Compass Diversified Reports Fourth Quarter and Full Year 2022 Financial Results

Source: Nasdaq GlobeNewswire / 01 Mar 2023 16:15:01 America/New_York

WESTPORT, Conn., March 01, 2023 (GLOBE NEWSWIRE) -- Compass Diversified (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle market businesses, announced today its consolidated operating results for the three and twelve months ended December 31, 2022.

“The quality and resilience of CODI’s subsidiary businesses were once again on display during our fourth quarter as we achieved solid financial performance,” said Elias Sabo, CEO of Compass Diversified. “End market demand for the majority of our core consumer brands remained strong, and we believe our high-quality, premium brands can take market share even in a difficult macroeconomic backdrop.”

Mr. Sabo continued, “As discussed at our Investor Day in January, while there are near-term market uncertainties brought on by rapidly changing monetary policy and inventory destocking at retail, we believe they are short-term in nature. We believe our group of market share-taking businesses can outperform the general market over the long-term, driving strong financial results and increasing shareholder value.”

Fourth Quarter and Full Year 2022 Financial Summary vs. Same Year-Ago Period (where applicable)

Net sales up 6% to $594.9 million, and up 4% on a pro forma basis. For the full year 2022, net sales up 17% to $2.3 billion, and up 12% on a pro forma basis.
Branded consumer net sales up 11% to $371.0 million, and up 7% on a pro forma basis. For the full year 2022, branded consumer net sales up 23% to $1.4 billion, and up 14% on a pro forma basis.
Niche industrial net sales down 1% to $224.0 million. For the full year 2022, niche industrial net sales up 9% to $856.8 million.
Net loss of $11.8 million vs. net income of $25.9 million due to a $20.6 million impairment expense associated with the Company’s Ergobaby subsidiary. For the full year 2022, net income was $51.4 million vs. $126.8 million in the year-ago period, primarily due to the $72.8 million gain on the sale of Liberty Safe in August 2021.
Loss from continuing operations of $14.3 million vs. income from continuing operations of $25.9 million. For the full year 2022, income from continuing operations of $42.0 million vs. $46.4 million.
Adjusted Earnings, a non-GAAP financial measure, was $28.7 million vs. $37.1 million. For the full year 2022, Adjusted Earnings was up 17% to $158.6 million.
Adjusted EBITDA, a non-GAAP financial measure, was up 5% to $87.3 million. For the full year 2022, Adjusted EBITDA was up 20% to $369.8 million.
Paid a fourth quarter 2022 cash distribution of $0.25 per share on CODI's common shares in January 2023.

Recent Business Highlights

On November 3, 2022, CODI’s Manager appointed Kurt Roth as Partner and Head of Healthcare for Compass Group Management. In this role, Roth will work with the organization’s senior professionals to launch CODI’s new healthcare vertical.
On January 19, 2023, CODI hosted an Investor Day in New York City, showcasing its consumer businesses as well as the Company’s newest acquisition, PrimaLoft. A replay of the PrimaLoft and Compass Diversified presentations can be viewed here.
On January 19, 2023, CODI announced a $50 million share repurchase program, the first in the Company’s history.
On February 15, 2023, CODI announced the closing of the sale of Advanced Circuits for an enterprise value of $220 million. CODI expects to realize a pre-tax gain on the sale of Advanced Circuits of between $100 million to $110 million.

Fourth Quarter and Full Year 2022 Financial Results

Net sales in the fourth quarter of 2022 were $594.9 million, up 6% compared to $559.9 million in the fourth quarter of 2021. For the full year 2022, net sales were $2.3 billion, up 17% compared to $1.9 billion a year ago. The increase was due to strong performance in the Company’s branded consumer subsidiaries. On a pro forma basis, assuming CODI had acquired Lugano and PrimaLoft on January 1, 2021, net sales were up 4% in the fourth quarter of 2022 and up 12% in 2022.

Branded consumer net sales, pro forma for the Lugano and PrimaLoft acquisitions, increased 7% in the fourth quarter of 2022 to $371.0 million compared to the fourth quarter of 2021 and increased to $1.5 billion in 2022, an increase of 14% as compared to 2021. Niche industrial net sales decreased 1% in the fourth quarter of 2022 to $224.0 million compared to the fourth quarter of 2021 and increased to $856.8 million in 2022 which is an increase of 9% as compared to 2021.

Net loss in the fourth quarter of 2022 was $11.8 million compared to net income of $25.9 million in the fourth quarter of 2021. Net loss from continuing operations for the fourth quarter of 2022 was $14.3 million compared to $25.9 million in net income from continuing operations in the fourth quarter of 2021. For the full year 2022, net income was $51.4 million compared to $126.8 million a year ago, and income from continuing operations was $42.0 million compared to $46.4 million a year ago. The decrease in both periods were primarily attributable to higher SG&A and interest expenses, as well as a $20.6 million impairment expense associated with the Company’s Ergobaby subsidiary. Additionally, the Company’s net income in 2021 included a $72.8 million gain from the sale of Liberty Safe in August 2021. Operating income for the fourth quarter of 2022 was $19.6 million compared to $39.6 million in the fourth quarter of 2021 due to the impairment expense associated with Ergobaby. For the full year 2022, operating income increased 7% to $175.6 million compared to $164.7 million a year ago.

Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the fourth quarter of 2022 was $28.7 million compared to $37.1 million a year ago. The decrease was a result of financing costs for the acquisition of PrimaLoft in July 2022 ahead of its seasonally slow third and fourth quarter earnings periods. For the full year 2022, Adjusted Earnings increased 17% to $158.6 million compared to $135.7 million a year ago. CODI's weighted average number of shares outstanding in the fourth quarter of 2022 was 72.2 million compared to 66.6 million in the prior year fourth quarter. For the full year 2022, CODI’s weighted average number of shares outstanding was 70.7 million compared to 65.4 million in 2021.

Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) in the fourth quarter of 2022 was $87.3 million, up 5% compared to $83.3 million in the fourth quarter of 2021. For the full year 2022, Adjusted EBITDA was $369.8 million, up 20% compared to $308.2 million a year ago. The increase was primarily due to the strong performance at CODI’s branded consumer subsidiaries and the benefit of the PrimaLoft and Lugano acquisitions. 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 $17.3 million and $63.6 million, respectively.

Liquidity and Capital Resources

As of December 31, 2022, CODI had approximately $61.3 million in cash and cash equivalents, $155.0 million outstanding on its revolver, $395.0 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, 2022, the Company had no significant debt maturities until 2027 and had net borrowing availability of approximately $442.8 million under its revolving credit facility.

Fourth Quarter 2022 Distributions

On January 4, 2023, CODI’s Board of Directors (the “Board”) declared a fourth quarter distribution of $0.25 per share on the Company's common shares. The cash distribution was paid on January 26, 2023, to all holders of record of common shares as of January 19, 2023.

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, 2022, up to, but excluding, January 30, 2023. The distribution for such period was payable on January 30, 2023 to all holders of record of Series A Preferred Shares as of January 15, 2023.

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, 2022, up to, but excluding, January 30, 2023. The distribution for such period was payable on January 30, 2023 to all holders of record of Series B Preferred Shares as of January 15, 2023.

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, 2022, up to, but excluding, January 30, 2023. The distribution for such period was payable on January 30, 2023 to all holders of record of Series C Preferred Shares as of January 15, 2023.

2023 Outlook

CODI expects its current subsidiaries to produce consolidated subsidiary Adjusted EBITDA (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the full year 2023 of between $420 million and $460 million. This estimate is based on the summation of the Company’s expectations for its current subsidiaries in 2023, excluding ACI, and is absent additional acquisitions or divestitures, and excludes corporate expenses such as interest expense, management fees paid by CODI and corporate overhead. In addition, the Company expects to earn between $105 million and $135 million in Adjusted Earnings (see “Note Regarding Use of Non-GAAP Financial Measures” below) for the full year 2023.

In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, CODI has not reconciled 2023 Adjusted EBITDA or 2023 Adjusted Earnings to their comparable GAAP measure because it does 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, 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, March 1, 2023, 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) 396-8049 and the dial-in number for international callers is (416) 764-8646. The Conference ID is 74552633. 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 8, 2023. 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. We believe Adjusted EBITDA and Adjusted Earnings are also useful in measuring our ability to service debt and other payment obligations.

Pro forma net sales is defined as net sales including the historical net sales relating to the pre-acquisition periods of Lugano and PrimaLoft, assuming that the Company acquired Lugano and PrimaLoft on January 1, 2021. 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 2023 Adjusted EBITDA or 2023 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 niche 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 2023 Adjusted EBITDA, our 2023 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, 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); general considerations associated with the COVID-19 pandemic and its impact on the markets in which we operate; 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 divestitures 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 Cody Slach Gateway Group 949.574.3860	Media Contact: The IGB Group Leon Berman 212.477.8438 lberman@igbir.com
CODI@gatewayir.com

Compass Diversified Holdings
Condensed Consolidated Balance Sheets


(in thousands)	December 31, 2022		December 31, 2021

Assets
Current assets
Cash and cash equivalents	$	61,271	$	160,733
Accounts receivable, net		341,440		277,710
Inventories, net		732,428		565,743
Prepaid expenses and other current assets		75,046		57,006
Total current assets		1,210,185		1,061,192
Property, plant and equipment, net		205,474		186,477
Goodwill		1,133,404		882,083
Intangible assets, net		1,127,936		872,690
Other non-current assets		172,632		141,819
Total assets	$	3,849,631	$	3,144,261

Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	94,214	$	124,203
Accrued expenses		191,605		178,518
Deferred revenue		10,204		12,802
Due to related parties		15,745		11,830
Current portion, long-term debt		10,000		—
Other current liabilities		38,063		34,269
Total current liabilities		359,831		361,622
Deferred income taxes		156,642		97,763
Long-term debt		1,824,468		1,284,826
Other non-current liabilities		146,728		115,520
Total liabilities		2,487,669		1,859,731
Stockholders' equity
Total stockholders' equity attributable to Holdings		1,136,920		1,111,816
Noncontrolling interest		225,042		172,714
Total stockholders' equity		1,361,962		1,284,530
Total liabilities and stockholders’ equity	$	3,849,631	$	3,144,261

Compass Diversified Holdings
Consolidated Statements of Operations

	Three months ended December 31,						Year ended December 31,
(in thousands, except per share data)		2022			2021			2022			2021
Net revenues	$	594,921		$	559,889		$	2,264,044		$	1,932,155
Cost of revenues		360,090			346,842			1,356,300			1,165,149
Gross profit		234,831			213,047			907,744			767,006
Operating expenses:
Selling, general and administrative expense		150,209			136,666			553,637			474,481
Management fees		17,300			12,939			63,604			47,443
Amortization expense		27,192			23,845			94,383			80,347
Impairment expense		20,552			—			20,552			—
Operating income		19,578			39,597			175,568			164,735
Other income (expense):
Interest expense, net		(25,769	)		(16,232	)		(83,506	)		(58,839	)
Amortization of debt issuance costs		(1,005	)		(812	)		(3,740	)		(2,979	)
Loss on debt extinguishment		—			—			(534	)		(33,305	)
Other income (expense), net		(1,320	)		424			(714	)		(1,482	)
Net income (loss) before income taxes		(8,516	)		22,977			87,074			68,130
Provision (benefit) for income taxes		5,828			(2,906	)		45,029			21,756
Income (loss) from continuing operations		(14,344	)		25,883			42,045			46,374
Income from discontinued operations, net of income tax		—			—			—			7,665
Gain on sale of discontinued operations		2,500			25			9,393			72,770
Net income (loss)		(11,844	)		25,908			51,438			126,809
Less: Net income attributable to noncontrolling interest		124			3,820			15,051			11,735
Less: Net income from discontinued operations attributable to noncontrolling interest		—			—			—			522
Net income (loss) attributable to Holdings	$	(11,968	)	$	22,088		$	36,387		$	114,552

Basic income (loss) per common share attributable to Holdings
Continuing operations	$	(0.37	)	$	(0.08	)	$	(0.23	)	$	(0.49	)
Discontinued operations		0.03			—			0.13			1.22
	$	(0.34	)	$	(0.08	)	$	(0.10	)	$	0.73

Basic weighted average number of common shares outstanding		72,203			66,623			70,715			65,362

Cash distributions declared per Trust common share	$	0.25		$	0.25		$	1.00		$	2.21

Compass Diversified Holdings
Net Income 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
Net income (loss) from continuing operations	$	23,747		$	31,536		$	1,106		$	(14,344	)	$	42,045
Less: income from continuing operations attributable to noncontrolling interest		5,978			4,590			4,359			124			15,051
Net income (loss) attributable to Holdings - continuing operations	$	17,769		$	26,946		$	(3,253	)	$	(14,468	)	$	26,994
Adjustments:
Distributions paid - preferred shares		(6,045	)		(6,046	)		(6,045	)		(6,045	)		(24,181	)
Amortization expense - intangible assets and inventory step-up		23,375			22,474			26,241			28,787			100,877
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		2,805			2,804			3,242			5,100			13,951
Acquisition expense		216			—			5,902			—			6,118
Integration services fee		563			563			1,625			1,313			4,064
Corporate tax effect - ACI		—			(4,338	)		16,457			—			12,119
Other		1,803			1,026			1,287			119			4,235
Adjusted earnings	$	40,486		$	43,429		$	45,990		$	28,681		$	158,586
Plus (less):
Depreciation expense		10,438			10,866			11,284			11,837			44,425
Income tax provision		11,083			6,955			21,163			5,828			45,029
Corporate tax effect - ACI		—			4,338			(16,457	)		—			(12,119	)
Interest expense		17,419			17,519			22,799			25,769			83,506
Amortization of debt issuance costs		866			865			1,004			1,005			3,740
Income from continuing operations attributable to noncontrolling interest		5,978			4,590			4,359			124			15,051
Distributions paid - preferred shares		6,045			6,046			6,045			6,045			24,181
Tax effect - impairment expense		—			—			—			3,557			3,557
Non-controlling interest - impairment expense		—			—			—			3,120			3,120
Other		(1,988	)		(757	)		2,139			1,320			714
Adjusted EBITDA	$	90,327		$	93,851		$	98,326		$	87,286		$	369,790

Compass Diversified Holdings
Net Income (Loss) to Non-GAAP Adjusted Earnings and Non-GAAP Adjusted EBITDA - 2021
(Unaudited)

	Three months ended												Year ended
(in thousands)	March 31, 2021			June 30, 2021			September 30, 2021			December 31, 2021			December 31, 2021
Net income (loss)	$	21,996		$	(11,251	)	$	90,156		$	25,908		$	126,809
Gain on sale of discontinued operations, net of tax		—			—			72,745			25			72,770
Income (loss) from discontinued operations, net of tax		4,194			4,780			(1,309	)		—			7,665
Net income (loss) from continuing operations	$	17,802		$	(16,031	)	$	18,720		$	25,883		$	46,374
Less: income from continuing operations attributable to noncontrolling interest		2,696			3,018			2,201			3,820			11,735
Net income (loss) attributable to Holdings - continuing operations	$	15,106		$	(19,049	)	$	16,519		$	22,063		$	34,639
Adjustments:
Distributions paid - preferred shares		(6,045	)		(6,046	)		(6,045	)		(6,045	)		(24,181	)
Amortization expense - intangible assets and inventory step-up		18,599			18,847			19,056			26,606			83,108
Loss on debt extinguishment		—			33,305			—			—			33,305
Non-controlling shareholder compensation		2,764			2,840			2,892			2,941			11,437
Acquisition expense		299			11			1,866			1,415			3,591
Integration services fee		1,600			1,600			1,100			563			4,863
Corporate tax effect - ACI		—			—			—			(12,119	)		(12,119	)
Other		(2,101	)		1,032			460			1,709			1,100
Adjusted earnings	$	30,222		$	32,540		$	35,848		$	37,133		$	135,743
Plus (less):
Depreciation expense		9,064			9,460			10,372			10,493			39,389
Income tax provision		6,078			9,028			9,556			(2,906	)		21,756
Corporate tax effect - ACI		—			—			—			12,119			12,119
Interest expense		13,805			14,947			13,855			16,232			58,839
Amortization of debt issuance costs		686			722			759			812			2,979
Income from continuing operations attributable to noncontrolling interest		2,696			3,018			2,201			3,820			11,735
Distributions paid - preferred shares		6,045			6,046			6,045			6,045			24,181
Other		2,232			706			(1,032	)		(425	)		1,481
Adjusted EBITDA	$	70,828		$	76,467		$	77,604		$	83,323		$	308,222

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated EBITDA Reconciliation
Three months ended December 31, 2022
(Unaudited)

(in thousands)	Corporate				5.11		BOA			Ergo			Lugano		Marucci Sports			PrimaLoft			Velocity Outdoor			ACI		Altor Solutions		Arnold			Sterno			Consolidated
Net income (loss) from continuing operations	$	(12,653	)	$	7,093		$	5,491		$	(18,035	)	$	6,063	$	3,152		$	(9,249	)	$	(3,699	)	$	3,445	$	2,513	$	466		$	1,069		$	(14,344	)
Adjusted for:
Provision (benefit) for income taxes		—			2,126			(292	)		(4,706	)		6,026		1,499			(308	)		(810	)		1,016		267		561			449			5,828
Interest expense, net		25,684			(12	)		(6	)		8			4		1			(3	)		87			—		—		6			—			25,769
Intercompany interest		(34,086	)		4,260			1,776			2,026			4,932		2,328			4,261			3,295			1,808		2,898		1,571			4,931			—
Depreciation and amortization		272			6,168			5,648			2,033			3,148		3,025			6,271			3,393			524		4,149		1,976			5,021			41,628
EBITDA		(20,783	)		19,635			12,617			(18,674	)		20,173		10,005			972			2,266			6,793		9,827		4,580			11,470			58,881
Other (income) expense		17			(310	)		545			2			—		(46	)		(148	)		1,263			16		547		(20	)		(545	)		1,321
Non-controlling shareholder compensation		—			301			622			325			379		368			2,142			229			124		411		2			197			5,100
Impairment expense		—			—			—			20,552			—		—			—			—			—		—		—			—			20,552
Integration services fee		—			—			—			—			—		—			1,313			—			—		—		—			—			1,313
Other		—			—			—			—			—		—			—			—			—		—		—			119			119
Adjusted EBITDA	$	(20,766	)	$	19,626		$	13,784		$	2,205		$	20,552	$	10,327		$	4,279		$	3,758		$	6,933	$	10,785	$	4,562		$	11,241		$	87,286

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated EBITDA Reconciliation
Three months ended December 31, 2021
(Unaudited)

(in thousands)	Corporate				5.11	BOA		Ergo		Lugano			Marucci Sports			Velocity Outdoor			ACI		Altor Solutions			Arnold			Sterno			Consolidated
Net income (loss) from continuing operations	$	(570	)	$	5,834	$	4,270	$	2,008	$	4,558		$	747		$	3,878		$	3,812	$	1,979		$	1,174		$	(1,807	)	$	25,883
Adjusted for:
Provision (benefit) for income taxes		(12,119	)		2,048		1,394		661		1,790			150			856			872		(248	)		(717	)		2,407			(2,906	)
Interest expense, net		16,175			8		—		—		9			—			40			—		(1	)		1			—			16,232
Intercompany interest		(20,748	)		3,125		2,261		446		1,902			1,220			1,875			1,733		2,483			1,327			4,376			—
Depreciation and amortization		263			5,593		5,246		2,058		4,687			2,257			3,215			554		3,916			3,066			7,056			37,911
EBITDA		(16,999	)		16,608		13,171		5,173		12,946			4,374			9,864			6,971		8,129			4,851			12,032			77,120
Other (income) expense		1			427		187		—		(6	)		(1,000	)		(38	)		175		76			59			(306	)		(425	)
Non-controlling shareholder compensation		—			502		539		452		190			275			243			124		265			22			329			2,941
Acquisition expenses		—			—		—		—		—			971			—			—		444			—			—			1,415
Integration services fee		—			—		—		—		563			—			—			—		—			—			—			563
Other		47			—		—		—		—			1,000			—			—		—			—			662			1,709
Adjusted EBITDA	$	(16,951	)	$	17,537	$	13,897	$	5,625	$	13,693		$	5,620		$	10,069		$	7,270	$	8,914		$	4,932		$	12,717		$	83,323

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated EBITDA Reconciliation
Year ended December 31, 2022
(Unaudited)

(in thousands)	Corporate				5.11		BOA			Ergo			Lugano		Marucci Sports			PrimaLoft			Velocity Outdoor		ACI		Altor Solutions		Arnold			Sterno			Consolidated
Net income (loss) from continuing operations	$	(64,084	)	$	22,633		$	42,613		$	(18,669	)	$	27,934	$	11,526		$	(17,741	)	$	4,127	$	12,955	$	9,662	$	7,683		$	3,406		$	42,045
Adjusted for:
Provision (benefit) for income taxes		12,119			7,125			6,527			(4,274	)		11,889		4,320			(3,878	)		1,562		3,616		3,174		3,329			(480	)		45,029
Interest expense, net		83,243			—			(25	)		10			16		14			(7	)		229		—		—		26			—			83,506
Intercompany interest		(105,813	)		13,761			7,410			6,026			12,773		6,977			7,512			10,282		6,659		10,742		5,518			18,153			—
Loss on debt extinguishment		534			—			—			—			—		—			—			—		—		—		—			—			534
Depreciation and amortization		1,134			22,972			21,993			8,094			11,533		12,583			10,465			13,374		2,158		16,403		8,041			20,293			149,043
EBITDA		(72,867	)		66,491			78,518			(8,813	)		64,145		35,420			(3,649	)		29,574		25,388		39,981		24,597			41,372			320,157
Other (income) expense		(57	)		(217	)		1,043			6			2		(1,875	)		112			2,417		267		766		(20	)		(1,730	)		714
Non-controlling shareholder compensation		—			1,511			2,511			1,479			1,179		1,457			2,142			971		496		1,321		40			844			13,951
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			—		1,802			—			—		853		—		—			1,330			4,235
Adjusted EBITDA	$	(72,924	)	$	67,785		$	82,072		$	13,474		$	67,014	$	36,804		$	6,660		$	33,184	$	27,004	$	42,284	$	24,617		$	41,816		$	369,790

Compass Diversified Holdings
Net Income (Loss) from Continuing Operations to Non-GAAP Consolidated EBITDA Reconciliation
Year ended December 31, 2021
(Unaudited)

(in thousands)	Corporate				5.11	BOA		Ergo		Lugano		Marucci Sports			Velocity Outdoor			ACI		Altor Solutions			Arnold		Sterno			Consolidated
Net income (loss) from continuing operations	$	(65,287	)	$	20,152	$	21,178	$	5,079	$	5,239	$	10,232		$	23,035		$	14,178	$	7,871		$	5,013	$	(316	)	$	46,374
Adjusted for:
Provision (benefit) for income taxes		(12,119	)		6,905		3,559		2,018		2,094		3,070			6,237			3,419		2,619			1,345		2,609			21,756
Interest expense, net		58,639			16		—		—		9		5			165			—		(1	)		6		—			58,839
Intercompany interest		(73,982	)		11,868		8,581		1,960		2,450		3,110			7,461			7,217		7,558			5,455		18,322			—
Loss on debt extinguishment		33,305			—		—		—		—		—			—					—			—		—			33,305
Depreciation and amortization		904			22,355		20,279		8,435		4,757		8,634			12,704			2,212		12,938			8,888		23,369			125,475
EBITDA		(58,540	)		61,296		53,597		17,492		14,549		25,051			49,602			27,026		30,985			20,707		43,984			285,749
Other (income) expense		(284	)		125		377		—		16		(119	)		2,573			298		(323	)		8		(1,189	)		1,482
Non-controlling shareholder compensation		—			2,428		2,194		1,693		190		1,101			1,020			496		1,035			38		1,242			11,437
Acquisition expenses		39			—		—		—		1,827		971			—			—		444			310		—			3,591
Integration services fee		—			—		3,300		—		563		1,000			—			—		—			—		—			4,863
Other		1,132			273		—		—		—		1,000			(2,300	)		—		—			—		995			1,100
Adjusted EBITDA	$	(57,653	)	$	64,122	$	59,468	$	19,185	$	17,145	$	29,004		$	50,895		$	27,820	$	32,141		$	21,063	$	45,032		$	308,222

Compass Diversified Holdings
Adjusted EBITDA
(Unaudited)

	Three months ended December 31,						Year ended December 31,
(in thousands)		2022			2021			2022			2021

Branded Consumer
5.11	$	19,626		$	17,537		$	67,785		$	64,122
BOA		13,784			13,897			82,072			59,468
Ergobaby		2,205			5,625			13,474			19,185
Lugano ⁽¹⁾		20,552			13,693			67,014			17,145
Marucci Sports		10,327			5,620			36,804			29,004
PrimaLoft ⁽²⁾		4,279			—			6,660			—
Velocity Outdoor		3,758			10,069			33,184			50,895
Total Branded Consumer	$	74,531		$	66,441		$	306,993		$	239,819

Niche Industrial
Advanced Circuits	$	6,933		$	7,270		$	27,004		$	27,820
Altor Solutions		10,785			8,914			42,284			32,141
Arnold Magnetics		4,562			4,932			24,617			21,063
Sterno		11,241			12,717			41,816			45,032
Total Niche Industrial	$	33,521		$	33,833		$	135,721		$	126,056
Corporate expense		(20,766	)		(16,951	)		(72,924	)		(57,653	)
Total Adjusted EBITDA	$	87,286		$	83,323		$	369,790		$	308,222

(1	)	The above results for Lugano do not include management's estimate of Adjusted EBITDA, before our ownership, of $24.1 million for the twelve months ended December 31, 2021. Lugano was acquired on September 3, 2021.

(2	)	The above results for PrimaLoft do not include management's estimate of Adjusted EBITDA, before our ownership, of $24.8 million for the twelve months ended December 31, 2022, and $4.9 million and $25.0 million, respectively, for the three and twelve months ended December 31, 2021. 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)		2022		2021		2022		2021

Net Sales	$	594,921	$	559,889	$	2,264,044	$	1,932,155
Acquisitions ⁽¹⁾		—		13,494		55,185		136,940
Pro Forma Net Sales	$	594,921	$	573,383	$	2,319,229	$	2,069,095

(1) Acquisitions reflects the net sales for Lugano and PrimaLoft on a proforma basis as if we had acquired these businesses on January 1, 2021.

Compass Diversified Holdings
Subsidiary Pro Forma Net Sales
(unaudited)

	Three months ended December 31,				Year ended December 31,
(in thousands)		2022		2021		2022		2021

Branded Consumer
5.11	$	135,605	$	123,954	$	486,213	$	444,963
BOA		42,473		45,117		208,688		165,150
Ergobaby		20,179		24,531		88,435		93,631
Lugano ⁽¹⁾		64,278		43,224		201,507		125,105
Marucci Sports		42,930		31,838		165,411		118,166
PrimaLoft ⁽¹⁾		14,032		13,494		79,929		65,882
Velocity Outdoor		51,464		64,535		232,238		270,426
Total Branded Consumer	$	370,961	$	346,693	$	1,462,421	$	1,283,323

Niche Industrial
Advanced Circuits	$	22,309	$	23,278	$	89,503	$	90,487
Altor Solutions		61,748		57,635		261,338		180,217
Arnold Magnetics		37,496		38,048		153,815		139,941
Sterno		102,407		107,729		352,152		375,127
Total Niche Industrial	$	223,960	$	226,690	$	856,808	$	785,772

Total Subsidiary Net Sales	$	594,921	$	573,383	$	2,319,229	$	2,069,095

(1) Net sales for Lugano and PrimaLoft are pro forma as if we had acquired these businesses on January 1, 2021.Historical net sales for Lugano prior to acquisition on September 3, 2021 were $71.1 million for the twelve months ended December 31, 2021. Historical net sales for PrimaLoft prior to acquisition on July 12, 2022 were $55.2 million for the twelve months ended December 31, 2022, and $13.5 million and $65.9 million, respectively, for the three and twelve months ended December 31, 2021.

Compass Diversified Holdings
Condensed Consolidated Cash Flows

	Three months ended December 31,						Year ended December 31,
(in thousands)		2022			2021			2022			2021

Net cash provided by (used in) operating activities	$	11,632		$	(13,097	)	$	(28,291	)	$	134,051
Net cash used in investing activities		(27,774	)		(115,067	)		(626,725	)		(317,496	)
Net cash provided by financing activities		14,757			218,334			556,885			273,206
Foreign currency impact on cash		1,404			324			(1,331	)		228
Net increase (decrease) in cash and cash equivalents		19			90,494			(99,462	)		89,989
Cash and cash equivalents - beginning of the period⁽¹⁾		61,252			70,239			160,733			70,744
Cash and cash equivalents - end of the period	$	61,271		$	160,733		$	61,271		$	160,733

⁽¹⁾Includes cash from discontinued operations of $4.3 million at January 1, 2021.

Compass Diversified Holding
Selected Financial Data - Cash Flows

	Three months ended December 31,						Year ended December 31,
(in thousands)		2022			2021			2022			2021

Changes in operating assets and liabilities	$	(29,213	)	$	(69,044	)	$	(252,377	)	$	(83,764	)
Purchases of property and equipment	$	(24,591	)	$	(12,550	)	$	(64,274	)	$	(40,551	)
Distributions paid - common shares	$	(18,051	)	$	(23,742	)	$	(70,845	)	$	(150,946	)
Distributions paid - preferred shares	$	(6,045	)	$	(6,045	)	$	(24,181	)	$	(24,181	)

Compass Diversified Reports Fourth Quarter and Full Year 2022 Financial Results

Set Language