• Revenue: $542.6 million, up 11% from $486.9 million in the prior year period.
• Net Loss: $13.7 million compared to net income of $17.1 million in the prior year.
• Adjusted EBITDA: $105.4 million, up 27% from $82.9 million in the prior year.
• Pro-forma Revenue Growth: 6% for the quarter; 4.9% year-to-date versus June 2023.
• Pro-forma Adjusted EBITDA Growth: 18% for the quarter; 16.6% year-to-date versus June 2023.
• Industrial Segment Revenue Decline: 6.7% year-to-date versus June 2023.
• Industrial Segment Adjusted EBITDA Decline: 8% year-to-date versus June 2023.
• Consumer Segment Pro-forma Revenue Growth: 10.9% year-to-date versus June 2023.
• Consumer Segment Pro-forma Adjusted EBITDA Growth: 27% year-to-date versus June 2023.
• BOA Revenue Growth: 42.1% in Q2 2024 versus Q2 2023.
• BOA Adjusted EBITDA Growth: Almost 60% in Q2 2024 versus Q2 2023.
• PrimaLoft Revenue Growth: 14.1% in Q2 2024 versus Q2 2023.
• PrimaLoft Adjusted EBITDA Growth: 11.1% in Q2 2024 versus Q2 2023.
• Cash Flow from Operations: Used $35 million in Q2 2024.
• Capital Expenditures: $11.2 million in Q2 2024, compared to $13.7 million in the prior year period.
• Leverage Ratio: 3.2 times as of June 30, 2024.

• Warning! GuruFocus has detected 6 Warning Signs with CODI.

Release Date: July 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Compass Diversified Holdings (NYSE:CODI) reported strong performance in its branded consumer vertical, with BOA, PrimaLoft, and Lugano leading the growth.
• The company experienced a 27% increase in adjusted EBITDA for the second quarter, driven by acquisitions and strong growth in key subsidiaries.
• Lugano's international expansion, particularly the new salon in London, exceeded expectations, indicating successful growth strategies.
• CODI maintained its full-year 2024 guidance, expecting to hit the high end of its consolidated guidance ranges, reflecting confidence in its business outlook.
• The company has a strong liquidity position with $68.4 million in cash and $544 million available on its revolver, providing financial flexibility for future investments.

Negative Points

• CODI's industrial vertical faced challenges, with a decline in both revenues and adjusted EBITDA due to a weakening global macro economy.
• The HoneyPot company underperformed slightly, with revenue and EBITDA below expectations due to the loss of non-core SKUs at a large retailer.
• The company reported a consolidated net loss of $13.7 million for the second quarter, impacted by a loss on the sale of Crosman and tax expenses.
• 5.11 faced operational challenges related to inventory fluctuations and the PFAS transition, affecting its financial performance.
• CODI's leverage ratio remains a focus, with plans to reduce it further, but it still poses a risk if significant acquisitions are pursued.

Q & A Highlights

Q: Can you provide more color on BOA's strong performance this quarter? Is it the main driver of the $10 million increase in the branded consumer vertical? A: Patrick Maciariello, COO: BOA's growth was broad-based across its verticals, with significant contributions from its workwear segment. Elias Sabo, CEO: Both BOA and PrimaLoft exceeded expectations, contributing to the $10 million increase. Lugano's remarkable growth also played a significant role.

Q: Regarding HoneyPot's performance, is the decline due to traffic at big box retailers? A: Patrick Maciariello, COO: Yes, some well-publicized traffic reductions at major retailers impacted HoneyPot, which relies heavily on these channels for revenue.

Q: How does the current M&A environment affect your acquisition strategy, especially in healthcare? A: Elias Sabo, CEO: We are focused on innovative companies with strong margins and growth potential. While deal volume has increased, quality remains a concern. In healthcare, we are open to smaller acquisitions with a build strategy, but remain disciplined in our criteria.

Q: With the economy softening, how does this impact your appetite for larger acquisitions? A: Elias Sabo, CEO: We are cautious due to the weakening economy, which affects growth expectations and valuations. However, we remain open to paying premium multiples for high-quality businesses with strong growth prospects.

Q: Can you share insights from the London salon opening and its impact on Lugano's expansion plans? A: Patrick Maciariello, COO: The London salon exceeded expectations, validating our strategy of deep relationships and high-value products. This success encourages further European expansion, although modeling growth remains challenging due to robust performance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.