Clarus (CLAR) Q4 2025 Earnings Call Transcript

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DATE

Thursday, March 5, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Executive Chairman — Warren Kanders
• Chief Financial Officer — Michael J. Yates
• President, Black Diamond Equipment — McNeil Seymour Fiske

TAKEAWAYS

• Consolidated Revenue -- $65.4 million, down 8% reflecting softer North American wholesale at Outdoor, lower global D2C, and Adventure segment declines, with Peips divested.
• Outdoor Segment Revenue -- Down 2.1%, with constant currency revenue down 2.9%; Apparel grew 10%, Mountain grew 0.4%, and Climb increased 4.3%.
• Adventure Segment Revenue -- Down $2.1 million, or 10.4%, primarily from reduced OEM demand, soft US bike market, and transitioning Australian and New Zealand customers; partially offset by European expansion and RockyMounts acquisition.
• Gross Margin (Consolidated) -- 27.7%, down from 33.4% a year ago, impacted by inventory reserves ($3.4 million Adventure, $500,000 Outdoor), tariffs, and FX losses; adjusted gross margin 33.6% compared to prior year's 38%.
• Outdoor Segment Gross Margin -- 32.2%-30.3%, below 35.2% prior, reflecting a 630 basis point headwind from tariffs and FX contracts.
• Adventure Segment Gross Margin -- 16% vs. prior 28.9%; would have been 34.5% excluding $3.4 million inventory reserve.
• Tariff Impact -- Net unrecovered tariff impact was $3.4 million to Outdoor adjusted EBITDA for the year; expects remaining $2.8 million impact in 2026.
• FX Contract Impact -- $2.2 million negative EBITDA impact year over year at Outdoor; expects a $1.6 million EBITDA pickup in 2026 due to rolling off these contracts.
• Inventory -- $64.9 million, up from $53.5 million prior, attributable to change in recognition timing ($7.9 million), tariffs, and FX ($5 million), not incremental purchases.
• Adjusted EBITDA -- $1.2 million, or 1.8% margin; $300,000 Adventure, $2.0 million Outdoor, and $1.2 million in adjusted corporate costs.
• Restructuring Charges -- $900,000 in Q4 related to further organizational streamlining, exit of three product lines, Canadian 3PL exit, European logistics restructuring, and store closures; expects additional $1.5 million in Q1 2026.
• Legal Costs (Section 16(b), CPSC, DOJ) -- $1.2 million in Q4 and $4.7 million for the year, adjusted out of EBITDA.
• Free Cash Flow -- $11.6 million for 2025, down from $14.4 million prior due to inventory receipt timing at Outdoor.
• Cash and Debt -- $30.7 million in cash; total debt of zero at year end.
• 2026 Guidance -- Full-year sales expected at $255 million-$265 million; adjusted EBITDA $9 million-$11 million (3.8% margin at midpoint); capex $6 million-$7 million; free cash flow $3 million-$4 million.
• Segment Guidance 2026 -- Adventure: $80 million sales; Outdoor: $180 million sales.
• Q1 2026 Outlook -- Sales expected between $60 million and $62 million.
• Pricing Actions -- Outdoor raised prices by $7 million-$8 million total since May 2025 to offset tariffs (75%-80% of $11 million-$12 million impact), with latest increases effective January 2026; Adventure executed price increases in Q4 (RockyMounts ~5%, +$2 million-$3 million in revenue expected for 2026), and broader increases for Rhino-Rack in Q1 2026.
• Cost Initiatives -- Outdoor headcount down 38% from 2023 baseline (30% ex-manufacturing); Adventure streamlined facilities in New Zealand and Australia, consolidated MAXTRAX and Rhino-Rack under one roof, and shifted to new 3PL in Europe for improved service and lead times.
• Channel Performance -- North America wholesale (Outdoor) down 10.4% (excluding FX), North America digital D2C down 0.8%; Europe wholesale up 12.1% USD (3.2% constant currency), international distributor channel up 19.3%.
• Product Mix Evolution -- Mountain, Climb, and Apparel combined accounted for 86% of Outdoor Q4 sales, 90% full-year; Ski now less than 10% of the business and expected to fall to 5%-7% as mix stabilizes.
• Inventory Quality -- Adventure and Outdoor both took significant inventory write-downs ($3.4 million and $500,000) to address obsolete stock, with Adventure’s step viewed as a one-time "significant step in improving quality."
• Litigation and Regulatory -- Section 16(b) litigation ongoing; Caption Management claims settled February 2026; DOJ investigation initiated regarding avalanche beacon products, with subpoenas served and Black Diamond former executives named as targets.
• Innovation & Growth Moves -- Adventure delivered a record number of new vehicle fitments; European platform expansion expected to yield incremental $1 million in sales; RockyMounts contributed $5 million in 2025 with further growth expected.
• Management's Market View -- Outdoor order book for 2026 described as “holding up” despite cautious retailer behavior and weather uncertainty; Adventure notes market remains “challenging” but sees “green shoots” in Europe and Japan following new distribution and service model.

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RISKS

• Outdoor gross margins declined 280 basis points compared to the prior period due to unrecovered tariffs, FX contract losses, and inventory exits, specifically with tariffs causing a 390 basis point impact, FX contracts a 240 basis point drag, and inventory exits an 80 basis point hit.
• Adventure segment gross margin fell to 16% from 28.9% driven by inventory reserve write-downs and lower sales volume.
• Legal and regulatory risk remains material with ongoing DOJ criminal investigation into avalanche beacons, grand jury subpoenas to company and current/former Black Diamond employees, and unresolved regulatory scrutiny by CPSC.
• Management stated, "to achieve our guided adjusted EBITDA, we need to hit our gross margin targets," underscoring execution risk tied closely to margin improvement rather than cost control alone.

SUMMARY

Clarus Corporation (NASDAQ:CLAR) delivered an 8% year-over-year revenue decline, with both Outdoor and Adventure segments pressured by tariffs, FX losses, inventory write-downs, and tepid OEM demand in key markets. Price increases, operational streamlining, and product portfolio concentration partially offset these headwinds but were insufficient to prevent sharp gross margin contraction, especially in Adventure, where inventory reserves and market softness hit results hard. The company reaffirmed 2026 guidance with consolidated sales targeted at $255 million–$265 million and adjusted EBITDA of $9 million–$11 million, contingent on improving gross margins amid continued regulatory and macroeconomic uncertainties. Adjusted free cash flow generation remained resilient, and the debt-free balance sheet, combined with reduced headcount and narrowed product focus, allows for strategic patience and capital flexibility as management awaits resolution of significant legal and regulatory actions.

• Former President John Walbrecht and former Director of Quality Rick Vance have been named as targets in the DOJ's criminal investigation regarding Black Diamond’s avalanche beacons, with the company and multiple employees receiving grand jury subpoenas.
• Management indicated the recent Supreme Court decision could lead to a $6.5 million recovery of IEEPA tariffs, though the most burdensome 50% Section 232 tariffs remain and are not subject to reversal.
• Adventure segment’s new distribution warehouse in the Netherlands enabled incremental $1 million in annual revenue, expanding into smaller European customers previously unreachable from Australia.
• The company does not plan near-term M&A, instead "sit on our cash for at least the first half of the year." to focus on internal execution following recent structural and operational changes.

INDUSTRY GLOSSARY

• IEEPA tariffs: U.S. trade tariffs authorized under the International Emergency Economic Powers Act, affecting certain imported goods; relevant due to possible recovery of paid duties.
• Section 232 tariffs: U.S. tariffs imposed on imported steel and aluminum for reasons of national security, referenced as the most punitive and non-recoverable for Clarus Corporation.
• 3PL: Third-party logistics provider; in this context, refers to outsourced warehousing and distribution used to streamline Clarus’s supply chain.
• PFAS: Per- and polyfluoroalkyl substances, regulated chemicals sometimes leading to specific product inventory reserves or write-downs.
• OEM: Original Equipment Manufacturer, large customers purchasing products for integration or resale under their own brand, significant for Clarus’s Adventure segment.

Full Conference Call Transcript

Warren Kanders: Good afternoon, and thank you for joining Clarus Corporation’s earnings call to review our results for the fourth quarter and full year. I am joined today by our Chief Financial Officer, Michael J. Yates, who will cover our Q4 results, including Adventure segment performance, as well as McNeil Seymour Fiske, who will discuss our Outdoor segment. In 2025, we remained focused on positioning Clarus Corporation for sustainable growth over the long term, prioritizing our most profitable products and styles in the Outdoor segment, and executing incremental operational progress in the Adventure segment. Our financial results reflect a challenging market characterized by weaker consumer demand, tariff impact, supply chain disruptions, and broader macro headwinds.

As you will hear from McNeil during the fourth quarter, we experienced the most unfavorable seasonal conditions in 50 years in key ski destinations in the United States. Against this backdrop, we continued to advance our overall strategic plan to simplify our businesses to drive share gains as market conditions normalize. Across both segments, we implemented targeted cost-outs and tariff countermeasures that will enhance profitability on an annualized basis and set the stage for long-term value creation. At Outdoor, we have fundamentally reshaped the business over the last two years, simplifying the portfolio, exiting low-margin categories, and rationalizing SKUs while upgrading leadership and reallocating investment toward higher-growth areas.

At the same time, we have meaningfully reduced our cost structure, modernized our systems and sourcing capabilities, and expanded product margins by more than 300 basis points before factoring in the impact of tariffs. Together, these actions have positioned the business to operate more efficiently and profitably moving forward. I would also like to highlight the continued success of the Black Diamond apparel line, which saw sales growth of 10% in the fourth quarter despite unusually adverse seasonal conditions in both the U.S. West and Europe. We see very strong momentum in key business units heading into 2026. Turning to Adventure, our results continue to be affected by market pressures.

Q4 gross profit was impacted by several one-time and external factors that Michael will discuss in greater detail. While 2025 was a challenging year for the segment, we have taken corrective action to position the business for a stronger, more innovative future. Importantly, as we discussed last quarter, we identified that pricing in several of our markets, particularly Australia, had not kept pace with inflation or our cost base, contributing to margin erosion, and we have moved forward with price increases across all brands and markets effective Q1 2026.

We continue to believe that Adventure is only beginning to tap into significant growth opportunities around the world, and we have begun to see green shoots, particularly in Europe and Japan, where the steps we have taken to improve service levels and shorten lead times have helped to accelerate growth and drive new customer wins. Additionally, our commitment to fitting more vehicles led to a record number of new fitments delivered in 2025, strengthening our competitive positioning and supporting future revenue growth. There is certainly more work to be done, but we have been pleased with the continued progress on strategic initiatives at Adventure.

Overall, Clarus Corporation is far better positioned to navigate uncertainty and market weakness than we were a year ago. Supported by a debt-free balance sheet and a streamlined organizational structure, we will continue to advance our multiyear growth plans while maintaining a disciplined approach to capital allocation and a clear focus on maximizing shareholder value. With that, thank you for being with us today, and I will turn the call over to McNeil.

McNeil Seymour Fiske: Thanks, Warren. Turning to Slide 6, I will review the Outdoor segment’s Q4 performance and our expectations heading into the remainder of 2026. Overall, Q4 came in somewhat softer than our plan due primarily to adverse seasonal conditions affecting our ski segment that Warren mentioned. That said, our more focused, simplified business showed growth and resilience in our core go-forward priority categories. The aggressive reshaping of Black Diamond over the last three years has allowed us to weather a year of tremendous disruption, tariff impact, supply challenges, and macro headwinds. It is worth putting that multiyear effort in perspective.

Since 2023, we have dramatically simplified and narrowed our focus, exited low-margin underperforming categories—Peips, bindings, JetForce, to name a few—rationalized styles and SKUs, reduced headcount versus the 2023 baseline by 38% in total and 30% excluding changes in manufacturing, upgraded key leadership positions, reallocated headcount and investment to support apparel growth, stood up Black Diamond Asia sourcing and product development, launched a new e-commerce platform and supporting MarTech stack, launched a new S&OP system to support better supply-demand alignment, modernized our ERP in the EU with a new North America–EU ERP and process, substantially improved the quality of inventory, concentrating our mix into high-volume A styles while reducing markdown exposure and the level of discontinued merchandise, moved BD to a more full-price, lower-discount model, and engineered more than 300 basis points of improvement in product margin pre-tariff through line simplification, new product introductions, mix management, sourcing, and supply chain improvements.

In short, we are leaner, more focused, more agile, and more competitive. The core of the business is strong. Thanks to the hard work of our teams over the last few years, we have set the stage for sustainable, profitable growth and operating margin expansion in the years ahead. Now let us turn to Q4 results. As with my last update, I will address tariffs and currency at the top of my remarks and exclude the Peips brand, which we divested in Q3, in year-over-year comparisons. First, tariffs. In early May, we initiated the first phase of our tariff mitigation plan, which included raising prices, negotiating vendor concessions, air freighting products where necessary, and accelerating our exit out of China.

By moving quickly and decisively, we were able to offset about half of the impact of tariffs in 2025. We estimate that the net unrecovered impact from tariffs and duties for the year was approximately $3.4 million to adjusted EBITDA. As we roll forward into 2026, we have now offset nearly 75% of the tariff impact as best we can estimate today, leaving a $2.8 million gap this coming fiscal year. Over time, we believe we can reduce that gap still further through pricing, sourcing, new product introductions, and value engineering.

In the event that we are able to recover tariffs as a result of the recent Supreme Court decision, Black Diamond would receive approximately $6.5 million for the reciprocal IEEPA tariffs paid in 2025. Note that the most punitive tariffs on our business—the 50% Section 232 tariffs on steel and aluminum—are not covered by the Supreme Court decision and remain in effect. And of course, the IEEPA tariffs have largely been replaced by new ones under a different claims authority. Now let me address currency. As noted last quarter, while we benefited from the translation of the higher euro to the dollar, we incurred significant losses on FX contracts in 2025.

These losses, which amounted to a $2.2 million EBITDA swing year over year, flowed through and suppressed product margins. We have now rolled off these contracts and expect a run-rate pickup of $1.6 million in EBITDA in 2026 at the current exchange rate. Turning to operating results. Revenue for the quarter was down 2.1% to prior year, down 2.9% in constant currency excluding FX contracts. The largest drag on the top line was our ski business unit, which was down 30% to prior period due to a combination of our rotation out of low-margin categories like bindings, beacons, and airbags, and the most unfavorable seasonal conditions in 50 years in key ski destinations in the U.S.

Moreover, while our ski apparel line started strong through October and November, the growth trend tapered in December with the unusually poor conditions in both the U.S. West and Europe. Still, apparel for the quarter was up 10% compared to Q4 2024, and we continue to see very strong momentum in that business into 2026. Meanwhile, our Mountain and Climb business units were both up for the quarter 0.4% and 4.3%, respectively. Taken together, these three categories of Apparel, Mountain, and Climb grew 3.7% in Q4, accounting for 86% of our sales in the quarter and 90% for the full year.

This is where our simplification strategy is paying off, and we expect this strategy to drive profitable growth at BD in the future. By channel and region, North America wholesale, excluding FX contracts, was down 10.4% due to planned exits in the ski category and somewhat softer replenishment orders in December. North America digital D2C was down 0.8% compared to the fourth quarter of last year, which was a significant improvement in the run rate from previous quarters. Europe wholesale, excluding FX contracts, was up 12.1% in U.S. dollars and 3.2% on a constant currency basis.

Europe digital D2C, which is a relatively small part of the region’s revenue at 7.3% of total sales, was down 290.9%, or 36% in constant currency. Our international distributor channel was up 19.3% for the quarter. In 2024, we realigned our deliveries to better suit the needs of our international market. That means our year-over-year results are now comparable in timing. I would also like to highlight results of our “Designed for the Deep Winter” catalog, which far exceeded our expectations and validated an important new part of our marketing mix.

We had taken a break from marketing via the catalog, and this past winter’s success gives us confidence, and we expect to continue with the catalog marketing program going forward. Turning to gross margins. Q4 gross margin rate declined 280 basis points versus prior period due to the impact of unrecovered tariffs and FX contracts, as well as write-downs for exiting inventory. Breaking that down, tariffs had a 390 basis point impact in the quarter, while FX contracts accounted for another 240 basis points of drag, and inventory exits cost 80 basis points.

Stripping out these non-comp factors, our comparable underlying gross margin showed a 450 basis point improvement, reflecting the progress we have made in simplifying the line and focusing on higher-margin styles and categories. This helped reduce the impact of what would have otherwise been a 730 basis point decline in margin. Operating expenses, excluding restructuring and legal costs from both periods, were essentially flat year over year. Adjusted EBITDA came in at $2.0 million for the quarter, down $2.1 million to prior period, with unrecovered tariffs and loss on FX contracts amounting to a $2.4 million drag on earnings versus the prior-year period.

Adjustments to EBITDA reflect the latest phase of our restructuring efforts, which have been designed to help offset the higher cost of tariffs and trade in this environment. These actions occurred in Q4 and January 2026, and include continued streamlining of our organization and overall headcount, completing the exits of Peips, JetForce, and bindings businesses, exiting our 3PL in Canada, initiating a project to restructure our logistics and fulfillment operations in Europe, closing additional Black Diamond stores, and slimming down our athlete roster. For Q4, these actions resulted in approximately $900,000 of restructuring charges. We also expect to incur another $1.5 million in February 2026, which will be reflected in our Q1 results.

We do not anticipate any further restructuring at this point, yet remain mindful of the dynamic and changing macro environment. Finally, inventory ended the year at $64.9 million. On the surface, that looks like a significant increase versus last year’s ending position, excluding Peips at $53.5 million. However, the biggest factor in the increase was a change of inventory recognition from Delivered at Place (DAP) to recognition at FOB shipment this year, meaning our in-transit inventory on the books appears much larger this year than last. This is $7.9 million of the difference to prior year and is strictly a matter of timing.

The two other factors raising this year’s number are tariffs and currency, which together inflate the value of inventory approximately $5.0 million. We have made great progress in improving the quality and composition of the inventory over the last few years and enter 2026 in good shape. In closing, I will again thank our teams around the world for their incredible perseverance, creativity, and drive in the face of this turbulent, tough, and unpredictable global environment. With that, I will turn it over to our CFO, Michael J. Yates.

Michael J. Yates: Thank you, McNeil, and good afternoon, everyone. On today’s call, I will provide some brief comments on the Adventure segment, and then we will conclude with a summary of our Q4 financial results followed by the Q&A session. Taking a closer look at Adventure, Q4 revenue declined $2.1 million year over year, or 10.4%, driven primarily by reduced demand from two OEM customers compared to the prior-year quarter. Also contributing were weaknesses in the U.S. bike market and customer transitions in our home markets of Australia and New Zealand. Offsetting this pressure, our European expansion continues to gain traction.

The new 3PL warehouse we opened in the Netherlands has improved service levels and shortened lead times, enabling accelerated growth and new customer wins in Sweden, Norway, the UK, Spain, and Eastern Europe. We also expanded our international distribution footprint, adding a new partner in Japan and multiple partners serving key off-road markets in Africa. In our home markets of Australia and New Zealand, we secured a chain-wide placement of Rhino-Rack product with a large retail customer across all 300 locations in Australia and New Zealand. This partnership is expected to become a top-five customer in 2026.

In North America, strengthened relationships with rack specialty retailers and upgraded point-of-sale displays have driven new placements for Rhino-Rack and RockyMounts, filling product and price gaps not addressed by competitors. While we continue to set ourselves up to grow the right way, fourth quarter gross profit, in addition to being pressured by lower sales volume, was impacted by several one-time and external factors, including a significant inventory reserve write-down adjustment of $3.4 million relating to excess and old inventory, including some old packaging for in-house assembled goods. We also incurred higher customer rebates in the fourth quarter and higher impacts from U.S. tariffs. Corrective actions are underway.

Specifically, the group has implemented price increases on fast-turning RockyMounts SKUs in November, is renegotiating unfavorable customer contracts in our home markets of Australia and New Zealand, and has now executed price increases across all brands and markets effective 2026. These important actions position the business to restore margin performance moving forward. Operationally, we are streamlining our footprint to reduce costs and overhead and improve scalability at Adventure. In the fourth quarter, we closed the high-cost Wellington, New Zealand facility and transitioned to a 3PL in Upland that is closer to customers and will better support growth. We also closed Brendale in Queensland on March 1, 2026, consolidating the former MAXTRAX operations into our Eastern Creek headquarters.

What this means is we have combined MAXTRAX and Rhino-Rack businesses under one roof. Product development remains a core focus. Our investment in vehicle fitments delivered a record year in 2025, with more new vehicle fits completed than in any of the prior 10 years. This strengthens our competitive position and supports future revenue growth. Beyond fits, we expect multiple new innovations and product platforms will be launching in the next 18 months. With that, now let me turn to the consolidated results and a detailed review of the segment financials. I am on Slide 8. Fourth quarter sales were $65.4 million compared to $71.4 million in the fourth quarter of the prior year.

The 8% decrease in total sales was due to softness in the North American wholesale market at Outdoor, lower global D2C revenues, and lower Peips revenues due to its disposal in July 2025, and significantly reduced global demand from two OEM customers in a challenging wholesale market in Australian Rhino-Rack in the Adventure segment. The decrease in the Adventure segment was partially offset by increased contributions from the acquisition of RockyMounts. The consolidated gross margin rate in the fourth quarter was 27.7% compared to 33.4% in 2024. Gross margin was impacted by higher inventory reserves at both segments—$3.4 million and $500,000, respectively, at Adventure and Outdoor. The $500,000 at Outdoor addressed slow-moving obsolete inventory.

The $3.4 million, as I mentioned, also dealt with slow-moving and old obsolete inventory at Adventure. Tariffs impacted gross margin at both segments. Lower volumes at the Outdoor segment due to sales peaks, along with unfavorable foreign currency impact at the Outdoor segment, were a drag on margins. These decreases were partially offset by favorable product mix and lower PFAS inventory reserves at the Outdoor segment compared to 2024. Consolidated adjusted gross margin, reflecting PFAS-related and other inventory reserves and inventory fair value adjustments as a result of purchase accounting, was 33.6% for the quarter compared to 38% in the year-ago quarter.

I wanted to note that actual gross margin includes significant headwinds from tariffs, FX, and inventory reserves in the quarter. It is a key point to make sure everyone understands as they look at our financials for the quarter. Outdoor’s actual gross margin for Q4 2025 was 32.2%–30.3% compared to 35.2% in 2024. The significant efforts at Outdoor under McNeil’s leadership to improve our gross margins are being realized as he outlined earlier, but these improvements were completely wiped out in Q4 2025 due to tariffs and FX, which were approximately a 630 basis point headwind in the current quarter compared to last year. Adventure’s actual gross margin for Q4 2025 was 16% compared to 28.9% in Q4 2024.

Actual Q4 2025 gross margins include the $3.4 million of inventory reserves I mentioned earlier. Excluding this inventory reserve, our gross margin at Adventure for Q4 2025 would have been 34.5%. With this inventory reserve, we believe we have taken a significant step in improving the quality of our inventory at Adventure. Fourth quarter consolidated selling, general, and administrative expenses were $25.5 million compared to $27.8 million, or down 8%, versus the same year-ago quarter. The decrease was primarily due to lower employee-related costs, lower costs from Peips due to the divestiture, and other expense reduction initiatives to manage costs across the segments and at corporate.

Adjusted EBITDA in the fourth quarter was $1.2 million, or an adjusted EBITDA margin of 1.8%. Our adjusted EBITDA is adjusted for restructuring charges, transaction costs, stock compensation expense, contingent consideration benefits, and other inventory reserves. Additionally, as noted in prior quarters, beginning in 2024, we adjusted legal costs associated with the Section 16(b) litigation and the Consumer Product Safety Commission/DOJ investigation, known as the CPSC and DOJ matter. These legal costs were $1.2 million in the fourth quarter of 2025 and $4.7 million in total for the full year 2025. The fourth quarter adjusted EBITDA by segment was $300,000 at Adventure and $2.0 million at Outdoor. Adjusted corporate costs were $1.2 million in the fourth quarter.

Let me shift over to liquidity and the balance sheet. Free cash flow, defined as net cash provided by operating activities less capital expenditures, for 2025 was $11.6 million compared to $14.4 million for the three months ended December 31, 2024. This strong cash flow generation was expected and is consistent with our historical practice. The decrease versus the prior year is due to the timing of the inventory receipts at Outdoor that McNeil walked us through. Total debt at December 31, 2025 was zero. At December 31, 2025, cash and cash equivalents were $30.7 million compared to $45.4 million at December 31, 2024.

The $36.7 million balance is consistent with the expectations I shared last quarter that our consolidated cash balance would be in the range of $35 million to $40 million by the end of the year. Let me move on to our outlook. I am on Slide 9. In 2026, we expect full-year sales to range between $255 million and $265 million and adjusted EBITDA to be in the range of $9 million to $11 million, or an adjusted EBITDA margin of 3.8% at the midpoint of revenue and adjusted EBITDA. We have tried to take a reasonable approach to guidance, and we have a decent understanding of our revenue. The key for us this year will be improving gross margins.

We have our SG&A costs under control, but to achieve our guided adjusted EBITDA, we need to hit our gross margin targets. We are initiating our 2026 segment guidance as follows: Adventure $80 million for the full year, and Outdoor $180 million of sales for the full year 2026. This totals $260 million, which is the midpoint of the consolidated sales guidance range I gave above. Adjusted corporate costs should be around $8 million, or $2 million per quarter. We expect capital expenditures to range between $6 million and $7 million for the full year and free cash flow to range between $3 million and $4 million for the full year 2026.

First-quarter sales are expected to be between $60 million and $62 million. I want to reiterate our outlook does not include any expense for the ongoing litigation relating to Section 16(b) matters, the CPSC matter, or the DOJ investigation. With that, let me give an update on legal. I would like to provide an update on the outstanding Section 16(b) securities litigation matters that the company is pursuing, as well as an update on the open matter with the CPSC and DOJ. We continue to proceed in our lawsuit against HAF Trading LLC and Mr. Harsha Padia for the disgorgement of short-swing profits under the securities laws.

In early 2025, the district court granted summary judgment in favor of the defendants. We filed a timely appeal and an oral argument was held on February 12, 2026, before the Second Circuit Court of Appeals in New York City. The court has invited the SEC to file an amicus brief within 60 days, or by April 17, 2026. By March 10, 2026, the SEC is to advise the court if it does not intend to submit a brief, and if it does, the parties have 21 days to respond to it. We also filed a lawsuit against Caption Management and its related entity and controlling persons.

On February 24, 2026, we entered into a settlement agreement with Caption to resolve the company’s claims, and on March 2, 2026, Caption paid the company an undisclosed sum in exchange for, among other things, mutual releases and dismissal of the claims with prejudice. With respect to the open matters with the CPSC and DOJ, in late 2024, the company was notified by the CPSC that the unresolved matters involving beacons against Black Diamond had been referred to the Department of Justice. To date, the DOJ has not pursued a civil lawsuit regarding this matter.

However, in early 2025, the DOJ served the company and Black Diamond with grand jury subpoenas in connection with a criminal investigation, requesting categories of documents related to Black Diamond’s avalanche beacons. We have cooperated with the DOJ in responding to its discovery request and have produced substantially all of the documents requested. The DOJ has sent letters to John Walbrecht, Black Diamond’s former President, and Rick Vance, Black Diamond’s former Director of Quality, advising them that they are targets in its investigation. And the DOJ has also served subpoenas for grand jury testimony on a current and a former employee of Black Diamond.

In conclusion, we see Clarus Corporation today as far better positioned to drive sustainable, profitable growth supported by a simplified and narrowed business focus, as well as a strong balance sheet with zero debt. We look forward to taking the next steps in our transformation in 2026 and delivering significant long-term value for Clarus Corporation shareholders. At this point, Operator, we are ready to take questions.

Operator: Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. Our first question comes from the line of Matthew Butler Koranda of ROTH Capital Partners. Your line is now open.

Matthew Butler Koranda: Hey, guys. I wanted to hear a little bit more about the pricing actions that you took at the end of the year and then in January. Maybe just breaking them out between Outdoor and Adventure, could you talk about the magnitude of pricing that was taken and how that impacts the outlook for growth for 2026 between the two segments?

Michael J. Yates: Certainly. McNeil, do you want to talk about BD, and I will cover Adventure?

McNeil Seymour Fiske: Yep, sure. Hi, Matt. Thanks for the question. Maybe to give you a sense of magnitude on the pricing actions we have taken at Black Diamond, and really with the goal, of course, of offsetting the impact of tariffs, if you look at the gross impact of tariffs on the Black Diamond business, it would be about $11 million to $12 million a year impact on margin and earnings. With pricing and with some sourcing work that we have done, we have been able to offset all but $2.8 million of that. So something around 75%–80%.

And so, yeah, I think you can assume that there is about $7 million to $8 million of pricing that we have taken in the Black Diamond business in order to offset tariffs. Obviously, that is not the whole amount; we did not get all the way back to $11 million, but we pushed it as far as we thought we could push it relative to what competitors were doing and what we thought the consumer would accept in this environment. And then over time, our goal is to continue with smaller price adjustments, product line reengineering, and remixing to close that remaining $2.8 million gap. But about a $7 million to $8 million overall price increase.

Matthew Butler Koranda: Okay. That is helpful. Before Michael answers Adventure, McNeil, just to clarify, $7 million to $8 million, was that taken in two tranches? You mentioned some May actions from 2025. I just want to make sure I understand the impact of 2026 and how that feeds into the growth outlook, especially for Outdoor.

McNeil Seymour Fiske: Yeah, thanks. Good clarifying question. That is the result of both sets of actions we have now taken—the initial price ups we took in May and then the ones we took at the start of 2026. It is both of those.

Matthew Butler Koranda: Okay. Should we think half and half in terms of impact, or any breakout between those two actions that were taken?

Michael J. Yates: I do not think I have an accurate estimate offhand of the split.

McNeil Seymour Fiske: Yeah.

Matthew Butler Koranda: Okay. We would have to get back to you. We can take it offline. Yep. Okay, that is fair. And then, Michael, go ahead on Adventure.

Michael J. Yates: Thanks, McNeil. Yeah, so, Matt, in Adventure we took price specifically at RockyMounts back in November, per my prepared remarks. That is a nice bump, probably around a 5% price increase there. And then here in the first quarter across the Rhino-Rack business, we took price up as well, pretty much on the primary Pioneer platform racks, our primary categories that we sell. All in, I think we would expect to get about $2 million to $3 million of price this year.

Matthew Butler Koranda: Got it. Okay. Alright. Very clear. We are fighting volume; the market is challenging. It is, as we have talked about and as some of our competitors have reported. Okay. Understood. And it seems like embedded in the expectation for 2026, especially as it pertains to Adventure, is a pickup in growth and unit volume as the year moves on. What are the components that you are assuming there that give you that return to growth?

Michael J. Yates: Yes. So it is volume, it is price, and then there is an FX tailwind as well. Some of that volume should recover in Australia in the home market, but also through some of the expansion I talked about. We have some growth in Europe and elsewhere, specifically when you think about the bike business here in North America, and some of the other things I mentioned in Japan and so forth. So that is where it comes from—it is a combination of all three of those things.

Matthew Butler Koranda: Okay. Got it. And then maybe any commentary on how you plan to use the balance sheet this year. Obviously, you are in a much better position from a cash perspective, no debt. Access to capital, I assume, is solid. Are you finding anything in the funnel in terms of M&A that is interesting? It is a really dynamic time in the markets. Maybe there is more stuff shaking loose. I would love to hear your perspective.

Michael J. Yates: Yeah, that is a good question. For right now, I think we are really focused internally on our two respective businesses and making sure they are well positioned for the future and that we can grow those businesses. So I think we are just going to sit on our cash for at least the first half of the year.

Matthew Butler Koranda: Okay. Seems fair. I appreciate it, guys. Thanks.

Michael J. Yates: Thanks, Matt. Thank you.

Operator: One moment for our next question. Our next question comes from the line of Anna Christian of B. Riley Securities. Your line is now open.

Anna Christian: Hey, good afternoon. Thanks for taking my questions. I would like to start on the category breakdown within Black Diamond. You used to disclose the breakdown between Mountain, Climb, Ski, and the like. It has been a while. I think by the prepared remarks, it implied that Ski was roughly 10% of the business. Is that accurate? And is that the right number going forward to expect, or should we expect some compression as we fully lap the exit of bindings, etc.?

Michael J. Yates: Well, I think what we talked about here—and McNeil can follow up—but we talked about 86% of our revenue coming from Apparel, Climb, and Mountain. That is a direct result of our simplification strategy, leaning into our best products that are our most profitable products and that are core to our business. So Ski is—we are not disclosing those categories. We are in the 10-K; we just filed it. But we are really focused on those three categories going forward. And that is where the growth is going to come from, and that is what we are focused on, Anna.

Anna Christian: Got it. Go ahead.

McNeil Seymour Fiske: I could add just a little bit to this. Appreciate it, Michael. We do not want to break out specifically the categories themselves yet. But basically, Mountain, Climb, and Apparel for the year were 90% of our sales. Ski is less than 10%, because we also have a little footwear segment in there that we do not normally talk about. It is primarily focused on rock shoes. So Ski is less than 10%, and we expect that to drop by a couple more percentage points on the mix as we complete the rotation out of Peips and JetForce and bindings.

So I think if you think about the go-forward business, Mountain, Climb, and Apparel will get pretty close to 93%–95% of the business going forward.

Anna Christian: That is helpful. Got it. Thanks. And then shifting to broader market expectations: you have talked about a challenging environment. What is the general tone you are hearing from retailers and expectations for sell-in versus sell-through? Should we expect those to be more aligned, or are there still pockets of destocking that you expect this year?

McNeil Seymour Fiske: I can certainly speak to Outdoor on that, and Michael can comment on Adventure. I would say it is really hard to read. I do not think there is a clear trend or a clear pattern that has yet emerged, and the only constant is change, as they say. As a result, I would say retailers are being cautious and maybe keeping their powder dry in terms of where they spend their money, deferring open-to-buy decisions into the latest possible moment, trying to keep a little bit more of their open-to-buy in the at-once versus the preseason category.

And I think particularly with the winter that we had this year in the Mountain West, in that particular segment the retailers will probably be a little bit more conservative next year. But for the most part, we are pretty happy with our order book for 2026 and how it is holding up, and very happy with the strength of our wholesale relationships—from the big accounts like REI and MEC to a very much revitalized and rebuilt specialty business for us. I think our wholesale relationships are the strongest they have been in more than five years, and I think that will keep us in good stead this year.

Anna Christian: Great. Thanks.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Laurent Vasilescu of BNP Paribas Exane. Your line is now open.

Leah (for Laurent Vasilescu): Hi, this is Leah on for Laurent. Just following up on the overall trend, can you talk about the recent trends in the Outdoor segment—particularly what are you seeing in terms of consumer demand and also channel inventories?

McNeil Seymour Fiske: I can take that, Michael. Please. On channel inventory, I think we are through the heavy days of the destocking trend that came in the post-COVID correction. Now I would say for retailers, it is more fine-tuning and ongoing rebalancing of their inventory in normal course. I do not see any major overhang right now, at least from the Black Diamond business as we see it in retail. That gives us some good confidence for where we are in our inventory and where our retail partners are in their inventory in the year ahead. In terms of trends in our business, Apparel has the most momentum right now. It is up 10% in Q4; it was up 25% in Q3.

We expect it to be up again double digits in 2026. We have seen Mountain—our big Mountain category includes trekking poles, lighting, gloves, and some of our real power categories—return to growth in 2026 and even a little bit in Q4. Interestingly, we are seeing a bit of a rebound in Climb right now. I am not sure I would call that a trend yet. But what I would say is if you take the three big business units together—Mountain, Climb, and Apparel—they grew in the fourth quarter, and we are confident that they will grow again in 2026.

Leah (for Laurent Vasilescu): Awesome. Thank you. That is very helpful.

Operator: Thank you. One moment for next question. Our next question comes from the line of Alex Turnick of Lake Street Capital Markets. Your line is now open.

Alex Turnick: Yeah, hey, guys. You have got Alex on for Mark Smith today. Thanks for taking my questions. First one for me: looking at the RockyMounts contribution in the quarter, could you talk about how that business is performing so far and how meaningful you expect it to become within the Adventure segment over time?

Michael J. Yates: It is meaningful. It is an excellent product, specifically here in the North American market. It did a little more than $5 million of revenue in 2025. We continue to expect that to grow. I mentioned the point of sale—we have made some investment in point-of-sale marketing that is specific to the RockyMounts business. That is out at the bike shop distributors and wholesalers that we work with. We are excited about that. I think it is a good business. It is a great product, and we expect that to be part of our growth story going forward.

Alex Turnick: Okay. That is great. And then last one for me. You have highlighted encouraging traction in Europe following the opening of the Netherlands warehouse. Could you expand on how meaningful Europe has become for the Adventure segment, and how do you see that opportunity developing going forward?

Michael J. Yates: What the warehouse in the Netherlands is giving us is the opportunity to expand our footprint and serve some of our smaller customers. Our bigger customers in Europe—our legacy customers—are still taking inventory from our business in Australia. They are ordering a full container, and it is shipping. The warehouse in the Netherlands is allowing us to fulfill orders that are smaller than a full shipping container, and that is where you see growth in Spain, growth in the Nordic region, and growth throughout Europe where we were not penetrating at all in the past. I would say that is going to be about $1 million this year of incremental revenue for the Adventure business.

Alex Turnick: Alright. That is great. Thanks for taking my questions.

Operator: Certainly. Thank you. I am showing no further questions at this time. I will now turn it back to Michael J. Yates for closing remarks.

Michael J. Yates: I am sorry, I was muted. I want to thank everyone for attending the call this afternoon and for your continued support and interest in Clarus Corporation. We look forward to updating you on our results again next quarter. Thank you.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

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