Compass Diversified Reports Fourth Quarter and Full Year 2023 Financial Results

WESTPORT, Conn., Feb. 28, 2024 (GLOBE NEWSWIRE) -- Compass Diversified (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle market branded consumer and industrial businesses, announced today its consolidated operating results for the three and twelve months ended December 31, 2023.

“Our fourth quarter results exceeded our expectations and demonstrate that owning premium businesses with defensible competitive moats drives strong financial performance,” said Elias Sabo, CEO of Compass Diversified. “At a consolidated level, our business saw strong revenue, net income, and Subsidiary Adjusted EBITDA growth in the fourth quarter led by Lugano Diamonds. While the economic backdrop remains uncertain for many, our diversified business model continues to shine, and has us feeling optimistic that we will provide a strong shareholder return in the coming year.”

Sabo continued: “Our differentiated competitive advantage of a permanent capital structure and a lower cost of capital enabled our opportunistic sale of Marucci Sports in November and our acquisition of The Honey Pot Company in early 2024. Inclusive of The Honey Pot Company acquisition, we expect to see above trend growth in consolidated financial performance in 2024, on a pro forma basis.”

Fourth Quarter and Full Year 2023 Financial Summary vs. Same Year-Ago Period (where applicable)

• Net sales in the fourth quarter up 7% to $567.0 million. For the full year 2023, net sales up 2% to $2.1 billion, and roughly flat on a pro forma basis.
• Branded consumer net sales in the fourth quarter up 13% to $371.9 million. For the full year 2023, branded consumer pro forma net sales up 3% to $1.3 billion.
• Industrial net sales in the fourth quarter down 3% to $195.1 million. For the full year 2023, industrial net sales down 5% to $728.5 million.
• Net income in the fourth quarter of $139.4 million vs. $8.7 million last year. For the full year 2023, net income of $262.4 million vs. $51.4 million. The increase in both periods was primarily due to the $179.5 million gain on the sale of Marucci Sports in November 2023 and the $98.0 million gain on the sale of Advanced Circuits in February 2023.
• Loss from continuing operations in the fourth quarter of $36.4 million vs. $4.6 million in the prior year period. For the full year 2023, loss from continuing operations of $38.7 million vs. income from continuing operations of $3.7 million for full year 2022. The increases in net loss from continuing operations were primarily due to non-cash impairment charges associated with PrimaLoft and Velocity Outdoor.
• Adjusted Earnings, a non-GAAP financial measure, in the fourth quarter was $38.1 million vs. $16.3 million for the fourth quarter of 2022. For the full year 2023, Adjusted Earnings was $116.7 million vs. $110.2 million in the prior year.
• Adjusted EBITDA, a non-GAAP financial measure, in the fourth quarter was up 35% to $94.8 million. For the full year 2023, Adjusted EBITDA was up 11% to $340.9 million.
• Paid a fourth quarter 2023 cash distribution of $0.25 per share on CODI's common shares in January 2024.

Recent Business Highlights

• On February 1, 2024, CODI announced the completion of its partnership with The Honey Pot Company, a leading “better-for-you” feminine care brand, for an enterprise value of $380 million.
• On January 17, 2024, CODI hosted an Investor Day in Newport Beach, California, showcasing its Lugano Diamonds and 5.11 subsidiaries. A replay of the Lugano Diamonds and Compass Diversified presentations has been made available on the Investor Relations page of the Company’s website at compassdiversified.com.
• On December 21, 2023, CODI announced the completion of a private placement of approximately 3.6 million of its common shares to a mutual fund managed by Allspring Global Investments, LLC for $21.18 per share, or an aggregate sale price of approximately $75.2 million, before commissions and expenses.
• On December 19, 2023, PrimaLoft Inc., a subsidiary of CODI and a leading provider of branded, high-performance synthetic insulation and materials used primarily in consumer outerwear and accessories, announced the appointment of Anne Cavassa as CEO.
• On November 15, 2023, CODI announced the completion of the sale of Marucci Sports to Fox Factory Holding Corp. (Nasdaq: FOXF) for an enterprise value of $572 million. CODI realized a $179.5 million gain on the sale of Marucci Sports.
  

Fourth Quarter and Full Year 2023 Financial Results

Net sales in the fourth quarter of 2023 were $567.0 million, up 7% compared to $529.7 million in the fourth quarter of 2022. For the full year 2023, net sales were $2.1 billion, up 2% compared to $2.0 billion a year ago. This was driven by a 63% increase in Lugano net sales, somewhat offset by lower net sales at PrimaLoft and Velocity Outdoor due to inventory destocking headwinds and reduced wholesale demand. On a pro forma basis, assuming CODI had acquired PrimaLoft on January 1, 2022, net sales were roughly flat in the full year 2023.

Branded consumer net sales increased 13% in the fourth quarter of 2023 to $371.9 million compared to the fourth quarter of 2022. On a pro forma basis, branded consumer net sales increased 3% to $1.3 billion in the full year 2023 compared to a year ago.

Industrial net sales decreased 3% in the fourth quarter of 2023 to $195.1 million compared to the fourth quarter of 2022, and decreased 5% to $728.5 million in the full year 2023 compared to a year ago.

Operating loss for the fourth quarter of 2023 was $4.0 million compared to operating income of $26.8 million in the fourth quarter of 2022. For the full year 2023, operating income decreased 31% to $90.1 million compared to $130.8 million a year ago. The decline was primarily due to a $56.8 million non-cash impairment expense associated with PrimaLoft in the fourth quarter of 2023.

Net income in the fourth quarter of 2023 was $139.4 million compared to net income of $8.7 million in the fourth quarter of 2022. For the full year 2023, net income was $262.4 million compared to $51.4 million a year ago. The increases in net income were due primarily to the $179.5 million gain on the sale of Marucci Sports in November 2023 and the $98.0 million gain on the sale of Advanced Circuits in February 2023.

Loss from continuing operations in the fourth quarter of 2023 was $36.4 million compared to $4.6 million in the fourth quarter of 2022. For the full year 2023, loss from continuing operations was $38.7 million compared to income from continuing operations of $3.7 million a year ago. The increases in net loss from continuing operations were primarily due to the non-cash impairment expenses associated with PrimaLoft and Velocity Outdoor.

Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the fourth quarter of 2023 was $38.1 million compared to $16.3 million a year ago. For the full year 2023, Adjusted Earnings was $116.7 million compared to $110.2 million a year ago. CODI's weighted average number of shares outstanding in the fourth quarter of 2023 was 72.43 million compared to 72.20 million in the prior year fourth quarter. For the full year 2023, CODI’s weighted average number of shares outstanding was 72.11 million compared to 70.72 million in 2022.

Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) in the fourth quarter of 2023 was $94.8 million, up 35% compared to $70.0 million in the fourth quarter of 2022. For the full year 2023, Adjusted EBITDA was $340.9 million, up 11% compared to $306.0 million a year ago. The increases were primarily due to strong results at Lugano and the Company’s Industrial subsidiaries. The Company no longer adds back management fees in its calculation of Adjusted EBITDA. Management fees incurred during the fourth quarter and full year were $16.9 million and $68.4 million, respectively.

Liquidity and Capital Resources

As of December 31, 2023, CODI had approximately $450.5 million in cash and cash equivalents, $2.2 million outstanding on its revolver, $385.0 million outstanding in term loans, $1.0 billion outstanding in 5.250% Senior Notes due 2029 and $300.0 million outstanding in 5.000% Senior Notes due 2032.

As of December 31, 2023, the Company had no significant debt maturities until 2027 and had net borrowing availability of approximately $598 million under its revolving credit facility.

Fourth Quarter 2023 Distributions

On January 4, 2024, CODI’s Board declared a fourth quarter distribution of $0.25 per share on the Company's common shares. The cash distribution was paid on January 25, 2024, to all holders of record of common shares as of January 18, 2024.

The Board also declared a quarterly cash distribution of $0.453125 per share on the Company’s 7.250% Series A Preferred Shares (the “Series A Preferred Shares”). The distribution on the Series A Preferred Shares covers the period from, and including, October 30, 2023, up to, but excluding, January 30, 2024. The distribution for such period was payable on January 30, 2024, to all holders of record of Series A Preferred Shares as of January 15, 2024.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series B Preferred Shares (the “Series B Preferred Shares”). The distribution on the Series B Preferred Shares covers the period from, and including, October 30, 2023, up to, but excluding, January 30, 2024. The distribution for such period was payable on January 30, 2024, to all holders of record of Series B Preferred Shares as of January 15, 2024.

The Board also declared a quarterly cash distribution of $0.4921875 per share on the Company’s 7.875% Series C Preferred Shares (the “Series C Preferred Shares”). The distribution on the Series C Preferred Shares covers the period from, and including, October 30, 2023, up to, but excluding, January 30, 2024. The distribution for such period was payable on January 30, 2024, to all holders of record of Series C Preferred Shares as of January 15, 2024.

2024 Outlook

CODI expects its current subsidiaries, inclusive of The Honey Pot Company as if we owned it from January 1, 2024, to produce consolidated Subsidiary Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the full year 2024 of between $480 million and $520 million. Of this range, CODI expects its Branded Consumer vertical to produce $355 million to $385 million and its Industrial vertical to produce $125 million to $135 million. This estimate is based on the summation of the Company’s expectations for its current subsidiaries in 2024, and is absent additional acquisitions or divestitures, and excludes corporate expenses such as interest expense, management fees paid by CODI and corporate overhead.

CODI is now providing guidance for Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) including management fees and corporate expenses, and expects to earn between $390 million and $430 million for the full year 2024. Adjusted EBITDA only includes results from The Honey Pot Company from the date of acquisition.

In addition, the Company expects to earn between $145 million and $160 million in Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the full year 2024.

In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, CODI has not reconciled 2024 consolidated Subsidiary Adjusted EBITDA, 2024 Adjusted EBITDA or 2024 Adjusted Earnings to their comparable GAAP measure because it does not provide guidance on Income (Loss) from Continuing Operations or Net Income (Loss) or the applicable reconciling items as a result of the uncertainty regarding, and the potential variability of, these items. For the same reasons, CODI is unable to address the probable significance of the unavailable information, which could be material to future results.

Conference Call

Management will host a conference call on Wednesday, February 28, 2024, at 5:00 p.m. ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the U.S. is (888) 259-6580 and the dial-in number for international callers is (416) 764-8624. The Conference ID is 60782779. The conference call will also be available via a live listen-only webcast and can be accessed through the Investor Relations section of CODI's website. An online replay of the webcast will be available on the same website following the call. Please allow extra time prior to the call to visit the site and download any necessary software that may be needed to listen to the Internet broadcast. A replay of the call will be available through Wednesday, March 6, 2024. To access the replay, please dial (877) 674-7070 in the U.S. and (416) 764-8692 outside the U.S.

Note Regarding Use of Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted Earnings are non-GAAP measures used by the Company to assess its performance. We have reconciled Adjusted EBITDA to Income (Loss) from Continuing Operations and Adjusted Earnings to Net Income (Loss) on the attached schedules. We consider Income (Loss) from Continuing Operations to be the most directly comparable GAAP financial measure to Adjusted EBITDA and Net Income (Loss) to be the most directly comparable GAAP financial measure to Adjusted Earnings. We believe that Adjusted EBITDA and Adjusted Earnings provides useful information to investors and reflect important financial measures as each excludes the effects of items which reflect the impact of long-term investment decisions, rather than the performance of near-term operations. When compared to Net Income (Loss) and Income (Loss) from Continuing Operations, Adjusted Earnings and Adjusted EBITDA, respectively, are each limited in that they do not reflect the periodic costs of certain capital assets used in generating revenues of our businesses or the non-cash charges associated with impairments, as well as certain cash charges. The presentation of Adjusted EBITDA allows investors to view the performance of our businesses in a manner similar to the methods used by us and the management of our businesses, provides additional insight into our operating results and provides a measure for evaluating targeted businesses for acquisition. The presentation of Adjusted Earnings provides insight into our operating results and provides a measure for evaluating earnings from continuing operations available to common shareholders.

Pro forma net sales is defined as net sales including the historical net sales relating to the pre-acquisition periods of PrimaLoft, assuming that the Company acquired PrimaLoft on January 1, 2022. We have reconciled pro forma net sales to net sales, the most directly comparable GAAP financial measure, on the attached schedules. We believe that pro forma net sales is useful information for investors as it provides a better understanding of sales performance, and relative changes thereto, on a comparable basis. Pro forma net sales is not necessarily indicative of what the actual results would have been if the acquisition had in fact occurred on the date or for the periods indicated nor does it purport to project net sales for any future periods or as of any date.

In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled 2024 consolidated Subsidiary Adjusted EBITDA, 2024 Adjusted EBITDA or 2024 Adjusted Earnings to their comparable GAAP measures because we do not provide guidance on Net Income (Loss) from Continuing Operations or Net Income (Loss) 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.

Adjusted EBITDA, Adjusted Earnings and pro forma net sales are not meant to be a substitute for GAAP measures and may be different from or otherwise inconsistent with non-GAAP financial measures used by other companies.

About Compass Diversified

Since its founding in 1998 and IPO in 2006, CODI has consistently executed on its strategy of owning and managing a diverse set of highly defensible, middle-market businesses across the industrial, branded consumer, and healthcare sectors. The Company leverages its permanent capital base, long-term disciplined approach, and actionable expertise to maintain controlling ownership interests in each of its subsidiaries, maximizing its ability to impact long-term cash flow generation and value creation. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and has consistently generated strong returns through its culture of transparency, alignment, and accountability. For more information, please visit compassdiversified.com.

Forward Looking Statements

Certain statements in this press release may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements as to our future performance or liquidity, such as expectations regarding our results of operations and financial condition, our 2024 consolidated Subsidiary Adjusted EBITDA, our 2024 Adjusted EBITDA, our 2024 Adjusted Earnings, our pending acquisitions and divestitures, and other statements with regard to the future performance of CODI. We may use words such as “plans,” “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “may,” “seek,” “look,” and similar expressions to identify forward-looking statements. The forward-looking statements contained in this press release involve risks and uncertainties. Actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in CODI’s annual report on Form 10-K and its quarterly reports on Form 10-Q. Other factors that could cause actual results to differ materially include: changes in the economy, financial markets and political environment, including changes in inflation and interest rates; risks associated with possible disruption in CODI’s operations or the economy generally due to terrorism, war, natural disasters, social, civil and political unrest or the COVID-19 pandemic; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); environmental risks affecting the business or operations of our subsidiaries; disruption in the global supply chain, labor shortages and high labor costs; our business prospects and the prospects of our subsidiaries; the impact of, and ability to successfully complete and integrate, acquisitions that we may make; the ability to successfully complete when we’ve executed divestitures agreements; the dependence of our future success on the general economy and its impact on the industries in which we operate; the ability of our subsidiaries to achieve their objectives; the adequacy of our cash resources and working capital; the timing of cash flows, if any, from the operations of our subsidiaries; and other considerations that may be disclosed from time to time in CODI’s publicly disseminated documents and filings. Undue reliance should not be placed on such forward-looking statements as such statements speak only as of the date on which they are made. Although, except as required by law, CODI undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that CODI may make directly to you or through reports that it in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Investor Relations
irinquiry@compassdiversified.com

Gateway Group
Cody Slach
949.574.3860
CODI@gateway-grp.com

Media Relations
Mediainquiry@compassdiversified.com

The IGB Group
Leon Berman
212.477.8438
lberman@igbir.com

Compass Diversified Holdings
Condensed Consolidated Balance Sheets
(in thousands)		December 31, 2023				December 31, 2022
Assets
Current assets
Cash and cash equivalents		$	450,477			$	56,599
Accounts receivable, net			318,241				297,722
Inventories, net			740,387				680,545
Prepaid expenses and other current assets			94,715				73,200
Current assets of discontinued operations			—				102,119
Total current assets			1,603,820				1,210,185
Property, plant and equipment, net			192,562				184,501
Goodwill			901,428				991,007
Intangible assets, net			923,905				1,015,497
Other non-current assets			195,266				162,392
Non-current assets of discontinued operations			—				286,049
Total assets		$	3,816,981			$	3,849,631
Liabilities and stockholders’ equity
Current liabilities
Accounts payable		$	93,412			$	82,942
Accrued expenses			150,725				177,245
Deferred revenue			6,731				7,093
Due to related parties			16,025				15,495
Current portion, long-term debt			10,000				10,000
Other current liabilities			35,465				35,286
Current liabilities of discontinued operations			—				31,771
Total current liabilities			312,358				359,832
Deferred income taxes			120,131				142,627
Long-term debt			1,661,879				1,824,468
Other non-current liabilities			203,232				139,267
Non-current liabilities of discontinued operations			—				21,475
Total liabilities			2,297,600				2,487,669
Stockholders' equity
Total stockholders' equity attributable to Holdings			1,326,750				1,136,920
Noncontrolling interest			192,631				203,464
Noncontrolling interest of discontinued operations			—				21,578
Total stockholders' equity			1,519,381				1,361,962
Total liabilities and stockholders’ equity		$	3,816,981			$	3,849,631

Compass Diversified Holdings
Consolidated Statements of Operations
		Three months ended December 31,								Year ended December 31,
(in thousands, except per share data)			2023				2022				2023				2022
Net revenues		$	566,989			$	529,682			$	2,058,876			$	2,009,130
Cost of revenues			320,682				327,934				1,165,553				1,226,078
Gross profit			246,307				201,748				893,323				783,052
Operating expenses:
Selling, general and administrative expense			152,626				132,969				549,589				484,369
Management fees			16,909				17,050				68,445				62,604
Amortization expense			23,914				24,886				95,820				84,689
Impairment expense			56,832				—				89,400				20,552
Operating income (loss)			(3,974	)			26,843				90,069				130,838
Other income (expense):
Interest expense, net			(24,826	)			(25,768	)			(105,179	)			(83,492	)
Amortization of debt issuance costs			(1,004	)			(1,005	)			(4,038	)			(3,740	)
Loss on debt extinguishment			—				—				—				(534	)
Other income (expense), net			(357	)			(1,349	)			1,743				(2,321	)
Net income (loss) before income taxes			(30,161	)			(1,279	)			(17,405	)			40,751
Provision (benefit) for income taxes			6,254				3,313				21,331				37,093
Income (loss) from continuing operations			(36,415	)			(4,592	)			(38,736	)			3,658
Income (loss) from discontinued operations, net of income tax			(3,674	)			10,800				18,116				38,387
Gain on sale of discontinued operations			179,530				2,500				283,025				9,393
Net income			139,441				8,708				262,405				51,438
Less: Net income (loss) attributable to noncontrolling interest			2,555				(1,131	)			15,945				10,367
Less: Net income (loss) from discontinued operations attributable to noncontrolling interest			(551	)			1,255				174				4,684
Net income attributable to Holdings		$	137,437			$	8,584			$	246,286			$	36,387
Basic income (loss) per common share attributable to Holdings
Continuing operations		$	(0.74	)		$	(0.50	)		$	(1.71	)		$	(0.66	)
Discontinued operations			2.44				0.16				4.17				0.56
		$	1.70			$	(0.34	)		$	2.46			$	(0.10	)
Basic weighted average number of common shares outstanding			72,429				72,203				72,105				70,715
Cash distributions declared per Trust common share		$	0.25			$	0.25			$	1.00			$	1.00

Compass Diversified Holdings
Net Income to Non-GAAP Adjusted Earnings and Non-GAAP Adjusted EBITDA - 2023
(Unaudited)
		Three months ended																Year ended
(in thousands)		March 31, 2023				June 30, 2023				September 30, 2023				December 31, 2023				December 31, 2023
Net income (loss)		$	109,601			$	17,123			$	(3,760	)		$	139,441			$	262,405
Gain on sale of discontinued operations, net of tax			97,989				4,232				1,274				179,530				283,025
Income (loss) from discontinued operations, net of tax			10,000				2,840				8,950				(3,674	)			18,116
Net income (loss) from continuing operations		$	1,612			$	10,051			$	(13,984	)		$	(36,415	)		$	(38,736	)
Less: income from continuing operations attributable to noncontrolling interest			4,171				3,498				5,721				2,555				15,945
Net income (loss) attributable to Holdings - continuing operations		$	(2,559	)		$	6,553			$	(19,705	)		$	(38,970	)		$	(54,681	)
Adjustments:
Distributions paid - preferred shares			(6,045	)			(6,046	)			(6,045	)			(6,045	)			(24,181	)
Amortization expense - intangible assets and inventory step-up			25,148				23,977				23,956				23,914				96,995
Impairment expense			—				—				32,568				56,832				89,400
Tax effect - impairment expense			—				—				(4,308	)			978				(3,330	)
Non-controlling interest - impairment expense			—				—				—				(5,382	)			(5,382	)
Non-controlling shareholder compensation			1,641				3,207				2,750				3,067				10,665
Acquisition expense			—				—				—				321				321
Integration services fee			1,187				1,188				—				—				2,375
Other			432				348				349				3,377				4,506
Adjusted earnings		$	19,804			$	29,227			$	29,565			$	38,092			$	116,688
Plus (less):
Depreciation expense			11,155				12,107				11,994				11,291				46,547
Income tax provision			6,920				4,320				3,837				6,254				21,331
Interest expense			26,180				26,613				27,560				24,826				105,179
Amortization of debt issuance costs			1,005				1,024				1,005				1,004				4,038
Income from continuing operations attributable to noncontrolling interest			4,171				3,498				5,721				2,555				15,945
Distributions paid - preferred shares			6,045				6,046				6,045				6,045				24,181
Tax effect - impairment expense			—				—				4,308				(978	)			3,330
Non-controlling interest - impairment expense			—				—				—				5,382				5,382
Other			(1,160	)			105				(1,045	)			357				(1,743	)
Adjusted EBITDA		$	74,120			$	82,940			$	88,990			$	94,828			$	340,878

Compass Diversified Holdings
Net Income (Loss) to Non-GAAP Adjusted Earnings and Non-GAAP Adjusted EBITDA - 2022
(Unaudited)
		Three months ended																Year ended
(in thousands)		March 31, 2022				June 30, 2022				September 30, 2022				December 31, 2022				December 31, 2022
Net income (loss)		$	29,740			$	30,957			$	2,585			$	(11,844	)		$	51,438
Gain (loss) on sale of discontinued operations, net of tax			5,993				(579	)			1,479				2,500				9,393
Income from discontinued operations, net of tax			13,059				4,371				10,157				10,800				38,387
Net income (loss) from continuing operations		$	10,688			$	27,165			$	(9,051	)		$	(25,144	)		$	3,658
Less: income (loss) from continuing operations attributable to noncontrolling interest			4,388				3,813				3,297				(1,131	)			10,367
Net income (loss) attributable to Holdings - continuing operations		$	6,300			$	23,352			$	(12,348	)		$	(24,013	)		$	(6,709	)
Adjustments:
Distributions paid - preferred shares			(6,045	)			(6,046	)			(6,045	)			(6,045	)			(24,181	)
Amortization expense - intangible assets and inventory step-up			19,691				20,258				24,400				26,454				90,803
Impairment expense			—				—				—				20,552				20,552
Tax effect - impairment expense			—				—				—				(3,557	)			(3,557	)
Non-controlling interest - impairment expense			—				—				—				(3,120	)			(3,120	)
Loss on debt extinguishment			—				—				534				—				534
Non-controlling shareholder compensation			2,405				2,404				2,581				4,608				11,998
Acquisition expense			216				—				5,902				—				6,118
Integration services fee			563				563				1,625				1,312				4,063
Corporate tax effect			—				(4,338	)			16,457				—				12,119
Other			—				1,027				434				119				1,580
Adjusted earnings		$	23,130			$	37,220			$	33,540			$	16,310			$	110,200
Plus (less):
Depreciation expense			9,450				9,741				10,149				10,690				40,030
Income tax provision			7,970				6,926				18,884				3,313				37,093
Corporate tax effect			—				4,338				(16,457	)			—				(12,119	)
Tax effect - impairment expense			—				—				—				3,557				3,557
Non-controlling interest - impairment expense			—				—				—				3,120				3,120
Interest expense			17,419				17,509				22,796				25,768				83,492
Amortization of debt issuance costs			866				865				1,004				1,005				3,740
Income from continuing operations attributable to noncontrolling interest			4,388				3,813				3,297				(1,131	)			10,367
Distributions paid - preferred shares			6,045				6,046				6,045				6,045				24,181
Other			(226	)			(718	)			1,916				1,349				2,321
Adjusted EBITDA		$	69,042			$	85,740			$	81,174			$	70,026			$	305,982

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three Months Ended December 31, 2023
(Unaudited)
(in thousands)		Corporate					5.11			BOA				Ergo				Lugano				PrimaLoft				Velocity Outdoor				Altor Solutions				Arnold				Sterno				Consolidated
Net income (loss) from continuing operations		$	(10,847	)		$	9,840			$	1,345			$	(1,487	)		$	20,847			$	(64,383	)		$	(3,183	)		$	4,260			$	3,523			$	3,670			$	(36,415	)
Adjusted for:
Provision (benefit) for income taxes			301				1,004				639				(37	)			4,293				(2,549	)			289				1,797				921				(406	)			6,252
Interest expense, net			24,732				(4	)			(9	)			—				—				(2	)			120				—				(11	)			—				24,826
Intercompany interest			(35,402	)			4,546				2,548				2,111				10,177				4,780				3,440				2,303				1,728				3,769				—
Depreciation and amortization			342				6,143				5,496				1,998				2,258				5,394				3,259				4,183				2,193				4,943				36,209
EBITDA			(20,874	)			21,529				10,019				2,585				37,575				(56,760	)			3,925				12,543				8,354				11,976				30,872
Other (income) expense			—				(412	)			(19	)			7				(75	)			(66	)			(31	)			1,239				(4	)			(280	)			359
Non-controlling shareholder compensation			—				203				950				278				162				761				228				186				1				298				3,067
Impairment expense			—				—				—				—				—				57,810				(978	)			—				—				—				56,832
Acquisition expenses			—				—				—				321				—				—				—				—				—				—				321
Other			—				—				3,072				—				—				—				—				—				—				305				3,377
Adjusted EBITDA		$	(20,874	)		$	21,320			$	14,022			$	3,191			$	37,662			$	1,745			$	3,144			$	13,968			$	8,351			$	12,299			$	94,828

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Three Months Ended December 31, 2022
(Unaudited)
(in thousands)		Corporate					5.11			BOA				Ergo				Lugano				PrimaLoft				Velocity Outdoor				Altor Solutions				Arnold				Sterno				Consolidated
Net income (loss) from continuing operations		$	(16,856	)		$	7,093			$	5,491			$	(18,035	)		$	6,063			$	(9,249	)		$	(3,699	)		$	2,513			$	466			$	1,069			$	(25,144	)
Adjusted for:
Provision (benefit) for income taxes			—				2,126				(292	)			(4,706	)			6,026				(308	)			(810	)			267				561				449				3,313
Interest expense, net			25,684				(12	)			(6	)			8				4				(3	)			87				—				6				—				25,768
Intercompany interest			(29,950	)			4,260				1,776				2,026				4,932				4,261				3,295				2,898				1,571				4,931				—
Depreciation and amortization			342				6,168				5,648				2,033				3,148				6,271				3,393				4,149				1,976				5,021				38,149
EBITDA			(20,780	)			19,635				12,617				(18,674	)			20,173				972				2,266				9,827				4,580				11,470				42,086
Other (income) expense			15				(310	)			545				2				—				(148	)			1,263				547				(20	)			(545	)			1,349
Non-controlling shareholder compensation			—				301				622				325				379				2,142				229				411				2				197				4,608
Impairment expense			—				—				—				20,552				—				—				—				—				—				—				20,552
Integration services fee			—				—				—				—				—				1,313				—				—				—				—				1,313
Other			—				—				—				—				—				—				—				—				—				119				119
Adjusted EBITDA		$	(20,765	)		$	19,626			$	13,784			$	2,205			$	20,552			$	4,279			$	3,758			$	10,785			$	4,562			$	11,241			$	70,027

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Year ended December 31, 2023
(Unaudited)
(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

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated Adjusted EBITDA Reconciliation
Year ended December 31, 2022
(Unaudited)
(in thousands)		Corporate					5.11			BOA				Ergo				Lugano				PrimaLoft				Velocity Outdoor				Altor Solutions				Arnold				Sterno				Consolidated
Net income (loss) from continuing operations		$	(77,990	)		$	22,633			$	42,613			$	(18,669	)		$	27,934			$	(17,741	)		$	4,127			$	9,662			$	7,683			$	3,406			$	3,658
Adjusted for:
Provision (benefit) for income taxes			12,119				7,125				6,527				(4,274	)			11,889				(3,878	)			1,562				3,174				3,329				(480	)			37,093
Interest expense, net			83,243				—				(25	)			10				16				(7	)			229				—				26				—				83,492
Intercompany interest			(92,177	)			13,761				7,410				6,026				12,773				7,512				10,282				10,742				5,518				18,153				—
Loss on debt extinguishment			534				—				—				—				—				—				—				—				—				—				534
Depreciation and amortization			1,405				22,972				21,993				8,094				11,533				10,465				13,374				16,403				8,041				20,293				134,573
EBITDA			(72,866	)			66,491				78,518				(8,813	)			64,145				(3,649	)			29,574				39,981				24,597				41,372				259,350
Other (income) expense			(58	)			(217	)			1,043				6				2				112				2,417				766				(20	)			(1,730	)			2,321
Non-controlling shareholder compensation			—				1,511				2,511				1,479				1,179				2,142				971				1,321				40				844				11,998
Impairment expense			—				—				—				20,552				—				—				—				—				—				—				20,552
Acquisition expenses			—				—				—				—				—				5,680				222				216				—				—				6,118
Integration services fee			—				—				—				—				1,688				2,375				—				—				—				—				4,063
Other			—				—				—				250				—				—				—				—				—				1,330				1,580
Adjusted EBITDA		$	(72,924	)		$	67,785			$	82,072			$	13,474			$	67,014			$	6,660			$	33,184			$	42,284			$	24,617			$	41,816			$	305,982

Compass Diversified Holdings
Adjusted EBITDA
(Unaudited)
		Three months ended December 31,								Year ended December 31,
(in thousands)			2023				2022				2023				2022
Branded Consumer
5.11		$	21,320			$	19,626			$	73,605			$	67,785
BOA			14,022				13,784				56,042				82,072
Ergobaby			3,191				2,205				14,366				13,474
Lugano			37,662				20,552				110,368				67,014
PrimaLoft (1)			1,745				4,279				25,262				6,660
Velocity Outdoor			3,144				3,758				12,777				33,184
Total Branded Consumer		$	81,084			$	64,204			$	292,420			$	270,189
Industrial
Altor Solutions		$	13,968			$	10,785			$	52,047			$	42,284
Arnold Magnetics			8,351				4,562				29,893				24,617
Sterno			12,299				11,241				46,687				41,816
Total Industrial		$	34,618			$	26,588			$	128,627			$	108,717
Corporate expense			(20,874	)			(20,765	)			(80,169	)			(72,924	)
Total Adjusted EBITDA		$	94,828			$	70,027			$	340,878			$	305,982
(1) The above results for PrimaLoft do not include management's estimate of Adjusted EBITDA, before our ownership, of $24.3 million for the twelve months ended December 31, 2022. PrimaLoft was acquired on July 12, 2022.

Compass Diversified Holdings
Net Sales to Pro Forma Net Sales Reconciliation
(unaudited)
		Three months ended December 31,								Year ended December 31,
(in thousands)			2023				2022				2023				2022
Net Sales		$	566,989			$	529,682			$	2,058,876			$	2,009,130
Acquisitions (1)			—				—				—				55,185
Pro Forma Net Sales		$	566,989			$	529,682			$	2,058,876			$	2,064,315
(1) Acquisitions reflects the net sales for PrimaLoft on a proforma basis as if we had acquired this business on January 1, 2022.

Compass Diversified Holdings
Subsidiary Pro Forma Net Sales
(unaudited)
		Three months ended December 31,								Year ended December 31,
(in thousands)			2023				2022				2023				2022
Branded Consumer
5.11		$	147,394			$	135,605			$	533,089			$	486,213
BOA			42,435				42,473				155,825				208,688
Ergobaby			22,074				20,179				93,859				88,435
Lugano			104,750				64,278				308,321				201,507
PrimaLoft (1)			9,434				14,032				67,053				79,929
Velocity Outdoor			45,842				51,464				172,190				232,238
Total Branded Consumer		$	371,929			$	328,031			$	1,330,337			$	1,297,010
Industrial
Altor Solutions			56,417				61,748				238,030				261,338
Arnold Magnetics			44,632				37,496				166,679				153,815
Sterno			94,011				102,407				323,830				352,152
Total Industrial		$	195,060			$	201,651			$	728,539			$	767,305
Total Subsidiary Net Sales		$	566,989			$	529,682			$	2,058,876			$	2,064,315
(1) Net sales for PrimaLoft are pro forma as if we had acquired this business on January 1, 2022. Historical net sales for PrimaLoft prior to acquisition on July 12, 2022, were $55.2 million for the twelve months ended December 31, 2022.

Compass Diversified Holdings
Condensed Consolidated Cash Flows
		Three months ended December 31,								Year ended December 31,
(in thousands)			2023				2022				2023				2022
Net cash provided by (used in) operating activities		$	21,128			$	11,632			$	78,080			$	(28,291	)
Net cash provided by (used in) investing activities			466,213				(27,774	)			570,503				(626,725	)
Net cash provided by (used in) financing activities			(102,236	)			14,757				(260,163	)			556,885
Foreign currency impact on cash			636				1,404				786				(1,331	)
Net increase (decrease) in cash and cash equivalents			385,741				19				389,206				(99,462	)
Cash and cash equivalents - beginning of the period (1)			64,736				61,252				61,271				160,733
Cash and cash equivalents - end of the period		$	450,477			$	61,271			$	450,477			$	61,271
(1) Includes cash from discontinued operations of $4.7 million at January 1, 2023 and $3.6 million at January 1, 2022.

Compass Diversified Holding
Selected Financial Data - Cash Flows
		Three months ended December 31,								Year ended December 31,
(in thousands)			2023				2022				2023				2022
Changes in operating assets and liabilities		$	(24,390	)		$	(27,722	)		$	(153,310	)		$	(224,587	)
Purchases of property and equipment		$	(17,239	)		$	(23,726	)		$	(55,776	)		$	(60,989	)
Distributions paid - common shares		$	(17,955	)		$	(18,051	)		$	(71,967	)		$	(70,845	)
Distributions paid - preferred shares		$	(6,045	)		$	(6,045	)		$	(24,181	)		$	(24,181	)