Compass Diversified (CODI) 31 Jul 242024 Q2 Earnings call transcript

Good afternoon, and welcome to Compass Diversified Second Quarter 2024 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 Second welcome Call. XXXX and you, Compass Quarter Diversified Conference Thank Group the Sabo, Pat CFO; Compass Elias today Maciarello, CEO; of Representing are CODI's CODI's company Ryan Faulkingham, COO Management. and

website at to on and point we press compassdiversifi.com. including sales pro at EBITDA, reconciliations forma financial the adjusted I'd the measure available Before and financial subsidiary out net release, non-GAAP begin, the tables for the section QX that EBITDA, company's Investor XXXX Relations like adjusted adjusted are earnings

The closed, of with on XXXX the EBITDA following the financial reconciliation without references company adjusted of the also Form in SEC the section company's not refer financial to or XX-Q income discussions discussed unreasonable reconciled its Relations because not is the also or net filed certain of that which efforts. continuing to reconciling full its website. earnings, provide as loss information available EBITDA today after company available significant Investor operations note at from this expected measures is certain in market subsidiary adjusted filings. adjusted does a call and reconciliations adjusted EBITDA the includes non-GAAP The EBITDA company's to year Please

refer this company. as to we Throughout call, CODI will Diversified Compass or the

safe me statement. allow the following to harbor Now read

forward-looking and similar identify future anticipates, future such impact uncertainties its the to initiatives. the regard this projects, plans to ESG expects, During subsidiaries, statements, divestitures forward-looking expected the expressions CODI conference forward-looking and statements call, should, acquisitions conditions. intended we expectations results the and subject related or to Words and predicting operational inherent as are performance such are certain in statements with timing may including to plans, future statements. make These future believes, and as of of and

have discussion December XXXX, in other in particular, supply in those of changing the Certain factors factor basis on or a I whether as as Except chain, XX-K information, filed no the are law, these update the our the because CODI impact call SEC factors enumerated all statements, results and CODI like as or statements may labor for this projected cause disruptions, SEC obligation companies. over significant time, to subsidiary new required to XX, economic and environment, Sabo. interest forward-looking a actual At some otherwise. to on as forward-looking rates revise year and risk by inflation with In Elias domestic of these the global ended well turn from future differ events undertakes filings. material any would could Form and to publicly the in

owning report everyone, afternoon, results, us Good in and growing innovative, of another slowing thanks strong even disruptive pleased execute of a am our yet to strategy the joining today. we of second I backdrop number a businesses of economy. high-growth and well met for exceptionally to against the continuing quarter performed quarter,

Boa, the businesses. our in extremely had Primaloft this quarter, our consumer saw and our on than consumer vertical branded current environment any a impact by business the vertical weakness we negative of performed businesses, led our While industrial performance well Lugano offset strong has more industrial

strong quarter back businesses are QX, year. this Boa both for believe headwinds of inventory double-digit half in past, had returned the great predicted we destocking to As We subsided another PrimaLoft growth. positioned and a

of Lugano feeling this many of we of past PrimaLoft London. Last with vastly strongly our Boa the remarkable trend rest our its in beyond. businesses quarter, second a bullish has so expectations. With for few international well short it opened X months, growth. continued all we exceeded them Lugano and positioned half Lugano, these salon performing are year, the like EBITDA. in represent approximately addition, and half salons, our of just and XXXX of In And about so first quarter the our Combined, of

earlier, industrial businesses. this challenging weakening outperformance a mentioned our made our As I quarter, despite overall a global for economy quarter macro for

saw will industrial and adjusted believe of this vertical revenues QX. a year. the in in decline through somewhat muted continue EBITDA We the both Our rest performance

to long-term more However, overall great confident engines we not all, growth as for innovative step likely one group we quarter that given All businesses, XX% owning of the This only to in is CODI, strong our when in noncorrelated, for strategy. period, XXXX. believe a in of evidenced or was benefit grew change well CODI's experiencing smooth overall further vertical, are one the story growth this a of positioning demonstrated we another any it true remain power of in quarter growth. and positioned high businesses almost our By this is year-over-year. by performance of we period. more diversified in from a But period a it

leave but to like I'd We outlook end Ryan our anticipate high briefly will consolidated our will detail the shortly, ranges. on decision guidance outlook still discuss to our go hit our of we unchanged. into financial

raising caution economy range concern a for and this the an point the short-term regarding not at X of we businesses. of weakening However, our are industrial performance out guidance abundance our of

of overall about year. While really the remain rest we positive the

beyond. of I XXXX highest the creation businesses to Pat. more turn With faster growth call stakeholders overall our detail some expectations though growing, to Ryan and consumer outlook, and now shifting our from shift value to intrinsic our As value we over that same, is for even holistically our we will our level accelerated EBITDA industrial creates now will vertical of into us believe are overall an that, our significant the guidance mix vertical, positions favors this staying our adjusted protected shortly, and within drive

Thanks, Elias.

adjusted and and be revenue adjusted X, XX%, good saw forma XXXX. reminder, throughout On report EBITDA quarter. of HoneyPot Boa basis, quarter. results, of of with pleased if a respectively. I revenue June forma by As XX.X%, respectively, grew strength am pro On at discuss Pro by this and presentation, and EBITDA both X.X% performance when driver to year-to-date X% on broadening forma company the this another be to owned combined Lugano we as versus the very January we XXXX. a continues it as a increased year-to-date Primaloft a The growth and successful pro will basis, largest we

Elias driven weak and and XXXX. on, period, by for touched by the year-to-date meaningfully reduced robust we Industrial customer and believe a of demand at As the X% The since in segment, Altor, for all at cold QX. which these funnel some Within of a well in accounts versus in almost EBITDA in three by performance partners. declined was positioned year year-to-date has are of our decreased by decreased was tripled distribution primarily this This at the of revenues churn our last X.X% adjusted remains decline growth the and June businesses size decline remainder disappointing, couple time year. beyond. outdoor sales Though driven combination chain

however, contracts New design muted typically take some a half leading to XXXX. to of test, time second and potentially

began rebound a again and Arnold revenue our now confident manufacturing management team modify has will we believe be in grow technological are XXXX. footprint to reminder, experienced in effort a the company the And improve to the As what grow efficiencies in an we as to to once company capabilities. we place. quarter SG&A in result, as continued higher a world-class to

be over anticipate we next quarters. million this several in incurred dollars expenses of part onetime strategic the As few relocation, will

we addition, in to In capital part of through million make project expect as this way million $XX our expenditures onetime we $XX transition. as this

throughout the business. company's the sales in again in quarter as the grew offset EBITDA modestly division softer service slightly once Sterno strong than were execution more by food

Turning to our Consumer Segment.

year-to-date remained both by EBITDA on by the the pro June strongest performer, period, the in XX.X%, quarter XXXX almost June Lugano and forma revenues versus increased year-to-date pro XX% For XXXX. year-to-date increased a forma basis. and adjusted

and during likely Beach. salon performance our London quarter first continue significantly in Palm we finalizing to forward its strong Our We're the and you look the next exceeded to call. and salon sharing Aspen, location our location quarterly Beach of expectations of operation, with in of its on Newport ninth process see

acceleration to growth period. into of the and throughout year Primaloft pleased I'm and continue the quarter returned the rest I growth Boa the also We Lugano's on this of to expect very to in report extraordinary XXXX. in

abate second verticals. as Similarly, industry QX as EBITDA grew Boa by by revenue versus revenue The Boa of grew grew categories adjusted inventory each its almost XXXX. XX% quarter, continue EBITDA and many its XX.X% XX.X%, in PrimaLoft in expected. For by respectively, and brands to and the of and apparel saw growth XX.X% headwinds

the prospects the for are of quarter by performance the both of their and this Boa by encouraged and year. PrimaLoft rest We

a slightly was of online and expectations. impact performance the new and of accounts, same company to national in slightly long-term and the our short-term was the add continues The financial greater EBITDA the for result, in The to a slightly losing however, period year-to-date noncore the XXXX. HoneyPot a We remain trajectory SKUs in for of small our purchased year-to-date has revenue at retail below number retailers. versus that for company. and large knowledge period. expectations we its Turning been a one Both Honeypot's confident quarter period, mission-driven And the Honeypot than company declined with HoneyPot as the both business.

the on announced DTC given year challenging the issues leadership represents and previously a transition business XXXX lingering X.XX. transition. inventory-related Lastly, the changes somewhat of for in PFAS

muted somewhat financial in both result, period. the quarter a As year-to-date was and performance

in particularly side, year, the remains robust. professional this brand the for demand However,

While exogenous in expect of the beyond, of these the strong remainder we we the ago see following continue performance in year period, XXXX, looking business. XXXX and to performance to financial in facing similar issues resolution growth

results. very call in outlook will half are full first we the for for to Ryan over financial pleased on the now with comments the confident year. our and additional whole, a As I remain our turn

Thank you, Pat.

the primarily results Crosman up for Velocity Moving filed the XXXX, and a at XX, the was PrimaLoft, X.XX of increase Honeypot acquisition prior will $XXX.X ended to which Company its and revenue offset detailed On quarter compared to results by SEC for and XX% today. of million the as to subsidiary result June was Boa I ended $XXX.X XX, my at earlier was financial for of the growth results result Altor, period. Form CODI and of the the largely strong at our consolidated This XX-Q for million, individual division. year XXXX, sale June was consolidated revenue basis, comments that the lower Lugano, a partially since with limit the our in overall a are quarter

of $XX.X year. second Consolidated of net loss XXXX for compared to net million prior was quarter income million the in $XX.X the

costs million acquisition growth XXXX Lugano, The second tax allowance as of of in loss Crosman the and $XX.X quarter for of the on quarter XXXX a the and earnings million. the million $XXX.X EBITDA performances was company prior to well the as $XX.X to fees and the XX% deferred second were Included corporate the a from recorded The significantly of million $XX Adjusted in on EBITDA up quarter to Boa and included Honeypot sale were million, and at management million, PrimaLoft. compared adjusted $X.X $XX.X valuation related Lugano in and second strong Velocity to quarter at the was quarter of year expense coming a at tax assets. respectively. due This million increase strong our of at in second in $XX.X Boa. its expectations, million up $XX.X above Adjusted was year. in prior XXXX due

Now guidance. moving our XXXX to

we million. current of view our between our earnings expectations is adjusted we remainder Thus, XXXX the second what outlook. maintaining our year quarter, million As EBITDA of a are subsidiary of $XXX financial performance last full call our XXXX consistent with economy, XXXX our $XXX of in for the on result and to the provided our

consumer outperformance EBITDA million the we branded $XXX to of million. consumer $XX adjusted vertical our to companies, for are the range Given by our subsidiary million $XXX branded increasing

for we by to reducing the range our to subsidiary also vertical $XX However, million $XXX million EBITDA $XXX are million. adjusted industrial

in million, EBITDA This an full and XXXX. year between XXXX adjusted consistent in fees $XX in to level This expect million on call. range expected management our what in overhead million earnings in million We EBITDA and to provided $XXX compares with $XXX XXXX. be factors adjusted last $XXX corporate we

remaining Finally, we quarter. be X year XXXX $XXX between are maintaining earnings toward adjusted million, adjusted and earnings our the expect of more the guidance months skewed to and slightly of fourth $XXX million full range we

sheet. balance Turning to our

As we of million cash, our had $XX.X and X.Xx. in $XXX approximately June ratio on total revolver available approximately million our XXXX, leverage XX, was

ratio the of decline. at and end declined remainder to as ratio our result leverage quarter anticipated significant to continue acquisitions Our expect operating leverage of a strong Absent performance. we for total the any of as our the XXXX

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

Turning operations. flow provided by now to cash

consolidated growth. the $XX its During quarter million Outside $XX of used from operations Lugano, operations flow the flow capital allowing million $XX finally, to in from cash in second cash the as used million cash of quarter turning flow earlier. continued other extraordinary of operations. XXXX, X support subsidiaries reduce Lugano produced stated from leverage second us combined to And to our expenditures. in we

in of in rollouts decline at prior subsidiaries, million During year the $XX.X second XXXX. the was to a a our decrease result incurred XXXX, of CapEx we X.XX The quarter in $XX.X of period. store existing million compared primarily

year total $XX between expenditures full of anticipate capital $XX million we and of the For XXXX million.

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

Thank you, Ryan.

of Before moving the to strategy M&A ESG and I'd current Q&A both portion our to the market. briefly discuss the like call,

before, growth our model of development to you told foster subsidiaries. and have the we is our As designed business long-term

and vital disruption, not both talent We take require pool. horizons meaningful view. innovation permanent time, our capital is exceptional investment approach short allows long-term constrained base us also and industry because require they to are This by an a and

and The for best strategy the well-being. our ESG of future holistic and and focusing thinking people development pillar their planet prioritizes attracting people professional on

and to diversity variety experiences. Additionally, enriches a our our and teams of commitment inclusion with perspectives

at integrated and not into bold they we who lasting boundaries stakeholders. model do, can our creating only what so our are attract in these We taking good will people also steps, principles for value business pushing who that keep us but have really and join

Turning to the market. M&A

own what met years in While in our companies. levels historic there manage returned we've We seen and compared quality recent steadfast to past, uptick deal our an been innovative, to remain not actively standards. to has deals recently we have activity high-growth efforts identify, and in hasn't

We asset markets competitive only our will grows. permanent also are landscape. in high When capital debt shine believe weak for today's single advantage our edge interest buyouts, rate competitive

also As please to XXXX of invest enables Ryan acquisition in upon and beyond. and mentioned, act to the our our strong on liquidity operator, that, build position track to us subsidiaries lines for opportunities our record Q&A. open into delivering With growth

Instructions]. [Operator

Our comes first of question Securities. today from Solow CJS Larry

guess environment. I on and one the just operating One, two questions. M&A Great.

really Is is side? Just Boa the us the a on to increase give of the maybe driver a it see. branded you subsiding good on the really like just nice strength? $XX the more the primary quarter, sounds had it color And destocking? million little Can inventory of Boa

is the this It verticals. really How I as Boa was business mentioned, of of breadth, certainly the it's becoming broad company would across one Larry, and that are a I say business, great domestically certainly internationally. a them, each well, would Pat. Yes. I here say as and of is material a growth in more part of developing both driver workwear, and their you? was

the the bounced the PrimaLoft of of as expectations respect a this businesses both prior a million really driver inventory has would owned numbers did extraordinary. is that to know, one performing we've the say, as sort up you back With combination. of Yes. better our to exceeded growth, extraordinarily Larry, been $XX I destocking. put and And Boa,

trajectory. that of a good and behind back really them get kind to on see growth normal it's So

Lugano of remarkable continues at level. then, to course, just grow a And

three and side. by those to $XX on expectations as that like or be year us said, of represent I kind roughly half now, of half million right so are having them they consumer full year together, And up the growing the -- back in the they enables the for our of

some And your were And SKUs. your big Is these of called retail also a the revenue? still box box of -- still of to you as that traffic one bit at it you stores in expectation, thoughts like just some out, majority these on bigger the some below the particular? on the going lose it HoneyPot, sounds little is

reductions bigger of stores a Yes. more slightly couple close into of would our those come or revenue. that, Those half well-publicized of revenue -- a that there at one our of probably box would some are the to account. I And than traffic good is say least chunk

Fair enough.

Okay.

Just last on acquisition the environment.

thoughts health and the your about scenes health and there. vertical care. you've man, curious, lot know cut Just come are I'm of doing table, sure good I horizons expanding any bit I'm time thoughts But you've in investments curious down. really him good so just Again, on care, obviously, that And a a the no repurposed haven't your I'm particular, in little a sure potential curious, stuff you behind in multiples specifically.

is would but Larry, to market, they companies in very as on innovation we're enjoy in that innovative products be focused that, sure increased target go then deal today after, the Yes, enjoy market to And the some there's those that to -- in green we -- say recovering. market market the the premium we coming really shoots continue would probably to But significantly the is broadly, making but what mentioned, the continuing and of that. opportunities that's just market, can of yet. that out I of the say seen have unfortunately, general, I companies in there able narrows really haven't and kind in are they volume, a what source I I margins from M&A do really pretty down think will

industrial. A+ premium things an or at across by this health in these A you see care, an and goes that consumer and -- trade -- business, because they the multiples way, businesses great In times are compromise don't typically. are they for, great always terms of we which the in kind When of look particular trade

And gets not to out circular back multiple. businesses so have is our clearing them to fact we're pay expectation a a there. that of come, when of going to seeing lot It kind just the these we're

range, we've the smaller sizes historical we consider bit. we bit little little to I care, parameters opening kind a would But in done, maybe EBITDA strategy. With than would more respect our of remaining are $XX with down build that we're the bit say of other that, a something very kind of million maybe in a the lower little health dipping are. so criteria what a than a deal disciplined

And the next from coming question of we that Koranda Capital. Matt is Roth have

side on the going second. more like just little terms sticking deal toward here? of guys for especially of just on awareness of forward our things. tone I'm Maybe shift you front it in Does a the a larger softening bit industrial or posture change your little appetite a sounds economy, for curious, just that slowing on bit a from acquisitions

would your your maybe but meeting unpack expectations quality sounds as that like little of And maybe around not if be curious flow, that may deals unpack more it just of deal and Elias, talk pricing bit a standards. could you you about commentary if helpful. you theme just sort It be well, could if

and that the we're and companies I they at a why at in in the it or really right the obviously raining as factored feels reduced expectation expectations even raise too, didn't -- mean looking now, of good our business. about half it's don't But notwithstanding bit. minimum that like Matt, maybe economy that we really feeling growth a some good and into having little going we've be how feels clearly to probably there's that's the like in economy all. is back Yes. weakening, quarter factors we Sure. a grow at into

be looking businesses mean right forward we've kind have moats. a And acquired innovation. businesses recently, may about So are multiples. want Those which or for are negative IP those real go-to-market that pay And Primaloft mid-double-digit that expect of strategy think or to traded that incredibly lower is unfolding feel maybe because view would want really source of with of these multiples, slightly protected is our in impact I impacts earnings, you kind now. us the elevated of examples. our durable. of may And view of terms and if kind Boa for. we competitive range, that high-quality are view I in more the we of how we not And XX-ish good two times. valuation. economic going of really to of allow kind to companies economy we're say deep on businesses the that that of We some can being a kind is as we

industry. And significantly the to ultimately, it being needs to its company manifest in able outgrowing underlying

but are the have sort part those criteria capital you about in talking been so of buying sort down, this kind sort not come costs and protected, faster-growing those our evaluating, two we've well of things of strategic of gone been that our as And hand to hand. businesses of has and more shift, we're have

that what were those, because ago today when you those it's meeting those characteristics, the I very when we're those are so to companies about trade say looking you're you're just is for, are year for criteria. and whether companies that in-demand strong have multiples 'XX And really pay back clearing strict for would times typically in a with assets. or or price identify always robust really 'XX, or you and And about, we

performance, on historically assets back highest look also as invested best-performing they're our we When capital they're return priced well. at our our notwithstanding assets, on

and deal sort we now, see still volume lagging. right market as So you the has back. come -- that's quality of But said, is where

if deal, that on you trajectory are sheet on focus didn't I to bit why the we're And could naturally reducing so. economy, priority do already quarters. a leverage? we expect that over year the about leverage just where maybe bit. without you like if But the we and like mentioned we if sort a curious, delever be there, talk see that guess, see reticent just couple to the if the front, I kind deal more then you a little maybe Okay. of know we of would end ours, a on softening Very maybe helpful. starting things And a that balance next might that about of not of

for is this Thanks question. Ryan. the Matt, Yes,

in that is right subsidiaries our talk which You're strong the heard leverage and transaction, come we're our really some the to at continuing calls you that seeing denominator about consumer few there. past post continued performance Honeypot on down, us is growing the

our grow as to as other quarter. from we X.X% our down of subsidiaries not So inventory is of X but coming cash over only down build and quarters a business, came above some next such. our little to I'd down, start line, we the X.X% similar convert this kind we the about leverage EBITDA expect declines

focus a ours, organic. say still it's of I'd So more

I is of think bit saw also preferred. you what during we the a quarter little raised

capital equity been of us to some source deleverage. So a that's I good for think

we're year. think in confident this do to north But in Clearly, I feel we prospects growth year-over-year. growth our guiding EBITDA XX% for of

I think feels all So good. that

on balance the as about So think we're good I I shape sheet in closing think year. out the

And Great. fundamental do more of Okay. one could the I if one on just businesses.

of informs the I you kind above have hear to incrementals this Like Swan I continue preliminary and in to expansion may that be great, from any Europe. wanted rest have you I thing, model to opening. the just there for London that sort guess And the plans you're terms but metrics, it's of around noticed if and how Lugano, also, hard you if really learnings additional XX% incrementals. of punching given learnings any you sort of on that's strong, can just had guys So share of quantifiable that the

of is I us but should it down we going assume that that? was on impressive. to forward? front, would try you're modeling sustainable how Sort about tamp to going think that How probably

just that. I hear wanted more little So a bit to on

the great mean Sure. does company job. a I

that seeding with You learnings take sort We market And thing of lot a a time from business working said relationships we this and European we before did a market. market of with the the see same when enter London. some great went smaller of company they in that deep the here we of customers a equestrian London, they with job spent us some that does had into the London. helped

relationships So would be do be works on deep sort and good product well. our over we sort that that Point would point really which of one. #X there amazing business, way value is of as the

there European And sort more with are learning at that who work with differently. works purchase several that was and well, that We're who some -- so we're buyer of are there we a as optimistic it work customers there locations differently, buys it least could to.

So made it growth on bullish growth sort us and of internationally more Europe. only within

any not as I'm the to exercise make As far modeling sorry, going your growth. I'm easier, Matt.

will number somewhat XXXX at company we're and and that by driven be relationships. I that we by the the really of and be somewhat continued think going depth into the of and just determined robustness of to continue see beyond to robust growth growth open XXXX salons continued in

to provided rule that. of thumb have guys you it. know Any metrics sales? translating Got sort investment around I some around inventory of

another you have or that if crack anything changed on if Just that front. one curious at

basically do it's have we I additional similar where some Matt, making to would remained been. say Yes, upfront. investment it's we're

international, As our kind about being we're inventory But expanding little that going given a as required been some little which growth creates challenges bit really as bit London, especially our it now actually moving rate how is requires a And business it example, accelerating, has of for actually accelerating, upfront more it's is to this footprint. capital, fast remarkable growing. more investment.

question there mean, a also business as is buyers is fast sticking have been that put I the bit historically. of of out grow. to within where for network to will in and the that a business, answer, for large this And there's for growing there. on we're exactly question part inventory this I We've in numbers too, the general, on they look your your would it's modeling say as that kind and at investment for our passed So component that us, mean, of Pat, for accept are modeling. know how I demand everybody. of we said inventory I and we level the more hard additional X network little And that demand as of years, is kind

we with investment. more opportunity And are creating inventory so revenue

I down. has not that think and that slowed continues

be conservative as performance other have right so desire kind into product of the And I says of constraints should look bit get and inventory demand growth of more be our build, sort to to a onboarded, still within and our right have what material outlook the to over the getting nothing satisfying. and kind it's that say feels network its would we of those more than kind currently going this there's getting not than that a skis, we're thing, same people some now like in is it grow solidly of present business now are the the out little change XXXX, we a

next Jefferies. Our question coming from will of be the Sommers Derek line of

subsidiaries. questions couple quick the A of on

as business on commentary in transition you sort or we should there's kind And be those? modeling if the on then of any us X.XX remind any Lugano, Just seasonality will could HoneyPot be helpful of well. of and transformation cognizant additionally,

part? Sorry, second what X.XX. was the

Honeypot, I at seasonality it's lessening. mean So

than But think At not and QX pretty the depends to there's sort just I year. see for Lugano, that, bigger think QX, be there -- much on we've tended be QX a them. to and strong it seasonality. I QX quarter tends of QX and than other doesn't too

well sort how a transition, relates opening product the in of and it And that for working just spending on incredibly incredibly do we bring performs X.XX up and how more to trusted -- lot customers brand. aperture to do has we're X.XX. an we authentic the of As this time

spending a our on different What touched then purchase And and is somewhat how consumer sort and And customers at of of for the of demand to latest we time now months same have in in will And related that. just be to last is different relatively you some X little understanding complex states X the fluctuation though, COVID, different a so that's specs, will for happening X PFS next too bring lot that big been X in much impacting still to a will over products lastly, product our we're will need months. a different time with and inventory PFAS do part the also and of or free process, where we it's we I to agencies too not. wholesale lot sales is different DTC. SKUs as focus retail

on with that's So presenting have And you to operational products. lot challenges. keep us inventory of double some a essentially

going I in think the faster most than industry. we're

we in now. it when it be so And of bit it but headwind through get is tailwind right a XXXX, a think I a could potentially

corporate any the Got But aware rate just it. And of then we your on is level. the at subsidiary at debt the it of through exposure rate on there flow should be cuts, rate interest variable will interest level? kind

No, owed All that Derek. debt is subsidiary us.

interest So risk. with would respect cut there's Any no exogenous be to the positive outstanding risk a to business. rate

Instructions]. [Operator

Dodd Raymond Robert question James. of next will be coming Our from

Kind my noise. question Lugano. few to the background as for but like of quarters, the reading it last Sorry about down

hit of issue but it's cash driver [indiscernible] point $XX it the So big of I a big guarantee consumption discussion such a year, you million flow asked is and your in a the this is going and of total a does a that's the not mean, consumer quarters to -- keep cash. the EBITDA it's great first if But again, could couple Obviously, third concentration thought this of in is said operating no. X/X half. business, share. you a you growing as that it quarter. I Well, ago,

the the returns give and quarter, continue to on but us performance at fund update Lugano, growth, the are dominate Lugano. we're can yet of not your thoughts you maximize how financial it you last you can needs the on talked while So the what to having about just accelerating all

Robert, to because the get Yes. last an we of matter mean, ignore really on high about I capital It's abnormally a can't kind the hard and return. allocation alternative request high-class additional better return in for it because capital invested From so direct a a standpoint, time. this capital is problem we it's talked here.

in massive think like you're is the need And capital that to to is any in becoming I it's notwithstanding fund while it it's portfolio. so risk a to more continue phase. us highlighting, the growth has that capital the that growth And it consumer concentrated it, a leads want to hyper which business this, is

to it good quite XX% producer. -- a causes XX%, thing cash flow. to produce ton I growth slowed and at be cash our really a free mean if business that XX% the flow growth to It's requirements this X% capital at of it grew down it grow a substantial. would just be capital And if would happening or X%,

the it think think of really asset. about how I kind strategically we is

is is is maximum of needs its well. and CODI funding is it kind important as us of long potential as subsidiary Lugano it's a and important fray of to think creation to value the reaching I as important, it

So breakdown think gets returns, alternative with to and return there the if can to wisely type happens then that they of capital really everything these fund on I isn't work invested clearly, capital that reevaluated. put an

that's that. then that, will continue sort of to say quo, fund you if we But a status

differential is in given rate if would think portfolio, going third the that growing -- what quarter the continues, of concentration expect much grow only to it the which points is is faster the than in represented to it rest I differential it it we and so the to. likely XX% growth

historically way. would anything part own the could which with continuing a we've our divestiture, CODI to our become And and it financing to it. done kind of from be and a more that in assets And years, that clearly, couple it strategy, is of creatively say creative to in that of so of going do part bigger we something it's a I with next unless

and through can business that We could because how financed participate. own their the of a and piece. creatively markets as access of I it think it of win-win debt And own still big or example the markets cost own And its lowers like then was the -- an it part taking it wherever capital. facts we having public capital of to

of a overall that in own reduction to majority kind the as our the majority business. in owner beginning, by WACC So of was was an overall continuing weight it

there's options we So that have. some

by large business over both done options next get our about shareholders. a manage to of the mind in growing And to big from financing But big concentration for way, as suffice past. to of things obviously a in need. is -- of problem it is We're of for kind return ways rapidly thinking well has us years now with come cap just the this this best risk such company say, of top represents and couple two a I and or the and high-class re-recognize plethora the a that capital we've and point a the that

Got it. Understood. It is really a problem. [indiscernible]

smaller you actually mean, health tie you [indiscernible] the I you doing would care are they about more that, might or So a a Obviously, care larger done something if had hypothetic you build concentration. be considering talked kind [indiscernible] that making the of one strategy, on that reduce that acquisition. health

problem, you the in that add-on you if a might to to kind some mean, aim hyper enter solution. have care, you then. year diversification I care a right, find be small the than not thought So something in but need a health a is case been going the actually at creative Lugano to of when manage if find to way health value smaller that, does accelerate is

verticals that's sort acquisitions, invest we door health only in. you've that of that's #X exists, care, we X of do enough Sure. but identified And is which that also the X

be shoots, day that Lugano to teams we're looking and to diversify another we industrial about bring a to at acquisition starting capital. And just will I be or that diversify aggressively are more concentration clearly So come for down. and consumer see are as opportunities Lugano's some business deploy That it going green could out Robert, think could the are day out, is looking candidates. something in are there I CODI another It broadly, that business. mean, tech

So that's do the third it. can way we

Clearly, is leverage. balancing the there

just And are happens smaller sort access earlier. we point a we're million in are there's only care our looking would focus making a in at But -- just deal, deal And industrial, kind becomes do where slightly on it. that in as at important, the lot be It just as and happy deals. We're than that do start a consumer that that health if there we of million will maybe health start we're so larger. We our some too but in the care an do to capital also will industrial care a fact as I we was market wouldn't much to we or smaller the consumer deals of verticals. would $XXX well. looking in health vertical. factors But that markets of so was $XXX that I

to are sheet. prudently But of kind looking without and balance so do yes, leverage we our on acquire overusing

So we're walking line. that fine

B. next our Riley. will question be from And Howlett coming P. Matthew of

comfortable Just still X think wanted. said really you the quarters if clear, be last We I that to found leverage a you call be turn same half that you something up temporarily. you'd taking between feel

outstanding Yes. had anticipated sometimes they given to just destocking growth, period sell-in was reset went really these a think are events kind lower that of being their nobody businesses. these it mean inventory are Matt, I of businesses they But of PrimaLoft are say, all thing, through really time. went for and our And expectations to and up, that and traumatic half I and a the really Boa and would well taking return And is I growth, we where generational come have including period what great a of with unleash, sell-through good share, all protected. are industries COVID

normal aren't they've the ability economy changes can on times here where if bit a inventory even right grow so the it. that And those through businesses proven do And macro so there, to wild. little weakens in or

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able a really of to outside formula conditions. good be it's So to general grow macroeconomic

sheet stable good as a get only so then that that. to beyond. and not said more X base comfortable little leverage you you at 'XX and comfortable grow are with with such It's just be And businesses, look on those now, and to poised bit in but before, we take can a balance they

we long-winded up take X/X for of could confident saying, remain X/X leverage turn. a right that yes, asset maybe So answer we of to the a

confidence. that that gives that you loyalty, consumer you incredible That's the much loyalty have that

it's a special -- So they really really company. are

So what mean, at technology about 'XX? detail in flag And in could impact talked new other -- new more about go products talked Honeypot. on at anything -- we anything the Can could the some on in subsidiaries Velocity, happen any [indiscernible] I to 'XX. Honeypot. you new Anything. you there I'm else that on at into just little new a is the -- note, maybe be looking what new products could

we think Just something rolled subsidiary. being 'XX, about in when stuff out the

around details. highlight So anything the to going

that road our In really be road with businesses, and the maps they of quarterly, we're to are But a going consumer we coming figure I out highlights are just and talk on work that across of little how preview closely to, we innovate. profitable. are all new and and working in execute our how innovative I to of out everybody give to could has business, We product mean product our all it's general, you continue product industrial introductions they businesses. more consumer companies very -- detailed our working we're businesses, out again, maps. our and businesses all about bit you to a If on a roll of tell trying products some are in

all become differentiated ourselves. environmentally are friendly more cost lower are there? maintain our a of through for innovation we goes that our the efficient? everybody to that of top. and capture new and source we your some Can is customer doing solutions path what better deliver we down and what value It's every Compass Can with we our of on over create you it basis. companies day Can and tell to It to tone in they kind all What come mission me. companies. at competition that's can in portfolio And when starts much be companies. through daily are go of I It in detail this at daily company. we too you to our into competitive of and our driving lead and would out our talk set a and and on that's our focus about

our So not been poised organization years, difficult ever why few industrial within innovation next quarter. but from because businesses economy is we're of to and we to global meet, only we nearly disconnected really the you, the our stronger I over do. our it's than up had core and today growth a that engine will tell here the potentially that's feel exceed rates just a one XX% growth tough put That's thing

gives businesses of some visibility and for of are us that, an have lot hope great into only period time. that and have growth really hope up these really extended driving We to that is rates set a company and good of kind that not 'XX beyond this

guess growth. a you at into like XX% a incredible. was long statement. it you in, I incredibly rate. when the with know or Do a going feel appreciate at you bought strong -- was To that an it's outlook. Honeypot really the throw you on feel I a think term bull, but I at mean, growing I double-digit an ran just little tell I guess mean bit I incredible that's mid it's grower of something CAGR. that I to you was double-digit still the confidence still speed like

The I Yes. and trajectory. think and reward. issues real and it's is we a we on And customers and or double-digit them I really market -- get grower to mission-driven feel any destigmatize really a there feminine is that respect term. trying care, that long aspect brand they're authentic the around will think to they're like back we'll double-digit

we go you consume before have unusual that, the say drain not some guys a it's in. that that these obligations the make that to And the the there's a of you're is benefit we to some through lot as first part the And integration of we part that a CODIize And first have we lot investments the buy as company there's cost a lot company, and from the resource to period in of of become internally, of when productivity there. inevitably of family. and CODI other have resources, results that a starting reporting get start go to to

for abnormal that of growth get lot that with not where companies we to is is manifest. a a that to to of have and especially period starts build it bit slower little So in an for the we partner start growth, and to infrastructure a long-term accelerate, see then us as more

where that expect rates their by And they we investment growth would in up from can more were. pick putting

numbers company, such it's the I reverse Now guess, the growth of or, rate, its was law Honeypot a large here. small

small So it was coming off such a base.

company the brand get You're we're that rate. our XX% now a a can extended right be not for lot that given given investment under of that in an be double-digit TAM time. period of has current consistently a to of double-digit And growth ownership. of its products, the strength so it a its putting is this But given its grower and innovative suggests given going share market the there and that it can't XX%, kind grower perception nothing from consumer, infrastructure

more Elias. I Mr. time, Please like turn At call would no There back to go are over ahead. go to ahead questions. this the and

you, Thank operator.

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

much so joining. for you conclude does for This conference Thank today's today. call

may You disconnect.