By Eric Smith
The two consumer brands in Compass Diversified Holdings’ portfolio that focus on the sportsmans categories—5.11 Tactical and Velocity Outdoor—were the only assets to show substantial pro forma net sales gains in the first quarter compared to the year-ago period.
Tactical gear brand 5.11 notched Q1 pro forma net sales of $88.1 million, up 4.9 percent from the first quarter of 2018. Not only that, but the brand’s improving EBITDA margins—adjusted EBITDA jumped 40.9 percent to $8.3 million—earned a shoutout from CODI CEO Elias Sabo in the earnings release.
And Velocity Outdoor, the parent company of a handful of sportmans brands and formerly known as Crosman Corp., reported Q1 pro forma net sales of $31.1 million, up 27.6 percent from the year-ago period. Velocity’s pro forma net sales didn’t include the addition of Ravin, which was acquired last August.
Both brands built on the strength of the previous earnings report. In March, when CODI reported Q4 and full-year 2018 figures, it said Velocity Outdoor’s revenue increased 10.3 percent, while 5.11’s 2018 revenue increase of 12.2 percent exceeded expectations, even as EBITDA decreased 16.2 percent compared to 2017.
In the previous year, 5.11’s margins were negatively impacted by the installation of a new ERP system, the transition to a new distribution warehouse and the recruitment of a number of executive management team members.
Fast forward to Q1 of the current year and CODI reported companywide net sales for the quarter ended March 31 of $402.5 million, up from $344.4 million for the quarter ended March 31, 2018. Despite the 16.9 percent year-over-year increase, CODI’s revenue missed Wall Street’s expectations by $1 million.
Also, net sales from the quarter ended March 31, 2018, do not include Rimports, Foam Fabricators and Ravin net sales prior to CODI’s ownership.
Meanwhile, net income for the first quarter was $110.2 million, as compared to a net loss of $1.6 million for the quarter ended March 31, 2018. Earnings per share of (31) cents missed analysts’ target of 10 cents per share.
Read the detailed report about CODI’s Q1 earnings here.
“Our operating results in the first quarter exceeded our expectations, as we reported solid consolidated revenues, net income and adjusted EBITDA growth across our group of leading, niche middle market businesses,” Sabo said. “During the first quarter, we also realized tangible benefits from previous investments in the management, sales and marketing functions at several of our branded consumer businesses, highlighted by the sale of Manitoba Harvest at a highly attractive valuation and 5.11 Tactical’s improving EBITDA margins.”
Sabo continued, “Our success monetizing Manitoba Harvest resulted in CODI realizing a sizeable gain in just over three years of ownership, increasing total realized gains to over $870 million for shareholders since our IPO. Complementing our focus on building long-term and sustainable value in CODI and its leading subsidiaries, we are pleased to have promoted long-time partner at Compass Group Management Pat Maciariello to the newly created position of Chief Operating Officer. Going forward, our focus remains on continuing to work with our world-class management teams to best capitalize on growth opportunities, implementing our proven and disciplined acquisition strategy, opportunistically divesting businesses and providing sizable distributions.”
CODI’s other brand of interest for SGB Executive readers, gun safe maker Liberty Safe, saw pro forma net sales decline 5.3 percent to $22.2 million.
Photo courtesy CODI
[author] [author_image timthumb=’on’]https://s.gravatar.com/avatar/dec6c8d990a5a173d9ae43e334e44145?s=80[/author_image] [author_info]Eric Smith is Senior Business Editor at SGB Media. Reach him at eric@sgbonline.com or 303-578-7008. Follow on Twitter or connect on LinkedIn.[/author_info] [/author]
