Compass Diversified Reports Third Quarter 2023 Financial Results
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 )