Compass Diversified Reports Fourth Quarter and Full Year 2023 Financial Results

February 28, 2024
Strong Results Driven by CODI’s Unique Business Model and Significant Competitive Advantage

WESTPORT, Conn., Feb. 28, 2024 (GLOBE NEWSWIRE) -- Compass Diversified (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle market branded consumer and industrial businesses, announced today its consolidated operating results for the three and twelve months ended December 31, 2023.

“Our fourth quarter results exceeded our expectations and demonstrate that owning premium businesses with defensible competitive moats drives strong financial performance,” said Elias Sabo, CEO of Compass Diversified. “At a consolidated level, our business saw strong revenue, net income, and Subsidiary Adjusted EBITDA growth in the fourth quarter led by Lugano Diamonds. While the economic backdrop remains uncertain for many, our diversified business model continues to shine, and has us feeling optimistic that we will provide a strong shareholder return in the coming year.”

Sabo continued: “Our differentiated competitive advantage of a permanent capital structure and a lower cost of capital enabled our opportunistic sale of Marucci Sports in November and our acquisition of The Honey Pot Company in early 2024. Inclusive of The Honey Pot Company acquisition, we expect to see above trend growth in consolidated financial performance in 2024, on a pro forma basis.”

Fourth Quarter and Full Year 2023 Financial Summary vs. Same Year-Ago Period (where applicable)

  • Net sales in the fourth quarter up 7% to $567.0 million. For the full year 2023, net sales up 2% to $2.1 billion, and roughly flat on a pro forma basis.
  • Branded consumer net sales in the fourth quarter up 13% to $371.9 million. For the full year 2023, branded consumer pro forma net sales up 3% to $1.3 billion.
  • Industrial net sales in the fourth quarter down 3% to $195.1 million. For the full year 2023, industrial net sales down 5% to $728.5 million.
  • Net income in the fourth quarter of $139.4 million vs. $8.7 million last year. For the full year 2023, net income of $262.4 million vs. $51.4 million. The increase in both periods was primarily due to the $179.5 million gain on the sale of Marucci Sports in November 2023 and the $98.0 million gain on the sale of Advanced Circuits in February 2023.
  • Loss from continuing operations in the fourth quarter of $36.4 million vs. $4.6 million in the prior year period. For the full year 2023, loss from continuing operations of $38.7 million vs. income from continuing operations of $3.7 million for full year 2022. The increases in net loss from continuing operations were primarily due to non-cash impairment charges associated with PrimaLoft and Velocity Outdoor.
  • Adjusted Earnings, a non-GAAP financial measure, in the fourth quarter was $38.1 million vs. $16.3 million for the fourth quarter of 2022. For the full year 2023, Adjusted Earnings was $116.7 million vs. $110.2 million in the prior year.
  • Adjusted EBITDA, a non-GAAP financial measure, in the fourth quarter was up 35% to $94.8 million. For the full year 2023, Adjusted EBITDA was up 11% to $340.9 million.
  • Paid a fourth quarter 2023 cash distribution of $0.25 per share on CODI's common shares in January 2024.

Recent Business Highlights

  • On February 1, 2024, CODI announced the completion of its partnership with The Honey Pot Company, a leading “better-for-you” feminine care brand, for an enterprise value of $380 million.
  • On January 17, 2024, CODI hosted an Investor Day in Newport Beach, California, showcasing its Lugano Diamonds and 5.11 subsidiaries. A replay of the Lugano Diamonds and Compass Diversified presentations has been made available on the Investor Relations page of the Company’s website at compassdiversified.com.
  • On December 21, 2023, CODI announced the completion of a private placement of approximately 3.6 million of its common shares to a mutual fund managed by Allspring Global Investments, LLC for $21.18 per share, or an aggregate sale price of approximately $75.2 million, before commissions and expenses.
  • On December 19, 2023, PrimaLoft Inc., a subsidiary of CODI and a leading provider of branded, high-performance synthetic insulation and materials used primarily in consumer outerwear and accessories, announced the appointment of Anne Cavassa as CEO.
  • On November 15, 2023, CODI announced the completion of the sale of Marucci Sports to Fox Factory Holding Corp. (Nasdaq: FOXF) for an enterprise value of $572 million. CODI realized a $179.5 million gain on the sale of Marucci Sports.

Fourth Quarter and Full Year 2023 Financial Results

Net sales in the fourth quarter of 2023 were $567.0 million, up 7% compared to $529.7 million in the fourth quarter of 2022. For the full year 2023, net sales were $2.1 billion, up 2% compared to $2.0 billion a year ago. This was driven by a 63% increase in Lugano net sales, somewhat offset by lower net sales at PrimaLoft and Velocity Outdoor due to inventory destocking headwinds and reduced wholesale demand. On a pro forma basis, assuming CODI had acquired PrimaLoft on January 1, 2022, net sales were roughly flat in the full year 2023.

Branded consumer net sales increased 13% in the fourth quarter of 2023 to $371.9 million compared to the fourth quarter of 2022. On a pro forma basis, branded consumer net sales increased 3% to $1.3 billion in the full year 2023 compared to a year ago.

Industrial net sales decreased 3% in the fourth quarter of 2023 to $195.1 million compared to the fourth quarter of 2022, and decreased 5% to $728.5 million in the full year 2023 compared to a year ago.

Operating loss for the fourth quarter of 2023 was $4.0 million compared to operating income of $26.8 million in the fourth quarter of 2022. For the full year 2023, operating income decreased 31% to $90.1 million compared to $130.8 million a year ago. The decline was primarily due to a $56.8 million non-cash impairment expense associated with PrimaLoft in the fourth quarter of 2023.

Net income in the fourth quarter of 2023 was $139.4 million compared to net income of $8.7 million in the fourth quarter of 2022. For the full year 2023, net income was $262.4 million compared to $51.4 million a year ago. The increases in net income were due primarily to the $179.5 million gain on the sale of Marucci Sports in November 2023 and the $98.0 million gain on the sale of Advanced Circuits in February 2023.

Loss from continuing operations in the fourth quarter of 2023 was $36.4 million compared to $4.6 million in the fourth quarter of 2022. For the full year 2023, loss from continuing operations was $38.7 million compared to income from continuing operations of $3.7 million a year ago. The increases in net loss from continuing operations were primarily due to the non-cash impairment expenses associated with PrimaLoft and Velocity Outdoor.

Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the fourth quarter of 2023 was $38.1 million compared to $16.3 million a year ago. For the full year 2023, Adjusted Earnings was $116.7 million compared to $110.2 million a year ago. CODI's weighted average number of shares outstanding in the fourth quarter of 2023 was 72.43 million compared to 72.20 million in the prior year fourth quarter. For the full year 2023, CODI’s weighted average number of shares outstanding was 72.11 million compared to 70.72 million in 2022.

Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) in the fourth quarter of 2023 was $94.8 million, up 35% compared to $70.0 million in the fourth quarter of 2022. For the full year 2023, Adjusted EBITDA was $340.9 million, up 11% compared to $306.0 million a year ago. The increases were primarily due to strong results at Lugano and the Company’s Industrial subsidiaries. The Company no longer adds back management fees in its calculation of Adjusted EBITDA. Management fees incurred during the fourth quarter and full year were $16.9 million and $68.4 million, respectively.

Liquidity and Capital Resources

As of December 31, 2023, CODI had approximately $450.5 million in cash and cash equivalents, $2.2 million outstanding on its revolver, $385.0 million outstanding in term loans, $1.0 billion outstanding in 5.250% Senior Notes due 2029 and $300.0 million outstanding in 5.000% Senior Notes due 2032.

As of December 31, 2023, the Company had no significant debt maturities until 2027 and had net borrowing availability of approximately $598 million under its revolving credit facility.

Fourth Quarter 2023 Distributions

On January 4, 2024, CODI’s Board declared a fourth quarter distribution of $0.25 per share on the Company's common shares. The cash distribution was paid on January 25, 2024, to all holders of record of common shares as of January 18, 2024.

The Board also declared a quarterly cash distribution of $0.453125 per share on the Company’s 7.250% Series A Preferred Shares (the “Series A Preferred Shares”). The distribution on the Series A Preferred Shares covers the period from, and including, October 30, 2023, up to, but excluding, January 30, 2024. The distribution for such period was payable on January 30, 2024, to all holders of record of Series A Preferred Shares as of January 15, 2024.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series B Preferred Shares (the “Series B Preferred Shares”). The distribution on the Series B Preferred Shares covers the period from, and including, October 30, 2023, up to, but excluding, January 30, 2024. The distribution for such period was payable on January 30, 2024, to all holders of record of Series B Preferred Shares as of January 15, 2024.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series C Preferred Shares (the “Series C Preferred Shares”). The distribution on the Series C Preferred Shares covers the period from, and including, October 30, 2023, up to, but excluding, January 30, 2024. The distribution for such period was payable on January 30, 2024, to all holders of record of Series C Preferred Shares as of January 15, 2024.

2024 Outlook

CODI expects its current subsidiaries, inclusive of The Honey Pot Company as if we owned it from January 1, 2024, to produce consolidated Subsidiary Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the full year 2024 of between $480 million and $520 million. Of this range, CODI expects its Branded Consumer vertical to produce $355 million to $385 million and its Industrial vertical to produce $125 million to $135 million. This estimate is based on the summation of the Company’s expectations for its current subsidiaries in 2024, and is absent additional acquisitions or divestitures, and excludes corporate expenses such as interest expense, management fees paid by CODI and corporate overhead.

CODI is now providing guidance for Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) including management fees and corporate expenses, and expects to earn between $390 million and $430 million for the full year 2024. Adjusted EBITDA only includes results from The Honey Pot Company from the date of acquisition.

In addition, the Company expects to earn between $145 million and $160 million in Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the full year 2024.

In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, CODI has not reconciled 2024 consolidated Subsidiary Adjusted EBITDA, 2024 Adjusted EBITDA or 2024 Adjusted Earnings to their comparable GAAP measure because it does not provide guidance on Income (Loss) from Continuing Operations or Net Income (Loss) or the applicable reconciling items as a result of the uncertainty regarding, and the potential variability of, these items. For the same reasons, CODI is unable to address the probable significance of the unavailable information, which could be material to future results.

Conference Call

Management will host a conference call on Wednesday, February 28, 2024, at 5:00 p.m. ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the U.S. is (888) 259-6580 and the dial-in number for international callers is (416) 764-8624. The Conference ID is 60782779. The conference call will also be available via a live listen-only webcast and can be accessed through the Investor Relations section of CODI's website. An online replay of the webcast will be available on the same website following the call. Please allow extra time prior to the call to visit the site and download any necessary software that may be needed to listen to the Internet broadcast. A replay of the call will be available through Wednesday, March 6, 2024. To access the replay, please dial (877) 674-7070 in the U.S. and (416) 764-8692 outside the U.S.

Note Regarding Use of Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted Earnings are non-GAAP measures used by the Company to assess its performance. We have reconciled Adjusted EBITDA to Income (Loss) from Continuing Operations and Adjusted Earnings to Net Income (Loss) on the attached schedules. We consider Income (Loss) from Continuing Operations to be the most directly comparable GAAP financial measure to Adjusted EBITDA and Net Income (Loss) to be the most directly comparable GAAP financial measure to Adjusted Earnings. We believe that Adjusted EBITDA and Adjusted Earnings provides useful information to investors and reflect important financial measures as each excludes the effects of items which reflect the impact of long-term investment decisions, rather than the performance of near-term operations. When compared to Net Income (Loss) and Income (Loss) from Continuing Operations, Adjusted Earnings and Adjusted EBITDA, respectively, are each limited in that they do not reflect the periodic costs of certain capital assets used in generating revenues of our businesses or the non-cash charges associated with impairments, as well as certain cash charges. The presentation of Adjusted EBITDA allows investors to view the performance of our businesses in a manner similar to the methods used by us and the management of our businesses, provides additional insight into our operating results and provides a measure for evaluating targeted businesses for acquisition. The presentation of Adjusted Earnings provides insight into our operating results and provides a measure for evaluating earnings from continuing operations available to common shareholders.

Pro forma net sales is defined as net sales including the historical net sales relating to the pre-acquisition periods of PrimaLoft, assuming that the Company acquired PrimaLoft on January 1, 2022. We have reconciled pro forma net sales to net sales, the most directly comparable GAAP financial measure, on the attached schedules. We believe that pro forma net sales is useful information for investors as it provides a better understanding of sales performance, and relative changes thereto, on a comparable basis. Pro forma net sales is not necessarily indicative of what the actual results would have been if the acquisition had in fact occurred on the date or for the periods indicated nor does it purport to project net sales for any future periods or as of any date.

In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled 2024 consolidated Subsidiary Adjusted EBITDA, 2024 Adjusted EBITDA or 2024 Adjusted Earnings to their comparable GAAP measures because we do not provide guidance on Net Income (Loss) from Continuing Operations or Net Income (Loss) or the applicable reconciling items as a result of the uncertainty regarding, and the potential variability of, these items. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.

Adjusted EBITDA, Adjusted Earnings and pro forma net sales are not meant to be a substitute for GAAP measures and may be different from or otherwise inconsistent with non-GAAP financial measures used by other companies.

About Compass Diversified

Since its founding in 1998 and IPO in 2006, CODI has consistently executed on its strategy of owning and managing a diverse set of highly defensible, middle-market businesses across the industrial, branded consumer, and healthcare sectors. The Company leverages its permanent capital base, long-term disciplined approach, and actionable expertise to maintain controlling ownership interests in each of its subsidiaries, maximizing its ability to impact long-term cash flow generation and value creation. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and has consistently generated strong returns through its culture of transparency, alignment, and accountability. For more information, please visit compassdiversified.com.

Forward Looking Statements

Certain statements in this press release may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements as to our future performance or liquidity, such as expectations regarding our results of operations and financial condition, our 2024 consolidated Subsidiary Adjusted EBITDA, our 2024 Adjusted EBITDA, our 2024 Adjusted Earnings, our pending acquisitions and divestitures, and other statements with regard to the future performance of CODI. We may use words such as “plans,” “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “may,” “seek,” “look,” and similar expressions to identify forward-looking statements. The forward-looking statements contained in this press release involve risks and uncertainties. Actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in CODI’s annual report on Form 10-K and its quarterly reports on Form 10-Q. Other factors that could cause actual results to differ materially include: changes in the economy, financial markets and political environment, including changes in inflation and interest rates; risks associated with possible disruption in CODI’s operations or the economy generally due to terrorism, war, natural disasters, social, civil and political unrest or the COVID-19 pandemic; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); environmental risks affecting the business or operations of our subsidiaries; disruption in the global supply chain, labor shortages and high labor costs; our business prospects and the prospects of our subsidiaries; the impact of, and ability to successfully complete and integrate, acquisitions that we may make; the ability to successfully complete when we’ve executed divestitures agreements; the dependence of our future success on the general economy and its impact on the industries in which we operate; the ability of our subsidiaries to achieve their objectives; the adequacy of our cash resources and working capital; the timing of cash flows, if any, from the operations of our subsidiaries; and other considerations that may be disclosed from time to time in CODI’s publicly disseminated documents and filings. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. Although, except as required by law, CODI undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that CODI may make directly to you or through reports that it in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Investor Relations
irinquiry@compassdiversified.com

Gateway Group
Cody Slach
949.574.3860
CODI@gateway-grp.com

Media Relations
Mediainquiry@compassdiversified.com

The IGB Group
Leon Berman
212.477.8438
lberman@igbir.com

 
Compass Diversified Holdings
Condensed Consolidated Balance Sheets
         
(in thousands)   December 31, 2023   December 31, 2022
         
Assets        
Current assets        
Cash and cash equivalents   $ 450,477     $ 56,599  
Accounts receivable, net     318,241       297,722  
Inventories, net     740,387       680,545  
Prepaid expenses and other current assets     94,715       73,200  
Current assets of discontinued operations           102,119  
Total current assets     1,603,820       1,210,185  
Property, plant and equipment, net     192,562       184,501  
Goodwill     901,428       991,007  
Intangible assets, net     923,905       1,015,497  
Other non-current assets     195,266       162,392  
Non-current assets of discontinued operations           286,049  
Total assets   $ 3,816,981     $ 3,849,631  
         
Liabilities and stockholders’ equity        
Current liabilities        
Accounts payable   $ 93,412     $ 82,942  
Accrued expenses     150,725       177,245  
Deferred revenue     6,731       7,093  
Due to related parties     16,025       15,495  
Current portion, long-term debt     10,000       10,000  
Other current liabilities     35,465       35,286  
Current liabilities of discontinued operations           31,771  
Total current liabilities     312,358       359,832  
Deferred income taxes     120,131       142,627  
Long-term debt     1,661,879       1,824,468  
Other non-current liabilities     203,232       139,267  
Non-current liabilities of discontinued operations           21,475  
Total liabilities     2,297,600       2,487,669  
Stockholders' equity        
Total stockholders' equity attributable to Holdings     1,326,750       1,136,920  
Noncontrolling interest     192,631       203,464  
Noncontrolling interest of discontinued operations           21,578  
Total stockholders' equity     1,519,381       1,361,962  
Total liabilities and stockholders’ equity   $ 3,816,981     $ 3,849,631  

 

Compass Diversified Holdings
Consolidated Statements of Operations
                 
    Three months ended December 31,   Year ended December 31,
(in thousands, except per share data)     2023       2022       2023       2022  
Net revenues   $ 566,989     $ 529,682     $ 2,058,876     $ 2,009,130  
Cost of revenues     320,682       327,934       1,165,553       1,226,078  
Gross profit     246,307       201,748       893,323       783,052  
Operating expenses:                
Selling, general and administrative expense     152,626       132,969       549,589       484,369  
Management fees     16,909       17,050       68,445       62,604  
Amortization expense     23,914       24,886       95,820       84,689  
Impairment expense     56,832             89,400       20,552  
Operating income (loss)     (3,974 )     26,843       90,069       130,838  
Other income (expense):                
Interest expense, net     (24,826 )     (25,768 )     (105,179 )     (83,492 )
Amortization of debt issuance costs     (1,004 )     (1,005 )     (4,038 )     (3,740 )
Loss on debt extinguishment                       (534 )
Other income (expense), net     (357 )     (1,349 )     1,743       (2,321 )
Net income (loss) before income taxes     (30,161 )     (1,279 )     (17,405 )     40,751  
Provision (benefit) for income taxes     6,254       3,313       21,331       37,093  
Income (loss) from continuing operations     (36,415 )     (4,592 )     (38,736 )     3,658  
Income (loss) from discontinued operations, net of income tax     (3,674 )     10,800       18,116       38,387  
Gain on sale of discontinued operations     179,530       2,500       283,025       9,393  
Net income     139,441       8,708       262,405       51,438  
Less: Net income (loss) attributable to noncontrolling interest     2,555       (1,131 )     15,945       10,367  
Less: Net income (loss) from discontinued operations attributable to noncontrolling interest     (551 )     1,255       174       4,684  
Net income attributable to Holdings   $ 137,437     $ 8,584     $ 246,286     $ 36,387  
                 
Basic income (loss) per common share attributable to Holdings                
Continuing operations   $ (0.74 )   $ (0.50 )   $ (1.71 )   $ (0.66 )
Discontinued operations     2.44       0.16       4.17       0.56  
    $ 1.70     $ (0.34 )   $ 2.46     $ (0.10 )
                 
Basic weighted average number of common shares outstanding     72,429       72,203       72,105       70,715  
                 
Cash distributions declared per Trust common share   $ 0.25     $ 0.25     $ 1.00     $ 1.00  

 

Compass Diversified Holdings
Net Income to Non-GAAP Adjusted Earnings and Non-GAAP Adjusted EBITDA - 2023
(Unaudited)
         
    Three months ended   Year ended
(in thousands)   March 31, 2023   June 30, 2023   September 30, 2023   December 31, 2023   December 31, 2023
Net income (loss)   $ 109,601     $ 17,123     $ (3,760 )   $ 139,441     $ 262,405  
Gain on sale of discontinued operations, net of tax     97,989       4,232       1,274       179,530       283,025  
Income (loss) from discontinued operations, net of tax     10,000       2,840       8,950       (3,674 )     18,116  
Net income (loss) from continuing operations   $ 1,612     $ 10,051     $ (13,984 )   $ (36,415 )   $ (38,736 )
Less: income from continuing operations attributable to noncontrolling interest     4,171       3,498       5,721       2,555       15,945  
Net income (loss) attributable to Holdings - continuing operations   $ (2,559 )   $ 6,553     $ (19,705 )   $ (38,970 )   $ (54,681 )
Adjustments:                    
Distributions paid - preferred shares     (6,045 )     (6,046 )     (6,045 )     (6,045 )     (24,181 )
Amortization expense - intangible assets and inventory step-up     25,148       23,977       23,956       23,914       96,995  
Impairment expense                 32,568       56,832       89,400  
Tax effect - impairment expense                 (4,308 )     978       (3,330 )
Non-controlling interest - impairment expense                       (5,382 )     (5,382 )
Non-controlling shareholder compensation     1,641       3,207       2,750       3,067       10,665  
Acquisition expense                       321       321  
Integration services fee     1,187       1,188                   2,375  
Other     432       348       349       3,377       4,506  
Adjusted earnings   $ 19,804     $ 29,227     $ 29,565     $ 38,092     $ 116,688  
Plus (less):                    
Depreciation expense     11,155       12,107       11,994       11,291       46,547  
Income tax provision     6,920       4,320       3,837       6,254       21,331  
Interest expense     26,180       26,613       27,560       24,826       105,179  
Amortization of debt issuance costs     1,005       1,024       1,005       1,004       4,038  
Income from continuing operations attributable to noncontrolling interest     4,171       3,498       5,721       2,555       15,945  
Distributions paid - preferred shares     6,045       6,046       6,045       6,045       24,181  
Tax effect - impairment expense                 4,308       (978 )     3,330  
Non-controlling interest - impairment expense                       5,382       5,382  
Other     (1,160 )     105       (1,045 )     357       (1,743 )
Adjusted EBITDA   $ 74,120     $ 82,940     $ 88,990     $ 94,828     $ 340,878  

 

Compass Diversified Holdings
Net Income (Loss) to Non-GAAP Adjusted Earnings and Non-GAAP Adjusted EBITDA - 2022
(Unaudited)
                     
    Three months ended   Year ended
(in thousands)   March 31, 2022   June 30, 2022   September 30, 2022   December 31, 2022   December 31, 2022
Net income (loss)   $ 29,740     $ 30,957     $ 2,585     $ (11,844 )   $ 51,438  
Gain (loss) on sale of discontinued operations, net of tax     5,993       (579 )     1,479       2,500       9,393  
Income from discontinued operations, net of tax     13,059       4,371       10,157       10,800       38,387  
Net income (loss) from continuing operations   $ 10,688     $ 27,165     $ (9,051 )   $ (25,144 )   $ 3,658  
Less: income (loss) from continuing operations attributable to noncontrolling interest     4,388       3,813       3,297       (1,131 )     10,367  
Net income (loss) attributable to Holdings - continuing operations   $ 6,300     $ 23,352     $ (12,348 )   $ (24,013 )   $ (6,709 )
Adjustments:                    
Distributions paid - preferred shares     (6,045 )     (6,046 )     (6,045 )     (6,045 )     (24,181 )
Amortization expense - intangible assets and inventory step-up     19,691       20,258       24,400       26,454       90,803  
Impairment expense                       20,552       20,552  
Tax effect - impairment expense                       (3,557 )     (3,557 )
Non-controlling interest - impairment expense                       (3,120 )     (3,120 )
Loss on debt extinguishment                 534             534  
Non-controlling shareholder compensation     2,405       2,404       2,581       4,608       11,998  
Acquisition expense     216             5,902             6,118  
Integration services fee     563       563       1,625       1,312       4,063  
Corporate tax effect           (4,338 )     16,457             12,119  
Other           1,027       434       119       1,580  
Adjusted earnings   $ 23,130     $ 37,220     $ 33,540     $ 16,310     $ 110,200  
Plus (less):                    
Depreciation expense     9,450       9,741       10,149       10,690       40,030  
Income tax provision     7,970       6,926       18,884       3,313       37,093  
Corporate tax effect           4,338       (16,457 )           (12,119 )
Tax effect - impairment expense                       3,557       3,557  
Non-controlling interest - impairment expense                       3,120       3,120  
Interest expense     17,419       17,509       22,796       25,768       83,492  
Amortization of debt issuance costs     866       865       1,004       1,005       3,740  
Income from continuing operations attributable to noncontrolling interest     4,388       3,813       3,297       (1,131 )     10,367  
Distributions paid - preferred shares     6,045       6,046       6,045       6,045       24,181  
Other     (226 )     (718 )     1,916       1,349       2,321  
Adjusted EBITDA   $ 69,042     $ 85,740     $ 81,174     $ 70,026     $ 305,982  

 

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three Months Ended December 31, 2023
(Unaudited)
                                             
(in thousands)   Corporate     5.11     BOA   Ergo   Lugano   PrimaLoft   Velocity Outdoor   Altor Solutions   Arnold   Sterno   Consolidated
Net income (loss) from continuing operations   $ (10,847 )   $ 9,840     $ 1,345     $ (1,487 )   $ 20,847     $ (64,383 )   $ (3,183 )   $ 4,260     $ 3,523     $ 3,670     $ (36,415 )
Adjusted for:                                            
Provision (benefit) for income taxes     301       1,004       639       (37 )     4,293       (2,549 )     289       1,797       921       (406 )     6,252  
Interest expense, net     24,732       (4 )     (9 )                 (2 )     120             (11 )           24,826  
Intercompany interest     (35,402 )     4,546       2,548       2,111       10,177       4,780       3,440       2,303       1,728       3,769        
Depreciation and amortization     342       6,143       5,496       1,998       2,258       5,394       3,259       4,183       2,193       4,943       36,209  
EBITDA     (20,874 )     21,529       10,019       2,585       37,575       (56,760 )     3,925       12,543       8,354       11,976       30,872  
Other (income) expense           (412 )     (19 )     7       (75 )     (66 )     (31 )     1,239       (4 )     (280 )     359  
Non-controlling shareholder compensation           203       950       278       162       761       228       186       1       298       3,067  
Impairment expense                                   57,810       (978 )                       56,832  
Acquisition expenses                       321                                           321  
Other                 3,072                                           305       3,377  
Adjusted EBITDA   $ (20,874 )   $ 21,320     $ 14,022     $ 3,191     $ 37,662     $ 1,745     $ 3,144     $ 13,968     $ 8,351     $ 12,299     $ 94,828  

 

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three Months Ended December 31, 2022
(Unaudited)
                                             
(in thousands)   Corporate     5.11     BOA   Ergo   Lugano   PrimaLoft   Velocity Outdoor   Altor Solutions   Arnold   Sterno   Consolidated
Net income (loss) from continuing operations   $ (16,856 )   $ 7,093     $ 5,491     $ (18,035 )   $ 6,063     $ (9,249 )   $ (3,699 )   $ 2,513     $ 466     $ 1,069     $ (25,144 )
Adjusted for:                                            
Provision (benefit) for income taxes           2,126       (292 )     (4,706 )     6,026       (308 )     (810 )     267       561       449       3,313  
Interest expense, net     25,684       (12 )     (6 )     8       4       (3 )     87             6             25,768  
Intercompany interest     (29,950 )     4,260       1,776       2,026       4,932       4,261       3,295       2,898       1,571       4,931        
Depreciation and amortization     342       6,168       5,648       2,033       3,148       6,271       3,393       4,149       1,976       5,021       38,149  
EBITDA     (20,780 )     19,635       12,617       (18,674 )     20,173       972       2,266       9,827       4,580       11,470       42,086  
Other (income) expense     15       (310 )     545       2             (148 )     1,263       547       (20 )     (545 )     1,349  
Non-controlling shareholder compensation           301       622       325       379       2,142       229       411       2       197       4,608  
Impairment expense                       20,552                                           20,552  
Integration services fee                                   1,313                               1,313  
Other                                                           119       119  
Adjusted EBITDA   $ (20,765 )   $ 19,626     $ 13,784     $ 2,205     $ 20,552     $ 4,279     $ 3,758     $ 10,785     $ 4,562     $ 11,241     $ 70,027  

 

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Year ended December 31, 2023
(Unaudited)
                                             
(in thousands)   Corporate     5.11     BOA   Ergo   Lugano   PrimaLoft   Velocity Outdoor   Altor Solutions   Arnold   Sterno   Consolidated
Net income (loss) from continuing operations   $ (51,761 )   $ 21,690     $ 16,496     $ (2,601 )   $ 52,315     $ (69,883 )   $ (40,045 )   $ 16,504     $ 10,434     $ 8,115     $ (38,736 )
Adjusted for:                                            
Provision (benefit) for income taxes     301       4,994       2,863       (1,309 )     14,589       (5,672 )     (5,616 )     5,890       4,185       1,106       21,331  
Interest expense, net     104,855       (8 )     (18 )           4       (11 )     352             5             105,179  
Intercompany interest     (134,835 )     20,244       7,580       8,595       32,837       18,123       13,510       10,486       6,806       16,654        
Loss on debt extinguishment                                                                  
Depreciation and amortization     1,399       26,009       22,932       8,110       9,229       21,478       13,282       16,741       8,441       19,959       147,580  
EBITDA     (80,041 )     72,929       49,853       12,795       108,974       (35,965 )     (18,517 )     49,621       29,871       45,834       235,354  
Other (income) expense     (128 )     (515 )     98       36       (80 )     62       (1,210 )     1,440       (5 )     (1,441 )     (1,743 )
Non-controlling shareholder compensation           1,191       3,019       1,214       1,474       980       914       986       27       860       10,665  
Impairment expense                                   57,810       31,590                         89,400  
Acquisition expenses                       321                                           321  
Integration services fee                                   2,375                               2,375  
Other                 3,072                                           1,434       4,506  
Adjusted EBITDA   $ (80,169 )   $ 73,605     $ 56,042     $ 14,366     $ 110,368     $ 25,262     $ 12,777     $ 52,047     $ 29,893     $ 46,687     $ 340,878  

 

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Year ended December 31, 2022
(Unaudited)
                                             
(in thousands)   Corporate     5.11     BOA   Ergo   Lugano   PrimaLoft   Velocity Outdoor   Altor Solutions   Arnold   Sterno   Consolidated
Net income (loss) from continuing operations   $ (77,990 )   $ 22,633     $ 42,613     $ (18,669 )   $ 27,934     $ (17,741 )   $ 4,127     $ 9,662     $ 7,683     $ 3,406     $ 3,658  
Adjusted for:                                            
Provision (benefit) for income taxes     12,119       7,125       6,527       (4,274 )     11,889       (3,878 )     1,562       3,174       3,329       (480 )     37,093  
Interest expense, net     83,243             (25 )     10       16       (7 )     229             26             83,492  
Intercompany interest     (92,177 )     13,761       7,410       6,026       12,773       7,512       10,282       10,742       5,518       18,153        
Loss on debt extinguishment     534                                                             534  
Depreciation and amortization     1,405       22,972       21,993       8,094       11,533       10,465       13,374       16,403       8,041       20,293       134,573  
EBITDA     (72,866 )     66,491       78,518       (8,813 )     64,145       (3,649 )     29,574       39,981       24,597       41,372       259,350  
Other (income) expense     (58 )     (217 )     1,043       6       2       112       2,417       766       (20 )     (1,730 )     2,321  
Non-controlling shareholder compensation           1,511       2,511       1,479       1,179       2,142       971       1,321       40       844       11,998  
Impairment expense                       20,552                                           20,552  
Acquisition expenses                                   5,680       222       216                   6,118  
Integration services fee                             1,688       2,375                               4,063  
Other                       250                                     1,330       1,580  
Adjusted EBITDA   $ (72,924 )   $ 67,785     $ 82,072     $ 13,474     $ 67,014     $ 6,660     $ 33,184     $ 42,284     $ 24,617     $ 41,816     $ 305,982  

 

Compass Diversified Holdings
Adjusted EBITDA
(Unaudited)
                 
    Three months ended December 31,   Year ended December 31,
(in thousands)     2023       2022       2023       2022  
                 
Branded Consumer                
5.11   $ 21,320     $ 19,626     $ 73,605     $ 67,785  
BOA     14,022       13,784       56,042       82,072  
Ergobaby     3,191       2,205       14,366       13,474  
Lugano     37,662       20,552       110,368       67,014  
PrimaLoft (1)     1,745       4,279       25,262       6,660  
Velocity Outdoor     3,144       3,758       12,777       33,184  
Total Branded Consumer   $ 81,084     $ 64,204     $ 292,420     $ 270,189  
                 
Industrial                
Altor Solutions   $ 13,968     $ 10,785     $ 52,047     $ 42,284  
Arnold Magnetics     8,351       4,562       29,893       24,617  
Sterno     12,299       11,241       46,687       41,816  
Total Industrial   $ 34,618     $ 26,588     $ 128,627     $ 108,717  
Corporate expense     (20,874 )     (20,765 )     (80,169 )     (72,924 )
Total Adjusted EBITDA   $ 94,828     $ 70,027     $ 340,878     $ 305,982  
 
(1) The above results for PrimaLoft do not include management's estimate of Adjusted EBITDA, before our ownership, of $24.3 million for the twelve months ended December 31, 2022. PrimaLoft was acquired on July 12, 2022.

 

Compass Diversified Holdings
Net Sales to Pro Forma Net Sales Reconciliation
(unaudited)
                 
    Three months ended December 31,   Year ended December 31,
(in thousands)     2023       2022       2023       2022  
                 
Net Sales   $ 566,989     $ 529,682     $ 2,058,876     $ 2,009,130  
Acquisitions (1)                       55,185  
Pro Forma Net Sales   $ 566,989     $ 529,682     $ 2,058,876     $ 2,064,315  
 
(1) Acquisitions reflects the net sales for PrimaLoft on a proforma basis as if we had acquired this business on January 1, 2022.

 

Compass Diversified Holdings
Subsidiary Pro Forma Net Sales
(unaudited)
             
    Three months ended December 31,   Year ended December 31,
(in thousands)     2023       2022       2023       2022  
                 
Branded Consumer                
5.11   $ 147,394     $ 135,605     $ 533,089     $ 486,213  
BOA     42,435       42,473       155,825       208,688  
Ergobaby     22,074       20,179       93,859       88,435  
Lugano     104,750       64,278       308,321       201,507  
PrimaLoft (1)     9,434       14,032       67,053       79,929  
Velocity Outdoor     45,842       51,464       172,190       232,238  
Total Branded Consumer   $ 371,929     $ 328,031     $ 1,330,337     $ 1,297,010  
                 
Industrial                
Altor Solutions     56,417       61,748       238,030       261,338  
Arnold Magnetics     44,632       37,496       166,679       153,815  
Sterno     94,011       102,407       323,830       352,152  
Total Industrial   $ 195,060     $ 201,651     $ 728,539     $ 767,305  
                 
Total Subsidiary Net Sales   $ 566,989     $ 529,682     $ 2,058,876     $ 2,064,315  
 
(1) Net sales for PrimaLoft are pro forma as if we had acquired this business on January 1, 2022. Historical net sales for PrimaLoft prior to acquisition on July 12, 2022, were $55.2 million for the twelve months ended December 31, 2022.

 

Compass Diversified Holdings
Condensed Consolidated Cash Flows
         
    Three months ended December 31,   Year ended December 31,
(in thousands)     2023       2022       2023       2022  
                 
Net cash provided by (used in) operating activities   $ 21,128     $ 11,632     $ 78,080     $ (28,291 )
Net cash provided by (used in) investing activities     466,213       (27,774 )     570,503       (626,725 )
Net cash provided by (used in) financing activities     (102,236 )     14,757       (260,163 )     556,885  
Foreign currency impact on cash     636       1,404       786       (1,331 )
Net increase (decrease) in cash and cash equivalents     385,741       19       389,206       (99,462 )
Cash and cash equivalents - beginning of the period (1)     64,736       61,252       61,271       160,733  
Cash and cash equivalents - end of the period   $ 450,477     $ 61,271     $ 450,477     $ 61,271  
 
(1) Includes cash from discontinued operations of $4.7 million at January 1, 2023 and $3.6 million at January 1, 2022.

 

Compass Diversified Holding
Selected Financial Data - Cash Flows
                 
    Three months ended December 31,   Year ended December 31,
(in thousands)     2023       2022       2023       2022  
                 
Changes in operating assets and liabilities   $ (24,390 )   $ (27,722 )   $ (153,310 )   $ (224,587 )
Purchases of property and equipment   $ (17,239 )   $ (23,726 )   $ (55,776 )   $ (60,989 )
Distributions paid - common shares   $ (17,955 )   $ (18,051 )   $ (71,967 )   $ (70,845 )
Distributions paid - preferred shares   $ (6,045 )   $ (6,045 )   $ (24,181 )   $ (24,181 )

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Source: Compass Diversified Holdings

Compass Diversified
IRinquiry@compassdiversified.com

Cody Slach
Gateway Group
CODI@gateway-grp.com
949-574-3860

Broadridge Corporate Issuer Solutions
P.O. Box 1342?
Brentwood, NY 11717
https://www.shareholder.broadridge.com/
shareholder@broadridge.com
203-635-8320