Mike Yates: Good question, Mark. No, we are progressing well with that. We are working with all the opportunities to move inventory that we have that has PFAS in it. There is actually some exceptions we are looking in to take advantage of for some extreme weather here that will give us another year to move that inventory as well. And then there is also regions that they are still acceptable to sell that. But with all that being said, like I think I had mentioned in the last call, we said there is $3 million to $5 million of exposure. And I think that number is probably very similar, still $3 million to $4 million of exposure, but that’s why we have gone ahead and booked the small 25% of that number here in the quarter.
Mark Smith: Perfect. And then another question for me, just as we think about inventory in general today and primarily within outdoor, how do you feel about the improvements are positive, but how do we feel about that total inventory number today? Are we in a good place? How much is us to kind of move what’s a good level where you would like to be?
Mike Yates: I am very pleased. I would explain it this way. In ‘23, we wanted to just reduce inventory, right. In ‘24, we are definitely reducing inventory kind of with our purpose. Last year was reduced inventory, generate cash pay down debt. This year, it’s very tactical in this direction is strategic. We are reducing inventory, but we are pivoting as Neil described, we are adding back from inventory as we categorize inventory A, B, C to D. And we are adding – the inventory we are adding back is A category inventory, which will allow us to meet demand, which will allow us to build or improve our fill rate. It’s all A category inventory stuff that we sell the most of that we have the highest margin on that our customers want.
So, I think overall, I would expect inventory to continue to decrease. At the end of Q2, it will probably increase a little bit compared to where we are now as we prepare for the fall winter. But by the time we get to the end of the year, I would expect inventory to be down significantly compared to last year, but more importantly, the mix of our inventory at the end of this year compared to the end of last year will be much healthier.
Mark Smith: Excellent. Thank you.
Operator: Thank you. And our next question comes from Jim Duffy of Stifel. Your line is open.
Mike Yates: Hey Jim.
Peter McGoldrick: Hi guys. This is Peter McGoldrick on for Jim. I am sorry for taking the question.
Mike Yates: Good morning Peter. Go ahead.
Peter McGoldrick: Yes. I wanted to discuss your investment plans as you build your strategies for re-platforming outdoor DTC, updating systems and otherwise simplifying the business. So, how should we be thinking of SG&A dollar growth on a year-over-year basis as 2024 progresses?
Mike Yates: Good question. So, I think Neil mentioned, we are being very cautious on SG&A. In fact, our operating cost is down 8% year-over-year. So, again, it’s all about complexity reduction and choosing the best investments with the highest return, whether that’s human capital, which is hiring more people are investing in CapEx, right. It’s new systems that we go ahead and install right, being capitalized on to our book. So, that’s how we are kind of – that’s the filter. We are looking at all investments, again, whether it’s operating cost or capital. And Neil and I and Warren are fully aligned on that. So, when we think about SG&A, I wouldn’t expect it to increase significantly. It’s really about an allocation of those dollars that we have available and putting them to the right in the best opportunities.
Peter McGoldrick: Okay. And then as we think about gross margin drivers for the year, the BD Asia office is a meaningful driver long-term. Can you provide some expectations for timing of the BD Asia sourcing and product development office to influence gross margin?
Mike Yates: Yes. Great question, Jim – Peter , I am sorry. That’s the investment we are making this year, and we won’t see the full benefit of that until next year.
Peter McGoldrick: Okay. Thank you.
Mike Yates: Our supply chain and lead times are extended. So, we will get that benefit in ‘25.
Operator: Thank you. I would like to turn it back to Mike Yates for any closing remarks.
Mike Yates: Great. Well, hey, I wanted to thank everyone very much for participating in our call today and your interest in Clarus and your continued support. We look forward to updating you at investor conferences over the coming months, I will be on the road at three or four conferences and then again in 90 days when we report the second quarter. Again, thank you very much and we will talk soon.
Operator: This concludes today’s conference call. Thank you for participating and you may now disconnect.
