Compass Diversified (CODI), which owns Velocity Outdoor, BOA, Marucci, Primaloft, 5.11, and others in the active lifestyle space, reported net sales in the fourth quarter of 2022 were $594.9 million, up 6 percent (+4 percent on a pro forma basis) compared to $559.9 million in the fourth quarter of 2021.
For the full year 2022, net sales were $2.3 billion, up 17 percent compared to $1.9 billion in the prior year. The increase was due to strong performance in the company’s branded consumer subsidiaries. On a pro forma basis, assuming CODI had acquired Lugano and PrimaLoft on January 1, 2021, net sales were up 4 percent in the fourth quarter of 2022 and up 12 percent in 2022.
Branded consumer net sales, pro forma for the Lugano and PrimaLoft acquisitions, increased 7 percent in the fourth quarter of 2022 to $371.0 million compared to the prior-year comp quarter and increased to $1.5 billion in full-year 2022, an increase of 14 percent compared to full-year 2021. Niche industrial net sales decreased by 1 percent in the fourth quarter to $224.0 million compared to the fourth quarter of 2021 and increased to $856.8 million in 2022, an increase of 9 percent as compared to full-year 2021.
Compass posted an $11.8 million net loss in the fourth quarter, compared to a net income of $25.9 million in the fourth quarter of 2021. The net loss from continuing operations for Q4 2022 was $14.3 million, compared to $25.9 million in net income from continuing operations in the fourth quarter of 2021.
For the full year 2022, net income was $51.4 million compared to $126.8 million in 2021 full-year, and income from continuing operations was $42.0 million in 2022, compared to $46.4 million in 2021. The decrease in both periods was primarily attributable to higher SG&A and interest expenses, as well as a $20.6 million impairment expense associated with the company’s Ergobaby subsidiary. Additionally, CODI’s net income in 2021 included a $72.8 million gain from the sale of Liberty Safe in August 2021. Operating income for the fourth quarter of 2022 was $19.6 million compared to $39.6 million in the fourth quarter of 2021 due to the impairment expense associated with Ergobaby. For the full year 2022, operating income increased 7 percent to $175.6 million compared to $164.7 million a year ago.
Adjusted Earnings for the fourth quarter of 2022 was $28.7 million, compared to $37.1 million in the prior-year comp quarter. The decrease was a result of financing costs for the acquisition of PrimaLoft in July 2022 ahead of its seasonally slow third and fourth-quarter earnings periods. For the full year 2022, Adjusted Earnings increased 17 percent to $158.6 million compared to $135.7 million a year ago.
CODI’s weighted average number of shares outstanding in the fourth quarter of 2022 was 72.2 million compared to 66.6 million in the prior-year fourth quarter. For the full year 2022, CODI’s weighted average number of shares outstanding was 70.7 million compared to 65.4 million in 2021.
Adjusted EBITDA in the fourth quarter of 2022 was $87.3 million, up 5 percent from $83.3 million in the fourth quarter of 2021. For the full-year 2022, Adjusted EBITDA was $369.8 million, up 20 percent compared to $308.2 million in 2021. The increase was primarily due to the strong performance at CODI’s branded consumer subsidiaries and the benefit 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 fourth quarter and full year were $17.3 million and $63.6 million, respectively.
“The quality and resilience of CODI’s subsidiary businesses were once again on display during our fourth quarter as we achieved solid financial performance,” said Elias Sabo, CEO of Compass Diversified. “End market demand for the majority of our core consumer brands remained strong, and we believe our high-quality, premium brands can take market share even in a difficult macroeconomic backdrop.”
Mr. Sabo continued, “As discussed at our Investor Day in January, while there are near-term market uncertainties brought on by rapidly changing monetary policy and inventory de-stocking at retail, we believe they are short-term in nature. We believe our group of market share-taking businesses can outperform the general market over the long-term, driving strong financial results and increasing shareholder value.”
2023 Outlook
CODI expects its current subsidiaries to produce consolidated subsidiary Adjusted EBITDA of between $420 million and $460 million for the full year 2023. This estimate is based on the summation of the company’s expectations for its current subsidiaries in 2023, excluding ACI, and is absent additional acquisitions or divestitures, and excludes corporate expenses such as interest expense, management fees paid by CODI and corporate overhead. In addition, the company expects to earn between $105 million and $135 million in Adjusted Earnings for the full year 2023.
Photo courtesy Marucci
