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 (June 2019)
47 slides from D/b/a Compass Diversified Holdings Shares Of Beneficial Interest's investor day presentation, Jun 25, 2019
Slide 1: Investor Day • June 2019
INVESTOR DAY • JUNE 2019 Growth • Stability • Transparency 1 Growth • Stability • Transparency
Slide 2: Legal Disclaimer
Legal Disclaimer • 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 by the use of
Slide 3: Today's Presenters
Today’s Presenters Elias Sabo Ryan Faulkingham Founding Partner & CEO EVP & CFO • Responsible for directing CODI’s strategy • Responsible for accounting and reporting, financial controls, as well as risk assessment • Joined The Compass Group in 1998 as one of its founding partners • Joined The Compa
Slide 4: Business Overview
Business Overview Growth • Stability • Transparency 4 Growth • Stability • Transparency
Slide 5: Executive Summary
Executive Summary Compass Diversified Holdings (“CODI” or the “Company”) acquires, operates and selectively divests middle-market consumer and niche industrial businesses, a strategy typically employed by private equity investors • Unlike traditional private equity investors, CODI’s permanent capita
Slide 6: Competitive Advantages
Competitive Advantages Permanent Capital • Allows the company to be opportunistic in both acquisitions and divestitures • Fosters business building • Invest in people, processes and culture • Invest in growth opportunities (capital expenditures, sales and marketing, add-on acquisitions, etc.) Cost o
Slide 7: Total Return Performance
Total Return Performance CODI’s business model and execution has produced significant, long term outperformance versus the benchmarks $1.00 invested at IPO is worth $4.13 vs. $2.54 in the Russell 2000 Total return from May 16, 2006 through June 14, 2019 Middle market asset pricing typically more att
Slide 8: Significant Events in 2019
Significant Events in 2019 Sold Manitoba Harvest in February • Sale price of Cd$370mm plus an earnout of up to Cd$49mm • Realized $121.7 million gain • Sold for >50x EBITDA • Sale expected to be neutral to Cash Available for Distribution or Reinvestment (‘CAD’ or ‘Cash Flow’) in 2019 and $7mm accret
Slide 9: Strategic Direction
Strategic Direction Defensively positioned • Longest economic expansion in US history at 10+ years • Global weakness emerging, partially due to trade issues • CODI has only minor direct exposure to tariffs (estimated at less than 5% of EBITDA) Continue to seek attractively valued acquisition opportu
Slide 10: Competitive Advantages
Competitive Advantages Growth • Stability • Transparency 10 Growth • Stability • Transparency
Slide 11: Competitive Advantages: Capital structure vs private equity model
Competitive Advantages Capital structure provides significant advantages over private equity investment model Acquisitions • No 5-year investment period, allows for more disciplined approach to deployment of capital • Certainty of financing / speed of closure Ownership • Potential for extended owner
Slide 12: Sought-after Partner in Middle-Market
Sought-after Partner in Middle-Market Perceived Attributes of Strategic Acquirers Perceived Attributes of Financial Acquirers 12 Growth • Stability • Transparency
Slide 13: Case Study: Manitoba Harvest
Case Study: Manitoba Harvest Ownership and Management: • Recruited Bill Chiasson, a former CEO of a CODI portfolio company, to transition from founder led business • Recruited VP Marketing, SVP Global Sales, CFO • Relocated corporate offices from Winnipeg to Minneapolis to provide access to robust t
Slide 14: Subsidiary Review
Subsidiary Review Growth • Stability • Transparency 14 Growth • Stability • Transparency
Slide 15: Current Subsidiaries
Current Subsidiaries 8 subsidiaries, 4 Branded Consumer and 4 Niche Industrial • Market leaders with strong, identifiable competitive moats • Extraordinary free cash flow profile • PF LTM 3/31/19 adjusted EBITDA, maintenance capex and cash taxes of $236mm, $18mm and $15mm, respectively • $203mm of n
Slide 16: Subsidiary Snapshot
Subsidiary Snapshot ($ millions) (1) TTM 03/31/19 Initial Subsidiaries Purchase Price Adj. Adj. EBITDA Maintenance Growth Ownership Purchase Revenue + Add-ons EBITDA (4) Margin Capex Capex Price (Year) $400 $352 $35 10% $1 $16(2) 98% $400 (Aug 2016) $151 $248 (3) $161 $29 18% $4 $1 99% (Jun 2017) ($
Slide 17: Financials
Financials Growth • Stability • Transparency 17 Growth • Stability • Transparency
Slide 18: Diversified Leading Brands and Growing Businesses
Diversified Leading Brands and Growing Businesses, Producing Consistent Cash Flow and Earnings % Pro Forma Subsidiary Adj. EBITDA March 31, 2019 LTM Revenues and Pro Forma Subsidiary Adjusted EBITDA of $1.4 billion and $236 million, respectively Diversified cash flows from 8 subsidiaries • 4 niche i
Slide 19: Demonstrated History of Value Creation
Demonstrated History of Value Creation • Generated $1.4 billion in Cash Flow and realized gains over the last 7 years • Stable cash flow generated by diverse businesses * * ** ** Note: CAD refers to Cash Available for Distribution or Reinvestment. Refer to the appendix for a reconciliation. * Estima
Slide 20: Distributions Paid Since IPO
Distributions Paid Since IPO ($17.88 per share) ~7.5% yield at 06/14/19 20 Growth • Stability • Transparency
Slide 21: Strongest Balance Sheet in History
Strongest Balance Sheet in History - When Clean Earth closes (estimated June 28th) we expect ~$506mm in net proceeds - Manitoba Harvest remaining sale proceeds (end of August) we expect ~$27mm in add’l net proceeds (millions, estimated) March 31, 2019 Pro Forma* Cash $40mm $488mm Revolver $85mm $0mm
Slide 22: History of Successfully Deleveraging
History of Successfully Deleveraging • CODI has a demonstrated history of paying down its debt and is committed to staying conservatively levered Ravin Add-on Divestiture of: $65MM FOXF $72MM FOXF Secondary & Secondary & $100MM CODI $100MM CODI Add-ons of Secondary Secondary HOCI, NII, (Jul '14) (No
Slide 23: Improving Cost of Capital
Improving Cost of Capital May 2006 Dec 2011 Dec 2016 Est. Jun 2019 Rate on debt – 10.9% Rate on debt – 8.8% Rate on debt – 5.5% Rate on debt – 6.4% Rate on preferred – 7.6% 23 Growth • Stability • Transparency
Slide 24: Cash Flow Impact of Divestitures
Cash Flow Impact of Divestitures – Annualized impact (estimated, in millions) Manitoba Harvest Clean Earth Adj. EBITDA – TTM March $5mm $50mm Less: Cash Taxes (0.5) (8) Maint. Cap Ex (0.5) (8) Cash flow to CODI $4 $34 Less: Mgmt. Fee (2) (8) Revolver Int. Exp. (9) (3) Interest on Cash - (8) (Accreti
Slide 25: Benefits of Owning CODI
Benefits of Owning CODI Consistent outperformance of benchmarks • CODI total return of 313% since IPO versus total return of 154% for the Russell 2000 • Consistent distribution which has never been reduced Access to an attractive segment of the market historically reserved for private equity manager
Slide 26: Why CODI Now?
Why CODI Now? Strongest balance sheet in our history • Pro forma for the Clean Earth sale and Manitoba Harvest proceeds, leverage <2x • Approximately $1bn of availability to deploy Lowest cost of capital in our history • 2018 debt refinancing extended maturities and added $400mm of unsecured debt wi
Slide 27: Appendix
Appendix 27 Growth • Stability • Transparency
Slide 28: CODI Partnership Structure
CODI Partnership Structure Compass Diversified Holdings Sostratus LLC (1) (“Trust”) (“Sostratus”) NYSE: CODI Management Compass Group • Revolver $600mm Compass Group Diversified Services Agreement Management • $500mm Term Loan B Holdings LLC LLC (2) • $400mm Senior Unsecured (“Compass” / the “Compan
Slide 29: Current Subsidiaries
Current Subsidiaries 29 Growth • Stability • Transparency
Slide 30: 5.11 subsidiary profile
Industry: Designer and manufacturer of purpose-built tactical apparel and gear serving a wide range of global customers Purchase Price (August 2016): $400mm Competitive Strengths: • Passionate and enthusiastic customer base • Entrenched position in the professional market providing stable cash flow
Slide 31: Velocity Outdoor subsidiary profile
Industry: Designer, manufacturer and marketer of airguns, archery products, optics and related accessories Purchase Price (June 2017): $152mm + $97mm add-on acquisitions Competitive Strengths: • Market share leader in airguns and crossbows • Unrivaled sourcing and manufacturing capabilities allows f
Slide 32: Ergobaby subsidiary profile
Industry: Designer and manufacturer of soft structured baby carriers, wraps, as well as complementary juvenile products Purchase Price (September 2010): $85mm + $83mm add-on acquisitions Competitive Strengths: • Carrier endorsed as “one of the 20 best products in the last 20 years” by Parenting Maga
Slide 33: Liberty Safe subsidiary profile
Industry: Manufacturer of home and gun safes and related accessories Purchase Price (March 2010): $70mm + $1mm add-on acquisition Competitive Strengths: • Market share leader • Well-known brand names • Category management capabilities for customers • Low cost domestic manufacturer Compass Value Adde
Slide 34: Arnold Magnetic Technologies subsidiary profile
Industry: Engineered permanent magnet and magnetic assemblies, manufacturer of thin and ultra-thin alloy products in a variety of materials Purchase Price (March 2012): $129mm Competitive Strengths: • Market share leader • Attractive and diverse end-markets • Engineering and product development capa
Slide 35: Advanced Circuits subsidiary profile
Industry: Quick-turn production printed circuit board (“PCB”) manufacturing Purchase Price (May 2006): $81mm + $19mm add-on acquisitions Competitive Strengths: • Insulated from Asian manufacturing due to small, customized order size and requirements for rapid turnaround • Largest quick turn manufact
Slide 36: Foam Fabricators subsidiary profile
Industry: Designer and manufacturer of custom molded protective foam solutions and OEM components made from expanded polystyrene Purchase Price (February 2018): $248mm Competitive Strengths: • A leader in molded foam protective packaging • National manufacturing footprint of 13 plants provides: ◦ Ab
Slide 37: Sterno subsidiary profile
Industry: Foodservice and Consumer Products manufacturer and marketer Purchase Price (October 2014): $160mm + $184mm add-on acquisitions Competitive Strengths: • Leading manufacturer in a niche market • Iconic brand with over 100 year history • Strong management team with proven ability to make accr
Slide 38: Balance Sheet - Condensed
Balance Sheet - Condensed(000’s) March 31, 2019 Current Assets: Cash and cash equivalents $ 39,837 Other current assets 665,368 Total current assets 705,205 Property, plant and equipment 203,549 Goodwill, intangibles and other assets 1,460,872 Total assets $ 2,369,626 Current Liabilities: Current po
Slide 39: Income Statement - Condensed
Income Statement - Condensed(000’s) YTD March 31, 2019 Net Sales $ 402,489 Cost of Sales 266,300 Gross Profit $ 136,189 Operating Income $ 14,868 Interest expense, net (18,582) Other income (expense) (7,384) Provision (benefit) for income taxes 403 Net gain on sales of discontinued operations 121,65
Slide 40: Cash Flow Statement – Condensed
Cash Flow Statement – Condensed (000’s) YTD March 31, 2019 Net cash used in operating activities $ (8,936) Net cash provided by investing activities $ 168,944 Net cash used in financing activities $ (172,448) Effect of foreign currency on cash $ (1,049) Net increase in cash and cash equivalents $ (1
Slide 41: Adjusted EBITDA Three Months Ended March 31, 2019
Adjusted EBITDA Three Months Ended March 31, 2019 Velocity Corporate 5.11 Ergobaby Liberty Outdoor ACI Arnold Foam Sterno Consolidated Net income (loss) $ 104,899 $ (1,870) $ 1,523 $ 153 $ (1,865) $ 3,704 $ 137 $ 604 $ 1,446 $ 108,731 Adjusted for: Provision (benefit) for income taxes — (445) 626 11
Slide 42: Adjusted EBITDA Three Months Ended March 31, 2018
Adjusted EBITDA Three Months Ended March 31, 2018 Velocity Corporate 5.11 Ergobaby Liberty Outdoor ACI Arnold Foam Sterno Consolidated Net income (loss) $ (4,588) $ (2,775) $ 674 $ 1,318 $ (1,286) $ 3,118 $ 91 $ (597) $ 1,545 $ (2,500) Adjusted for: Provision (benefit) for income taxes — (1,779) 262
Slide 43: Adjusted EBITDA Year Ended December 31, 2018
Adjusted EBITDA Year Ended December 31, 2018 Velocity Advanced Corporate 5.11 Ergobaby Liberty Outdoor Circuits Arnold Foam Sterno Consolidated Net income (loss) $ (35,018) $ (12,079) $ 4,937 $ 1,161 $ (4,458) $ 15,029 $ (740) $ 1,103 $ 12,451 $ (17,614) Adjusted for: Provision (benefit) for income
Slide 44: Adjusted EBITDA Year Ended December 31, 2017
Adjusted EBITDA Year Ended December 31, 2017 Velocity Advanced Corporate 5.11 Outdoor Ergobaby Liberty Circuits Arnold Sterno Consolidated Net income (loss) $ (22,790) $ (9,405) $ 7,634 $ 16,674 $ 4,861 $ 17,503 $ (10,740) $ 10,712 $ 14,449 Adjusted for: Provision (benefit) for income taxes — (12,49
Slide 45: Adjusted EBITDA Year Ended December 31, 2016
Adjusted EBITDA Year Ended December 31, 2016 Velocity Advanced Corporate 5.11 Outdoor Ergobaby Liberty Circuits Arnold Sterno Consolidated Net income (loss) $ 53,312 $ (10,441) $ 5,916 $ 5,409 $ 9,294 $ (22,782) $ 6,411 $ 47,119 Adjusted for: Provision (benefit) for income taxes — (5,190) 4,440 3,44
Slide 46: CAD Reconciliation
CAD Reconciliation Quarter Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended (in thousands) 3/31/2019 12/31/2018 12/31/2017 12/31/2016 12/31/2015 12/31/2014 12/31/2013 Net Income $110,158 $(1,790) $33,612 $56,530 $165,770 $291,155 $78,816 Adjustment to reconcile net income to c
Slide 47: 47 Growth • Stability • Transparency
47 Growth • Stability • Transparency
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