Compass Diversified (CODI) 3 May 232023 Q1 Earnings call transcript

Good afternoon, and welcome to Compass Diversified's First Quarter 2023 Conference call. Today's call is being recorded. [Operator Instructions]

At this time, I would like to turn the conference over to Cody Slach of Gateway Group for introductions and the reading of the safe harbor statement. Please go ahead, sir.

to First welcome Call. XXXX and you, Compass Quarter Diversified's Conference Thank Group the Sabo, Pat CFO; Compass Elias today Maciariello, CEO; of Representing are CODI's CODI's company Ryan Faulkingham, COO Management. and

Investor like note forma full with in to we XXXX the of income references filings. company's release, following available as Throughout certain efforts. also net significant CODI the and certain company. section reconciliation the adjusted website. Please XX-Q EBITDA, measure Investor on of on sales filed the is Diversified at closed, is including adjusted market the because I financial adjusted operations the will Before refer net The reconciled company tables to company's unreasonable information does without Compass to non-GAAP year for point or non-GAAP and earnings are press and provide begin, Relations financial section reconciliations that available the also out earnings its discussed of today the the its refer continuing SEC EBITDA which the company's discussions QX website from compassdiversified.com. The would adjusted available as not a call, to reconciling to EBITDA we EBITDA this measures not this reconciliations financial and company at the call or adjusted at XXXX after expected loss Form that or includes pro financial Relations

statement. to me safe read allow the harbor Now following

results basis in timing such those plans, believes, differ identify performance risk certain actual initiatives. of these factor and Form companies. the forward-looking year well with the its projected all a are SEC of otherwise. At such future rising XX, regard call, statements domestic material forward-looking statements, filings. In the rates factors conditions. future in inherent the similar may impact undertakes to of uncertainties the XXXX, future ended as projects whether December as of subsidiary I with SEC a Words filed operational CODI to subject from and subsidiaries, these over make in or our Sabo. predicting on ESG on Except the this plans intended for statements cause the the results to including enumerated law, statements and or forward-looking anticipates, in statements, call acquisitions interest to as obligation publicly as are labor as we expects, and to a and and by new and some During as no statements. These future result environment, and update expected Certain chain, forward-looking economic impact significant forward-looking CODI are and future expressions could in factors XX-K inflation, disruptions, other the required would information, to discussion events Elias may CODI have revise turn particular, any supply like global or time, as this to

and joining everyone, afternoon, today. for thanks us Good

The strength consolidated and our as expectations. durability subsidiary accomplishment pro adjusted group again subsidiary to for evidenced subsidiaries adjusted amidst of in results unique a and This of delivered full our earnings. quarter we first was EBITDA And and on that an outlook both is adjusted forma pleased the EBITDA a and we both macroeconomic year result, extraordinary significantly basis. challenges. our are broad the raising We of financial revenue as exceeded growth report diversified in backdrop are

apparent. this past, it's obvious able the quarter, are think achieve Well, no more what it's this. question the but said how we've I to than is different we perhaps in

transform core consumer demographics growth group end rate strategy wide strong Our underlying markets, reach a a intentional today. highly results set have assembling highly-diversified companies set broad the of This of drove of we of reported shift companies results a be a reach strategic and and is allowing towards that and XXXX us a to colleagues these our for made assets. to of back traced deliver we concerted when to can higher-quality, today. business strong our group like higher-growth recognize to amazing I'd

But despite we some quarter consumer this, much very on in headwinds cloud significant to wholesale and destocking QX are subsidiaries the experience our still continue remarks Similar to our our to branded exposure fourth out near-term outlook. inventory with overcame headwinds. call, there our of

first the who our extremely from in demand reminder, issues. benefited a supply we product chain high needed from XXXX, their help own half customers As to of manage

reckoning until inventory some year. growth start second winding over-ordered, this a a is the they happens, that Until it fortunately, rightsized. correcting it With retailers event to will and the in be has unique pandemic businesses constrained. we created these the is with that half fact the But of effect expect down whipsaw in our

for subsidiary BOA, This take share. an high example. Take level to at is market extremely and continues executing

destocking we gains the destocking we a in growth. snapback revenue profitability. of experiencing SKU some we from for are sell-through product and This high that and is placement number on current our growth gaining so once would of to phenomenon. the is get actually obviously expect are this are partners, current unique count brand beyond continue we accelerate new it's but the and SKUs rate share of selling SKUs market products we cycle, strongest on, And significant inventory a Our the outpacing

of X competitive similar in with seeing flow are chain. and trends value free PrimaLoft together our supply its and position represent Taking margins same represent best the fastest-growing the these with businesses. generation. cash We They also differentiation, our strongest broad BOA, propositions, given of at some the businesses

and are these growth down incredible getting consolidated the unusual astounding our still PrimaLoft strong model pulled reporting an show confidence overall rates BOA back ties majority will with by facilitates. Outside reverting to So well. extremely growth. that that performing growth adjusted phenomenon, once growth, they're our our gives business fact business headwinds to X and are remaining EBITDA. delivered destocking inventory an normalized diversified back The XX% again subsidiaries subside we in the This the performance organic of subsidiaries, we that of us

Pat, performance over I'd to like and to call turning Before our summarize outlook. the

first we an destocking market QX. the While other we quarter for to of the expect goods inventory and earnings anticipated, End negative headwinds that demand our and was remain in majority had than effects suppress stronger of strong. services outstanding

well as the moderation However, goods as the the of we to end you the by market experienced continued majority has progressed, at affluent continues sales April some incredible to businesses a as growth the in that performance we headwinds Lugano. of I consumer modest economic most we Notwithstanding at over consumer will leading uncertainty. Notwithstanding in spend of and to the XXXX, time to the now the half of QX, sell confidence trend. our call Pat. And encounter for gives evidenced that, full quarter aware, are which strength consumer, slowing, our us subsidiaries during we positions to affluent growth second deliver in our this us turn year. With will expect more the the

this grew expectations. discuss Thanks, from if January pro results, be when EBITDA Elias. combined exceeded forma On revenue and as will it we and X, our a basis, slightly we Throughout presentation XXXX. owned PrimaLoft

continue to in in and Elias agility inventory backdrop, XXXX often As multiple this challenging led differed order disruptions elevated from perform and the patterns and the chain to quarter, customer our XXXX widely-reported management areas employees that demand. skill. materially levels teams end with discussed, and, in supply Despite created

subsidiary on our begin Now businesses. with our to results. industrial I'll niche

of XXX once the by partially and in For the revenues mix of first company as positive more adjusted quarter raw flat approximately continued increased margins declined provide advanced the businesses margins to almost our basis of prices declined sales headwinds. shipments. to more and, slightly exceeded of revenue Adjusted markets and niche increased due as the to quarter the quarter faced continues XX%, showed quarter, first solutions aggregate, the gain its growth however, and industrial EBITDA, XXXX, bookings more in EBITDA expanded expanded quarter, end first to work Arnold in solid management points. In EBITDA revenue to cyclical were versus in as adjusted and over material again EBITDA by by their XX% customers. Outdoor's Each expanded technologically efficiencies. some Margins XXXX.

foodservice continued well costs a and led made ago, him scented to company's pleased revert and management Sterno, the business year progress levels, Terry by oil the demand segment. well, reminder, back Outdoor's were transition its continued quarter. growth a driving Sterno's than in Moody, early less a combined for to we pre-pandemic the business team. At managed in by as his very As wax CEO, and are bit and a catering planned performance at products solid the

consumer our businesses. to Turning

Marucci BOA, by For and in EBITDA BOA of remain the X% at in the Velocity, first record showed was adjusted our offset increased our QX at EBITDA SKU sell-through. PrimaLoft Though decline and XXXX, many the as less by supply X%, strong in growth simply, sell-in revenues Lugano, declined XXXX, excess inventory and confident Put company's X.XX. in quarter share, a market and than counts we a segments, versus product positioning. chains very

with CATX an categories, continue year bags the the did The the targeting once growth line building the freight and a this Also respectively. of grew calendar EBITDA its non-bat location a from the operated Beach full membership quarter shoes. Marucci its Beach. in Privé in second shelf maintain of its will as grew with slip and when EBITDA with its multiple their salon significant experienced and adjusted and the performance exclusive over as and air last by above exceptional Washington, XXXX, and year. early Beach technology and the first EBITDA salons, also XX% Under its QX grew efficiently. Lugano to Houston this X.XX The company a similar and line in encouraged to recur XX% its XXXX year. expect professional once D.C. Alpine pressures XXXX. XX%, on XXXX was grow retail as saw of international salon. as were continue adjusted the Lugano quarter. Greenwich, incorporating, in half discussed, Lugano potentially of strong strong and the trend with strong second QX had opened revenue first we year incurred XX% Armour by in U.S., quarter, its have boots, date to strength we and rebounding speed XXXX. Similar as compared the along we space and by end, both bats broad salon, channels XX%, in markets and salon, growth sales, prelaunch currently Beach, Despite before partnership its third growth the levels. We company to revenues, company showing of again club introduced flagship effectively, XXXX revenue had in Palm from respectively. recently target including XX% officially sales and strong believe to a helmets, The in exceptional in quarter and by benefited company back completion As quarter location, company in including quarter benefited Connecticut EBITDA fielding not continues growth. significant strong domestically is company's sell-throughs end in investments Lugano, diverse out growing quarter Subsequent training The and manage Newport Newport led by team to QX company's gloves, Newport all the BOA's well internationally, had new of to there newly-opened again

leverage and did revenue down target showed in slight at continue we're efficiently, in X.XX customers and adjusted team decline an job EBITDA as the excellent levels. both growth the their inventory gain outpaced EBITDA as growth. PrimaLoft and operating quarter, able a pull revenue to Additionally, to effectively

company's competitors. financial Point-of-sale stabilization immediately as strong during and is it time the the pipeline acquisition, remain date to following in the the briefly broad Velocity. and has has and bullish as chain project XXXX of inventory activity market And fully our taking following we outperforming where prospects, met PrimaLoft's believe the share. about company impact we performance not sits believe rebalancing, in financial given of for we The chain. Touching post-pandemic. performance expectations slowed While inventory it on its is supply at ever, is supply

basis, both continue partners cost examine structure have will segments sequential In the move the better a Velocity's reflect in of performance of demand year, inventory patterns. our options rightsize we additional quarterly to addition, that levels. Though through to we as to parts it retail sought further to current company improve is reduce belief on

performance his the will we first whole, in pleased a the businesses now As were with turn the very financial call comments to our results. of over Ryan our on quarter. I for

Thank you, Pat.

to filed the subsidiary detailed XXXX. XX, results limit was results our ended XX-Q today. earlier comments that my March Form Moving for results individual to our since overall financial with the the consolidated the I quarter in for SEC are largely will CODI

sale As our XXXX and, XX-Q. in occurred of a reclassified discontinued of to quarter operations in our therefore, reminder, the Circuits Advanced first quarter was first

Now benefit was March PrimaLoft to our interest a third compared gain million the in quarter in in primarily prior quarter X% was income of basis, a on of quarter financing the above was due income the compared for last PrimaLoft prior our decline first of rising to consolidated to during rates. Adjusted result $XXX.X in The The Advanced $XX.X quarter year. XX, year $XX the year revenue for first acquisition. $XXX.X was prior year. was expense. million was The results. the This the million, increase earnings quarter from first XXXX, our compared consolidated up increase interest $XX.X quarter of XXXX. $XXX.X quarter. result PrimaLoft the to primarily the quarter, million million, net and the in offset net Consolidated primarily of period. by down to EBITDA as interest a the the million $XX quarterly expense first sale of acquisition Circuits the million year-over-year of for $XX.X higher at On million increase the the of Adjusted XX% to was $XX.X first for increase acquisition due the expectations up an million, reflects in ended

financial outlook. to our on Now

earnings in relative our quarter to performance the adjusted adjusted increasing are of first a As our we and expectations, the estimates. strong EBITDA result

million the full million, our end we adjusted the $XXX subsidiary to For at EBITDA of consolidated XXXX, year million $XX bottom range. between initial increase $XXX expect and range of an

our the and of range adjusted earnings increase For year range. $XXX million million, the between at full of an bottom million XXXX, initial $XXX we to $X expect end

mid-single-digit covered, As adjusted second then headwinds the discussed and and Elias EBITDA in in have a Pat given the expects year. the and a of challenging sequentially assumes reacceleration outlook this second quarter decline percentage half a

sheet. to Turning our balance

As of was approximately cash, million March million and our XX, available $XX.X we X.XXx. our approximately in on revolver, XXXX, had leverage $XXX

the by communicated, have ability have capacity as substantial And liquidity. upsize previously $XXX additional We we to an our million. revolver

our our levels. the During used of leverage the the therefore, balance, Advanced quarter, proceeds Circuits net our revolver sale from -- we reducing to repay leverage

add-on approximately subsidiary Baum provide financial and million quarter of liquidity In we Bat. support they present $XX and With able opportunities as compelling end, subsequent acquisition addition, to ready in themselves. invest we they capital, our our used Marucci's stand and act to fund acquisition growth on the opportunities to subsidiaries need, with

Turning to provided flow cash operations. now by

businesses' of the disruptions. in we support of as decrease prior flow quarter produce consolidated CapEx. we remaining total. Also to the conversion to continue working our in the strong XX% require company respect However, fee a of inventory during strong $XX.X when operations, the first needed of levels cash million performance. the to $XX.X expect by the operating we working turning capital in result our of manager XXXX of note in used result year management from many during million quarter, finally, in substantial will Lugano During for PrimaLoft. And XXXX, a primarily $XX.X million the a to first quarter of to capital We supply XXXX, quarter received owed from investments waived of cash subsidiaries chain

of to of at quarter result subsidiaries capital $XX.X the compared their continued During expenditures incurred Lugano increase primarily in at the prior XXXX, of the The first and was period. retail support growth. million $XX.X to existing of build-outs we year timing X.XX million our a

$XX of between $XX total million. of XXXX, year CapEx spend full we the and anticipate million For

see our to several will returns of at capital growth primarily and be We The Elias. back on have and salons increase to short current continue subsidiaries payback invested stores. With at the periods. they will I spend store at for from turn XXXX will we over believe new expenditure as strong count call its Lugano its now to continue retail XXX X.XX that, retail capital

the Thank to providing briefly and by strategic an Ryan. I'd like update initiatives. M&A you, our close market on

last has half changed believe XXXX moderate. Deal will in of continue we In not headwinds of since improve as economic we in much spoke levels, activity suppressed to below activity second March. remained terms and historic well M&A, the

to and front, ESG continue key our the execute strategy. our we advance On initiatives

recognition variety our to silver Nations. the During in be the with creating an and actively corporations throughout clearly Catalyst quarter, to and XXXX, by organization the with sustainable like our with impact work purchasing we've outlined we of thrilled social our had achievements power from that highlight. Reflective badge goals. were badge partner to social to development are commitment of XXXX planet, used a silver We to I would we people a that partners goals positive way United defined with organization of awarded CODI's the the awarded the enterprises achieve organizations for

Looking supply sustainability at Magnetic create supply our developing annual the inclusive responsibility proud framework, the and operator, released with opportunities. Arnold their forward strategy. core more a to to quality to Materials, outlines which of future The organic goals our and in footprint open in environment proud have and against CODI the progress for Q&A. execution earth an environment earth their work and look which our pioneer of develop EBITDA the Technologies report, generate companies. to our pace a ESG of testament with chain Last rate. With more partnership month, for will carbon significantly and a first of am BOA lines reduce social that a subsidiaries its to challenging their circular we're rare fact the recycling chains a are able impact together our this quarter domestic industries creating conclusion, that, Cyclic and on please results, amongst announced unprecedented materials. I rare of elements. to for continuing program, made sustainable earth were CODI's and up rare benefit we Cyclic our revenue we of Arnold path. In diversification successful accelerated growth volumes growth amongst subsidiaries, operating speaks equitable such the

Instructions] from Your Securities. [Operator from first CGS Solow line comes the question of Larry

first, guess, just guess on question observation. I I

expected. feel off So started year than strong, really I better the like

into guess more a trying than acceleration longer and a the or end most of slowdown? sort sequential sort doing QX strong Just you market a millions I are more businesses expected slowdown, guess, of expected of feels little combination originally it of than or you there it larger bit the inventory, And the ones of are still bit some to inventory out Is the the of -- on particular some percentage. outside a or -- drop little are I mid-single end that digits, market businesses, originally parse inventory because like drawdowns in drawdown.

little So market bit I'm on seeing you're color some get slowdown. to bit just of little a more extra trying a where end

Yes. the was good Larry, you for us. really question. for it's and Elias, QX a thank quarter

yet I when as business say in almost the we you the better general, at in I of weakness thought rolling fourth that -- there's that's which the of continuing. on We're talked and really expected Jolt had terms than and down sat would low think is quite think taking on And I board. percent more guided businesses and we obviously we're digits. see data we this job there. of banking There's kind ago macro we're well. Coming the lows performed severe, kind when on be the we openings. guidance. weighing that, of in XX-plus in performed first some out regional aftermarket came destocking, the really what months our of think kind just environment we see the outlook couple -- kind inventory across about sector. the we double X-year of might weakness It's our I But bank issues. right here just into that weakening. conservative earnings continuing of out again call, to us kind The quarter significantly from single had, starting really QX, right obviously, to down some cautious BOA our of high a of now it's quarter now, we a digits hearing in couple down There's a

but of cautious, you're kind want a we is just Larry. would I outlook nothing say, would and of slowdown, There of I may QX what our now hearing first us for nervous be that So in we example, of the DTC to good so would our seeing, is cautious now. really seeing say be There principally not being pretty is materially conservative. bit more in industrial growth. business slowed quarter, slower. terms we're kind portfolio, incredible right more little X.XX which I that bookings would seeing within material the say has to was get that it's bookings in growth

there in. improve. So kind new the some other are slight of come off, inflationary orders a say the of I of on margins But pressures in coming evidence would that seeing some slowdown are we're side,

We I within industrial would continue. to think improvement portfolio. you that in our we massive probably expect saw a had margins

results of as would respect lot we're I in I at quarter. continues some we through that weaker to of nothing think materially be with least expect would and to we uneasiness now all quarter anticipated, us anticipated here macro say go the is they're headlines, to headwinds, that to were the the that forecasting the say business we going we forward. And an move right but just inventory points second about they I that as destocking have a there So in that these to second what

comes and is and get destocking booking consistently along. of that hardest. a bit then weeks the seems I good green of right which start order be PrimaLoft, get to need seeing on schedule are, see say, to improvement we most an in BOA we is that are That's the would that shoots at where good that issues there, we where bookings of hitting to little here and probably a now. where I week There we think some,

achieve as But where annual today, to we general, Larry, be are and that in kind that on not sit of numbers feels confidence a kind are. outlook a that And to right now, in hearing we immune headlines we able better the have being we'd of think a rather some the level bit we're be we all higher of we of conservative. to and set out. I So just

ask I fair. just going was that's but to you question on Lugano, a Yes, about maybe X.XX.

So last did give grow. plans I mentioned know bit remarkably years has obviously, could there the been where on well through which little and have the a obviously and you few other us still that, lot that give growing couple store X.XX. big power quarters a little us Is last and really Maybe growth new then -- struggled DTC, you of businesses businesses opening of just driver. COVID just for to Maybe they just a slower? update continued

Yes.

lot Pat, I comps So by our provides and law say for year, way. in X.XX, professional off. that was is all into earnings there, on and quarter. Selling consumer strategy agencies consistency And first a the Larry. strength out positive at a that's again, our remain really the came lot a good comps, of diversified for This But business we the DTC of enforcement right, in company this typically the give the brands this very business. that's positive of sign. A think QX I'd of paid of color from sort a unlike

year, than them just we little between new compelling. but and economics are less to planned it, XX it XX As continue the because this year, last we bit continuing have, stores opened be are the to to relates a store, open very call to be new

Lugano. Got you. I slip one just if And just could on more,

rapid there. Just obviously, the growth

-- the year. -- wherever. guys growth by amount growth last an openings? be can't open opened you the salon new salons feel optimal the you like think must I driven X Is I just There to, is

forward. a am growth in been going on has just to and color trying get on I feel But I little that? which more any will trajectory, like it rein amazing flow. thoughts So

It's customers, salons. sort size, and to increases adding from right? come and all by also in openings. And continues partially not -- those growth Yes. those of by customers. of lot The salon order we're is And average driven so increase new a driven new of which materially,

Some come and they relationships from of equestrian or events. may may other them from other operations, come our

can't complex give you -- more this picture it's where per can But times, short out there, is a next so you I formula of Like a much X.XX, se. -- like everywhere. can't from equals that, point So it's stores really it's I not they sort answer right? our coming

Your next line from from Chris comes Kennedy of the question William Blair.

on in the for you given visibility talked the the confidence snapback second and the Elias, what macro your talk side, about BOA in for half just PrimaLoft. about

it thanks that and Chris, going right? tell. be Yes, is to little deeper for going I of for a in hard the is is The to question, bit Larry of either of us exact it timing, kind can't you -- kind give or asking of was good terms afternoon. sort longer, And inventory of drawdown,

now. and isn't of that sales significant sitting partners get consumers know this the of amount how months their brand I Chinese of were both zero in about globally I China, China kind our material where then and are It's market just think just kind that the of the that things having we're of partners that of sell greater we number policy inventory. sideline, brand China on China-centric a you COVID PrimaLoft think sell BOA the customers one to many market. it to product on out if But the impacted really and of a was beyond

it's able back, China Chris, QX, inventory back. I being to QX. and that's COVID or reopening clear going us to coming for it's snap can't to think behind Now tell and consumption with zero you us, way I be clear whether the

a to specific we of snapback, And going overhang accelerated on don't won't higher analysis, a I think is we're But sell-through there won't you of confident numbers faster is I know the the is than be. give basis. when I amount sell-in. how can I you tell much. dramatically our But there -- feel think from timing we I getting inventory in very through just on kind and this

provide chain, to kind we And goes the X be with will that so point, given everyone given in XX% of what would that growers sell-through. I possible, Both to sell-in a start PrimaLoft. that, and amount additional sell-through have we us we've is at obviously far in and been or jump between right between that revenue any of is in the delta now, supply our differential fact some which had kind of over at of point, I BOA do material now This isn't just the excess BOA's and right historical time. some not growth north both be talking to were revenue this of snapback and than to SKU SKUs has in deceleration amount kind rate consistent on, match is that going PrimaLoft. of exists also of have at inventory no and of probably stronger profitability. One, well that would unless sell-in which And could of sell-through. the been about, the point measure think, there that a growth the that

of a to it picking what be, that it minimum, And it's the to snapback sell-through when a are to massive earnings share, of going going is. good revenue the so really in And amounts is our because kind start and opinion, significant to at fact violent up drive in we happens, match add which will, way. growth just

crystal a I the able we tell do I had ball you it. to can't be So to timing. wish exact

I of the issues. inventory some largely working through think we're

kind every in representative footwear inventory. going. but by which of the the to you industry is I largest quarter, ends company shoe that don't the of rightsized said If where May, thought larger in representative largely you go companies, the company, of of company, that's that the wear end their they world second footwear I is of bet be know they would with some

analytical and that the with all is fourth So some to really data guess, as the this saw in think coming I now. But the if I probably to revert a in we we about not some to much and this But we 'XX; of at back we've I think started that's of QX we ready of easier I the more in earnings of 'XX, going to both from frankly, take going a get think take And the BOA, had even QX, we're be very put if off. the And trying think so in not this result think do businesses. third entering fourth or these PrimaLoft, seeing going on the headwinds quarter, gets got going in fourth start snapback start quarter And quarter started comparisons. until quarter it I back comparison easier. that it's as kind anticipate some for strong. year to right those normal, of quarter orders to to of the in the much QX the on I look isn't together through you're have of first that, can what severe pressure it's because mosaic then based snapback of a even we very strong to in because to hearing getting just is we're marketplace

we and as with the the the predict very to going that second year. think be get I the happens. why So whole can't growth, year, growth and portfolio we'll show deliver confident really be all but when half exact for get we're strong, we're will BOA we feel and will good and of the PrimaLoft, very feel But at good that's any going when to snapback certainty to it it's I that really

your not on a PrimaLoft issue? on that. is there? appreciate that to there clarification more going expectations, something I is the inventory just related No, And initial Or primarily then meeting

orders is been at or expectations. again, customers new have rollouts the above been It's and confident replan our than and existing less the perceive just, technology the customer in what we has our existing of to SKUs, the Their we're expected issues orders been sort above Yes. expectations. what supply chain. acquisitions our Their have due at inventory or in Pat. and we This

Koranda question ROTH Your Matt comes from next from MKM.

Matt. Zabran Mike for It's on

retailers? does we year, growth aggressive line in still under bit the a the up we this when to we're and be typical top seasonality quite lower were Both margins to seasonality In start that for XQ should stocking summer overall in mean the expect What key seeing sell-in. Velocity. with less from expecting from given of turn, Velocity caution some year? But QX throughout the pressure are quarters? retailers starting Just for

there. lot a there's Yes,

So we than QX, will than be let QX. it little. QX a be me better I'd say QX think unpack better will and

hunting given with start sense. me dynamics let do for and strength the believe than of we around those that So we that in side hunting, archery about in sequentially, Within more up right? you talked gearing makes that, if airgun will see the side, sort

clarity. see very normal. was than smaller much year don't would of have being really a the QX we So weak. too QX that, percentage Absent I as

Got it. That's helpful.

how year, well from restocking? different Moving capital, takes the salon the inventory should specifically we're about the are and How the key to seeing from inventory. caution build-out to balance as retailers move about given and as working inventory, store puts we around on thinking X.XX further throughout

Yes.

So or inventory was and guys That growth really really X that in to saw I quarter. first that the of the was in but of statement we businesses. X.XX at is use cash saw exiting least think was both you what quarter, Lugano, the and also support flow first XXXX, and the at

for progress other amongst type support continue though, to to progresses. as working the If the come inventory. see and a inventory through a growth, conversion of both subsidiaries significant as will this Outside So see expect we we year right? of cash to we we Lugano, capital, majority we business them, continue exception that the the year, down businesses, should of with being the X

Got it. me, one guys. That's helpful. for Last

update changed a for And of stand care just in on to and market within XXXX health how the the building health there. Just all? current size about speak we team specifically acquisition just in out maybe at maybe Has an front, a pipeline private valuation, care. the relative where appetite on potential feel the we

Yes.

kind Team various same levels, we that start then a by a from segment have -- and and acquired until Curt we capital of start assisted then up really where the kind no in from Roth capital human at company a get human standpoint. conference were of how couple that to staffing X of major the call. building remains by led kind kind or last we update vertical we'll that's look and will of So within firm the

suppressed, In of get of in-house. want Unfortunately, the there. to bank to desire what's I some and kind of be happening of it's helps. it in M&A kind a health to We to remain continue really remains suppressed around cautious. care terms Sellers deal, of don't be do all markets able assets very market think in kind the Mike, and categories. invested kind

So going to territory rated when capital you of see and conducive not of of out right regional markets cost their banks junk broadly. now, that's the kind into business M&A of going just kind capital, investment-grade

that, see huge on to continue weight of we all kind being So a a think, I markets.

think in federal prior free year. until now, of are for economy that been Now than buyers, deals has kind the more have more 'XX say are that capital just care out health course enormous capital we is pricing through sideline. And of a consistent we there has continued the on one business to couple that all been over point in was one I capital last assets kind economy right differentiator the say indicative generally with where the short-term that model. private has amount be It's an of there's a last that as And been funds money be pricing of a kind competing horizons. of a the of in funds that there equity X.X and lot of it's of run-up against would that the key X% have and I to and being CODI's of rate private years. that costs an these should being the of there elevated always it Those the all raised just raised really in fact has have said, up given was relatively markets, would when that priced. think time the than the I'd come broadly, about sitting year, you where to things anticipate, pricing massive

avoids And moral and and when of put that it to competitors work a it, those private to suffer you of pick in to general and X-year hazard. Our work lose the partners. management and investors and really efforts We that eliminates between or really incredible to model our we equity have more be either business and not creates interest money able want that luckily, patient from you put moral and hazard put were to divergence teams that to choose over period. money work

into really It's to sort we're which back. in creating windows under to when the commitment can their and assets P/E the funds a of our that Now being ate come this of of and if opinion, level in tightening money market. cycle X/X equity, X-year put limited of their flat you time that years number up desperation, the basically private we're work. X.X markets overhang of there's create -- will on seeing traditional think kind now Fed M&A That

you elevated. not And I go can't going up really say, to in make some in are driving that, today you're of couple is can now players head. assets to these of there financing, in of that remains when health on. are been because pricing take care kind or scratch financing I a a your if think being health outside cases, So much more is not seller the at just space, some prices. prices We get become care the the a from care of private can't market time you And is and bid year a out accommodative, though now health overhang bad market really because financing, company, But even X find assuming price of deals. discovery they have a markets market that would

high this the way, I think is part -- last for by something of better dealt with, the it's not pricing will decade. it -- So we've the

continues right that not But number in now. say that's see would unique of we pricing deals elevated something for limited it's I to market. remain the So

Your next question Jefferies. from Kyle from comes Joseph

zag. others acquisitions zigging Just when pandemic, been thinking kind kind history sounds X least of But fruitful, you been like you focused at were COVID, of has it had stubbornly during just of follow-up a And there. a have have Obviously, guys there. so the rate, high. very prices health in did allocation on which the CODI, obviously But but about thinking about in sound terms given there's It your kind the in environment doesn't kind in leverage about given the there just like of thinking all guys capital a out capital the acquisition it's market. and of how of environment? a are platform is layer-on dislocation strategy, now acquisitions market dislocation you but lot this, allocation M&A., where of care

Yes.

you're think, Kyle, So right. one, I

We levels. lot smaller. is typically in different comes some to we are most synergy generally technology, much And those there's much or extract. price, acquisition competitiveness add you savings to revenue pricing the be of and into of made brand Bat better recent to cost look to can of you at going that Baum We on and look opportunity less, we opportunities exist. synergies add-on that's have much at then a real Marucci revenue a And great and kind be think and The a Sports. at better more that acquisitions, looking tend obviously, kind either that

have acquire thrilled either we more company would within a kind more to that or acquisitions, opportunities not synergy just see acquisitions good But portfolio. like I anticipate we're saving be of from our of bound-type cost couldn't terms but So Marucci, going to that. in add-on

we you're fetch there is new platform elevated seem kind cost are opportunities into the I there trading and that to dearth that have. of also right or the take X, out think that kind pricing when borrowing that doesn't X of account given new of they

and we of value, can And and probably we come more do to we'll great think platform, can move is sometimes up there quickly. it's think can that find I think although really one. things a stretch we these a a bit

basis, don't I going likely want but that So less a bit just find that. a we're to it's would it to out, say probability-weighted rule I from

kind priority and So Lugano of within top I firm our #X when our the portfolio, list. high-return to you of say think goes about kind allocation, would clearly opportunities fund to that the capital within of is

and been we've in as that been in company. company, growth You see the we've rates inventory that generated generating building plus XX%

has very on have return a invested store there's capital. of capital. to continue where think invested on high I very return invest a to network, out we've been there lot been able get its another high to X.XX building by runway company and

be need we plans. really And our our will #X. Priority to dividend think that a clearly will come So be with right buyback. by. then priority although And a to little returning long-term know, to will platforms allocation add-ons feel be principally capital harder and I doesn't on top capital our goal the through to as capital third now, #X because companies, acquire bit is buyback priority, growth grow, grow, doing is like of so kind a of consistent you

from We of are worth. what our are in a just short-term businesses disconnected period where levels reality extraordinarily the are these price

value will destocking, accrete snapback both happily because to value of growth us it more who accrete our want continue then through averages. to BOA call, shareholders. And reiterate buy And If so sell back a its going and rate makes short someone I and to stock said sense I'll it today. term-oriented last our is businesses, our PrimaLoft to historical will shareholders be and so and stock on are we'll our the conference for for because to inventory there in more those will are our back back revert long-term it to this oriented buy and just big

to do sacrifice, now a going capital buyback. of for through accrete balance on And stock to opportunity future best be because execution our is so even it's our this value acquisitions for a sacrifice going to or using shareholders acquisition where the potentially sheet to we're us, for

that And this some will and But react will so the back, think that an of stock opportunity. with come priority. at current the and high a be point, has reality, less in maybe environment allocation become capital I to current

Sean-Paul from comes Your James. from Raymond question next Adams

know correctly, PrimaLoft. like seems you that is continue BOA I everything don't XQ. guys past had and going understand with I you much you really if this if Basically, to pretty It hit

any as as goes, a PrimaLoft guys might be seen interest rate little adjusting So other on run you that bit in have difficult. any far But regions?

or So then globally, through in mean when to manufacturing We -- shipped do the I that you now they not contract on that, snow right? and Yes. that -- globally, Asia, be we our partners mostly work sell sell end projects working those globally. we sell Asia, with brand partners brand other we have right? a other then outerwear accretive. of our we see have some to and gear, in you'll who Any specifically PrimaLoft in But globally. I'm then ship Does partners customers, think our regions? sure. and lot could the -- than are I say regions, sell brand Europe We So on in everywhere, Asia manufacture make of sense? manufacturers other primarily we're

of Yes, meant were industry. Pacific approximately I from any you so sell that coming which -- revenue But XX% because Yes. to is, to Asia getting course, of -- from interest know the clarify, the was textile directly if guys of didn't any... I

the exactly that's up. Does contracted of So brands, that sense? a it make We there. can't from ends where pass-through where buyers are and kind there's track the

product, you're buys that if the right. comes where -- revenue the that's but That where So from, that's consumer the actually, sense. not makes is

conference are ahead. back questions no There would go further the over Mr. Elias. turn time. to Please this I to like at now

you, Thank operator.

call and CODI. you on thank your in joining everyone today's As like for for to always, for interest support. us Thank I'd your continued again

have an conference This excellent all, day. concludes you Compass Thank call. Diversified's and