Clarus Corp Q4 FY2023 Earnings Call

Good afternoon everyone, and thank you for participating in today's conference call to discuss Clarus Corporation's Financial Results for the Fourth Quarter and Full Year ended December 31, 2023. Joining us today are Clarus Corporation's Executive Chairman Warren Kanders; CFO, Mike Yates and the company's External Director of Investor Relations Matt Berkowitz. Following the remarks we'll open the call for your questions. Before we go further, I would like to turn the call over to Mr. Berkowitz as he reads the company safe harbor statement with any meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Matt, please go ahead.

Thank you. Before we begin, I'd like to remind everyone that during today's call, we'll be making several forward-looking statements, and we make these statements under the safe harbor provisions of this 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 conditions 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 March 21, 2024, starting at 7 PM 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's Executive Chairman, Warren Kanders.

Good afternoon and thank you for joining Clarus' earnings call to review our results for the fourth quarter and the full year. I am joined today 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 segments and a more detailed financial review. While consumer demand remains constrained, adversely impacting our fourth quarter results, we have taken crucial steps to realign our overall platform and individual brands to position Clarus for long-term, profitable growth as a pure play, ESG-friendly outdoor business. Specifically, we completed the sale of our Precision Sports segment, streamlining the company to focus on our Outdoor and Adventure segments. As we have communicated in prior quarters, we are establishing new baselines for our brands. During this transition period, our leadership teams of both Outdoor and Adventure spent much of 2023 identifying areas for structural change, business process improvement and enhanced operational efficiencies. Incremental initiatives in the fourth quarter included taking sharp action on inventory and product categories that we view as non-core going forward while exiting unprofitable retail decisions from prior years. We entered 2024 with highly capable leadership teams committed to increasing profitability and unlocking new opportunities while continuing to build the foundation to scale and achieve operating leverage in future years. Before discussing those segments in greater depth, let me first address the monetization of our Precision Sports segment. Last week, we completed the $175 million sale, which represents a highly successful outcome for Clarus. I'd like to highlight that we invested approximately $132 million in this segment since 2017, and during our ownership period, Precision Sports returned nearly $94 million of cash to Clarus. Inclusive of the gross proceeds from the sale, we generated nearly $270 million during our ownership period. Importantly, the proceeds from the sale allow us to retire all of Clarus's outstanding debt. Our balance sheet is now debt-free with approximately $43 million of cash on hand that provides flexibility in how we pursue our long-term value creation objectives and growth initiatives. From an operating perspective, Clarus has now simplified around two traditional Outdoor brands without the overhang from the association with ammunition. We believe that our platform offers an attractive entry point into two consumer segments with broad appeal and tailwinds supporting growth as we enter a more normalized post-COVID environment. In the near term, our capital allocation strategy will focus on strengthening our existing operating businesses, either through reinvestment in our high-margin categories or through bolt-on product acquisitions that enhance our brands. Turning to our two remaining segments, Outdoors and Adventure, we are confident that we have two leaders in place, fully capable of driving Clarus' turnaround. We believe that we are at different points in the reset of both segments, but each segment is showing signs that the steps taken thus far are positive. These brands are leaders in their respective core categories, and we expect that they will rebound as the market stabilizes and reaches a new normal. We continue to believe that we are in the early stages of our action plan and recognize that our strategic initiatives require patience. You'll hear more from both Neil Fiske and Matt Hayward at our upcoming Investor Day, where they will share details on the significant strides we've taken in our strategic review, including rebuilding top-level leadership, re-engaging with our customer base, and restarting the product development pipeline with a focus on delivering enhanced product margins. While we are excited to share our longer-term vision next week, I would like to take a moment now to discuss Q4 developments. After turning the corner in Q3, Adventure had its best quarter of the year with 43% sales growth and gross margins of 38.1%. This reflected increasing sales in the Australian market and the benefit of the TRED Outdoors acquisition. Our contacts, excluding the acquisition of TRED, saw our gross margins increase by 700 basis points over the prior year period. We are pleased with the intermediate steps management has taken to improve overall profitability. Our revenue growth in the quarter was largely driven by the introduction of the new Pioneer 6 platform in Australia and the first deliveries to a new OEM customer for an upcoming product launch. With respect to Pioneer 6, this marks the first major new product launch in the last 15 months. The Pioneer range is the hallmark of the Rhino-Rack and we are excited to bring to market the portfolio of accessories that will complement it over the next 12 months, along with other new product launches throughout 2024. With respect to Outdoor, sales for the quarter were down 9.4% over the prior year period. However, when zooming into the various selling channels, we began to see signs of stabilization, particularly in North American wholesale, which picked up 2% over the prior comparable period. This was driven by increases in our national accounts offset by continued challenges in certain key accounts, mainly big box partners and the specialty channel. North American e-commerce sales were up 3% in the period, offset by lower pro sales. Our core climbing business was off 4% for the period, but it's important to note that we are seeing repurchasing trends in the first quarter of 2024 to fill shelves back to normalized stock levels. I am excited about our potential to build long-term value in Outdoor. Neil has brought on an excellent team that is energized to bring the Black Diamond brand forward. While we believe we have identified the necessary changes, it takes time for those adjustments to manifest themselves in terms of performance. We continue to stress simplification throughout the organization. One of the core tenants of prior versions of Black Diamond was a focus on fast innovation and speed to market. Neil and his team have taken a balanced approach to product, building a plan to reduce SKUs by nearly 30% while focusing on fewer, better products. As part of that process, we took a critical view of necessary products and categories and the associated inventory levels. You will see that we have taken an inventory write down of $4.2 million in the quarter, most of which is associated with these actions. Mike will cover this in greater detail in a moment. In summary, while 2023 was a transition year for Clarus, we are excited to begin 2024 with a solid foundation in place, driven by continued strong momentum in Adventure and operational progress in Outdoor. After completing the sale of our Precision Sports segment, we are now debt-free with over $40 million of cash on our balance sheet and the financial strength and flexibility to create sustainable value for shareholders.

Thanks, Warren, and good afternoon, everyone. I'll start with our performance in the fourth quarter. But before I dive into our reported results, I'd like to share a summary of our performance inclusive of both continuing and discontinuing operations. As Warren mentioned, we announced the sale of Precision Sports on December 29, 2023, and completed and closed on the sale of the segment for approximately $175 million on February 29, 2024. Accordingly, under U.S. GAAP, the financial statements have been presented on a continuing operations and discontinued operations basis. The financials and results of the Precision Sports segment have been segregated and reported as assets and liabilities held for sale on the December 31, 2023 balance sheet, and the income statement has been reported under discontinued operations for all periods presented in today's earnings release and in our Form 10-K filed earlier today. In the fourth quarter, sales of Precision Sports were $18.3 million, which exceeded our expectations compared to the guidance we provided when reporting our third-quarter 2023 results. Including Precision Sports, total fourth-quarter sales were $94.8 million. This compares favorably to the $83 to $87 million we guided for the fourth quarter. For the full year, including the contributions of Precision Sports, we delivered sales of approximately $376 million, which again reflects our performance versus our guidance range of $364 to $368 million of revenue. From an adjusted EBITDA perspective, Precision Sports generated $26.8 million for the full year 2023 on sales of nearly $90 million, or a 29.8% EBITDA margin, and $4.9 million of adjusted EBITDA in the fourth quarter or 26.7% on the $18.3 million of revenue. Beginning today, going forward, our U.S. GAAP results will be comprised of our Outdoor and Adventure segments and results will be referred to as continuing operations. Fourth quarter sales from continuing operations were $76.5 million compared to $73.8 million in the prior year fourth quarter, driven largely by the strength of our Adventure segment. The strength at Adventure was partially offset by softness in the European region in Outdoor, consistent with what we discussed during our last call. On a reported basis, sales were up 3.6%. On a constant currency basis, sales were up 3.8%. FX was not material in the fourth quarter, as you can see. Our Adventure segment saw its best quarter of the year. Sales increased 43% to $26.4 million, or $26.6 million on a constant currency basis compared to $18.5 million in the year-ago quarter. This increase reflects increased sales in the Australian market and the benefit of the TRED Outdoors acquisition announced during the fourth quarter. TRED contributed approximately $1.7 million of revenue in the fourth quarter. The Adventure business has started to benefit from various initiatives, including the TRED acquisition, new product development, new customers, and a new global leadership team under the direction of Matt Hayward. New channels, new products, and new customers will be critical as we grow Adventure in 2024. And we are excited to introduce Matt Hayward at our Investor Day, as Warren mentioned on Monday, March 11, to share our vision for Adventure in more detail. Sales in the Outdoor segment were $50.1 million, or $50 million on a constant currency basis compared to $55.3 million in the year-ago quarter. The decline primarily reflected continued challenging market conditions in both North America and the European wholesale market, as well as the unseasonably warm winter weather. Notably, however, we are beginning to see the wholesale market stabilize both in North America and Europe. Our business simplification initiatives are beginning to take hold as we operate in the first quarter of 2024. This process and the benefit from our simplification journey will be ongoing throughout 2024. The good news is the North American wholesale market is stabilizing. However, our direct-to-consumer channels are still very highly promotional, as the market continues to work through excess inventory levels. During the fourth quarter, we made some adjustments to our retail strategy, which is part of our D2C business. As Warren alluded to, we closed four retail locations. However, we also opened a new outlet location in the Seattle, Washington area, and are committed to opening a flagship retail store in the Seattle area as well. The Seattle metro area has proven to be a highly attractive market based on strong D2C e-commerce sales, based on the demographics we review. Moving to consolidated gross margins, in the fourth quarter, gross margin was 28.9% compared to 37.2% in the year-ago quarter. The decrease in gross margin was primarily due to a $4.2 million inventory reserve write-off in the Outdoor segment during the fourth quarter. The bulk of this reserve resulted from our category review and product simplification process that will reduce SKUs from around 14,000 to under 10,000. Another material contributor to the reserve was the recently announced PFAS regulation change. PFAS is an evolving industry issue that we will be dealing with throughout 2024. PFAS is a chemical used in many products to create the waterproof benefits found in many outdoor goods, including our apparel. Certain states in the USA have banned the sale of products containing PFAS, beginning in 2025, and some large retailers will no longer accept or purchase any products with PFAS starting this summer. We are actively managing the end of life of our products containing PFAS during 2024, but depending on our execution and the market reaction to these regulatory changes, we may have further exposure to PFAS inventory during 2024. This exposure is both inventory on hand and commitments to buy inventory containing PFAS from our vendors. Other than the PFAS risk, we believe we have right-sized and properly valued our inventory at Outdoor based on this fourth quarter action. Inventory ended the year at Outdoor at $64.8 million. Total inventory for continuing operations was $91 million. Gross margin at the Adventure segment improved to 38.1% from 31.7% in the year-ago quarter. This increase was due to cost-out initiatives to right-size the business earlier in the year, as well as lower freight costs. The adjusted gross margin in the fourth quarter was 29.0% compared to 37.2% in the year-ago quarter related to inventory step up due to the TRED Outdoor's acquisition. Selling, general administrative expenses in the fourth quarter were $30.7 million compared to $29.9 million in the same year-ago quarter. The increase was attributed to the Outdoor segment with higher legal and marketing expenses compared to the prior year. The loss from continuing operations in the fourth quarter of 2023 was $7.2 million, a loss of $0.19 per diluted share compared to a net loss from continuing operations of $83.3 million or $2.25 per diluted share in the year-ago quarter. The net loss in the fourth quarter included $1.5 million of one-off charges related to restructuring and transaction costs, as well as the $4.2 million inventory reserve. The net loss in the fourth quarter of 2022 included a non-cash impairment charge of $92.3 million in the Adventure segment. Adjusted loss from continuing operations was a net loss of $2.8 million or $0.07 per diluted share compared to adjusted income from continuing operations of $4.4 million or $0.11 per diluted share in the year-ago quarter. Adjusted EBITDA in the fourth quarter was a negative $3.5 million or an adjusted EBITDA margin of negative 4.5%. This compares to $3.6 million or an adjusted EBITDA margin of 4.9% in the same year-ago quarter. The decline in adjusted EBITDA was primarily driven by continuing challenging market conditions at Outdoor and increasing the inventory reserves at Outdoor and higher legal and marketing expenses. By segment, adjusted EBITDA was negative $4.6 million at Outdoor primarily due to the inventory reserve of $4.2 million in the fourth quarter. Adjusted EBITDA at Adventure for the fourth quarter was $3.9 million or 14.8%. Let me shift now over to liquidity. At December 31, 2023, cash and cash equivalents were $11.3 million compared to $12 million at December 31, 2022. Total debt on December 31, 2023 was $119.8 million compared to $139 million at the end of 2022. After the closing of the sales Precision Sports last week, our total debt today is zero. The credit agreement was terminated and repaid in full at closing and cash of approximately $43 million is on our balance sheet as of today. We expect to realize the gain on the sales Precision Sports in the first quarter of 2024. The gain will be recognized through discontinued operations. The expected cash tax expense is only expected to be $2 million to $3 million allowing us to maintain most of the net cash realized from the sales Precision Sports. Free cash flow, defined as net cash provided by operating activities less capital expenditures for the fourth quarter of 2023, was $13.3 million compared to $30.3 million in the prior year quarter. These free cash flow results include both continuing and discontinued operating results. As a reminder, we have NOL carry-forwards for U.S. federal income tax purposes of approximately $7.7 million at December 31, 2023. The company expects to utilize all the remaining NOLs in their entirety in 2024. Clarus utilized $103 million of NOLs during the ownership period of Precision Sports from 2017 to 2023. Let me share a few additional thoughts regarding capital allocation, adding to Warren's comment. Our near term capital allocation strategy will prioritize organic growth through reinvestment in our existing two businesses. Beyond organic growth, we will pay our quarterly dividends and selectively look at smaller bolt-on M&A opportunities to add to our Adventure business, just like we did in the fourth quarter with the purchase of TRED. Otherwise, throughout 2024, we will continue to focus on cash generation through our continued right-sizing of the inventory and growth of our businesses with the intent of letting cash grow on our balance sheet as we work on growing and improving the profitability of our existing businesses. Before looking forward to our financial guidance, I would like to highlight that we continue to proceed in our lawsuit against HAP Trading LLC and Mr. Harsh A. Padia. The parties conducted expert depositions on February 29, March 1, and March 6 of 2024. At this time, there is no further discovery to be conducted. The parties must submit a joint letter to the court on March 13, stating among other things whether or not they plan to file a motion for summary judgment. Counsel for the parties are required to meet in person to discuss settlement within 14 days of the closing of discovery. The parties are required to submit a joint pre-trial order within 30 days of the closing of discovery, or if a summary judgment motion has been filed within 30 days of a decision on such motion. Included in our earnings for the year was approximately $1.4 million of legal and related costs associated with this lawsuit. The company also intends to file similar complaints against Parallax Volatility Advisers, LP and Caption Management, LLC. Moving on to our outlook for 2024. We expect 2024 sales to range between $270 million to $280 million and adjusted EBITDA from continued operations of approximately $16 million to $18 million, or an adjusted EBITDA margin of 6.2% at the midpoint of revenue and adjusted EBITDA. We expect capital expenditures to range between $4 million and $5 million and free cash flow to range between $18 million and $20 million for the full year 2024. First quarter sales are expected to be between $64 million and $66 million, and adjusted EBITDA is expected to be between $1 million and $2 million. Our outlook does not include any expense or ongoing litigation specifically relating to the HAP matter or further increases in PFAS-related inventory reserves, but it does reflect the early results of our effort to achieve less complexity, better margins, and a streamlined business as we grow our Outdoor and Adventure segments. As we look forward to 2024, I'd like to reinforce what Warren said about the monetization of the Precision Sports segments. During our ownership of Precision Sports, the segment returned nearly $270 million of cash declares. We believe this was a very successful outcome. It is emblematic of the value creation potential of our businesses and the teams who lead them. We're excited about our new positioning as a pure-play outdoor business and believe we have a strategy in place today to deliver growth and profitability in 2024 and beyond. At this point, operator, we're ready to take questions.

Thank you. Our first question comes from Laurent Vasilescu with BNP Paribas. You may proceed.

Good afternoon. Thank you very much for taking my question. I wanted to ask about the Investor Day for next week. I don't know if you can share any highlights ahead of the meeting, but should we anticipate three to five-year targets next week?

Yes, that's a good question. So we'll be going through all the segments next week, and we'll be providing you with three-year outlooks for our businesses for each one of them.

Super helpful. And then on the TRED business, I don't think you quantified the size of it, whether it was announced in today's press release, just so that we can understand the organic revenues. How much did it contribute in the fourth quarter? I think it's de minimis. But more importantly, how do we think about TRED in the context of FY '24 revenues of $270 million to $280 million?

I think you'll hear more about that from Matt Hayward next week. We're not going to break out specifically the various brands, but he'll take you through the automotive as a single segment.

Okay, fair enough.

He will be able to discuss the margin profile of the different businesses and how everything integrates.

Okay, fair enough. About the guidance for the midpoint of EBITDA margin, the adjusted EBITDA margin is 6.2. I believe that's approximately a 600 basis points improvement compared to last year. Is this improvement due to gross margin or efficiencies in SG&A? Additionally, regarding the PFAS situation, I seem to remember that apparel makes up around 15% of Outdoor. It appears to be a small part of the business, but could you clarify the size of the apparel business in relation to the PFAS issue?

Sure, Laurent, we'll kind of work backwards. You're right, apparel is about 15% of our business. So it's historically been about $30 million to $40 million of Outdoor. As I mentioned, the risk here in '24 is both the inventory we have on hand and commitments we have to purchase inventory. It really comes down to our execution of how well we execute here selling and how well the market absorbs what essentially is the waterproofing product.

I just want to mention before we address the first part of your question that the PFAS issue is prevalent right now. The technology for PFAS is very effective, and these products are of high quality. In many instances, the alternative waterproofing methods do not perform as well. We believe we will be able to sell our PFAS-related inventory, but since this is a common issue across the market, there may be an ample supply. Therefore, we are proceeding with caution. While the potential numbers are not significant, it presents a minor risk. Looking ahead, we believe that in a year, consumers will seek out these products due to their excellent performance.

Yes, with regards to kind of guidance next year, most, all of that improvement that you referenced, Laurent, is at the gross profit level, right? As you recall during 2023, there was so much promotional pricing in place, you know, margins were hit pretty significantly as a result of the promotional pricing. We see a recovery both from price stability in '24 and from some margin enhancements at the gross profit level that both the Outdoor and more importantly, the Adventure business are focused on.

Very helpful. Thank you very much for taking my questions.

Sure.

Thank you. One moment for questions. Our next question comes from Matt Koranda with Roth MKM. You may proceed.

Hey guys. I guess a few from me. Wanted to focus on the 2024 outlook you've provided. For the roughly $275 million in revenue, are you willing to just kind of roughly split out the assumptions between Outdoor and Adventure? It just looks like Adventure has been growing nicely even if you strip out TRED. It looks like some really healthy organic growth in the fourth quarter. I would assume we can probably maybe not pull forward that rate of growth, but we can probably pull forward some growth, which would suggest that Outdoor is declining. So, why the decline after kind of a down year in '23, are we shedding some unprofitable revenue that sounded like that was what you were alluding to, so, maybe just the split there and just a little bit more around the puts and takes of growth at Outdoor and Adventure?

Matt, thanks. Thanks. Good question. You pretty much nailed that though. Yes, I expect Adventure to grow. We're not going to give specific guidance today by segment. You'll see on Monday, we'll talk a little bit more in detail about where we see the business is going, but Adventure will grow, it should grow. In Outdoor, we'll actually shrink, but that's a direct result of some of the simplification and the SKU reduction and leaning into our best products. It's a journey that we're going through here in '24 to kind of turn the outdoor business around. Your view and your assumptions are spot on.

Yes Matt, Neil will take you through from start to finish what he found, how we're processing that, and what the future looks like. But one of the things I had him do was really to look at SKU rationalization. And you'll see that in quite a bit of detail. By virtue of that, we will shrink the revenues somewhat, but margins will improve quite considerably. And I think when he goes through the plan and you look at the margin progression over the next couple of years, I think it will all come into focus.

Okay, that's helpful. And then just, I guess the bigger broader question that I know we're going to get here is basically that the guidance has revenue down at the midpoint for year-over-year, but EBITDA up pretty healthily, and I guess that implies. We're sort of doing away with some unprofitable business and/or removing structural costs. I know you mentioned most of the improvements going to come from gross margin, but maybe just help us square all of that. And are there corporate costs that can come out now that Precision is no longer part of the portfolio here?

Yes. So we'll get into all of that on Monday to provide all the detail that you're going to need to put together the accurate models. The corporate overheads will be coming down during the course of the year. That's our expectation. Some of the things that we've had in place we're able to reset. The other thing that, as you know, we've given some guidance to what our legal expense has been for the 16(b) trading issue. And we have baked in to our guidance for this year the appropriate amount of legal expense to continue to pursue not just the 16(b) issue against HAP Trading, but also, as Mike said, we will be filing complaints against both Parallax and Caption. So that's built into the numbers. But now, obviously, what's not built into the numbers is obviously any interest income that we'll get on our cash balances, which is now already at a 5% plus rate.

Okay. That makes sense. And then, I guess the PFAS commentary, can we just nail down and maybe I missed it, but did you guys quantify the exposure there? Obviously, there's some exposure to inventory, which sounds minimal, but then the more interesting or maybe the thing I'm more interested in understanding is the vendor question that you mentioned. Maybe there are some commitments for minimum purchases and stuff like that, maybe just any way to think about that?

I think - go ahead, Mike.

I was going to say, we didn't quantify it. It all depends. It could be $3 million to $4 million or $5 million, but it depends on how we execute that. That's why we're bringing it up, right? How the market absorbs this product. But as long as we work through this, as Warren alluded to, it's the waterproof product.

It's all great. It's all great products. We're just highlighting it because it is conceivably a risk to our numbers. At this point, we don't think it's a material risk, but we're just highlighting it again because every other company in the world also has a PFAS issue. And so, depending upon how that all processes through, it may be a little more challenging for us to sell the product. But again, we believe that product will sell, and people may buy this now because they won't be able to get it in the future. And it is better quality. The waterproofing with PFAS is better than the other technologies that we have to use.

Matt, we did take a charge in the fourth quarter related to PFAS, which was for the commitments to products we decided we didn't want anymore, in order to avoid compounding our problem. It’s important to understand that the exposure lies with the inventory that is currently on hand or being built. If we can move that inventory through our channels, we believe it won't be a significant issue. However, if we struggle to sell that inventory, we wanted to be transparent about the situation, as we believe we've adjusted our inventory to appropriate levels. If there are challenges in 2024, we wanted to preempt any questions regarding our inventory adjustments made at the end of last year. The only real risk pertains to the inventory we have on hand and what is still being built. We took a charge in the fourth quarter for the products we committed to buy but haven't purchased yet. We believe we have a solid inventory of a good product that should sell, but we need to manage what we have.

Okay, no, that's clear. Just timing on potential risk there, it sounds like you got to sell it into retail by summer, roughly?

I would think so by the third quarter.

Max, most of it will go through the second quarter.

Okay, great guys. I'll take the rest up on. Thank you.

Thank you. One moment for questions. Our next question goes from Anna Glaessgen with B. Riley. You may proceed.

Hello, Anna.

Hi, good afternoon. Thanks for taking my question. I guess encouraging to hear that you're starting to see some stabilization at wholesale in North America. I guess would you characterize their inventory levels now as having been mostly appropriately normalized and to what extent just the 2024?

No.

Got it. And so I guess when would you expect that to normalize and what's being assumed in the 2024 guide?

Well, so I'll answer that. It's normalizing. It's normalizing. So, we're working on. Things are getting better, but we don't believe that our retail partners are fully stocked at a normalized level yet.

Got it. So I guess when would you expect sell-in and sell-through to become more balanced?

We're actually seeing sell-in improve on a year-over-year basis, week-over-week basis here in the first quarter compared to the first quarter last year. And as Warren just mentioned, I think that's starting to take hold here in the first quarter, first half of the year, and hopefully that normalizes back half.

You'll hear from Neil, and I don't want to steal his thunder about the changes that he had made. But what I can say is that our people are on it now, and we are actively pointing out to our retail partners where they're short, and we're pushing them to fill out the assortments in their shelf. And that seems to be working. But everybody is cautious right now. So I think that's part of it. But our view is that we're looking forward to a great summer, and we think that the fill-in will accelerate. And we have the right inventory to achieve those goals. I think you'll hear about that.

Got it. And turning to some of the commentary around Promotionality and DTC specifically, is that a function of mix? I know that skews more toward apparel and footwear than the wholesale exposure, or is that a function of closing some of those retail locations and just clearing that inventory or something else?

It's more in the marketplace for apparel.

Mike? Mike, do we hear you?

Did you hear my answer? I'm sorry.

No, no, we lost you, Mike. Can you just say?

Oh, I'm sorry. I said it's the former, Anna. It's the apparel, the promotional pricing in the marketplace for apparel right now. All throughout Q3, Q4 was extremely strong, and that's really the main driver.

Got it. Looking forward to Monday. Thanks, guys.

Thanks.

Thanks.

Thank you. One moment for questions. Our next question goes from Mark Smith with Lake Street. You may proceed.

Hi, guys. First question, I just want to confirm the EBITDA guidance that you guys gave for '24 here, that is stripping out and excluding all of your one-time items, including the legal expense expected and some of these lawsuits. Is that correct?

The EBITDA guidance, the $16 million to $18 million full-year guidance does not include significant costs associated with the legal costs. That's what I said in my statements, in my prepared remarks.

Okay. And then it sounds like on Monday, you guys will walk through a little bit some of the corporate overhead as well as kind of total SG&A outlook. But does it seem like in the near term here, this kind of $30 million range on total SG&A seems like about the right range here in the near term?

Yes. That's a little high, but it's a little less than that, but you're in the ballpark.

Okay. And then the last question for me was just, if you can call out, I haven't seen it yet, or maybe I missed it, impact from FX and currency here in the quarter and then kind of your outlook, if you will, for '24?

Well, the comments I made in the prepared remarks at FX was completely immaterial during the quarter, during the fourth quarter. Our forecast for this year is based on exchange rates here from a few weeks ago. So it's not significantly different than what kind of the business has been functioning at throughout the third and fourth quarter of this past year.

Excellent. Thank you.

Thank you. I would now like to turn the call back over to Mike Yates for any closing remarks.

Thank you. Thank you for your interest in Clarus, and we appreciate everyone's questions. And we look forward to spending more time with you next week in New York City for our Investor Day, where both Warren and I are excited to have Matt Hayward speak in depth about the Adventure business and Neil Fiske to spend equal time walking through his plans and vision for the Outdoor business. So we thank you for your continued interest in Clarus and look forward to speaking and seeing many of you next week in New York.

Thank you for your participation. You may now disconnect.