Compass Diversified, the parent company to a number of active lifestyle brands, including BOA, 5.11, Primaloft and Velocity Outdoor, among others, posted $597.6 million in net sales in the third quarter, up 22 percent compared to $488.2 million in the third quarter of 2021. The increase was said to be due to strong performance at its branded consumer and niche industrial subsidiaries. On a pro forma basis, assuming CODI had acquired Lugano and PrimaLoft on January 1, 2021, net sales were up 15 percent compared to the prior-year period.
Branded consumer net sales, pro forma for the Lugano and PrimaLoft acquisitions, increased 21 percent in the third quarter to $380.5 million compared to $314.8 million in the third quarter of 2021. Niche industrial net sales increased 7 percent in the third quarter of 2022 to $219.4 million compared to $205.0 million in the third quarter of 2021.
Net income for the third quarter decreased to $2.6 million compared to net income of $90.2 million in the third quarter of 2021. Income from continuing operations for the third quarter of 2022 decreased to $1.1 million compared to $18.7 million in the third quarter of 2021. The decreases in net income and income from continuing operations were a result of higher interest expenses related to the funding of the acquisitions of PrimaLoft and Lugano and provisions for income tax primarily as a result of the reclassification of Advanced Circuits to continuing operations. Additionally, the company’s net income in the year-ago period included a $72.7 million gain from the sale of Liberty Safe in August 2021.
Operating income for the third quarter of 2022 increased 16 percent to $48.7 million compared to $41.9 million in the third quarter of 2021.
Adjusted Earnings for the third quarter increased 28 percent to $46.0 million compared to $35.8 million in the third quarter of 2021.
Adjusted EBITDA in the third quarter of 2022 was $98.3 million, up 27 percent compared to $77.6 million in the third quarter of 2021. The increase was primarily due to the strong performance across the branded consumer and niche industrial businesses on a combined basis and the impact of the PrimaLoft and Lugano acquisitions. The company no longer adds back management fees in its calculation of Adjusted EBITDA. Management fees incurred during the third quarter were $16.7 million.
“Our third-quarter results yet again demonstrate the quality of CODI’s subsidiary businesses, as we delivered another consecutive quarter of record financial performance,” said Elias Sabo, CEO, Compass Diversified. “Our subsidiaries on a combined basis continue to deliver excellent results despite inflationary pressures impacting consumer discretionary spending. End market demand for our core consumer products remains strong, and with many of our consumer businesses taking market share, we believe our businesses can outperform the general market and deliver strong financial results.”
2022 Outlook
As a result of CODI’s strong financial performance in the third quarter, its expectations for the remainder of 2022 and its current view of the economy, the company is raising its outlook. CODI now expects its current subsidiaries to produce consolidated subsidiary Adjusted EBITDA for the full year 2022 of between $460 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 $7.5 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 $145 million and $155 million in Adjusted Earnings for the full year 2022.
Photo courtesy 5.11 Tactical
