue to drive efficiencies and strategically reinvest in our brands in an effort to drive further EBITDA margin gains and free cash flow growth. We believe these gains combined with our strategic capital allocation policy of share repurchases, dividends and opportunistic M&A of other super-fan brands have the ability to drive significant shareholder value for the long term. Now onto a product discussion for our upcoming spring and fall of 2019 seasons. For both seasons, our products team has been hard at work developing new products as well as innovating on our core lineup. Now over 150 new products slated for launch in the spring and another 150-plus for the fall. The initial reception of this offering has been strong and in fact, Black Diamond…

[Operator Instructions] Our first question comes from Dave King of ROTH Capital. Your line is now open.

Thanks, afternoon, guys.

Hey Dave.

Hey, maybe starting with that last comment there, John, in terms of the Q1 guidance. It sounds like Q1 is going pretty well. How should we be thinking about that versus the 8% target you laid out for the year, and then how should we be thinking about the progression over the course of the year given the timing of certain product launches you talked about? Thanks.

So, Dave, this is Aaron and I'll take that one. As John mentioned, we are seeing strong momentum in Q1, and we do anticipate that the overall growth rate in Q1 will exceed that of our current outlook, but as mentioned it is baked into how we're thinking about 2019, et cetera. And so, what you'll start to see happening is that Q1 will post some strong results and then it'll tail off a little bit in Q2, and we'll also start to see a shift in the seasonal mix being heavier-weighted towards the back half. So in 2018, we finished at about a split about 47 to 53, and we expect that that will be closer to about 45 to 55 in 2019.

And Dave, we've always had the strong belief that our goal is to meet or exceed.

Fantastic. Okay, that's helpful. And then switching gears on Sierra. Do you have the growth breakdown in the quarter between OEM versus green box? And then just as we think about that business going forward, what can you share about the initial retail response either in terms of early bookings et cetera for the ammo launch, and then how have the OEMs reacted to that? Thank you.

So the way to look at the first part of your question, we don't announce or project how our business will be broken down between the green box and the OEM business this early in the stage. Green box is a function of the marketing and the product innovation, and OEM is solely a function of how we innovate and drive new product introductions with them. And so it's a little more driven on their timelines than our timelines. Our goal is to constantly re-innovate and reinvest in that process. To your second question, the response to the ammunition was very good. Mind you remember that we launched 5 calibers. So our goal is to find out the reception specifically in hunt for precision accuracy in ammunition rather than just bullets, which we clearly did. You will see that as we continue to invest in more and more ammunition opportunities. And then to your final piece, we are working in tandem with our OEM partners on the development of the on-staged ammunition, and they are both participants and excited about the direction we're going with each of the different OEM partners. So as we expand more opportunities within the hunt, compete, defend and protect, we work with the different OEMs to develop not only the bullet innovations required for their businesses, but the ammo opportunities that we are looking at jointly between Sierra and these OEM partners.

Okay, great. Thanks and good luck with the rest of 2019.

Thank you.

[Operator Instructions] Our next question comes from Michael Kawamoto of D.A. Davidson. Your line is now open.

Hey guys, thanks for taking my questions. Just building on the Sierra comments, can you elaborate just a little more on what you're seeing there for the outlook for low single digits for '19? It seems like quite a deceleration from 2018. And then just any other color on what you're seeing in the industry as far as bullets and ammunition would be helpful.

I think the industry as a whole continues to be weary and concerned as to the overall category success in -- late coming out of 2018, and I think into 2019. I think as we get to 2020, the industry as a whole gets a little bit more positive. We believe that during the downtime in an industry as we've said previously, the way to be competitive is to innovate faster than the competition and to keep the gas on during the downtime, and as the market responds, which we are anticipating it will be going into the end of '19, maybe it's 2020 that the rising market share that we've gained over that period of time both in 2018 and 2019 will set us up well for when the rising tide comes again. So we're prudent, we have a lot of innovations in the works, we have a lot of plans in the works, both in the bullet and the ammunition world. We think it's prudent to put a plan together that's a high-single digit, similar to what we said last year. And then our goal is to continue to innovate and accelerate and see what happens as the market trends.

All right, that's helpful. And then just a follow up, maybe for Aaron. You guys come a long way on the gross margin front, but it seems like there's still room to move higher. How are you thinking about gross margin for next year?

Yes, so for 2019, we anticipate seeing a modest improvement in gross margin that definitely continues to be a focus, but as you are aware, Michael, we were able to make really good strides in 2018 with certain initiatives around what we call value leakages. And as we head into 2020, we also have some other initiatives at play, you know that we're working through, but as I say, those will start to manifest themselves until -- they won't manifest themselves until spring of 2020. And so, our focus on 2019 continues to be on that of product mix, channel mix and just continue to work with our suppliers and also what we do at retail. And so it is little more modest improvements that we're expecting to see in '19 with some further opportunities expected to be present in 2020 as we continue to work through some of these gross margin enhancing initiatives.

Got it. Thank you and good luck for the rest of the year.

Appreciate it.

Thank you. Our next question comes from Chris Krueger, Lake Street Capital. Your line is now open.

Hi, good afternoon.

Hey, good afternoon, Chris.

Hi. Most of my questions have been answered, but I just have one. You said you're introducing over 300 new Black Diamond products. How many products are discontinued or go away at the same time, or is that a net number? How should we look at that?

We look at new products as any time we launch something completely new or any time that we put resources on redesigning, re-leveraging current product. So there is always a fallout at the bottom and we don't make that -- I would say a strategic start out. That's a function of the planning of the business. Our real goal is to look at every single product, every season by category and ask the question relative to our competition, why does BD exist today, and can we make our products lighter, faster or stronger, and if so how and be disruptive. Clearly, at the end of each season, retailers by their vote, determine what -- at what level and what loses out. So both the winners and the losers and then we retrench and rethink of that each time. So we don't go into it with a preset strategy, all right. Eventually as you just go through, you innovate everything and it continues to re-move the needle up.

All right, that's helpful. Thank you.

Thank you. And at this time, this does conclude our question-and-answer session. I would now like to turn the call back over to Mr. Walbrecht for closing remarks.

We'd like to thank everyone for listening to today's call and we look forward to speaking to you more with the good news as we report on the first quarter results. Thanks again for listening in. We appreciate it, guys. Bye.

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