Good afternoon, everyone and thank you for participating in today's conference call to discuss Clarus Corporation's financial results for the first quarter ended March 31, 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 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.

Thanks, Geje. 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, everyone. It's great to be joining you today. The momentum of 2018 continued into the first quarter of 2019, with sales growth across every brand, category, geography and channel. Sales were up 15% to a record 61 million due to our continued dedication to product innovation as well as better order fulfillment and effective marketing campaigns. Aiding our strong first quarter performance was the favorable winter weather that extended late into the season in both the US and in Europe, which drove 49% year-over-year growth in our ski category. Sales growth was also due to the shipment and strong sell through of the New Black Diamond Beacon products, which you may recall we moved from the fourth quarter of last year into the first quarter of this year. Additionally, our mountain and climb categories were both up 12%, further supporting the quarter that experienced solid performance across the board. Accompanying strong top line results was continued gross margin expansion with 60 basis points of improvement compared to our adjusted gross margin in the first quarter of 2018. Increases like this have been a familiar trend, as we continue to make great strides on delivering truly innovative product to our customers on time, improve sourcing and our supply chain activities, and more importantly, our increased operational efficiencies. We also continued our focus on efficient brand investment allocations, which led to selling, general and administrative expenses, increasing only 3% in the quarter, significantly below that of our 15% sales growth. This resulted in meaningful growth of both net income and adjusted EBITDA, as well as adjusted EBITDA margin increasing 370 basis points to 11.8%. Our financial discipline has allowed us to reinvest in our brands to drive increased product innovation, higher levels of brand awareness and…

Thank you, John and good afternoon, everyone. Jumping into our results for the first quarter of 2019, sales increased 15% to $61.2 million compared to $53.3 million in the same year ago quarter, and on a constant currency basis, sales were up 16%. Along with the strong category and regional growth performance John just mentioned, the increase was driven by 16% growth in Black Diamond and 7% growth from Sierra. Gross margin in the first quarter increased 250 basis points to 36% compared to 33.5% in the year ago quarter. The increase was primarily due to favorable brand mix, and an inventory fair value adjustment that was incurred in the first quarter of 2018. This was partially offset by foreign currency exchange headwinds from the strengthening of the US dollar, as well as impacts from channel mix, given the strong momentum we see in our independent global distributor network. On a more normalized basis, gross margin in the first quarter of 2019 increased 60 basis points compared to an adjusted gross margin of 35.4% in the first quarter of 2018, which is adjusted for the aforementioned fair value inventory step up associated with the Sierra acquisition. Overall, our sales and gross margins were negatively impacted by $0.8 million by unfavorable foreign currency changes on a transactional basis. The primary cost of our inventory is denominated in US dollars, while 33% of our global sales are denominated in foreign currencies, primarily the Euro, Canadian dollar, Norwegian kroner and Swiss franc. We attempt to manage our foreign currency risk on a continuous basis through natural hedges and foreign currency hedge contracts. Although we have hedges in place for the different cash flows denominated in foreign currencies, these hedges will never be a perfect offset to the actual currency movements, especially with the…

Thanks, Aaron. Now that we've highlighted our strong results for the first quarter, I'd like to transition to a product discussion for the upcoming fall ‘19 and spring ‘20 seasons. For both seasons, we're doubling down on those categories where we believe there is significant runway for growth and an opportunity to grow our market share. These include footwear, apparel, gloves, trekking poles, packs, amongst others. For fall ‘19, we expect to have over 150 new products slated for launch and for spring ’20, we will continue this momentum with another 125 plus slated for launch. Now turning to fall ‘19. As we discussed on the last call, Black Diamond’s fall ‘19 offerings have already garnished significant attention and awards at the recent trade shows. The new product introductions including the Vision Down jacket, which is our strongest and warmest down jacket, the Approach Down which is our lightest down jacket and the Boundary Lap Line Mapped jacket which has a stretch wool base layer that provides active thermal regulation and moisture management, are just a few of the new apparel items. We have also some major updates in gloves with the Solano heated glove, which deploys supplemental battery powered heat, as well as new ski gloves and technical liners. This is the glove that won the ISPO Gold Award. Backcountry skiing and snow safety continues to be a significant emphasis of Black Diamond with the expansion of our most innovative collection of Jetforce packs today, featuring the Jetforce Pro, the tour and the new ultra-light. The collection has also already won numerous awards from the Outdoor Retailer ISPO shows earlier this year. Finally, the latest innovations to headlamps, trekking poles, ultra-light apparel and packs, Black Diamond has built an exceptional and expansive offering for fall ’19. Moving forward into…

[Operator Instructions] And our first question will come from Jim Duffy from Stifel.

Couple of questions for you. Nice work on the quarter. I'm wondering if you can kind of disaggregate the ski component of business and break it down to what type of trends you saw in the spring business component of the first quarter. And, related to that, do you think about your business and in two seasons, what's the outlook for the spring business as a whole?

I think I’ll answer the first part of it and let Aaron follow and answer your facts, I don't catch. Obviously, we saw momentum in the first quarter with ski and with snow safety, and we posted that. And of course, ski doesn't trend over into the second quarter into our season. But you continue to see the momentum in climb, in mountain and apparel and footwear, in what we would call traditional spring categories and even within mountain growth in trekking poles, headlamps, packs and our belief as always said is, rather than try and blow this up one category, one season, one geography, one channel, we really try and focus on delivering each and every business category segment in each calendar quarter, as if it was our only business. And wherever the winter trends play in our favor, sometimes great and other cases not so much. And in regards to the second half of the year, we're optimistic about how things are going. Obviously, we're just finished the pre-booking stage of that. And so a lot will transpire between now and when we start shipping in Fall Labor Day window. But we were we were strongly optimistic and positive about how the bookings were coming in.

And then next question is on the SG&A? How did you guys do it in the quarter, just terrific leverage with that type of sales growth, I would have thought maybe on the variable costs and so forth would make that more challenging. Can you dig in some on the key areas where you're finding SG&A savings?

Yeah, so one of our focuses has always been on that of reallocation. And despite coming into the year with a certain budget or plan, every day, we look -- we relook at what we believe to be opportunistic in terms of maximizing the value proposition of the various brands within the go to market process, and that's where we still made substantial investments or saw increases. But then on the operational side, we continue to be very focused on operational efficiencies. And so as a result of the growth that we saw, we obviously didn't cut expenses, but we were able to garner quite a bit of leverage by just being prudent and disciplined in our approach, continue to invest in the areas that we believe provide us with the highest levels of returns, but also continue to look at ways of how we can optimize but also ensure scalability within the supporting activities. And so this is just the manifestation of a sound strategy and approach but also the great work of a great team that continues to embrace these elements of these values that we're instilling in the business.

Great, really nice work. Last one for me, and then I'll let someone else jump in. Aaron, you had previously spoken about of a 55-45 split of the year. Is that still how you're seeing things playing out as we think about the model?

Yes, that's still correct.

Thank you. Our next question is from Dave King from ROTH Capital.

Maybe first on the EBITDA guidance, Aaron, did you say how much or how we should think about the 11% EBITDA margin between gross margin and the ability to leverage SG&A as the year progresses?

We didn't get into that, Dave, we've kept our outlook pretty consistent with that of last year where we focused on one, the top line revenue guidance along then with the EBITDA and EBITDA margin guidance. We did provide some additional color or commentary the last call where we highlighted that, we made substantial improvements or gains when it came to gross margin in 2018, and we knew that 2019 will be a little bit more difficult to be able to realize those same type of improvements in gross margin just concerning some of the transitional activities from a sourcing and supply chain activity that we have going on. We do believe that those transitional activities will benefit us starting in Q1 of 2020. And so as a result, we view 2019 to be more in line and more consistent with that of 2018. And that's why you see the 60 basis point of margin improvement in Q1 on an adjusted basis.

Okay, so then it sounds like it's sort of similar to last year's levels or similar to the improvement you saw maybe this quarter?

In Q1. Yeah. We have a few different initiatives at play where we believed will continue to drive gross margin improvements. And this is a focus holistically that we have where we look to maximize through our product design, the position, the repricing, et cetera, et cetera, but also to optimize on the back end through our sourcing and supply chain activities. And we have a major initiative at play taking place right now with some of our Black Diamond hard goods that is progressing well. But as I say, we really won’t see the benefits of that until Q1 of 2020.

Okay, perfect. Then turning to Sierra, for the quarter, do you have the breakdown between green box and OEM and any things you can highlight on those fronts and then have you begun shipping your own ammunition yet or when should we start to see it in stores?

Yeah, so we stay away from getting down into the specific breakouts between OEM and green box just know that holistically it's a 50-50 split. We did see continued improvement. One of our initiatives coming into 2019 was focusing also on the international side. As we've discussed before, as we bought the business, we knew that one of the opportunities was the go to market process, which we focused on domestically, and we saw the benefits of that coming into 2019. We also placed more emphasis or leaned into more of our international partners and we saw the benefit coming from there as well. And to answer your question on the ammo side, yes, we did start to ship some of our ammunition, albeit quite insignificant, to the overall results. You'll see most of the shipments will start to occur late Q2, early Q3.

Late Q2, early Q3. Okay. So when you say when you did, did you mean you saw a little bit in the first quarter or is that you're saying, as of May 6, you’ve started to ship a little bit?

In the first quarter, we did ship a little bit.

Our next question is from Michael Kawamoto from DA Davidson.

Yeah. Hey, guys, thanks for taking my question and congrats on the good start.

Thanks, Michael. Appreciate it.

Yeah, so you noted that the ammo industry was down, I think low double digits, just curious what you're hearing from your partners domestically and retailers on their outlook for the rest of the year in the category. And I'd imagine that the part of the market that you play in is in better shape than industry as a whole, is that still the case.

I think when everyone [indiscernible] the perception of the marketplace of the hope I would say was that we would see a flat Q1 and a Q2, and that by Q3, Q4, whether it was the political momentum, or just we'd already hit rock bottom and new product innovations, marketing, the buzz, hunt season, that we’d start to see a lift. I think, now as you're seeing the numbers posted by other ammunition and/or weapons manufacturers posting that the quarter was softer than expected and probably ranged in the low double digits to mid double digits of the teens on a decline. I would say, from us, we believe that the point of difference is constantly putting out new innovation and keeping the gas down. And, as we move into fall, we’ll continue to do that both with our OEM partners where we continue to be very innovative in product as well as in our offerings to consumers. And I think now the industry is hoping that by Q3, Q4, it starts to be flat, and maybe some -- maybe late in the year, some positive back. I think that's the best case scenario in the marketplace right now. Our belief is that it's always been about market share, both through our OEM partners, and to our consumers that at the end of the day, it's create consumer desired products and you'll work through the marketplace.

Got it. That's helpful. And then just on your point about innovation, can you maybe share some initiatives working on the examination side or on green bullets or anything like that?

I think two things that, we're working with our OEM on a regular basis to determine where there are unique opportunities for what Sierra offers from a bullet perspective, which is precision and accuracy. And then obviously, from the ammunition, we've launched into Game Changer, we will continue to expand that as an offering. And then I think the other side is we're continuing to look for additional opportunities and ammunition in tandem with our OEM partners where we can launch innovative new technologies to the marketplace. And so we're very pleasantly pleased with how that's developing going into the rest of 2019 and 2020.

[Operator Instructions] And our next question is from Chris Krueger from Lake Street.

Hey, this is Mark on for Chris. Hey, just a couple of quick ones here. Just, can you give us any more insight into the impact from winter weather and snow conditions and maybe touch on the quality of inventory as you came out of the season?

Okay, I think we're always careful about inventory to begin with. I think it was a good winter. I don't leave all of it up to the winner. Our team developed some very award winning innovative products, both in snow safety packs as well as in beacons and we saw growth in that, likewise in ski and gloves and other categories. I think the market is -- because the winner was good, I think the market is clean. And I think the industry has probably seen that in bookings for fall ‘19. And sometimes it goes your way. And globally, we had a decent winter. It wasn't phenomenal, but it was enough around the globe in Asia, in Europe and the US to help the retailers.

Okay. And then just kind of following up on Sierra here from some other questions. As we look at, we're early into another presidential election cycle, if we were to see increased demand coming into that cycle, how much lead time do you really need to build into and meet higher demand?

I think we would say to you that because this is a expected type of trend, and we're staying close with the OEM partners and our retail partners, I think we get as early a glimpse as it as we can. Our goal at Sierra is to make sure that we are doing everything in our possibility, both for innovative products as well as our production planning and efficiency, that we can maximize the opportunities that we get whether the market is down, flat or growing.

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

Thank you, operator. We'd like to thank everybody for listening to today's call. As we've said previously, we believe great teams build great brands and a huge kudos to the BD team for the product innovation, to the Sierra team for the product innovations, and now moving into skin nourishment. We're excited for the year and we look forward to speaking with you again when we report our second quarter results. Thank you.

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