Compass Diversified Q2 FY2024 earnings call

• Elias Sabo noted strong Q2 results, with branded consumer vertical (BOA, PrimaLoft, Lugano) outperforming industrial businesses. Inventory destocking headwinds subsided, and Lugano's international salon in London exceeded expectations.
• Pat Maciariello reported pro-forma revenue and adjusted EBITDA growth, Lugano's continued strong growth, BOA and PrimaLoft's acceleration, industrial segment challenges (e.g., Altor's weak performance, Arnold's manufacturing transition), and HoneyPot/5.11's performance.
• Ryan Faulkingham discussed consolidated financial results (revenue up 11%, adjusted EBITDA up 27%), balance sheet (cash, revolver availability, leverage ratio), cash flow, and capital expenditures.

Consumer Segment: For the year-to-date June 2024 period, pro-forma revenues increased by 10.9% and pro-forma adjusted EBITDA increased by almost 27% versus year-to-date June 2023. Lugano was the strongest performer, with its London salon exceeding expectations. BOA grew revenue by 42.1% and adjusted EBITDA by almost 60% in Q2 2024 vs 2023. PrimaLoft grew revenue and EBITDA by 14.1% and 11.1%, respectively. Industrial Segment: For the year-to-date period, revenues decreased by 6.7% and adjusted EBITDA decreased by 8% versus year-to-date June 2023. This was driven by weak performance at Altor, Arnold's manufacturing footprint transition, and Sterno's modest EBITDA growth offset by softer sales in the food service division.

• Maintained 2024 subsidiary adjusted EBITDA outlook between $480M - $520M. Increased branded consumer vertical subsidiary adjusted EBITDA range by $10M to $365M - $395M, decreased industrial vertical range by $10M to $115M - $125M.
• Maintained adjusted earnings guidance range of $148M - $163M, with adjusted EBITDA expected between $390M - $430M.
• Anticipated total capital expenditures for 2024 between $55M - $65M, primarily at Lugano and Arnold.

• Domestic and global economic environment, supply chain, labor disruptions, inflation, and changing interest rates may impact performance.
• Industrial businesses face weak customer demand, churn at cold chain partners, and muted second half growth potential.
• HoneyPot faces short-term impact from losing non-core SKUs at large retailers.
• 5.11 deals with inventory-related issues in DTC and complex PFAS transition challenges.

Q: About BOA's strength and M&A environment A: Pat Maciariello said BOA's growth was broad across verticals, and Elias Sabo mentioned M&A focus on innovative companies with strong growth potential.

Q: About acquisition environment and leverage A: Elias Sabo discussed deal quality and multiples, while Ryan Faulkingham talked about leverage trajectory and deleveraging through organic growth.

Q: About Lugano seasonality and 5.11 transition A: Pat Maciariello noted Lugano's seasonality and 5.11's operational challenges (inventory fluctuations, PFAS transition).

Q: About Lugano concentration and funding A: Elias Sabo discussed Lugano's high return on investment and capital allocation, emphasizing funding needs due to rapid growth.

Q: About 2025 outlook and HoneyPot A: Elias Sabo and Pat Maciariello talked about innovation across subsidiaries and HoneyPot's long-term double-digit growth potential