On its fourth-quarter analyst call, Compass Diversified officials said some subsidiaries in its Branded Consumer segment, including BOA and PrimaLoft, had been hurt in the fourth quarter by a wholesale order slowdown caused by elevated inventories in the marketplace. Those pressures it expects will continue through the first half of 2023.

“In the first half of 2022, we benefited from extremely high demand from customers who needed our product to help manage their own supply chain issues,” said Elias Sabo, CEO, on the call. “With the pandemic winding down and some retailers reckoning with the fact that they over-ordered, it has created a whipsaw effect until inventory is right-sized. For our brands further down the supply chain like BOA and PrimaLoft, the destocking headwinds are exacerbated.”

Sabo added, “We expect the first half of 2023 to reflect lower performance from some of our companies with a reacceleration anticipated in the back half as inventory is worked through and comparisons ease.”

BOA’s Sales Jump 26 Percent In 2022
Pat Maciariello, COO, said BOA had a “very strong” 2022 and finished the year with 26 percent growth in revenues and a 38 percent gain in adjusted EBITDA. For the fourth quarter, however, revenue declined slightly and EBITDA was approximately flat due the broader inventory challenges

The supply chain pressures are expected lead to revenue declines for BOA in the first half of 2023 with a return to growth expected in the back half.

Nonetheless, Maciariello said BOA has been a successful investment since being acquired by CODI in late 2000. In that year, BOA produced slightly over $30 million of EBITDA.  Due to significant market share gains and strong consumer demand for products incorporating

BOA’s technology, adjusted EBITDA grew to over $60 million in 2021 and over $82 million in 2022.

Said Maciariello, “We believe the inventory destocking headwinds discussed will lead to a short-term decline in financial performance in 2023. We believe performance will be above 2021 levels. We are also confident that the company will then return to growth as these pressures abates.”

Maciariello said the inventory headwinds notwithstanding, BOA is making “significant strides in market share” and finding success expanding its technologies as measured by the model count on which BOA products are used. Growth for fall/winter 2023 is expected to be close to 10 percent with further acceleration projected for fall/winter 2024 based on initial discussions with brand partners.

Said Maciariello, “In addition, we were ecstatic at the market receptance to BOA’s Alpine ski technology as four of the company’s brand partners recently pre-launched Alpine ski boots integrating the BOA system giving skiers unprecedented fit and performance.The quantities are limited until the official launch this fall for the 2023-2024 ski season. The excitement is significant. And we believe that with its brand partners, BOA has the opportunity to revolutionize fit in the industry.”

BOA’S adjusted EBITDA tumbled 62.4 percent in the quarter to $3.8 million from $10.1 million. For the full year, adjusted EBIDTA was down 34.7 percent to $33.2 million from $50.9 million.

PrimaLoft’s Pro-Forma Revenues Climb 21 Percent In 2022
PrimaLoft, acquired by CODI on July 13, 2022, reported 2022 pro-forma revenue and EBITDA increased by 21 percent and 24 percent, respectively. In the fourth quarter, on a pro forma basis, revenue growth grew slightly and EBITDA declined slightly from 2021 as the company’s price increases did not take effect until the end of 2022 and several extraneous factors led to higher margins in Q4 of 2021.

“Despite facing similar challenges BOA given its position in the supply chain and inventory levels within the channel, we believe PrimaLoft will fuel growth this year and remain confident in the medium and long-term outlook for the business,” said Maciariello.

Marucci Boosted By Its CATX Bat Range
Marucci racked up another strong quarterly performance as sell through and reorders of its CATX line of bats were above expectations and the company continued growing in new markets. For 2022, Marucci’s revenue and EBITDA grew by 40 percent and 27 percent, respectively. Marucci’s margins remained strong in the quarter as supply chain related issues continue to improve.

Maciariello said, “Marucci continued to diversify its product mix and enter new markets in 2022. The company saw significant growth in its apparel and fielding glove categories and made significant inroads geographically through opening its Japanese operations. The 2023 represents a year without a major CAT bat launch. The company is launching several new products and its growth in adjacent categories and geographies drives optimism for the year.”

Marucci’s adjusted EBIDTA rose 83.8 percent to $10.3 million from $5.6 million. For the full year, adjusted EBIDTA climbed 26.9 percent to $36.8 million from $29 million.

5.11 Benefits From DTC Strength
5.11, the tactical gear brand, grew revenue and EBITDA by 9 percent and 6 percent respectively in 2022 despite challenges in the overall apparel space.

“We remain proud of the company’s performance in a difficult environment,” said Maciariello. “In the fourth quarter, EBITDA growth outpaced revenue growth and the company’s DTC comps remained positive led by strong e-commerce sales. 5.11 is having a solid start to 2023 and we believe it will be another year of growth for the company.”

5.11’s adjusted EBIDTA increased 11.9 percent to $19.6 million from $17.5 million. For the full year, adjusted EBIDTA grew 5.7 percent to $67.8 million from $64.1 million.

Velocity Outdoor Slowed By High Inventories
Velocity Outdoor, which includes the Crosman, Benjamin, Ravin, LaserMax, and CenterPoint brands in the airguns and archery space, faced continued struggles in the fourth quarter as inventory levels at retail in its archery business remained high and sell-through remains challenged in both segments of the business following COVID-related surges in outdoor activities. Maciariello said, “We’re working diligently with management to rationalize the company’s cost structure to this new environment, while remaining focused on innovation. We expect a challenging first half of 2023 for this business as we proceed down this path but are confident in the outcome.”

Velocity Outdoor’s adjusted EBIDTA tumbled 62.4 percent in the quarter to $3.8 million from $10.1 million. For the full year, adjusted EBIDTA was down xx percent to 34.7 percent to $33.2 million from $50.9 million.

CODI’s only other remaining business in its Branded Consumer segment is Lugano, a maker of jewelry. Lugano’s growth continued in the fourth quarter and for the year as both revenue and EBITDA grew by over 45 percent and 60 percent respectively

CODI’s Niche industrial businesses include Advanced Circuits, Arnold, Altor Solutions and Sterno.

Maciariello concluded, “As a whole, we are very pleased with the performance of our businesses in 2022. Though the fourth quarter was challenging for several subsidiaries and the outlook for the first half of the year is mixed in several places. We are confident in the positioning of our businesses and the outlook for CODI.”

Photo courtesy Boa