Brand aggregator Compass Diversified (CODI) saw second-quarter sales expand 11 percent pro-forma to $373.5 million in its Consumer Brands segment, led by major gains by BOA, Primaloft and Lugano.

Among brands owned by CODI in the active lifestyle space, BOA’s sales jumped 42.1 percent to $54.2 million, PrimaLoft’s sales improved 14.1 percent to $25.3 million, 5.11’s sales slid 2.2 percent to $123.2 million,

Velocity Outdoor’s sales tumbled 50.6 percent to $18.7 million due to the divestiture of Crosman Corporation, the air gun division of its Velocity Outdoor subsidiary. On April 30, CODI announced the sale of Crosman to Daisy Manufacturing.

The consumer segment also includes Ergobaby, Lugano and The Honey Pot Co., which CODI acquired in 2023.

Consolidated net sales were up 11 percent to $542.6 million. Adjusted to include the impact of The Honey Pot Co. in both periods, sales were up 6 percent on a pro-forma basis. Industrial net sales were down 4 percent to $169.1 million. Companies in the Industrial segment include Altor Solutions, Arnold Magnetics and Sterno.

The loss from continuing operations was $13.7 million, compared with income from continuing operations of $10.1 million. The net loss was $13.7 million, compared with net income of $17.1 million, primarily due to the loss of $24.6 million from the divestiture of Crosman.

On an adjusted basis, earnings were up 36 percent to $39.8 million from $29.2 million a year ago. Adjusted EBITDA increased 27 percent to $105.4 million.

“I’m pleased to announce another strong quarter with results that exceeded our expectations, driven by continued strength in our consumer businesses,” said Compass Diversified CEO Elias Sabo. “While Q2 saw deteriorating economic conditions that negatively impacted our industrial vertical, our branded consumer businesses performed exceptionally well with net sales up close to 20 percent, or 11 percent on a pro forma basis, offsetting any weaknesses in our industrial businesses. As expected, destocking headwinds subsided this past quarter, which meant both BOA and PrimaLoft performed exceptionally well and Lugano continued to grow at an extraordinary pace.”

Second Quarter 2024 Financial Results
Net sales in the second quarter of 2024 were $542.6 million, up 11 percent compared to $486.9 million in the second quarter of 2023. This was driven by CODI’s acquisition of The Honey Pot Co. in January 2024 and continued strong sales growth at Lugano and BOA. On a pro-forma basis, assuming CODI had acquired The Honey Pot Co. on January 1, 2023, net sales were up 6 percent.

On a pro-forma basis, Branded Consumer net sales increased 11 percent to $373.5 million compared to the second quarter of 2023.

Industrial net sales decreased 4 percent to $169.1 million compared to the second quarter of 2023.

Operating income for the second quarter of 2024 was $61.3 million compared to $42.1 million in the second quarter of 2023. Operating income in the second quarter of 2024 reflected higher gross profit at CODI’s Branded Consumer brands, offset by increased SG&A and amortization expense from CODI’s acquisition of The Honey Pot Co. in the first quarter of 2024.

Loss from continuing operations in the second quarter of 2024 was $13.7 million compared to income from continuing operations of $10.1 million in the second quarter of 2023, primarily reflecting the loss on the divestiture of Crosman Corporation.

The net loss in the second quarter of 2024 was $(13.7) million, compared to a net income of $17.1 million in the second quarter of 2023, primarily reflecting the loss on the divestiture of Crosman Corporation.

Adjusted earnings for the second quarter of 2024 increased 36 percent to $39.8 million compared to $29.2 million a year ago.

Adjusted EBITDA in the second quarter of 2024 was $105.4 million, up 27 percent compared to $82.9 million in the second quarter of 2023. The increase was primarily due to strong results at BOA and Lugano and the addition of The Honey Pot Co. in the first quarter of 2024. The company no longer adds management fees back in its calculation of adjusted EBITDA. Management fees incurred during the second quarter were $18.9 million.

Liquidity and Capital Resources

As of June 30, 2024, CODI had approximately $68.4 million in cash and cash equivalents, $54.0 million outstanding on its revolver, $380.0 million outstanding in term loans, $1.0 billion outstanding in 5.250 percent Senior Notes due 2029 and $300.0 million outstanding in 5.000 percent Senior Notes due 2032.

As of June 30, 2024, the company had no significant debt maturities until 2027 and had net borrowing availability of approximately $543.6 million under its revolving credit facility.

2024 Outlook
Based on CODI’s financial performance in the second quarter, its expectations for the remainder of 2024, and its current view of the economy, the company is maintaining its 2024 outlook.

CODI continues to expect its subsidiaries, including The Honey Pot Co., to produce subsidiary adjusted EBITDA for the full year 2024 between $480 million and $520 million as if it owned them from January 1, 2024.

Of this range, CODI now expects its Branded Consumer vertical to produce $365 million to $395 million, an upward revision of $10 million, and its Industrial vertical to produce $115 million to $125 million, a downward revision of $10 million. These estimates are 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.

CODI continues to expect to earn adjusted EBITDA, 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 maintaining its adjusted Earnings guidance and expects to earn between $148 million and $163 million for the full year 2024.

Image courtesy of BOA