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Compass Diversified Holdings (CODI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 results accelerated into year-end: Net sales $620.3M (+13.8% y/y), Adjusted EBITDA $118.2M (+29.0% y/y), and Adjusted Earnings $46.6M (+34% y/y); strength concentrated in Branded Consumer (Lugano, BOA, PrimaLoft, Honey Pot) with Industrial improving sequentially .
  • 2025 outlook implies another step-up: Subsidiary Adjusted EBITDA $570–$610M; company Adjusted EBITDA $480–$520M; Adjusted Earnings $170–$190M; leverage at ~3.5x with liquidity enhanced by a $300M term loan A (funded $200M, $100M delayed draw) .
  • Portfolio reshaping/ capital actions: Ergobaby divested (EV $104M), >400K CODI shares repurchased in Q4 at $23.19 avg, >$115M preferred raised in 2024, and management services agreement amended to reduce long-term costs and better align incentives .
  • Estimate comparison unavailable: S&P Global consensus data could not be retrieved due to an API limit; we will update beat/miss analysis when accessible (see “Estimates Context”). Values are from company filings and press releases cited herein.

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based outperformance in Consumer: Lugano delivered exceptional growth and margin expansion (Q4 Lugano Adj. EBITDA $65.8M, +75% y/y), with BOA and PrimaLoft also strong; Honey Pot contributed as well . Management: “Growth in both revenue and adjusted EBITDA accelerated in the fourth quarter” .
    • Capital structure and liquidity improved: $300M incremental term loan A in Jan-25 (funded $200M) and ample revolver availability (~$486.6M at 12/31) support reinvestment and M&A .
    • Portfolio optimization and buybacks: Sold Ergobaby (12/27) and repurchased >400K shares in Q4 at $23.19—signaling confidence and capital discipline .

  • What Went Wrong

    • 5.11 one-time PFAS impact and DTC challenges: Q4 Adjusted EBITDA includes an ~$11.8M inventory write-down at 5.11 that will not repeat; year marked as “transition” with PFAS product shifts and DTC inventory issues .
    • Cash conversion pressured by Lugano working capital: CODI generated $10.0M operating cash in Q4 but continues to fund high-return Lugano inventory; ex-Lugano operating cash >$25M in Q4 .
    • Industrial remains mixed: While Q4 Industrial Adj. EBITDA improved to $36.4M (vs. $34.6M), full-year declined modestly; Altor integrating Lifoam, Arnold incurred relocation costs, and Velocity Outdoor remains subdued post-Crosman divestiture .

Financial Results

Overall performance (quarterly trend)

Metric ($USD Millions unless noted)Q2 2024Q3 2024Q4 2024
Net Sales$542.6 $582.6 $620.3
Adjusted EBITDA$105.4 $114.0 $118.2
Adjusted Earnings$39.8 $48.7 $46.6
Net Income attributable to Holdings$(19.5) $22.1 $11.9
Basic EPS – total ($)$(0.45) $0.08 $(0.06)
Gross Profit$259.1 $274.6 $271.0
Capex$11.2 $15.6 $22.9

Margins (computed from reported figures)

MarginQ2 2024Q3 2024Q4 2024
Gross Margin %47.8% (259.1/542.6) 47.1% (274.6/582.6) 43.7% (271.0/620.3)
Adjusted EBITDA Margin %19.4% (105.4/542.6) 19.6% (114.0/582.6) 19.1% (118.2/620.3)

Segment and subsidiary snapshot (Q4)

Segment / SubsidiaryQ4 2024 Net Sales ($M)Q4 2023 Net Sales ($M)Q4 2024 Adjusted EBITDA ($M)Q4 2023 Adjusted EBITDA ($M)
Branded Consumer Total$403.0 $374.8 $104.5 $77.9
• Lugano$149.7 $104.8 $65.8 $37.7
• BOA$48.1 $42.4 $17.2 $14.0
• 5.11$144.8 $147.4 $11.0 $21.3
• PrimaLoft$12.7 $9.4 $3.1 $1.7
• The Honey Pot$28.7 $24.9 $6.0 —
• Velocity Outdoor$19.0 $45.8 $1.4 $3.1
Industrial Total$217.2 $195.1 $36.4 $34.6
• Sterno$94.6 $94.0 $15.8 $12.3
• Altor Solutions$81.3 $56.4 $15.9 $14.0
• Arnold Magnetics$41.3 $44.6 $4.7 $8.4
Corporate expense——$(22.7) $(20.9)

KPIs and balance sheet

KPIQ4 2024
Cash & Equivalents$59.7M
Revolver Outstanding / Availability$113.5M / ~$486.6M
Term Loans Outstanding$375.0M
Senior Notes$1.0B (2029); $300.0M (2032)
Leverage Ratio~3.5x at Q4 end (ex-one-time costs ~3.4x)
Operating Cash Flow (Q4)$10.0M
Share Repurchase (Q4)>400K shares at $23.19 avg
Distribution (Q4)$0.25 per common share (paid 1/23/25)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Subsidiary Adjusted EBITDAFY 2025N/A$570–$610M New
Adjusted EBITDA (incl. corp.)FY 2025N/A$480–$520M New
Adjusted EarningsFY 2025N/A$170–$190M New
CapexFY 2025N/A$80–$90M (call commentary) New
DistributionQ4 2024$0.25 last quarter $0.25 declared for Q4 (paid Jan-25) Maintained
Management Services AgreementEffective 1Q25Prior termsSliding base fee + incentive; integration fee eliminated; excess cash excluded Cost alignment

Note: No prior FY25 guidance issued; 2024 guidance was updated in Q3 but is not comparable to FY25 ranges .

Earnings Call Themes & Trends

TopicQ2 2024 (7/31)Q3 2024 (10/30)Q4 2024 (2/27)Trend
Lugano growth/marginsExtraordinary growth; London salon exceeded expectations Record Q3; incrementals high; expansion to Chicago; strong average ticket/transactions >50% sales growth in 2024; $195M FY Adj. EBITDA; 3 salon openings in 2025; mix supports margin accretion Strengthening, footprint expanding
5.11 PFAS/DTCTransition year; PFAS complexity and DTC inventory issues; near-term muted —~$11.8M inventory write-down in Q4; non-recurring; 2025 brand refresh/new product; DTC strategy Headwind in 2024; cleanup sets 2025 recovery
Industrial (Altor/Arnold/Sterno)Weakness at Altor; Arnold relocation costs; Sterno stable Industrial stabilized with Lifoam; one-time costs called out Q4 improvement; Lifoam integration driving synergies; Arnold move near completion Gradual improvement
M&A/Deal flowQuality lacking; disciplined; willing to lever 0.5–0.75x for right asset Pipeline building; repurchase program added Market still subdued but improving; priority on innovative assets; multiple levers incl. preferred equity Cautious optimism
Tariffs/macroMacro softness hurts Industrial; portfolio resilient Momentum index stable; some industrial gyration Monitoring 2025 tariff risk; diversified sourcing; affluent consumer resilient Managed risk
Capital allocationMaintain 2024 outlook; deleveraging organic/preferred $100M buyback authorization Raised $300M TLA; repurchased >400K shares; >$115M preferred in 2024 Balance growth, leverage, buybacks
AI/automation——Centers of excellence incl. AI and automation to drive ops efficiency New organizational focus

Management Commentary

  • Strategic reorientation to innovative/disruptive assets: “2024 was a transformational year…shift our focus to more innovative and disruptive businesses that can grow faster and drive long-term value creation” .
  • Capital alignment: “We revised our management services agreement…sliding scale for base management fees…incentive management fee…eliminating integration services fees…excluding excess cash” .
  • Macro/tariffs: “Geopolitical uncertainty driven by tariffs and the potential for a trade war create incremental risk for 2025…we have taken steps to diversify our supply chain” .
  • Lugano thesis: “This performance is a direct result of the company's disruptive business model, redefining the >$160B luxury collectibles market” .
  • Cash deployment: “We bought back more than 400,000 shares…large discount between share price and intrinsic value” .

Q&A Highlights

  • Guidance drivers: Growth in Branded Consumer is broader than Lugano (includes BOA, Honey Pot, PrimaLoft); if Lugano sustains outsized growth, branded likely at high-end of range .
  • 5.11: PFAS inventory write-down (~$11.8M) embedded in Q4 Adj. EBITDA; brand refresh, DTC execution, and new product expected to support 2025 .
  • Lugano margins/expansion: Q4 margins aided by operating leverage and mix (less wholesale); three salon openings in 2025 imply some near-term margin dilution but EBITDA growth remains strong .
  • Tariffs: Multi-year sourcing diversification; any industry-wide cost increases likely be shared; some competitors more exposed .
  • Leverage/capacity: ~3.5x leverage (ex one-timers ~3.4x) with available secured and bond market capacity; comfort to temporarily lever higher for right assets .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q4 2024 EPS/Revenue/EBITDA and target price. The request failed due to a daily API limit (“Daily Request Limit of 250000 Exceeded”). As a result, we cannot provide beat/miss vs Wall Street consensus in this report and will update when SPGI data becomes available. Results presented here are from CODI’s filings/press releases/transcripts as cited [GetEstimates failure noted].

Key Takeaways for Investors

  • Q4 capped a strong year with accelerating top-line and EBITDA—driven by high-quality Consumer assets; 2025 guidance implies continued growth and expanding scale .
  • Lugano remains the engine: outsized growth, expanding margins, and footprint expansion; near-term working capital needs are intentional and high-return .
  • 5.11 cleanup is progressing; PFAS write-down is non-recurring and 2025 should benefit from brand refresh, DTC improvements, and new products .
  • Industrial turning a corner: Lifoam synergy ramp and Arnold relocation completion support improving run-rate through 2025; Sterno execution remains solid .
  • Capital flexibility intact: leverage ~3.5x with ample liquidity; tools include preferred equity, term loans, and opportunistic buybacks to optimize ROIC and intrinsic value per share .
  • Structural fee changes align with shareholders and should reduce long-term cost drag, enhancing operating leverage at the holdco level .
  • Watch items: tariff policy path, Lugano inventory investment cadence, 5.11 demand normalization, and Industrial synergy execution; each can shift near-term cash conversion and sentiment .

Sources

  • Q4 2024 8-K (Item 2.02) and Exhibit 99.1: revenue, margins, segment details, liquidity, capital actions, and 2025 guidance .
  • Q4 2024 earnings press release (same content as Exhibit 99.1): highlights, reconciliations, distributions .
  • Q4 2024 earnings call transcript: guidance context, PFAS, Lugano dynamics, leverage, tariffs, capex .
  • Q3 2024 press release and call: prior-quarter comps and outlook adjustments -.
  • Q2 2024 press release and call: trend analysis and segment commentary -.
  • Repurchase authorization (10/16/24) .
  • Ergobaby sale (12/30/24) .
  • Management services agreement amendments (1/15/25) .