CODI

Image source: The Motley Fool. Monday, Aug. 10, 2026 at 5:00 p.m. ET Vice President, Investor Relations - Ben Avenia-Tapper Chief Executive Officer - Elias Sabo Chief Operating Officer - Zachary Sawtelle Chief Financial Officer - Stephen Keller Operator: Good afternoon, and welcome to Compass Diversified's Fiscal 2026 Second Quarter Conference Call. Today's call is being recorded. [Operator Instructions] At this time, I would like to turn the call over to Ben Tapper, Vice President, Investor Relations. Ben, please go ahead. Ben Avenia-Tapper: Thank you, and welcome to Compass Diversified's Second Quarter 2026 Conference Call. Representing the company today are Elias Sabo, Chief Executive Officer; Zach Sawtelle, Chief Operating Officer; and Stephen Keller, Chief Financial Officer. Before we begin, I'd like to remind everyone that during the course of this call, CODI will make certain forward-looking statements, including discussions of forecasts and targets, future business and divestiture plans, future liquidity and leverage positions, plans to return capital to shareholders, future performance of CODI and its subsidiaries and other forward-looking statements regarding CODI and its financial results. Words such as believes, expects, anticipates, plans, projects, should, and future or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to many risks and uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ on a material basis from those projected in these forward-looking statements. And in some of these -- some of these factors are enumerated in the risk factor discussion in the company's Form 10-K as filed with the SEC on February 27, 2026, as well as in other SEC filings and press releases. Except as required by law, CODI undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. During today's call, we will refer to certain non-GAAP financial measures. Definitions of these measures, reconciliations to the most directly comparable GAAP measures and additional information regarding their use are included in today's earnings release, which is available in the Investor Relations section of the company's website at www.compassdiversified.com. Please note that references to EBITDA in our prepared remarks refer to adjusted EBITDA. Unless otherwise indicated, year-over-year comparisons of net sales and subsidiary adjusted EBITDA exclude Lugano from the prior year period and exclude the divested Sterno's Foodservice business from both the current and prior year periods. Our full year 2026 outlook is presented on a different basis and includes the adjusted EBITDA generated by the Sterno's Foodservice business prior to its sale. CODI has not reconciled its full year 2026 subsidiary adjusted EBITDA outlook to the most directly comparable GAAP measure because CODI does not provide guidance for income or loss from continuing operations and management cannot predict with sufficient certainty all of the inputs necessary to provide such a reconciliation without unreasonable effort. Additional information regarding this limitation is included in today's earnings release. Throughout this call, we will refer to Compass Diversified as CODI or the company. At this time, I would like to turn the call over to Elias Sabo. Elias? Elias Sabo: Thank you, Ben, and good afternoon, everyone. In the second quarter, our subsidiaries delivered double-digit adjusted EBITDA growth and strong cash flow. Based on our first half performance and current expectations for the remainder of the year, we are maintaining our fiscal 2026 total subsidiary adjusted EBITDA outlook. Zach and Stephen will provide detail on our operating performance and outlook shortly. Beyond subsidiary performance, we took concrete actions to strengthen our balance sheet and improve alignment with shareholders. In May, we completed the previously announced sale of Sterno's Food Service business at an attractive valuation, applying more than $280 million of the proceeds to debt reduction. We also amended our management services agreement. The amendment followed a Board-led review that considers investor perspectives and market practices. It lowers fees and ties more of the manager's compensation to shareholder returns and operating performance. Let me provide some additional details. Effective January 1, 2027, the amended agreement reduces the base management fee from 2% to 1.25% of average adjusted net assets on the first $3 billion in assets and caps the 2027 base fee at $30 million. It also establishes 2 additional awards, each equal to 12.5 basis points of average adjusted net assets. One is designed to increase the manager's ownership of CODI shares and the other is tied directly to shareholder returns and operating performance. Even assuming full payout of both awards, we expect the amended agreement to reduce 2027 fees by approximately $20 million compared with the prior management fee formula. While the Sterno's sale and MSA changes are important milestones, our work is not done. Our shares continue to trade at what we believe is a meaningful discount to intrinsic value, and we remain focused on closing that gap. Before I hand the call over to Zach, I want to briefly address the leadership transition we announced in June. I will retire as Chief Executive Officer at the end of this year, and Zach will succeed me. CODI has been the focus of my career, and I am proud of what we have accomplished. The challenges following Lugano made the past year one of the most difficult periods in our history. I wanted to remain in place through the most acute phase of that work and help put CODI in a position to move forward. With the progress we have made and Zach ready to lead, I believe this is the right time for the transition. I have worked with Zach for 17 years. He understands our businesses, our people and our model, and I have complete confidence in him. Over the remainder of the year, Zach and I will continue working closely to ensure a smooth transition. With that, I'll turn the call over to Zach. Zachary Sawtelle: Thanks, Elias. I appreciate your confidence, and I look forward to working closely with you through the transition. Our near-term priorities are straightforward: drive profitable growth across our subsidiaries, pursue divestitures where we can realize attractive value, further reduce debt and as our balance sheet strengthens, efficiently return capital to shareholders to close the valuation gap in our current share price. We are moving with urgency and discipline to realize value for our shareholders. Turning to the quarter. Our strong operating performance was broad-based. Every one of our branded consumer businesses grew adjusted EBITDA. BOA grew adjusted EBITDA 27% on growth across all primary segments with expanding gross margins. The Honey Pot grew adjusted EBITDA 32% on expanded period care distribution across grocery, drug and mass, where it is significantly outpacing the broader category. PrimaLoft returned to growth with adjusted EBITDA up 28%, supported by strong demand from our Asian brand partners. 5.11 grew adjusted EBITDA by 14% on expanded margins of more than 200 basis points through more disciplined promotional activity and tariff refunds. We estimate that some of the second quarter strength at BOA and PrimaLoft reflected the timing of customer orders. We have considered that timing in our expectations for the remainder of the year. Within Industrial, Arnold delivered a standout performance with adjusted EBITDA up nearly 50%. Backlog remains strong, supported by demand for rare earth magnets sourced outside China and continued progress at our Thailand facility. Rimports, our home fragrance business, benefited from tariff refunds while absorbing separation costs related to the Sterno's Food Services divestiture. As discussed last quarter, lower expected volume from a large customer will weigh on results in the second half. Altor is where we have work to do. Adjusted EBITDA declined roughly 50% in the quarter. Tariff-related disruption weighed on white goods, while softer vaccine demand affected the cold chain business. Higher input costs and competition added further pressure. Those are real market factors, but they are not the only issue. Our commercial execution has not been good enough, and we are urgently working to correct this issue. The team is focusing its commercial efforts on the end markets where Altor is strongest and taking costs out to match current demand. This will take several quarters. Taken together, the quarter reinforced our confidence in our businesses and the teams running them. With that, I'll turn the call over to Stephen to review our financial results, balance sheet and outlook. Stephen Keller: Thanks, Zach. As Ben noted in the introduction, the year-over-year comparisons are complicated by the inclusion of Lugano in the prior year period and the sale of Sterno's Food Service business during the quarter. I will begin with our reported GAAP results and then discuss our results on a more comparable basis. For the second quarter, GAAP net sales were $424 million compared with $479 million in the prior year period. Income from continuing operations was $82 million compared with a loss of $81 million last year. Basic earnings per share were $0.86 compared with a loss of $0.88 in the prior year period. The current quarter results included a $182 million gain on the sale of Sternos' Food Service business and a $58 million reduction in the fair value of our receivable from Lugano. Turning to the operating results of our continuing subsidiaries, which exclude Lugano and divested foodservice business, net sales were approximately $411 million, roughly flat with the prior year. Branded Consumer net sales increased 7.2%, while industrial net sales declined 11.5%. On the same basis, subsidiary adjusted EBITDA was approximately $92 million, an increase of 12.6% Branded Consumer adjusted EBITDA increased 24.2%, while the adjusted EBITDA for Industrial declined 12.8%. It's important to note that these results benefited from IEPA tariff refunds received across several of our businesses during the quarter. As Zach described in detail, strong performance across our branded consumer businesses and at Arnold more than offset the challenges at Altor. On a reported basis, including Sterno's Food Service business, which generated approximately $2 million in adjusted EBITDA through the May 1 sale date, subsidiary adjusted EBITDA was approximately $94 million. Corporate expenses were approximately $29 million, resulting in total adjusted EBITDA of approximately $66 million. Corporate management fees, excluding fees paid by our subsidiaries, were $12.3 million for the quarter as reflected in our income statement. Actual cash payments related to second quarter fees were $6.2 million, roughly half that amount. We continue to expect corporate cash management fees paid to the manager to be between $25 million and $30 million for the full year, reflecting the manager's repayment of the remaining management fees overpaid in connection with the Lugano restatement. Public company costs were approximately $16 million in the quarter. This includes more than $12 million of Lugano related and other onetime costs. We do not add these costs back in calculating adjusted EBITDA. They are included in corporate expenses and reduced total adjusted EBITDA. These costs remain elevated due primarily to ongoing professional fees associated with Lugano and the related litigation, investigation and bankruptcy proceedings. To date, D&O insurance recoveries have offset only a small portion of the related cash outlays. Year-to-date, we have received around $2 million of D&O insurance reimbursements. We have submitted additional claims and expect significant further recoveries, though the timing and amount are not fully within our control. I'm accountable for both and I'm focused on recovering more and spending less. Cash generation improved substantially. We generated approximately $30 million of operating cash in the second quarter, bringing year-to-date operating cash flow to more than $50 million compared with an operating cash outflow of approximately $65 million in the first half of 2025. Capital expenditures were $6 million in the quarter and $11 million year-to-date, roughly half the prior year level. We ended the quarter with $87 million of cash and near full availability on our revolver. Total debt was approximately $1.6 billion, down nearly $300 million from year-end, primarily reflecting the application of the Sterno's sale proceeds to our term loan. Our covenant leverage ratio was 4.8x, down from 5.3x at the end of the first quarter. Our senior secured net leverage was 0.66x. Subsequent to the quarter end, we amended our senior credit facility to extend all of our term loan and $54 million of our revolving commitments to January 12, 2028. We have rightsized the revolver to reflect our expected liquidity needs, strong cash generation and continued focus on reducing debt. We believe the amended facility provides the financial flexibility we need. Reducing leverage remains a top financial priority. We made real progress during the first half, but there is more work to do. Before turning to our outlook, I want to provide a brief update on Lugano. During the quarter, we announced a settlement with the unsecured creditors committee intended to facilitate the orderly liquidation of Lugano's assets, preserve value in the state and accelerate a portion of our recovery. Under the settlement, we currently expect to receive nearly $20 million in recovery by early fall, which we intend to apply to debt reduction. We expect additional recoveries over time, although the timing and amount remains uncertain. We will continue to update investors as appropriate. Turning to our outlook. We are maintaining our fiscal 2026 total subsidiary adjusted EBITDA outlook of $320 million to $365 million. One note on the outlook, it includes the roughly $9 million of adjusted EBITDA generated by the Food Service business before the sale because that is how we report the full year. The quarterly year-over-year comparisons I gave you a moment ago exclude it. We now expect Branded Consumer adjusted EBITDA of $235 million to $270 million. For Industrial, we expect $85 million to $95 million. This reflects a stronger outlook for our branded consumer business and a softer outlook for Industrial. For modeling purposes, we continue to assume capital expenditures of $30 million to $40 million for the full year. Our outlook incorporates the order timing at BOA and PrimaLoft that Zach discussed as well as the current operating environment at Altor. It does not assume any additional acquisitions or divestitures or significant changes in the current trade environment. With that, I'll turn the call back to Zach. Zachary Sawtelle: Thanks, Stephen. I want to close by emphasizing 2 things. First, we have great businesses led by strong management teams. We will continue to support our teams with the resources and flexibility they need to perform. We are focused on ensuring that our businesses deliver long-term shareholder value. Second, our priorities are unchanged: drive profitable growth across our subsidiaries, pursue divestitures where we can realize attractive value and reduce debt. As our balance sheet strengthens, we intend to efficiently return capital to shareholders. We believe that our continued execution against these priorities will narrow the gap between our share price and the underlying value of our business. Thank you for your time. Elias, Stephen and I will now take your questions. Operator, please open the line. Operator: [Operator Instructions] And our first question comes from the line of Chris Kennedy with William Blair. Cristopher Kennedy: Zach, you've had a large role at Compass over the years. Can you just provide some perspective as to what you think the consumer and the industrial subsidiaries can grow over the long term? Zachary Sawtelle: Sure. Absolutely. Thank you for the question. I think we have a carefully curated portfolio of very high-quality consumer and industrial businesses that are well positioned in their respective markets. And as we've outlined in prior earnings calls, I think across the spectrum, the consumer businesses vary from high single-digit to double-digit profitability growth opportunities. And I think on the industrial side of the business, the opportunity remains in the mid-single-digit to high single-digit growth opportunities in the future. Cristopher Kennedy: Got it. And then any update on free cash flow guidance for this year? Clearly, it's improving. Just are we at a sustainable level going forward? Zachary Sawtelle: I'm going to let Stephen answer that question. Stephen Keller: Yes. No, I think no significant changes here. I mean, again, obviously, short of any divestiture that we may do during the second half of the year, which would substantially change it. But I think we're still on track for the way that we have described it, still kind of in that $50 million range given where we're at, and that's after all payments. Operator: And our next question comes from the line of Lance Vitanza with TD Cowen. Lance Vitanza: A couple, if I can. The first is on the corporate cost structure. I think that's an area that appears increasingly important to the equity story. And as investors look toward 2027, should we be thinking about total corporate expense, including management fees and public company costs as being closer to $50 million than the levels we've seen historically? And are there additional opportunities over the longer term beyond the MSA amendment that might further reduce corporate overhead over time? Stephen Keller: Yes. I think, the way to think about it, I think a little bit higher than $50 million is probably the right way. There is a -- on the base fees next year, there is a -- from the management fee, there is a $30 million cap. We're targeting this year to have about -- excluding the onetime fees on public company costs, we're talking about $25 million this year, but I would expect those to come down next year, as we kind of deal with some of the -- as we deal with some of the auditor changes, et cetera. So I think somewhere for corporate costs, somewhere around $20 million is probably the right number to think about it. And then for management fees, think in that $30 million to $35 million is probably the right way to think about it. Lance Vitanza: Okay. That's helpful. And then on Altor, you mentioned in the prepared remarks that the work to improve performance remains fairly comprehensive, and it sounds like it's going to take several quarters to execute. EBITDA down obviously quite a bit in the second quarter. As we think about the next few quarters, what milestones can we be watching for to gauge whether the turnaround is progressing as expected? And how should we think about the cadence of improvement from here, both towards stabilizing results and then ultimately returning the platform to growth. Is it going to be sort of like the proverbial straight line towards flat and then growth? Or do we have a few more really tough quarters to come and then a big hockey stick up higher in 2 or 3 quarters' time? How would you sort of describe that? Zachary Sawtelle: Lance, this is Zach. Thank you for the question. Our assumption is a gradual improvement over the next 4 to 5 quarters. Q2 was a very challenging quarter, some external factors, some internal factors of note with high oil prices, our primary raw material has inflated and that is squeezing margins, and we do not anticipate that to abate for several quarters. So I would anticipate the recovery to stretch modestly over a handful of future quarters. Lance Vitanza: So if I could just get one -- if I could just get one more in before I jump back in the queue. You've talked a lot, including today about the substantial discount to intrinsic value, we agree. And you've made progress over the past year with the Sterno's transaction, balance sheet is in much better shape, et cetera. As you think about closing the discount from here, do you believe additional asset sales remain the primary catalyst? Or can continued operating performance and deleveraging begin to narrow the gap even absent another transaction? Zachary Sawtelle: Great question. We are still highly committed to an additional divestiture in order to accelerate the deleveraging process. and that hasn't changed. And we are continuing to evaluate multiple opportunities to pursue what would be an attractive divestiture and realization for our shareholders. We still think that is an important part of the next steps in order to close that gap between our intrinsic value and where the share price is currently trading. Operator: And our next question comes from the line of Larry Solow with CJS Securities. Lawrence Solow: Zach, just want to welcome you. I know you've been with the company for a while, but welcome to your new role or your pending new role -- well, I guess, COO is a new role, you're welcome. I guess just a follow-up on that question. I think we all agree probably the fastest way to close that gap in underlying value and value we see in the market today is through an asset sale. Just your thoughts, kind of big picture, thinking outside the box, any other levers the size of an asset sale at a good price, which I think is an obvious way to hopefully improve the value there. But just any other thoughts? Clearly, you're going to run by this -- the playbook is probably going to be run pretty much the same. I don't expect you to come in there and upend everything. But just any thoughts on how -- other ways to sort of narrow that gap over time? Zachary Sawtelle: Certainly. There are alternative methods, but I do believe that the most prudent way, given where we're -- our share price is currently trading would be to monetize an asset, whether that is a full monetization or a partial monetization. And we're evaluating everything across the spectrum with the North Star being what is the best way to create value in the share price for our shareholders. Lawrence Solow: Okay. Okay. And just more operational question. It sounds like just general broad brush, the consumer, more specifically the consumer as it relates to your businesses. It sounds like the businesses are still doing -- marching along doing pretty well. There was maybe a little bit of some pull forward this quarter, but general broad brush, have you seen any change since the beginning of the year relative to today across at least your branded businesses? Zachary Sawtelle: Generally speaking, we are seeing a strong consumer through our businesses in the data that we see. And I would generally characterize Q2 performance in the consumer side of our subsidiaries at or slightly above expectations. So we are not seeing weakness in the consumer and probably performing, again, modestly better than expectations set in January of this year. Lawrence Solow: Got it. And just lastly, tariff refunds total, can you give us just an idea? I think you mentioned Rimports and 5.11 benefited from them. Can you kind of give us a thought on what it was in the quarter? And I assume there's a number you have kind of baked into guidance? Or is that just for what it was in the quarter? Zachary Sawtelle: Yes, that's correct. I would characterize IEEPA tariff rebates in Q2 as relatively modest, mid-single-digit millions. And I would characterize expected tariff refunds for the business modestly more than that in the back half of the year. Lawrence Solow: Okay. And is that -- that's already in the guidance or not? Zachary Sawtelle: That's correct. It is included in the guidance. Operator: [Operator Instructions] And our next question comes from the line of Timothy D'Agostino with B. Riley Securities. Timothy D'Agostino: Just on leverage and then obviously deleveraging going forward, I'm looking at the 10-Q and for the covenants -- it seems you within your range for all 3 on those covenant ratios. So I guess, thinking to the end of '26 and into '27, is there a certain leverage ratio you're targeting getting to? And then could you maybe just provide some color or commentary on your focuses -- your focus for deleveraging through the end of '26 and maybe how we should think about it for '27? Stephen Keller: Sure. Look, again, number one, we've always said that we would like to be operating around 3 to 3.5x. So I think that's the right level. And so to get there, we clearly need to do a divestiture, which is what Zach has been talking about is one of the key focus areas. Outside of that, the things that we're doing is, one, driving the businesses forward and also trying to maximize our recoveries from Lugano and some other areas. We think excluding a divestiture, which is lumpy and happens -- it happens when it happens, we would -- we think we can get down to kind of close to around 4.5x by the end of the year on an organic basis. And then we would -- like I said, we would like to add additional inorganic, whether it's asset sales, business sales, et cetera. And so that is -- those -- getting that leverage down is a key focus and driving cash flow. Ultimately, given our businesses, though, we do have really strong free cash flow generating businesses, and that's going to be a key point for organic deleveraging this year and into next year. Timothy D'Agostino: Okay. Great. And then if we just think about maybe potential other ways of capital or just returning capital to shareholders in terms of maybe a dividend or share repurchases. Should we really not start to think about that until you get within that leverage target you're focusing on? Or could we see that even if you do get to a 4x leverage, let's say? Stephen Keller: I think you'd see us under 4x, I think you would see us start thinking through how to return capital efficiently to shareholders. Obviously, we have to work with the Board to get to do that. But that -- I think under 4, we would see ourselves in a position to probably return capital and again, with a focus on getting -- closing the gap to intrinsic value. Operator: [Operator Instructions] And our next question comes from the line of Robert Dodd with Raymond James. Robert Dodd: Welcome Zach to public company conference calls one-on-one. On the kind of -- on Lugano, right, and you gave us right, you've got a $20 million recovery coming by the fall and maybe more ultimately. Can you give us -- and I'm not asking -- I mean, are there potential recoveries beyond that -- I mean, is there another 0 to $20 million? Or is it a 0 to $100 million? I mean, can you give us any kind of idea about the scale there? Because obviously, any recovery from Lugano straight to debt is 3, quotes around 3, deleveraging. So any qualitative idea you can give us about the relative scale? Zachary Sawtelle: It's a similar amount of money from tax. That $20 million that we're talking about would primarily come from the Gordon Brothers guarantee that was related to the inventory. The additional recoveries that we have line of sight to would be tax refunds. Those are just hard to predict when. It's not entirely clear -- it's hard to predict when the IRS will refund the money, but you would expect another $20 million or so coming in from that over the next couple of years or so. And then there are other things -- there are lots of other recoveries that we would expect the liquidity trust or the final state to go after. They are very hard to predict, both the amount and the timing. And so I think we would expect some additional recovery. It's just hard to quantify. And so we wouldn't want to -- we're operating that those would be 0. And then if there are more, we'll be -- to your point, we'll use that to pay down debt immediately or return capital to shareholders. Robert Dodd: Got it. Got it. On an operating target, BOA and PrimaLoft, obviously, a good quarter this quarter, and that's the seasonality, right? I mean, customers stocking up, so to speak, before the manufacturing season for the back half of the year, however exactly you want to turn that. How confident are you that this is normal seasonality, which you have built into the guidance already versus -- is there a risk that this is inventory overstock again that the customers are worried about other tariffs or whatever and so they're overstocking. And is there a risk that this has a kind of a negative effect in '27? Or is it just -- it's normal and it's just SKU growth, et cetera, et cetera? Zachary Sawtelle: Thanks for the great question. So I would not characterize it as normal seasonality per se. As we noted in the prepared remarks, we do think that the Iran conflict did cause some B2B partners likely to modestly accelerate some orders into Q2. However, I do want to emphasize, we believe that to be modest, and that is reflected in our projections for the back half of the year, and we remain confident in the business' performance for the back half of the year. So we think that they did perform modestly above expectations as a result of some pull forward. But despite that tailwind, the businesses are really well positioned for a strong back half of the year. Robert Dodd: Got it. Got it. And then just on 5.11, you mentioned more moderate promotional activity, which obviously contributed to margin expansion. I mean some kind of question. Is there -- how moderate and is there any risk to impairing end-user relationships who like their coupons, et cetera? I mean, thoughts on trimming back sometimes on promotional activity might annoy an end customer and what your view is there? Zachary Sawtelle: Sure. We think moderating the promotional activity is the right decision to create long-term value in the business to ensure that we're getting the right customer that's paying full price for a great quality product. And so it is striking the right balance of ensuring that we are not disappointing our customer in a tough market environment, but also ensuring that we're realizing the appropriate value for the great products that 5.11 is delivering. I would also call out that the professional business, which is the heritage of the business, the B2B portion of the business is performing incredibly strong and is seeing a robust demand, both in North America and across Europe, in particular, somewhat driven by the increase in conflicts, both in Europe and the Middle East. Operator: And with no additional questions, I would now like to turn the conference back over to Zach Sawtelle for closing remarks. Zachary Sawtelle: Great. Well, thank you, everyone, for your time, and we look forward to discussing Q3 with you in the future. Take care. Operator: Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect. Before you buy stock in Compass Diversified, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Compass Diversified wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $421,511!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,381,960!* That performance is why people listen. 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Compass Diversified (CODI) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

This article first appeared on GuruFocus. GAAP Net Sales: $424 million in Q2 2026, compared with $479 million in the prior year period. Income from Continuing Operations: $82 million, compared with a loss of $81 million in the prior year period. Basic Earnings Per Share: $0.86, compared with a loss of $0.88 in the prior year period. Continuing Subsidiaries Net Sales: Approximately $411 million, roughly flat with the prior year. Branded Consumer Net Sales: Increased 7.2%. Industrial Net Sales: Declined 11.5%. Subsidiary Adjusted EBITDA: Approximately $92 million, an increase of 12.6%. Branded Consumer Adjusted EBITDA: Increased 24.2%. Industrial Adjusted EBITDA: Declined 12.8%. Total Adjusted EBITDA: Approximately $66 million, including $2 million from the divested Sterno Food Service business through the May 1 sale date. Corporate Expenses: Approximately $29 million. Operating Cash Flow: Approximately $30 million in Q2, bringing year-to-date to more than $50 million. Capital Expenditures: $6 million in Q2 and $11 million year-to-date. Total Debt: Approximately $1.6 billion, down nearly $300 million from year-end. Covenant Leverage Ratio: 4.8 times, down from 5.3 times at the end of Q1. Senior Secured Net Leverage: 0.66 times. Fiscal 2026 Total Subsidiary Adjusted EBITDA Outlook: Maintained at $320 million to $365 million. Branded Consumer Adjusted EBITDA Outlook: $235 million to $270 million. Industrial Adjusted EBITDA Outlook: $85 million to $95 million. Capital Expenditures Outlook: $30 million to $40 million for the full year. Warning! GuruFocus has detected 6 Warning Signs with CODI. Is CODI fairly valued? Test your thesis with our free DCF calculator. Release Date: August 10, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Subsidiaries delivered double-digit adjusted EBITDA growth (12.6%) and strong cash flow in Q2, with broad-based strength across branded consumer businesses. Completed the sale of Sterno's food service business at an attractive valuation, applying over $280 million to debt reduction and lowering covenant leverage from 5.3x to 4.8x. Amended the management services agreement to reduce base management fees from 2% to 1.25% on the first $3 billion in assets, with a $30 million cap for 2027, expected to save approximately $20 million in fees. Strong performance in key subsidiaries: BOA grew adjusted EBITDA 27%, The H1ypot grew 32%, Primaloft returned to growth with 28%, and 511 grew 14% with margin expansion. Arnold delivered standout performance with adjusted EBITDA up nearly 50%, supported by strong demand for rare earth magnets and progress at the Thailand facility. Improved cash generation: operating cash flow of $30 million in Q2 and over $50 million year-to-date, with capital expenditures roughly half the prior year level. Extended senior credit facility to January 2028, providing financial flexibility and reducing revolver size to match expected liquidity needs. Expecting nearly $20 million in Lugano recovery by early fall, with additional potential recoveries from tax refunds and other sources, all to be applied to debt reduction. Maintained full-year 2026 subsidiary adjusted EBITDA outlook of $320-$365 million, with a stronger outlook for branded consumer and a softer outlook for industrial. Leadership transition to Zach Sawtelle as CEO is planned, with a focus on driving profitable growth, pursuing divestitures, and reducing debt to close the valuation gap. Altor's adjusted EBITDA declined roughly 50% in Q2 due to tariff-related disruption in white goods, softer vaccine demand in cold chain, higher input costs, and competition, with commercial execution issues that will take several quarters to correct. Industrial segment net sales declined 11.5% and adjusted EBITDA declined 12.8%, reflecting challenges at Altor and lower expected volume from a large customer in the second half. Corporate expenses were elevated at $29 million in Q2, including over $12 million of Lugano-related and other one-time costs, with D&O insurance recoveries only offsetting a small portion of cash outlays. Leverage remains high at 4.8x covenant leverage, and the company expects to only reach about 4.5x by year-end on an organic basis, requiring a divestiture to achieve the target of 3-3.5x. The company's shares continue to trade at a meaningful discount to intrinsic value, and management acknowledges that closing this gap will require additional divestitures and continued execution. The outlook for industrial was softened to $85-$95 million, reflecting a weaker environment at Altor and other headwinds. The company expects gradual improvement at Altor over the next four to five quarters, with high oil prices (a key raw material) expected to continue squeezing margins for several quarters. The company's full-year outlook does not assume any additional acquisitions or divestitures, limiting potential upside from portfolio actions. The company's cash flow guidance of around $50 million for the year is unchanged, but this is after all payments and could be impacted by divestiture timing. The company's management fee reduction is effective only from January 1, 2027, so near-term fees remain elevated, and the company expects 2027 management fees to be $30-$35 million, which is still significant. Q: As you think about closing the discount to intrinsic value, do you believe additional asset sales remain the primary catalyst, or can continued operating performance and deleveraging begin to narrow the gap even absent another transaction?A: Zachary Sawtelle (COO): We are still highly committed to an additional divestiture in order to accelerate the deleveraging process. We are continuing to evaluate multiple opportunities to pursue an attractive divestiture and realization for our shareholders. We still think that is an important part of the next steps to close the gap between our intrinsic value and where the share is currently trading. Q: On the corporate cost structure, as investors look toward 2027, should we be thinking about total corporate expense, including management fees and public company costs, as being closer to $50 million? Are there additional opportunities beyond the MSA amendment to reduce overhead?A: Stephen Keller (CFO): That is the way to think about it, though a little bit higher than $50 million is probably the right way. On the base fees next year, there is a $30 million cap from the management fee. We are targeting about $25 million this year for public company costs, but I would expect those to come down next year to around $20 million as we deal with auditor changes. For management fees, thinking that $30 to $35 million is probably the right way to think about it. Q: On Altor, what milestones can we watch for to gauge whether the turnaround is progressing as expected, and how should we think about the cadence of improvement? Is it a straight line towards flat and then growth, or do we have a few more tough quarters and then a big hockey stick?A: Zachary Sawtelle (COO): Our assumption is gradual improvement over the next four to five quarters. Q2 was a very challenging quarter with some external factors, such as high oil prices inflating primary raw materials and squeezing margins, which we do not anticipate abating for several quarters. I would anticipate the recovery to stretch modestly over a handful of future quarters. Q: On leverage and deleveraging going forward, is there a certain leverage ratio you are targeting to get to by the end of '26 and into '27?A: Stephen Keller (CFO): We have always said we would like to be operating around three or three and a half times. To get there, we clearly need to do a divestiture. Excluding a divestiture, we think we can get down to close to about four and a half times by the end of the year on an organic basis. We would like to add additional inorganic methods, such as asset sales, to get leverage down. Q: Should we not start to think about returning capital to shareholders in terms of a dividend or share purchases until you get within your leverage target?A: Stephen Keller (CFO): I think you would see it under four times. Under four times, I think you would see us start thinking through how to return capital efficiently to shareholders. Obviously, we would have to work with the board, but under four, we would see ourselves in a position to probably return capital, with a focus on closing the gap to intrinsic value. Q: On Lugano, you have a $20 million recovery coming by the fall. Are there potential recoveries beyond that, and can you give us any idea about the relative scale?A: Stephen Keller (CFO): That $20 million would primarily come from the Gordon Brothers guarantee limited to inventory. Additional recoveries we have line of sight to would be tax refunds, which are hard to predict on timing, but you would expect another $20 million or so coming in over the next couple of years. There are other recoveries we would expect the liquidating trust to go after, but they are very hard to predict in both amount and timing. We are operating as if those would be zero, and if they are more, we will use that to pay down debt immediately or return capital to shareholders. Q: On BOA and Primaloft, how confident are you that the strong quarter is normal seasonality versus a risk of inventory overstocking from customers worried about tariffs, which could negatively affect 2027?A: Zachary Sawtelle (COO): I would not characterize it as normal seasonality per se. We do think the Iran conflict caused some B2B partners to modestly accelerate orders into Q2. However, we believe that to be modest, and that is reflected in our projections for the back half of the year. Despite that tailwind, the businesses are really well positioned for a strong back half of the year. Q: On 5.11, you mentioned more moderate promotional activity contributed to margin expansion. Is there any risk that trimming back promotions might impair end-user relationships?A: Zachary Sawtelle (COO): We think moderating promotional activity is the right decision to create long-term value, ensuring we get the right customer paying full price for a great quality product. It is about striking the right balance. I would also call out that the professional business, the heritage of the business, is performing incredibly strong with robust demand in North America and Europe, somewhat driven by the increase in conflicts both in Europe and the Middle East. Q: Can you provide perspective on what you think the consumer and industrial subsidiaries can grow over the long-term?A: Zachary Sawtelle (COO): We have a carefully curated portfolio of very high-quality consumer and industrial businesses well positioned in their respective markets. Across the spectrum, the consumer businesses vary from high single-digit to double-digit profitability growth opportunities. On the industrial side, the opportunity remains in the mid-single-digit to high single-digit growth opportunities in the future. Q: Any update on free cash flow guidance for this year? Are we at a sustainable level going forward?A: Stephen Keller (CFO): No significant changes here. Obviously, short of any divestiture during the second half of the year, which would substantially change it, we are still on track for the way we have described it, still in that $50 million range given where we are at. That is after all payments. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance was driven by double-digit growth in Branded Consumer businesses, specifically BOA, The Honey Pot, and PrimaLoft, which benefited from expanded distribution and strong demand from Asian brand partners. Management attributed 5.11's margin expansion of over 200 basis points to more disciplined promotional activity and the receipt of IEEPA tariff refunds. Industrial performance was mixed, with Arnold delivering nearly 50% EBITDA growth due to demand for non-China sourced rare earth magnets, while Altor saw a 50% decline due to tariff disruptions and soft vaccine demand. The company completed the sale of Sterno's Food Service business, applying $280 million of proceeds to debt reduction as part of a broader strategy to close the valuation gap between share price and intrinsic value. A significant amendment to the Management Services Agreement was enacted to lower base fees from 2% to 1.25% starting in 2027, better aligning manager compensation with shareholder returns. CEO Elias Sabo announced his retirement effective year-end, with COO Zach Sawtelle set to succeed him following a period of acute stabilization after the Lugano challenges. Maintained fiscal 2026 subsidiary adjusted EBITDA outlook of $320 million to $365 million, reflecting a stronger Branded Consumer outlook offset by softer Industrial expectations. Management expects a gradual recovery at Altor over the next 4 to 5 quarters as they focus on commercial execution and cost-cutting to match current demand levels. Guidance for the remainder of the year incorporates the timing of customer orders at BOA and PrimaLoft, which saw some modest pull-forward into Q2 due to geopolitical concerns. The company remains committed to pursuing an additional divestiture to accelerate deleveraging, targeting a covenant leverage ratio of 3x to 3.5x over the long term. Future capital returns to shareholders, including potential dividends or buybacks, are contingent on reaching a leverage ratio below 4x. Public company costs remain elevated due to ongoing professional fees related to the Lugano litigation and bankruptcy proceedings, with only $2 million in D&O insurance recoveries received to date. A $58 million reduction in the fair value of the Lugano receivable was recorded in the quarter, though a settlement with creditors is expected to yield a $20 million recovery by early fall. Altor faces continued margin pressure from high input costs, specifically oil prices, which management does not anticipate abating for several quarters. Rimports is expected to face headwinds in the second half of the year due to lower expected volume from a large customer. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management targets high single-digit to double-digit profitability growth for consumer businesses and mid-to-high single-digit growth for industrial subsidiaries. The portfolio is described as 'carefully curated' to position these businesses as leaders in their respective markets. Total corporate costs are expected to be slightly higher than $50 million in 2027, comprising approximately $30 million to $35 million in management fees and $20 million in public company costs. Management expects public company costs to decrease as auditor changes and Lugano-related expenses eventually normalize. Management identified an additional asset sale as the primary catalyst for closing the valuation gap, though they are also evaluating partial monetizations. Reducing leverage remains a top financial priority with the goal of reaching a profile under 4x that allows the company to return capital efficiently to shareholders, while the 'North Star' for decision-making is determining the best way to create value in the share price. Tariff refunds contributed a 'modest' mid-single-digit million amount in Q2, with slightly higher amounts expected in the second half of the year. These refunds are already baked into the current fiscal 2026 guidance.

Interested in Compass Diversified Holdings? Here are five stocks we like better. Adjusted EBITDA rose 12.6% to approximately $92 million on a comparable basis, driven by broad strength across branded consumer businesses, while industrial results were mixed and Altor’s EBITDA fell roughly 50% amid tariff, demand and cost pressures. Compass Diversified used more than $280 million from the Sterno food-service sale to reduce debt, ending the quarter with approximately $1.6 billion in total debt and improving its covenant leverage ratio to 4.8 times. The company maintained its 2026 subsidiary adjusted EBITDA outlook of $320 million to $365 million and said further divestitures remain a priority to accelerate deleveraging and potentially support future shareholder returns. Compass Diversified's $292M Sale Ignites Stock Compass Diversified (NYSE:CODI) reported second-quarter results marked by double-digit growth in subsidiary adjusted EBITDA, improved operating cash flow and lower debt following the sale of Sterno’s food service business, while maintaining its full-year 2026 outlook. GAAP net sales for the second quarter were $424 million, compared with $479 million a year earlier. Income from continuing operations was $82 million, versus a loss of $81 million in the prior-year period, while basic earnings per share were $0.86, compared with a loss of $0.88. The quarter included a $182 million gain from the sale of Sterno’s food service business and a $58 million reduction in the fair value of a receivable from Lugano. → SoundHound AI Sends a Loud Signal After Its Q2 Earnings Beat Compass Diversified In Buy Range After Clearing Handle Buy Point On a comparable basis excluding Lugano and Sterno’s divested food service business, net sales were approximately $411 million, roughly flat from a year earlier. Subsidiary adjusted EBITDA rose 12.6% to approximately $92 million. Branded consumer adjusted EBITDA increased 24.2%, while industrial adjusted EBITDA declined 12.8%. Chief Operating Officer Zach Sawtelle said every branded consumer business increased adjusted EBITDA during the quarter. BOA’s adjusted EBITDA rose 27%, supported by growth across its primary segments and expanding gross margins. The Honey Pot Co. increased adjusted EBITDA 32% as it expanded period-care distribution across grocery, drug and mass retail channels. → Take-Two’s Q1 Results Leave GTA 6 Bulls Stuck in the Fog of War PrimaLoft returned to growth, with adjusted EBITDA up 28% due to demand from Asian brand partners. Sawtelle said some of the quarterly strength at BOA and PrimaLoft reflected the timing of customer orders, which the company incorporated into its expectations for the rest of the year. At 5.11, adjusted EBITDA increased 14%, aided by margin expansion of more than 200 basis points. The company cited more disciplined promotional activity and tariff refunds. During the question-and-answer session, Sawtelle said the company believes moderation in promotions supports long-term value by attracting customers willing to pay full price for products. He also said 5.11’s professional, business-to-business segment was performing strongly in North America and Europe. → 3 Dividend Champion Utilities for a Market That Can't Sit Still Sawtelle characterized consumer performance as at or slightly above the company’s expectations entering the year. He said Compass Diversified was not seeing consumer weakness across its branded businesses. Within the industrial portfolio, Arnold Magnetic Technologies posted adjusted EBITDA growth of nearly 50%. The company said Arnold’s backlog remained strong, supported by demand for rare-earth magnets sourced outside China and progress at its Thailand facility. Rimports benefited from tariff refunds during the quarter but also absorbed separation costs tied to the Sterno food service divestiture. The company reiterated that lower expected volume from a large customer is expected to weigh on Rimports’ second-half results. Altor remained the principal operating challenge. Its adjusted EBITDA declined by roughly 50% in the quarter as tariff-related disruption pressured its white-goods business and weaker vaccine demand affected its cold-chain operations. Higher input costs and competition also weighed on results. Sawtelle said commercial execution at Altor “has not been good enough” and that the company is focusing on end markets where the business is strongest while reducing costs to match demand. He said Compass Diversified expects a gradual improvement over the next four to five quarters, rather than an immediate recovery, citing elevated oil prices for a key raw material as a continuing margin headwind. Chief Executive Officer Elias Sabo said the company used more than $280 million in proceeds from the May sale of Sterno’s food service business to reduce debt. Total debt ended the quarter at approximately $1.6 billion, down nearly $300 million from year-end. The company’s covenant leverage ratio improved to 4.8 times from 5.3 times at the end of the first quarter. Compass Diversified ended the quarter with $87 million in cash and near-full availability under its revolving credit facility. Subsequent to quarter-end, the company amended its senior credit facility, extending its term loan and $54 million of revolving commitments to Jan. 12, 2028. Operating cash flow was approximately $30 million during the second quarter, bringing first-half operating cash flow to more than $50 million, compared with an approximately $65 million cash outflow in the first half of 2025. Capital expenditures were $6 million in the quarter and $11 million year to date. The company also amended its management services agreement, effective Jan. 1, 2027. The amendment lowers the base management fee to 1.25% of average adjusted net assets on the first $3 billion in assets, from 2%, and caps the 2027 base fee at $30 million. It adds two potential awards, each equal to 12.5 basis points of average adjusted net assets, linked to manager ownership of Compass shares and shareholder returns and operating performance. Sabo said that even with full payout of the additional awards, the revised agreement is expected to reduce 2027 fees by approximately $20 million compared with the prior formula. CFO Stephen Keller said investors should think of recurring corporate costs at around $20 million next year and management fees in a range of $30 million to $35 million, excluding one-time items. Regarding Lugano, Keller said the company expects to receive nearly $20 million by early fall under a settlement with the unsecured creditors committee, with proceeds intended for debt reduction. He also said the company expects roughly another $20 million in potential tax refunds over the next couple of years, though timing remains uncertain. Additional recoveries are possible but were not quantified. Compass Diversified maintained its fiscal 2026 total subsidiary adjusted EBITDA outlook of $320 million to $365 million. The outlook includes approximately $9 million of adjusted EBITDA generated by Sterno’s food service business before its sale. Branded Consumer adjusted EBITDA outlook: $235 million to $270 million. Industrial adjusted EBITDA outlook: $85 million to $95 million. Full-year capital expenditure outlook: $30 million to $40 million. The forecast assumes no additional acquisitions or divestitures and no significant changes in the current trade environment. The company said its full-year guidance includes expected tariff refunds, which Sawtelle described as modest mid-single-digit millions in the second quarter and modestly higher in the second half. Management said deleveraging remains a top priority. Keller said the company aims to operate at leverage of roughly three to 3.5 times over time and expects it could reach close to 4.5 times by year-end on an organic basis, excluding a divestiture. He said the company could begin considering capital returns to shareholders if leverage falls below four times. Sawtelle, who will succeed Sabo as chief executive officer at the end of 2026, said the company remains committed to pursuing another divestiture, including potential full or partial monetizations, to accelerate debt reduction and help narrow what management considers a gap between the company’s share price and its intrinsic value. Compass Diversified Holdings (NYSE:CODI) is a publicly traded private equity company headquartered in Bethesda, Maryland. The firm specializes in acquiring and managing middle-market businesses across a variety of industries, with a focus on driving operational performance and sustainable growth. As an externally managed entity, Compass Diversified leverages a disciplined investment approach to build a portfolio of market-leading companies that benefit from strategic oversight, capital support and shared best practices. Compass Diversified's investment activities span five core sectors: branded consumer, consumer services, differentiated industrial products, value-added distribution and business services. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Compass Diversified Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

WESTPORT, Conn., Aug. 10, 2026 (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 six months ended June 30, 2026 and filed its Quarterly Report on Form 10-Q for the period. “In the second quarter, our subsidiaries delivered strong operating performance and cash flow,” said Elias Sabo, Chief Executive Officer of Compass Diversified. “We took concrete actions to strengthen our balance sheet, including selling Sterno’s Food Service Business at an attractive valuation and applying more than $280 million of proceeds to debt reduction. We also amended our Management Services Agreement to lower expected fees and increase alignment with shareholders by tying more of the Manager’s compensation to shareholder returns and operating performance.” “Our performance was broad-based, with Adjusted EBITDA growth across our Branded Consumer businesses and at Arnold,” added Zach Sawtelle, Chief Operating Officer of Compass Diversified. “BOA, PrimaLoft and The Honey Pot were each up more than 25% year-over-year, and Arnold was a standout, up nearly 50%. 5.11 expanded margins despite a softer top line.” Sawtelle continued, “Our work is not done. Our shares trade at what we believe is a meaningful discount to intrinsic value, and we remain focused on closing that gap. Our near-term priorities are straightforward: drive profitable growth, pursue divestitures where we can realize attractive value, further reduce debt and, when appropriate, efficiently return capital to shareholders. We are moving with urgency and discipline to realize value for shareholders.” Financial Summary – GAAP Results Year-over-year GAAP comparisons reflect the operating results of Lugano and a full quarter of Sterno’s Food Service Business in the 2025 period, versus the 2026 period, which excludes Lugano's operating results (following its deconsolidation in connection with its bankruptcy proceedings) and includes the Food Service Business through its May 1 sale date. Q2 2026 vs Q2 2025 (GAAP) Net revenues were $424.0 million, down 11.4% vs Q2 2025 Net income from continuing operations: $81.9 million vs net loss from continuing operations of $80.8 million in Q2 2025 Net income attributable to Holdings: $81.1 million, or $0.86 per common share, vs. a net loss of $51.2 million, or $(0.88) per common share Cash provided by operating activities: $29.7 million, vs. cash used of $35.2 million Q2 2026 results included a $182.3 million gain on the sale of Sterno’s Food Service Business and a $58.0 million reduction in the fair value of CODI’s receivable from Lugano. Financial Summary – Non-GAAP Results To facilitate comparison of CODI’s continuing subsidiaries, the following non-GAAP results exclude Lugano from the prior-year period and exclude net sales and Adjusted EBITDA attributable to the divested Sterno Food Service Business from both current and prior-year periods. Rimports and the Food Service Business historically operated and were reported together as Sterno Group under a shared management structure. Following the sale, certain shared management and other indirect costs remained with Rimports. To provide a comparable view of the continuing business, the non-GAAP results exclude the Food Service Business’s net sales and Adjusted EBITDA and reflect the costs retained by Rimports on a consistent basis in both periods. Q2 2026 vs Q2 2025 (Non-GAAP) Net revenues were $410.6 million, approximately flat vs. Q2 2025 Subsidiary Adjusted EBITDA was $91.5 million, up 12.6% vs. Q2 2025 Key Business Updates During and subsequent to the quarter, CODI: Completed the sale of Sterno’s Food Service Business and applied more than $280 million of the proceeds to senior secured term loan debt. Amended its Management Services Agreement to reduce expected management fees beginning in 2027 and further strengthen shareholder alignment. Amended its senior credit facility to extend the maturity of its term loan and revolving commitments, providing financial flexibility. Announced a settlement to facilitate the orderly liquidation of Lugano’s assets. Announced that Elias Sabo will retire as Chief Executive Officer on December 31, 2026, and appointed Zach Sawtelle Chief Operating Officer and named him CEO successor. Liquidity and Capital Resources As of June 30, 2026, CODI had approximately $87.4 million in cash and cash equivalents and approximately $97 million in revolver availability. Total debt was $1,592.3 million, compared with $1,890.7 million as of December 31, 2025. CODI’s leverage ratio for debt covenant purposes was approximately 4.8x as of June 30, 2026, down from 5.3x as of March 31, 2026, and senior secured net leverage was 0.66x as of June 30. Subsequent to quarter-end, CODI amended its senior credit facility to extend all outstanding term loan borrowings and its revolving commitments to January 12, 2028, and to reduce aggregate revolving commitments from $100.0 million to $54.0 million. 2026 Outlook CODI is maintaining its fiscal 2026 total Subsidiary Adjusted EBITDA outlook of $320 million to $365 million. The outlook includes approximately $9 million of Adjusted EBITDA generated by the Sterno Food Service Business through its May 1, 2026 sale date. That contribution will be reflected in CODI’s reported full-year results but will not recur following the sale. CODI’s outlook reflects higher expectations for the Branded Consumer businesses and lower expectations for the Industrial businesses relative to prior guidance. In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, CODI has not reconciled 2026 Subsidiary Adjusted EBITDA to its comparable GAAP measure because it does not provide guidance on Income (Loss) from Continuing Operations and because management cannot predict, with sufficient certainty, all of the inputs necessary to provide such a reconciliation. 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 In conjunction with this announcement, CODI will host a conference call on August 10, 2026, at 5:00 p.m. ET / 2:00 p.m. PT with the Company’s Chief Executive Officer, Elias Sabo, Chief Operating Officer, Zach Sawtelle and Chief Financial Officer, Stephen Keller. A live webcast of the call will be available on the Investor Relations section of CODI’s website. To avoid delays, we encourage participants to log into the webcast 15 minutes ahead of the scheduled start time. A replay of the webcast will also be available for a limited time on the Company’s website. Note Regarding Use of Non-GAAP Financial Measures Adjusted EBITDA, Adjusted Earnings (Loss), Subsidiary Adjusted EBITDA, Subsidiary Adjusted EBITDA excluding Lugano and the divested Sterno Food Service Business, Net Sales excluding Lugano, and Net Sales excluding Lugano and the divested Sterno Food Service Business are non-GAAP financial measures used by the Company to assess its performance. We have reconciled Adjusted EBITDA, Subsidiary Adjusted EBITDA and Subsidiary Adjusted EBITDA excluding Lugano and the divested Sterno Food Service Business to Income (Loss) from Continuing Operations, Adjusted Earnings (Loss) to Net Income (Loss), and non-GAAP Net Sales measures to Net Sales on the attached schedules. We consider Income (Loss) from Continuing Operations to be the most directly comparable GAAP financial measure to Adjusted EBITDA, Subsidiary Adjusted EBITDA, and Subsidiary Adjusted EBITDA excluding Lugano and the divested Sterno Food Service Business; Net Income (Loss) to be the most directly comparable GAAP financial measure to Adjusted Earnings (Loss); and Net Sales to be the most directly comparable GAAP financial measure to the non-GAAP Net Sales measures. The attached schedules should be read together as continuous reconciliations of the applicable non-GAAP measures to their most directly comparable GAAP measures. We believe that Adjusted EBITDA and Adjusted Earnings (Loss) provide useful information to investors and reflect important financial measures, as each excludes the effects of items that 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 (Loss) 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, non-cash charges associated with impairments and 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 (Loss) provides additional insight into our operating results. As used in the body of this press release, Subsidiary Adjusted EBITDA refers to the sum of Adjusted EBITDA for the applicable period attributable to each consolidated subsidiary of the Company, disregarding corporate expense, unless the context indicates otherwise. Management uses Subsidiary Adjusted EBITDA to evaluate the operating performance of the subsidiary portfolio before corporate expense. Because the measure excludes corporate expense, it does not reflect CODI’s consolidated operating results and should be considered together with the comparable GAAP measure and the other information in this release. Subsidiary Adjusted EBITDA, excluding Lugano and the divested Sterno Food Service Business, represents Subsidiary Adjusted EBITDA after excluding Adjusted EBITDA (loss) attributable to Lugano and Adjusted EBITDA attributable to the divested Sterno Food Service Business. Net Sales excluding Lugano represents reported Net Sales after excluding Net Sales attributable to Lugano for the applicable periods. Net Sales excluding Lugano and the divested Sterno Food Service Business represent reported Net Sales after excluding Net Sales attributable to those businesses for the applicable periods. We believe these measures facilitate comparison of the operating performance and net sales of CODI’s continuing subsidiaries across periods. Adjusted EBITDA attributable to the divested Sterno Food Service Business is calculated from Rimports’ reported results by identifying the net sales and directly attributable expenses of the Food Service Business and applying CODI’s Adjusted EBITDA methodology. Rimports and the Food Service Business historically operated and were reported together as Sterno Group under a shared management structure. Following the sale, certain shared management and other indirect costs remained with Rimports. Those costs remain in Rimports' results for all periods presented. Therefore, the exclusion of the Food Service Business does not eliminate all costs historically shared by the combined operations. In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled our 2026 Subsidiary Adjusted EBITDA guidance to the most directly comparable GAAP measure because certain components of Income (Loss) from Continuing Operations, including potential impairment charges, acquisition- and disposition-related gains, losses and expenses, fair-value adjustments and related income-tax effects, cannot be reasonably predicted without unreasonable effort. These items could be material to our future results. These non-GAAP financial measures are not intended to be substitutes for the most directly comparable GAAP financial measures and may differ from, or otherwise be inconsistent with, similarly titled non-GAAP financial measures used by other companies. About Compass Diversified CODI leverages its permanent capital base and long-term disciplined approach, maintaining controlling ownership interests in each of its subsidiaries and 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 seeks to generate strong returns through its culture of transparency, alignment and accountability. Forward Looking Statements This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation, CODI’s expectations regarding its Adjusted EBITDA, subsidiary Adjusted EBITDA, plans for future divestitures and return of capital and its future performance, growth, liquidity and leverage, and the future performance of CODI’s subsidiaries. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as “believe,” “expect,” “may,” “could,” “would,” “plan,” “intend,” “estimate,” “predict,” “future,” “potential,” “continue,” “should” or “anticipate” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These statements are based on management’s current expectations, estimates, forecasts and assumptions and information available to management as of the date of this press release. These statements involve risks and uncertainties that could cause actual results and outcomes to differ, perhaps materially, including but not limited to: changes in the economy, financial markets and political environment, including changes in inflation, interest rates and U.S. tariff and import/export regulations; risks associated with possible disruption in CODI’s operations or the economy generally due to terrorism, war, natural disasters, or social, civil or political unrest; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); environmental risks affecting the business or operations of our subsidiaries; disruption in the global supply chain, labor shortages and labor costs; our business prospects and the prospects of our subsidiaries; the impact of, and ability to successfully complete and integrate, acquisitions that we have made or may make; the ability to successfully execute divestitures and complete divestitures that we may execute; 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;; the cooperation of, and future concessions granted by, CODI’s lenders; control deficiencies identified or that may be identified in the future that will result in material weaknesses in CODI’s internal control over financial reporting; and litigation relating to the Lugano investigation, including CODI’s representations regarding its financial statements, and current and future litigation, enforcement actions or investigations relating to CODI’s internal controls, restatement reviews, the Lugano investigation or related matters. Please see CODI’s Annual Report on Form 10-K filed with the SEC on February 27, 2026 for other risk factors that you should consider in connection with such forward-looking statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date such statements have been made. Except as required by law, CODI does not undertake any public obligation to update any forward-looking statements to reflect events, circumstances, or new information after the date of this press release, or to reflect the occurrence of unanticipated events. Investor Relations Compass Diversified [email protected] (1) Rimports includes the Adjusted EBITDA of the Sterno food service product division from April 1, 2026 through the date of sale, May 1, 2026. (2) The amount of Other (income) expense at corporate includes the change in the fair value of the receivable due from unconsolidated affiliate ($58.0 million) and the gain on the sale of the Sterno food service product division ($182.3 million). (1) Other represents specified operating expenses that are included by management in the calculation of Adjusted EBITDA when analyzing monthly operating results of our subsidiaries. In the second quarter of 2025, the calculation of Adjusted EBITDA for Arnold includes the add-back of certain expenses that have been incurred related to the relocation of two of Arnold's facilities in the United States and severance costs related to chief executive officer at Arnold. For Altor, other includes the add-back of certain expenses incurred related to restructuring of their facilities after the acquisition of Lifoam. (1)    Rimports includes the Adjusted EBITDA of the Sterno food service product division from January 1, 2026 through the date of sale, May 1, 2026. (2) The amount of Other (income) expense at corporate includes the change in the fair value of the receivable due from unconsolidated affiliate ($58.0 million) and the gain on the sale of the Sterno food service product division ($182.3 million). (3) Other in the six months ended June 30, 2026 includes the add-back of a gain on sale leaseback at Altor. (1) Other represents specified operating expenses that are included by management in the calculation of Adjusted EBITDA when analyzing monthly operating results of our subsidiaries. In the current year, the calculation of Adjusted EBITDA for Arnold includes the add-back of certain expenses that have been incurred related to the relocation of two of Arnold's facilities in the United States and severance costs related to the chief executive officer at Arnold. For Altor, other includes the add-back of certain expenses incurred related to restructuring of their facilities after the acquisition of Lifoam. (1)   Adjusted EBITDA attributable to the divested Sterno Food Service Business is calculated from the reported results of Rimports by identifying the net sales and directly attributable expenses of the Food Service Business and applying CODI’s Adjusted EBITDA methodology. The calculation does not allocate to the Food Service Business shared management or other indirect costs that were not specifically attributable to that business. (1) During the second quarter of 2026, the Company completed the sale of Sterno’s food service business. Prior to the sale, Sterno distributed Rimports, its home fragrance business, to its stockholders, and Rimports remained a majority owned subsidiary of the LLC. Accordingly, the net sales presented above includes the results of Sterno’s food service business through the May 1, 2026 date of sale and the results of Rimports for all periods presented, including the three and six months ended June 30, 2025 and 2026. (1)   Net sales attributable to the divested Sterno Food Service Business represent the net sales of those operations through the May 1, 2026 date of sale and for all prior periods presented.

WESTPORT, Conn., July 27, 2026 (GLOBE NEWSWIRE) -- Compass Diversified (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle-market branded consumer and industrial businesses, announced today that it plans to report financial results for the second quarter ended June 30, 2026 on Monday, August 10, 2026 after market close. The Company has scheduled a conference call at 5:00 p.m. ET on August 10, 2026 to review its second quarter financial results and provide an update on its 2026 business outlook. A live webcast of the call will be available on the Investor Relations section of CODI’s website. To avoid delays, participants are encouraged to log into the webcast 15 minutes before the scheduled start time. A replay of the webcast will also be available for a limited time on the Company’s website. Forward Looking Statements This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation, CODI’s expectations regarding the timing of a conference call to discuss its second quarter of 2026 results, CODI’s expectations with respect to the delivery of its financial results and the future performance of CODI and its subsidiaries. Such forward looking statements may be identified by, among other things, the use of forward-looking terminology such as “believe,” “expect,” “may,” “could,” “would,” “plan,” “intend,” “estimate,” “predict,” “potential,” “continue,” “should” or “anticipate” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These statements are based on beliefs and assumptions by CODI’s Board of Directors and management, and on information currently available to CODI’s Board of Directors and management. These statements involve risk and uncertainties that could cause CODI’s actual results and outcomes to differ, perhaps materially. Please see CODI’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on February 27, 2026 for other risk factors that you should consider in connection with such forward-looking statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date such statements have been made. Except as required by law, CODI does not undertake any public obligation to update any forward-looking statements to reflect events, circumstances, or new information after the date of this press release, or to reflect the occurrence of unanticipated events. Investor RelationsCompass [email protected]

WESTPORT, Conn., July 01, 2026 (GLOBE NEWSWIRE) -- Compass Diversified (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle market businesses, announced today that its Board of Directors (the “Board”) has declared a quarterly cash distribution for each of its three preferred share series. The Board 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, April 30, 2026, up to, but excluding, July 30, 2026. The distribution for such period is payable on July 30, 2026, to all holders of record of Series A Preferred Shares as of July 15, 2026. 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, April 30, 2026, up to, but excluding, July 30, 2026. The distribution for such period is payable on July 30, 2026, to all holders of record of Series A Preferred Shares as of July 15, 2026. 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, April 30, 2026, up to, but excluding, July 30, 2026. The distribution for such period is payable on July 30, 2026, to all holders of record of Series A Preferred Shares as of July 15, 2026. CODI’s preferred cash distributions should generally constitute “qualified dividends” for U.S. federal income tax purposes to the extent they are paid from “earnings and profits” (as determined under U.S. federal income tax principles), provided that the requisite holding period is met. To the extent that the amount of cash distributions exceeds earnings and profits, such distribution will first be treated as a non-taxable return of capital to the extent of the holder’s adjusted tax basis in the shares and thereafter be treated as a capital gain from the sale or exchange of such shares. About Compass Diversified (“CODI”)CODI has consistently executed its strategy of owning and managing a diverse set of middle-market businesses. CODI leverages its permanent capital base and long-term, disciplined approach to maintain controlling ownership interests in each of its subsidiaries and maximize 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 seeks to generate strong returns through its culture of transparency, alignment and accountability. Forward Looking StatementsThis press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation, CODI’s expectations with respect to payment of its quarterly distributions and timing related to the same. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as “believe,” “expect,” “may,” “could,” “would,” “plan,” “intend,” “estimate,” “predict,” “future,” “potential,” “continue,” “should” or “anticipate” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These statements are based on beliefs and assumptions by CODI’s Board of Directors and management, and on information currently available to CODI’s Board of Directors and management. These statements involve risk and uncertainties that could cause actual results and outcomes to differ, perhaps materially, including but not limited to: changes in the economy, financial markets and political environment, including changes in inflation, interest rates and U.S. tariff and import/export regulations; risks associated with possible disruption in CODI’s operations or the economy generally due to terrorism, war, natural disasters, or social, civil or political unrest; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); environmental risks affecting the business or operations of our subsidiaries; disruption in the global supply chain, labor shortages and labor costs; our business prospects and the prospects of our subsidiaries; the impact of, and ability to successfully complete and integrate, acquisitions that we have made or may make; the ability to successfully complete 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. Please see CODI’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on February 27, 2026 for other risk factors that you should consider in connection with such forward-looking statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date such statements have been made. Except as required by law, CODI does not undertake any public obligation to update any forward-looking statements to reflect events, circumstances, or new information after the date of this press release, or to reflect the occurrence of unanticipated events. Compass Diversified Investor [email protected]

Interested in Compass Diversified Holdings? Here are five stocks we like better. Compass Diversified posted improved first-quarter performance, with subsidiary adjusted EBITDA up 6.3% to $83.9 million and operating cash flow rising to $23.9 million, helped by strong consumer results and lower capital spending. The company used proceeds from the Sterno food service sale to repay more than $280 million of debt, cutting leverage to about 5x and moving CODI closer to its long-term target of 3x to 3.5x. Management raised its 2026 outlook after the divestiture, now expecting subsidiary adjusted EBITDA of $320 million to $365 million, while noting that consumer brands like The Honey Pot and BOA are driving growth even as industrial businesses remain mixed. Compass Diversified's $292M Sale Ignites Stock Compass Diversified (NYSE:CODI) reported first-quarter 2026 results that management characterized as a period of execution, highlighted by a divestiture, debt reduction and growth in subsidiary adjusted EBITDA despite macroeconomic uncertainty. Chief Executive Officer Elias Sabo said the company began the year with a “clear plan” and had delivered against several priorities, including the sale of Sterno’s food service business, completion of a sale-leaseback at Altor and the application of proceeds toward debt reduction. He said the company’s subsidiaries generated strong operating cash flow in the quarter, which he described as a hallmark of CODI’s model. → Uber's Annual Product Showcase Reveals It Is Coming for Airbnb and Booking Compass Diversified In Buy Range After Clearing Handle Buy Point “Our path is clear. De-leverage. Drive continued operational performance. Further align management incentives. Over time, close the gap between our share price and intrinsic value,” Sabo said. Chief Financial Officer Stephen Keller said GAAP net revenues for the first quarter were $427 million, down 5.9% year over year, reflecting the inclusion of Lugano in the prior-year period. Lugano was deconsolidated after its bankruptcy filing last November. GAAP net loss from continuing operations was $30.8 million, an improvement of approximately $19 million from the prior year, primarily due to the absence of Lugano’s losses in the current period. → Wells Fargo’s Comeback Is Real—But Not Risk-Free On a non-GAAP basis excluding Lugano from the prior year, Keller said net sales were in line with the prior-year period. Strong double-digit growth at The Honey Pot and Arnold was offset by challenges at Altor, which management attributed largely to unfavorable macro trends. Subsidiary adjusted EBITDA was $83.9 million, up 6.3% from the prior-year period. Consumer adjusted EBITDA rose 11.6%, while industrial adjusted EBITDA declined 4.5%. Keller said Arnold nearly doubled year over year, but industrial growth was offset by top-line headwinds at Altor. → Rocket Lab Posts Record Q1 Revenue, Raises Q2 Guidance Operating cash flow totaled $23.9 million, a meaningful improvement versus the prior year, while capital expenditures were $5.1 million, less than half of the prior-year period. Keller said the results reflected disciplined capital allocation and the capital-efficient profile of the company’s subsidiary businesses. Sabo said CODI’s consumer businesses produced double-digit adjusted EBITDA growth in the quarter, with The Honey Pot and BOA among the strongest contributors. The Honey Pot posted revenue growth of nearly 25% and EBITDA growth of more than 40% compared with the prior-year period. Sabo said the brand continued to gain share across the feminine care category, helped by expanded distribution and consumer adoption as it expands beyond its original focus into the broader period care category. During the question-and-answer portion of the call, Sabo said The Honey Pot’s growth is being driven by market share gains and brand expansion into period care, a market he described as much larger than the company’s original category of washes and wipes. He said the brand’s “better-for-you” positioning has resonated with younger consumers. BOA reported revenue growth of 6.5% and EBITDA growth of 11% from the prior-year period. Sabo said the BOA Fit System continues to see adoption across snow sports, cycling, workwear and other categories. In response to an analyst question, he said BOA is in a stronger position after a period of volatility and should be able to produce double-digit growth on a continuing basis. 5.11 Tactical delivered what Sabo described as solid margin performance and strong cash flow despite modest top-line pressure. He said the company is working to broaden its appeal beyond its core professional customer base, including through a new retail format in Seattle that outperformed the chain average on opening weekend. Sabo also said a new leadership team at PrimaLoft is “getting up to speed” and laying groundwork to accelerate future growth while maintaining a profitable, low-working-capital business model. In the industrial portfolio, Sabo said Arnold delivered a standout quarter, with adjusted EBITDA nearly doubling year over year despite geopolitical dynamics around rare earth supply and continued export restrictions from China. He said those dynamics create near-term headwinds but reinforce longer-term demand for secure non-China sources of rare earth magnet supply. Sabo said Arnold’s Thailand facility is ramping up, adding capacity and supply chain redundancy for aerospace, defense and industrial customers that prioritize supply chain security and performance reliability. Altor, however, remained a “work in progress,” Sabo said. The business faced a challenging quarter due to competitive pressure in the cold chain market and consumer headwinds in the appliance market. Management said the team is focused on optimizing the combined platform following the Lifoam acquisition and improving commercial execution. CODI also discussed Rimports, the home fragrance platform retained after the sale of Sterno’s food service business. Sabo said 2026 will be a transition period for Rimports as it absorbs stranded costs from the separation and works through an updated commercial relationship with a large customer. Keller later said Rimports is expected to be somewhat lower this year than last year and that cost levels will need to be adjusted over time. CODI ended the quarter with $65 million in cash and cash equivalents and nearly full availability on its $100 million revolver. Keller said the company’s leverage ratio for debt covenant purposes was approximately 5.3 times at quarter-end. Following the close of the Sterno food service sale, Keller said CODI repaid more than $280 million of senior secured term loan debt. The transaction reduced total leverage to approximately 5 times and brought senior secured net leverage below 1 time. He said the debt repayment also allowed the company to avoid milestone fees under its senior credit facility that otherwise would have applied beyond June 30. In response to an analyst question, Keller said CODI’s long-term leverage goal remains about 3 times to 3.5 times, while the company’s current key milestone is getting below 4 times. He said that once leverage falls below 4 times, CODI could consider returning capital to shareholders, potentially through share repurchases, depending on the stock price and discount to intrinsic value. Sabo said CODI is continuing to pursue additional divestitures but cautioned that M&A markets remain choppy. He said the company has urgency because leverage remains too high and management believes the stock does not reflect intrinsic value, but added that CODI would not sell an asset if market conditions significantly undervalued it. CODI updated its full-year 2026 outlook to reflect the sale of Sterno’s food service business. The company now expects subsidiary adjusted EBITDA of $320 million to $365 million. Keller said the range, adjusted for the divestiture, is at or above the expectation set at the start of the year. Consumer adjusted EBITDA is expected to be $225 million to $260 million. Industrial adjusted EBITDA is expected to be $95 million to $105 million, including some stranded costs related to the Sterno sale. Capital expenditures are expected to be $30 million to $40 million. Corporate cash management fees are expected to be $25 million to $30 million. Keller said the outlook excludes potential acquisitions or divestitures, other than the Sterno food service sale, and does not include any significant impact from the evolving trade environment. Management said tariffs have created market uncertainty but are currently providing a tailwind across multiple businesses. Keller said the company expects one-time tariff-related refunds during 2026, though the timing and magnitude remain difficult to forecast. He said any historical tariff refunds would be identified as one-time benefits when reported. Sabo also said CODI has initiated a review of its management services agreement and is evaluating opportunities to further align incentives and drive shareholder value. He said the company expects to provide updates in the coming months. Compass Diversified Holdings (NYSE:CODI) is a publicly traded private equity company headquartered in Bethesda, Maryland. The firm specializes in acquiring and managing middle-market businesses across a variety of industries, with a focus on driving operational performance and sustainable growth. As an externally managed entity, Compass Diversified leverages a disciplined investment approach to build a portfolio of market-leading companies that benefit from strategic oversight, capital support and shared best practices. Compass Diversified's investment activities span five core sectors: branded consumer, consumer services, differentiated industrial products, value-added distribution and business services. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Compass Diversified Q1 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for May 2026.

Image source: The Motley Fool. Wednesday, May 6, 2026 at 5 p.m. ET Chief Executive Officer — Elias Sabo Chief Financial Officer — Stephen Keller Vice President, Investor Relations — Ben Avenia-Tapper Operator: Good afternoon, and welcome to Compass Diversified Fiscal 2026 First Quarter Conference Call. Today's call is being recorded. [Operator Instructions] At this time, I would like to turn the call over to Ben Tapper, Vice President, Investor Relations. Ben, please go ahead. Ben Avenia-Tapper: Thank you, and welcome to Compass Diversified's First Quarter 2026 Conference Call. Representing the company today are Elias Sabo, CODI's Chief Executive Officer; and Stephen Keller, CODI's Chief Financial Officer. Before we begin, I'd like to remind everyone that during the course of this call, CODI will make certain forward-looking statements, including discussions of forecasts and targets, future business plans, future performance of CODI and its subsidiaries, and other forward-looking statements regarding CODI and its financial results. Words such as believes, expects, anticipates, plans, projects, should and future, or similar expressions, are intended to identify forward-looking statements. These forward-looking statements are subject to many risks and uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ on a material basis from those projected in these forward-looking statements. And some of these factors are enumerated in the risk factor discussion in the company's Form 10-K as filed with the SEC on February 27, 2026, as well as in other SEC filings and press releases. Except as required by law, CODI undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. During the call, we will refer to certain non-GAAP financial measures. The Q1 2026 press release, including the financial tables and non-GAAP financial measure reconciliations for adjusted EBITDA, subsidiary adjusted EBITDA, pro forma net sales and financial results excluding Lugano, are available at the Investor Relations section on the company's website at www.compassdiversified.com. Please note that references to EBITDA in the following discussions refer to adjusted EBITDA as reconciled to net income or loss from continuing operations in CODI's press release and SEC filings. The company does not provide a reconciliation of its full year expected 2026 subsidiary adjusted EBITDA because certain significant reconciling information is not available without unreasonable efforts. Throughout this call, we will refer to Compass Diversified as CODI or the company. At this time, I would like to turn the call over to Elias Sabo. Elias? Elias Sabo: Thank you, Ben, and good afternoon to everyone. We started 2026 committed to a clear plan, and we are delivering against it. Specifically, we sold Sterno's food service business at an attractive valuation despite a muted M&A environment. We completed a sale leaseback at Altor and applied the proceeds directly to debt reduction. We delivered solid subsidiary adjusted EBITDA growth, highlighted by double-digit growth in our Consumer businesses despite uncertainty in the global economy. And collectively, our subsidiaries generated strong operating cash flow in the quarter, a hallmark of the CODI model. Incorporating our current view of the operating environment and reflecting the sale of Sterno's food service business, we are updating our full year guidance. Before Stephen walks through the financials and our updated guidance, I would like to provide additional color on both our strategic focus and operational performance. Let me start with the sale of Sterno's food service business. Throughout this process, we've been asked whether the broader environment, including geopolitical uncertainty in the Middle East, tighter private credit markets and other macro factors, would limit our ability to monetize our businesses at attractive values. From the outset, our answer was straightforward. First, there is almost always a market for high-quality businesses. And second, we have an experienced team with a track record of maximizing value across market cycles. We believe the outcome here speaks for itself. We view this as an initial step towards the goals we've established, not the final stop. Our leverage ratio remains above our target range and our shares continue to trade at what we believe is a discount to intrinsic value. Our work is not done. We will continue to pursue deleveraging and value creation, both organically and inorganically, with the same urgency and discipline we have demonstrated so far. And once leverage is within our target range, we will accelerate work to address the gap to intrinsic value, including through the efficient return of capital to shareholders. Alongside our deleveraging efforts, we have initiated a review of our management services agreement. We are actively evaluating our MSA for opportunities to further align incentives and drive incremental shareholder value. The process is underway and we expect to provide further updates in the coming months. Turning to operational performance. Against the backdrop of continued macro uncertainty, our subsidiaries collectively outperformed in the first quarter. Let me walk through a few highlights. Our Consumer businesses led the way, with double-digit adjusted EBITDA growth driven by strength across these businesses. The Honey Pot continued its exceptional momentum in the first quarter, with revenue growth of nearly 25% and EBITDA growth of over 40% compared to the prior period. We continue to see the brand gain share across the feminine care category, reflecting the strength of the product portfolio, expanded distribution and growing consumer adoption as the brand continues to extend beyond its origin into the broader period care category. The Honey Pot is now firmly established as a leading better-for-you brand in the feminine care, and we believe it has significant runway for continued growth. BOA delivered another strong quarter, with revenue growth of 6.5% and EBITDA growth of 11% compared to the prior-year period. We believe the performance of the BOA Fit System is unmatched. And that technical edge continues to drive category-leading adoption across snow sports, cycling, workwear and more. The company's focus on differentiated solutions and operational efficiency supports their category-leading margins. And with continued innovation and expansion into new performance applications, we see meaningful opportunity for growth ahead. 5.11 Tactical delivered solid margin performance and strong cash flow in the quarter, despite some modest top line pressure. The business continues to generate durable cash flow from its core professional customer base, and we are encouraged by the steps the team is taking to expand 5.11's appeal to the broader adventure-oriented consumer. This includes a recent grand opening of its next-generation retail format in Seattle, which significantly outperformed the chain average on opening weekend. Early customer response has been strong and we are seeing encouraging traction. While this is an early signal, it reinforces our belief that 5.11 has meaningful runway to broaden the brand's reach over time. And finally, within our Consumer businesses, a new leadership team is getting up to speed at PrimaLoft. It's only month 3, but we are pleased with management's progress, laying the groundwork to accelerate future growth while remaining a highly profitable, low working capital business. Much more to come in future quarters. Turning to our Industrial businesses. Arnold delivered a standout quarter with adjusted EBITDA nearly doubling year-over-year, despite ongoing geopolitical dynamics around rare earth supply including continued export restrictions out of China. While these dynamics create near-term headwinds, they also reinforce the long-term tailwinds for the business. Demand for geopolitically secure rare earth magnet supply continues to build as customers increasingly prioritize reliable non-China sources. Arnold's Thailand facility is ramping up, adding capacity and supply chain redundancy. We believe this uniquely positions Arnold to serve aerospace, defense and industrial customers who prioritize supply chain security and performance reliability. Altor remains a work in progress. The business faced a challenging first quarter, reflecting competitive pressure in the cold chain market and continued consumer headwinds in the appliance market. The team is focused on execution, optimizing the combined platform following the Lifoam acquisition and driving commercial progress. And we remain confident in Altor's long-term positioning even as near-term results continue to reflect current market conditions. Finally, let me turn to Rimports, which is the business we retained following the sale of the Sterno food service business. Rimports is a home fragrance platform, supplying scented wax, wax warmers and essential oils under a range of in-house and private-label brands to many of the nation's largest retailers. We want to be clear about what to expect. The balance of 2026 will be a transition period. Rimports will absorb some stranded costs from the separation of the food service business during the year, and we are working through an updated commercial relationship with a large customer. Both of these factors will weigh on near-term results, but are expected to improve in 2027. We have confidence in the leadership team and believe the long-term opportunity remains attractive as the team focuses on the go-forward business. Before I hand the call over to Stephen, I want to underscore that the actions this quarter are part of a disciplined, sequenced plan. Our path is clear: deleverage, drive continued operational performance, further align management incentives, and over time, close the gap between our share price and intrinsic value. That is the priority we are executing against. With that, I'll turn the call over to Stephen to walk through the financial results. Stephen Keller: Thanks, Elias. As a reminder, our prior-year GAAP results include Lugano, which has since been deconsolidated following its bankruptcy filing last November. With that context, I will discuss our GAAP results first, followed by our non-GAAP results that exclude Lugano, to better facilitate year-over-year comparisons. For the first quarter, GAAP net revenues were $427 million, down 5.9% year-over-year due to the inclusion of Lugano in the prior period. GAAP net loss from continuing operations was $30.8 million, an improvement of approximately $19 million year-over-year, primarily reflecting the absence of Lugano's losses in the current period. I will now provide our first quarter non-GAAP results, which excludes Lugano from the prior year. Net sales were in line with prior year as strong double-digit growth at the Honey Pot and Arnold were offset by ongoing challenges at Altor due largely to unfavorable macro trends. Across our businesses, our Consumer net sales increased 2.3%, while Industrial net sales declined 3.3% compared to the prior-year period. Subsidiary adjusted EBITDA was $83.9 million, an increase of 6.3%, with Consumer up 11.6% and Industrial down 4.5% compared to the prior year period. While Arnold nearly doubled year-over-year, Industrial growth was offset by the top line headwinds at Altor. Corporate management fees, excluding those paid by subsidiaries, were $14.4 million for the quarter as reflected on the income statement. Actual cash payments for Q1 fees will be significantly less at around $7.5 million. As previously discussed, corporate cash management fees paid to the manager are expected to be between $25 million and $30 million for the full year as our manager pays back the overpaid management fees related to Lugano restatement. Public company costs were $13 million in the quarter, which includes more than $7 million of onetime costs associated with Lugano, including the cost of ongoing litigation and investigation and corporate governance changes. While these onetime costs were significantly higher than initially anticipated, we did not include any offsets that may be realized through insurance or other proceeds as we move through 2026. It is important to note that in April, we received our first insurance reimbursement, and we expect to recover additional expenses over the balance of 2026. More importantly, we remain focused on managing and reducing our public company costs, consistent with our efforts to delever and drive long-term value creation. Cash generation was a highlight of the quarter. We generated $23.9 million in operating cash flow, a meaningful improvement versus the prior year. Our capital expenditures of $5.1 million were less than half of the prior-year period, reflecting disciplined capital allocation and a capital-efficient profile of our subsidiary businesses. Together, Q1's operational cash generation demonstrates the strength of our businesses and keeps us on track towards delivering significant free cash flow in 2026. We ended the quarter with $65 million in cash and cash equivalents and nearly full availability on our $100 million revolver. Our leverage ratio for debt covenant purposes at quarter-end was approximately 5.3x, a strong improvement in the quarter. As we announced earlier this week, the sale of Sterno's food service business has now closed, and we have repaid more than $280 million of senior secured term loan debt. This reduces our total leverage to approximately 5x and brings our senior secured net leverage to below 1x. Importantly, this allows us to avoid the milestone fees under our senior credit facility that would otherwise have applied beyond June 30. Reducing leverage has been and remains our top financial priority. Our actions thus far this year put us in a meaningfully stronger position. There is more work to do, and we remain disciplined and focused on the priorities we have laid out to our shareholders. Turning briefly to Lugano. The Chapter 11 process is advancing as expected, as are our efforts to minimize our liability and maximize our ultimate recovery. We expect to have greater clarity on timing by the end of the second quarter, and we'll update investors as appropriate. Before turning to our outlook, I'd like to briefly note that while the evolving tariff environment has created significant market uncertainty, we are currently experiencing a tailwind across multiple businesses. Separately, we also expect to receive onetime tariff-related refunds during 2026, though the specific timing and magnitude are difficult to forecast at this time. We will provide more clarity as the year progresses. I'll now provide an update on our 2026 outlook. For the full year, we expect subsidiary adjusted EBITDA of between $320 million to $365 million. This range, adjusted for the impact of the sale of Sterno's food service business, is at or above the expectation we set at the start of the year and reflects the continued strength of our diversified collection of businesses. For our Consumer businesses, this equates to adjusted EBITDA between $225 million to $260 million. And for our Industrial businesses, we expect adjusted EBITDA of between $95 million and $105 million, which includes some stranded costs associated with the sale of our Sterno business. We expect these costs will decline in 2027. For modeling purposes, we continue to assume CapEx of between $30 million to $40 million for 2026 and we expect corporate cash management fees of between $25 million and $30 million. As has been our practice, our outlook does not include the impact of any potential acquisitions or divestitures, except as noted regarding the sale of the Sterno food service business. It also does not include any significant impact positive or negative to the evolving trade environment. With that, I'll hand it back to Elias for closing remarks. Elias Sabo: Thanks, Stephen. Let me be clear about where we stand. The first quarter of 2026 was a quarter of execution, solid subsidiary performance, a meaningful divestiture at an attractive valuation and measurable progress on the priorities we laid out. But a single quarter does not make a turnaround and we've by no means reached the finish line. We will continue to pursue our stated objective to create long-term shareholder value and close the gap to intrinsic value. That means in the near term pursuing strategic divestitures at attractive valuations and returning capital to shareholders where appropriate. Trust is earned through consistent execution, and that is what shareholders should expect from us every quarter going forward. The sale of Sterno's food service business is an important signal of what is possible. We transacted at an attractive value, on an accelerated time line, in an otherwise softer M&A environment. That outcome reflects both the quality of the business and the capability of our team to run disciplined processes and maximize value for shareholders. Beyond the proof point, it is an important first step. We believe in the CODI model. We take a permanent capital approach to acquire great businesses, partner with strong management teams and actively manage growing category leaders over the long term. That model has generated value for shareholders for nearly 2 decades. We are confident in the model and committed to demonstrating its value through execution. Thank you as always for your support. Stephen and I will now take your questions. Operator, please open the lines. Operator: [Operator Instructions] Your first question is from Larry Solow of CJS Securities. Lawrence Solow: Great. I guess, can you just clarify the guidance? So net, you're down $25 million, and obviously, you're up $5 million in Branded. So that's separate from the sale, the divestiture of Sterno. But then obviously, Sterno's a -- it sounds like there's some moving parts, right, for Sterno, maybe more than we would have thought the impact on the sale. You said some kind of stranded or lagging costs there. But then maybe there's still another adjustment. Are you reducing maybe Altor Solutions a little lower too, or anything else in there? Stephen Keller: Larry, no, the main thing is actually, is just adjusting for -- the Industrial just adjusting for the sale of Sterno, specifically related to the lost EBITDA, the stranded costs, and as well as what Elias mentioned in the prepared remarks, which is we do have a couple of negotiations with some long-term -- with some large customers in that particular business that we think will be a little bit of a headwind for the year. So it's -- yes. Lawrence Solow: So basically the RemainCo of Sterno, which is Rimports, will be somewhat lower this year than last year. Stephen Keller: Yes. I want to be clear, we're not -- we won't be fully -- we're selling Sterno, we're not deconsolidating it out of business. So you will have the first quarter of Sterno will be included in our full year EBITDA. And then the next 3 quarters will just be Rimports. Lawrence Solow: Right. And is there like -- is there a short term, like your corporate costs are too much because you kind of carved out Sterno but you still have Rimports, or could you maybe bulk up infrastructure maybe where it actually impacts you? Yes, go ahead. Stephen Keller: As we mentioned I think in our original press release, we are retaining the management team in the Rimports -- the Sterno management team is staying with Rimports. And so that is something that we need to work through. We think -- we actually really think this is the right team to help kind of -- help accelerate Rimports growth, but it is a little -- we do have to make some adjustments to overall cost levels as we go forward. Lawrence Solow: Got you. And the stranded costs, I imagine those, you kind of have pretty good visibility will not repeat next year. Your customer negotiations with the one -- I think I know one large customer, that we don't know the outcome yet. But the stranded costs, obviously, you have pretty good confidence those won't repeat, right, I guess. Is that fair? Stephen Keller: Yes. I mean it's -- we have to address the stranded costs. The stranded costs are costs that existed last year, that will continue to exist in the business, but we need to work them down over time as appropriate for a small -- what is now a smaller business. Lawrence Solow: Right. Okay. That's what I thought. So you need to downsize sort of the corporate structure there. That makes sense. And just curious, so a couple of quickies. In general, Elias, maybe just on the Branded piece, it sounds like a lot of moving parts. But in general, just your Consumer, the confidence you have, anything really changed over the last 6 months? Obviously, that encompasses the start of the Iran conflict or whatever you want to call it, higher -- more inflationary pressures back or a lot higher. So any visibility or any -- have you seen any impact at any of your businesses because of this? Or are you contemplating that in your guidance? Any thoughts there? Elias Sabo: Yes, Larry. We, I would say, have seen our Consumer businesses performing extremely well. First quarter was above what our expectations were. And I would say coming into the second quarter and as a lot of these companies worked on backlog, I would say they're set up to perform better in the second quarter than expectations as well. And that's clearly in the face of the Iran war starting. Now I think where it gets a little bit harder to dissect is whether customers are accelerating some orders because of the war and worries about longer-term inflation and kind of oil going through -- kind of global oil supply. That's a little bit more to be determined. But I would say right now, what we can analyze, the business on the Consumer side looks very strong and better than anticipation. And currently, and I know this sounds odd to say, unaffected by the global macro events that we see kind of around us on a daily basis. Lawrence Solow: Okay. And BOA really had a nice quarter. Anything outstanding there? I know -- I think you had -- you sold the footwear business, I know. So maybe -- so you reported 11% EBITDA growth, but I imagine it was even better ex that. So any extra color there? Elias Sabo: No. BOA is a great business. We say over and over how awesome this company is, its competitive positioning, strategic outlook. It has one of the best management teams, if not the best management team, that I've ever worked with. And so I think those are all the ingredients to propel the company forward on a consistent basis. As you know, Larry, it's got a great IP position. So it's just -- it's so well positioned. And I think we went through a lot of kind of turbulence. Obviously, it had huge growth during the supply chain shock, and then we had some softness that came from that. And then more recently, we had a customer in Asia on our kids line that, from price competitive reasons, we walked away from. And so there's been a little bit of noise. And I think right now, the business is in a much better spot based on where the industry is in kind of its inventory positioning, and where we are in terms of the customer mix and durability and then all the growth that it has ahead of it. So I would say where there's been some extraneous sort of kind of choppy things that have happened here, this business now, we think, is sort of in a smoother set of waters and should produce the kind of double-digit kind of growth rates that we saw in the first quarter on a continuing basis. Lawrence Solow: Great. Last question, Elias. You did announce that you completed a nice divestiture. I know you said you'd look and probably do more. Are you pretty confident you'll complete at least 1 more this calendar year? Elias Sabo: I mean that is our plan. The M&A markets I referred to are a bit choppy. They're weaker than where they've been in the past. But they ebb and flow, as you know. We own really great-quality assets, Larry. And as I mentioned in my opening remarks, there's always the market to transact for a great company or great companies. And so we do feel confident we'll be able to transact. Now against that, there's still a war in Iran going on and $100 oil prices and lots of uncertainty. Private credit markets have really tightened, I think we see that kind of in the public stock prices of a lot of these private credit providers. So that is clearly a headwind for being able to transact. But it is what our focus -- it's where our focus is. We understand we need to get our leverage down, and that is kind of the #1, 2 and 3 goals right now, to get back into a position where we can be allocating capital again. And as we said in our opening remarks, looking to close the intrinsic value discount once we get there. So we remain confident we'll be able to execute against that, although I want to caution the markets continue to remain -- the M&A markets continue to remain choppy. Operator: Our next question will come from Timothy D'Agostino from B. Riley Securities. Timothy D'Agostino: Regarding leverage, could you remind us again what your long-term goal is? Where do you want leverage to be? As well, given the sale of Sterno food services, how does that impact kind of your time line and your path in order -- getting to that leverage target? And then lastly on that, given where the stock is today and, let's say, looking into the future getting to your leverage target, when would share buybacks become part of the equation for you all? And at these levels, is it attractive? Understanding you still have more deleveraging to do. Stephen Keller: Long term, we've always said we'd like to be around 3x to 3.5x levered. That would be like our long-term goal if things were in a more normal situation. I would say our current focus is now to get under 4x levered, as a key milestone for us. Once we got under 4x, we would start to think, given where the stock is trading and discount to intrinsic value, we would start thinking it would make sense to look to return capital to shareholders potentially through a share buyback. And so I think long term, 3x, 3.5x. But I think the next milestone for us is to get below 4x, which just allows us to be a little bit more -- think a little bit about returning capital. Timothy D'Agostino: Okay. Great. And then with, I guess, with an additional sale of a full subsidiary, do you think you can get to that 4x by year-end? Or do you think it's going to take a little bit more work? Just understanding the impact of the next sale might have, in your opinion. Stephen Keller: Yes. I think -- so the way I would think about, if you think about it organically, I think the rest of the year, we kind of get -- you kind of have another step-down probably to around 4.5x somewhere, a little bit higher than that, but somewhere around there. And then you start talking about the kind of inorganic activities, which would include recovery from Lugano, which would be straight deleveraging. And then you would have a sale of a subsidiary. And that, obviously, it just depends on which subsidiary. There's obviously a little bit of a circular reference there where you get rid of EBITDA, but you -- and you get how much -- you get the multiple on it. And so we think with the sale of another company and organic work and the work from Lugano recoveries, I think we would anticipate being below 4x. But again, it is dependent on the specific subsidiary and the multiple that we get for it. Timothy D'Agostino: Okay. Great. That's super helpful color. And if I could just sneak a final quick one in there. I may have missed it earlier, I apologize. On SG&A, lower this quarter and, on my model, a lower percentage of revenue. I guess, is there anything to flag there on why SG&A was lower in the quarter? Again, I might have missed it, so apologies if I did. Stephen Keller: You mean collectively across the business or are you talking about corporate? Corporate costs are higher, right, as we talked about in the prepared remarks. In terms of the overall business, and if you're looking at collectively SG&A on the GAAP accounts line, I think it's nothing specific to call out. It's nothing, just normal prudent management within the teams. As I think we talked about at the last call, 5.11 has made some significant strides in using AI to reduce overhead costs in all of their businesses. As prudent managers do, they look to reduce SG&A costs, especially at a time when there's a little bit more macro uncertainty. Operator: Our next question will come from Matt Koranda from ROTH Capital. Matt Koranda: I guess one fundamental one on segment and then maybe a couple of housekeeping things. But on Honey Pot, maybe can you just unpack a little bit more about what's driving the really substantial growth there? And I guess just north of 30% EBITDA margins in that segment, how sustainable do you view that level as? And how should we be thinking about sort of a normalized level going forward? Elias Sabo: Yes, Matt. What's driving the growth is market share gains in the category. If you recall, when we acquired the company, it was principally in the hygiene side, the washes and wipes side of the business. That is a very small percentage of the overall addressable market. Only about 5% of the potential population of candidates use washes and wipes as -- instead of regular soap. And so the big opportunity with this company was, one, to increase that percentage, which we've been doing. But secondly, to extend the brand into other adjacent categories. We've had really good success extending into the period care market. That is a market that is kind of 20x bigger than the original market that we started out with, and our brand has shown the elasticity to be able to move into that. Remember, we stand for better-for-you, which is something that resonates especially with the younger consumer. And our goal is to win that younger consumer as they're coming into the category. And so the strategy is working extremely well. I would say growth in period care can continue to drive really dramatic growth because we are relatively small in an enormous market right now with a differentiated proposition to the customer. In terms of margin, the company is in a category where it can generate higher margins. I mean these are better-for-you products. The positioning and brand association is all around better-for-you. And as a result, consumers are willing to pay up for that. Now I will say the company also had some benefits. And we've had Stephen mention, from tariff rulings here. There were huge tariff costs that were incurred as part of Liberation Day last year, and now with the IEEPA ruling, some of those costs have significantly come down. That is aiding margin, without question. I think if your view is those tariffs creep back in some other way, then there'll be some give-back of margin naturally. I think if your view is tariffs are going to be sort of where they are right now at this temporary level, then you should view those margins as being stable. But there's nothing from a pricing standpoint that we look at that says we aren't able to maintain these margins. And I think if you see the growth rate of mid-20s top line growth, it's indicative of a very healthy brand, that price is not the reason that people are not buying. So we plan -- we believe we can hold that. Matt Koranda: Okay. And I guess maybe this is a broader question for all the segments. But on tariff recoveries, I just want to make sure there were none within the first quarter that benefited margins. So just clarify that for us. But also as you get recoveries throughout the year, how will those flow through the financial statements, just so we're clear on sort of how it shows up? Stephen Keller: Yes. So there was no onetime recovery of last year's tariffs in our Q1. As Elias mentioned, we did have some benefits of not having -- having lower tariffs than we had maybe in Q4 of last year, if that makes sense. To the extent that we -- when we do get onetime historical refunds on tariffs, that would just be a -- it would just be a positive in the P&L, and we will be sure to call that out for everyone for modeling purposes. But any margin that you see right now is not related to onetime tariff benefits. It's more related to current -- on the current tariff environment that we're in today. Matt Koranda: Okay. Got it. And then maybe just one more, if I could. You mentioned kind of a revisiting or a review of the MSA. Are you willing to share any preliminary thoughts on that front in terms of what some of the changes could be or the changes you're contemplating maybe based around either, I guess, the asset-based management fee or allocation interest and how those are calculated? Elias Sabo: We are not in a position yet to start to discuss that. What we wanted to convey to the market is that there are discussions that are ongoing now between the manager and the Compensation Committee to the Board of Directors. And we anticipate MSA changes to come in the next couple, few months, and we just were really conveying that. But it would be premature, Matt, at this point to start talking about the flavor of what those changes will look like. Operator: [Operator Instructions] And at this time, we have -- our next question is from Heli Sheth of Raymond James. Heli Sheth: Congrats on the sale. So now that you've completed this and kind of gotten your senior leverage down below 1x, is there any urgency with other sales processes, especially with a muted M&A market? Elias Sabo: Yes. I would say, Heli, there's urgency because leverage at 5x is too high. And there's urgency because our shares trading at these prices, in our opinion, don't reflect intrinsic value. And so the urgency really becomes getting our leverage down and getting back into a position where we have capital allocation availability. And there was a direct question earlier, and we said it would include potential share buybacks as part of that capital allocation. And so I think that creates urgency. Now it is a fair question, and we have to juxtapose kind of that urgency against the conditions that exist in the M&A markets. And they are somewhat muted. But we transacted in an equally difficult M&A market on Sterno, and I think there is the ability to do that with another asset here over the course of the year, and we're taking it with a sense of urgency. I do want to be clear though, to the extent the markets would significantly undervalue an asset in an M&A market, by doing the Sterno deal, it's taken the pressure off to do something that would be a necessity. We will transact to the extent it can create additional shareholder value. But if the market conditions were so weak that it didn't create additional shareholder value, we have bought time to be able to kind of have other strategic alternatives we could consider. But that would be not our central case. Our central case is the markets, although they're not extremely strong, they're also not extremely weak. They kind of are a bit muted. And we believe the appropriate thing is continued deleveraging through divestitures. Heli Sheth: Got it. And then if I can squeeze another quick one in here. On the tariffs, I know you mentioned that there's not much clarity right now on the timing or the magnitude of tariff refund. What does the process look like for that? And any clarity on whether there would be an inflection point at which you would have a better idea of the magnitude or the timing? Stephen Keller: Yes. I mean it was just a couple of weeks ago or whatever where the government set up the website to actually start the process. And so each of our companies is going through the process. We really just do not have clarity. We will be sure to provide -- as soon as this happens, we will provide clarity. Again, we will call it -- on future earnings reports, when we have it, we will call it out as a onetime benefit. But at this point, we do not -- it's just really hard to predict. And we expect -- I think we'd expect that it will be a little bit choppy. We'll get some back, we'll probably have to fight some. Each company will be a little bit different. Operator: And at this time, I'm showing no further questions. I would like to turn it back to Elias Sabo for closing remarks. Elias Sabo: Thank you, everyone, for your time today. We look forward to seeing you and talking to you on our next conference call. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Before you buy stock in Compass Diversified, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Compass Diversified wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. CODI Q1 2026 Earnings Call Transcript was originally published by The Motley Fool

WESTPORT, Conn., May 06, 2026 (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 months ended March 31, 2026. "The first quarter of 2026 was a quarter of execution, with strong subsidiary performance led by our Consumer vertical, and a meaningful divestiture at an attractive valuation," said Elias Sabo, Chief Executive Officer of Compass Diversified. "We are delivering against the priorities we laid out for shareholders at the beginning of the year." Sabo continued, "A single quarter does not make a turnaround. Trust is earned through consistent execution, and that is what we expect to deliver for shareholders going forward." On November 16, 2025, CODI deconsolidated Lugano Holding, Inc. ("Lugano"). Accordingly, CODI’s GAAP results for the three months ended March 31, 2026 do not include Lugano’s operating results. Certain non-GAAP results and their associated growth rates are presented excluding Lugano’s 2025 results to facilitate comparisons of year-over-year performance for our remaining subsidiaries. Each of CODI’s subsidiaries represents an operating segment. For ease of presentation, CODI has grouped its operating segments into Branded Consumer and Industrial groups for certain results described below. Subsidiary details are available in the appendix. Financial Summary – (GAAP) Q1 2026 (GAAP) Net revenues were $426.9 million, down 5.9% vs Q1 2025 Net loss from continuing operations was $30.8 million vs $49.8 million in Q1 2025 Financial Summary – (non-GAAP) Q1 2026 (non-GAAP – Excluding Lugano in the prior year period) Net revenues were $426.9 million, flat to Q1 2025 Branded Consumer: $257.0 million, up 2.3% vs Q1 2025 Industrial: $169.9 million, down 3.3% vs Q1 2025 Subsidiary Adjusted EBITDA was $83.9 million, up 6.3% vs Q1 2025 Branded Consumer: $59.4 million, up 11.6% vs Q1 2025 Industrial: $24.4 million, down 4.5% vs Q1 2025 Recent Business Updates Completed the sale of Sterno’s food service business for an enterprise value of $292.5 million, with net proceeds used to repay outstanding debt. The Sterno transaction generated proceeds to CODI of approximately $280 million, reducing senior secured indebtedness below 1.0x, sufficient to avoid second quarter milestone fees associated with excess leverage under the Company’s senior secured credit arrangements, as of June 30, 2026. Liquidity and Capital Resources As of March 31, 2026, CODI had approximately $65.2 million in cash and cash equivalents and approximately $100 million in revolver availability. 2026 Outlook The Company is updating its fiscal 2026 financial guidance to reflect the sale of Sterno's food service business. The updated guidance is at or above the expectations set at the start of the year, adjusting for the divested business. In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, CODI has not reconciled 2026 Subsidiary Adjusted EBITDA to its comparable GAAP measure because it does not provide guidance on Income (Loss) from Continuing Operations and because management cannot predict, with sufficient certainty, all of the inputs necessary to provide such a reconciliation. 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 In conjunction with this announcement, CODI will host a conference call on May 6, 2026, at 5:00 p.m. E.T. / 2:00 p.m. PT with the Company’s Chief Executive Officer, Elias Sabo and the Company’s Chief Financial Officer, Stephen Keller. A live webcast of the call will be available on the Investor Relations section of CODI’s website. To avoid delays, we encourage participants to log into the webcast 15 minutes ahead of the scheduled start time. A replay of the webcast will also be available for a limited time on the Company’s website. Note Regarding Use of Non-GAAP Financial Measures Adjusted EBITDA and Adjusted Earnings (Loss) 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 (Loss) 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 (Loss). Unless the context indicates otherwise, Subsidiary Adjusted EBITDA disclosed in the body of the press release excludes Lugano, a deconsolidated subsidiary of the Company, and corporate expenses. We believe that Adjusted EBITDA and Adjusted Earnings (Loss) provide useful information to investors and reflect important financial measures as each of Adjusted EBITDA and Adjusted Earnings (Loss) excludes the effects of items that 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 (Loss) 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 (Loss) provides insight into our operating results. As used in the body of this press release, Subsidiary Adjusted EBITDA refers to the sum of Adjusted EBITDA for the applicable period attributable to each consolidated subsidiary of the Company, excluding Lugano and disregarding corporate expense, unless the context indicates otherwise. Where excluded, we believe the exclusion of Lugano provides investors with a more accurate record of year-over-year performance for our remaining subsidiaries Net Revenues (excluding Lugano) is defined as net revenues excluding Lugano. Net Revenues (excluding Lugano) is reconciled to Net Revenues. We consider Net Revenues to be the most directly comparable GAAP financial measure to Net Revenues (excluding Lugano). We believe that Net Revenues (excluding Lugano) provides useful information to investors and reflects important financial measures as it helps investors evaluate the performance of our remaining subsidiaries. In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled 2026 Adjusted EBITDA or 2026 Subsidiary Adjusted EBITDA to its comparable GAAP measure because we do not provide guidance on Net Income (Loss) from Continuing Operations 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, Subsidiary Adjusted EBITDA (excluding Lugano) and Net Revenues (excluding Lugano) 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 CODI leverages its permanent capital base and long-term disciplined approach, maintaining controlling ownership interests in each of its subsidiaries and 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 seeks to generate strong returns through its culture of transparency, alignment and accountability. Forward Looking Statements This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation, CODI’s expectations regarding its Adjusted EBITDA, subsidiary Adjusted EBITDA and its future performance, liquidity and leverage, and the future performance of CODI’s subsidiaries. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as “believe,” “expect,” “may,” “could,” “would,” “plan,” “intend,” “estimate,” “predict,” “future,” “potential,” “continue,” “should” or “anticipate” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These statements are based on management’s current expectations, estimates, forecasts and assumptions and information available to management as of the date of this press release. These statements involve risks and uncertainties that could cause actual results and outcomes to differ, perhaps materially, including but not limited to: changes in the economy, financial markets and political environment, including changes in inflation, interest rates and U.S. tariff and import/export regulations; risks associated with possible disruption in CODI’s operations or the economy generally due to terrorism, war, natural disasters, or social, civil or political unrest; future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); environmental risks affecting the business or operations of our subsidiaries; disruption in the global supply chain, labor shortages and labor costs; our business prospects and the prospects of our subsidiaries; the impact of, and ability to successfully complete and integrate, acquisitions that we have made or may make; the ability to successfully complete divestitures that we may execute; 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; CODI’s ability to regain compliance with NYSE continued listing requirements; the cooperation of, and future concessions granted by, CODI’s lenders; control deficiencies identified or that may be identified in the future that will result in material weaknesses in CODI’s internal control over financial reporting; the results of the Lugano bankruptcy proceedings, including the amount and timing of any recoveries on CODI’s claims against Lugano and the risk that CODI’s secured position may be challenge; and litigation relating to the Lugano investigation, including CODI’s representations regarding its financial statements, and current and future litigation, enforcement actions or investigations relating to CODI’s internal controls, restatement reviews, the Lugano investigation or related matters. Please see CODI’s Annual Report on Form 10-K filed with the SEC on February 27, 2026 for other risk factors that you should consider in connection with such forward-looking statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date such statements have been made. Except as required by law, CODI does not undertake any public obligation to update any forward-looking statements to reflect events, circumstances, or new information after the date of this press release, or to reflect the occurrence of unanticipated events. Compass Diversified Investor Relations [email protected] (1) Other represents non-recurring operating expenses that are included by management in the calculation of Adjusted EBITDA when analyzing monthly operating results of our subsidiaries. (1) Other represents non-recurring operating expenses that are included by management in the calculation of Adjusted EBITDA when analyzing monthly operating results of our subsidiaries. In the current year, the calculation of Adjusted EBITDA for Arnold includes the add-back of certain expenses that have been incurred related to the relocation of two of Arnold's facilities in the United States and severance costs related to chief executive officer at Arnold. For Altor, other includes the add-back of certain expenses incurred related to restructuring of their facilities after the acquisition of Lifoam. (1) Total Subsidiary Adjusted EBITDA for the three months ended March 31, 2026 includes the Adjusted EBITDA amount for Lugano, which was deconsolidated on November 16, 2025. Total Branded Consumer Adjusted EBITDA for the three months ended March 31, 2025 excluding Lugano is $53.3 million, and total Subsidiary Adjusted EBITDA excluding Lugano is $78.9 million. (1) Reconciliation of Total Branded Consumer Net Sales and Total Subsidiary Net Sales excluding Lugano:

On May 5, 2026, Western Standard disclosed in an SEC filing that it sold 1,232,881 shares of Alphatec Holdings (NASDAQ:ATEC), an estimated $17.95 million trade based on quarterly average pricing. According to an SEC filing dated May 5, 2026, Western Standard reduced its holdings in Alphatec Holdings (NASDAQ:ATEC) by 1,232,881 shares during the first quarter. The estimated value of the shares sold was $17.95 million based on the mean unadjusted close for the quarter. The quarter-end value of the remaining stake reflects a $26.17 million decrease, a figure that includes both share sales and price changes. After this sale, the Alphatec Holdings position accounts for 0.13% of Western Standard's reported U.S. equity assets. Top holdings as of the filing: NYSE:GDOT: $39.79 million (20.9% of AUM) NYSE:CODI: $24.66 million (13.0% of AUM) NYSE:TFX: $22.11 million (11.6% of AUM) NASDAQ:IOSP: $16.56 million (8.7% of AUM) NYSE:OSG: $10.45 million (5.5% of AUM) As of May 4, 2026, Alphatec Holdings shares were priced at $10.33, down 13.8% over one year and underperforming the S&P 500 by 40.54 percentage points. However, shares plunged more than 20% to about $8.12 in after-hours trading on Tuesday following worse-than-expected results. Alphatec offers a portfolio of spinal surgery solutions including neural monitoring systems, minimally invasive access platforms, fixation systems, interbody implants, and biologics The firm generates revenue primarily through the sale of proprietary medical devices and biologics to hospitals and surgical centers, leveraging a direct sales force and independent distributors It serves orthopedic and neurosurgeons specializing in spinal disorders across the United States, with a focus on complex and degenerative spine procedures Alphatec Holdings is a U.S.-based medical technology company specializing in innovative surgical solutions for spinal disorders. The company pursues growth by expanding its differentiated product portfolio and investing in technologies that enhance surgical outcomes and patient safety. Its competitive edge stems from a focus on surgeon-driven innovation and a broad suite of proprietary systems tailored to complex spine procedures. The timing of this disclosure is interesting because it happened not long before Alphatec reported first-quarter results after Tuesday’s market close that very much disappointed investors. Revenue came in at $192 million, up 14% year over year but missing analyst projections by about 4%, with surgical revenue climbing 17% and case volumes up 21%. Meanwhile, margins improved, with adjusted EBITDA hitting $21 million and expanding meaningfully. But the market was clearly looking for more, and the company lowered parts of its full-year outlook, which triggered a more than 20% drop in after-hours trading. So you have a business that is improving, but still not hitting the bar investors set for it, and that gap is where volatility lives. For long-term investors, however, it’s still important to separate execution from expectations. The core story, surgeon adoption and procedural growth, still looks intact, but until the company proves it can consistently beat and raise, the stock might very well be priced around short-term sentiment. Before you buy stock in Alphatec, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphatec wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $490,864!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,216,789!* Now, it’s worth noting Stock Advisor’s total average return is 963% — a market-crushing outperformance compared to 201% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of May 5, 2026. Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Teleflex. The Motley Fool has a disclosure policy. This Fund Disclosed Selling $18 Million in Alphatec Last Quarter. The Stock Just Tanked 20% After Earnings was originally published by The Motley Fool