WESTPORT, Conn., May 01, 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 March 31, 2024. "We started 2024 on a strong note especially when you look at the performance of our Branded Consumer businesses, which only underscores the effectiveness of our well-defined, strategic pivot to own and manage companies at the forefront of innovation and disruptive growth," said Elias Sabo, CEO of Compass Diversified. "Lugano Diamonds and BOA both had great first quarters and The Honey Pot Co., a company we only acquired in the first quarter, is already integrated with a newly appointed, world-class board of directors, and we are looking forward to the rest of the year. Given our first quarter results and the momentum we see in many of our businesses, we are feeling optimistic and raising our outlook." First Quarter 2024 Financial Summary vs. Same Year-Ago Period (where applicable) Net sales up 8% to $524.3 million and up 4% on a pro forma basis. Branded Consumer net sales up 11% on a pro forma basis to $375.4 million. Industrial net sales down 10% to $159.6 million. Income from continuing operations of $2.4 million vs. $1.6 million. Net income of $5.8 million vs. $109.6 million, primarily due to the $98.0 million gain on the sale of Advanced Circuits in February 2023. Adjusted Earnings, a non-GAAP financial measure, was up 73% to $34.3 million vs. $19.8 million. Adjusted EBITDA, a non-GAAP financial measure, was up 28% to $94.8 million. Paid a first quarter 2024 cash distribution of $0.25 per share on CODI's common shares in April 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 their Board of Directors. On March 5, 2024, CODI announced the appointment of Joshua Gaynor as President of Lugano Diamonds. On February 1, 2024, CODI announced the completion of its partnership with leading, better-for-you feminine care brand, The Honey Pot Co., for an enterprise value of $380 million. First Quarter 2024 Financial Results Net sales in the first quarter of 2024 were $524.3 million, up 8% compared to $483.9 million in the first quarter of 2023. This was driven by a 61% increase in Lugano net sales and the acquisition of The Honey Pot Co. On a pro forma basis, assuming CODI had acquired The Honey Pot Co. on January 1, 2023, net sales were up 4%. On a pro forma basis, Branded Consumer net sales increased 11% to $375.4 million compared to the first quarter of 2023. Industrial net sales decreased 10% to $159.6 million compared to the first quarter of 2023. Operating income for the first quarter of 2024 was $38.6 million compared to $34.6 million in the first quarter of 2023. Operating income in the first quarter of 2024 reflected higher SG&A from the acquisition of The Honey Pot Co., as well as an $8.2 million non-cash impairment expense associated with Velocity Outdoor. Income from continuing operations in the first quarter of 2024 increased 51% to $2.4 million compared to $1.6 million in the first quarter of 2023. Net income in the first quarter of 2024 was $5.8 million compared to $109.6 million in the first quarter of 2023, reflecting the $98.0 million gain on the sale of Advanced Circuits in February 2023. Adjusted Earnings (see "Note Regarding Use of Non-GAAP Financial Measures" below) for the first quarter of 2024 increased 73% to $34.3 million compared to $19.8 million a year ago. CODI's weighted average number of shares outstanding in the first quarter of 2024 was 75.27 million compared to 72.18 million in the prior year first quarter. Adjusted EBITDA (see "Note Regarding Use of Non-GAAP Financial Measures" below) in the first quarter of 2024 was $94.8 million, up 28% compared to $74.1 million in the first quarter of 2023. The increase was primarily due to strong results at Lugano. The Company no longer adds back management fees in its calculation of Adjusted EBITDA. Management fees incurred during the first quarter were $18.1 million. Liquidity and Capital Resources As of March 31, 2024, CODI had approximately $64.7 million in cash and cash equivalents, $46.0 million outstanding on its revolver, $382.5 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 March 31, 2024, the Company had no significant debt maturities until 2027 and had net borrowing availability of approximately $551.6 million under its revolving credit facility. First Quarter 2024 Distributions On April 4, 2024, CODI's Board declared a first quarter distribution of $0.25 per share on the Company's common shares. The cash distribution was paid on April 25, 2024, to all holders of record of common shares as of April 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, January 30, 2024, up to, but excluding, April 30, 2024. The distribution for such period was payable on April 30, 2024, to all holders of record of Series A Preferred Shares as of April 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, January 30, 2024, up to, but excluding, April 30, 2024. The distribution for such period was payable on April 30, 2024, to all holders of record of Series B Preferred Shares as of April 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, January 30, 2024, up to, but excluding, April 30, 2024. The distribution for such period was payable on April 30, 2024, to all holders of record of Series C Preferred Shares as of April 15, 2024. 2024 Outlook As a result of the strong performance of the Company's Branded Consumer vertical, it is raising its outlook for Subsidiary Adjusted EBITDA by $10 million. However, with the recent sale of Crosman, the Company is reducing its outlook by a similar amount. As a result, CODI expects its current subsidiaries, inclusive of The Honey Pot Co. as if it owned it from January 1, 2024, and excluding Crosman, 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 expects its Branded Consumer vertical to produce $355 million to $385 million and its Industrial vertical to produce $125 million to $135 million. This estimate is based on the summation of the Company's expectations for its current subsidiaries in 2024, and is absent additional acquisitions or divestitures, and excludes corporate expenses such as interest expense, management fees paid by CODI and corporate overhead. Inclusive of the strong performance of the Company's Branded Consumer vertical and the sale of Crosman, CODI expects 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 raising its Adjusted Earnings guidance and now expects to earn between $148 million and $163 million ($145-$160 million previously) (see "Note Regarding Use of Non-GAAP Financial Measures" below) for the full year 2024. The increased range includes the outperformance of CODI's Branded Consumer vertical in the first quarter of 2024, the sale of Crosman, and the interest savings on its outstanding floating rate debt as a result of the use of proceeds from the Crosman sale to pay down its revolver balance outstanding. 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 May 1, 2024, at 5:00 p.m. E.T. / 2:00 p.m. PT with the Company's Chief Executive Officer, Elias Sabo, Chief Financial Officer, Ryan Faulkingham, and Compass Group Management's Chief Operating Officer, Pat Maciariello. 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 and provides a measure for evaluating earnings from continuing operations available to common shareholders. Pro forma net sales is defined as net sales including the historical net sales relating to the pre-acquisition periods of 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. CODI 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. CODI provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and has consistently generated strong returns through its culture of transparency, alignment, and accountability. For more information, please visit compassdiversified.com. Forward Looking Statements Certain statements in this press release may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements as to our future performance or liquidity, such as expectations regarding our results of operations and financial condition, our 2024 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 Gateway GroupCody Media The IGB GroupLeon   Compass Diversified Holdings Condensed Consolidated Balance Sheets       March 31, 2024   December 31, 2023 (in thousands)   (Unaudited)       Assets           Current assets           Cash and cash equivalents   $ 64,715     $ 450,477   Accounts receivable, net     338,310       318,241   Inventories, net     788,809       740,387   Prepaid expenses and other current assets     126,764       94,715   Total current assets     1,318,598       1,603,820   Property, plant and equipment, net     191,869       192,562   Goodwill     1,023,024       901,428   Intangible assets, net     1,145,439       923,905   Other non-current assets     186,099       195,266   Total assets   $ 3,865,029     $ 3,816,981               Liabilities and stockholders' equity           Current liabilities           Accounts payable and accrued expenses   $ 258,073     $ 250,868   Due to related party     17,202       16,025   Current portion, long-term debt     10,000       10,000   Other current liabilities     37,681       35,465   Total current liabilities     322,956       312,358   Deferred income taxes     139,861       120,131   Long-term debt     1,705,982       1,661,879   Other non-current liabilities     202,019       203,232   Total liabilities     2,370,818       2,297,600   Stockholders' equity           Total stockholders' equity attributable to Holdings     1,251,271       1,326,750   Noncontrolling interest     242,940       192,631   Total stockholders' equity     1,494,211       1,519,381   Total liabilities and stockholders' equity   $ 3,865,029     $ 3,816,981   Compass Diversified Holdings Consolidated Statements of Operations (Unaudited)       Three Months Ended March 31, (in thousands, except per share data)     2024       2023   Net sales   $ 524,290     $ 483,933   Cost of sales     282,463       278,869   Gross profit     241,827       205,064   Operating expenses:         Selling, general and administrative expense     150,714       130,264   Management fees     18,067       16,270   Amortization expense     26,288       23,973   Impairment expense     8,182       —   Operating income     38,576       34,557   Other income (expense):         Interest expense, net     (23,575 )     (26,180 ) Amortization of debt issuance costs     (1,005 )     (1,005 ) Other income (expense), net     (2,874 )     1,160   Net income from continuing operations before income taxes     11,122       8,532   Provision for income taxes     8,686       6,920   Income from continuing operations     2,436       1,612   Income from discontinued operations, net of income tax     —       10,000   Gain on sale of discontinued operations, net of income tax     3,345       97,989   Net income     5,781       109,601   Less: Net income from continuing operations attributable to noncontrolling interest     7,429       4,171   Less: Net income from discontinued operations attributable to noncontrolling interest     —       33   Net income (loss) attributable to Holdings   $ (1,648 )   $ 105,397             Amounts attributable to Holdings         Loss from continuing operations   $ (4,993 )   $ (2,559 ) Income from discontinued operations, net of income tax     —       9,967   Gain on sale of discontinued operations, net of income tax     3,345       97,989   Net income (loss) attributable to Holdings   $ (1,648 )   $ 105,397             Basic income (loss) per common share attributable to Holdings         Continuing operations   $ (0.89 )   $ (0.19 ) Discontinued operations     0.04       1.48       $ (0.85 )   $ 1.29             Basic weighted average number of common shares outstanding     75,274       72,178             Cash distributions declared per Trust common share   $ 0.25     $ 0.25   Compass Diversified Holdings Net Income (Loss) to Non-GAAP Adjusted Earnings and Non-GAAP Adjusted EBITDA (Unaudited)       Three Months Ended March 31, (in thousands)