Compass Diversified (CODI) reported that BOA and Marucci Sports banged out strong double-digit gains in the third quarter. Velocity Outdoor’s sales were up 8.9 percent, while 5.11, which confidentially filed for an IPO, saw 12.9 percent growth.
BOA Q3 Sales Vault 51.1 Percent
BOA’s sales in the quarter were $39.5 million compared to pro-forma sales of $26.1 million a year ago, representing a gain of 51.1 percent. Pro-forma results assume the business had been acquired on January 1, 2020. BOA was acquired in October 2020.
The sales increase was due to underlying category and BOA momentum within key markets, including Snow Sports, Cycling, Athletic, and Workwear. The three primary factors impacting growth rates were market share gains in key categories, consumer participation increases and accelerated production ordering by BOA’s customers due to longer lead times resulting from overall global supply chain constraints.
Operating income in the quarter came to $7.1 million, more than double the $2.8 million achieved a year ago. Gross margins eroded to 60.6 percent from 62.7 percent due to product mix. SG&A expense increased 32.3 percent year-over-year in dollars but was reduced as a percent of sales to 32.1 percent from 36.6 percent a year ago.
BOA’s year-to-date revenue climbed 55.5 percent to $120.0 million. Year-to-date EBITDA increased 89.3 percent to $46.3 million, exceeding expectations.
“BOA continued to experience strong demand across most of its categories, led by Athletic and Workwear,” said Patrick Maciariello, CODI’s COO, on the call. “In addition, BOA continues to make strides in product development. As we mentioned last quarter, we believe that some portion of BOA’s exceptional growth stems from partners ordering ahead due to supply chain constraints.”
Marucci Sports’ Q3 Sales Climb 27.6 Percent
Marucci Sports sales in the third quarter reached $25.0 million from pro-forma sales of $19.6 million a year ago, a gain of 27.6 percent. Marucci was acquired in April 2020.
Marucci saw significant demand after the launch of its CAT9 line of aluminum and composite bats, as well as a return of baseball participation following the shutdown of spring sports during the initial months of the pandemic. During the current quarter, Marucci continued to see increased customer demand and improved market share in key product lines, including aluminum and wood bats, batting gloves and bags. The increased sales from these products occurred in both retail and direct channels.
Operating income nearly tripled to $3.6 million from $1.3 million a year ago. Gross margins improved to 56.8 percent from 54.7 percent as the year-ago period included $1.3 million in amortization of the inventory step-up resulting from the acquisition purchase price allocation. Excluding the effect of the step-up amortization, gross margins were down from 61.1 percent a year due to increased freight costs as supply chain delays led to increased use of air freight. SG&A expenses increased to $8.9 million from $7.6 million a year ago but were reduced as a percent of sales to 35.3 percent from 38.9 percent.
“Marucci had another strong quarter that exceeded expectations,” said Maciariello. “Despite having a dip slightly by increased expedited freight costs, the company successfully navigated strong demand and supply chain challenges, and the brand remains in demand at all levels of baseball. We are very optimistic about the company’s future.”
In the nine months, Marucci’s sales jumped 82.3 percent to $86.3 million from $47.3 million a year ago. Income from operations came to $15.3 million against a loss from operations of $6.1 million for the same period in 2020.
CODI’s 10Q filing also noted that it paid $47.0 million on October 22 to acquire Lizard Skins, a designer and seller of branded grip products, protective equipment, bags and apparel for use in baseball, cycling, hockey, esports, and lacrosse. As reported, the Lizard Skins business becomes part of Marucci’s unit and is expected to allow Marucci to build on its position in diamond sports while simultaneously developing Marucci’s presence in new sports markets such as hockey and cycling.
Maciariello said, “We believe the transaction comes with a number of strategic synergies and are excited about the combination.”
Velocity Outdoor’s Sales Gain 8.9 Percent
Velocity Outdoor’s sales were up 8.9 percent in the quarter to $76.9 million due to a significant increase in consumer demand across all Velocity Outdoor product lines. The segment makes airguns, archery products, laser aiming devices, and related accessories under the Crosman, Benjamin, LaserMax, Ravin, and CenterPoint brands.
Income from operations reached $12.9 million, up 16.2 percent from $11.1 million for the same period in 2020. Gross margins were down slightly to 33.1 percent from 33.5 percent a year ago. SG&A expenses were reduced to 13.2 percent of sales from 14.5 percent as cost-containment efforts offset volume-driven expenses.
In the nine months, sales grew 38.9 percent to $205.9 million, while operating earnings jumped to $33.0 million from $13.9 million a year ago.
“Velocity’s performance continued to surpass our expectations. Interest in outdoor activities remain strong, even while the country slowly exits pandemic conditions,” said Maciariello. “Inventory at retail for many of the company’s categories has returned to healthy pre-pandemic levels, and we believe revenue will be driven by end-consumer demand in the coming quarters. Challenges in the supply chain at the company continued in Q3, and in some instances, became even more acute.”
5.11’s Q3 Revenues Advance 12.9 Percent
5.11 filed with the Securities & Exchange Commission to be spun off in an initial public offering, delivered sales of $111.1 million in the third quarter, up 12.9 percent year-over-year. Acquired by CODI in August 2016, the Irvine, CA-based company makes tactical apparel and gear serving a wide range of customers, including law enforcement, special military operations, firefighters, and outdoor enthusiasts.
This increase in sales is partly due to e-commerce and retail sales growth of $7.7 million, up 19 percent from the prior year’s comparable period. Retail sales grew largely due to fourteen new retail store openings since September 2020, bringing the total store count to 85 as of September 30 and positive growth in same-store growth. The year-ago period was negatively impacted by the effects of the pandemic as certain retail locations had to close temporarily. Net sales were also positively affected by domestic wholesale sales growth of $4.7 million, up 13 percent from the prior year comparable period, which was negatively impacted by the effects of the pandemic.
Income from operations improved 16.1 percent to $10.1 million from $8.7 million a year ago. Gross margins improved to 53.4 percent from 52.1 percent a year ago due to channel mix as direct to consumer sales, which realized a higher gross profit than wholesale sales, grew versus the prior period. Margins were also helped by domestic price increases, which went into effect early in July that were partially offset by an increase in freight charges.
In the nine months, 5.11’s sales improved 13.9 percent to $321.0 million. Operating earnings improved 55.0 percent to $27.9 million from $18.0 million for the same period in 2020.
Maciariello said CODI is not elaborating on 5.11’s performance due to the pending offering. CODI’s quarterly filing noted that on August 10, 5.11, ABR Corp. confidentially filed for an initial public offering with the SEC. The number of shares to be offered and the price range for the proposed offering have not yet been determined.
CODI also completed a recapitalization of 5.11 on August 11, whereby CODI amended the brand’s intercompany loan agreement. The 5.11 Loan Agreement was amended to provide additional term loan borrowings of $55 million to fund a distribution to shareholders. The company owned 97.7 percent of the outstanding shares of 5.11 on the date of the distribution and received $53.7 million. The remaining amount of the distribution went to minority shareholders.
Photo courtesy Marucci
