Compass Diversified Holdings (CODI, Financial), an owner of leading middle market businesses, announced its consolidated operating results for the third quarter ended September 30, 2023, on November 2, 2023. Despite a slight dip in net sales, the company's Adjusted EBITDA increased by 13% year-over-year (YoY).
Financial Highlights
Net sales for Q3 2023 were down 1% on a pro forma basis to $569.6 million. Branded consumer pro forma net sales saw a 2% increase to $388.3 million, while niche industrial net sales were down 8% to $181.2 million. The company reported a net loss of $3.8 million, primarily due to a $32.6 million non-cash impairment expense associated with the Company’s Velocity Outdoor subsidiary and higher interest expense.
Adjusted Earnings, a non-GAAP financial measure, was $41.0 million, slightly down from $41.6 million in the same period last year. Adjusted EBITDA, another non-GAAP financial measure, was up 13% to $103.9 million. The company also paid a third quarter 2023 cash distribution of $0.25 per share on CODI's common shares in October 2023.
Strategic Moves
CODI announced the sale of Marucci Sports to Fox Factory Holding Corp. for an enterprise value of $572 million. The company purchased the business in 2020 for $200 million and after approximately $70 million in add-on acquisitions, agreed to sell the brand for $572 million. This move underscores the strength of CODI's brands and its ability to drive uncorrelated market returns.
Outlook
Given the strong performance in Q3 2023, CODI is raising its full-year outlook. For the full year 2023, the company now expects consolidated subsidiary Adjusted EBITDA of between $450 million and $465 million. This estimate is based on the summation of the Company’s expectations for its current subsidiaries in 2023, including Marucci, and is absent additional acquisitions or divestitures, and excludes corporate expenses such as interest expense, management fees paid by CODI and corporate overhead.
For the full year 2023, including Marucci, CODI now expects to earn between $130 million and $140 million in Adjusted Earnings, a non-GAAP financial measure.
Conclusion
Despite facing a challenging economic backdrop, Compass Diversified Holdings (CODI, Financial) has demonstrated resilience in its Q3 2023 results. The company's strategic decision to sell Marucci has further strengthened its economic moat and provided it with a greater ability to increase shareholder returns. With a raised full-year outlook, CODI remains confident in its ability to drive value for its shareholders in 2023 and beyond.
Explore the complete 8-K earnings release (here) from Compass Diversified Holdings for further details.
