MARAN CAPITAL MANAGEMENT

Transcription

1 MARAN CAPITAL MANAGEMENT Unconventional Investment Management Targeting Unconventional - That Is, Superior - Results Best Ideas Hosted by MOI Global January, 2018 Topic: Clarus Corp (CLAR) Maran Capital Management, LLC (917) droller@marancapital.com

2 Disclaimers MARAN CAPITAL MANAGEMENT This presentation and the information contained herein is intended for informational purposes only. It is not investment advice or a recommendation to buy or sell any securities. It does not constitute an advertisement or an offer to sell or a solicitation of an offer to buy any securities. All investments involve risk, including the loss of principal. This presentation and information contained herein reflects various assumptions, opinions, and projections of Maran Capital Management, LLC ( Maran Capital Management or Maran ) as of the date of the presentation, which is subject to change at any time, and serves as a limited supplement to a verbal presentation. Maran does not represent that any opinion or projection will be realized. This presentation may include certain forward-looking statements, estimates, or projections regarding, among other things, the historical and anticipated operating performance of the company discussed herein, access to the capital markets, and overall market conditions. Due to various risks and uncertainties, actual events or results or the actual performance of the company discussed herein may differ materially from those reflected or contemplated in such forwardlooking statements. The information contained in this presentation may not contain all of the information required in order to evaluate the value of the company discussed herein. The analyses, conclusions, and opinions presented in this presentation are the views of Maran Capital Management and not those of any third party. The analyses and conclusions of Maran contained in this presentation are based on publicly available information. Maran recognizes there may be public or non-public information available that could lead others, including the company discussed herein, to disagree with Maran s analyses, conclusions, and opinions. Funds managed by Maran Capital Management have an investment in the company discussed in this presentation. It is possible that Maran may change its opinion regarding this company at any time for any or no reason. Maran may buy, sell, sell short, cover, change the form of its investment, or completely exit from its investment in this company at any time for any or no reason. Maran hereby disclaims any duty to provide updates or changes to the analyses contained herein including, without limitation, the manner or type of any Maran investment. This presentation serves as a supplement to a verbal presentation and is not intended to be a complete analysis of the company discussed herein. 2

3 MARAN CAPITAL MANAGEMENT We are: 3

4 Value-Driven All intelligent investing is value investing. - Charlie Munger 4

5 Concentrated Diversification is protection against ignorance. It makes very little sense to those who know what the are doing. - Warren Buffett 5

6 Small (and committed to stay that way) It's a huge structural advantage not to have a lot of money. - Warren Buffett 6

7 Patient (with like-minded partners) Having clients with a long-term orientation is crucial. Nothing else is as important to the success of an investment firm. - Seth Klarman 7

8 Most Investors Focus on the Same Large Stocks 8

9 We Focus on What We Think are Inefficient Corners of the Market Where Others Can t or Don t Look 9

10 Our Hunting Ground: Small/Micro Cap Stocks and Special Situations Before figuring out how you will win the game, figure out which game to play. - Michael Mauboussin 10

11 Spin-offs, M&A transactions, broken deals, divestitures, asset sales, IPOs/broken IPOs, rights offerings Change in capital structure, management, ownership, shareholder composition or corporate governance Distress, bankruptcy, post-emergence, restructuring, or reorganization Dark or unregistered securities Change in industry structure or corporate strategy Smaller cap stocks that are uncovered, ignored, or unloved Where others can t look institutional restrictions (explicit or implicit); forced sellers 11

12 We eat our own cooking 12

13 Case Study: An Under-the-Radar 100 Bagger 13

14 Armor Holdings (AH) Sales: $11mm $2.4bn (218x) BV: $5mm $851mm (170x) Shares: 6.8mm 35.5mm (4.2x) EPS: $0.08 $3.64 (46x) 37% CAGR Stock: $0.75 $88 (117x) 49% CAGR 14 13

15 100 Armor Holdings (AH) Sales: $11mm $2.4bn 70 (218x) BV: $5mm - $851mm 60 (170x) Shares: 6.8mm 35.5mm (4.2x) EPS: $0.08 $3.64 (46x) 37% CAGR (117x) 49% CAGR Stock: $0.75 $ Range Shown: Quarterly Low to Quarterly High per 10k 15 13

16 Connect the Dots Acquisitive Strategy Buy and Build Owner Operator with Skin in the Game (Chairman Warren Kanders) Secular Tailwinds 16

17 Today s Topic: Clarus Corp (CLAR) 17

18 Acquisitive Strategy Broken Deal Owner Operator with Skin in the Game (Chairman Warren Kanders) Management Change Buy and Build Clarus Dots Under-Earning NOL Shell Secular Tailwinds 18

19 History of Clarus 16 Sells Gregory for $85mm Clarus Acquires Black Diamond ($90mm, or ~1x sales) and Gregory Mountain Products ($45mm) - Chairman Warren Kanders buys stock at $6 to fund deal Acquires PIEPS for $13mm - Sells POC for $65mm - Left with Black Diamond and PIEPs (~150mm of revenues) plus ~$75mm of net cash 10 8 Broken Deal Acquires Sierra Bullets for $79mm 6 Acquires POC for $43.5mm 4 Strategic Alternatives 2 Shell with cash and NOLs - Company buys back ~10% of stock in $4s - EV at $4 = $45mm Stock Flat over 7+ years 19

20 8 Year Organic Revenue CAGR: 7.5% Price: $7.75 Shares: 30mm Cap: $233mm Net Debt: $15mm (year-end estimate) EV: $248mm NOLs: $170mm+ NOLs E 20

21 Heritage: 1957 Founder: Yvonne Chouinard 21

22 Climb Ski Mountain 22

23 Equipment for Experiences 23

24 Products To Save Your Life 24

25 Secular Tailwinds 2020 Secular Tailwinds Retail climbing equipment market growing 15% 1 US commercial climbing gym market growing 8-10% 2 Climbing will be an Olympic sport for the first time in 2020 Organic Opportunities New Categories New Distribution Retail Stores 1) Per Clarus Sept 2017 Corporate Presentation 2) Per Climbing Business Journal; 8-10% growth over period

26 Inside View vs. Outside View Margin Opportunity: Is a 10% EBITDA Margin Target Reasonable? History Peers Target s Under-Earning 26

27 Strong, Aligned Management Team Warren Kanders Chairman 25% owner Owner Operator with Skin in the Game Management Change John Walbrecht President Joined Company: 3Q

28 Acquisitive Strategy Buy and Build Heritage: 1947 Sierra Bullets Price Paid: $79mm TTM EBITDA: $12.5mm Maintenance Capex: $0.5mm Multiple (EBITDA): 6.3x Yield (FCF): 15% 28

29 2020E Based on Current Portfolio ~$1/sh in annual FCF ~$2/sh in net cash on the balance sheet Potential upside from capital allocation Two more Sierra s in the next few years and FCF would approach ~$1.50/sh run-rate Conclusion We think CLAR is a three year double with limited risk of permanent capital loss. 29

30 MARAN CAPITAL MANAGEMENT Let s Stay in Touch Sign up at Dan Roller Founder & Chief Investment Officer (917) droller@marancapital.com 30