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Overview of Compass Diversified (CODI)
Compass Diversified (NYSE: CODI) is a publicly traded holding company that specializes in acquiring and managing a diverse portfolio of middle-market businesses. Founded in 1998 and headquartered in the United States, CODI operates with a unique and strategic approach to long-term value creation. The company’s business model is rooted in its ability to identify, acquire, and support companies that exhibit a clear "reason to exist" in their respective markets. CODI’s diversified portfolio is divided into two primary segments: branded consumer businesses and industrial businesses, each contributing to the company’s robust and balanced revenue streams.
Business Model and Revenue Generation
CODI’s business model is centered on acquiring controlling stakes in middle-market companies with strong growth potential and sustainable competitive advantages. Unlike traditional private equity firms, CODI employs a permanent capital structure, allowing it to take a patient and long-term approach to value creation. The company generates revenue through the operations of its subsidiaries, which span a wide range of industries and markets. By providing operational support, strategic guidance, and growth capital, CODI enables its portfolio companies to thrive while creating value for its shareholders.
Portfolio Segmentation
CODI’s portfolio is strategically segmented into two main categories:
- Branded Consumer Businesses: These subsidiaries leverage strong brand equity to dominate their respective markets. Examples include companies like 5.11, Ergobaby, Liberty Safe, and Velocity Outdoor, which cater to consumer needs ranging from tactical gear and baby products to home safes and outdoor equipment. These businesses are characterized by their ability to capitalize on brand loyalty and market differentiation.
- Industrial Businesses: This segment focuses on manufacturing and providing specialized products and services to niche markets. Subsidiaries in this category include companies involved in protective packaging solutions, engineered materials, and other industrial applications. By addressing specific market needs, these businesses maintain steady demand and operational resilience.
Strategic Approach
CODI’s strategy revolves around partnering with exceptional management teams and fostering growth through operational excellence and innovation. The company’s commitment to its "forever ownership" philosophy ensures that its subsidiaries receive the support needed to achieve long-term success. CODI embraces positive change as a catalyst for growth while maintaining a steadfast focus on its core values and operational principles. This strategic approach not only differentiates CODI from traditional investment firms but also positions it as a trusted partner for middle-market businesses.
Competitive Positioning
In the competitive landscape, CODI distinguishes itself through its permanent capital model, which eliminates the pressure of exit timelines commonly associated with private equity firms. This allows CODI to prioritize sustainable growth and operational improvements over short-term gains. Additionally, the company’s diversified portfolio mitigates risk by spreading exposure across multiple industries and markets. CODI’s ability to identify high-quality acquisitions and drive value creation within its subsidiaries further solidifies its position as a leading player in the middle-market segment.
Market Significance
CODI’s operations extend across the United States, Canada, Europe, Asia Pacific, and other international markets, reflecting its global reach and diversified revenue streams. The company’s focus on middle-market businesses fills a critical gap in the investment landscape, providing growth capital and strategic support to companies that might otherwise be overlooked by larger investment firms. This unique positioning underscores CODI’s importance in fostering innovation and economic growth within its target markets.
Conclusion
Compass Diversified (CODI) exemplifies a forward-thinking approach to business management and investment. Through its diversified portfolio, permanent capital structure, and commitment to long-term value creation, CODI has established itself as a trusted partner for middle-market businesses and a compelling entity within the investment community. By balancing branded consumer and industrial businesses, CODI ensures a resilient and adaptable business model capable of weathering market fluctuations and delivering consistent results.
Compass Diversified (NYSE: CODI) announces a virtual investor day on December 9, 2021, at 1:00 PM ET. The event will feature presentations from CODI's management team and its subsidiary, Marucci Sports, along with Q&A sessions. Interested participants can pre-register and access the live video webcast through the official CODI link. The company emphasizes its strategic role in managing a portfolio of leading middle-market businesses across various sectors, aiming to enhance cash flow generation and value creation for its investors.
Compass Diversified (CODI) announced the successful completion of a $300 million offering of 5.000% senior unsecured notes due 2032. This move significantly enhances CODI's financial flexibility, reducing revolver borrowings by $297 million and leaving approximately $583 million available from its $600 million revolving credit facility. CEO Elias Sabo emphasized that the company is well-positioned for future acquisitions and growth thanks to a stronger balance sheet and extended debt maturities.
Compass Diversified (NYSE: CODI) has announced a pricing of $300 million in 5.000% senior unsecured notes due 2032, set at an issue price of 100%. The net proceeds from this private offering will be utilized to repay a portion of the existing balance under the company's revolving credit facility. The offering is expected to close on November 17, 2021, subject to customary conditions. These notes are not secured by any subsidiaries and will be offered only to qualified institutional buyers under Rule 144A and to non-U.S. Persons under Regulation S.
Compass Diversified (NYSE: CODI) announced plans to offer $300 million in senior unsecured notes due 2032. The proceeds will primarily be used to pay down part of the existing revolving credit facility. The notes will not be guaranteed by any subsidiaries and will be offered only to qualified institutional buyers under Rule 144A and non-U.S. persons under Regulation S. The offering is subject to market conditions and will not be registered under the Securities Act, thus adhering to specific exemptions.
5.11 ABR Corp., a subsidiary of Compass Diversified (NYSE: CODI), has filed for an initial public offering (IPO) with the SEC, seeking to list on Nasdaq under the ticker symbol 'VXI.' The share price and number of shares offered are yet to be determined. Morgan Stanley, Jefferies, and Baird will serve as lead book-running managers for the offering, with several firms acting as co-managers. The registration statement is currently not effective, meaning no sales can occur until it does. This announcement indicates 5.11's intentions to access public capital for future growth.
Compass Diversified (CODI) announced strong third-quarter results, reporting net sales of $488.2 million and net income of $90.2 million. The company attributes this success mainly to heightened demand for its consumer brands and strategic acquisitions, including Lugano Diamonds for $256 million. Adjusted EBITDA reached $90.0 million, up from $67.6 million year-over-year. CODI also raised its full-year guidance, now projecting 2021 Adjusted EBITDA between $380 million to $390 million. Significant distributions of $0.36 and $0.88 per share were made in October and September 2021, respectively.
Lugano Diamonds & Jewelry, a subsidiary of Compass Diversified (NYSE: CODI), announced the appointment of Frederic Cumenal, former CEO of Tiffany & Co., and David Arnold, Vice Chairman of Robb Report, to its Board of Directors. Both leaders bring significant luxury industry experience and will invest in Lugano, enhancing its growth strategy. Cumenal's expertise in high-end retail and Arnold's success in luxury media are expected to bolster Lugano's position in the luxury jewelry market. This leadership change reflects Lugano's commitment to growth and customer relationship-building.
Marucci Sports, a subsidiary of Compass Diversified (CODI), has acquired Lizard Skins, enhancing its leading position in diamond sports and expanding into new markets like hockey and cycling. Founded in 1993, Lizard Skins is recognized for its innovative grip products and protective equipment, serving elite athletes across multiple sports including Major League Baseball and the NHL. This acquisition is expected to strengthen Marucci's product offerings and leverage Lizard Skins' technology to boost market presence.
Compass Diversified (CODI) will release its third-quarter financial results for the period ending September 30, 2021, on October 28, 2021, after market close. The Company will host a conference call at 5:00 p.m. ET on the same day to discuss these results. Key executives, including CEO Elias J. Sabo and CFO Ryan J. Faulkingham, will present. Investors can join by calling the provided numbers or listening to a live webcast available on CODI's website. A replay of the call will be available until November 4, 2021.
Compass Diversified (CODI) announced a definitive agreement to sell its majority-owned subsidiary, Advanced Circuits, to Tempo Automation for $310 million, including $240 million in cash and $70 million in Tempo stock. The deal allows CODI to repay outstanding borrowings and supports future growth. Following the transaction, Tempo Automation will merge with ACE Convergence Acquisition Corp., becoming Tempo Automation Holdings, Inc.. The closing is expected in Q1 2022, subject to regulatory approvals.
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