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Compass Diversified Reports Record Second Quarter 2022 Financial Results

·25 min read
Compass Diversified Holdings
Compass Diversified Holdings

Net Sales Growth of 19% Drives Record Quarterly Earnings

Raises Full-Year Outlook Given Continued Strong Performance and PrimaLoft Acquisition

WESTPORT, Conn., Aug. 03, 2022 (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, 2022.

“The second quarter marks our sixth consecutive quarter of record financial performance, which is a continued testament to the strength of our management teams and quality of the companies we own,” said Elias Sabo, CEO of Compass Diversified. “Despite the significant macroeconomic challenges that have curbed consumer discretionary spending, ongoing global supply chain constraints, and inflationary concerns, CODI reported another quarter of double-digit sales and earnings growth. Based on our strong performance and our current view of the economy, we are raising our full-year outlook. We believe we remain well-positioned to drive continued value for our shareholders.”

Second Quarter 2022 Financial Highlights vs. Same Year-Ago Quarter (where applicable)

  • Net sales up 19% to $515.6 million, and up 13% on a pro forma basis.

  • Branded consumer net sales up 21% to $326.5 million, and up 12% on a pro forma basis.

  • Niche industrial net sales up 16% to $189.1 million.

  • Operating income up 38% to $50.3 million.

  • Income from continuing operations up considerably to $26.5 million vs. $(21.6) million.

  • Net income up considerably to $31.0 million vs. $(11.3) million.

  • Adjusted Earnings, a non-GAAP financial measure, up 41% to $39.3 million.

  • Adjusted EBITDA, a non-GAAP financial measure, up 26% to $87.4 million.

  • Paid a second quarter 2022 cash distribution of $0.25 per share on CODI's common shares in July 2022.

Second Quarter 2022 Business Highlights

  • Joined the Russell 2000 and 3000 Indexes, providing the Company with increased visibility in the public markets.

  • Announced the acquisition of PrimaLoft Technologies Holdings, Inc., the parent company of PrimaLoft, Inc. ("PrimaLoft"), a leading provider of branded, high-performance synthetic insulation and materials used primarily in outerwear and accessories. The Company completed the acquisition on July 12, 2022.

Second Quarter 2022 Financial Results

Net sales in the second quarter of 2022 were $515.6 million, up 19% compared to $431.5 million in the second quarter of 2021. The increase was due to strong performance at its branded consumer and niche industrial subsidiaries. On a pro forma basis, assuming CODI had acquired Lugano on January 1, 2021, net sales were up 13% compared to the prior year period.

Branded consumer net sales increased 21% in the second quarter of 2022 to $326.5 million. On a pro forma basis, assuming CODI had acquired Lugano on January 1, 2021, branded consumer net sales were up 12% compared to the prior year period. Niche industrial net sales increased 16% in the second quarter of 2022 to $189.1 million compared to $162.5 million in the second quarter of 2021.

Net income for the second quarter of 2022 increased to $31.0 million compared to a net loss of $11.3 million in the second quarter of 2021. Income from continuing operations for the second quarter of 2022 increased to $26.5 million compared to a loss from continuing operations of $21.6 million in the second quarter of 2021. The increases in both were due to the strong performance across the branded consumer and niche industrial businesses on a combined basis. In addition, the second quarter of 2021 included a loss on debt extinguishment of $33.3 million in connection with the redemption of CODI’s 8.000% Senior Notes due 2026 on April 1, 2021. Operating income for the second quarter of 2022 increased $14.0 million to a record $50.3 million compared to $36.4 million in the second quarter of 2021.

Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the second quarter of 2022 was $39.3 million, up 41% compared to $27.9 million in the second quarter of 2021. CODI's weighted average number of shares outstanding for the quarter ended June 30, 2022, was 70.2 million and, for the quarter ended June 30, 2021, was 64.9 million.

Adjusted EBITDA (see "Note Regarding Use of Non-GAAP Financial Measures" below) in the second quarter of 2022 was $87.4 million, up 26% compared to $69.5 million in the second quarter of 2021. The increase was primarily due to the strong performance across the branded consumer and niche industrial businesses on a combined basis. The Company no longer adds back management fees in its calculation of Adjusted EBITDA. Management fees incurred during the second quarter were $14.9 million.

Liquidity and Capital Resources

As of June 30, 2022, CODI had approximately $102.7 million in cash and cash equivalents, no borrowings outstanding on its revolver, $1.0 billion outstanding in 5.250% Senior Notes due 2029 and $300 million outstanding in 5.000% Senior Notes due 2032.

As of June 30, 2022, the Company had no significant debt maturities until 2029 and had net borrowing availability of $597.7 million under its revolving credit facility.

On July 12, 2022, the Company amended and restated its credit agreement, which now provides a new $400 million term loan with the final installment payment due July 2027, in addition to a maximum aggregate amount of $600 million in revolving loans. The due date of all amounts outstanding under the revolving line of credit has also been extended to July 2027. The credit agreement also permits the Company, prior to the maturity date, to increase the revolving loan commitment and/or obtain additional term loans in an aggregate amount of up to $250 million, subject to certain restrictions and conditions.

Second Quarter 2022 Distributions

On July 1, 2022, CODI's Board of Directors (the “Board”) declared a second quarter distribution of $0.25 per share on the Company's common shares. The cash distribution was paid on July 28, 2022, to all holders of record of common shares as of July 21, 2022.

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, 2022, up to, but excluding, July 30, 2022. The distribution for such period was payable on July 30, 2022, to all holders of record of Series A Preferred Shares as of July 15, 2022. The payment occurred on August 1, 2022, the next business day following the payment date.

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, 2022, up to, but excluding, July 30, 2022. The distribution for such period was payable on July 30, 2022, to all holders of record of Series B Preferred Shares as of July 15, 2022. The payment occurred on August 1, 2022, the next business day following the payment date.

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, 2022, up to, but excluding, July 30, 2022. The distribution for such period was payable on July 30, 2022, to all holders of record of Series C Preferred Shares as of July 15, 2022. The payment occurred on August 1, 2022, the next business day following the payment date.

Increases 2022 Outlook

As a result of CODI’s strong financial performance in the second quarter, its expectations for the remainder of 2022 and its current view of the economy, the Company is raising its outlook. CODI expects its current subsidiaries, including PrimaLoft, to produce consolidated subsidiary Adjusted EBITDA for the full year 2022 of between $445 million and $470 million. This estimate is based on the summation of the Company’s expectations for its current subsidiaries in 2022, absent additional acquisitions or divestitures, includes a reduction for management fees paid at the subsidiaries of approximately $8 million and excludes corporate expenses such as interest expense, management fees paid at CODI and corporate overhead. In addition, the Company expects to earn between $130 million and $145 million in Adjusted Earnings for the full year 2022, including PrimaLoft, and including Advanced Circuits as a result of the expectation of reclassifying Advanced Circuits to continuing operations during the third quarter.

Conference Call

Management will host a conference call on Wednesday, August 3, 2022, 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) 396-8049 and the dial-in number for international callers is (416) 764-8646. The Conference ID is 68393459. 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. Please allow extra time prior to the call to visit the site and download any necessary software that may be needed to listen to the Internet broadcast. A replay of the call will be available through Wednesday, August 10, 2022. 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 reflects important financial measures as it 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 Lugano, assuming that the Company acquired Lugano on January 1, 2021. 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 2022 Adjusted EBITDA or 2022 Adjusted Earnings to their comparable GAAP measure 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 (“CODI”)

Since its founding in 1998, CODI has consistently executed on its strategy of owning and managing a diverse set of highly defensible, middle-market businesses across the niche industrial and branded consumer 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 2022 Adjusted EBITDA, our 2022 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; 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); general considerations associated with the COVID-19 pandemic and its impact on the markets in which we operate; 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 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@gatewayir.com

 

Compass Diversified Holdings
Condensed Consolidated Balance Sheets

 

 

 

 

 

June 30, 2022

 

December 31, 2021

(in thousands)

(Unaudited)

 

 

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

102,709

 

 

$

157,125

 

Accounts receivable, net

 

268,530

 

 

 

268,262

 

Inventories, net

 

695,687

 

 

 

562,084

 

Prepaid expenses and other current assets

 

66,530

 

 

 

56,575

 

Current assets held-for-sale

 

96,227

 

 

 

99,423

 

Total current assets

 

1,229,683

 

 

 

1,143,469

 

Property, plant and equipment, net

 

182,989

 

 

 

178,393

 

Goodwill and intangible assets, net

 

1,649,174

 

 

 

1,688,082

 

Other non-current assets

 

141,487

 

 

 

134,317

 

Total assets

$

3,203,333

 

 

$

3,144,261

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued expenses

$

292,278

 

 

$

295,206

 

Due to related party

 

13,501

 

 

 

11,705

 

Other current liabilities

 

32,286

 

 

 

45,490

 

Current liabilities held-for-sale

 

27,270

 

 

 

29,127

 

Total current liabilities

 

365,335

 

 

 

381,528

 

Deferred income taxes

 

79,357

 

 

 

84,344

 

Long-term debt

 

1,285,747

 

 

 

1,284,826

 

Other non-current liabilities

 

118,048

 

 

 

109,033

 

Total liabilities

 

1,848,487

 

 

 

1,859,731

 

Stockholders' equity

 

 

 

Total stockholders' equity attributable to Holdings

 

1,177,509

 

 

 

1,111,816

 

Noncontrolling interest

 

177,707

 

 

 

175,328

 

Noncontrolling interest held-for-sale

 

(370

)

 

 

(2,614

)

Total stockholders' equity

 

1,354,846

 

 

 

1,284,530

 

Total liabilities and stockholders’ equity

$

3,203,333

 

 

$

3,144,261

 

 

 

 

 


 

 

 

Compass Diversified Holdings
Consolidated Statements of Operations
(Unaudited)

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

Six months ended June 30,

(in thousands, except per share data)

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net sales

$

515,597

 

 

$

431,525

 

 

$

1,026,110

 

 

$

840,081

 

Cost of sales

 

303,840

 

 

 

257,961

 

 

 

613,538

 

 

 

497,969

 

Gross profit

 

211,757

 

 

 

173,564

 

 

 

412,572

 

 

 

342,112

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative expense

 

125,624

 

 

 

107,317

 

 

 

246,296

 

 

 

211,369

 

Management fees

 

14,901

 

 

 

11,058

 

 

 

29,337

 

 

 

21,856

 

Amortization expense

 

20,921

 

 

 

18,837

 

 

 

42,026

 

 

 

37,426

 

Operating income

 

50,311

 

 

 

36,352

 

 

 

94,913

 

 

 

71,461

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense, net

 

(17,519

)

 

 

(14,947

)

 

 

(34,938

)

 

 

(28,752

)

Amortization of debt issuance costs

 

(865

)

 

 

(722

)

 

 

(1,731

)

 

 

(1,408

)

Loss on debt extinguishment

 

 

 

 

(33,305

)

 

 

 

 

 

(33,305

)

Other income (expense), net

 

737

 

 

 

(642

)

 

 

2,773

 

 

 

(2,870

)

Net income from continuing operations before income taxes

 

32,664

 

 

 

(13,264

)

 

 

61,017

 

 

 

5,126

 

Provision for income taxes

 

6,132

 

 

 

8,344

 

 

 

16,108

 

 

 

13,652

 

Income (loss) from continuing operations

 

26,532

 

 

 

(21,608

)

 

 

44,909

 

 

 

(8,526

)

Income from discontinued operations, net of income tax

 

5,004

 

 

 

10,357

 

 

 

10,374

 

 

 

19,271

 

Gain (loss) on sale of discontinued operations

 

(579

)

 

 

 

 

 

5,414

 

 

 

 

Net income

 

30,957

 

 

 

(11,251

)

 

 

60,697

 

 

 

10,745

 

Less: Net income from continuing operations attributable to noncontrolling interest

 

3,635

 

 

 

1,967

 

 

 

8,572

 

 

 

3,870

 

Less: Net income from discontinued operations attributable to noncontrolling interest

 

955

 

 

 

1,412

 

 

 

1,996

 

 

 

2,511

 

Net income (loss) attributable to Holdings

$

26,367

 

 

$

(14,630

)

 

$

50,129

 

 

$

4,364

 

 

 

 

 

 

 

 

 

Basic income (loss) per common share attributable to Holdings

 

 

 

 

 

 

 

Continuing operations

$

0.13

 

 

$

(0.50

)

 

$

0.19

 

 

$

(0.53

)

Discontinued operations

 

0.04

 

 

 

0.12

 

 

 

0.18

 

 

 

0.24

 

 

$

0.17

 

 

$

(0.38

)

 

$

0.37

 

 

$

(0.29

)

 

 

 

 

 

 

 

 

Basic weighted average number of common shares outstanding

 

70,227

 

 

 

64,900

 

 

 

69,804

 

 

 

64,900

 

 

 

 

 

 

 

 

 

Cash distributions declared per Trust common share

$

0.25

 

 

$

0.36

 

 

$

0.50

 

 

$

0.72

 

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)

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income (loss)

$

30,957

 

 

$

(11,251

)

 

$

60,697

 

 

$

10,745

 

Gain (loss) on sale of discontinued operations

 

(579

)

 

 

 

 

 

5,414

 

 

 

 

Income from discontinued operations, net of tax

 

5,004

 

 

 

10,357

 

 

 

10,374

 

 

 

19,271

 

Income (loss) from continuing operations

$

26,532

 

 

$

(21,608

)

 

$

44,909

 

 

$

(8,526

)

Less: income from continuing operations attributable to noncontrolling interest

 

3,635

 

 

 

1,903

 

 

 

8,572

 

 

 

3,870

 

Net income (loss) attributable to Holdings - continuing operations

$

22,897

 

 

$

(23,511

)

 

$

36,337

 

 

$

(12,396

)

Adjustments:

 

 

 

 

 

 

 

Distributions paid - Preferred Shares

 

(6,046

)

 

 

(6,046

)

 

 

(12,091

)

 

 

(12,091

)

Amortization expense - intangibles and inventory step up

 

22,471

 

 

 

18,837

 

 

 

45,837

 

 

 

37,426

 

Loss on debt extinguishment

 

 

 

33,305

 

 

 

 

 

 

33,305

 

Stock compensation

 

2,680

 

 

 

2,716

 

 

 

5,361

 

 

 

5,356

 

Acquisition expenses

 

 

 

 

11

 

 

 

216

 

 

 

310

 

Integration Services Fee

 

563

 

 

 

1,600

 

 

 

1,125

 

 

 

3,200

 

Held for Sale corporate tax impact

 

(4,338

)

 

 

 

 

 

(4,338

)

 

 

 

Other

 

1,027

 

 

 

1,032

 

 

 

2,829

 

 

 

(1,069

)

Adjusted Earnings

$

39,254

 

 

$

27,880

 

 

$

75,276

 

 

$

54,041

 

Plus (less):

 

 

 

 

 

 

 

Depreciation

 

10,355

 

 

 

8,946

 

 

 

20,282

 

 

 

17,503

 

Income taxes

 

6,132

 

 

 

8,344

 

 

 

16,108

 

 

 

13,652

 

Held-for-sale tax impact - corporate

 

4,338

 

 

 

 

 

 

4,338

 

 

 

 

Interest expense, net

 

17,519

 

 

 

14,947

 

 

 

34,938

 

 

 

28,752

 

Amortization of debt issuance

 

865

 

 

 

722

 

 

 

1,731

 

 

 

1,408

 

Noncontrolling interest

 

3,635

 

 

 

1,967

 

 

 

8,572

 

 

 

3,870

 

Preferred distributions

 

6,046

 

 

 

6,046

 

 

 

12,091

 

 

 

12,091

 

Other expense (income)

 

(737

)

 

 

642

 

 

 

(2,773

)

 

 

2,870

 

Adjusted EBITDA

$

87,407

 

 

$

69,494

 

 

$

170,563

 

 

$

134,187

 

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three months ended June 30, 2022
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

5.11

 

 

BOA

 

Ergo

 

Lugano

 

Marucci Sports

 

Velocity Outdoor

 

Altor Solutions

 

Arnold

 

Sterno

 

Consolidated

Income (loss) from continuing operations (1)

 

$

(9,790

)

 

$

6,990

 

 

$

13,988

 

 

$

1,604

 

$

5,282

 

$

(1,990

)

 

$

2,434

 

 

$

2,448

 

 

$

2,782

 

$

2,784

 

 

$

26,532

 

Adjusted for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

 

(4,338

)

 

 

2,274

 

 

 

2,566

 

 

 

443

 

 

1,802

 

 

(794

)

 

 

754

 

 

 

1,043

 

 

 

1,219

 

 

1,163

 

 

 

6,132

 

Interest expense, net

 

 

17,466

 

 

 

(16

)

 

 

(7

)

 

 

1

 

 

4

 

 

9

 

 

 

55

 

 

 

 

 

 

7

 

 

 

 

 

17,519

 

Intercompany interest

 

 

(20,460

)

 

 

3,078

 

 

 

1,798

 

 

 

1,476

 

 

2,453

 

 

1,320

 

 

 

2,137

 

 

 

2,558

 

 

 

1,278

 

 

4,362

 

 

 

 

Depreciation and amortization expense

 

 

301

 

 

 

5,584

 

 

 

5,451

 

 

 

2,020

 

 

3,048

 

 

2,865

 

 

 

3,292

 

 

 

4,140

 

 

 

1,903

 

 

5,087

 

 

 

33,691

 

EBITDA

 

 

(16,821

)

 

 

17,910

 

 

 

23,796

 

 

 

5,544

 

 

12,589

 

 

1,410

 

 

 

8,672

 

 

 

10,189

 

 

 

7,189

 

 

13,396

 

 

 

83,874

 

Other (income) expense

 

 

 

 

 

(68

)

 

 

45

 

 

 

 

 

 

 

(18

)

 

 

(26

)

 

 

(203

)

 

 

 

 

(467

)

 

 

(737

)

Non-controlling shareholder compensation

 

 

 

 

 

418

 

 

 

633

 

 

 

379

 

 

204

 

 

276

 

 

 

251

 

 

 

267

 

 

 

12

 

 

240

 

 

 

2,680

 

Integration services fee

 

 

 

 

 

 

 

 

 

 

 

 

 

563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

563

 

Other

 

 

 

 

 

 

 

 

 

 

 

250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

777

 

 

 

1,027

 

Adjusted EBITDA (2)

 

$

(16,821

)

 

$

18,260

 

 

$

24,474

 

 

$

6,173

 

$

13,356

 

$

1,668

 

 

$

8,897

 

 

$

10,253

 

 

$

7,201

 

$

13,946

 

 

$

87,407

 

(1) Income (loss) from continuing operations does not include income from discontinued operations for the three months ended June 30, 2022.

(2) As a result of the classification of ACI as Held for Sale at June 30, 2022, Adjusted EBITDA for the three months ended June 30, 2022 does not include $6.4 million in Adjusted EBITDA from ACI.

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three months ended June 30, 2021
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

5.11

 

 

BOA

 

Ergo

 

Marucci Sports

 

Velocity Outdoor

 

Altor Solutions

 

Arnold

 

Sterno

 

Consolidated

Income (loss) from continuing operations (1)

 

$

(46,509

)

 

$

7,096

 

 

$

7,108

 

$

2,559

 

$

(278

)

 

$

5,364

 

$

1,083

 

$

636

 

$

1,333

 

 

$

(21,608

)

Adjusted for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

 

 

 

 

2,259

 

 

 

2,172

 

 

681

 

 

(109

)

 

 

1,541

 

 

596

 

 

468

 

 

735

 

 

 

8,343

 

Interest expense, net

 

 

14,892

 

 

 

7

 

 

 

 

 

 

 

2

 

 

 

46

 

 

 

 

 

 

 

 

 

14,947

 

Intercompany interest

 

 

(15,694

)

 

 

2,799

 

 

 

2,076

 

 

507

 

 

641

 

 

 

1,866

 

 

1,680

 

 

1,353

 

 

4,772

 

 

 

 

Loss on debt extinguishment

 

 

33,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,305

 

Depreciation and amortization

 

 

253

 

 

 

5,439

 

 

 

4,917

 

 

2,102

 

 

2,053

 

 

 

3,200

 

 

3,193

 

 

2,056

 

 

5,293

 

 

 

28,506

 

EBITDA

 

 

(13,753

)

 

 

17,600

 

 

 

16,273

 

 

5,849

 

 

2,309

 

 

 

12,017

 

 

6,552

 

 

4,513

 

 

12,133

 

 

 

63,493

 

Other (income) expense

 

 

29

 

 

 

(289

)

 

 

25

 

 

 

 

894

 

 

 

227

 

 

131

 

 

 

 

(375

)

 

 

642

 

Non-controlling shareholder compensation

 

 

 

 

 

659

 

 

 

523

 

 

403

 

 

276

 

 

 

262

 

 

256

 

 

8

 

 

329

 

 

 

2,716

 

Acquisition expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

 

 

11

 

Integration services fees

 

 

 

 

 

 

 

 

1,100

 

 

 

 

500

 

 

 

 

 

 

 

 

 

 

 

 

1,600

 

Other

 

 

699

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

333

 

 

 

1,032

 

Adjusted EBITDA (2)

 

$

(13,025

)

 

$

17,970

 

 

$

17,921

 

$

6,252

 

$

3,979

 

 

$

12,506

 

$

6,939

 

$

4,532

 

$

12,420

 

 

$

69,494

 

(1) Income (loss) from continuing operations does not include income from discontinued operations for the three months ended June 30, 2021.

(2) As a result of the sale of Liberty Safe in August 2021, and the classification of ACI as Held for Sale at December 31, 2021, Adjusted EBITDA for the three month ended June 30, 2021 does not include $ 6.5 million in Adjusted EBITDA from Liberty and $7.1 million in Adjusted EBITDA from ACI.

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Six months ended June 30, 2022
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

5.11

 

 

BOA

 

Ergo

 

Lugano

 

Marucci Sports

 

Velocity Outdoor

 

Altor Solutions

 

Arnold

 

Sterno

 

Consolidated

Income (loss) from continuing operations (1)

 

$

(24,771

)

 

$

9,635

 

 

$

28,187

 

 

$

125

 

$

13,776

 

$

4,144

 

 

$

3,147

 

$

4,384

 

$

3,742

 

$

2,540

 

 

$

44,909

 

Adjusted for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

 

(4,338

)

 

 

3,093

 

 

 

5,043

 

 

 

842

 

 

4,697

 

 

1,212

 

 

 

956

 

 

2,102

 

 

2,231

 

 

270

 

 

 

16,108

 

Interest expense, net

 

 

34,834

 

 

 

10

 

 

 

(12

)

 

 

2

 

 

9

 

 

10

 

 

 

72

 

 

 

 

13

 

 

 

 

 

34,938

 

Intercompany interest

 

 

(39,735

)

 

 

5,998

 

 

 

3,826

 

 

 

2,263

 

 

4,578

 

 

2,837

 

 

 

3,990

 

 

5,023

 

 

2,545

 

 

8,675

 

 

 

 

Depreciation and amortization expense

 

 

637

 

 

 

11,038

 

 

 

10,768

 

 

 

4,028

 

 

5,302

 

 

7,054

 

 

 

6,561

 

 

8,130

 

 

4,129

 

 

10,203

 

 

 

67,850

 

EBITDA

 

 

(33,373

)

 

 

29,774

 

 

 

47,812

 

 

 

7,260

 

 

28,362

 

 

15,257

 

 

 

14,726

 

 

19,639

 

 

12,660

 

 

21,688

 

 

 

163,805

 

Other (income) expense

 

 

 

 

 

(616

)

 

 

95

 

 

 

4

 

 

2

 

 

(1,828

)

 

 

183

 

 

109

 

 

 

 

(722

)

 

 

(2,773

)

Non-controlling shareholder compensation

 

 

 

 

 

829

 

 

 

1,268

 

 

 

792

 

 

444

 

 

552

 

 

 

502

 

 

535

 

 

25

 

 

414

 

 

 

5,361

 

Acquisition expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

216

 

 

 

 

 

 

 

216

 

Integration services fee

 

 

 

 

 

 

 

 

 

 

 

 

 

1,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,125

 

Other

 

 

 

 

 

 

 

 

 

 

 

250

 

 

 

 

1,802

 

 

 

 

 

 

 

 

 

777

 

 

 

2,829

 

Adjusted EBITDA (2)

 

$

(33,373

)

 

$

29,987

 

 

$

49,175

 

 

$

8,306

 

$

29,933

 

$

15,783

 

 

$

15,411

 

$

20,499

 

$

12,685

 

$

22,157

 

 

$

170,563

 

(1) Income (loss) from continuing operations does not include income from discontinued operations for the six months ended June 30, 2022.

(2) As a result of the classification of ACI as Held for Sale at June 30, 2022, Adjusted EBITDA for the six months ended June 30, 2022 does not include $13.6 million in Adjusted EBITDA from ACI.

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Six months ended June 30, 2021
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

5.11

 

 

BOA

 

Ergo

 

Marucci Sports

 

Velocity Outdoor

 

Altor Solutions

 

Arnold

 

Sterno

 

Consolidated

Income (loss) from continuing operations (1)

 

$

(57,916

)

 

$

9,095

 

 

$

12,652

 

$

3,602

 

$

7,250

 

$

10,589

 

 

$

3,298

 

 

$

1,594

 

$

1,310

 

 

$

(8,526

)

Adjusted for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision (benefit) for income taxes

 

 

 

 

 

3,027

 

 

 

1,465

 

 

1,028

 

 

2,289

 

 

3,047

 

 

 

1,531

 

 

 

1,004

 

 

260

 

 

 

13,651

 

Interest expense, net

 

 

28,651

 

 

 

7

 

 

 

 

 

 

 

4

 

 

90

 

 

 

 

 

 

 

 

 

 

 

28,752

 

Intercompany interest

 

 

(31,825

)

 

 

5,783

 

 

 

4,362

 

 

1,073

 

 

1,193

 

 

3,684

 

 

 

3,418

 

 

 

2,815

 

 

9,497

 

 

 

 

Loss on debt extinguishment

 

 

33,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,305

 

Depreciation and amortization

 

 

459

 

 

 

10,894

 

 

 

9,884

 

 

4,327

 

 

4,222

 

 

6,328

 

 

 

5,816

 

 

 

3,817

 

 

10,591

 

 

 

56,338

 

EBITDA

 

 

(27,326

)

 

 

28,806

 

 

 

28,363

 

 

10,030

 

 

14,958

 

 

23,738

 

 

 

14,063

 

 

 

9,230

 

 

21,658

 

 

 

123,520

 

Other (income) expense

 

 

149

 

 

 

(301

)

 

 

80

 

 

 

 

892

 

 

2,613

 

 

 

(133

)

 

 

 

 

(430

)

 

 

2,870

 

Non-controlling shareholder compensation

 

 

 

 

 

1,287

 

 

 

1,083

 

 

807

 

 

551

 

 

524

 

 

 

513

 

 

 

8

 

 

583

 

 

 

5,356

 

Acquisition expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

310

 

 

 

 

 

310

 

Integration services fees

 

 

 

 

 

 

 

 

2,200

 

 

 

 

1,000

 

 

 

 

 

 

 

 

 

 

 

 

 

3,200

 

Other

 

 

898

 

 

 

 

 

 

 

 

 

 

 

 

(2,300

)

 

 

 

 

 

 

 

333

 

 

 

(1,069

)

Adjusted EBITDA (2)

 

$

(26,279

)

 

$

29,792

 

 

$

31,726

 

$

10,837

 

$

17,401

 

$

24,575

 

 

$

14,443

 

 

$

9,548

 

$

22,144

 

 

$

134,187

 

(1) Income (loss) from continuing operations does not include income from discontinued operations for the six months ended June 30, 2021.

(2) As a result of the sale of Liberty Safe in August 2021, and the classification of ACI as Held for Sale at December 31, 2021, Adjusted EBITDA for the six months ended June 30, 2021 does not include $12.5 million in Adjusted EBITDA from Liberty and $13.1 million in Adjusted EBITDA from ACI.

Compass Diversified Holdings
Non-GAAP Adjusted EBITDA
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

Six months ended June 30,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

Branded Consumer

 

 

 

 

 

 

 

 

5.11

 

$

18,260

 

 

$

17,970

 

 

$

29,987

 

 

$

29,792

 

BOA

 

 

24,474

 

 

 

17,921

 

 

 

49,175

 

 

 

31,726

 

Ergobaby

 

 

6,173

 

 

 

6,252

 

 

 

8,306

 

 

 

10,837

 

Lugano (1)

 

 

13,356

 

 

 

 

 

 

29,933

 

 

 

 

Marucci Sports

 

 

1,668

 

 

 

3,979

 

 

 

15,783

 

 

 

17,401

 

Velocity Outdoor

 

 

8,897

 

 

 

12,506

 

 

 

15,411

 

 

 

24,575

 

Total Branded Consumer

 

$

72,828

 

 

$

58,628

 

 

$

148,595

 

 

$

114,331

 

 

 

 

 

 

 

 

 

 

Niche Industrial

 

 

 

 

 

 

 

 

Altor Solutions

 

$

10,253

 

 

$

6,939

 

 

 

20,499

 

 

 

14,443

 

Arnold Magnetics

 

 

7,201

 

 

 

4,532

 

 

 

12,685

 

 

 

9,548

 

Sterno

 

 

13,946

 

 

 

12,420

 

 

 

22,157

 

 

 

22,144

 

Total Niche Industrial

 

$

31,400

 

 

$

23,891

 

 

$

55,341

 

 

$

46,135

 

Corporate expense

 

 

(16,821

)

 

 

(13,025

)

 

 

(33,373

)

 

 

(26,279

)

Total Adjusted EBITDA

 

$

87,407

 

 

$

69,494

 

 

$

170,563

 

 

$

134,187

 


(1

)

 

The above results for Lugano do not include management's estimate of Adjusted EBITDA, before the Company’s ownership, of $7.1 million and $18.6 million, respectively, for the three and six months ended June 30, 2021. Lugano was acquired on September 3, 2021.

Compass Diversified Holdings
Net Sales to Pro Forma Net Sales Reconciliation
(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

Six months ended June 30,

(in thousands)

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

Net Sales

 

$

515,597

 

$

431,525

 

$

1,026,110

 

$

840,081

Acquisitions (1)

 

 

 

 

22,944

 

 

 

 

52,383

Pro Forma Net Sales

 

$

515,597

 

$

454,469

 

$

1,026,110

 

$

892,464

(1) Acquisitions reflects the net sales for Lugano on a pro forma basis as if the Company had acquired this business on January 1, 2021.

Compass Diversified Holdings
Subsidiary Pro Forma Net Sales
(unaudited)

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

Six months ended June 30,

(in thousands)

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

Branded Consumer

 

 

 

 

 

 

 

 

5.11

 

$

120,048

 

$

110,033

 

$

224,071

 

$

209,910

BOA

 

 

59,386

 

 

44,085

 

 

116,196

 

 

80,537

Ergobaby

 

 

26,506

 

 

26,956

 

 

46,716

 

 

49,284

Lugano (1)

 

 

39,065

 

 

22,944

 

 

86,084

 

 

52,383

Marucci Sports

 

 

27,636

 

 

24,640

 

 

79,728

 

 

61,288

Velocity Outdoor

 

 

53,846

 

 

63,358

 

 

105,292

 

 

128,990

Total Branded Consumer

 

$

326,487

 

$

292,016

 

$

658,087

 

$

582,392

 

 

 

 

 

 

 

 

 

Niche Industrial

 

 

 

 

 

 

 

 

Altor Solutions

 

$

66,144

 

$

40,640

 

$

129,972

 

$

78,460

Arnold Magnetics

 

 

38,777

 

 

32,556

 

 

76,942

 

 

65,041

Sterno

 

 

84,189

 

 

89,257

 

 

161,109

 

 

166,571

Total Niche Industrial

 

$

189,110

 

$

162,453

 

$

368,023

 

$

310,072

 

 

 

 

 

 

 

 

 

Total Subsidiary Net Sales

 

$

515,597

 

$

454,469

 

$

1,026,110

 

$

892,464

(1) Net sales for Lugano are pro forma as if the Company had acquired this business on January 1, 2021.

Compass Diversified Holdings
Condensed Consolidated Cash Flows
(unaudited)

 

Three months ended June 30,

 

Six months ended June 30,

(in thousands)

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

(1,808

)

 

$

73,044

 

 

$

(35,337

)

 

$

109,434

 

Net cash used in investing activities

 

(13,946

)

 

 

(10,429

)

 

 

(22,238

)

 

 

(52,696

)

Net cash provided by (used in) financing activities

 

18,049

 

 

 

(15,830

)

 

 

3,597

 

 

 

(17,323

)

Foreign currency impact on cash

 

(873

)

 

 

190

 

 

 

(1,132

)

 

 

8

 

Net increase (decrease) in cash and cash equivalents

 

1,422

 

 

 

46,975

 

 

 

(55,110

)

 

 

39,423

 

Cash and cash equivalents - beginning of the period (1)

 

104,201

 

 

 

63,192

 

 

 

160,733

 

 

 

70,744

 

Cash and cash equivalents - end of the period (2)

$

105,623

 

 

$

110,167

 

 

$

105,623

 

 

$

110,167

 

(1) Includes cash from discontinued operations of $3.6 million at January 1, 2022 and $10.7 million at January 1, 2021.

(2) Includes cash from discontinued operations of $2.9 million at June 30, 2022 and $5.3 million at June 30, 2021.

Compass Diversified Holding

Selected Financial Data - Cash Flows

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

Six months ended June 30,

(in thousands)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities

 

$

(63,478

)

 

$

23,241

 

 

$

(159,195

)

 

$

(2,318

)

Purchases of property and equipment

 

$

(14,044

)

 

$

(8,793

)

 

$

(24,435

)

 

$

(16,096

)

Distributions paid - common shares

 

$

(17,511

)

 

$

(23,364

)

 

$

(34,863

)

 

$

(46,728

)

Distributions paid - preferred shares

 

$

(6,046

)

 

$

(6,046

)

 

$

(12,091

)

 

$

(12,091

)