Compass Diversified Reports Second Quarter 2024 Financial Results

WESTPORT, Conn., July 31, 2024 (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 June 30, 2024.

“I’m pleased to announce another strong quarter with results that exceeded our expectations, driven by continued strength in our consumer businesses,” said Elias Sabo, CEO of Compass Diversified. “While Q2 saw deteriorating economic conditions that negatively impacted our industrial vertical, our branded consumer businesses performed exceptionally well with net sales up close to 20%, or 11% on a pro forma basis, offsetting any weaknesses in our industrial businesses. As expected, destocking headwinds subsided this past quarter, which meant both BOA and PrimaLoft performed exceptionally well and Lugano continued to grow at an extraordinary pace.”

Second Quarter 2024 Financial Summary vs. Same Year-Ago Period (where applicable)

  • Net sales up 11% to $542.6 million and up 6% on a pro forma basis.
  • Branded Consumer net sales up 11% on a pro forma basis to $373.5 million.
  • Industrial net sales down 4% to $169.1 million.
  • Loss from continuing operations of $13.7 million vs. income from continuing operations of $10.1 million.
  • Net loss of $(13.7) million vs. net income of $17.1 million, primarily due to the loss of $24.6 million from the divestiture of Crosman Corporation, a division of Velocity Outdoor.
  • Adjusted Earnings, a non-GAAP financial measure, was up 36% to $39.8 million vs. $29.2 million.
  • Adjusted EBITDA, a non-GAAP financial measure, was up 27% to $105.4 million.
  • Paid a second quarter 2024 cash distribution of $0.25 per share on CODI’s common shares in July 2024.

Recent Business Highlights

  • On April 30, 2024, CODI announced the divestiture of Crosman Corporation, the air gun division of its Velocity Outdoor subsidiary.
  • On April 18, 2024, The Honey Pot Co., a subsidiary of CODI and a leading, better-for-you feminine care brand, announced the appointment of three new female members to its board of directors.

Second Quarter 2024 Financial Results

Net sales in the second quarter of 2024 were $542.6 million, up 11% compared to $486.9 million in the second quarter of 2023. This was driven by CODI’s acquisition of The Honey Pot Co. in January 2024 and continued strong sales growth at Lugano and BOA. On a pro forma basis, assuming CODI had acquired The Honey Pot Co. on January 1, 2023, net sales were up 6%.

On a pro forma basis, Branded Consumer net sales increased 11% to $373.5 million compared to the second quarter of 2023.

Industrial net sales decreased 4% to $169.1 million compared to the second quarter of 2023.

Operating income for the second quarter of 2024 was $61.3 million compared to $42.1 million in the second quarter of 2023. Operating income in the second quarter of 2024 reflected higher gross profit at CODI’s Branded Consumer brands, offset by increased SG&A and amortization expense from CODI’s acquisition of The Honey Pot Co. in the first quarter of 2024.

Loss from continuing operations in the second quarter of 2024 was $(13.7) million compared to income from continuing operations of $10.1 million in the second quarter of 2023, primarily reflecting the loss on the divestiture of Crosman Corporation.

Net loss in the second quarter of 2024 was $(13.7) million compared to net income of $17.1 million in the second quarter of 2023, primarily reflecting the loss on the divestiture of Crosman Corporation.

Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the second quarter of 2024 increased 36% to $39.8 million compared to $29.2 million a year ago. CODI’s weighted average number of shares outstanding in the second quarter of 2024 was 75.39 million compared to 71.93 million in the prior year second quarter.

Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) in the second quarter of 2024 was $105.4 million, up 27% compared to $82.9 million in the second quarter of 2023. The increase was primarily due to strong results at BOA and Lugano, and the addition of The Honey Pot Co. in the first quarter of 2024. The Company no longer adds back management fees in its calculation of Adjusted EBITDA. Management fees incurred during the second quarter were $18.9 million.

Liquidity and Capital Resources

As of June 30, 2024, CODI had approximately $68.4 million in cash and cash equivalents, $54.0 million outstanding on its revolver, $380.0 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 June 30, 2024, the Company had no significant debt maturities until 2027 and had net borrowing availability of approximately $543.6 million under its revolving credit facility.

Second Quarter 2024 Distributions

On July 2, 2024, CODI’s board of directors declared a second quarter distribution of $0.25 per share on the Company’s common shares. The cash distribution was paid on July 25, 2024, to all holders of record of common shares as of July 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, April 30, 2024, up to, but excluding, July 30, 2024. The distribution for such period was payable on July 30, 2024, to all holders of record of Series A Preferred Shares as of July 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, April 30, 2024, up to, but excluding, July 30, 2024. The distribution for such period was payable on July 30, 2024, to all holders of record of Series B Preferred Shares as of July 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, April 30, 2024, up to, but excluding, July 30, 2024. The distribution for such period was payable on July 30, 2024, to all holders of record of Series C Preferred Shares as of July 15, 2024.

2024 Outlook

As a result of CODI’s financial performance in the second quarter, it’s expectations for the remainder of 2024 and its current view of the economy, the Company is maintaining its 2024 outlook.

CODI continues to expect its current subsidiaries, inclusive of The Honey Pot Co. as if it owned it from January 1, 2024, to produce 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 now expects its Branded Consumer vertical to produce $365 million to $395 million, an upward revision of $10 million, and its Industrial vertical to produce $115 million to $125 million, a downward revision of $10 million. These estimates are 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 continues to expect to earn Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below), which includes management fees and corporate expenses, of $390 million to $430 million for the full year 2024. Adjusted EBITDA only includes results from The Honey Pot Co. from the date of acquisition.

In addition, the Company is maintaining its Adjusted Earnings guidance and expects to earn between $148 million and $163 million (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 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

In conjunction with this announcement, CODI will host a conference call on July 31, 2024, at 5:00 p.m. E.T. / 2:00 p.m. PT with the Company’s Chief Executive Officer, Elias Sabo, the Company’s Chief Financial Officer, Ryan Faulkingham, and Pat Maciariello the Chief Operating Officer of Compass Group Management. A live webcast of the call will be available on the Investor Relations section of CODI’s website. To access the call by phone, please go to this link (registration link) and you will be provided with dial in details. To avoid delays, we encourage participants to dial into the conference call 15 minutes ahead of the scheduled start time. A replay of the webcast will also be available for a limited time on the Company’s website.

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.

Pro forma net sales is defined as net sales including the historical net sales relating to the pre-acquisition periods of The Honey Pot Co., assuming that the Company acquired The Honey Pot Co. on January 1, 2023. 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.

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 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.

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 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 or social, civil and political unrest; 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
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Gateway Group
Cody Slach
949.574.3860
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Media Relations
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The IGB Group
Leon Berman
212.477.8438
[email protected]

Compass Diversified Holdings
Condensed Consolidated Balance Sheets
 
  June 30, 2024   December 31, 2023
(in thousands) (Unaudited)    
Assets      
Current assets      
Cash and cash equivalents $ 68,370     $ 450,477  
Accounts receivable, net   358,530       318,241  
Inventories, net   843,634       740,387  
Prepaid expenses and other current assets   126,027       94,715  
Total current assets   1,396,561       1,603,820  
Property, plant and equipment, net   180,928       192,562  
Goodwill   1,003,685       901,428  
Intangible assets, net   1,088,647       923,905  
Other non-current assets   188,373       195,266  
Total assets $ 3,858,194     $ 3,816,981  
       
Liabilities and stockholders’ equity      
Current liabilities      
Accounts payable and accrued expenses $ 268,874     $ 250,868  
Due to related party   17,928       16,025  
Current portion, long-term debt   10,000       10,000  
Other current liabilities   37,486       35,465  
Total current liabilities   334,288       312,358  
Deferred income taxes   138,218       120,131  
Long-term debt   1,712,084       1,661,879  
Other non-current liabilities   204,852       203,232  
Total liabilities   2,389,442       2,297,600  
Stockholders’ equity      
Total stockholders’ equity attributable to Holdings   1,216,504       1,326,750  
Noncontrolling interest   252,248       192,631  
Total stockholders’ equity   1,468,752       1,519,381  
Total liabilities and stockholders’ equity $ 3,858,194     $ 3,816,981  
Compass Diversified Holdings
Consolidated Statements of Operations
(Unaudited)
 
  Three Months Ended June 30,   Six Months Ended June 30,
(in thousands, except per share data)   2024       2023       2024       2023  
Net sales $ 542,595     $ 486,889     $ 1,066,885     $ 970,822  
Cost of sales   283,481       270,248       565,944       549,117  
Gross profit   259,114       216,641       500,941       421,705  
Operating expenses:              
Selling, general and administrative expense   151,446       133,755       302,160       264,019  
Management fees   18,864       16,795       36,931       33,065  
Amortization expense   27,461       23,978       53,749       47,951  
Impairment expense               8,182        
Operating income   61,343       42,113       99,919       76,670  
Other income (expense):              
Interest expense, net   (26,561 )     (26,613 )     (50,136 )     (52,793 )
Amortization of debt issuance costs   (1,004 )     (1,024 )     (2,009 )     (2,029 )
Loss on sale of Crosman   (24,606 )           (24,606 )      
Other income (expense), net   (1,375 )     (105 )     (4,249 )     1,055  
Net income from continuing operations before income taxes   7,797       14,371       18,919       22,903  
Provision for income taxes   21,520       4,320       30,206       11,240  
Income (loss) from continuing operations   (13,723 )     10,051       (11,287 )     11,663  
Income from discontinued operations, net of income tax         2,840             12,840  
Gain on sale of discontinued operations         4,232       3,345       102,221  
Net income (loss)   (13,723 )     17,123       (7,942 )     126,724  
Less: Net income from continuing operations attributable to noncontrolling interest   5,806       3,498       13,235       7,669  
Less: Net income from discontinued operations attributable to noncontrolling interest         19             52  
Net income (loss) attributable to Holdings $ (19,529 )   $ 13,606     $ (21,177 )   $ 119,003  
               
Amounts attributable to Holdings              
Income (loss) from continuing operations $ (19,529 )   $ 6,553     $ (24,522 )   $ 3,994  
Income from discontinued operations         2,821             12,788  
Gain on sale of discontinued operations, net of income tax         4,232       3,345       102,221  
Net income (loss) attributable to Holdings $ (19,529 )   $ 13,606     $ (21,177 )   $ 119,003  
               
Basic income (loss) per common share attributable to Holdings              
Continuing operations $ (0.45 )   $ (0.45 )   $ (1.30 )   $ (0.59 )
Discontinued operations         0.10       0.04       1.57  
  $ (0.45 )   $ (0.35 )   $ (1.26 )   $ 0.98  
               
Basic weighted average number of common shares outstanding   75,389       71,932       75,332       72,055  
               
Cash distributions declared per Trust common share $ 0.25     $ 0.25     $ 0.50     $ 0.50  
Compass Diversified Holdings
Net Income (Loss) to Non-GAAP Adjusted Earnings and Non-GAAP Adjusted EBITDA
(Unaudited)
 
  Three Months Ended June 30,   Six Months Ended June 30,
(in thousands)   2024       2023       2024       2023  
Net income (loss) $ (13,723 )   $ 17,123     $ (7,942 )   $ 126,724  
Income from discontinued operations, net of tax         2,840             12,840  
Gain on sale of discontinued operations, net of tax         4,232       3,345       102,221  
Net income (loss) from continuing operations $ (13,723 )   $ 10,051     $ (11,287 )   $ 11,663  
Less: income from continuing operations attributable to noncontrolling interest   5,806       3,498       13,235       7,669  
Net income (loss) attributable to Holdings – continuing operations $ (19,529 )   $ 6,553     $ (24,522 )   $ 3,994  
Adjustments:              
Distributions paid – preferred shares   (6,101 )     (6,046 )     (12,146 )     (12,091 )
Amortization expense – intangibles and inventory step up   28,641       23,977       57,755       49,125  
Impairment expense               8,182        
Loss on sale of Crosman   24,606             24,606        
Tax effect – loss on sale of Crosman   7,254             7,254        
Stock compensation   3,927       3,207       8,257       4,848  
Acquisition expenses               3,479        
Integration services fee   875       1,188       875       2,375  
Other   131       348       405       780  
Adjusted Earnings $ 39,804     $ 29,227     $ 74,145     $ 49,031  
Plus (less):              
Depreciation expense   10,504       12,107       21,396       23,262  
Income tax provision   21,520       4,320       30,206       11,240  
Interest expense   26,561       26,613       50,136       52,793  
Amortization of debt issuance costs   1,005       1,024       2,009       2,029  
Tax effect – loss on sale of Crosman   (7,254 )           (7,254 )      
Income from continuing operations attributable to noncontrolling interest   5,806       3,498       13,235       7,669  
Distributions paid – preferred shares   6,101       6,046       12,146       12,091  
Other (income) expense   1,375       105       4,249       (1,055 )
Adjusted EBITDA $ 105,422     $ 82,940     $ 200,268     $ 157,060  
Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three Months Ended June 30, 2024
(Unaudited)
 
                                               
  Corporate     5.11   BOA   Ergobaby   Lugano   PrimaLoft   THP   Velocity Outdoor   Altor   Arnold   Sterno   Consolidated
Income (loss) from continuing operations $ (7,188 )   $ 5,457   $ 8,995     $ (1,277 )   $ 14,781     $ 325     $ (4,114 )   $ (39,226 )   $ 2,701     $ 2,258     $ 3,565     $ (13,723 )
Adjusted for:                                              
Provision (benefit) for income taxes         1,807     1,930       1,689       4,625       664       (1,402 )     8,717       1,098       1,190       1,202       21,520  
Interest expense, net   26,450       1     (10 )                 (3 )     (3 )     11             115             26,561  
Intercompany interest   (40,896 )     3,253     5,299       2,125       13,579       4,430       2,925       2,364       1,868       1,797       3,256        
Depreciation and amortization   180       5,708     5,411       2,189       2,525       5,323       5,507       2,006       4,085       2,261       4,955       40,150  
EBITDA   (21,454 )     16,226     21,625       4,726       35,510       10,739       2,913       (26,128 )     9,752       7,621       12,978       74,508  
Other (income) expense   502       107     57             (70 )     4       (13 )     26,195       (572 )     (61 )     (168 )     25,981  
Noncontrolling shareholder compensation         552     1,419       247       699       315       472       176       252       5       (210 )     3,927  
Integration services fee                                     875                               875  
Other                                                             131       131  
Adjusted EBITDA $ (20,952 )   $ 16,885   $ 23,101     $ 4,973     $ 36,139     $ 11,058     $ 4,247     $ 243     $ 9,432     $ 7,565     $ 12,731     $ 105,422  
Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three Months Ended June 30, 2023
(Unaudited)
 
                                           
  Corporate     5.11     BOA   Ergobaby   Lugano   PrimaLoft   Velocity Outdoor   Altor   Arnold   Sterno   Consolidated
Income (loss) from continuing operations $ (12,952 )   $ 3,866     $ 5,526     $ 382     $ 6,916     $ 620     $ (3,480 )   $ 4,501   $ 2,503     $ 2,169     $ 10,051  
Adjusted for:                                          
Provision (benefit) for income taxes         1,344       737       (101 )     2,698       (2,508 )     (1,499 )     1,540     1,348       761       4,320  
Interest expense, net   26,546       (1 )     (3 )                 (4 )     70           5             26,613  
Intercompany interest   (33,258 )     5,422       1,669       2,191       7,446       4,386       3,309       2,760     1,723       4,352        
Depreciation and amortization   361       6,841       5,813       2,040       2,040       5,363       3,364       4,178     2,103       5,005       37,108  
EBITDA   (19,303 )     17,472       13,742       4,512       19,100       7,857       1,764       12,979     7,682       12,287       78,092  
Other (income) expense         (124 )     66       29       (76 )     243       (79 )     359     (7 )     (306 )     105  
Noncontrolling shareholder compensation         478       669       312       445       665       228       250     9       151       3,207  
Integration services fee                                 1,188                             1,188  
Other                                                       348       348  
Adjusted EBITDA $ (19,303 )   $ 17,826     $ 14,477     $ 4,853     $ 19,469     $ 9,953     $ 1,913     $ 13,588   $ 7,684     $ 12,480     $ 82,940  
Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Six Months Ended June 30, 2024
(Unaudited)
 
                                               
  Corporate     5.11     BOA   Ergobaby   Lugano   PrimaLoft   THP   Velocity Outdoor   Altor   Arnold   Sterno   Consolidated
Income (loss) from continuing operations $ (12,436 )   $ 8,857     $ 12,346     $ (3,108 )   $ 34,985   $ (988 )   $ (7,604 )   $ (55,199 )   $ 3,394   $ 3,909     $ 4,557     $ (11,287 )
Adjusted for:                                              
Provision (benefit) for income taxes         3,010       2,469       380       11,668     584       (2,569 )     9,297       1,726     1,986       1,655       30,206  
Interest expense, net   50,041       (1 )     (12 )           3     (5 )     (25 )     54           81             50,136  
Intercompany interest   (80,834 )     6,780       10,791       4,248       25,337     9,046       4,920       5,582       3,877     3,497       6,756        
Depreciation and amortization   434       11,581       10,849       4,374       4,872     10,650       10,645       5,282       8,170     4,414       9,890       81,161  
EBITDA   (42,795 )     30,227       36,443       5,894       76,865     19,287       5,367       (34,984 )     17,167     13,887       22,858       150,216  
Other (income) expense   463       73       132       (5 )     7     3       (30 )     25,898       2,664     (9 )     (341 )     28,855  
Non-controlling shareholder compensation         1,086       2,848       506       1,203     995       617       370       504     9       119       8,257  
Impairment expense                                           8,182                       8,182  
Acquisition expenses                                     3,479                             3,479  
Integration services fee                                     875                             875  
Other                                     90                       314       404  
Adjusted EBITDA $ (42,332 )   $ 31,386     $ 39,423     $ 6,395     $ 78,075   $ 20,285     $ 10,398     $ (534 )   $ 20,335   $ 13,887     $ 22,950     $ 200,268  
Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Six Months Ended June 30, 2023
(Unaudited)
 
                                           
  Corporate     5.11     BOA   Ergobaby   Lugano   PrimaLoft   Velocity Outdoor   Altor   Arnold   Sterno   Consolidated
Income (loss) from continuing operations $ (27,164 )   $ 6,016     $ 10,894     $ (853 )   $ 16,884     $ (607 )   $ (7,981 )   $ 7,202   $ 4,808     $ 2,464     $ 11,663  
Adjusted for:                                          
Provision (benefit) for income taxes         2,070       1,359       (652 )     6,085       (559 )     (2,954 )     2,634     2,388       869       11,240  
Interest expense, net   52,598       (2 )     (5 )           4       (6 )     194           10             52,793  
Intercompany interest   (64,725 )     10,221       3,461       4,340       13,730       8,708       6,437       5,634     3,372       8,822        
Depreciation and amortization   677       13,293       11,506       4,079       4,890       10,723       6,751       8,343     4,122       10,032       74,416  
EBITDA   (38,614 )     31,598       27,215       6,914       41,593       18,259       2,447       23,813     14,700       22,187       150,112  
Other (income) expense   (128 )     (201 )     180       29       (76 )     139       (754 )     563     (9 )     (798 )     (1,055 )
Non-controlling shareholder compensation         730       1,333       624       840       (43 )     458       566     18       322       4,848  
Integration services fee                                 2,375                             2,375  
Other                                                       780       780  
Adjusted EBITDA $ (38,742 )   $ 32,127     $ 28,728     $ 7,567     $ 42,357     $ 20,730     $ 2,151     $ 24,942   $ 14,709     $ 22,491     $ 157,060  
Compass Diversified Holdings
Non-GAAP Adjusted EBITDA
(Unaudited)
 
               
  Three Months Ended June 30,   Six Months Ended June 30,
(in thousands)   2024       2023       2024       2023  
               
Branded Consumer              
5.11 $ 16,885     $ 17,826     $ 31,386     $ 32,127  
BOA   23,101       14,477       39,423       28,728  
Ergobaby   4,973       4,853       6,395       7,567  
Lugano   36,139       19,469       78,075       42,357  
PrimaLoft   11,058       9,953       20,285       20,730  
The Honey Pot Co.(1)   4,247             10,398        
Velocity Outdoor   243       1,913       (534 )     2,151  
Total Branded Consumer $ 96,646     $ 68,491     $ 185,428     $ 133,660  
               
Niche Industrial              
Altor Solutions   9,432       13,588       20,335       24,942  
Arnold Magnetics   7,565       7,684       13,887       14,709  
Sterno   12,731       12,480       22,950       22,491  
Total Niche Industrial $ 29,728     $ 33,752     $ 57,172     $ 62,142  
Corporate expense   (20,952 )     (19,303 )     (42,332 )     (38,742 )
Total Adjusted EBITDA $ 105,422     $ 82,940     $ 200,268     $ 157,060  

(1) The above results for The Honey Pot Co. do not include management’s estimate of Adjusted EBITDA, before the Company’s ownership of $3.9 million for the six months ended June 30, 2024, and $4.7 million and $15.5 million, respectively, for the three and six months ended June 30, 2023. The Honey Pot Co. was acquired on January 31, 2024.

Compass Diversified Holdings
Net Sales to Pro Forma Net Sales Reconciliation
(unaudited)
 
               
  Three Months Ended June 30,   Six Months Ended June 30,
(in thousands)   2024       2023       2024       2023  
               
Net Sales $ 542,595     $ 486,889     $ 1,066,885     $ 970,822  
Acquisitions(1)         25,009       10,671       56,887  
Pro Forma Net Sales $ 542,595     $ 511,898     $ 1,077,556     $ 1,027,709  

(1) Acquisitions reflect the net sales for The Honey Pot Co. on a pro forma basis as if the Company had acquired The Honey Pot Co. on January 1, 2023.

Compass Diversified Holdings
Subsidiary Pro Forma Net Sales
(unaudited)
 
               
  Three Months Ended June 30,   Six Months Ended June 30,
(in thousands)   2024       2023       2024       2023  
               
Branded Consumer              
5.11 $ 123,201     $ 126,030     $ 248,175     $ 250,482  
BOA   54,160       38,123       97,063       76,109  
Ergobaby   28,557       26,149       49,775       48,567  
Lugano   99,358       60,949       202,397       124,836  
PrimaLoft   25,291       22,160       47,832       46,689  
The Honey Pot(1)   24,182       25,009       55,018       56,887  
Velocity Outdoor   18,711       37,839       48,610       71,879  
Total Branded Consumer $ 373,460     $ 336,259     $ 748,870     $ 675,449  
               
Niche Industrial              
Altor Solutions   52,213       60,886       105,617       122,398  
Arnold Magnetics   43,155       40,138       84,442       80,228  
Sterno   73,767       74,615       138,627       149,634  
Total Niche Industrial $ 169,135     $ 175,639     $ 328,686     $ 352,260  
               
Total Subsidiary Net Sales $ 542,595     $ 511,898     $ 1,077,556     $ 1,027,709  

(1) Net sales for The Honey Pot Co. are pro forma as if the Company had acquired this business on January 1, 2023.

Compass Diversified Holdings
Condensed Consolidated Cash Flows
(unaudited)
 
  Three Months Ended June 30,   Six Months Ended June 30,
(in thousands)   2024       2023       2024       2023  
               
Net cash provided by (used in) operating activities $ (35,182 )   $ 21,694     $ (48,383 )   $ 37,239  
Net cash provided by (used in) investing activities   46,404       (36,895 )     (336,074 )     117,829  
Net cash provided by (used in) financing activities   (7,539 )     28,827       3,366       (149,619 )
Foreign currency impact on cash   (28 )     72       (1,017 )     634  
Net increase (decrease) in cash and cash equivalents   3,655       13,698       (382,108 )     6,083  
Cash and cash equivalents – beginning of the period(1)   64,715       53,656       450,478       61,271  
Cash and cash equivalents – end of the period(2) $ 68,370     $ 67,354     $ 68,370     $ 67,354  

(1) Includes cash from discontinued operations of $4.7 million at January 1, 2023.

(2) Includes cash from discontinued operations of $3.1 million at June 30, 2023.

Compass Diversified Holding
Selected Financial Data – Cash Flows
(unaudited)
               
  Three Months Ended June 30,   Six Months Ended June 30,
(in thousands)   2024       2023       2024       2023  
               
Changes in operating assets and liabilities $ (93,270 )   $ (55,222 )   $ (154,124 )   $ (92,114 )
Purchases of property and equipment $ (11,172 )   $ (13,707 )   $ (18,919 )   $ (28,604 )
Distributions paid – common shares $ (18,846 )   $ (17,987 )   $ (37,664 )   $ (36,038 )
Distributions paid – preferred shares $ (6,101 )   $ (6,046 )   $ (12,146 )   $ (12,091 )


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