Compass Diversified Holdings (CODI) reported BOA recorded a 34.7 percent year-over-year gain in the second quarter ended June 30, the strongest growth among its active lifestyle holdings. Sales increased 9.1 percent for 5.11 and 12.2 percent for Marucci Sports but declined 15.0 percent for Velocity Outdoor.

BOA’s Sales Expand 34.7 Percent
Sales climbed 34.7 percent year-over-year for BOA in the second quarter to $59.4 million, according to CODI’s 10Q filing. The increase was reflected across key industries, including Snow Sports, Outdoor, Athletic, and Workwear. The three factors impacting their growth rates were market share gains, increased consumer participation as well as accelerated production ordering by BOA’s customers due to longer lead times resulting from overall global supply chain constraints.

SG&A expenses increased 12.3 percent to $13.8 million due to increased employee costs related to BOA’s bonus plan, incremental headcount and marketing investments. The year-ago period included $1.1 million in integration services fees paid to CGM (Compass Group Management) as part of integration efforts that did not recur in the current quarter.

BOA’s operating income was $18.5 million, an increase of 60.9 percent from $11.5 million for the same period in 2021.

5.11’s Sales Climb 9.1 percent
5.11’s sales expanded 9.1 percent to $120.0 million. The increase for the tactical gear maker is due in part to a $4.3 million, or 10.6 percent, increase in domestic wholesale sales following the fulfillment of backorders, as well as an increase of $4.9 million, or 26.6 percent in other international channel sales due to inventory availability to meet strong demand. Net sales were also positively impacted by an increase of $3.4 million in DTC sales growth, up 7 percent from the prior year’s comparable period. DTC sales grew largely due to an increase in store count, as well as positive same-store growth.

Gross margins improved to 54.2 percent from 53.3 percent a year ago, favorably impacted by price increases. The positive impact of the price increase was partially offset by continued increases in in-bound ocean and air freight charges during the period due to logistic challenges.

SG&A expense was $50.4 million, or 41.9 percent of sales compared to $44.2 million, or 40.2 percent of sales, a year ago. The increase was driven by the costs associated with additional retail stores, increased sales and marketing spend to drive digital sales, and increased travel and entertainment spend coming out of the pandemic. These increases were partially offset by a decrease in variable marketplace expenses based on decreased sales in the wholesale channel.

5.11’s operating income reached $12.3 million, a slight increase from $12.0 million for the same period in 2021.

Marucci Sports Sales Gain 12.2 Percent
Marucci Sports were $27.6 million, an increase of 12.2 percent from $24.6 million a year ago.  The increase in net sales was due to Marucci’s acquisition of Lizard Skins in the fourth quarter of 2021 and increased customer demand and market share in many of Marucci’s key product lines, including aluminum and wood bats, and batting gloves.

Gross margins in the quarter were 45.6 percent, down from 50.2 percent a year ago, primarily due to increased freight costs, as supply chain delays coupled with demand exceeding the company’s forecast, led to increased use of air freight to meet increased demand from Marucci’s customer base and product sales mix.

SG&A expenses increased 32.2 percent to $11.7 million and increased as a percent of sales to 42.4 percent of sales from 38.5 percent a year ago. The increase partially correlates to the increase in sales, with increases in credit card expenses, royalties, commissions, business development fees, and other variable expenses. Marucci also incurred additional professional fees, personnel costs and marketing expenses in 2022 related to investments supporting growth.

Marucci Sports’ operating loss was $1.4 million against operating income of $1.2 million for the same period in 2021 due to the margin and cost pressures as well as an increase in amortization expense related to the Lizard Skins intangibles assets.

Velocity Outdoor’s Revenues Slide 15.0 Percent
Velocity Outdoor’s dropped 15.0 percent in the second quarter to $53.8 million. The decline was primarily due to inflationary pressures impacting the demand for airgun products along with supply chain constraints which have delayed new archery product releases. The segment includes the Crosman, Benjamin, Ravin, LaserMax, and CenterPoint brands.

Gross margins in the second quarter decreased to 27.8 percent from 31.5 percent due to product mix as more legacy products were sold with lower margins versus new models at higher margins.

SG&A expense declined 15.3 percent to $7.2 million and was flat as a percent of sales to 13.3 percent in each period. The decrease is related to volume-related expenses. Marketing investments continued.

Velocity Outdoor’s operating income fell 40.7 percent to $5.4 million.

Other businesses include Advanced Circuits, Arnold Magnetic Technologies, Ergobaby, Foam Fabricators, Lugano Diamonds, Primaloft and Sterno.

Companywide, CODI’s net sales grew 19 percent in the second quarter to  $515.6 million. Sales were up 13 percent on a proforma basis. Net income jumped considerably to $31.0 million versus $11.3 million.

Adjusted earnings grew 41 percent to $39.3 million while adjusted EBITDA increased 26 percent to $87.4 million. The period marked its sixth consecutive quarter of record financial performance.

Looking ahead, CODI now expects adjusted EBITDA for 2022 of between $445 million and $470 million, up from previous guidance of between $410 million and $430 million. The company also expects to earn between $130 million and $145 million in adjusted earnings, including PrimaLoft and Advanced Circuits as a result of the expectation of reclassifying Advanced Circuits to continue operations during the third quarter. Previously, CODI expected adjusted earnings between $120 million and $135 million for 2022, excluding Advanced Circuits subsidiary results that had been classified as held for sale, on August 1, Compass Diversified terminated the agreement to sell Advanced Circuits.

Photo courtesy BOA