Compass Diversified Reports Third Quarter 2023 Financial Results

November 2, 2023
Raises Full-Year Outlook Given Strong Third Quarter Performance

WESTPORT, Conn., Nov. 02, 2023 (GLOBE NEWSWIRE) -- Compass Diversified (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle market businesses, announced today its consolidated operating results for the three months ended September 30, 2023.

“Our third quarter results were remarkably strong, driven by Lugano’s continued outperformance and the majority of our companies performing above expectations,” said Elias Sabo, CEO of Compass Diversified. “The consistent resilience of our results against a challenging economic backdrop reflects not only the diversification of our subsidiaries, but our ability to find strong businesses that produce above-trend growth. Given our strong performance, we remain confident that our diversified group of subsidiaries will continue to drive value for our shareholders in 2023 and beyond.”

Mr. Sabo continued: “As announced today, we have made the strategic decision to sell Marucci to Fox Factory Holding Corp. We purchased the business in 2020 for $200 million and after approximately $70 million in add-on acquisitions, have agreed to sell the brand for $572 million. Our ability to sell this business for a large premium in the current consumer discretionary market further underscores the strength of our brands, as well as our ability to drive uncorrelated market returns. Ultimately, this fuels our lower cost of capital, deepens our economic moat, and provides us the greater ability to increase shareholder returns.”

Third Quarter 2023 Financial Summary vs. Same Year-Ago Period (where applicable)

  • Net sales down 1% and down 1% on a pro forma basis to $569.6 million.
  • Branded consumer pro forma net sales up 2% to $388.3 million.
  • Niche industrial net sales down 8% to $181.2 million.
  • Net loss of $3.8 million vs. net income of $2.6 million primarily due to a $32.6 million non-cash impairment expense associated with the Company’s Velocity Outdoor subsidiary and higher interest expense.
  • Loss from continuing operations of $5.0 million vs. $3.0 million.
  • Adjusted Earnings, a non-GAAP financial measure, was $41.0 million vs. $41.6 million.
  • Adjusted EBITDA, a non-GAAP financial measure, was up 13% to $103.9 million.
  • Paid a third quarter 2023 cash distribution of $0.25 per share on CODI's common shares in October 2023.

Recent Business Highlights

  • Today, CODI announced the sale of Marucci Sports to Fox Factory Holding Corp. (Nasdaq: FOXF) for an enterprise value of $572 million.
  • On July 5, 2023, CODI announced that Mr. C. Sean Day retired from the Board of Directors (the “Board”) of Compass Group Diversified Holdings LLC, effective June 30, 2023. The Board elected Ms. Heidi Locke Simon to fill the vacancy resulting from Mr. Day’s departure from the Board. Ms. Locke Simon’s election became effective as of July 5, 2023.
  • On July 17, 2023, The Sterno Group, a subsidiary of CODI and manufacturer and marketer of portable food warming systems, creative indoor and outdoor lighting, and home fragrance solutions for the foodservice industry and consumer markets, announced the appointment of Geoffrey Feil as CEO.

Third Quarter 2023 Financial Results

Net sales in the third quarter of 2023 were $569.6 million, down 1% compared to $575.8 million in the third quarter of 2022. Strong performance at Lugano and Marucci roughly offset lower sales at BOA due to inventory destocking in the footwear industry and lower sales at Velocity Outdoor in the third quarter of 2023. On a pro forma basis, assuming CODI had acquired PrimaLoft on January 1, 2022, net sales were down 1% in the third quarter of 2023 as compared to the prior year.

Branded consumer net sales, pro forma for the PrimaLoft acquisition, increased 2% in the third quarter of 2023 to $388.3 million compared to the third quarter of 2022. Niche industrial net sales decreased 8% in the third quarter of 2023 to $181.2 million compared to the third quarter of 2022.

Operating income for the third quarter of 2023 was $28.4 million compared to $43.8 million in the third quarter of 2022. The decline was due primarily to a $32.6 million non-cash impairment expense associated with the Company’s Velocity Outdoor subsidiary in the third quarter of 2023. Net loss in the third quarter of 2023 was $3.8 million compared to net income of $2.6 million in the third quarter of 2022. Net loss from continuing operations in the third quarter of 2023 was $5.0 million compared to $3.0 million in the third quarter of 2022. The increases in net loss and net loss from continuing operations are due to the non-cash impairment expense, as well as higher interest expense.

Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the third quarter of 2023 was $41.0 million compared to $41.6 million a year ago. CODI's weighted average number of shares outstanding in the third quarter of 2023 was 71.88 million compared to 71.91 million in the prior year third quarter.

Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) in the third quarter of 2023 was $103.9 million, up 13% compared to $91.9 million in the third quarter of 2022. The increase was primarily due to strong results at Lugano, Marucci, Sterno and Altor. The Company no longer adds back management fees in its calculation of Adjusted EBITDA. Management fees incurred during the third quarter of 2023 were $18.6 million.

Liquidity and Capital Resources

As of September 30, 2023, CODI had approximately $64.7 million in cash and cash equivalents, $112.0 million outstanding on its revolver, $387.5 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 September 30, 2023, the Company had no significant debt maturities until 2027 and had net borrowing availability of approximately $486 million under its revolving credit facility.

Third Quarter 2023 Distributions

On October 3, 2023, CODI’s Board declared a third quarter distribution of $0.25 per share on the Company's common shares. The cash distribution was paid on October 26, 2023, to all holders of record of common shares as of October 19, 2023.

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, July 30, 2023, up to, but excluding, October 30, 2023. The distribution for such period was payable on October 30, 2023, to all holders of record of Series A Preferred Shares as of October 15, 2023.

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, July 30, 2023, up to, but excluding, October 30, 2023. The distribution for such period was payable on October 30, 2023, to all holders of record of Series B Preferred Shares as of October 15, 2023.

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, July 30, 2023, up to, but excluding, October 30, 2023. The distribution for such period was payable on October 30, 2023, to all holders of record of Series C Preferred Shares as of October 15, 2023.

2023 Outlook

As a result of CODI’s strong financial performance in the third quarter, the Company is raising its Adjusted EBITDA and Adjusted Earnings outlook (see “Note Regarding Use of Non-GAAP Financial Measures” below). For the full year 2023, CODI now expects consolidated subsidiary Adjusted EBITDA of between $450 million and $465 million. This estimate is based on the summation of the Company’s expectations for its current subsidiaries in 2023, including Marucci, and is absent additional acquisitions or divestitures, and excludes corporate expenses such as interest expense, management fees paid by CODI and corporate overhead. For the full year 2023, including Marucci, CODI now expects to earn between $130 million and $140 million in Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below).

In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, CODI has not reconciled 2023 Adjusted EBITDA or 2023 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 Thursday, November 2, 2023, 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 90701822. 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 Thursday, November 9, 2023. 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. We believe Adjusted EBITDA and Adjusted Earnings are also useful in measuring our ability to service debt and other payment obligations.

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 2023 Adjusted EBITDA or 2023 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 niche 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 2023 Adjusted EBITDA, our 2023 Adjusted Earnings, our pending divestiture of Marucci, 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, 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 divestitures (including the divestiture of Marucci) 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

Cody Slach
Gateway Group
949.574.3860
Media Contact:
The IGB Group
Leon Berman
212.477.8438
lberman@igbir.com
CODI@gateway-grp.com  

 

 
Compass Diversified Holdings
Condensed Consolidated Balance Sheets
 
  September 30, 2023   December 31, 2022
(in thousands) (Unaudited)    
Assets      
Current assets      
Cash and cash equivalents $ 64,737   $ 57,880
Accounts receivable, net   349,839     331,396
Inventories, net   801,887     728,083
Prepaid expenses and other current assets   98,974     74,700
Current assets of discontinued operations       18,126
Total current assets   1,315,437     1,210,185
Property, plant and equipment, net   203,512     198,525
Goodwill   1,041,469     1,066,726
Intangible assets, net   1,069,995     1,127,936
Other non-current assets   180,399     166,412
Non-current assets of discontinued operations       79,847
Total assets $ 3,810,812   $ 3,849,631
       
Liabilities and stockholders’ equity      
Current liabilities      
Accounts payable and accrued expenses $ 291,294   $ 286,643
Due to related party   17,230     15,495
Current portion, long-term debt   10,000     10,000
Other current liabilities   35,795     36,545
Current liabilities of discontinued operations       11,148
Total current liabilities   354,319     359,831
Deferred income taxes   133,118     145,643
Long-term debt   1,775,776     1,824,468
Other non-current liabilities   157,850     141,535
Non-current liabilities of discontinued operations       16,192
Total liabilities   2,421,063     2,487,669
Stockholders' equity      
Total stockholders' equity attributable to Holdings   1,139,580     1,136,920
Noncontrolling interest   250,169     223,509
Noncontrolling interest of discontinued operations       1,533
Total stockholders' equity   1,389,749     1,361,962
Total liabilities and stockholders’ equity $ 3,810,812   $ 3,849,631
       

 

 
Compass Diversified Holdings
Consolidated Statements of Operations
(Unaudited)
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in thousands, except per share data)   2023       2022       2023       2022  
Net sales $ 569,565     $ 575,819     $ 1,635,952     $ 1,601,929  
Cost of sales   315,347       346,260       907,013       959,798  
Gross profit   254,218       229,559       728,939       642,131  
Operating expenses:              
Selling, general and administrative expense   147,962       144,040       442,345       390,336  
Management fees   18,596       16,592       51,911       45,929  
Amortization expense   26,657       25,152       79,708       67,178  
Impairment expense   32,568             32,568        
Operating income   28,435       43,775       122,407       138,688  
Other income (expense):              
Interest expense, net   (27,560 )     (22,799 )     (80,355 )     (57,737 )
Amortization of debt issuance costs   (1,005 )     (1,004 )     (3,034 )     (2,735 )
Loss on debt extinguishment         (534 )           (534 )
Other income (expense), net   1,043       (1,917 )     2,069       856  
Net income from continuing operations before income taxes   913       17,521       41,087       78,538  
Provision for income taxes   5,947       20,493       20,227       36,601  
Income (loss) from continuing operations   (5,034 )     (2,972 )     20,860       41,937  
Income (loss) from discontinued operations, net of income tax         4,078       (1,391 )     14,452  
Gain on sale of discontinued operations   1,274       1,479       103,495       6,893  
Net income (loss)   (3,760 )     2,585       122,964       63,282  
Less: Net income from continuing operations attributable to noncontrolling interest   6,394       3,675       14,892       12,247  
Less: Net income (loss) from discontinued operations attributable to noncontrolling interest         684       (777 )     2,680  
Net income (loss) attributable to Holdings $ (10,154 )   $ (1,774 )   $ 108,849     $ 48,355  
               
Amounts attributable to Holdings              
Income (loss) from continuing operations $ (11,428 )   $ (6,647 )   $ 5,968     $ 29,690  
Income (loss) from discontinued operations         3,394       (614 )     11,772  
Gain on sale of discontinued operations, net of income tax   1,274       1,479       103,495       6,893  
Net income (loss) attributable to Holdings $ (10,154 )   $ (1,774 )   $ 108,849     $ 48,355  
               
Basic income (loss) per common share attributable to Holdings              
Continuing operations $ (0.35 )   $ (0.27 )   $ (0.74 )   $ (0.04 )
Discontinued operations   0.02       0.06       1.43       0.24  
  $ (0.33 )   $ (0.21 )   $ 0.69     $ 0.20  
               
Basic weighted average number of common shares outstanding   71,881       71,910       71,996       70,514  
               
Cash distributions declared per Trust common share $ 0.25     $ 0.25     $ 0.75     $ 0.75  

 

 
Compass Diversified Holdings
Net Income (Loss) to Non-GAAP Adjusted Earnings and Non-GAAP Adjusted EBITDA
(Unaudited)
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in thousands)   2023       2022       2023       2022  
Net income (loss) $ (3,760 )   $ 2,585     $ 122,964     $ 63,282  
Income (loss) from discontinued operations, net of tax         1,479       (1,391 )     6,893  
Gain on sale of discontinued operations, net of tax   1,274       4,078       103,495       14,452  
Income (loss) from continuing operations $ (5,034 )   $ (2,972 )   $ 20,860     $ 41,937  
Less: income from continuing operations attributable to noncontrolling interest   6,394       3,675       14,892       12,247  
Net income (loss) attributable to Holdings - continuing operations $ (11,428 )   $ (6,647 )   $ 5,968     $ 29,690  
Adjustments:              
Distributions paid - preferred shares   (6,045 )     (6,045 )     (18,136 )     (18,136 )
Amortization expense - intangibles and inventory step up   26,658       26,241       80,843       72,078  
Impairment expense   32,568             32,568        
Tax effect - impairment expense   (4,308 )           (4,308 )      
Loss on debt extinguishment         534             534  
Stock compensation   3,174       3,118       8,885       8,479  
Acquisition expenses   28       5,902       392       6,118  
Integration services fee         1,626       2,375       2,751  
Held for sale corporate tax impact         16,457             12,119  
Other   349       434       1,129       3,263  
Adjusted Earnings $ 40,996     $ 41,620     $ 109,716     $ 116,896  
Plus (less):              
Depreciation expense   12,690       10,776       37,264       31,058  
Income tax provision   5,947       20,493       20,227       36,601  
Held for sale corporate tax impact         (16,457 )           (12,119 )
Interest expense   27,560       22,799       80,355       57,737  
Amortization of debt issuance costs   1,005       1,004       3,034       2,735  
Tax effect - impairment expense   4,308             4,308        
Income from continuing operations attributable to noncontrolling interest   6,394       3,675       14,892       12,247  
Distributions paid - preferred shares   6,045       6,045       18,136       18,136  
Other (income) expense   (1,043 )     1,917       (2,069 )     (856 )
Adjusted EBITDA $ 103,902     $ 91,872     $ 285,863     $ 262,435  

 

 
Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three Months Ended September 30, 2023
(Unaudited)
 
    Corporate     5.11     BOA   Ergobaby   Lugano   Marucci Sports   PrimaLoft   Velocity Outdoor   Altor   Arnold   Sterno   Consolidated
Income (loss) from continuing operations   $ (11,506 )   $ 5,834     $ 4,257     $ (261 )   $ 14,584   $ 6,706   $ (4,893 )   $ (28,881 )   $ 5,042     $ 2,103   $ 1,981     $ (5,034 )
Adjusted for:                                                
Provision (benefit) for income taxes           1,920       865       (620 )     4,210     2,110     (2,566 )     (2,951 )     1,460       876     643       5,947  
Interest expense, net     27,524       (2 )     (4 )               1     (3 )     38             6           27,560  
Intercompany interest     (36,908 )     5,477       1,571       2,144       8,930     2,200     4,635       3,633       2,549       1,706     4,063        
Loss on debt extinguishment                                                                  
Depreciation and amortization     335       6,573       5,930       2,033       2,081     3,443     5,361       3,272       4,215       2,126     4,984       40,353  
EBITDA     (20,555 )     19,802       12,619       3,296       29,805     14,460     2,534       (24,889 )     13,266       6,817     11,671       68,826  
Other (income) expense     2       98       (63 )           71         (9 )     (425 )     (362 )     8     (363 )     (1,043 )
Non-controlling shareholder compensation           258       736       312       472     424     262       228       234       8     240       3,174  
Impairment expense                                           32,568                       32,568  
Acquisition expenses                                 28                                 28  
Other                                                           349       349  
Adjusted EBITDA   $ (20,553 )   $ 20,158     $ 13,292     $ 3,608     $ 30,348   $ 14,912   $ 2,787     $ 7,482     $ 13,138     $ 6,833   $ 11,897     $ 103,902  
                                                 

 

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three Months Ended September 30, 2022
(Unaudited)
 
    Corporate     5.11   BOA   Ergobaby   Lugano   Marucci Sports   PrimaLoft   Velocity Outdoor   Altor   Arnold   Sterno   Consolidated
Income (loss) from continuing operations   $ (31,602 )   $ 5,905   $ 8,935     $ (759 )   $ 8,095   $ 4,230     $ (8,492 )   $ 4,679   $ 2,765   $ 3,475   $ (203 )   $ (2,972 )
Adjusted for:                                                
Provision (benefit) for income taxes     16,457       1,906     1,776       (410 )     1,166     1,609       (3,570 )     1,416     805     537     (1,199 )     20,493  
Interest expense, net     22,725       2     (7 )           3     3       (4 )     70         7           22,799  
Intercompany interest     (27,141 )     3,503     1,808       1,737       3,263     1,812       3,251       2,997     2,821     1,402     4,547        
Loss on debt extinguishment     534                                                         534  
Depreciation and amortization     315       5,766     5,577       2,033       3,083     2,504       4,194       3,420     4,124     1,936     5,069       38,021  
EBITDA     (18,712 )     17,082     18,089       2,601       15,610     10,158       (4,621 )     12,582     10,515     7,357     8,214       78,875  
Other (income) expense     (72 )     709     403                 (1 )     260       971     110         (463 )     1,917  
Non-controlling shareholder compensation           381     621       362       356     537             240     375     13     232       3,117  
Acquisition expenses                                     5,680       222                   5,902  
Integration services fee                           563           1,063                         1,626  
Other                                                       434       434  
Adjusted EBITDA   $ (18,784 )   $ 18,172   $ 19,113     $ 2,963     $ 16,529   $ 10,694     $ 2,382     $ 14,015   $ 11,000   $ 7,370   $ 8,417     $ 91,871  

 

 
Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Nine Months Ended September 30, 2023
(Unaudited)
 
    Corporate     5.11     BOA   Ergobaby   Lugano   Marucci Sports   PrimaLoft   Velocity Outdoor   Altor   Arnold   Sterno   Consolidated
Income (loss) from continuing operations   $ (33,858 )   $ 11,850     $ 15,151     $ (1,114 )   $ 31,468     $ 16,125   $ (5,500 )   $ (36,862 )   $ 12,244   $ 6,911     $ 4,445     $ 20,860  
Adjusted for:                                                
Provision (benefit) for income taxes           3,990       2,224       (1,272 )     10,295       5,150     (3,125 )     (5,905 )     4,094     3,264       1,512       20,227  
Interest expense, net     80,122       (4 )     (9 )           4       3     (9 )     232           16             80,355  
Intercompany interest     (106,361 )     15,698       5,032       6,484       22,660       6,928     13,343       10,070       8,183     5,078       12,885        
Depreciation and amortization     929       19,866       17,436       6,112       6,971       9,898     16,084       10,023       12,558     6,248       15,016       121,141  
EBITDA     (59,168 )     51,400       39,834       10,210       71,398       38,104     20,793       (22,442 )     37,079     21,517       33,858       242,583  
Other (income) expense     (126 )     (103 )     117       29       (5 )     29     130       (1,179 )     201     (1 )     (1,161 )     (2,069 )
Non-controlling shareholder compensation           988       2,069       936       1,312       1,287     219       686       800     26       562       8,885  
Impairment expense                                             32,568                       32,568  
Acquisition expenses                                   392                                 392  
Integration services fee                                       2,375                             2,375  
Other                                                             1,129       1,129  
Adjusted EBITDA   $ (59,294 )   $ 52,285     $ 42,020     $ 11,175     $ 72,705     $ 39,812   $ 23,517     $ 9,633     $ 38,080   $ 21,542     $ 34,388     $ 285,863  

 

 
Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Nine Months Ended September 30, 2022
(Unaudited)
 
    Corporate     5.11   BOA   Ergobaby   Lugano   Marucci Sports   PrimaLoft   Velocity Outdoor   Altor   Arnold   Sterno   Consolidated
Income (loss) from continuing operations   $ (56,373 )   $ 15,540   $ 37,122     $ (634 )   $ 21,871   $ 8,374     $ (8,492 )   $ 7,826   $ 7,149   $ 7,217   $ 2,337     $ 41,937  
Adjusted for:                                                
Provision (benefit) for income taxes     12,119       4,999     6,819       432       5,863     2,821       (3,570 )     2,372     2,907     2,768     (929 )     36,601  
Interest expense, net     57,559       12     (19 )     2       12     13       (4 )     142         20           57,737  
Intercompany interest     (66,876 )     9,501     5,634       4,000       7,841     4,649       3,251       6,987     7,844     3,947     13,222        
Loss on debt extinguishment     534                                                         534  
Depreciation and amortization     952       16,804     16,345       6,061       8,385     9,558       4,194       9,981     12,254     6,065     15,272       105,871  
EBITDA     (52,085 )     46,856     65,901       9,861       43,972     25,415       (4,621 )     27,308     30,154     20,017     29,902       242,680  
Other (income) expense     (72 )     93     498       4       2     (1,829 )     260       1,154     219         (1,185 )     (856 )
Non-controlling shareholder compensation           1,210     1,889       1,154       800     1,089             742     910     38     647       8,479  
Acquisition expenses                                     5,680       222     216               6,118  
Integration services fee                           1,688           1,063                         2,751  
Other                     250           1,802                         1,211       3,263  
Adjusted EBITDA   $ (52,157 )   $ 48,159   $ 68,288     $ 11,269     $ 46,462   $ 26,477     $ 2,382     $ 29,426   $ 31,499   $ 20,055   $ 30,575     $ 262,435  

 

 
Compass Diversified Holdings
Non-GAAP Adjusted EBITDA
(Unaudited)
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in thousands)   2023       2022       2023       2022  
               
Branded Consumer              
5.11 $ 20,158     $ 18,172     $ 52,285     $ 48,159  
BOA   13,292       19,113       42,020       68,288  
Ergobaby   3,608       2,963       11,175       11,269  
Lugano   30,348       16,529       72,705       46,462  
Marucci Sports   14,912       10,694       39,812       26,477  
PrimaLoft (1)   2,787       2,382       23,517       2,382  
Velocity Outdoor   7,482       14,015       9,633       29,426  
Total Branded Consumer $ 92,587     $ 83,868     $ 251,147     $ 232,463  
               
Niche Industrial              
Altor Solutions   13,138       11,000       38,080       31,499  
Arnold Magnetics   6,833       7,370       21,542       20,055  
Sterno   11,897       8,417       34,388       30,575  
Total Niche Industrial $ 31,868     $ 26,787     $ 94,010     $ 82,129  
Corporate expense   (20,553 )     (18,784 )     (59,294 )     (52,157 )
Total Adjusted EBITDA $ 103,902     $ 91,871     $ 285,863     $ 262,435  

 

(1) The above results for PrimaLoft do not include management's estimate of Adjusted EBITDA, before the Company's ownership, of $1.4 million and $24.8 million, respectively, for the three and nine months ended September 30, 2022. PrimaLoft was acquired on July 12, 2022.

 

 
Compass Diversified Holdings
Net Sales to Pro Forma Net Sales Reconciliation
(unaudited)
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in thousands)   2023       2022       2023       2022  
               
Net Sales $ 569,565     $ 575,819     $ 1,635,952     $ 1,601,929  
Acquisitions (1)         2,319             55,185  
Pro Forma Net Sales $ 569,565     $ 578,138     $ 1,635,952     $ 1,657,114  

 

(1) Acquisitions reflects the net sales for PrimaLoft on a pro forma basis as if the Company had acquired PrimaLoft on January 1, 2022.

 

 
Compass Diversified Holdings
Subsidiary Pro Forma Net Sales
(unaudited)
        
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in thousands)   2023       2022       2023       2022  
               
Branded Consumer              
5.11 $ 135,213     $ 126,537     $ 385,695     $ 350,608  
BOA   37,281       50,019       113,390       166,215  
Ergobaby   23,218       21,540       71,785       68,256  
Lugano   78,735       51,145       203,571       137,229  
Marucci Sports   48,500       42,753       144,065       122,481  
PrimaLoft (1)   10,930       13,031       57,619       65,897  
Velocity Outdoor   54,469       75,482       126,348       180,774  
Total Branded Consumer $ 388,346     $ 380,507     $ 1,102,473     $ 1,091,460  
               
Niche Industrial              
Altor Solutions   59,215       69,618       181,613       199,590  
Arnold Magnetics   41,819       39,377       122,047       116,319  
Sterno   80,185       88,636       229,819       249,745  
Total Niche Industrial $ 181,219     $ 197,631     $ 533,479     $ 565,654  
               
Total Subsidiary Net Sales $ 569,565     $ 578,138     $ 1,635,952     $ 1,657,114  

 

(1) Net sales for PrimaLoft are pro forma as if the Company had acquired this business on January 1, 2022.

 

 
Compass Diversified Holdings
Condensed Consolidated Cash Flows
(unaudited)
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in thousands)   2023       2022       2023       2022  
               
Net cash provided by (used in) operating activities $ 19,713     $ (4,586 )   $ 56,952     $ (39,923 )
Net cash provided by (used in) investing activities   (13,538 )     (576,713 )     104,291       (598,951 )
Net cash provided by (used in) financing activities   (8,308 )     538,531       (157,927 )     542,128  
Foreign currency impact on cash   (484 )     (1,603 )     150       (2,735 )
Net increase (decrease) in cash and cash equivalents   (2,617 )     (44,371 )     3,466       (99,481 )
Cash and cash equivalents - beginning of the period   67,354       105,623       61,271       160,733  
Cash and cash equivalents - end of the period $ 64,737     $ 61,252     $ 64,737     $ 61,252  

 

Compass Diversified Holding
Selected Financial Data - Cash Flows
(unaudited)
               
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in thousands)   2023       2022       2023       2022  
               
Changes in operating assets and liabilities $ (48,685 )   $ (62,803 )   $ (113,882 )   $ (221,998 )
Purchases of property and equipment $ (12,108 )   $ (15,036 )   $ (43,648 )   $ (39,471 )
Distributions paid - common shares $ (17,974 )   $ (17,931 )   $ (54,012 )   $ (52,794 )
Distributions paid - preferred shares $ (6,045 )   $ (6,045 )   $ (18,136 )   $ (18,136 )

 


compassdiversified

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