Compass Diversified Q1 FY2026 earnings call

• Sold Sterno's food service business at attractive valuation despite muted M&A environment. - Completed sale lease back at Altour and applied proceeds to debt reduction. - Subsidiaries collectively outperformed in first quarter with consumer businesses leading. - Honeypot had exceptional momentum with revenue and EBITDA growth. - BOA had strong quarter with revenue and EBITDA growth. - 5.11 Tactical had solid margin and cash flow with retail format grand opening. - Arnold had standout quarter with adjusted EBITDA nearly doubling. - Altor faced challenges but team focused on execution. - Rimports in transition period with stranded costs and commercial relationship issues

GAAP net revenues were $427 million, down 5.9% year-over-year. GAAP net loss from continuing operations was $30.8 million, an improvement of approximately $19 million year-over-year. Net sales were in line with prior year, with strong double-digit growth at the honeypot and Arnold offset by ongoing challenges at Altor. Subsidiary adjusted EBITDA was $83.9 million, an increase of 6.3%, with consumer up 11.6% and industrial down 4.5% compared to the prior year period. Consumer net sales increased 2.3%, while industrial net sales declined 3.3%. Arnold had adjusted EBITDA nearly doubling year over year. The honeypot had revenue growth of nearly 25% and EBITDA growth of over 40% compared to prior period. BOA had revenue growth of 6.5% and EBITDA growth of 11% compared to prior year period. 5.11 Tactical delivered solid margin performance and strong cash flow. Altor faced challenging first quarter. Rimports will be a transition period with stranded costs and updated commercial relationship weighing on near-term results

• Full year 2026 subsidiary adjusted EBITDA expected between $320 to $365 million. - Consumer businesses adjusted EBITDA between $225 to $260 million. - Industrial businesses adjusted EBITDA between $95 and $105 million including stranded costs. - Expect capex between $30 to $40 million for 2026 and corporate cash management between $25 to $30 million. - Outlook does not include impact of potential acquisitions or divestitures except sale of Sterno's food service business and no significant impact from evolving trade environment

• Broader environment including geopolitical uncertainty, tighter private credit markets could limit monetizing businesses at attractive values. - Leverage ratio above target range and shares trade at discount to intrinsic value. - Altor faced competitive pressure in cold chain and consumer headwinds in appliance market. - Rimports has transition period with stranded costs and updated commercial relationship impacting near-term results. - Evolving tariff environment creates market uncertainty and timing/magnitude of tariff-related refunds difficult to forecast

Q: Clarify guidance, impact of Sterno sale, stranded costs, corporate costs, etc.

A: Sale of Sterno's food service business closed, repaid debt, Rimports has transition with stranded costs and commercial negotiations.

Q: Regarding leverage, long-term goal, impact of Sterno sale on timeline, share buybacks.

A: Long-term goal 3 - 3.5 times leverage, next milestone under 4 times, share buybacks possible once under 4 times.

Q: SG&A lower in quarter, reason.

A: Normal prudent management, businesses looking to reduce SG&A.

Q: Honeypot growth drivers, tariff recoveries, MSA review.

A: Honeypot growth from market share gains and category extension, no Q1 tariff recoveries, MSA review ongoing.

Q: Urgency of other sale processes, tariff refunds process.

A: Urgency to delever and return capital, tariff refunds process ongoing with no clarity yet