Compass Diversified Holdings (CODI) said sales in the fourth quarter grew 55 percent at BOA and surged 71 percent at Marucci Sports while declining 5 percent at its Velocity Outdoor subsidiary. 5.11’s sales grew 4 percent, but the big news was that the tactical gear maker postponed its IPO.
5.11 Cancels IPO
CODI said 5.11’s IPO had been postponed due to adverse market conditions. Last November, a registration statement for an IPO was filed with the Securities & Exchange Commission.
Elias Sabo, CEO, said on an analyst call, “After being cleared by the Securities and Exchange Commission to proceed with the proposed offering, we monitored the markets carefully to find an opportune time to take the company public. The markets in the fourth quarter of 2021, and thus far in 2022, have been unsupported for new issuances. We have always viewed a public offering of 5.11 as a highly opportunistic event, and we do not feel compelled to complete a transaction while suboptimal market conditions persist.”
Acquired by CODI in August 2016, the Irvine, CA-based 5.11 makes tactical apparel and gear serving a wide range of customers, including law enforcement, military special operations, firefighters, and outdoor use.
Sabo added, “5.11 has substantial runway to continue to grow at an accelerated rate as it builds out its domestic consumer business. 5.11’s domestic consumer business represents just over 50 percent of total sales, and with expected growth rates in the consumer business far exceeding that in our professional division, we would expect the business mix to continue to shift towards consumers going forward. Given the continued market and economic uncertainty, we believe it is in the best interest of 5.11 and CODI shareholders to postpone the proposed initial public offering.
“5.11 has an enthusiastic customer base and a strong position in the market. And we remain committed and excited for its continued growth in the meantime. We will continue to assess the capital markets, and when appropriate, we will consider leveraging the hard work already performed to position 5.11 to become a public company.”
5.11’s Q4 Revenues Gain 4 Percent
5.11’s sales in the fourth quarter reached $124.0 million against $119.3 million, representing a gain of 3.9 percent. Adjusted EBITDA slid 3.0 percent to $17.8 from $18.3 million. For the year, sales improved 10.9 percent to $445.0 million from $401.1 million a year ago. Adjusted EBITDA reached $65.1 against $54.7 million, up 19.1 percent.
Patrick Maciariello, partner and COO, said on a call that although total direct consumer comps for 5.11 “remain materially positive,” e-commerce sales growth was impacted by significantly lower in-stock levels as a result of port congestion and extended delivery times from Asian factories.
Maciariello said 5.11’s team has been working to mitigate the impacts of the supply chain disruption, and February’s flow-through has shown “meaningful improvement” versus in recent months. He added, “Combined receipts in January and early February indicate that 5.11’s financial performance will be below our prior expectations for the first quarter. However, demand for the brand remains strong, and we believe the company is well-positioned to show solid growth in 2022.”
BOA’s Q4 Revenues Jump 55 Percent
BOA Technology, the dial-fit system acquired in October 2020, generated sales of $45.1 million in the quarter against $29.2 million a year ago, representing a gain of 54.6 percent. Net sales for BOA are proforma as if CODI had acquired these businesses on January 1, 2020.
Adjusted EBITDA in the quarter rose 59.7 percent to $14.1 million from $8.9 million a year ago. In the year, BOA’s sales reached $165.2 million against $106.4 million, a gain of 55.3 percent. EBITDA increased 77.1 percent versus 2020 to $60.5 million.
Maciariello said BOA’s results for the year exceeded expectations. The brand continued to experience strong demand across most of its categories, led by athletic, outdoor and snow customers. Looking forward, BOA will enter the alpine skiing category in the Fall 2023 selling season.
Maciariello said, “BOA is partnering with several of the industry’s leading brands on innovative products. Though some portion of BOA’s exceptional growth stems from partners ordering ahead due to supply chain constraints, we believe the company’s well-positioned to show solid gains in 2022. We remain excited about BOA’s future and continue to be impressed by the company’s management team.”
Marucci Sports’ Q4 Revenues Climb 71 Percent
Marucci Sports, acquired in April 20201, saw sales surge 70.9 percent in the quarter to $31.8 million from $18.6 million a year ago. Adjusted EBITDA improved 9.6 percent to $5.7 million from $5.2 million a year ago.
Net sales for Marucci are proforma as if CODI had acquired these businesses on January 1, 2020.
Revenues in the year reached $118.2 million against $65.9 million, representing a gain of 79.2 percent. Adjusted EBITDA grew by over 112 percent to 29.5 million.
Maciariello said, “Marucci grew revenue significantly in the fourth quarter, as they continue to be granted additional shelf space at several key retail customers and achieved growth, both in bat and non-bat categories. Margins were impacted by supply chain issues in the fourth quarter, as the company remained relentlessly focused on meeting the needs of its retail partners. The company is very well-positioned to have a strong 2022. Marucci’s recent acquisition, Lizard Skins, performed above expectations in the quarter, and we remain excited about its prospects.”
Velocity Outdoor’s Q4 Sales Decline 5 Percent
Velocity Outdoor, which includes the Crosman, Benjamin, Ravin, LaserMax, and CenterPoint brands in the airguns and archery space, generated $64.5 million in the fourth quarter against $67.8 million, representing a decline of 4.8 percent. Adjusted EBITDA declined 29.6 percent to $10.2 million from $14.5 million a year ago.
Sales in the year reached $270.4 million against $216.0 million, a gain of 25.2 percent. Adjusted EBITDA rose 30.0 percent to $51.4 million from $39.5 million a year ago.
Maciariello said Velocity Outdoor’s slight sales decline in the fourth quarter reflects difficulties in receiving certain key components as demand in its Crossbows division outpaced supply. In addition, retail demand in the company’s Airgun division has experienced some modest declines from pandemic peaks in Q420 and Q121. Maciariello said, “While inventory at retail has returned to normal pre-pandemic levels, we note that point of sales data indicates materially stronger demand in pre-pandemic levels. Early indications in 2022 appear to be a solid year in its Crossbows division; however, performance in Airgun is expected to be between that pre-pandemic and pandemic levels.”
CODI Delivers Fourth Straight Quarter Of Record Results
Companywide, CODI delivered a fourth consecutive quarter of record results and the best year-end results in its history. Other businesses include Advanced Circuits, Arnold Magnetic Technologies, Ergobaby, Foam Fabricators, Lugano Diamonds, and Sterno.
CODI’s sales reached $536.6 million in the fourth quarter, up from $421.6 million a year ago. Net income nearly tripled to $25.9 million from $8.8 million.
In the year, sales improved 35.4 percent to $1.84 billion from $1.36 billion. Net income increased nearly five-fold to $126.8 million from $27.2 million.
Sabo said, “I want to highlight that despite all the challenges from the supply chain, labor availability and rising inflation for the calendar year 2021, we produced on a proforma basis almost 20 percent subsidiary adjusted EBITDA margins, up 155 basis points over the prior year.”
To combat supply chain issues, he said CODI had chosen to significantly increase inventory levels, although a significant amount of inventory remained in transit and unavailable for delivery at year-end.
“We experienced a steady decline in warehouse deliveries throughout the fourth quarter with an offsetting increase in our in-transit inventory,” said Sabo. “This past January marked a low for deliveries to our warehouses. While February has proven to be marginally better, product availability is still the largest challenge our subsidiaries face. We expect supply chain issues to linger throughout the first half of 2022 and cost pressures to continue to rise. Where appropriate, we expect our subsidiaries will continue to raise prices to combat rapidly rising costs and protect margins.”
