D/b/a Compass Diversified Holdings Shares Of Beneficial Interest · NYSE:CODI
D/b/a Compass Diversified Holdings Shares Of Beneficial Interest — Compass Diversified Holdings — Investor Day (January 2023)
61 slides from D/b/a Compass Diversified Holdings Shares Of Beneficial Interest's investor day presentation, Jan 19, 2023
Slide 1: CODI Investor Day Presentation
CODI Investor Day Presentation JANUARY 19, 2023
Slide 2: Legal Disclaimer
Legal Disclaimer This presentation contains certain forward-looking statements within the meaning of the federal securities laws. These statements may be made a part of this presentation or by reference to other documents we file with the SEC. Some of the forward-looking statements can be identified
Slide 3: CODI Presenters
PATRICK MACIARIELLO COO Joined The Compass Group in 2005 Investment Committee Member Graduate of University of Notre Dame and Columbia Business School ELIAS SABO Founding Partner & CEO Responsible for directing CODI’s strategy Investment Committee Member Joined The Compass Group in 1998 as one of it
Slide 4: Agenda
Agenda Opening Remarks and Value Creation Roadmap – Elias Sabo State of the M&A Market – Pat Maciariello Launch of Healthcare Vertical – Kurt Roth CODI ESG – Zoe Koskinas Financial Review – Ryan Faulkingham 4 3 4 1 5 2
Slide 5: Opening Remarks and Value Creation Roadmap
Opening Remarks and Value Creation Roadmap 5
Slide 6: CODI by the Numbers
CODI BY THE NUMBERS $7.0B+ Aggregate Acquisitions 23 Platforms & 32 Add-Ons $3.3B Invested Capital 11 Current Companies $2.3B+ TTM Proforma Revenue $464M+ TTM Proforma Adjusted EBITDA $167.0M TTM Adjusted Earnings ~$550M Available Revolver + Cash Permanent Capital Base 17% TTM Proforma Revenue Growt
Slide 7: Our History
Our History 2006 2018 2018 – Elias Sabo named CEO 2019 – Opportunistically Divested Manitoba Harvest & Clean Earth 20192014 2014 – Balance sheet restructuring May 2006 – IPO 2020 2020 – COVID-19 outbreak, Acquired BOA and Marucci 2021 - Opportunistically Divested Liberty Safe; Acquired Lugano Diamon
Slide 8: Our History
Our History • Four subsidiaries, ~$70M subsidiary Adj. EBITDA • Cost of debt: mid-teens • Acquisition strategy: Acquire and manage market share leading businesses in stable industries at low multiples May 2006 – IPO • Refinanced debt with leading national bank • Added term loans, significantly lower
Slide 9: Our Business Transformation is Accelerating Our Core Growth Rate
Our Business Transformation is Accelerating Our Core Growth Rate Pro Forma Subsidiary Growth Profile 9 1. Revenue, Adj. EBITDA, capex shown pro forma for acquisition of Lugano Diamonds and PrimaLoft and divestiture of Liberty Safe. 2. Growth capex at 5.11 for retail store rollout. 3. Subsidiary Adj.
Slide 10: Zooming in on The Assets Driving This Transformation
Zooming in on The Assets Driving This Transformation 10 Collectively, these companies represent $240M of TTM Adj. EBITDA (52% of total consolidated TTM Adj. EBITDA), growing at strong double-digit growth rates with positive outlooks to sustain this growth. • Disruptive technology, low market penetra
Slide 11: Where Are We Going? 2023 And Beyond
Where Are We Going? 2023 And Beyond. 11 2023+ - Achieve subsidiary Adj. EBITDA of $1B by 2028. How? • 11 current companies producing subsidiary Adj. EBITDA of ~$465M in 2022E1, growing at a core growth rate of 8-10% - 3-year pro forma growth – 2020 ~+1%; 2021 +34%; 2022E1 +12% (CAGR +16%) - ~$715M2
Slide 12: Financial Targets
Financial Targets 121. Outlook provided on third quarter 2022 earnings call. Figures represent midpoint of ranges given. 2. These estimates are preliminary and subject to change. 3. Represents midpoint of 2028 growth target percentage range. 2022E¹ 2023E² Long-Term Growth Targets Subsidiary Adj. EBI
Slide 13: Announced Sale of Advanced Circuits
Announced Sale of Advanced Circuits PURCHASE PRICE (MAY 2006) $81M +$19M in add-on acquisitions DESCRIPTION Manufacturer of quick-turn, small-run and production rigid printed circuit boards ANNOUNCEMENT DATE (JAN 2023) January 19, 2023 - Compass Diversified announced the definitive agreement to sell
Slide 14: How CODI Intends to Drive Long-Term Shareholder Value
How CODI Intends to Drive Long-Term Shareholder Value 14 CODI is poised to deliver double digit earnings growth while also returning capital through its quarterly dividend (currently yielding ~5%). HOW? 1) M&A - Achieve a higher rate of return on acquired assets than the return lost from opportunist
Slide 15: State of the M&A Market
State of the M&A Market 15
Slide 16: State of the M&A Market
State of the M&A Market 16 $- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 Q1 2021 Q2 2021 Q3 2021 Q1 2022 Q2 2022 Q3 2022 Global M&A Transaction Value - Targets Under $500M EV Data provided by S&P Capital IQ $- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,0
Slide 17: State of the M&A Market
State of the M&A Market 17 Source: Pitchbook. U.S data. 1. LBO multiples use purchase price in the numerator 2. Values approximated for 2010 – 2020. *As of September 30, 2022 Like other illiquid markets, prices are sticky, though with far fewer transactions 9 9.5 9 9.5 11 11 10.5 11 11 11 11 11.1 11
Slide 18: State of the M&A Market
State of the M&A Market 18 We expect an uptick in relevant deal activity in 2023 Much of 2022 deal activity was not relevant to CODI • Numerous minority/non-control transactions often designed to provide liquidity while maintaining favorable credit arrangements • Secondary limited partner sales • St
Slide 19: Launch of Healthcare Vertical
Launch of Healthcare Vertical 19
Slide 20: Introduction to Kurt Roth
Kurt Roth Partner, Head of Healthcare • Hired Nov 2022, responsible for leading CODI’s diversification efforts into newest Healthcare vertical • Decade-long professional relationship with senior members of Compass prior to joining • Most recent role: SVP, Corporate Development and Strategy at Sotera
Slide 21: Healthcare Industry Overview
21 We expect several positive secular trends to drive increased spending for healthcare and outsourced & ancillary services Healthcare Industry Overview Annual growth in U.S. health expenditures will average 5.1% over 2021-2030 and reach $6.8T by 2030 (~20% of GDP)¹ This will be driven by: Aging dem
Slide 22: Healthcare Industry Overview (continued)
22 Healthcare Industry Overview (continued) Aging demographic trends coupled with higher levels of access to healthcare • Healthcare demand is increasing globally • World population expected to increase by nearly 2.0B in the next 30 years, from 8.0B to 9.7B in 2050¹ • One in six people are projected
Slide 23: Healthcare Industry Overview (continued)
23 Healthcare Industry Overview (continued) Growth in R&D spending and innovation across healthcare • Pharmaceutical and medical device industries continuously innovating and developing new products and treatments • Worldwide pharmaceutical R&D spending expected to grow steadily at a 3% CAGR between
Slide 24: Healthcare Industry Overview (continued)
24 Healthcare Industry Overview (continued) Increasingly complex supply chains and regulatory environment • More companies are outsourcing production to contract manufacturers, adding new modalities and exploring novel ways to reach patients • Due to supply chain burdens and advances in technology,
Slide 25: Healthcare Investment Criteria
25 We are focused on partnering with growing middle-market businesses across the broad Healthcare sector Healthcare Investment Criteria Acquisition criteria: Headquartered in North America Industry leader within respective sub-sector Highly defensible market position Strong management team
Slide 26: Target Healthcare Sectors
26 Target Healthcare Sectors While we are interested in all areas of Healthcare, we have a particular focus on the following sectors: OUTSOURCED PHARMA SERVICES • CDMO: Small/large molecule, API, finished dosage form, packaging, cold chain • CRO: Drug discovery, preclinical, clinical • CCO: Reg affa
Slide 27: CODI ESG
CODI ESG 27
Slide 28: Sustainability is a Business Strategy
Sustainability is a Business Strategy 28 Companies must embody a clear reason to exist above and beyond the pursuit of profit in order to succeed in today’s world. Companies are being challenged on multiple fronts - economic, societal, geopolitical, technological and environmental. Companies must ch
Slide 29: Most Common Questions from Investors
29 Do you have a framework? Do you have goals? Do you have KPI’s and practices in place to measure, track and report? Do you have a governance structure model in place? Where does accountability for ESG ultimately reside? Most Common Questions from Investors
Slide 30: WHY? What does ESG mean to CODI?
WHY? We have a responsibility to play an important role in driving a more sustainable future 30 CODI’s DRIVERS: Gaining long-term value by identifying companies with strong ESG performance Protecting acquisitions against ESG risks by selecting companies that are equipped to deal with turbulence Capt
Slide 31: ESG Progress to Date
ESG Progress to Date Develop CODI’s ESG Policies and Procedures Leverage ESG Learnings to Help Subsidiary Companies Implement ESG Policies, Processes and Reporting Publicly released our ESG statement Established an ESG committee Introduced board ESG champion and board ESG training Engaged with subsi
Slide 32: ESG Framework Design
ESG Framework Design Apply a more holistic and adaptable approach to our investment thesis Sets the parameter for our company leaders to make informed decisions Allows for subsidiary adaptation and customization Aligns with our culture of enhancing long-term returns that benefit people and planet Ma
Slide 33: Framework
Framework Our ESG framework is built on two key pillars, and supported by eight priority areas, collectively underpinned by sound governance practices Future-Thinking For Our People & Planet Climate action - reducing greenhouse gasses and reducing overall waste Trusted Partner With All Key Stakehold
Slide 34: Today Framework and Next Steps
Today Framework 1 Ambitious Pillars 2 Material Focus Areas 8 Core Metrics Minimum Standards 10 10 Next Steps Measure progress Designate executives as champions Set time bound targets Collect baseline data Report on progress 34
Slide 35: ESG Committee and Governance Structure
ESG Committee CODI Governance Structure Oversight Through ESG Board Sponsor & Audit Committee Drives Strategic Integration • Approves strategy and policy • Executive sponsorship • Training and development Governs Special Projects • ESG rating agencies and global framework adoption • ESG partnerships
Slide 36: ESG as a Strategic Driving Force
ESG ESG as a Strategic Driving Force Risk mitigation into a value creation agenda ESG is integral and built into our business strategy Actions and investments have shifted from tactical to strategic We are not slowing down Proactive mindset allowing us to leverage opportunity 36
Slide 37: Your Questions Answered
Your Questions Answered Do you have a framework? 1 2 3 37 4 5 Do you have goals? Do you have KPI’s and practices in place to measure, track and report? Do you have a governance structure model in place? Where does accountability for this work ultimately reside? 37
Slide 38: Financial Review
38 Financial Review
Slide 39: Revenue and EBITDA
39 Revenue and EBITDA (Figures in all tables below are in millions) 1. Net sales for Lugano and PrimaLoft are pro forma as if the Company had acquired these businesses on January 1, 2021. Historical net sales for Lugano prior to acquisition on September 3, 2021 were $18.7 million and $71.2 million,
Slide 40: Recent Strong Financial Performance
40 Recent Strong Financial Performance Significant Increase in Adj. Earnings and Subsidiary Pro Forma Adj. EBITDA Over Past Three Fiscal Years in USD (millions) $70.5 $135.7 $150.0 $303.6 $414.3 $465.0 2020 2021 2022E* Adjusted Earnings Subsidiary Adjusted EBITDA * Guidance midpoint as of the Compan
Slide 41: Strong Balance Sheet as of September 30, 2022
Strong Balance Sheet as of September 30, 2022 41 Created duration and fixed cost of capital at historic low rates Opened secured capacity to fund additional acquisitions (e.g., PrimaLoft) at attractive rates 47% 9% 38% Debt Preferred Equity $1,000M 5.25% Fixed Due 2029 $300M 5.0% Fixed Due 2032 70%
Slide 42: Transformed Business Stands to Benefit from Increased Retained Cash
42 42 Transformed Business Stands to Benefit from Increased Retained Cash Significant increase in retained cash since 2019 $(36.5) $3.7 $55.3 $72.6 2019 2020 2021 YTD 9/30/22 (Before change in working capital) See appendix for retained cash reconciliation Strong subsidiary operating performance lead
Slide 43: History of Successfully Deleveraging
43 History of Successfully Deleveraging CODI has a demonstrated history of paying down its debt and is committed to staying conservatively levered 1.8 2.4 3.7 2.9 2.5 2.6 2.8 3 3.5 3.5 3.9 3.9 3.6 1.9 1.9 1.4 1.75 1.9 1.8 3.2 2.9 2.6 2.9 2.96 3.04 2.98 3.93 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17
Slide 44: Appendix Q&A
44 Appendix Q&A Q&A
Slide 45: Appendix
Appendix 45
Slide 46: Retained Cash Before Working Capital
Retained Cash Before Working Capital 46 (Figures in thousands) Nine Months Ended September 30, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 Net cash provided by operating activities $ (39,923) $ 134,051 $ 148,625 $ 84,562 Changes in operating assets and
Slide 47: Net Income (Loss) to Non-GAAP Adjusted Earnings
Net Income (Loss) to Non-GAAP Adjusted Earnings 47 Year Ended December 31, 2021 Year Ended December 31, 2020 Net income $ 126,809 $ 27,197 Income from discontinued options, net of tax 72,770 100 Gain on sale of discontinued operations, net of tax 7,665 13,531 Net income (loss) from continuing operat
Slide 48: Net Income (Loss) to Non-GAAP Adjusted Earnings
Net Income (Loss) to Non-GAAP Adjusted Earnings 48 Three Months Ended Nine Months Ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Net income $ 2,585 $ 90,156 $ 63,282 $ 100,901 Gain on sale of discontinued operations 1,479 72,745 6,893 72,745 Income (loss) from disc
Slide 49: Adjusted Earnings to Adjusted EBITDA
Adjusted Earnings to Adjusted EBITDA 49 Three Months Ended Nine Months Ended In OOO’s September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Adjusted Earnings $ 45,990 $ 35,848 $ 129,906 $ 98,610 Plus (less): Depreciation 11,284 10,372 32,589 28,896 Income Taxes 21,163 9,556 39,
Slide 50: Adjusted EBITDA Quarter Ended September 30, 2022
Adjusted EBITDA Quarter Ended September 30, 2022 50 In OOO’s Corporate 5.11 BOA Ergo Lugano Marucci Sports PrimaLoft Velocity Outdoor ACI Altor Solutions Arnold Sterno Consolidated Income (loss) from continuing operations $ (29,950) $ 5,905 $ 8,935 $ (759) $ 8,095 $ 4,230 $ (8,492) $ 4,679 $ 2,426 $
Slide 51: Adjusted EBITDA Quarter Ended September 30, 2021
Adjusted EBITDA Quarter Ended September 30, 2021 51 In OOO’s Corporate 5.11 BOA Ergo Lugano Marucci Sports Velocity Outdoor ACI Altor Solutions Arnold Sterno Consolidated Income (loss) from continuing operations $ (10,553) $ 5,223 $ 4,256 $ (531) $ 681 $ 2,235 $ 8,568 $ 3,821 $ 2,594 $ 2,245 $ 181 $
Slide 52: Adjusted EBITDA Nine Months Ended September 30, 2022
Adjusted EBITDA Nine Months Ended September 30, 2022 52 In OOO’s Corporate 5.11 BOA Ergo Lugano Marucci Sports PrimaLoft Velocity Outdoor ACI Altor Solutions Arnold Sterno Consolidated Income (loss) from continuing operations $ (51,431) $ 15,540 $ 37,122 $ (634) $ 21,871 $ 8,374 $ (8,492) $ 7,826 $
Slide 53: Adjusted EBITDA Nine Months Ended September 30, 2021
Adjusted EBITDA Nine Months Ended September 30, 2021 53 In OOO’s Corporate 5.11 BOA Ergo Lugano Marucci Sports Velocity Outdoor Advanced Circuits Altor Solutions Arnold Sterno Consolidated Income (loss) from continuing operations $ (64,717) $ 14,318 $ 16,908 $ 3,071 $ 681 $ 9,485 $ 19,157 $ 10,366 $
Slide 54: Adjusted EBITDA Year ended December 31, 2021
Adjusted EBITDA Year ended December 31, 2021 Corporate 5.11 BOA Ergo Lugano Marucci Sports Velocity Outdoor Advanced Circuits Altor Solutions Arnold Sterno Consolidated Net income (loss) from continuing operations $ (65,287) $ 20,152 $ 21,178 $ 5,079 $ 5,239 $ 10,232 $ 23,035 $ 14,178 $ 7,871 $ 5,01
Slide 55: Adjusted EBITDA Year ended December 31, 2020
Adjusted EBITDA Year ended December 31, 2020 Corporate 5.11 BOA Ergo Liberty Marucci Sports Velocity Outdoor ACI Arnold Altor Solutions Sterno Consolidated Net income from continuing operations (1) $(19,065) $12,356 $(2,640) $725 $9,902 $(4,785) $11,161 $13,170 $(3,539) $6,092 $3,820 $27,197 Adjuste
Slide 56: LTM Revenue
LTM Revenue Trailing Twelve Months Ended September 30, 2022 in 000’s TTM 9/30/2022 Branded Consumer 5.11 Tactical $474,562 BOA 211,332 Ergobaby 92,787 Lugano 180,453 Marucci Sports 154,319 PrimaLoft 79,391 Velocity Outdoor 245,309 $1,438,153 Niche Industrial Advanced Circuits $90,472 Altor Solutions
Slide 57: Adjusted EBITDA Twelve Months Ended September 30, 2022
Adjusted EBITDA Twelve Months Ended September 30, 2022 57 Less: In OOO’s Corporate 5.11 Tactical BOA Ergobaby Lugano Marucci Sports Proforma PrimaLoft Velocity Outdoor Advanced Circuits Altor Arnold Magnetics Sterno Consolidated Corporate Adjusted EBITDA Net Income (loss) from continuing operations
Slide 58: Adjusted EBITDA Twelve Months Ended September 30, 2021
Adjusted EBITDA Twelve Months Ended September 30, 2021 58 Less: In OOO’s Corporate 5.11 Tactical BOA Ergobaby Proforma Lugano Marucci Sports Proforma PrimaLoft Velocity Outdoor Advanced Circuits Altor Arnold Magnetics Sterno Consolidated Corporate Subsidiary Adjusted EBITDA Net Income (loss) from co
Slide 59: Reconciliation of 1st Year Adjusted EBITDA
Reconciliation of 1st Year Adjusted EBITDA Lugano As Reported in 000’s QTD 12/31/21 YTD 9/30/22 TTM 9/30/2022 Net income (loss) from continuing operations $ 4,558 $ 21,871 $ 26,429 Adjusted for: Provision (benefit) for income taxes 1,790 5,863 7,653 Interest expense, net 9 12 21 Intercompany interes
Slide 60: Reconciliation of 1st Year Adjusted EBITDA
Reconciliation of 1st Year Adjusted EBITDA Marucci QTD 9/30/20 QTD 12/31/20 As Reported in 000’s YTD 6/30/21 TTM 6/30/21 Net income (loss) from continuing operations $ 981 559 $ 7,250 $ 8,790 Adjusted for: Provision (benefit) for income taxes (407) 961 2,289 2,843 Interest expense, net 2 1 4 7 Inter
Slide 61: Subsidiary Pro Forma Adjusted EBITDA
Subsidiary Pro Forma Adjusted EBITDA1 61 Year Ended December 31, 2021 Year Ended December 31, 2020 Advanced Circuits $ 27,820 $ 25,801 Altor Solutions 32,141 29,715 Arnold Magnetics 21,063 8,787 BOA2 59,468 33,149 Ergo 19,185 15,116 Lugano2 40,648 20,594 Marucci2 29,004 13,371 PrimaLoft2 24,963 15,3
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