Compass Diversified (CODI) 28 Feb 242023 Q4 Earnings call transcript

Good afternoon, and welcome to Compass Diversified's Fourth Quarter and Full Year 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.

Thank you, and welcome to Compass Diversified's Fourth Quarter and Full Year 2023 Conference Call. are Pat CODI's Group Maciariello, today CODI's Ryan Management. company and CFO; COO the Elias CEO; Sabo, Faulkingham, Representing of Compass

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

statement. me to safe read allow the harbor Now following

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

joining another for to strong capping report for quarter, fourth I'm exceptional us thanks everyone, Good off today. and afternoon, CODI. pleased year a

results Our moats competitive outperformance, of defensible financial premium even that results demonstrate drive uncertainty. economic during businesses continue to can owning These periods highly with are intentional.

our year fifth our subsidiary by XXXX transformation high-growth, tailwind is straight for on driving business XXXX, evidenced marked own as fourth manage quarter. experiencing Despite challenges a in and significant embarked businesses. EBITDA innovative to growth. of In adjusted our disruptive and our we strategy unique a business, This

prior Our branded year. produced EBITDA consumer adjusted results subsidiary to businesses forma pro essentially flat compared

subsidiary businesses produced growth annual other adjusted XX% in the On EBITDA. industrial our hand,

vertical, remarkable we delivered annual brands producing once own health inventory add more throughout again care again, revenue which XXXX. vertical. believe reduced XX% into the masked strength we volatility, issues Lugano a the will growth. branded as the and adjusted yet underlying be Our further EBITDA our led of financial In growth of consumer we diversification, enter most growth of to destocking and XX% reduction subsidiaries

disruptive has we industry. Lugano have high created As a mentioned, very repeatedly within innovative model business and the jewelry

XX% We and fourth continue invested to to subside. businesses inventory investment quarter, experienced company's year expand destocking consumer that strong branded is headwinds our over to fueling returns growth. In capital capital strong position, adjusted the as growth fund subsidiary exceptionally the the EBITDA realizing footprint company's inventory on started of prior rapid

trend level remember tailwind believe of turn the in up the a will throughout continue of We which higher growth enable that consumer expect will experience much fourth to inventory You year's XXXX. in prior rightsize many we a making for we XXXX, for businesses, destocking growth channel XXXX. our lasted inventory and a major started quarter will into didn't

and subsidiary growth the year. Our pressures margins EBITDA and industrial businesses in trends. The resulted above long-term EBITDA adjusted adjusted inflationary in double-digit generated growth boosted fourth easing of quarter full

this progress to healthy expect We through remain vertical industrial growth. remain at levels. about and back trend for optimistic Industrial normalize our vertical to we XXXX We our XXXX in very tailwind towards backlogs as revert since

to focused buying in and grew by in important We've and with alongside Since opportunistically with We divesting have transition disruptive quarter businesses our last power of fourth unveiled businesses. I'd produce efforts XXXX. like a outlined has competitive we boosted level the shift towards to growth seen return in growth. subsidiaries managing begin we change more of this positioning. focus Now really faster our efforts acquiring rates. fundamentally been at and more our consistent month's the innovative the results and Investor full our as to strategy detailed strategy on manifest to then, this engine of Day year. This growth our the faster their industry our innovative our and disruptive The management more numbers that evidenced

at vertical experienced above in example, like trend, with XXXX the BOA other achieving us we our we Lugano in basis. X of This and near industrial what our subsidiaries So or financial it trend, X rate drivers core growth when XXXX. growth not subsidiaries PrimaLoft, annual growing of diversification aren't reduces in our both or only growing likelihood did for also have on an volatility, but and increases

we create outlined shareholders Investor value for our As way M&A which another in through our at we opportunistic is Day, transactions.

of Honey Although early markets innovative, Sports, In to XXXX, gain the company, the on M&A a our were core the our shareholders, space. disruptive we for company of growth consolidated most a M&A value transactions divestiture our hygiene acquired for for we able Pot believe growth long-term opportunistic create decay in Marucci basis. were significant Marucci an accelerate and minimize of weak feminine likelihood the shareholders. Honey We and like consummate The Pot rate XXXX, realizing

like X to topics. the call passing Pat, over Before I'd discuss to

a First, the will think simplify address how CODI. macro evaluating believe we're you the and trends shift to we way seeing we which few about guide business, second, our

few a adjusted business. how by are is on our First, branded consumer XX% Pot generated thoughts affecting our Honey consolidated vertical. Including conditions our subsidiary The approximately EBITDA macroeconomic of Company,

the levels historically from much that XXXX, notwithstanding declining years. past consumer easing Unemployment the high So to albeit years. the in to grow pandemic-led grow trend, pressures far again and at existed past transfer lower savings be conditions the above to continue couple healthy, [ continues X over U.S. wages levels. of inflationary inflation ] have as Wages payments is low at is tighter the over looking savings years. X of government Excess rates for after past real buffered to exist causing continue monetary of

XXXX. believe for branded we in consumer business our bodes this well together, Taken

to which approximately to vertical, subsidiaries believe tight monetary in industrial is green subdued expected by being subsidiary our Outdoor Regarding levels solution Technologies XXXX, represented in the of market at tensions. XX% innovation, adjusted positive, positioned continue conditions to advanced global the due materials impact to Arnold Solutions remain EBITDA but with to global market and a energy. take share negative through growth consolidated used as leading We are market and our first biodegradable to generate of industrial evidenced

to our of continue industrial lead perform and results believe to in Thus company-led a as year have expected another expectations. to stable will XXXX, macro growth. our in our well businesses innovation economy exceeded again far We is XXXX

few Day, about and are based currently Investor XXXX our While experiencing. just we we trends a at the are ago reiterating exists on outlook are optimistic our certainly weeks upside believe we provided we

of the analysis health Speaking simplify own XX we consumer our our and of at help market. care outlook, are enter we communicate Today, the adjusting to guidance our industrial And business. expect some currently across to businesses we the point, we verticals. how subsidiary

we will in own to perhaps help than more transparency, simply, expect on of remain and XX will level this quantify more scale the EBITDA have level. Despite industrial governance that and guidance the provide we future. day ranges and detail of and subsidiary adjusted We a consumer change, one part to done continue this same focused protocols, as previously. companies our To we on as we branded manage disclose

We believe we shifting I that, Pat. as you now the the the CODI be to are easier call over narrative as for we continue own. With will follow of it to number will to subsidiaries we expand turn

Thanks, Elias.

As when as X, we will own be January if discuss of presentation a PrimaLoft as forma we reminder, XXXX. throughout this pro it results,

have year a to we than basis we XXXX, to was in pleased quality the EBITDA positioning it which stronger included by for Pot the on successful consolidated was as our flat year, in not thanks after XXXX a CODI the results On for grew addition, acquired approximately forma Honey very year and far and we revenue In The year-end. I'm our businesses. report one in X.X%. entered, adjusted subsidiary pro of exited

a last Elias saw material in we began our on acceleration abate. to headwinds quarter, facing many the the the over As businesses consolidated as mentioned, basis, fourth year of

expectations, verticals XX.X%, EBITDA in result, by Both XX.X% branded subsidiary and strong our subsidiary and a the X% adjusted had growing quarter, exceeded industrial EBITDA fourth and by and consumer growth revenue our respectively. quarters, XX.X%, adjusted growing respectively. As

In full as and industrial adjusted vertical, the revenue revenues costs. earnings cost increased decreased the products, customers, the leading versus passed strength to our input and lower year, to XX.X% our For subsidiary XXXX. by to industrial we many our combined businesses in X.X% from this quarter, broad with positive saw EBITDA by revenue lower higher-margin In we decline. slight cases, shipping mix on benefits within

operate industrial efficiently and growth. However, continue solid teams management to margin drive our

travel to business will by year, continued and believe to several on Arnold A Outdoor For we impact grew areas EBITDA this Sterno both industrial positive more the activities trend over of by our return have pre-pandemic and be ongoing. continues XX%. XX% and a and over adjusted

at specifically In point years. to out addition, several once last we Arnold, research the in over again investments development made and want the

not a company the XXXX, including As is the products And, medical to Arnold's industries, continues though new a rapidly growth projects. growing significant team -- new in result of Center, add of Technology devices. driver in

to consumer Turning our vertical.

forma subsidiary flat EBITDA versus half EBITDA the pro of and revenues subsidiary back quarter, fourth XX.X% X.X% XXXX, adjusted was XXXX. year, for For accelerated and in the by increased however, by the revenue XXXX. adjusted QX XX.X%, Growth respectively, approximately for and grew and

As Elias they headwind supply have this on represents mentioned, we transitional fully significantly. not has though believe where period inventory-related the -- revenues chain distortions weakened consumer have in dissipated, the had our a quarter

Conversely, give chain, double-digit and color indicate thus the bookings solid the in though to order to and XXXX. their PrimaLoft further moment, challenges by businesses full a at Technologies quarter, seeing X growth are be supply growth in expectations up year on to possible Specifically, of returned of often Brand delaying latest we appear encouraged the in we our far to partners basis. are further are but timing abating EBITDA many they in on adjusted improvements. somewhat, orders the remain, BOA

led to once close XX% quarter growth by our as for revenue the and both year grew in for XX%, salon Lugano increases and the revenue in in transaction EBITDA value. respectively. XXXX saw grew meaningful We and average adjusted and again every

and benefited relocation we In Beach flagship Palm of our expansion in quarter, fourth salon. addition, the from the

We year of opening the of excited the markets. quarter are London about and additional second salon in continue this our evaluate to

businesses very in the subsidiary in quarter. and of fourth pleased with performance As a in our we whole, particularly XXXX the are

and businesses outlook We are for XXXX. our the in the confident positioning of

turn now our comments Ryan on call I results. financial additional the over will for to

Pat. Thank you,

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

for were earnings our from fourth earnings respectively. Adjusted EBITDA fourth at was at million. increase discontinued up Adjusted basis, XX, due of Marucci consolidated strong have reminder, of the in On in million, fourth income income the reclassified gain Lugano was million and year. EBITDA and revenue EBITDA fees XXXX margin impairment PrimaLoft. the sale at our December X.XX $XXX to X.XX quarter million million partially its and was $XX.X performances Altor up of a quarter our due the Lugano the million, industrial This all by million the adjusted coming industrial XX% $XXX.X above and to strong in $XX.X primarily the Adjusted in by The growth $XX.X offset quarter at for up at quarter to to was result and occurred XXXX period. XX% fourth Velocity. Consolidated prior periods. loss year management year. for of XXXX results compared was our significantly The and compared quarter costs As revenue net fourth in million businesses. $XXX.X by expansion and of at growth as the was for $XX.X and expectations, the prior in were was prior XXXX our $XX.X offset an as sale of expectations quarters prior $XX and in year expense primarily fourth X% a Lugano significantly quarter above $XX.X for net corporate been operations sequentially. up on well Sterno, was businesses. quarter to million, Marucci, ended a This the the a in lower million due at to of and in X.XX, partially recorded increase net to compared strong Included the

approximate In adjusted addition, believe for consolidated subsidiary XXXX primarily purposes, benefits. We we and modeling earnings taxes our anticipated tax our a of at tax by lower the than our weaker performance we where Velocity positively was will throughout related impacted EBITDA. subsidiaries much on income that provision subsidiaries, basis adjusted PrimaLoft had at XX% and

EBITDA. was X% provision of However, in tax subsidiary XXXX, only our adjusted

be Now to on mentioned remain subsidiary we same. that to our and guidance would adjusted earnings outlook. in confusion. will January, our reduce our on to we Street and the guidance the At EBITDA financial Investor Providing continue Day our enhancing adjusted

level subsidiary guidance fees. One upon will However, a forma called forma acquisitions, we deduct management third are provide EBITDA EBITDA. a but refer differs corporate This will corporate expenses nor adjusted EBITDA that note, we additional pro to adjusted adjusted in metric adding we basis. adjusted not basis and on subsidiary from adjusted on we pro level a EBITDA earnings

by We verticals, subsidiary Elias providing are enhancing guidance EBITDA adjusted consumer for separately our also and as industrial previously mentioned.

our So XXXX now moving guidance. to

February reminder, a Pot we X Company As on of this year. acquired The Honey

subsidiary be businesses $XXX $XXX businesses between The branded Honey EBITDA year for XX% million. provided and range, between pro adjusted acquisition The The between our will growth for of Day $XXX the of XXXX. full The the $XXX expect million million. We $XXX will implies over our EBITDA, adjusted consistent $XXX an XXXX $XXX with consumer is of this adjusted million range midpoint forma million. our and EBITDA at for Investor Pot. subsidiary This range industrial range and rate subsidiary we be million million

our new in between XXXX to million we XXXX. management to full million $XXX expect EBITDA Moving year guidance, expected XXXX. be in in $XXX adjusted This $XX million corporate million. an and EBITDA compares in This adjusted EBITDA of factors $XXX level range overhead fees and adjusted to

adjusted earnings. Now on to

adjusted share. earn adjusted midpoint and $XXX December to share expect assuming per of earnings we XXXX earnings XXXX million year We same at full and million. shares, count of the At $X.XX $XXX as million the expect common in XX.X be range to XX, between this

challenging XXXX adjusted earnings. Given in XXXX it's operations to compare earnings adjusted the to discontinued XXXX,

approximately earnings lower mentioned from our by at benefited I million $XX anticipated. we as year's adjusted than subsidiaries taxes earlier, had However, last

Turning to sheet. our balance

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

quarter, During sold approximately cash the at we Marucci, million in fourth $XXX closing. providing

cash $XX million value end Pot proceeds. sold yielding the our acquisition, cash to The enterprise of total Honey Trust quarter, for million price X.Xx. common acquired approximately fund with $XXX provided to Honey of the increased an The shareholders. of shares in used we the the After Company also We our X.X in $XXX placement, a Pot remainder private million. We fourth approximately minority sheet by Subsequent to our closing million investment balance on purchase leverage

quarter reminder, traditionally the second As first quarters. our and are a cash lower flow

thus, is second we addition, for In in and the second planned XXXX quarter, inventory our we quarter prefunded during Lugano early anticipate with the first opening, salon significant and the of which leverage preparation first will quarter. increase London the in in

in of third growth in sequentially fourth expect our result quarter strong as EBITDA. declined subsidiary the Then we and adjusted a

And liquidity. our opportunities to capacity they ability growth our the upsize on additional invest an provide our substantial financial present have able ready and they opportunities capital, communicated, and compelling the and liquidity themselves. we acquisition to We support With have in with we by subsidiaries as million. previously stand as revolver act $XXX need, subsidiary

flow Turning cash to provided operations. by now

received quarter $XX.X This million operations, to flow million $XX prior comparable XXXX, fourth primarily the During due we of the cash year's period. of from operating performance. up is strong from

During the decrease $XX.X used million fourth a year. working from the of quarter, capital, we million in in prior $XX.X use

XXXX cash prior the operations million year. compared year For provided $XXX as the flow to increased by full period,

has million monetized generated of Outside has significant fund the inventory XXXX, an during invested strong on invested subsidiaries growth. and capital XXXX. inventory its working in $XXX experienced. our During Lugano Lugano exceptional to This Lugano, investment growth enabled capital remaining return

to finally, expenditures. capital turning And

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

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

at invested see now to our for believe Capital I'll XXXX growth of returns in strong Lugano salons. With capital several over Elias. will the they on short We that, continue payback periods. turn be will new retail have primarily back subsidiaries at and call expenditures to

Thank In increase on in the fourth and businesses you, to briefly update Ryan. I market also coming quarter, not to the would deal M&A quality of the only but close an initiatives. providing by market. in activity, our strategic an we like saw

the to leverage in function as continue consumer. of environment, specifically competitors a struggle Our buyout financing with current

great cost that a seeing of our environment be which are to an in believe to us advantage acquirer. We expand is for significantly this now us capital leads time

Honey perfect example. February acquisition Our in is The Company a Pot of

competitors pulled just Our financing is the to this done. consumer how market in have, which get their dramatically able back as we partners deal were

an level multiple on-trend financing a by For we our prospects permanent the Marucci had and we to capital optimism assets of at average. in company than Today's structure the allowed to when XXXX the valuation large able health better return with yet quality market like in years. that and than BOA. Today, driven uncertainties sideline, that competition COVID We're were reminds we personal past a space, able to consummate was us us lower of attractive have haven't at transact that in well-being historic years. M&A shareholder buy market more

stakeholders. focus On our to front, but our about creation success the is ESG the our mission, long-term business investors to our of is This commitment reflecting continued responsible continues transparency and focus our to not compliance, for only and value be essential and for practices. ESG integral

initiatives governance include and we release QX We which of emissions, human report practices. capital sustainability details expect in will greenhouse our first to gas our

with vision. will continue and sustainability seek aligned acquisitions to partnerships and ensuring our we our that that both responsible align Additionally, is with long-term our growth values,

strides conclude, aligns subsidiaries Pot quality our To vision CODI's make company The type of that of Our of most acquisition as recent continue exemplifies Honey improving upon whole. strategic we to a the great with objectives. and the

and delivering in build remain we efforts acquire further identify to similar shareholders. growth our disruptive for of our addition, track our upon In to steadfast businesses record

company their for lines like transitioning I'd and into ago. entire we years please were to tireless team X With a this thank in the than stronger the open for CODI Q&A. that, Operator, business different efforts

[Operator Instructions] Solow of from CJS Larry Your first comes question Securities.

you year larger plus? just a on you expressed -- some just Or first on your acquire going your Xx fits kind least. first of into environment. up sounds I'll to lot look month, your I'm is your And Xx at better guess during the the be I like that? idea gotten the going Would It the maybe do to Great. leverage it sized curious smaller go you might too, right What's how to selling around at subsidiaries? ask, ability with to and entertain acquisition like sweet half sounds last be question maybe assets? would of of of you spot. as

floor. afternoon. Yes, lot the don't to good Larry, deals say But better. off say for of kind better. level I acquisition 'XX and thank the the of at 'XX it in and would that high XXXX good a were very and as companies I to would I compared kind I'd when is say I clearly to -- the you it's and floor. sort we seeing coming. that market a some hard It's question, And quality represented know refer of were often we fall 'XX, think

a as So but come only deals, seeing it's pickup companies we're we in pickup. And some number well. clearly of quality seeing the through a also not are

well. bodes So that

it a down. come of not outside then our up the mentioned X.Xx It's commentary, I will to a leverage. year. as just we're partly bit floating Regarding at window could right first Lugano. [indiscernible] float it material of going up Ryan the the in at your kind inventory bit. funding half growth It's And yes. a little the think, be in now It's of little beginning question, of his leverage of

So we expect really growth. strong

comfortable company I dependent end, as the it's of below and goes deleveraging Xs the feel it temporarily the of dependent we kind a still beginning up generation deals, on power as our high into kind the financial kind to it's down the So because deal. And target say year. to of at well fall back of expect leverage which at down back size that. Obviously, policy yes, the expected both would that we range, kind growth X.Xx cash of the pay. flow, we of the then of doing into on we push But multiple here could of

And you a sight. Xx. to in we not of our would to we will hard little be until have take I leverage something so it's precise kind tell our

the cash to go And of right and could a bigger? the over this table. off to now But and little the Xx The we fact consummate where acquisition it flow or power the that's earnings so an business, back producing our line a have of deal trajectory will bring that And size the confidence Pot need are Absolutely. we that us absolutely that given we in in comfortable with post deleveraging to be. Honey our

that I the question, appreciate And question. second color. X-part maybe a then

trends the you bigger think, are brands businesses? and the like right? I certainly that at a that sort on tailwind BOA tailwind? PrimaLoft, a feels there kind that of of of you those inventory the to perhaps impacted those in and discuss mentioned upside maybe X maybe significantly, both maybe headwinds it it kind Maybe were inventory specifically were be actually Just turns did Can color of turn underlying into to of subsiding and guidance you And 'XX mentioned, just 'XX. would and the sort the more little a

Yes.

think of build a 'XX. QX. headwind sort let tailwind, to the of But neutral specifically Pat in hopefully that built BOA turned let which going So we I'm -- seeing how at and me trends will last guidance. part to PrimaLoft were into address we're some nor first, of how that headwind, a that no was It and which our is the into not speak

embedded gave too and is for a that be sell-in guidance. And tailwind if sell-through, increase too say, X it's now, that to inventory would built We irresponsible. we matching I would one be that's why have would that from there's our ago early. thing, not call I It think have and early this just guidance into from not to weeks range. us a right you take We

the catalysts reissuing today, more clear were I if be to we starting However, inventory we'd of be think, to where match it probably us sell-through. And, changes become kind range and sell-in those there just be guidance to catalysts optimistic. one could here, exceed of has material. And for are a tailwind could

been fact again that has get there constant building inventories sort at of to are longer point. just point inventory depleting Forget some theme to back be 'XX. no over want the could a the where We which

there's tell upside absolutely you the inventory I shell-shocked for that depth of little available of So we by of were the would that. a is that 'XX. kind bit changes

we've forward. exist as been nice I'll and to Pat some But BOA. could we we that think And so that that's build upside in. on PrimaLoft comment And go questions hesitant ask both your to on

Yes.

to of of these can't talked really strong each, of what the of BOA growth, I an part kind of management pressure easing it by tease about just and count, kind team? So that it's part -- is what is model strengthening. to it of -- that easing Larry and hey an there's and part out And, Clearly, is is is percentages. aspects that count what of headwinds you tough of of we is model that execution what part point

the tell basis, than But better from having, is we are bookings stable, on that going that XXXX. PrimaLoft, I easing customers more saw we're these each driving each language collectively, the are solid right? a you can to those I'd language is to that kind say headwinds customers be from So have clearly a clearly of year-ago at

not to order of will, chase if and season, advance. you are However, in willing brands many of the sort the

a PrimaLoft. little bit that the feels ahead It the I just a lag, makes a bit there's but So of like easing sense. how differentiate of little that's X BOA if of kind those of easing is of

Your ROTH MKM. question of comes Koranda next from Matt

growth based just of cut to the years negative X $XXX on guess, expectations, we EBITDA at to on out Zabran Maybe cut ] get need to [ with Mike the guide. million. It's starting to underperformance our I I of Matt. time, facing But same there. relative 'XX are Sterno. industrial the adjusted midpoint straight recent the wanted to segment I for just of

mid-single-digit So still guess, segment I in are we for drag segment color in the expecting I and to we're maybe on give industrial guess And -- which, in a the XXXX? industrial low we bit 'XX? headwinds seeing be more just to heaviest the business just growth where expect

Yes.

of maybe might I So your be I'll think you on on touch kind industrial Pat numbers. but the drivers, off let

full for EBITDA produced industrial million. adjusted of $XXX.X year So

guidance our about provided XXXX. X%, a So implies of growth kind as the X% midpoint we of that we think

I little conservative. agree think all bit we'd that's a

here, Sterno. right? not there's a Altor performing Same performing mentioned, you well. with to cut lot As is Arnold is well.

think we like that industrial trends kind on of other feel do benefit want So will think the But to XXXX? to color that you there's Pat, midpoint. any I upside provide you

Yes. don't underperformance and -- know answer to sort published, of grew of that respectfully. our about at mean, by your I just basis don't seeing count that. question, XX% I your question what see Sterno. there. XX% because we don't we I And can't not with I the agree the if I guess sense, makes I'm I

No. Yes.

from expect that yes, understand the stimulating coming of growth model, but meant underperformance just in XXXX where -- just where anything totally numbers our our we from. in Maybe growth to Industrial had kind to relative come you're in Sorry, XXXX? we in just and

Yes.

give of me kind So here. high a level just let

over 'XX. industrials. So mid-teens on our in basis in a core 'XX is far in of grew rate we consolidated growth excess That

skis an happen extraordinary of get rate think growth over back I say core payback and a And of right can of down that up have that to you some our triple so in where all we've commodity customers, year from so sort your and you we've but not that. A lot little rapidly. hesitant that And could now result which we're due that saying, occurred to expansion as were deflation that a lot revenues commodity why deflation. 'XX our been to of slightly, is EBITDA passed is margin grew as price a

So our exceedingly entered healthy and they with in industrial businesses really performed 'XX, well 'XX backlogs.

we that more really year. rate we're on in We seeing back the normal which we're grow -- extraordinary that's said, will we numbers really group mid-single going sort I not little of really Now cautious, back get of kind based at And if or kind came only right a is X%, manifest of year. is based to why to off growth longer-term guided isn't in what now. of It's the on that going that fact the paid digit. expect it's not But think at to a company grow much XXXX. there's its it reason some to don't that no industrial of frankly, know X%

that macro think would are I Ryan mentioned, of tensions given kind Europe. there kind mean happening is remember, say, as conservative we and and that's of prudent right now. being the it I wars in are global outlook just

I And some those numbers. so But are cognizant exists sure of guidance appropriately. our just say we that are we to that and threats be have of would make to there, guiding you to kind out want upside

there. well. of management exceptional Sterno, doing year-over-year. again. is we said, to Altor grew team well, as have Arnold is grow really Specifically, kind we for And have them Pat It's an -- performing decent double and digits expectations really

in that one issues core of to again, rate little than rate underperform like companies year, real any the your go but hesitant year, growth say, no no the too reason I to of our there's far in a out tripled when you've in could other a this of should sort growth mid-single point year. core digit on you're skis your So we there is following to

just it. set X.XX, we're and Switching maybe at just the store side, we're growth pausing capital year, Makes at consumer help deploy to strategy speak that for XXXX? X.XX to us this to level given growth where planning expectations sense. Got

Sure.

have believe we outside growth of if might for be there this the some of So right? kind that makes what So ] year to that's another We transition, first, we PPaaS similar in growth probably [ alluded to we will sense. we prior charges think a will of XXXX, that year growth, with year's going earlier consistent backwards. level have

I the As far sector. we're mean be sort in as best-in-class where trying to we're DTC reallocating, of

customer customer that we're to always service. provide that if to makes So Everybody's really trying online we're trying But better our to and well at as get service. get online drive business, trying customers best-in-class sense. experience better at to

we'll Secondarily, professional well. in and seeing mentioned believe growth we're the tensions growth mentioned professional. we to professional strong And drives some seeing of continue we're we growth our that strong -- in see we've -- as geopolitical

Joseph Kyle from comes Jefferies. question next of Your

of Ryan, obviously, of on you of I this earnings? it? in kind refresh think on evolved terms the the But can but in over adjusted commentary, has years. you portfolio seasonality just past your couple the touched

Yes.

second first So seasonality similar is mean, adjusted earnings, cash back said look at and quarter I you it's -- we weaker what first businesses on of I think fourth representative. if generally -- third a it's flow because prior our out years, to whether of be kind momentum and is the it the or cetera. the the season, lot generally quarter slightly quarter season to et close year, pretty have holiday outdoor than

our fact significant Lugano business generally, have but more So a events season. seasonality of around in quarter birthdays, business holiday year, do little gift anniversaries particular, giving is a amount the et or tend have That one that that. bit obviously now. of no fourth pretty or the doesn't I a all percentage cetera, in tremendous around People given business they to the guess, become there's

So kind that, say about how I roughly again, back of think modeling, I'd say, were of is it. XX% half front half, I if -- I'd outside XX% would

guidance, terms headwinds model I a And flat there a adjusted thinking you we its a growth. guys count and did be in new dollar -- about anything think you Because EBITDA you mentioned just share year-over-year. relatively really I being it. the Got of The are higher again share rate, Helpful. earnings then basis else tax per think about? or strong should for talked

Yes.

So earnings right? last always out that discontinued So to right? last tough it's lowers So earnings. adjusted operations, a adjusted ACI you when year, mean compare have our Kyle, and we I pulled Marucci, year,

call, about I guided the way roughly. third earnings $XXX quarter is we would adjusted the So had on think it million, earnings $XXX million, between

Marucci up XXXX. I quarter, think beat certainly would guidance, year whole we had this but the we have fourth slightly to if being that we see owned

there growth So in adjusted earnings. is I think

taxpayer, with interest got noncontrolling of to adjusted you've north shareholder, it a one. XX% we the a because the business. number respect team high less two, Lugano earnings is -- of challenge management right? that I have of think it's because And with it's The adjusted Lugano's number owns pretty earnings got leverage carries growth

of that So a creates interest that pretty noncontrolling adjusted level high lowers earnings.

as EBITDA year-over-year, have, we've pretty would indicated, be growth high So our Lugano. growth but adjusted we're adjusted not going given earnings substantial as of to growth subsidiary that of most

But had the significant a roughly coming -- we're in adjusted and EBITDA, into X% differential now. Kyle point modeling EBITDA, XXXX. to you a adjusted yes, subsidiary just to point tax is rate just We of drag could out, XX% out

So $XX points a it's if you take million, on that basis $X.XX it's XXX $XXX million, share.

just be adjusted per $X.XX versus So would $X.XX if and tax an growth. share earnings ], you were that's to having EBITDA rate the growth the adjusted adjusted [ earnings at same [ ] commensurate or

what said I earnings it adjusted And growth minority comes subsidiary very to the from adjusted true get carries EPS like with adjusted lower interest be investment. But would to the because has we Lugano capital same, clear adjusted stay tax and if to want higher here that rate just EBITDA. on Ryan our expect growth, is and the EPS also leverage when is some of

William Feldman Your next Blair. from of Mark question comes

verticals just changes management you strategies of interest PrimaLoft. question just of at expanding a into With you X.XX I talk priorities? had lot any know or both changes, of obviously, in changes companies and with to at in Can a some PrimaLoft, and the recent those products. newer new So major there's

any can just update you provide? So

got stayed it's PrimaLoft, a mean a great great in of business, IP. I couple It the course, Sure. a things. it's

believe probably who we of and the in a think PrimaLoft development, forth And believe, many invest to businesses in operational and Chairman. like stay user. strong, positions will PrimaLoft in Morales other many understands And like a businesses with excellence. very yield in tremendous excited benefits. Francisco would end Cavassa's that for more we And be at branded high And we have operational provides strong DTC -- bring he so a to very really, to Troy, the her. At driving little Executive customer we're we really more what end just very that efficiencies little Zumiez on for is along at working Francisco a is delivering product is think years, there bit and will and I bit as combination there environment. very as will Anne Brown, brand experience strong with relevant and X.XX, Troy

as other brands. it. appreciate one relates to that. it Got And I the then question consumer guess I

subsidiary one be guess, BOA be would You talked about impacted other X.XX and that inventory But, destocking. I would Velocity.

with anything trends changes you're going that And talk and you then about forward? foreseeing? if could strategies else in just there business So that any

year excited the it's will businesses. about new same be by coming some reduction be side, seen products we're levels they'll in archery later the -- it's But in X customers. that business. destocking think I'd Yes. of archery say inventory mean or -- we're year It's we a tough I it hit out -- this and X or -- the we've that well with and received really the in -- that some have

Crosman kind of pandemic would it driven a we weaker than buying side, more continues hope, the sort of era. lot of On really just during slightly or the POS to have weaker by

of lack needed. a so replenishment And really

every diversified working also right? a And that's to companies, day one benefits to business of every of the working we're of But focused there. XX -- course be continue we having and but So write day so the there.

from Dodd Raymond comes James. Your of next question Robert

question. back Larry's Almost to

On entering pretty you mean, health tend the for care willing be multiples. the would be a vertical? care high bit, businesses go do to said leverage question, take be up when for realistic you'd You I little health it leverage to but to

went XXx is scale different So NextGen we probably EBITDA. you're than at, which mean ], looking [ for a I and

to leverage up the if to on that's thought dynamic, there out your of acquisition that for X, now opportunities make you your potentially with making grow would mid-Xs, into a Or of the range? be go to market acquisition then leverage maybe EBITDA unless years the get incremental you down different So the take did couple what's a reducing X.X obviously, question. sale, target a to the ability

Robert, I not one, say, EBITDA our paying XXx Yes, would we're for business.

table. the off that's So

consumers it a innovative have XX% moats disruptive good innovative those we're XX, and businesses a around where looking businesses trading XXx real the are of to call XX, of range, premium that. care to the health kind -- are good that right think businesses that are premium now, if trading I in kind probably at, them at are the

Just of baseline. give to kind kind some of type of

the to out big million $XX $XX today If if to bring if to figure care, how of probably it's the $XX it's kind up of it's company. So going a to company, company size it's again, us deal, to bring EBITDA deal million were health have do on in million it's or depending EBITDA than the is. leverage -- I think temporarily maybe the or a we going we'd a mid-Xs more

we that is And been, going little have of over few divesting stop. tell not that to years, you fluid. bit so last businesses. will I a That's the opportunistically some

But they're really probably or market leaders, still Lugano times, line of away good And that our some their our kind niche our PrimaLoft cash move niche want are and a in, some from salon great own with a in to kind line more portfolio. businesses like in so to we industry, recently. of and BOA Marucci, businesses moved transaction we of create in they're look, commentary part and own which and they're flow. to had that share that we industry. companies of industries we businesses huge grow really in trying in with grow And we our is lot script And have

the the to been that grow making time, of companies of So their consciously at sort those towards. companies we've get a kind some effort And moving rid industry. been that of are the same with of we've concerted

another were flow generation we there's the core that -- next in couple dramatically portfolio consumer, our XX leverage in a more we portfolio. making the and companies helps in leverage free down as And just whether are growth that such up health that care or probably changes. more there always months and and gear think because portfolio the it's to higher real I our through be through business, divestitures growing be a So pretty at and at growing rate, of those feel we to over are buy will cash XX kind going to growth bring down comes conviction looking

table. And look historically been that's feel we're kind clearly fair of ways. the has ATM is to comfort are at The every raising to really that's get which We sort day when I when of leverage stock comfortable, where it how we've historically, powder deploy we to do dry in reflects have, capital, of opportunities. right to Then at so your much And nondilutive. that what don't leverage are the kind used want We've some to are we the on -- repositioning, things look, which we level those preferreds, the interesting zone. we raised something and portfolio get where the closer dictates but concern that acquisition out point it's price managing of we're it, value. would our opportunistically a do best continue case any more selling of us companies a gets the And push now. capital too, issued

shareholder And to so of can have dilute that opportunity. necessarily available great we become don't other capital a there to think that we are us the equity extent components

that willing capital cost we're in. And more is if of a ultimately, we're versus what capital. is on price, to Now bit pay the new discount enough purchase opportunity bringing significant always the can for the we're what we a that balancing, upfront drive little our

and we feel in tell can care I now. consumer right market both the firmly act balancing a it's so And you businesses. health for that

But that has we're stop working team, business continue may portfolio companies leverage from back closed. But we these our looking up deal. will be businesses. at me taking of as I deploy. of what own And to you that's until undertaking this over to privy our new of what line big of going a what words which up for was wouldn't great not be capital And to disruptive That for comfortable took that portfolio, market been portfolio bit. I look more had going innovative, going management to those some until know be is we legacy not is since hard transition acquisition and all in don't this so in divestitures looking kind and sort XXXX, us model in of we were you're sort then to to like a free will does hear and get we what the being we is too upon get a growing prevent the We're are the currently portfolio entire on transformation because said, our say, deal -- legacy that that the from with for, industries. little over to we profile the going I next are lot. our a it's going that point, sort next leverage of We in owning are we to vision to to in kind

the other thing that think in levels growth. keep mind is of I faster generating these businesses to are

when on rate core slightly so execute growth more better profiles our rate. you they line higher better market more businesses with to with with And not have in full companies, as leverage, be share, grow take continue quality of able this, our because comfortable up expectation is, longer is growth continue we growth pick to defensibility And level one their should a going our term industries. to to they're around just have those

the Very helpful, color. all I appreciate

EBITDA it envelope Like, for almost it's if point the back successful. mean year consolidated I because I been way, it next as too At does other successful." it look so big? not flipping subsidiary point you much no is mean, me, become line you it's be subsidiary growing companies can, of which it's Now, -- as of successful, "too massively what EBITDA then get X/X would looks like you line the of have if been could what much have everything I with for Lugano, Or dominating just too becomes much? the It's outgrowing industry. it that share there its company? don't a does and it in at countercyclicality join it's that. But too a of concern is very the

slow keep we that diversification don't Yes. down, to really talking in D of large companies one great Clearly, question, extent representing a CODI, starts and the It's benefits have mean start To of of and our our benefits. those a about the the earnings. component Robert. we I overall of too

is Lugano's as a I've businesses anything there. truly like of growth So think phenomenal. many as just -- don't what I the good valid just there's out that it of It's and it's sort Idit like have this honestly one there. are and rate never that company that businesses Moti seen built question. And are it.

of one And hand, the so kind don't you want on go. to let

portfolio I think kind of theory, not traders. rule #X we're in management and stock

and have So you really you here a got get visionary that if rise business rule still and capital opportunity. kind that, kind a bit. we massive got got It's out this kind little TAM. winners leadership -- applies and a it's growth -- and It's needs. loser. It's huge team, if support look, But doesn't This of of apply. of it's you're a is market its founder potential the to you're

our shareholders. that let to and So continue growth that benefit argues it for holding

On there a it and point it system. is big, the other sort too where hand, the of overwhelms becomes

the we're And so lookout something that's for. that on

it generate built at to kind you all. you're business a I X/X really think year talking that have that's into becomes if growth like because not going going our to promise EBITDA, this of you is we're rates about good a to similar of And year guidance XXXX. I our referenced,

there, options in it's a if rate not still rate growth business. and of by to of -- EBITDA, 'XX and and the different getting opportunities of looking at the it represents is triple And at we're have we're probably us. if financing something growing saying the but growth probably continue where we're all could we company end plethora the think of X/X double funded participate I or there then think company this of kind be are considering it where overall the for growth our I

depending this company how point is EBITDA. sort So But a a of high-class one. have. want not we us a to say, develops. for And look on our of that at -- would we is isn't that is this this you I will this XX% And represent and good to tell explored really problem 'XX your be

the going how rates, really about if to goes grow continues in business financing context to it forward. historical it be of we're going as want at evaluate growth and it's So of going kind forward think means would 'XX, to what to that we and great that a

And yes, tremendous it's just success. a

a is tax So it problem. high

Thank you, operator.

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

and have you. Thank call. conference great a you, concludes Compass Diversified's This Thank day.

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