UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 16, 2025
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
(Exact name of registrant as specified in its charter)
| Delaware | 001-34926 | 20-3812051 | ||||||||||||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (203 ) 221-1703
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | |||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Section 7 Regulation FD Disclosure
Item 7.01 Regulation FD Disclosure
On Thursday, January 16, 2025, the management of Compass Diversified Holdings (NYSE: CODI) and Compass Group Diversified Holdings LLC (collectively “CODI”) will host their Investor Day in New York City at 9:30 AM Eastern Standard Time. The event includes a presentation by the CODI management team and will include a panel discussion moderated by CODI's Chief Executive Officer, Elias Sabo with the chief executive officers of CODI subsidiaries 5.11 Tactical, PrimaLoft and Altor Solutions. A copy of management’s presentation is attached as Exhibit 99.1 hereto.
The information contained under Item 7.01 in this Report, including Exhibit 99.1, is being furnished and, as a result, such information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Section 9 Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
| (d) | Exhibits. | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: January 16, 2025 | COMPASS DIVERSIFIED HOLDINGS | ||||||||||
| By: | /s/ Stephen Keller | ||||||||||
| Stephen Keller | |||||||||||
| Regular Trustee | |||||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: January 16, 2025 | COMPASS GROUP DIVERSIFIED HOLDINGS LLC | ||||||||||
| By: | /s/ Stephen Keller | ||||||||||
| Stephen Keller | |||||||||||
| Chief Financial Officer | |||||||||||
compassdiversified.com Investor Day January 16, 2025
compassdiversified.com Legal Disclaimer “Compass Diversified,” as we refer to it, is comprised of three separate, business entities that work closely together: Compass Group Diversified Holdings LLC (the “Company”), sponsor of Compass Diversified Holdings (“Holdings”), and Compass Group Management LLC, the external manager of the organization, which we refer to as the “Manager.” Although the shares issued to the public are technically at the Holdings level (NYSE:CODI), Holdings and the Company file consolidated reports with the Securities Exchange Commission (the “SEC”) and are referred to collectively herein as “CODI,”, “us,” “we” or “our.” This presentation does not constitute an offer or invitation for the sale or purchase of securities and has been prepared solely for informational purposes. This presentation contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be made a part of this presentation or by reference to other documents we file with the SEC. Some of the forward-looking statements can be identified by the use of forward-looking words. Forward-looking statements are typically identified by words such as "believe," "expect," "anticipate," “plan,” “may,” "intend," "target," "estimate," “outlook,” "continue," "prospects" or "potential," by future conditional verbs such as "will," "would," "should," "could" or "may", or by variations of such words or by similar expressions. Certain statements regarding the following particularly are forward-looking in nature: future financial performance, market forecasts or projections, projected capital expenditures and our business and acquisition strategy. All forward-looking statements are based on our management's beliefs, assumptions and expectations of our future economic performance, taking into account the information currently available to it. These statements are not statements of historical fact. Forward-looking statements are subject to a number of assumptions, risks and uncertainties, some of which are not currently known to us and may change over time, that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial position. In addition to factors previously disclosed in CODI’s reports filed with the SEC, the following factors, among others, could cause actual results to differ materially from forward-looking statements: changes in the economy, financial markets and political environment; risks associated with possible disruption in CODI’s operations or the economy generally due to terrorism, natural disasters, or social, civil and political unrest; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); and other considerations that may be disclosed from time to time in CODI’s publicly disseminated documents and filings. Further information regarding CODI and factors which could affect the forward-looking statements contained herein can be found in CODI’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Our actual results may differ materially from the results discussed in forward-looking statements and you should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Except to the extent required by applicable law or regulation, we assume no duty to update forward-looking statements. In addition, our discussion may include references to Adjusted Earnings, Adjusted EBITDA, Subsidiary Adjusted EBITDA, pro forma adjusted EBITDA, retained cash, or other non-GAAP measures. These non-GAAP financial measures have limitations as analytical tools and should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP measures that may be presented by other companies. Non-GAAP measures are not necessarily indicative of our future results of operations or financial condition. A reconciliation of the most directly comparable GAAP financial measures to such non-GAAP financial measures is included in our annual and quarterly reports in Forms 10-K and 10-Q filed with the SEC as well as the Appendix attached to this presentation. In reliance on the unreasonable efforts exception provided under Regulation G and Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled expected Adjusted Earnings, Adjusted EBITDA or Subsidiary Adjusted EBITDA to their comparable GAAP measures because we do not provide guidance on net income (loss) or net income (loss) from continuing operations or the applicable reconciling items as a result of the uncertainty regarding, and the potential variability of, these items. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results. References in this presentation or our discussion to employees refer to employees of our Manager, as CODI currently does not have any employees and does not expect to have any employees in the foreseeable future. References in this presentation or our discussion to the “Board of Directors” or the “Board” or any “committee” of the Board, and to our “subsidiaries” or our “businesses” refer to the Board of Directors and the subsidiaries of the Company, respectively.
compassdiversified.com Welcome Q4 Update & Strategy Overview M&A Market & Verticals Financial Outlook Q&A – Strategy & Outlook CODI in Action – Moderated Panel Discussion 5.11 - Troy Brown PrimaLoft – Anne Cavassa Altor – Terry Moody Lunch & “CODI Corner” Today’s Agenda
compassdiversified.com Overview & Strategy Elias Sabo Founding Partner & Chief Executive Officer
compassdiversified.com Subsidiaries Performed Well in Q4; Expect Results to Come in at or Above the High End of Our Guidance* Continued strength in Consumer Industrial accelerating Expect to take ~$12 million write down of inventory at 5.11 related to PFAS; Write off inline with previously communicated expectations Sold Ergobaby for an Enterprise Value of $104 Million Will be reported as discontinued operations Raised $300 Million in Incremental Term Loan A Initial funding of $200 million; Additional $100 million available with six- month delayed draw Coterminous with the existing Term Loan A (matures July 2027) In Q4 2024 - Raised ~$90 Million in Preferred Shares >$115 million full Year Flexible; low cost source of capital Re-purchased >400,000 Shares of Common Shares Average price of $23.19 Q4 2024 Update *Excluding impact of Ergobaby & PFAS write-off
SubsidiariesCODI By The Numbers* *As at 09/30/2024 (includes Ergobaby) $161M $9.3B+ $5.1B+ $505M+ $2.2B+ TTM Adjusted Earnings1 Aggregate Acquisitions 24 Platforms and 34 Add-Ons Invested Capital TTM pro forma Subsidiary Adjusted EBITDA1,2 TTM pro forma Revenue2 22.5% TTM pro forma Subsidiary Adjusted EBITDA Margin1,2 Consumer Businesses Industrial Businesses 1Subsidiry Adjusted EBITDA, Adjusted EBITDA Margins, & Adjusted Earnings are non-GAAP financial measures. Please see Appendix. 2Pro forma financial data includes comparative historical results of our platform acquisitions as if acquired at the beginning of the period presented.
compassdiversified.com CODI is more than a ticker symbol.
compassdiversified.com C O D I ulture f isruption & nnovation
compassdiversified.com Collaboration We measure success as a team CODI Values Passion We have a strong will to succeed— an intense but graceful competitiveness Integrity We will always choose the right way over the easy way Accountability We deliver against our commitments and take initiative each step of the way Humility We recognize that we don't have all the answers, so we partner with strong world-class managers through the CODI family
compassdiversified.com We are unique. We are redefining our industry with transparency, liquidity, and accessibility.
compassdiversified.com Purpose-driven organization defined by our values Long-term focus on acquiring and owning innovative and disruptive businesses Financed in an intelligent way to lower overall cost of capital and align stakeholder incentives Match duration of opportunity with duration of capital Public company transparency and liquidity We are NOT Private Equity
compassdiversified.com The Evolution of CODI Inflation & Interest Rates Muted M&A Market Acquired The Honey Pot; Divested Ergobaby Codified Investment Thesis Launched Centers of Excellence 2024* >5% >23% Innovative & Disruptive Industry Leading Accelerating Tightened Aperture for Acquisitions Higher Multiples for Better Businesses Buyer of Choice Centers of Excellence Lowest Cost of Capital Closer Aligned Incentives 2025 & Beyond* >2x GDP Growth High Innovative & Disruptive Industry Leading Organic Growth (pro forma) Subsidiary Adjusted EBITDA %1 Subsidiary Characteristics Cost of Capital Progress Challenges 2018 – 2023 GDP+ Growth Medium Faster Growing & Innovative Improving Repositioning Subsidiary Transition Market disruptions (COVID; Supply Chain, etc.) Reduced Cost of Capital Greater Scale Improved Governance Simplified Tax Structure Restructured Balance Sheet *Based on management’s current estimates and assumptions. These are subject to significant uncertainties and contingencies and are based upon management’s current assumptions, which are subject to change. 2006 – 2017 GDP Growth Low Stable & Modest Growth Extremely High (Competitive Disadvantage) Foundational High Cost of Capital Model Not Understood IPO (first of its kind public company) Democratized Access to Middle Market Permanent Capital Differentiation 1Adjusted EBITDA % is a Non-GAAP Measure
compassdiversified.com The CODI Advantage For Our Businesses
compassdiversified.com Partner with Management Teams Alignment of values, strategic partner, active support to realize their vision The CODI Advantage For Our Businesses Growth & Innovation Mindset Driving outsized growth through innovation, superior execution and a long-term focus Permanent & Patient Capital Acquisitions financed at the parent company, duration of capital to match the duration of the opportunity, building lasting infrastructure Emerging Centers of Excellence Making expert resources and strategic advice available as required/requested
compassdiversified.com The CODI Advantage For Our Communities
compassdiversified.com Value-Driven fully committed ownership, with incentive to invest for the long-term The CODI Advantage For Our Communities Future-Thinking For Our People & Planet attracting and retaining top-tier talent; commitment to improving our companies and the world in which we operate Superior Governance & Transparency transparent reporting, independent board, strong financial processes and controls, ensuring our businesses thrive
compassdiversified.com The CODI Advantage For Our Shareholders
compassdiversified.com Unique Access to Middle Market Companies Exposure to innovative and disruptive businesses with public market transparency and liquidity The CODI Advantage For Our Shareholders Differentiated Value Creation Model Industry-leading cost of capital, patient deployment of capital, selective acquisitions, opportunistic divestitures Track Record of Strong Returns History of strong returns on invested capital, aligned interests between shareholders and management
compassdiversified.com Key Changes – Management Services Agreement Established a Sliding Scale for Management Fees: — Management Fee of 2.0% of Adjusted Net Assets (“ANA”) up to $3.5 billion — Management Fee of 1.25% of ANA over $3.5 billion and less than $10 billion — Fixed Management Fee of 1.5% if ANA hits $10 billion Eliminated Integration Service Fees on Platform Acquisitions Adjusted Net Assets Excludes Excess Cash Held at CODI and its Subsidiaries Established Incentive Management Fee of 0.25% for ANA between $3.5 - $10 billion — Only distributable to active members of management team — Earned when the trailing 3-year annualized internal rate of return exceeds 12% — Requires approval of Board’s Compensation Committee (comprised of independent Board members) Effective – the Quarter Commencing on January 1, 2025 For Our Shareholders Revised Management Services Agreement Key Benefits Reduces shareholder costs Further aligns management compensation with shareholder interests Increases oversight of the Board's Compensation Committee Focuses rewards for active members of management team
compassdiversified.com CODI – Shareholder Savings Integration Service FeeManagement Fees Adjusted Net Assets New Agreement Old AgreementNew Agreement Old Agreement $3.5 Million $0 $3.5 Million based on The Honey Pot $70 Million$70 Million$3.5 Billion $5.5 Million$0 $3.5 Million based on The Honey Pot $74 Million$76 Million$3.8 Billion $18 Million$0 $7.0 Million Assumes 2 new platform acquisitions per year $89 Million$100 Million$5.0 Billion $60 Million$0 $10 Million Assumes 2-3 new platform acquisitions per year $150 Million$200 Million$10.0 Billion For Our Shareholders Revised Management Services Agreement Illustrative – Annual Impact* *Excludes impact of any Incentive Management Fees (if earned)
compassdiversified.com Vertical & Subsidiary Update Pat Maciariello Partner & Chief Operating Officer
compassdiversified.com Empowering Success, Driving Growth, Exceeding Expectations Investment Thesis: At CODI, we acquire high-growth middle-market companies that we believe have a sustainable competitive advantage, poised to gain share in attractive markets. We empower strong management teams to realize their vision and drive outsized growth through innovation, superior execution, and a focus on the long-term. 2 Transaction Size Range of $100 Million to $800 Million 1 Consumer, Industrial Technology, and Healthcare & Critical Outsourced Sectors 3 EBITDA >$10 Million with Attractive Long-Term Growth Prospects Acquisition Criteria
compassdiversified.com Consumer (as of 9/30/24 – excluding Ergobaby) 6 $1.5B 11.9% Subsidiary Companies TTM Revenue (pro forma)1 TTM Revenue Growth (pro forma)1 $373M 25.7% TTM Adj. EBITDA (pro forma) 1,2 TTM Adj. EBITDA Margin (pro forma) 1,2 Consumer Subsidiaries Long-Term Outlook HSD+ Organic Revenue Growth >25% Adjusted EBITDA Margin2 +++ Capital Deployment Overview 1Pro forma financial data includes comparative historical results of our platform acquisitions as if acquired at the beginning of the period presented. 2Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures
compassdiversified.com 9 Curated Salons >$450k Average Transaction Size $425M+ Revenue (TTM)* 58.9% Growth (TTM)* $166M+ Adj EBITDA (TTM)* >80% Revenue from Repeat Customers >$19k Revenue Per Sq. Foot 39% Adj EBITDA Margin (TTM)* Disruptive business model redefining the >$160 Billion Luxury Collectibles Category * As of 9/30/2024 Growth continued in 2024 and expected to contribute >$180 Million in adjusted subsidiary EBITDA Given competitive positioning, ongoing investments and geographic expansion; Lugano is expected to continue to drive outsized growth
compassdiversified.com Lugano – Impact to CODI Leverage While Lugano requires significant investments in working capital for growth; investments in Lugano do not materially increase CODI’s leverage above target $80.0$77.5$75.0Annual Estimated EBITDA Growth $230.2$221.5$212.7CODI "Leveragability" at Target (3.5x) -$297.8-$297.8-$297.8Estimated Adjusted Investment in WC1 $149.3$146.8$144.3Estimated Cash Created at Lugano2 -$64.9-$64.9-$64.9Less: Allocation of all CODI corporate Costs and Dividends3 $16.8$5.6-$5.7Liquidity Contribution / Leakage From Lugano -0.031x-0.010x+0.011xImpact on CODI Leverage Illustrative 1 Assumes 1-2 salons opened per year 2 Equal to EBITDA less estimated CapEx and Taxes 3 Includes allocation of corporate costs, management fees, interest and dividends
compassdiversified.com Consumer – Subsidiary Outlook* Anticipated Key Drivers Long-Term Adjusted EBITDA Margins1 Organic Growth Outlook (2025 – 2028)Subsidiary • Continued consumer penetration and improved assortment • EBITDA margin improvement driven by mix shift towards DTC & greater efficiencies >15% MSD • Continued penetration of existing markets • EBITDA growth driven primarily by topline with modest margin improvements ~40% DD • Continued market share gains driven by increased demand for “better for you” personal care • EBITDA growth driven primarily by topline with modest margin improvements due to continued brand investments >25%DD • Continued market share gains driven by increased demand for sustainable solutions • EBITDA growth in line with topline growth ~40%HSD+ • Growth driven by innovation in core crossbow business category • EBITDA margins return to historical levels after impact of channel destocking and reduced IP litigation expense ~15%LSD *Based on management’s current estimates and assumptions. These are subject to significant uncertainties and contingencies and are based upon management’s current assumptions, which are subject to change. 1Adjusted EBITDA Margin is a non-GAAP financial measure
compassdiversified.com Industrial (as of 9/30/24) 3 $700M+ -4.0% Subsidiary Companies TTM Revenue TTM Revenue Growth $122M+ 17.4% TTM Adj. EBITDA1 TTM Adj. EBITDA Margin1 Industrial Subsidiaries Long-Term Outlook MSD Organic Revenue Growth >18% Adjusted EBITDA Margin ++ Capital Deployment Overview 1Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures
compassdiversified.com Industrial – Subsidiary Outlook* Anticipated Key Drivers Anticipated Long-Term EBITDA Margins Organic Growth Outlook (2025 – 2028)Subsidiary • Recent acquisition of Lifoam strengthens position in faster growth cold chain market • Stable long-term margins ~20%MSD • Continued strong growth in core markets (e.g. Aerospace/Defense) • Margin expansion driven by operating leverage as well as improved mix following recent investments >15% MSD • Modest volume growth driven by increases in corporate travel and further product and customer expansion • Stable long-term margins >15% LSD *Based on management’s current estimates and assumptions. These are subject to significant uncertainties and contingencies and are based upon management’s current assumptions, which are subject to change. 1Adjusted EBITDA Margin is a non-GAAP financial measure
compassdiversified.com Long-Term Financial Outlook Stephen Keller Executive Vice President & Chief Financial Officer
compassdiversified.com Trend20242022 2321 BBBBB 26.8N/A C-N/A Our Businesses Our Communities Our Shareholders Our Employees $179,000 $421,000 2016 2023 2024E* Subsidiary Adjusted EBITDA1 ESG Ratings Total Return Employees believe CODI is a great place to work >90%2.4x Russell 2000® Total ReturnSince IPO (5/2006 – 12/31/2024) +595%CODI +288%Russell 2000® Guided by Values, Driven By Excellence Exceeding ExpectationsDriving Growth Empowering Success Delivering For All Stakeholders 1Subsidiry adjusted EBITDA is a non-GAAP financial measure. Please see Appendix.
compassdiversified.com Adjusted EBITDA1 (as reported2) Significant increase in adjusted EBITDA over 3, 5, & 10 years EBITDA growth driven by organic and inorganic investment and active subsidiary management Targeting sustained DD+ growth in adjusted EBITDA 1Adjusted EBITDA is a non-GAAP financial measure. Please see Appendix. 2As presented in the annual or quarterly report filed with the SEC in the year indicated. $167.8 $195.1 $249.5 $226.1 $249.2 $327.3 $369.8 $340.9 2016 2017 2018 2019 2020 2021 2022 2023 2024E* $Millions CAGR >12%
compassdiversified.com Continued strong operating performance at subsidiaries is driving increased retained cash 1Retained Cash is a non-GAAP financial measure. Please see Appendix. $1.0 $57.1 $64.8 $79.5 $66.3 2020 2021 2022 2023 2024 (YTD Sept) $Millions Retained Cash1 (before Working Capital) Increased retained cash supports long-term strategic goals Organic de-levering Deploying capital for new acquisitions Investing in subsidiaries
compassdiversified.com Strong Balance Sheet 73% of debt fixed at blended 5.20% Ba la nc e Sh ee t & S ec ur ed D eb t U ns ec ur ed D eb t Ca pi ta l S tr uc tu re $300M 5.0% Fixed Due 2032 $1,000M 5.25% Fixed Due 2029 Est. as of 1/10/2025 40% 57% 13% Common Equity Preferred Equity Debt 6.6%Rate on debt 7.7%Rate on preferred ~$47 MillionCash: ~$0 MillionRevolver: ~$575 MillionTerm Loan: Availability ~$600 MillionRevolver:
compassdiversified.com History of Successfully Deleveraging CODI has a demonstrated history of paying down its debt and is committed to staying conservatively levered 3.7x 2.9x 2.5x 2.6x 2.8x 3.0x 3.5x 3.5x 3.9x 3.9x 3.6x 1.9x 1.9x 1.4x 1.75x 1.9x 1.8x 3.2x 2.9x 2.6x 2.9x 2.96x 3.04x 2.98x 3.93x 3.97x 3.87x 4.08x 4.03x 3.1x 3.8x 3.72x 3.68x Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sept-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Dec-24 Reported Leverage at Quarter End FOXF Secondary Sales Sale Sale Sale Series BSeries A Series C Common Shares Secondary Offering $200mm ATM Equity Proceeds $75mm Private Placement Sale Reported Leverage at quarter end other than for 12/31/24 which is management's estimate based on estimate of 2024 results and impact of the sale of Ergobaby. $100mm ATM Equity ProceedsPreferred Series Offering
compassdiversified.com Maintain Long-Term Leverage Target of 3.0x to 3.5x Financing Strategy & Outlook Secure Access to Diverse Sources Capital Ensure Significant Liquidity to Fund Subsidiary Growth and Drive Strategic Acquisitions
compassdiversified.com Capital Allocation Priorities 1. Continued Investment in Subsidiaries Organic investment in innovative and disruptive businesses Strategic add-ons 3. Efficient Return of Capital 2. Platform Acquisitions Active but disciplined capital allocation Target of 1-2 platform acquisitions per year
compassdiversified.com Long-Term Outlook* HSD+ ~25% >10% Organic Sales Growth* Subsidiary Adjusted EBITDA%* Adjusted Earnings Growth* Drive Organic Growth in Sales & Margins Actively Acquire Attractive Platform Businesses Opportunistically Divest Subsidiaries *Based on management’s current estimates and assumptions. These are subject to significant uncertainties and contingencies and are based upon management’s current assumptions, which are subject to change. **Organic Sales Growth, Adjusted EBITDA % and Adjusted Earnings Growth are non-GAAP financial measures.
compassdiversified.com Q&A
compassdiversified.com Panel Discussion Elias Sabo, CEO of Compass Diversified in conversation with: Troy Brown Anne Cavassa Terry A. Moody
compassdiversified.com Appendix
compassdiversified.com Appendix: Subsidiary Snapshot (as of 9/30/2024) Purchase Price + Add-ons TTM Capital Expenditures 9/30/24 PF Sub. Adj. EBITDA Margin 9/30/24 TTM PF Sub. Adj. EBITDA Growth Rate TTM PF Sub. Adj. EBITDA 9/30/24 TTM PF Revenue Growth Rate TTM PF Revenue 9/30/24 Year Acquired Subsidiaries ($ in millions) $408 $5 13.8%2.5%$74 2.6%$535 20155.11 $454 $3 38.1%26.4%$71 18.8%$185 2020BOA $173 $1 11.7%-18.5%$11 1.8%$94 2010Ergobaby $263 $9(1)39.1%78.6%$167 58.9%$426 2021Lugano $541 $0 36.8%-6.2%$26 -1.0%$71 2022PrimaLoft $377 $0 27.3%23.5%$30 8.5%$111 2024The Honey Pot(3) $268 $3 4.6%-57.6%$6 -30.7%$123 2017Velocity $2,484 $21 24.8%27.9%$384 11.2%$1,545 Total Branded Consumer: ($173)($1)($11)($94)Less: Ergobaby $2,311 $20 25.7%30.0%$373 11.9%$1,451 Total Branded Consumer (ex-Ergo) $327 $7 20.8%-8.8%$45 -12.0%$214 2018Altor $163 $18 17.6%18.3%$31 9.8%$175 2012Arnold $344 $7 14.6%1.9%$46 -4.3%$318 2014Sterno $834 $31 17.2%1.0%$122 -3.8%$707 Total Industrial $3,319$5222.5%20%$505(2)6.0%$2,252Total – Consolidated $3,145 $51 22.9%21.5%$495 6.2%$2,158 Total – Consolidated (ex- Ergo) 1. Growth capex at Lugano for retail store rollout. 2. Subsidiary Adj. EBITDA does not include ~$86M of corporate expenses. 3. On February 1, 2024, the Company announced the completion of its acquisition of The Honey Pot Company, LLC. Information prior to acquisition was from Honey Pot’s management.
compassdiversified.com Appendix: Net Income to Non-GAAP Adjusted Earnings Nine Months EndedThree Months Ended September 30, 2023September 30, 2024September 30, 2023September 30, 2024 $ 122,964 $ 23,519 $ (3,760)$ 31,461Net income (loss) 21,790—8,950—Income from discontinued operations, net of tax 103,4953,3451,274—Gain on sale of discontinued operations, net of tax $ (2,321)$ 20,174 $ (13,984)$ 31,461 Net income (loss) from continuing operations 13,39022,6325,7219,397Less: income (loss) from continuing operations attributable to non-controlling interest $ (15,711)$ (2,458)$ (19,705)$ 22,064 Net income (loss) attributable to Holdings - continuing operations Adjustments: (18,136)(18,491)(6,045)(6,345)Less: Distributions paid - Preferred Shares 73,08184,55323,95626,798Add: Amortization expense – intangibles and inventory step up 32,5688,18232,568—Add: Impairment expense (4,308)—(4,308)—Less: Tax effect – impairment expense —24,218—(388)Gain loss on sale of Crosman —7,254——Tax effect – loss on sale of Crosman 7,59813,0262,7504,769Add: Stock Compensation —3,479——Add: Acquisition expenses 2,3751,750—875Add: Integration Services Fee 1,1291,368349963Add (Less): Other $ 78,596 $ 122,881 $ 29,565 $ 48,736 Adjusted Earnings
compassdiversified.com Appendix: Adjusted EBITDA | Quarter Ended September 30, 2024 ConsolidatedSternoArnoldAltorVelocityTHPPrimaLoftLuganoErgoBOA5.11CorporateIn OOO’s $31,461 $3,154 $2,260 $2,682 $1,831 ($160)($4,273)$24,272 ($3,229)$3,902 $9,737 ($8,715)Net income (loss) Adjusted for: $10,754 $939 $1,196 $1,466 ($2,223)($20)($2,315)$8,342 $136 $1,451 $1,782 Provision (benefit) for income taxes $27,357 —$139 ($1)($3)($10)——($4)($2)$27,238 Interest expense, net —$2,944 $1,816 $1,735 $2,038 $2,907 $4,480 $15,080 $2,116 $4,925 $3,334 ($41,375)Intercompany interest ————————————Loss on debt extinguishment $38,169 $4,960 $2,340 $4,080 $1,397 $4,166 $5,337 $2,699 $2,053 $5,402 $5,617 $118 Depreciation and amortization $107,741 $11,997 $7,751 $9,963 $3,042 $6,890 $3,219 $50,393 $1,076 $15,676 $20,468 ($22,734)EBITDA ($309)($81)—$58 ($164)$25 $1 ($68)$17 ($110)$13 —Other income (expense) $4,769 $235 $4 $237 $186 $540 $828 $459 $232 $1,504 $544 —Non-controlling shareholder compensation ————————————Impairment expense ————————————Acquisition expenses $875 ————$875 ——————Integration services fee $963 $83 $880 —————————Other $114,039 $12,234 $8,635 $10,258 $3,064 $8,330 $4,048 $50,784 $1,325 $17,070 $21,025 ($22,734)Adjusted EBITDA
compassdiversified.com Appendix: Adjusted EBITDA | Quarter Ended September 30, 2023 ConsolidatedSternoArnoldAltorVelocityPrimaLoftLuganoErgoBOA5.11CorporateIn OOO’s ($13,984)$1,981 $2,103 $5,042 ($28,881)($4,893)$14,584 ($261)$4,257 $5,834 ($13,750)Net income (loss) Adjusted for: $3,837 $643 $876 $1,460 ($2,951)($2,566)$4,210 ($620)$865 $1,920 —Provision (benefit) for income taxes $27,560 —$6 —$38 ($3)——($4)($2)$27,525 Interest expense, net —$4,063 $1,706 $2,549 $3,633 $4,635 $8,930 $2,144 $1,571 $5,477 ($34,708)Intercompany interest ———————————Loss on debt extinguishment $36,955 $4,984 $2,126 $4,215 $3,272 $5,361 $2,081 $2,033 $5,930 $6,573 $380 Depreciation and amortization $54,368 $11,671 $6,817 $13,266 ($24,889)$2,534 $29,805 $3,296 $12,619 $19,802 ($20,553)EBITDA ($1,045)($363)$8 ($362)($425)($9)$71 —($63)$98 —Other income (expense) $2,750 $240 $8 $234 $228 $262 $472 $312 $736 $258 —Non-controlling shareholder compensation $32,568 ———$32,568 ——————Impairment expense ———————————Acquisition expenses ———————————Integration services fee $349 $349 —————————Other $88,990 $11,897 $6,833 $13,138 $7,482 $2,787 $30,348 $3,608 $13,292 $20,158 ($20,553)Adjusted EBITDA
compassdiversified.com Appendix: Adjusted EBITDA | Nine Months Ended September 30, 2024 ConsolidatedSternoArnoldAltorVelocityTHPPrimaLoftLuganoErgoBOA5.11CorporateIn OOO’s $20,174 $7,711 $6,169 $6,076 ($53,368)($7,764)($5,261)$59,257 ($6,337)$16,248 $18,594 ($21,151) Net income (loss) Adjusted for: $40,960 $2,594 $3,182 $3,192 $7,074 ($2,589)($1,731)$20,010 $516 $3,920 $4,792 — Provision (benefit) for income taxes $77,494 —$220 —$53 ($28)($15)$3 —($16)($3)$77,280 Interest expense, net —$9,700 $5,313 $5,612 $7,620 $7,827 $13,526 $40,417 $6,364 $15,716 $10,114 ($122,209) Intercompany interest ————————————Loss on debt extinguishment $119,330 $14,850 $6,754 $12,250 $6,679 $14,811 $15,987 $7,571 $6,427 $16,251 $17,198 $552 Depreciation and amortization $257,958 $34,855 $21,638 $27,130 ($31,942)$12,257 $22,506 $127,258 $6,970 $52,119 $50,695 ($65,528) EBITDA $28,545 ($423)($9)$2,722 $25,734 ($5)$5 ($61)$12 $22 $86 $462 Other income (expense) $13,026 $354 $13 $741 $556 $1,157 $1,823 $1,662 $738 $4,352 $1,630 — Non-controlling shareholder compensation $8,182 ———$8,182 ——————— Impairment expense $3,479 ————$3,479 —————— Acquisition expenses $1,750 ————$1,750 —————— Integration services fee $1,368 $398 $880 ——$90 —————— Other $314,308 $35,184 $22,522 $30,593 $2,530 $18,728 $24,334 $128,859 $7,720 $56,493 $52,411 ($65,066) Adjusted EBITDA
compassdiversified.com Appendix: Adjusted EBITDA | Nine Months Ended September 30, 2023 ConsolidatedSternoArnoldAltorVelocityPrimaLoftLuganoErgoBOA5.11CorporateIn OOO’s ($2,321)$4,445 $6,911 $12,244 ($36,862)($5,500)$31,468 ($1,114)$15,151 $11,850 ($40,914)Net income (loss) Adjusted for: $15,077 $1,512 $3,264 $4,094 ($5,905)($3,125)$10,295 ($1,272)$2,224 $3,990 —Provision (benefit) for income taxes $80,353 —$16 —$232 ($9)$4 —($9)($4)$80,123 Interest expense, net —$12,885 $5,078 $8,183 $10,070 $13,343 $22,660 $6,484 $5,032 $15,698 ($99,433)Intercompany interest ———————————Loss on debt extinguishment $111,370 $15,016 $6,248 $12,558 $10,023 $16,084 $6,971 $6,112 $17,436 $19,866 $1,056 Depreciation and amortization $204,479 $33,858 $21,517 $37,079 ($22,442)$20,793 $71,398 $10,210 $39,834 $51,400 ($59,168)EBITDA ($2,100)($1,161)($1)$201 ($1,179)$130 ($5)$29 $117 ($103)($128)Other income (expense) $7,598 $562 $26 $800 $686 $219 $1,312 $936 $2,069 $988 —Non-controlling shareholder compensation ————$32,568 ——————Impairment expense ———————————Acquisition expenses $2,375 ————$2,375 —————Integration services fee $1,129 $1,129 —————————Other $246,049 $34,388 $21,542 $38,080 $9,633 $23,517 $72,705 $11,175 $42,020 $52,285 ($59,296)Adjusted EBITDA
compassdiversified.com Appendix: Adjusted EBITDA | Full Year Ended December 31, 2023 ConsolidatedSternoArnoldAltorVelocityPrimaLoftLuganoErgoBOA5.11CorporateIn OOO’s ($38,736)$8,115 $10,434 $16,504 ($40,045)($69,883)$52,315 ($2,601)$16,496 $21,690 ($51,761)Net income (loss) from continuing operations Adjusted for: $21,331 $1,106 $4,185 $5,890 ($5,616)($5,672)$14,589 ($1,309)$2,863 $4,994 $301 Provision (benefit) for income taxes $105,179 —$5 —$352 ($11)$4 —($18)($8)$104,855 Interest expense, net —$16,654 $6,806 $10,486 $13,510 $18,123 $32,837 $8,595 $7,580 $20,244 ($134,835)Intercompany interest ———————————Loss on debt extinguishment $147,580 $19,959 $8,441 $16,741 $13,282 $21,478 $9,229 $8,110 $22,932 $26,009 $1,399 Depreciation and amortization $235,354 $45,834 $29,871 $49,621 ($18,517)($35,965)$108,974 $12,795 $49,853 $72,929 ($80,041)EBITDA ($1,743)($1,441)($5)$1,440 ($1,210)$62 ($80)$36 $98 ($515)($128)Other (income) expense $10,665 $860 $27 $986 $914 $980 $1,474 $1,214 $3,019 $1,191 —Non-controlling shareholder compensation $89,400 ———$31,590 $57,810 —————Impairment expense $321 ——————$321 ———Acquisition expenses $2,375 ————$2,375 —————Integration services fee $4,506 $1,434 ——————$3,072 ——Other $340,878 $46,687 $29,893 $52,047 $12,777 $25,262 $110,368 $14,366 $56,042 $73,605 ($80,169)Adjusted EBITDA
compassdiversified.com Appendix: Adjusted EBITDA | Full Year Ended December 31, 2022 ConsolidatedSternoArnoldAltorVelocity PrimaLoftLuganoErgoBOA5.11CorporateIn OOO’s $3,658 $3,406 $7,683 $9,662 $4,127 ($17,741)$27,934 ($18,669)$42,613 $22,633 ($77,990)Net income (loss) from continuing operations Adjusted for: $37,093 ($480)$3,329 $3,174 $1,562 ($3,878)$11,889 ($4,274)$6,527 $7,125 $12,119 Provision (benefit) for income taxes $83,492 —$26 —$229 ($7)$16 $10 ($25)—$83,243 Interest expense, net —$18,153 $5,518 $10,742 $10,282 $7,512 $12,773 $6,026 $7,410 $13,761 ($92,177)Intercompany interest $534 —————————$534 Loss on debt extinguishment $134,573 $20,293 $8,041 $16,403 $13,374 $10,465 $11,533 $8,094 $21,993 $22,972 $1,405 Depreciation and amortization $259,350 $41,372 $24,597 $39,981 $29,574 ($3,649)$64,145 ($8,813)$78,518 $66,491 ($72,866)EBITDA $2,321 ($1,730)($20)$766 $2,417 $112 $2 $6 $1,043 ($217)($58)Other (income) expense $11,998 $844 $40 $1,321 $971 $2,142 $1,179 $1,479 $2,511 $1,511 —Non-controlling shareholder compensation $20,552 ——————$20,552 ———Impairment expense $6,118 ——$216 $222 $5,680 —————Acquisition expenses $4,063 ————$2,375 $1,688 ————Integration services fee $1,580 $1,330 —————$250 ———Other $305,982 $41,816 $24,617 $42,284 $33,184 $6,660 $67,014 $13,474 $82,072 $67,785 ($72,924)Adjusted EBITDA
compassdiversified.com 9/30/202412/31/202312/31/202212/31/202112/31/2020($000's) -$77,610$78,080-$28,291$134,051$148,625Net Cash Provided by (Used in) Operating Activities 253,902 153,310 252,377 80,990 (3,349)Changes in Operating Assets and Liabilities (working capital) Less: (34,507)(55,776)(64,274)(39,880)(30,764)Capital Expenditures (18,941)(24,181)(24,181)(24,181)(23,678)Preferred Distributions (56,577)(71,967)(70,845)*(93,834)(89,856)Common Distributions $66,267$79,466$64,786$57,146$978Retained cash before working capital changes *Excludes special distribution of $57.1M Appendix: Retained Cash Calculation
compassdiversified.com Appendix Adjusted EBITDA (Historical) As reported in the annual (10K) report filed with the SEC in the year indicated.
compassdiversified.com Appendix: Adjusted EBITDA (as Reported*) | Full Year 2016 *As reported in the annual (10K) report filed with the SEC in the year indicated. Amount In $000s
compassdiversified.com Appendix: Adjusted EBITDA (as Reported*) | Full Year 2017 *As reported in the annual (10K) report filed with the SEC in the year indicated. Amount In $000s
compassdiversified.com Appendix: Adjusted EBITDA (as Reported*) | Full Year 2018 *As reported in the annual (10K) report filed with the SEC in the year indicated. Amount In $000s
compassdiversified.com Appendix: Adjusted EBITDA (as Reported*) | Full Year 2019 *As reported in the annual (10K) report filed with the SEC in the year indicated. Amount In $000s
compassdiversified.com Appendix: Adjusted EBITDA (as Reported*) | Full Year 2020 *As reported in the annual (10K) report filed with the SEC in the year indicated. Amount In $000s
compassdiversified.com Appendix: Adjusted EBITDA (as Reported*) | Full Year 2021 *As reported in the annual (10K) report filed with the SEC in the year indicated. Amount In $000s
compassdiversified.com Appendix: Adjusted EBITDA (as Reported*) | Full Year 2022 *As reported in the annual (10K) report filed with the SEC in the year indicated. Amount In $000s
compassdiversified.com Appendix: Adjusted EBITDA (as Reported*) | Full Year 2023 *As reported in the annual (10K) report filed with the SEC in the year indicated. Adjusted EBITDA Year ended December 31, 2023 (in thousands) Corporate 5.11 BOA Ergo Lugano PrimaLoft Velocity Outdoor Altor Solutions Arnold Sterno Consolidated Net income (loss) from continuing operations $ (51,761) $ 21,690 $ 16,496 $ (2,601) $ 52,315 $ (69,883) $ (40,045) $ 16,504 $ 10,434 $ 8,115 $ (38,736) Adjusted for: Provision (benefit) for income taxes 301 4,994 2,863 (1,309) 14,589 (5,672) (5,616) 5,890 4,185 1,106 21,331 Interest expense, net 104,855 (8) (18) — 4 (11) 352 — 5 — 105,179 Intercompany interest (134,835) 20,244 7,580 8,595 32,837 18,123 13,510 10,486 6,806 16,654 — Loss on debt extinguishment — — — — — — — — — — — Depreciation and amortization 1,399 26,009 22,932 8,110 9,229 21,478 13,282 16,741 8,441 19,959 147,580 EBITDA (80,041) 72,929 49,853 12,795 108,974 (35,965) (18,517) 49,621 29,871 45,834 235,354 Other (income) expense (128) (515) 98 36 (80) 62 (1,210) 1,440 (5) (1,441) (1,743) Non-controlling shareholder compensation — 1,191 3,019 1,214 1,474 980 914 986 27 860 10,665 Impairment expense — — — — — 57,810 31,590 — — — 89,400 Acquisition expenses — — — 321 — — — — — — 321 Integration services fee — — — — — 2,375 — — — — 2,375 Other — — 3,072 — — — — — — 1,434 4,506 Adjusted EBITDA $ (80,169) $ 73,605 $ 56,042 $ 14,366 $ 110,368 $ 25,262 $ 12,777 $ 52,047 $ 29,893 $ 46,687 $ 340,878
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