Thanks. Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements, and we make these statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements reflect our best estimates and assumptions based on our understanding of information known to us today. These forward-looking statements are subject to potential risks and uncertainties that could cause the actual results of operations or financial condition of Clarus Corporation to differ materially from those expressed or implied by the forward-looking statements. More information on potential factors that could affect the company's operating and financial results is included from time to time in the company's public reports filed with the SEC. I'd like to remind everyone this call will be available for replay through November 7, 2024, starting at 7:00 p.m. Eastern Time tonight. A webcast replay will also be available via the link provided in today's press release as well as on the company's website at claruscorp.com. Now I'd like to turn the call over to Clarus' Executive Chairman, Warren Kanders. Warren?

Thank you, Cody. Good afternoon, and thank you all for joining Clarus' earnings call to review our results for the third quarter of 2023. I am joined by our Chief Financial Officer, Mike Yates. I will start the call by addressing the overall business and corporate strategy. Mike will then provide specific comments on the performance of our three segments and a detailed financial review. Given the non-binding indication of interest I previously submitted to acquire the company's Precision Sports segment and our Special Committee's ongoing review, I believe it's prudent for Mike to handle today's Q&A session. Now, jumping to our performance. Our brands largely experienced another challenging quarter given persistent macroeconomic headwinds that have constrained consumer demand and the continued inventory overhang at retail and distributors. This was especially pronounced in our Precision Sports segment where customers stockpiling with markdown inventory earlier this year impacted sales velocity in the third quarter. This was partially offset by a snapback quarter in our Adventure segment, which I will discuss shortly. As an organization, however, we did not stand idle. During the quarter, we made significant strides in the strategic review of our brands developing compelling long-term growth plans, rebuilding our teams, and taking steps to recalibrate each business to operate most efficiently in the post-COVID era. We're undoing some of the choices made by prior management teams, so to a certain extent, we needed to press the reset button in order to pursue rebuilding our reputation as a customer-centric enterprise. I am confident that the teams in place are fully capable of driving the turnaround. Both of our leaders at Outdoor and Adventure have specific past experiences as operators for private equity-backed businesses, where they were responsible for structurally correcting and rightsizing iconic global heritage brands in preparation for their regrowth phase. We see the same characteristics with our brands, but the early steps require patience as the strategic initiatives are in motion. With our pivot away from a corporate cost structure nearly complete, each of the segment leaders now have full P&L ownership and are tasked with driving the success of their respective business units. As we build for the long term, I am pleased with our ability to progress the cash flow initiatives that we can control in this challenging market. We continue to seek opportunities to reduce our inventory levels without eroding overall gross margin. This includes improving the age of our inventory at Outdoor while prioritizing the investment in new products underlying potentially compelling new business opportunities. As mentioned, Adventure turned the corner in Q3, reporting 9% sales growth and generating adjusted EBITDA margin over 13%. From an operational standpoint, we completely reshaped the Adventure organization, forming new leadership globally, engaging strategically with key accounts, and developing a clear three-year product horizon, which was well received. This includes the launch of our new Rhino-Rack Pioneer six product, our premium TRED portfolio leader, which we began delivering in October. This product carries an average gross profit margin that is 1,200 basis points superior to the last generation product. This was supported with additional launches in our crossbar business with the introduction of both the RX100 and RX200 for our OEM partnership with Ford and their Everest product. In our recovery products, we launched the MAXTRAX Lightboard through an exclusive 500 door release with a key retail partner in Australia. Furthermore, we are excited about the acquisition of Australia-based TRED Outdoors, which we acquired subsequent to quarter end. TRED is a fast-growing outdoor adventure brand, best-in-class, innovative recovery products across off-road four by four automotive touring, camping, and caravans. TRED will continue to operate independently as a wholly owned subsidiary and will be part of our Adventure segment. The TRED Outdoor brand is designed and built for the seriously adventurous and embodies Clarus’s philosophy to identify brands that are passionately supported by customers and consumers who live and breathe the lifestyle. This transaction highlights our continued focus on identifying sought-after brands within the Adventure segment that are expected to both enhance our offering to existing retail customers and expand our reach into new and larger channels. In our Outdoor segment, revenue trends improved sequentially from the low of Q2 to down only 3% in the third quarter compared to the prior year third quarter. North America is stabilizing, but remains challenging as retailers continue to manage inventory and keep open to buys tight. Europe was a drag on the overall result as the region felt some of the inventory and macroeconomic challenges that our North American business faced in the fourth quarter of last year and the first half of this year. We expect this softness to persist in Europe in the coming quarters. Gross margins continued to be compressed as we right-sized inventory and cleared slower-moving products. We also continued to pursue various cost reduction initiatives and operational improvements in the quarter. We drove efficiencies in our R&D, marketing, sales and discretionary areas while also strategically investing in key areas to get the brand growing from the core again. As such, we hired a new Vice President of North American Sales and simplified the structure of the team while adding new directors for specialty and key accounts. In apparel, an important growth driver for Black Diamond, we hired a new business unit director, strengthened the design team, and implemented a more rigorous athlete-driven product development process. Importantly, we signed a multi-year agreement to be the official outfitter of Rainier Mountaineering, one of America's premier guide services with over 70 guides around the world from Rainier to Denali to Akron Conga, and the Himalayas. Under this partnership, Rainier Mountaineering will be a close partner in bringing innovation and extensive field testing to our alpine mountaineering apparel and hard goods. We have also bolstered our roster of legendary climbers, skiers, and mountain athletes with the addition of Angela Hawse, president of the American Mountain Guides Association; Adrian Ballinger, high altitude climber and skier, and founder of Alpenglow Expeditions; and Topo Mena and Carla Perez, Big Mountain Alpinists and Guides based in South America. Given our operational progress in Outdoor this year, we expect to begin 2024 on a much firmer footing as we pursue growth from our core while seeking to develop new revenue streams and categories, channels, and geographies. Zooming out on our consolidated brands and setting our sights on the fourth quarter and beyond, our priorities remain firmly set on the stabilization of sales and margins, additional organizational reshaping and cost reductions, and resetting our brands to a new baseline as we enter 2024. We are confident in our belief that this strategy is grounded in the maximization of shareholder value creation. Before passing the call over to Mike, I'd like to update shareholders on a couple of matters. First, we are planning to host an Investor Day in late January. We will have myself, Mike, and our segment leaders, Neil and Matt, available to share their strategies and growth plans. And finally, although we do not make a practice of commenting on pending litigation, we are pleased with the progress of the lawsuit against Hap Trading LLC and its principle for disgorgement of short swing profits under Section 16B of the securities laws. Fact discovery has for the most part concluded and expert reports are due to be exchanged shortly in late November with rebuttal reports due by late December. The depositions of the experts will be taken by mid-January 2024, and the parties will submit a joint status letter to the court by late January 2024. At that point, the court will issue a schedule for summary judgment and if the motion is denied, set a trial date. With that, thank you for being with us today, and I will turn the call over to Mike.

Thanks Warren, and good afternoon, everyone. Jumping right into the performance in the third quarter, total sales were $100.1 million compared to $115.7 million in the prior year quarter. On a reported and constant currency basis, total sales were down 14% and 13%, respectively. By segment, Adventure reported sales increased 9% to $20.2 million in the third quarter, and on a constant currency basis, sales were up 12% compared to $18.6 million in the third quarter, driven by strong OEM sales with the introduction of a new vehicle and product line and strong sell into a new box retail partner. The team did a tremendous job engaging with key accounts to promote our vision and product horizon which was well received. In the US, Adventure revenue surpassed our internal expectations. While demand for overlanding gear remains sluggish, we experience success with select new customers through targeted marketing, promotion and training. We continue to focus on expanding our go-to-market strategy and increasing attention to our e-commerce channel. Although customers domestically in the US have been and continue to control their open-to-buy dollars and are selective on their replenishment. Our MAXTRAX brand saw sales in Q3 rebound compared to Q2. A few key accounts are back online after softness in the second quarter, and we expect strong revenue in the fourth quarter in part due to the introduction of our MAXTRAX light new product. We currently believe the worst is behind us for our Adventure brands in this segment, and we're quite constructive about the opportunities we have to drive strong sales growth and better than 13% adjusted EBITDA margins in our Adventure segment over the long-term. And as Warren mentioned, after the quarter ended on October 9th, 2023, we purchased TRED Outdoors to complement our other brands in this segment. We are excited about the prospects for growth in this recovery brand and currently expect TRED to contribute roughly US$1.5 million to US$2 million in sales in the fourth quarter of 2023. Moving to Outdoor, sales were down 3% on a reported basis to $61.1 million versus $62.9 million in the year ago quarter. While sales have improved from Q2, the overall market continues to be soft due to excess inventory in the channel and a constrained consumer given the macroeconomic headwinds. As Warren mentioned, the regional dynamics are shifting from what we experienced earlier in the year and in the fourth quarter of last year, with our North American business stabilizing and the rest of the world getting tougher. We entered the fourth quarter with a strong order book. However, headwinds have continued to increase in our European market given mild early winter conditions, as well as the impact from macroeconomic headwinds and geopolitical issues. Our international global distributor business remains resilient, but we do anticipate some softness relative to the strength this region showed in the prior year. Partially offsetting this 3% decline at Outdoor was continued strong execution in our direct-to-consumer business at Black Diamond, which was up 22% in the quarter. We see our direct-to-consumer business as one of the best indicators of the strength of the brand since it is the fullest expression of our assortment and has less of the inventory hangover effect that has dragged on the wholesale market. We have executed well on an initial set of immediate cost reduction and operational alignment priorities. Our results at Outdoor in 2023 from a margin standpoint reflect the difficult market conditions and our effort to right-size, not just a dollar value, but also the quality and aging of the inventory is all in an attempt to reset the business to a new baseline for 2024. Precision Sports sales were $18.8 million in the third quarter compared to $34.2 million in the third quarter of last year, down 45%. Sales in this segment were constrained by heightened inventory levels at both retail and key distributors, but also some wallet tightening by the consumer. As one partner told me, not only is there too much inventory at retail and in the distribution channel, but there's also too much inventory in the hands of the consumer. We believe the consumer took advantage of the promotional pricing environment earlier in the year to stockpile inventory and frankly bought inventory when it was available, but now has ample supply to get them through this fall hunting season. Fall 2023 hunting season has been very tough. We did not move the expected ammo that we were planning to sell, especially at Barnes. We have been working through this rough patch and need to find an equilibrium of supply and demand for Precision Sports business. We specifically did not take any action to be promotional in our pricing to move our premium inventory. We are comfortable with our Barnes centerfield rifle hunting ammo and did not want to liquidate these premium products hastily, as we expect that demand will recover in the coming quarters. Moreover, given the two geopolitical conflicts our world is facing, we are seeing a modest uptick on some of our bullet calibers in October geared towards the military and the defense sector. While this could be a catalyst for growth in 2024, it's still too early to tell, but we are shifting production capacity to these new opportunities. Moving onto consolidated gross margins. In the second quarter, gross margin increased 140 basis points to 35.5% compared to 34.1% in the year ago period. This increase was primarily driven by easing freight costs, positively impacting gross margins by 90 basis points, along with positive channel and product mix of 80 basis points. This was somewhat offset by a 30 basis point unfavorable impact from foreign exchange. From a segment perspective, gross margin Adventure increased significantly to 40.7% in a quarter compared to 27.6% in the prior year quarter due to lower freight costs, the benefit from prior year cost out actions being realized in the current period and higher volume. Gross margin at Outdoor was 31.2% in the quarter compared to 33.6% in the prior year quarter, reflecting the continuing rightsizing of our inventory via promotional pricing and higher sales of discontinued merchandise. The quality of our Outdoor inventory is improving but is not yet fully aligned with demand. We also continue to work on organizational reshaping to reduce cost and expect the actions we are taking to drive improvements in both gross and operating margins in 2024 at the Outdoor business. Gross margin of Precision Sports increased 540 basis points to 44% in the third quarter compared to 38.6% in the prior year quarter due to favorable cost variances being realized along with better product mix, specifically less ammo sales, and more bullet sales, which are at a higher margin. Selling, general and administrative expenses in the third quarter decreased 2% to $31.8 million compared to $32.7 million in the same year ago quarter. The decline was driven by lower sales commissions, lower intangible amortization expense and lower non-cash stock-based compensation expenses for performance awards at corporate, partially offset by investments in e-commerce initiatives in the Outdoor segment and approximately $400,000 of higher legal costs in the third quarter of 2023 related to the pending litigation against Hap Trading. Net loss in the third quarter was $1.3 million or a negative $0.03 per diluted share. This compares to net income of $2.8 million or $0.07 per diluted share in the prior year quarter. The net loss in the third quarter included a $1.1 million restructuring charge on a pre-tax basis relating to our efforts to take costs out across our portfolio. The net loss also included approximately $800,000 for transaction costs on a pre-tax basis. These transaction costs related to the TRED Outdoor acquisition and costs related to the ongoing process undertaken by the Special Committee of the Board of Directors relating to its evaluation of the potential sale of the Precision Sports business. Adjusted EBITDA in the third quarter was $9.9 million, or an adjusted EBITDA margin of 9.9% compared to $15.1 million or adjusted EBITDA margin of 13.0% in the same quarter a year ago. The decline in adjusted EBITDA was driven by lower sales volumes, partially offset by improvements in SG&A in the quarter. By segment, adjusted EBITDA was $3.5 million or 5.8% at Outdoor; $6.9 million or 36.6% at Precision Sports; and $2.7 million or 13.3% at Adventure for the quarter. The consolidated adjusted EBITDA includes $3.2 million in corporate costs, which was higher than the $2.8 million in the prior year due to higher legal costs associated with the short swing profit litigation. Now let me shift over to our liquidity. At September 30th, cash and cash equivalents were $8 million compared to $12.1 million at December 31st, 2022. Free cash flow defined as net cash provided by operating activities less capital expenditures for the third quarter was a negative $1.1 million. This compares to a negative $13.6 million of free cash flow in the same year ago quarter. The improvement in free cash flow was due to our efforts to reduce inventory. We paid down roughly $5 million of debt and ended the quarter with total debt of $122.6 million. This put us in a net debt position of $114.6 million, resulting in a net debt leverage ratio of 3.3 times on a trailing 12-month adjusted EBITDA basis. Under our $300 million revolving credit facility, we have approximately $10.4 million outstanding with further borrowing capacity of approximately $17.3 million at September 30th, 2023. Our inventories were lower sequentially by $8.5 million to $140 million at September 30th. This $8.5 million decrease compared to the June 30th balance. As Warren discussed, we did a good job of clearing slow-moving inventory and investing behind products with good growth prospects. By Segment, Outdoor has approximately $70 million of inventory and was behind our internal targeted inventory balance due to softer market conditions and a mismatch between available inventory and demand opportunities. However, the aging of inventory is significantly improved in 2023, and the team is focused on prioritizing faster-moving products. Precision Sports inventory was higher than expected. Precision Sports has $45 million of inventory at the end of the quarter due to the market slowing and fall hunt season weakness resulting in much higher finished goods, especially at Barnes. Adventures is trending as planned, ending the quarter of approximately $25 million of inventory. This includes our investment in new inventory for the new commercial opportunity I mentioned in North America market with our new partner. From a tax perspective, we have over $18 million of NOLs remaining, and we expect these NOLs to offset any federal cash taxes due in 2023. Now let me move on to our 2023 outlook. We now expect sales to land within the range of $364 million to $368 million for the full year 2023, and adjusted EBITDA to be in a range of $33 million to $35 million or an adjusted EBITDA margin of 9.3% assuming the midpoint of sales and adjusted EBITDA guidance. We also now expect full year capital expenditures to be approximately $6 million and free cash flow is now expected to range between $20 million and $22 million for the full year 2023. We expect to end the year with approximately $120 million in debt, and this is inclusive of approximate $6 million of debt we borrowed in October to fund the TRED Outdoor acquisition. For the fourth quarter, this outlook implies sales in a range of $83 million to $87 million and adjusted EBITDA to range between $6 million and $8 million. The fourth quarter and full year guidance includes $1.5 million to $2 million of revenue related to TRED that I mentioned earlier. Lastly, during the quarter, Clarus confirmed the receipt of a non-binding indication of interest from Warren Kanders to acquire Precision Sports segment. In response, our Board of Directors formed a Special Committee and retained Houlihan Lokey as a financial advisor to evaluate the proposal and assist in the solicitation of parties that have expressed an interest in and other parties that might be interested in acquiring Precision Sports segments. At this point, the process is still ongoing, so we have no updates to share. There can be no assurance that any definitive agreement will result from this process or that any transaction will be consummated, whether with Mr. Kanders or any other party. I will pause here, hand the call back to the operator as we're now ready for your Q&A.

Thank you, sir. And your first question comes from the line of Anna Glaessgen with B Riley. Your line is now open.

Hi, good afternoon. Thanks for taking my questions.

Hi. Good to hear your voice.

Thanks. I guess first I'd like to dig a little bit into the implied fourth quarter guidance. It seems to imply a sequential deceleration in the trend. Would you say that's mostly due to the dynamics you described of North America stabilizing and Europe seeming to get a little bit worse? And then any color by segment given that Precision Sports was a little bit of an outlier with the declines in 3Q, should that get better in 4Q? Just any help there would be great.

Based on the guidance for the quarter, the midpoint for the third quarter is $88 million. This is primarily influenced by a slowdown in Europe, as mentioned in Outdoor, and significant inventory levels in North America for Outdoor. Additionally, there has been a decline in Precision Sports. The business tends to slow down in December due to annual maintenance, as we close the factory for a couple of weeks at the end of the year. Historically, this has resulted in lower volumes at Precision Sports. However, it is important to note that the business at Precision Sports has indeed slowed down, reflecting a weaker market, which is a shift from earlier in the year. Overall, the decline in the fourth quarter is fairly balanced between Precision and Outdoor.

Okay, thanks. So...

Compared to our prior guidance, just to be clear.

Okay. But from a year-over-year perspective, should we expect kind of a similar decline as in 3Q in Precision Sports?

Yes.

Thank you. Could you elaborate on the changes that have been made over the past year to prepare for 2024 and beyond, as previously mentioned by Warren in relation to decisions made by past management teams?

I don't want to go into specific details about what we're working on, but I don't think it's necessary to discuss that right now. Both Matt at Adventure and Neil at Outdoor are focused on developing new products, exploring new channels, and identifying new customer opportunities to drive business growth. We will provide more details with both of them in late January during the Analyst Day that we mentioned.

Okay. Thanks, Mike.

Thanks.

One moment for your next question. Your next question comes from the line of Matthew Koranda with ROTH MKM. Your line is now open.

Hey, Mike. So just wanted to drill down on BD and Outdoor. I'm just curious, can you highlight for us why profitability is so challenged there? It sounds like you alluded to D2C growing, so I would assume there'd be a mixed benefit there. Obviously, international wholesale sounds weak, and then obviously I think everybody well understands the North America sort of wholesale challenges with reticence to take inventory. But I would think that a D2C mix would help you from a margin standpoint. Are there particular headwinds that you're facing in terms of margins there? Just help us understand why they're weak, why they're continuing to remain weak in the fourth quarter, and then what the path is to get back to that kind of 10% bogey that you guys have put out there before.

Your assumption is correct that D2C contributes positively to our product mix and supports profitability. D2C grew by 22% this quarter, but it still represents a relatively small percentage of our overall Black Diamond business. We generated just over $9 million in D2C revenue this quarter for perspective. The ongoing challenge lies in rightsizing our inventory. As I mentioned in the prepared remarks, we moved more inventory, including discontinued merchandise and promotional items. To continue generating cash from inventory, our pricing strategies have become quite aggressive in the market. We also reduced inventory at Black Diamond by over $10 million, which required a focused approach on pricing, particularly in the North American wholesale market.

Okay. And then in the fourth quarter implied guide, it just sounds like you're assuming deterioration in profitability relative to the third quarter, at least on an overall basis. Did your guide build in the assumption that promotions at BD get worse in the fourth quarter? Is that how we should think about the compliance?

No, I don’t think it changes much. Our guidance assumes about a 35% gross margin in the fourth quarter, which is not very different from the 35.5% we experienced in the third quarter.

Okay. But the implied EBITDA margin in the fourth quarter gets worse sequentially. If gross margin isn't the issue, are we seeing an increase in SG&A? Can you help us understand the reason for that sequential decline? I think it decreases by more than a hundred basis points from the third to the fourth quarter.

I think the bigger impact you're going to see is on the gross margins, and the EBITDA at Precision Sports in the fourth quarter.

Can we briefly discuss this before I hand it over to others? Should we assume that the third quarter revenue run rate from Precision will continue into the fourth quarter? I'm trying to understand how to consider Precision’s revenue contribution in the fourth quarter given these lower levels.

It's probably even a little less because of the shutdown I've mentioned in December.

Okay. Got it. So sequentially lower than the third quarter on revs, and then probably in terms of margin, we should assume probably some headwinds to margin as well in the fourth quarter, just given the shutdown.

Yes. Correct. Correct.

Okay. You mentioned a benefit that we noticed in the data around mid-October due to the geopolitical disruption. There was definitely a rise in demand for a certain period. How much of that benefit have you factored into your fourth-quarter projections? How sustainable do you believe this increase in demand will be? It seems like it might only last a few weeks before tapering off. Have you observed any decline in demand since that increase in October?

Good question, Matt. There are two factors at play. In October, we observed an increase in demand from both military and defense perspectives. The rise in the home defense market in the US can be attributed to various geopolitical events happening worldwide, and there was a noticeable increase in late October connected to that. However, we don’t believe this trend will continue for long; it was just a brief increase over a couple of weeks, about 10 days, that we heard from our distributors and retail partners. Regarding the military aspect, we have seen a meaningful uptick, especially for a specific caliber bullet. We are reallocating our capacity to seize that opportunity and have already had some capacity set aside for it. We are simply increasing this capacity to address the geopolitical challenges in Europe and the Middle East. In summary, I believe the military demand has potential for growth, but the domestic market's uptick appears to be short-lived.

Thank you for the details, Mike. I have one more question. Regarding the sale of Precision, while you mentioned there are no updates, I'm curious about the expected duration of this process. Initially, it seemed like it would take around 40 to 45 days based on the indication from Kanders, but we are now beyond that timeframe. Can you provide any insights on why more time is needed? Any information about the mechanics would be helpful, even if specifics can't be shared, particularly about the timeline and the current thinking on it.

Sure. I don't have a specific update on the timing. I can say there are several interested parties in the process, and we will carry it through to its conclusion. If that extends beyond 45 days, which I believe we may have already passed, we will continue this process under the guidance of the Special Committee and the Board to ensure that they evaluate all opportunities to maximize shareholder value.

Okay. Helpful. I'll leave it there. Thank you.

Okay.

One moment for the next question. And your next question comes from the line of Jim Duffy with Stifel. Your line is now open.

Thank you. Hi, Mike.

Hey, Jim.

Mike, I've got three lines of questioning. I'll keep it direct and quick. First on the Precision Sports business, I'm curious the extent to which the pressure you're experiencing on that revenue run rate is reflective of your exposure to certain calibers or your allocation of capital, or excuse me, capacity to certain calibers versus just the general environment. Like is there a tactical approach that could have yielded better results for you?

I don't believe so. I think it's the general market. We have built inventory, especially at Barnes and in finished goods. That inventory includes what we consider our seven or eight critical center fire rifle hunting ammos that we expected to sell for the fall hunting season. There’s just too much inventory at all levels, so none of it's moving at this point. We chose not to be promotional or discount and give that away because it's a premium solution that we opted to hold onto, and we'll sell in coming quarters once the markets reach some type of equilibrium.

Understood. And on the Adventure segment, a positive there, particularly enthused about the progress that you've made with gross margins, is that gross margin rate sustainable on a go-forward basis? And are there approaches to improving the gross margin in the Adventure segment that can be applied to your other division?

No, I think it's sustainable. There may be blips up and down, but I think in Warren's comment he mentioned P 6, the Pioneer six platform has a 1200 basis point better margin. There's other products we're looking at to take cost out of. So over the coming quarters, I think that definitely is opportunity to continue to maintain or even expand that level of margin at Adventure at the gross margin level.

Okay. And then lastly, I just wanted to ask, looking around the quarter into 2024, 2023 has been a reset year in many respects. What are the objectives for the business in 2024 and how do you think about that in the context of the uncertain environment? I'm just trying to get a view into kind of the philosophy of your strategic planning for the business into 2024.

Right. Without getting into any financial metrics about 2024 because we'll talk about that in the coming weeks. But from a strategic standpoint, it's about getting the right leadership in place, building the teams out, introducing new products across the portfolio, developing new relations with new partners, whether it's distributors or wholesale or retail partners. It's about rightsizing inventory and one of the things we've said is to make sure we're just easy to do business. And all those things are the focus of Neil's team at Outdoor, Matt's team at Adventure. And the same with the team at Precision Sports under my leadership.

Very good. Thank you, Mike.

Okay. Thanks, Jim.

One moment for the next question. And your next question comes from the line of Mark Smith with Lake Street. Your line is now open.

Hi, guys. First question for me, as we look at the uptick in direct-to-consumer, how much of that maybe was due to promotions and did that hurt kind of the profitability of that business?

For the quarter, we achieved just under $9 million in our direct-to-consumer business at Outdoor. E-commerce as a true direct-to-consumer segment saw an increase of $1.2 million, and the margins remained stable despite some promotions, including a sale around Labor Day. Overall, the business performed well. Our main profit challenges stem from moving older inventory and discontinued merchandise, but we have made significant progress in that area. We did miss some opportunities due to not having the appropriate inventory where demand was present, which created a mismatch between our inventory and demand, potentially affecting revenue further. However, revenue on a direct-to-consumer basis increased, which we view as an indicator of the brand's health.

Okay. And then you talked at length about inventory issues continuing throughout the channel, within the Precision segment. Can you talk about within Outdoor and maybe a bit within Adventure, what you're seeing from your retail partners, distributors from inventory? Is there continue to be issues, or did you see it improve at all during Q3?

There are still ongoing issues, although we are seeing some areas of improvement. Overall, however, it remains challenging and inconsistent. When examining our key national accounts, the weekly sell-through data shows variability; some accounts are up by around 20%, while others are down by the same percentage week over week. This indicates there is still considerable volatility among our key accounts.

Okay. And as we look at some continued channel inventory issues, how are you viewing the promotional environment here in Q4? I assume this is fully built into your guidance, but do you think that we'll see improvement in inventory throughout the channel in Q4 or is this something that potentially bleeds further into 2024?

I mentioned in the prepared remarks that our inventory at Outdoor is around $70 million, and I expect it to decrease to the sixties by the end of the quarter. We are committed to right-sizing our inventory, improving its aging, and focusing more on our A products to meet existing demand. In the fourth quarter, we aim to sell $3 million to $4 million of older inventory at Outdoor, which will affect our margins. However, our goal is to reset the business for 2024, particularly from the Outdoor segment's perspective.

Outdoor? Are you seeing some of these same issues in the Adventure segment?

Not so much, no. We're introducing new products. You saw the margins holding up. I mean, I feel good about what we have going on there. Adventures saw the pressure first, and now Precision Sports is kind of seeing the pressure from too much inventory in the channel, and Adventures just is the first one to come out of that. I don't see it the same. I do see inventory being pressured at Precision, but we feel confident in being able to hold that finished good ammo because it is like I mentioned to Jim, it's in our premium center fire rifle calibers. We're not going to be super promotional around moving that inventory just to generate cash. That's not necessary at this point in time.

Okay. Great. Thank you.

Your next question comes from the line of Joe Altobello with Raymond James. Your line is now open.

Good afternoon. This is actually Martin on for Joe. Just a quick question. I saw with the destocking and heightened promotional environment, that's been pretty aggressive as of late, and it sounds like we might expect something similar in 4Q. But just beyond that, how confident are you that this is going to start dissipating, and which segment might have the most pressure just kind of starting into the early part of next year?

Well, this destocking of inventory has been going on for a while. So level of confidence is obviously low, because it has been going on for a while. But like I just mentioned with Mark, I think we're starting to see Adventure turn the corner, Black Diamond stabilize. I'd say the one I'm most worried about is the Precision Sports business as it's just starting to see the excess inventory in the channels here over the last couple of months.

Got it. Thank you. And just looking at the holiday season, do you think it's going to be kind of — any opportunity for you to move any inventory?

No. Nothing out of the ordinary. Outdoor will have its Black Friday, specials like it has every year, but nothing out of the ordinary.

Got it. Thank you, Mike.

Sure.

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

Thank you, Bella. I want to thank everyone for attending the call this afternoon and your continued support and interest in Clarus, and we look forward to speaking with you next time we get together. Thanks again for joining. Take care.

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