Clarus Corp 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements Please note that in this Quarterly Report on Form 10-Q Clarus Corporation (which may be referred to as the “Company,” “Clarus,” “we,” “our” or “us”) 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 our expectations and beliefs concerning future events impacting the Company and therefore involve a number of risks and uncertainties. We caution 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 in this Quarterly Report on Form 10 Q include, but are not limited to, the overall level of consumer demand on our products; general economic conditions and other factors affecting consumer confidence, preferences, and behavior; the potential impact of the uncertain macroeconomic environment on our financial results, including, but not limited to, the effects of sustained global inflationary pressures and interest rates, potential economic slowdowns or recessions, trade restrictions and regulatory changes, and global supply chain disruptions; the effect of inflation on our business, including any future pricing actions taken in an effort to mitigate the effects of inflation and potential impacts on our revenue, operating margins and net income; disruption and volatility in the global currency, capital and credit markets; the financial strength of retail economies and the Company’s customers; the Company’s ability to implement its business strategy; the Company’s ability to execute and integrate acquisitions, as well as to complete dispositions and effectively manage the associated separation and transition risks, including those related to the recent sale of PIEPS; the Company’s exposure to product liability or product warranty claims and other loss contingencies, including, without limitation, recalls and liability claims relating to certain avalanche beacon transceivers distributed by BDEL; disruptions and other impacts to the Company’s business, as a result of an outbreak of disease or similar public health threat, and government actions and restrictive measures implemented in response; stability of the Company’s manufacturing facilities and suppliers, as well as consumer demand for our products, in light of disease epidemics and health-related concerns; the impact that global climate change trends may have on the Company and its suppliers and customers, increased focus on sustainability issues as a result of global climate change; regulatory or market responses to global climate change; the Company’s ability to protect patents, trademarks and other intellectual property rights; any breaches of, or interruptions in, our information systems; the ability of our information technology systems or information security systems to operate effectively, including as a result of security breaches, viruses, hackers, malware, natural disasters, vendor business interruptions or other causes; our ability to properly maintain, protect, repair or upgrade our information technology systems or information security systems, or problems with our transitioning to upgraded or replacement systems; the impact of adverse publicity about the Company and/or its brands and products, including without limitation, through social media or in connection with brand damaging events and/or public perception; the potential impact of the Consumer Products Safety Commission’s and the U.S. Department of Justice’s investigations related to BDEL’s reporting obligations under the Consumer Product Safety Act in connection with BDEL’s recall of certain models of its avalanche transceivers on our business, results of operations, and financial condition; fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations; ongoing disruptions and delays in the shipping and transportation of our products due to port congestion, container ship availability and/or other logistical challenges; the impact of political unrest, natural disasters or other crises, terrorist acts, acts of war and/or military operations; our ability to utilize our net operating loss carryforwards; changes in tax laws and liabilities, tariffs, legal, regulatory, political and economic risks; the Company’s ability to maintain a quarterly dividend; our ability to obtain additional capital and funding on acceptable terms to meet our financial obligations as well as to support our business operations and growth strategy; and any material differences in the actual financial results of the Company’s past and future acquisitions and dispositions, including the impact of such transactions and any related recognition of impairment or other charges, such as the recent impairment recognized in the Outdoor segment, on the Company’s future earnings per share. More information on potential factors that could affect the 33 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ 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 Quarterly Report on Form 10 Q are based upon information available to the Company as of the date of this Quarterly Report on Form 10 Q, and speak only as of the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10 Q. Overview Headquartered in Salt Lake City, Utah, Clarus is a global leading designer, developer, manufacturer and distributor of best-in-class outdoor equipment and lifestyle products focused on the outdoor enthusiast markets. Each of our brands has a long history of continuous product innovation for core and everyday users alike. The Company’s products are principally sold globally under the Black Diamond®, Rhino-Rack®, MAXTRAX®, and TRED Outdoors® brand names through outdoor specialty and online retailers, our own websites, distributors and original equipment manufacturers. Our portfolio of iconic brands is well-positioned for sustainable, long-term growth underpinned by powerful industry trends across the outdoor and adventure sport end markets. Our iconic brands are rooted in performance-defining technologies that enable our customers to have their best days outdoors. We have a long history of technical innovation and product development, backed by an extensive patent portfolio that continues to evolve and advance our markets. We focus on enhancing our customers’ performance in the most critical moments. Our commitment to quality, rigorous safety, and ultimately best-in-class design is evidenced by outstanding industry recognition, as we have received numerous product awards across our portfolio of brands. Each of our brands represents a unique customer value proposition. Supported by six decades of proven innovation, our Black Diamond brand is an established global leader in high-performance, activity-based climbing, skiing, and technical mountain sports equipment. The brand is synonymous with premium performance, safety and reliability. Founded in 1992, our Rhino-Rack brand is a globally-recognized designer and distributor of highly-engineered automotive roof racks and accessories to enhance the outdoor enthusiast’s overlanding experience. Founded in 2005, our MAXTRAX brand offers high-quality overlanding and off-road vehicle recovery and extraction tracks for the overland and off-road market. Similarly, our TRED brand, founded in 2012, is a trusted brand for key retailers and distributors in the overlanding and off-road vehicle recovery market. Clarus, incorporated in Delaware in 1991, acquired Black Diamond Equipment, Ltd. (“Black Diamond Equipment”) in May 2010 and changed its name to Black Diamond, Inc. in January 2011. In October 2012, we acquired PIEPS Holding GmbH and its subsidiaries (collectively, “PIEPS”). On August 14, 2017, the Company changed its name from Black Diamond, Inc. to Clarus Corporation and its stock ticker symbol from “BDE” to “CLAR” on the NASDAQ stock exchange. On August 21, 2017, the Company acquired Sierra Bullets, L.L.C. (“Sierra”). On October 2, 2020, the Company completed the acquisition of certain assets and liabilities constituting the Barnes business (“Barnes”). On July 1, 2021, the Company completed the acquisition of Australia-based Rhino-Rack Holdings Pty Ltd (“Rhino-Rack”). On December 1, 2021, the Company completed the acquisition of Australia-based MaxTrax Australia Pty Ltd (“MAXTRAX”). On October 9, 2023, the Company completed the acquisition of Australia-based TRED Outdoors Pty Ltd. (“TRED”). On December 5, 2024, the Company completed the acquisition of certain assets and liabilities constituting the RockyMounts business (“RockyMounts”). On February 29, 2024, the Company completed the sale of all of the equity associated with the Company’s Precision Sport segment, comprised of the Company’s subsidiaries Sierra and Barnes, pursuant to a Purchase and Sale Agreement dated as of December 29, 2023 (the “Precision Sport Purchase Agreement”). Under the terms of the Precision Sport Purchase Agreement, the Company received net proceeds of approximately $37,871 in cash, after payment of certain fees and settlement of the Restated Credit Agreement, for all of the equity associated with the Company’s Precision Sport segment. The activities of the Precision Sport segment have been segregated and reported as discontinued operations for all periods 34 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ presented. See Note 3 to our condensed consolidated financial statements for financial information regarding discontinued operations. On July 11, 2025, the Company completed the sale of Black Diamond Austria GmbH and its operating subsidiary, PIEPS GmbH (together, “PIEPS”), to a private investment firm for a total purchase price of €7,800 (approximately $8,400), including cash and assumed debt. The transaction was effected pursuant to a Share Purchase and Transfer Agreement entered into on May 8, 2025, by BD European Holdings, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company. See Note 4 to our condensed consolidated financial statements for financial information regarding assets and liabilities held for sale. On August 6, 2018, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend program of $0.025 per share of the Company’s common stock (the “Quarterly Cash Dividend”) or $0.10 per share on an annualized basis. The declaration and payment of future Quarterly Cash Dividends is subject to the discretion of and approval of the Company’s Board of Directors. On July 30, 2025, the Company announced that its Board of Directors approved the payment on August 20, 2025 of the Quarterly Cash Dividend of $0.025 to the record holders of shares of the Company’s common stock as of the close of business on August 11, 2025. Restructuring Starting in 2023, the Company began incurring expenses to facilitate long-term sustainable growth through cost reduction actions, consisting of employee reductions, facility rationalization and contract termination costs. During the three months ended June 30, 2025 and 2024, the Company incurred $161 and $161, respectively, and during the six months ended June 30, 2025 and 2024, the Company incurred $334 and $531, respectively, of restructuring charges related to these actions. The Company has incurred $5,505 of cumulative restructuring charges since the commencement of our restructuring actions in 2023. The Company accrues for restructuring costs when they are probable and reasonably estimable. These costs include severance costs, exit costs, and other restructuring costs and are included in restructuring charges in the condensed consolidated statements of comprehensive (loss) income. Severance costs primarily consist of severance benefits through payroll continuation, conditional separation costs and employer tax liabilities, while exit costs primarily consist of lease exit and contract termination costs. Other costs consist primarily of costs related to the discontinuance of certain product lines and are distinguishable and directly attributable to the Company’s restructuring initiative and not a result of external market factors associated with the ongoing business. We estimate that we will continue to incur restructuring costs related to employee-related costs and facility exit costs during the year ending December 31, 2025; however, the Company cannot estimate the total amount expected to be incurred as cost reduction actions continue to be evaluated. The Company anticipates completing these restructuring activities in the year ending December 31, 2025. Critical Accounting Policies and Use of Estimates Management’s discussion of our financial condition and results of operations is based on the consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting periods. Our critical accounting policies that require the use of estimates and assumptions were discussed in detail in our Annual Report on Form 10-K for the year ended December 31, 2024. We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates. There have been no significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2024. 35 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ Recent Accounting Pronouncements See “Recent Accounting Pronouncements” in Note 1 to our condensed consolidated financial statements. Results of Operations Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 The following presents a discussion of operations for the three months ended June 30, 2025, compared with the three months ended June 30, 2024. ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ June 30, 2025 June 30, 2024 ​ ​ ​ ​ ​ ​ Sales ​ ​ ​ ​ ​ Domestic sales $ 24,724 ​ $ 22,934 International sales ​ 30,523 ​ ​ 33,550 Total sales ​ 55,247 ​ ​ 56,484 ​ ​ ​ ​ ​ ​ Cost of goods sold ​ 35,567 ​ ​ 36,078 Gross profit ​ 19,680 ​ ​ 20,406 ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ ​ ​ Selling, general and administrative ​ 26,910 ​ ​ 28,081 Restructuring charges ​ 161 ​ ​ 161 Transaction costs ​ 108 ​ ​ 27 Contingent consideration benefit ​ - ​ ​ (125) Legal costs and regulatory matter expenses ​ 1,837 ​ ​ 399 Impairment of indefinite-lived intangible assets ​ 1,565 ​ ​ - ​ ​ ​ ​ ​ ​ Total operating expenses ​ 30,581 ​ ​ 28,543 ​ ​ ​ ​ ​ ​ Operating loss ​ (10,901) ​ ​ (8,137) ​ ​ ​ ​ ​ ​ Other income ​ ​ ​ ​ ​ Interest income, net ​ 153 ​ ​ 455 Other, net ​ 1,483 ​ ​ 414 ​ ​ ​ ​ ​ ​ Total other income, net ​ 1,636 ​ ​ 869 ​ ​ ​ ​ ​ ​ Loss before income tax ​ (9,265) ​ ​ (7,268) Income tax benefit ​ (831) ​ ​ (1,775) Net loss $ (8,434) ​ $ (5,493) ​ Sales Total sales decreased $1,237, or 2.2%, to $55,247 during the three months ended June 30, 2025, compared to total sales of $56,484 during the three months ended June 30, 2024. The decrease in sales was attributable to a decrease in sales at the Adventure segment of $1,712, partially offset by an increase in sales at the Outdoor segment of $475. 36 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ Sales in the Outdoor segment were reduced by $99 due to foreign exchange impact from the strengthening of the U.S. dollar primarily against the euro during the three months ended June 30, 2025, compared to the prior period. Sales in the Adventure segment were reduced by $364 due to foreign exchange impact from the strengthening of the U.S. dollar against the Australian dollar during the three months ended June 30, 2025, compared to the prior period. Sales in the Adventure segment decreased due to significantly lower demand from global original equipment manufacturer (“OEM”) customers and a challenging wholesale market in Australia for Rhino-Rack, partially offset by a $2,099 increase from the RockyMounts acquisition and higher promotional sales in North America. Sales in the Outdoor segment increased due to a shift in timing for independent global distributor (“IGD”) revenues into the three months ended June 30, 2025, partially offset by decreases in our direct-to-consumer channels in both North America and Europe. Domestic sales increased $1,790, or 7.8%, to $24,724 during the three months ended June 30, 2025, compared to domestic sales of $22,934 during the three months ended June 30, 2024. The increase in sales was attributable to an increase in sales at the Adventure segment of $2,053, partially offset by a decrease in sales at the Outdoor segment of $263. International sales decreased $3,027, or 9.0%, to $30,523 during the three months ended June 30, 2025, compared to international sales of $33,550 during the three months ended June 30, 2024. The decrease in sales was attributable to a decrease in sales at the Adventure segment of $3,765, partially offset by an increase in sales at the Outdoor segment of $738. Cost of Goods Sold Cost of goods sold decreased $511, or 1.4%, to $35,567 during the three months ended June 30, 2025, compared to cost of goods sold of $36,078 during the three months ended June 30, 2024. Gross Profit Gross profit decreased $726, or 3.6%, to $19,680 during the three months ended June 30, 2025, compared to gross profit of $20,406 during the three months ended June 30, 2024. Gross margin was 35.6% during the three months ended June 30, 2025, compared to a gross margin of 36.1% during the three months ended June 30, 2024. Gross margin during the three months ended June 30, 2025, decreased compared to the prior year as a result of lower volumes and an unfavorable product mix at the Adventure segment. Specifically, the unfavorable product mix at Adventure was primarily driven by promotional sales efforts in North America. This combined with lower wholesale volume at Rhino-Rack in Australia drove the decline in gross margin compared to the three months ended June 30, 2024. These decreases were partially offset by higher volumes and a favorable product mix at the Outdoor segment during the three months ended June 30, 2025 compared to prior year. Selling, General and Administrative Selling, general, and administrative expenses decreased $1,171, or 4.2%, to $26,910 during the three months ended June 30, 2025, compared to selling, general and administrative expenses of $28,081 during the three months ended June 30, 2024. Selling, general and administrative expenses at the Outdoor segment decreased by $70 primarily as a result of lower employee-related costs and other expense reduction initiatives to manage costs. Selling, general and administrative expenses at the Adventure segment decreased by $617 primarily as a result of lower marketing, amortization, and employee-related costs, combined with other expense reduction initiatives. Additionally, Corporate costs decreased $484 due to lower outside service and employee-related costs. 37 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ Restructuring Charges Restructuring charges were $161 during the three months ended June 30, 2025, compared to restructuring charges of $161 during the three months ended June 30, 2024. The restructuring charges incurred during the three months ended June 30, 2025, relate to benefits provided to employees who were terminated due to the Company’s reduction-in-force as part of its continued realignment of resources within the organization. Transaction Costs Transaction costs increased to $108 during the three months ended June 30, 2025, compared to transaction costs of $27 during the three months ended June 30, 2024, which consisted of expenses related to the Company’s various acquisition and disposal efforts. Contingent Consideration Benefit Contingent consideration benefit decreased to $0 during the three months ended June 30, 2025, compared to a contingent consideration benefit of $125 during the three months ended June 30, 2024, which consisted of changes in the estimated fair value of contingent consideration liabilities associated with our acquisition of TRED in 2023. Legal Costs and Regulatory Matter Expenses Legal costs and regulatory matter expenses increased to $1,837 during the three months ended June 30, 2025, compared to legal costs and regulatory matter expenses of $399 during the three months ended June 30, 2024, which consisted of expenses related to the Company’s specific legal matters. See Note 17 to our condensed consolidated financial statements for financial information regarding specific legal matters. Impairment of Indefinite-Lived Intangible Assets Impairment of indefinite-lived intangible assets increased to $1,565 during the three months ended June 30, 2025, compared to impairment of indefinite-lived intangible assets of $0 during the three months ended June 30, 2024. Based on the results of the Company’s impairment analysis completed as of June 30, 2025, the Company determined that certain indefinite-lived intangible assets, specifically the PIEPS trademark, were impaired and recognized charges of $1,565 during the three months ended June 30, 2025. Interest Income, net Interest income, net decreased to $153 during the three months ended June 30, 2025, compared to interest income, net of $455 during the three months ended June 30, 2024. The decrease in interest income recognized during the three months ended June 30, 2025, was due to lower interest rates on lower cash balances, compared to the prior period. Other, net Other, net, changed by $1,069, or 258.2%, to $1,483 during the three months ended June 30, 2025, compared to other, net of $414 during the three months ended June 30, 2024. The change in other, net, was primarily attributable to an increase in remeasurement gains recognized on the Company’s foreign denominated accounts receivable and accounts payable. The change was partially offset by losses in mark-to-market adjustments on non-hedged foreign currency contracts during the three months ended June 30, 2025. 38 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ Income Taxes Income tax benefit decreased by $944, or 53.2%, to $831 during the three months ended June 30, 2025, compared to $1,775 during the same period in 2024. Our effective income tax rate was a benefit of 9.0% for the three months ended June 30, 2025, and differed compared to the statutory tax rates primarily due to the impact of valuation allowance, stock compensation, and research and experimentation expenditures and credits. For the three months ended June 30, 2024, our effective income tax rate was a benefit of 24.4% and differed compared to the statutory tax rates primarily due to the impact of stock compensation and research and experimentation expenditures and credits. 39 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 The following presents a discussion of operations for the six months ended June 30, 2025, compared with the six months ended June 30, 2024. ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ June 30, 2025 June 30, 2024 ​ ​ ​ ​ ​ ​ Sales ​ ​ ​ ​ ​ Domestic sales $ 49,533 ​ $ 51,218 International sales ​ 66,147 ​ ​ 74,577 Total sales ​ 115,680 ​ ​ 125,795 ​ ​ ​ ​ ​ ​ Cost of goods sold ​ 75,206 ​ ​ 80,538 Gross profit ​ 40,474 ​ ​ 45,257 ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ ​ ​ Selling, general and administrative ​ 53,526 ​ ​ 56,296 Restructuring charges ​ 334 ​ ​ 531 Transaction costs ​ 250 ​ ​ 65 Contingent consideration benefit ​ - ​ ​ (125) Legal costs and regulatory matter expenses ​ 2,462 ​ ​ 3,401 Impairment of indefinite-lived intangible assets ​ 1,565 ​ ​ - ​ ​ ​ ​ ​ ​ Total operating expenses ​ 58,137 ​ ​ 60,168 ​ ​ ​ ​ ​ ​ Operating loss ​ (17,663) ​ ​ (14,911) ​ ​ ​ ​ ​ ​ Other income (expense) ​ ​ ​ ​ ​ Interest income, net ​ 410 ​ ​ 825 Other, net ​ 1,942 ​ ​ (495) ​ ​ ​ ​ ​ ​ Total other income, net ​ 2,352 ​ ​ 330 ​ ​ ​ ​ ​ ​ Loss before income tax ​ (15,311) ​ ​ (14,581) Income tax benefit ​ (1,633) ​ ​ (2,626) Loss from continuing operations ​ (13,678) ​ ​ (11,955) ​ ​ ​ ​ ​ ​ Discontinued operations, net of tax ​ - ​ ​ 28,346 ​ ​ ​ ​ ​ ​ Net (loss) income $ (13,678) ​ $ 16,391 ​ Sales Total sales decreased $10,115, or 8.0%, to $115,680 during the six months ended June 30, 2025, compared to total sales of $125,795 during the six months ended June 30, 2024. The decrease in sales was attributable to a decrease in sales at the Adventure and Outdoor segments of $7,890 and $2,225, respectively. 40 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ Sales in the Outdoor segment were reduced by $795 due to foreign exchange impact from the strengthening of the U.S. dollar primarily against the euro during the six months ended June 30, 2025, compared to the prior period. Sales in the Adventure segment were reduced by $933 due to foreign exchange impact from the strengthening of the U.S. dollar against the Australian dollar during the six months ended June 30, 2025, compared to the prior period. Sales in the Adventure segment decreased due to significantly lower demand from global original equipment manufacturer (“OEM”) customers and a challenging wholesale market in Australia for both Rhino-Rack and MAXTRAX, combined with a prior year large wholesale customer in North America not reoccurring in the six months ended June 30, 2025, partially offset by a $3,441 increase from the RockyMounts acquisition. Sales in the Outdoor segment decreased due to our product simplification and SKU rationalization strategy across Black Diamond and decreases in our direct-to-consumer channels in both North America and Europe, partially offset by higher apparel revenue during the six months ended June 30, 2025. Domestic sales decreased $1,685, or 3.3%, to $49,533 during the six months ended June 30, 2025, compared to domestic sales of $51,218 during the six months ended June 30, 2024. The decrease in sales was attributable to a decrease in sales at the Outdoor segment of $3,199, partially offset by an increase in sales at the Adventure segment of $1,514. International sales decreased $8,430, or 11.3%, to $66,147 during the six months ended June 30, 2025, compared to international sales of $74,577 during the six months ended June 30, 2024. The decrease in sales was attributable to a decrease in sales at the Adventure segment of $9,404, partially offset by an increase in sales at the Outdoor segment of $974. Cost of Goods Sold Cost of goods sold decreased $5,332, or 6.6%, to $75,206 during the six months ended June 30, 2025, compared to cost of goods sold of $80,538 during the six months ended June 30, 2024. Gross Profit Gross profit decreased $4,783, or 10.6%, to $40,474 during the six months ended June 30, 2025, compared to gross profit of $45,257 during the six months ended June 30, 2024. Gross margin was 35.0% during the six months ended June 30, 2025, compared to a gross margin of 36.0% during the six months ended June 30, 2024. Gross margin during the six months ended June 30, 2025, decreased compared to the prior year as a result of lower volumes and unfavorable product mix at the Outdoor and Adventure segments. Specifically, the unfavorable product mix at Outdoor was related to high levels of discontinued merchandise that was sold, including the vast majority of the remaining Per- and Polyfluoroalkyl Substances (“PFAS”) inventory. The unfavorable product mix at Adventure was primarily driven by promotional sales efforts in North America. This combined with lower wholesale volume at both Rhino-Rack and MAXTRAX in Australia drove the decline in gross margin compared to the six months ended June 30, 2024. Selling, General and Administrative Selling, general, and administrative expenses decreased $2,770, or 4.9%, to $53,526 during the six months ended June 30, 2025, compared to selling, general and administrative expenses of $56,296 during the six months ended June 30, 2024. Selling, general and administrative expenses at the Outdoor segment decreased by $1,112 primarily as a result of lower digital marketing and employee-related costs, as well as lower retail expenses due to store closures and other expense reduction initiatives to manage costs. Selling, general and administrative expenses at the Adventure segment decreased by $963 primarily as a result of lower marketing, amortization, and employee-related costs, combined with other expense reduction initiatives, partially offset by a write-off of internally developed software during the six months ended June 30, 2025. Additionally, Corporate costs decreased $695 due to lower outside service and employee-related costs. 41 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ Restructuring Charges Restructuring charges decreased to $334 during the six months ended June 30, 2025, compared to restructuring charges of $531 during the six months ended June 30, 2024. The restructuring charges incurred during the six months ended June 30, 2025 relate to benefits provided to employees who were terminated due to the Company’s reduction-in-force as part of its continued realignment of resources within the organization of $304 and lease exit and contract termination costs of $30. Transaction Costs Transaction costs increased to $250 during the six months ended June 30, 2025, compared to transaction costs of $65 during the six months ended June 30, 2024, which consisted of expenses related to the Company’s various acquisition and disposal efforts. Contingent Consideration Benefit Contingent consideration benefit decreased to $0 during the six months ended June 30, 2025, compared to a contingent consideration benefit of $125 during the six months ended June 30, 2024, which consisted of changes in the estimated fair value of contingent consideration liabilities associated with our acquisition of TRED in 2023. Legal Costs and Regulatory Matter Expenses Legal costs and regulatory matter expenses decreased to $2,462 during the six months ended June 30, 2025, compared to legal costs and regulatory matter expenses of $3,401 during the six months ended June 30, 2024, which consisted of expenses related to the Company’s specific legal matters. See Note 17 to our condensed consolidated financial statements for financial information regarding specific legal matters. Impairment of Indefinite-Lived Intangible Assets Impairment of indefinite-lived intangible assets increased to $1,565 during the six months ended June 30, 2025, compared to impairment of indefinite-lived intangible assets of $0 during the six months ended June 30, 2024. Based on the results of the Company’s impairment analysis completed as of June 30, 2025, the Company determined that certain indefinite-lived intangible assets, specifically the PIEPS trademark, were impaired and recognized charges of $1,565 during the six months ended June 30, 2025. Interest Income, net Interest income, net decreased to $410 during the six months ended June 30, 2025, compared to interest income, net of $825 during the six months ended June 30, 2024. The decrease in interest income recognized during the six months ended June 30, 2025, was due to lower interest rates on lower cash balances, compared to the prior period. Other, net Other, net, changed by $2,437, or 492.3%, to $1,942 during the six months ended June 30, 2025, compared to other, net of ($495) during the six months ended June 30, 2024. The change in other, net, was primarily attributable to an increase in remeasurement gains recognized on the Company’s foreign denominated accounts receivable and accounts payable. The change was partially offset by losses in mark-to-market adjustments on non-hedged foreign currency contracts during the six months ended June 30, 2025. 42 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ Income Taxes Income tax benefit decreased by $993, or 37.8%, to $1,633 during the six months ended June 30, 2025, compared to $2,626 during the same period in 2024. Our effective income tax rate was a benefit of 10.7% for the six months ended June 30, 2025, and differed compared to the statutory tax rates primarily due to the impact of valuation allowance, stock compensation, and research and experimentation expenditures and credits. For the six months ended June 30, 2024, our effective income tax rate was a benefit of 18.0%, and differed compared to the statutory tax rates primarily due to the impact of stock compensation and research and experimentation expenditures and credits. Discontinued Operations Net income from discontinued operations was $0 during the six months ended June 30, 2025, compared to net income from discontinued operations of $28,346 during the six months ended June 30, 2024. The change in net income from discontinued operations is due to the sale of the Precision Sport segment occurring during the six months ended June 30, 2024. There was no activity in discontinued operations during the six months ended June 30, 2025. Liquidity and Capital Resources Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 Our primary ongoing funding requirements are for working capital, expansion of our operations (both organically and through acquisitions) and general corporate needs, as well as investing in the various brands. We plan to fund these activities through a combination of our future operating cash flows and net proceeds from the sale of our Precision Sport segment. Upon the closing of the sale of the Precision Sport segment, the Company terminated and settled all outstanding borrowings on our revolving credit facility and term debt under the Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto (the “Restated Credit Agreement”). We believe that our liquidity requirements and contractual obligations for at least the next 12 months will be adequately covered by cash provided by operations and the net proceeds from the sale of the Precision Sport segment after the settlement of the Restated Credit Agreement. Additionally, long-term contractual obligations are also currently expected to be funded from cash from operations and net proceeds from the sale of the Precision Sport segment after the settlement of the Restated Credit Agreement. At June 30, 2025, we had total cash of $28,474, compared to total cash of $45,359 at December 31, 2024. At June 30, 2025, the Company had $4,931 of the $28,474 in cash held by foreign entities, of which $3,917 is considered permanently reinvested. The following presents a discussion of cash flows for the condensed consolidated six months ended June 30, 2025 compared with the condensed consolidated six months ended June 30, 2024. ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ June 30, 2025 June 30, 2024 ​ ​ ​ ​ ​ ​ Net cash used in operating activities $ (11,497) ​ $ (15,527) Net cash (used in) provided by investing activities ​ (2,990) ​ ​ 172,162 Net cash used in financing activities ​ (1,962) ​ ​ (121,602) Effect of foreign exchange rates on cash ​ 520 ​ ​ (136) Change in cash ​ (15,929) ​ ​ 34,897 Cash, beginning of year ​ 45,359 ​ ​ 11,324 Cash, end of period $ 29,430 ​ $ 46,221 ​ 43 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ Net Cash From Operating Activities Net cash used in operating activities was $11,497 during the six months ended June 30, 2025, compared to net cash used in operating activities of $15,527 during the six months ended June 30, 2024. The change in net cash used in operating activities during 2025 is primarily due to the gain on sale of $40,585 during the six months ended June 30, 2024 related to the disposition of the Precision Sport segment. This impact was partially offset by a decrease in net income and deferred income taxes, and an increase in cash outflows related to working capital during the six months ended June 30, 2025, compared to the same period in 2024. Free cash flow, defined as net cash used in operating activities less capital expenditures, of $14,541 was used during the six months ended June 30, 2025 compared to $19,002 used during the same period in 2024. The Company believes that the non-GAAP measure, free cash flow, provides an understanding of the capital required by the Company to expand its asset base. A reconciliation of free cash flows to the nearest comparable GAAP financial measure is set forth below: ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ June 30, 2025 June 30, 2024 ​ ​ ​ ​ ​ ​ Net cash used in operating activities $ (11,497) ​ $ (15,527) Purchase of property and equipment ​ (3,044) ​ ​ (3,475) Free cash flow $ (14,541) ​ $ (19,002) ​ Net Cash From Investing Activities Net cash (used in) provided by investing activities was ($2,990) during the six months ended June 30, 2025, compared to net cash provided by investing activities of $172,162 during the six months ended June 30, 2024. The change in cash (used in) provided by investing activities during the six months ended June 30, 2025 is primarily due to the cash received related to the disposition of the Precision Sport segment during the six months ended June 30, 2024. Net Cash From Financing Activities Net cash used in financing activities was $1,962 during the six months ended June 30, 2025, compared to net cash used in financing activities of $121,602 during the six months ended June 30, 2024. The change in net cash used in financing activities during the six months ended June 30, 2025, compared to the same period in 2024 was primarily due to the settlement of all outstanding borrowings on our revolving credit facility and term debt under the Restated Credit Agreement during the six months ended June 30, 2024. Net Operating Loss As of December 31, 2024, the Company had net operating loss carryforwards (“NOLs”) and research and experimentation credit for U.S. federal income tax purposes of $0 and $5,439, respectively. As of December 31, 2024, the Company’s gross deferred tax asset was $35,658. The Company has recorded a valuation allowance of $23,344, resulting in a net deferred tax asset of $12,314, before deferred tax liabilities of $24,488. The Company has provided a full valuation allowance against all of the net U.S. deferred tax assets as of December 31, 2024, because the ultimate realization of those assets does not meet the more-likely-than-not criteria. The majority of the Company’s deferred tax assets consist of research and experimentation credits and capitalized costs for federal tax purposes. These deferred tax assets are expected to reverse into NOL carryforwards that can be used to offset taxable income and reduce income taxes payable in future periods. If a change in control were to occur, these future NOLs could be limited under Section 382 of the Internal Revenue Code of 1986 (“Code”), as amended. 44 Table of Contents CLARUS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS (in thousands, except per share amounts) ​ Credit Agreement Upon the closing of the sale of the Precision Sport segment on February 29, 2024, the Company terminated and settled all outstanding borrowings on our revolving credit facility and term debt under the Restated Credit Agreement. Off-Balance Sheet Arrangements We do not engage in any transactions or have relationships or other arrangements with unconsolidated entities. These include special purpose and similar entities or other off-balance sheet arrangements. We also do not engage in energy, weather or other commodity-based contracts. ​ ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has not been any material change in the market risk disclosure contained in our Annual Report on Form 10-K for the year ended December 31, 2024.