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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) plans to release its first-quarter financial results for the period ending March 31, 2022, on May 5, 2022, after market close. A conference call is scheduled for the same day at 5:00 p.m. ET to discuss these results. Participants can join by calling (833) 900-1532 domestically or (236) 712-2273 internationally, using Conference ID 5477725. The call will also be available as a live webcast on CODI's investor relations page, with an archive for those unable to attend live.
Compass Diversified (NYSE: CODI) has declared a quarterly cash distribution of $0.25 per share for its common shares, payable on April 28, 2022, for holders of record as of April 21, 2022. Additionally, $0.453125 per share will be distributed for its 7.250% Series A Preferred Shares and $0.4921875 for both Series B and C Preferred Shares, all payable on April 30, 2022, with payment dates on May 2, 2022. These distributions are expected to be treated as qualified dividends for U.S. federal income tax purposes.
Compass Diversified (CODI) reported record operating results for the fourth quarter and full year 2021, achieving net sales of $536.6 million and $1.842 billion respectively. Net income surged to $25.9 million for Q4 and $126.8 million for the full year, largely driven by acquisitions and strong performance in consumer and industrial sectors. Adjusted EBITDA reached $88.9 million for Q4 and $327.3 million for the year. Looking ahead, CODI projects 2022 Adjusted EBITDA of $400-$420 million.
Compass Diversified (NYSE: CODI) announced that shareholders can access their individual tax reporting information related to their ownership of CODI by February 21, 2022. The company will mail Investor Tax Reporting packages in early March for shareholders who held shares when CODI was taxable as a publicly traded partnership. CODI emphasizes the importance of checking statements from Broadridge or brokerage firms against trustee tax information. CODI, not subject to federal or state income tax, allows income, losses, deductions, or credits to flow directly to shareholders.
Compass Diversified (NYSE: CODI) announced plans to release its fourth quarter financial results for the period ending December 31, 2021, on February 24, 2022. The results will be discussed in a conference call at 5:00 p.m. ET the same day. Participating executives include CEO Elias J. Sabo and CFO Ryan J. Faulkingham. Investors can join the call via a live webcast on the company's investor relations website. A replay will be available until March 3, 2022. CODI specializes in owning and managing a diverse set of middle-market businesses across various sectors.
Altor Solutions, a subsidiary of Compass Diversified (CODI), has acquired Foam Concepts, a manufacturer of expanded polystyrene foam products. The acquisition enhances Altor's position in the protective packaging sector and expands its operational footprint to 19 U.S. facilities. Foam Concepts boosts Altor's capabilities, particularly in the cold chain market. CEO James Hughes expressed confidence in this strategic move to improve profitability and customer reach.
Compass Diversified (NYSE: CODI) announced the passing of D. Eugene Ewing, a long-serving member of its Board of Directors, on January 9, 2022. Mr. Ewing was recognized for his significant contributions to CODI's success and served as the Chairman of the Audit Committee and Independent Lead Director. CODI has decided not to fill his board seat at this time. The company continues to operate a diverse portfolio of middle market businesses to generate long-term value.
Compass Diversified (NYSE: CODI) has declared a quarterly cash distribution of $0.25 per share for the period ended December 31, 2021, payable on January 20, 2022. The company, now treated as a corporation for tax purposes, aims to expand its shareholder base. A reduction in the fourth-quarter distribution is attributed to corporate tax liability assumptions. Additionally, the company announced preferred share distributions of $0.453125 for Series A, $0.4921875 for Series B, and $0.4921875 for Series C preferred shares, all payable on January 31, 2022.
Compass Diversified (NYSE: CODI) announced the appointment of Alex Bhathal to its Board of Directors effective January 1, 2022. With over 15 years of asset management experience, Bhathal is the founder of RAJ Capital Management and serves as co-owner of Sacramento Basketball Holdings LLC. His expertise in sports and consumer products is expected to enhance the company's strategic growth efforts. The Board will now consist of nine directors, aiming to leverage their insights for long-term shareholder value.
Compass Diversified (CODI) held its 2021 Virtual Investor Day today at 1:00 PM ET, showcasing its long-term growth strategy and transformation initiatives. CEO Elias Sabo emphasized the goal of achieving $1 billion in EBITDA while exploring opportunities in the high-growth healthcare market. Key presentations included insights from Marucci Sports, a leader in baseball equipment, detailing its competitive advantages and growth strategies. CODI outlined its strong financial position, including lower capital costs and a focus on shareholder value through strategic partnerships.
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