Q1 2024 Compass Diversified Earnings Call

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Operator: Good afternoon, and welcome to Compass Diversified's first quarter 2024 conference call. This call is being recorded. All lines have been placed on mute. If you would like to ask a question at the end of your prepared remarks, please press star 11 on your touchtone phone. At this time, I would like to turn the conference over to Cody Slach of Gateway Group for introductions and the reading of the Safe Harbor Statement. Please go ahead, sir.

Speaker Change: Good afternoon, and welcome to accomplish diversified first quarter 2024 conference call. Today's call is being recorded all lines have been placed on mute. If you would like to ask a question at the end of parent.

Speaker Change: Remarks, Please press star one on your Touchtone phone at this time I would like to turn the conference over to Cody Slaw of Gateway group for introductions and the reading of the Safe Harbor statement. Please go ahead Sir.

Cody Slach: Thank you and welcome to Compass Diversified's first quarter 2024 conference call. Representing the company today are Elias Sabo, Cody's CEO, Ryan Faulkingham, Cody's CFO, and Pat Massarello, COO of Compass Group Management.

Cody Slach: Thank you and welcome to Compass diversified its first quarter 2024 conference call representing the company today are Elias Sabo, Codi's CEO, Ryan talking him coding CFO and Pat last Sorel O C O O of Compass Group management.

Cody Slach: Before we begin, I'd like to point out that the Q1 2024 press release, including the financial tables and non-GAAP financial measure reconciliations for subsidiary adjusted EBITDA, adjusted EBITDA, adjusted earnings, and pro forma net sales, are available in the investor relations section on the company's website at compassdiversified.com. The company also filed its Form 10-Q with the SEC today after the market closed, which includes reconciliations of certain non-GAAP financial measures discussed on this call and is also available in the Investor Relations section of the company's website.

Cody Slach: Before we begin I'd like to point out that the Q1, 'twenty 'twenty four press release, including the financial tables, and non-GAAP financial measure reconciliations for subsidiary adjusted EBITDA adjusted EBITDA adjusted earnings and.

Cody Slach: Pro forma net sales are available at the Investor Relations section on the company's website accomplished diversified dot com. The company also filed its Form 10-Q with the SEC today. After the market closed which includes reconciliations of certain non-GAAP financial measures discussed on this call.

Cody Slach: And is also available at the Investor Relations section of the company's website. 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 the company's financial filings. The company does not provide a reconciliation of its full year expected 2024.

Cody Slach: Please note that references to EBITDA and the following discussions refer to adjusted EBITDA as reconciled to net income or loss from continuing operations in the company's financial filing. The company does not provide a reconciliation of its full year expected 2024 adjusted earnings, adjusted EBITDA, or subsidiary adjusted EBITDA because certain significant reconciling information is not available without unreasonable effort. Throughout this call, we will refer to Compass Diversified as CODI or the company. Now, allow me to read the following Safe Harbor statement.

Cody Slach: Our adjusted earnings adjusted EBITDA or subsidiary adjusted EBITDA, because certain significant reconciling information is not available without unreasonable efforts.

Cody Slach: Throughout this call, we will refer to compass diversified as Cody or the company.

Cody Slach: Allow me to read the following safe Harbor statement. During this call we may make certain forward looking statements, including statements with regard to the expectations related to the future performance of Coty and its subsidiaries the impact and expected timing of acquisitions and divestitures and future operational plans such as ESG initiatives.

Cody Slach: During this call, we may make certain forward-looking statements, including statements with regard to the expectations related to the future performance of CODI and its subsidiaries, the impact and expected timing of acquisitions and divestitures, and future operational plans, such as ESG initiatives. 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 inherent uncertainties in predicting future results and conditions.

Cody Slach: 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 Form 10-K, as filed with the SEC for the year ended December 31st, 2023, as well as in other SEC filings. In particular, the domestic and global economic environment, supply chain, labor disruptions, inflation, and changing interest rates may all have a significant impact on CODI and our subsidiary companies.

Cody Slach: 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 the inherent uncertainties in predicting future results and conditions certain factors could cause actual results to differ on a material.

Cody Slach: Basis from those projected in these forward looking statements and some of these factors are enumerated in the risk factor discussion in the Form 10-K as filed with the SEC for the year ended December 31, 2023, as well as in other SEC filings in particular, the domestic and global economic environment supply chain lag.

Cody Slach: <unk> disruptions inflation and changing interest rates all may have a significant impact on coty in our subsidiary companies, except as required by law <unk> undertakes no obligation to publicly update or revise any forward looking statements, whether because of new information future events or otherwise.

Cody Slach: Except as required by law, Cody undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise. At this time, I would like to turn the call over to Elias Sabo. Good afternoon.

Cody Slach: At this time I would like to turn the call over to Elias Sabo.

Elias Joseph Sabo: Good afternoon, everyone, and thanks for joining us today. I am pleased to report yet another strong quarter of results. We once again exceeded our expectations. Our success in this first quarter can be attributed to our deliberate focus on owning and managing a growing number of innovative and disruptive businesses that have industry-leading growth potential. This strategy not only reduces financial volatility but also accelerates our annual core growth rate. As we saw this past quarter, the diversification of our subsidiaries means that if a few of our companies lag in growth, others may be able to compensate, resulting in more consistent and reliable growth.

Elias Joseph Sabo: Afternoon, everyone and thanks for joining us today.

Elias Joseph Sabo: I am pleased to report yet another strong quarter of results, we once again exceeded our expectations.

Elias Joseph Sabo: Our success in this first quarter can be attributed to our deliberate focus on owning and managing a growing number of innovative and disruptive businesses that have industry leading growth potential.

Elias Joseph Sabo: This strategy not only reduces financial volatility, but also accelerate our annual core growth rate.

Elias Joseph Sabo: As we saw this past quarter the diversification of our subsidiaries mean that of a few of our companies lagging growth.

Elias Joseph Sabo: Others may be able to compensate resulting in a more consistent and reliable growth engine.

Elias Joseph Sabo: This quarter, we saw the strongest performance from our branded consumer vertical, which reported 11% growth in pro forma revenue and 22% growth in pro forma adjusted EBITDA. Pat and Ryan will, of course, go into greater detail, but I will tell you that Lugano produced another quarter of remarkable results, and the company currently shows no signs of slowing down. With the opening of its new London Salon earlier this week, we believe international expansion will be a huge opportunity for this business. You will recall we were expecting both BOA and Primaloft to rebound against the inventory destocking headwinds of the past. And we believe they are now through the worst of it.

Elias Joseph Sabo: This quarter, we saw the strongest performance from our branded consumer vertical which reported 11% growth in pro forma revenue.

Elias Joseph Sabo: And 22% growth in pro forma adjusted EBITDA.

Elias Joseph Sabo: And Ryan will of course go into greater detail, but I will tell you Lugano produced another quarter of remarkable results and the company currently shows no signs of slowing down.

Elias Joseph Sabo: With the opening of its new London Salon earlier. This week, we believe international expansion will be a huge opportunity for this business.

Elias Joseph Sabo: You will remember we were expecting both boa and prime a law to rebound against the inventory destocking headwinds of the path of the recent past.

Elias Joseph Sabo: And we believe they are now through the worst of it.

Elias Joseph Sabo: I am pleased to announce BOA had a great first quarter, better than expected. While Primaloft continued to see revenue and adjusted EBITDA declines in Q1, they saw bookings growth in the first quarter, which provides confidence that they will return to growth in the second quarter. The Honeypot Company, a business we only acquired in the first quarter of this year, is already integrated with a newly appointed world-class board of directors, and we are seeing significant gains in shelf space across key retail partners. Additionally, point-of-sale data remains robust, reflecting strong consumer demand for the Honeypot Company's Better For You product.

Elias Joseph Sabo: I am pleased to announce <unk> had a great first quarter better than expected, while private <unk> continued to see revenue and adjusted EBITDA declines in Q1 data bookings growth in the first quarter, which provides confidence they will return to growth in the second quarter.

Elias Joseph Sabo: The Honeypot company a business, we only acquired in the first quarter of this year is already integrated with a newly appointed World Class Board of directors and we are seeing significant gains in shelf space across key retail partners. Additionally.

Elias Joseph Sabo: Additionally point of sale data remains robust, reflecting strong consumer demand for the honeypot companies better for you products.

Elias Joseph Sabo: Thanks to the strong performances at Lugano, BOA, and the acquisition of the Honeypot Company, adjusted earnings for this quarter were above our expectations and up significantly over Q1 of last year. I'd also like to briefly discuss the divestiture of Cross. The Airgun Division of Velocity Outdoor, Today's the Outdoor Process. We are grateful for its contributions to Velocity Outdoor and Cody. And I want to thank the entire Crosman team for their dedication over the years. Velocity Outdoor continues to be a subsidiary, specializing in archery and hunting apparel, and we are excited by its planned product launches in the coming years.

Elias Joseph Sabo: Thanks to the strong performances at Lugano.

Elias Joseph Sabo: And the acquisition of the Honeypot company.

Elias Joseph Sabo: Adjusted earnings for this quarter were above our expectations and up significantly over Q1 of last year.

Elias Joseph Sabo: I'd also like to briefly discuss the divestiture of <unk>. The Aragon division of velocity outdoor today's the outdoor products. We are grateful for his contributions to velocity outdoor and Cody and I want to thank the entire <unk> team for their dedication over the years.

Elias Joseph Sabo: <unk> outdoor continues to be a subsidiary specializing in archery and hunting apparel and we are excited by its planned product launches in the coming years.

Elias Joseph Sabo: This opportunistic divestiture of Crossman also aligns with our strategic focus of adding value through the management of innovative and disruptive companies that are poised to outpace industry growth. We believe selling Crossman Sail to Daisy, a recognized industry veteran in the airgun space, positions it well for future success. Despite our outperformance in the quarter, continued elevated inflation, delayed rate cuts, and heightened geopolitical risks all combined to create a weakening macroeconomic backdrop, which has negatively affected our industrial sector.

Elias Joseph Sabo: This opportunistic divestiture of Crossman also aligns with our strategic focus of adding value through the management of innovative and disruptive companies that are poised to outpace industry growth rates.

Elias Joseph Sabo: We believe crossman sale to Daisy a recognized industry veteran in the Aragon space positions it well for future success.

Elias Joseph Sabo: Despite our outperformance in the quarter.

Elias Joseph Sabo: Continued elevated inflation delayed rate cuts and heightened geopolitical risks all combined to create a weakening macroeconomic backdrop, which has negatively affected our industrial vertical.

Elias Joseph Sabo: Across our three industrial businesses, we saw a slight decline in both revenues and adjusted EBITDA in Q1. However, we remain confident in the positioning of these businesses and anticipate our industrial vertical could possibly see modest growth later this year. All in all, I am extremely pleased with our first quarter. This is our strategic repossession in action.

Elias Joseph Sabo: Across our three industrial businesses, we saw a slight decline in both revenues and adjusted EBITDA. In Q1. However, we remain confident in the positioning of these businesses and anticipate our industrial vertical could possibly see modest growth later this year.

Elias Joseph Sabo: All in all I am extremely pleased with our first quarter.

Elias Joseph Sabo: This is our strategic repositioning and action.

Elias Joseph Sabo: Despite a mixed economic environment, we delivered a strong first quarter. Both our results for the quarter and our outlook for the rest of the year demonstrate that owning and managing a diversified group of companies, with a growing share of disruptive high-growth businesses, is the right strategy, and we believe positions our business for sustained outperformance. We believe across our branded consumer vertical, inventories are now more balanced, and we expect the headwinds suffered in 2023 to turn into tailwinds for the remainder of the year.

Elias Joseph Sabo: Despite a mixed economic environment, we delivered a strong first quarter.

Elias Joseph Sabo: Both our results for the quarter and our outlook for the rest of the year demonstrate that owning and managing a diversified group of companies with a growing share of disruptive high growth businesses is the right strategy and we believe positions our business for sustained outperformance.

Elias Joseph Sabo: We believe across our branded consumer vertical inventories are now more balanced and we expect the headwinds suffered in 2023 to turn into a tailwind for the remainder of the year.

Elias Joseph Sabo: We also believe through company-led innovation, our industrial vertical could see another year of modest growth in 2024 and is positioned well for 2025. Combining our first quarter performance with our forward momentum, we are feeling bullish about the rest of the year, so we are raising our full year adjusted earnings outlook, which Ryan will detail for you in just a few minutes. With that, I will now turn the call over to Pat.

Elias Joseph Sabo: We also believe there are company led innovation, our industrial vertical could see another year of modest growth in 2024 and is positioned well for 2025.

Elias Joseph Sabo: Combining our first quarter performance with our forward momentum we are feeling bullish about the rest of the year. So we are raising our full year adjusted earnings outlook, which Ryan will detail for you in just a few minutes with that I will now turn the call over to Paul.

Paul: Thanks Elias.

Paul: As a reminder throughout this presentation when we discuss pro forma results it will be as if we own the honeypot company as of January one 2023.

Patrick A. Maciariello: As a reminder, throughout this presentation, when we discuss pro forma results, it will be as if we own the Honeypot company as of January 1st, 2020. I'm pleased to report on another successful quarter. On a combined basis, revenue and pro forma adjusted EBITDA grew by 4% and 15% respectively in the quarter. Therefore, Lugano once again was a significant driver of our growth, growing revenue and EBITDA by 61% and 83% respectively. We continue to see positive trends throughout our business. Within our industrial vertical, for the first quarter of 2024, revenues decreased by 10% and adjusted EBITDA decreased by 3% versus Q1.

Paul: I am pleased to report on another successful quarter on a combined basis revenue and pro forma adjusted EBITDA grew by 4% and 15% respectively in the quarter.

Paul: The Lugano once again was a significant driver of our growth growing revenue and EBITDA by 61%, 83% respectively.

Paul: We continue to see positive trends throughout our business within our industrial vertical for the first quarter of 2024 revenues decreased by 10% and adjusted EBITDA decreased by 3% versus Q1 2023.

Patrick A. Maciariello: Arnold continued to grow revenue in the quarter, though it experienced higher SG&A costs due to increased sales and marketing expenses and the timing of certain professional services. Bookings for the quarter significantly outpaced revenues, and we believe the company remains poised for a solid 2024 and continues to build upon its long-term project pipeline. At Alcor, revenue declined slightly as we experienced churn in projects with a couple of our larger customers.

Paul: Arnold continues to grow revenue in the quarter, though experienced higher SG&A costs due to increased sales and marketing expenses and the timing of certain professional services fees.

Paul: Bookings for the quarter significantly outpaced revenues and we believe the company remains poised for a solid 2024 and continues to build upon this long term project pipeline.

Paul: At outdoor revenue declined slightly as we experienced churn on projects with a couple of our larger customers.

Patrick A. Maciariello: The pipeline of new products is robust, however, and we believe the company will return to revenue growth in the back half of next year. We also know that Altos continues to increase margins in the face of revenue headwinds, and we remain confident in the business and the team. Sterno grew adjusted EBITDA slightly in the quarter as the strength of the company's food service division offset slightly weaker demand levels and extended wax.

Paul: The pipeline of new products is robust however, and we believe the company will return to revenue growth in the back half of this year.

Paul: We also know that outflow continues to increase margins in the face of revenue headwinds and we remain confident in the business and the team.

Paul: Sterno grew adjusted EBITDA slightly in the quarter as the strength of the company's foodservice division offset slightly weaker demand levels and incentives wax division.

Patrick A. Maciariello: Turning to our branded consumer vertical, for the first quarter of 2024, Pro Forma revenues increased by 11%, and Pro Forma adjusted EBITDA increased by 22% versus Q1 2023. As Elias mentioned, clearly the strongest performer in the quarter remained Lucano, which saw growth in each salon and geography and benefited significantly from investments made in our flagship salons in Newport Beach and Palm Beach. This week, the company opened its long-awaited London salon, and, though early, by all accounts, the opening has been a success, and we look forward to expanding the Lugano model internationally.

Paul: Turning to our branded consumer vertical for the first quarter of 2020 for pro forma revenues increased by 11% and pro forma adjusted EBITDA increased by 22% versus Q1 2023.

Paul: As Elias mentioned clearly the strongest performer in the quarter remained lugano.

Paul: Growth in.

Paul: And each salon, and geography, and benefiting significantly from investments made in our flagship salons in Newport Beach and Palm Beach.

Paul: This week the company opened its long awaited London's line and by.

Paul: By all accounts the opening has been a success and we look forward to expanding the Lugano model internationally.

Patrick A. Maciariello: Last quarter, we touched specifically on two of our businesses furthest up the supply chain, BOA and Primaloft, and how order patterns were normalizing as their respective channels cleared. At that point, it appeared that BOA was perhaps a bit more than a quarter ahead of Primaloft in clearing the inventory headwinds in their supply chains and returning to growth. We are pleased to report that BOA grew revenues and adjusted EBITDA by 13% and 15%, respectively, in the first quarter of 2024.

Paul: Last quarter, we talked specifically on two of our businesses furthest up the supply chain.

Paul: And prime a lot on how order patterns were normalizing as their respective channels cleared.

Paul: At that point, it appeared that bow with perhaps a bit more than a quarter ahead of prime are locked in clearing the inventory headwinds in their supply chains and returning to growth.

Paul: We are pleased to report that Boa grew revenues and adjusted EBITDA by 13% and 15% respectively. In the first quarter of 2024. In addition bookings outpaced revenue growth, which supports our expectations of a strong 2024 at.

Patrick A. Maciariello: In addition, bookings outpaced revenue growth, which supports our expectations of a strong 2024. At Primaloft, though revenue and adjusted EBITDA continued to decline in Q1 of 2024, we did see solid double-digit bookings growth in the quarter, which gives us increased confidence as we enter the second phase, Touching on our newest business, the Honey Bot. It performed in line with expectations as revenues were approximately flat and adjusted EBITDA declined slightly in the first quarter of 2024 on a pro forma basis, consistent with our understanding at the time of the transaction. The company had one large promotional event at retail in February of 2023 that did not repeat in the same magnitude this quarter.

Paul: At <unk>, the revenue and adjusted EBITDA continued to decline in Q1 of 2024, we did see solid double digit bookings growth in the quarter, which gives us increased confidence as we enter the second quarter.

Paul: Touching on our newest business the hunting company. It performed in line with expectations as revenues were approximately flat and adjusted EBITDA declined slightly in the first quarter of 2024 on a pro forma basis.

Paul: Consistent with our understanding at the time of the transaction.

Paul: The company had one large promotional event at retail in February of 2023 that did not repeat in the same magnitude this quarter.

Ryan J. Faulkingham: In addition, the company continued to add infrastructure, including headcount and a dedicated distribution center, to support its growth, which pressured adjusted EBITDA margins slightly. Importantly, though, the company grew points of sale for its core product and almost all its retail partners and added shelf space for new products with several partners so far this year. We remain excited about the Honeypot Company and expect a solid year in 2020. 511 was approximately flat in revenue and up slowly and adjusted even down in the first quarter of 2020.

Paul: In addition, the company continued to add infrastructure, including head count and a dedicated distribution center to support its growth, which pressured adjusted EBITDA margin slightly.

Paul: Importantly, though the company grew point of sales for its core product that almost all of its retail partners and added shelf space for new products with several partners. So far this year.

Paul: We remain excited about the Honeypot company you can expect a solid year in 2024.

Paul: 511 was approximately flat in revenue and up slightly and adjusted EBITDA in the first quarter of 2020 for strong revenue growth and progress in the professional channel offset both market related and self induced challenges in our DTC channels. We've seen improvement in these areas subsequent to quarter end and we believe the 511 management team is taking the right.

Ryan J. Faulkingham: Strong revenue growth in the professional channel offset both market-related and self-induced challenges in our DTC channel. We've seen improvement in these areas subsequent to quarter end. And we believe the 511 management team is taking the right actions, and the company is on solid ground. As a whole, we were very pleased with the first quarter and have confidence in our increased outlook for the full year. I will now turn the call over to Ryan for additional comments on our financial results.

Paul: Actions and the company is on solid footing.

Paul: As a whole we were very pleased with the first quarter and have confidence in our increased outlook for the full year I will now turn the call over to Ryan for additional comments on our financial results.

Paul: Yes.

Ryan: Thank you Pat.

Ryan J. Faulkingham: Moving to our consolidated financial results for the quarter ended March 31, 2024, I will limit my comments largely to the overall results for Cody since the individual subsidiary results are detailed in our Form 10-Q that was filed with the SEC earlier today. On a consolidated basis, revenue for the quarter ended March 31st, 2024, was $524.3 million, up 8% compared to $483.9 million for the prior year period. This increase was primarily a result of the Honeypot Company and strong growth at Lugano and BOA, which was partially offset by lower revenue at Sterno, Altor, and Velocity.

Ryan: Moving to our consolidated financial results for the quarter ended March 31 2024.

Ryan: I will limit my comments largely to the overall results for Coty since the individual subsidiary results are detailed in our Form 10-Q that was filed with the SEC earlier today.

Ryan J. Faulkingham: Consolidated net income for the first quarter of 2024 was $5.8 million, compared to net income of $109.6 million in the prior year. The first quarter of 2024 included an $8 million goodwill impairment charge at our Velocity Outdoor subsidiary. Net income in 2023 included a $98 million gain on the sale of advanced circuits. Adjusted EBIT in the first quarter was $94.8 million, up 28% compared to $74.1 million in the prior year. The increase was due to the acquisition of the Honeypot Company and strong growth at Lugano and BOA.

Ryan: On a consolidated basis revenue for the quarter ended March 31, 2024 was $524 3 million up 8% compared to $483 9 million for the prior year period. This increase was primarily a result of the Honeypot company and strong growth at Lugano in Butler, which was partially offset by lower revenue.

Paul: Sterno, all tour and velocity.

Paul: Consolidated net income for the first quarter of 2024 was $5 8 million compared to net income of $109 6 million in the prior year.

Paul: First quarter of 2024 included an $8 million goodwill impairment charge at our velocity outdoor subsidiary.

Paul: Net income in 2023 included a $98 million gain on the sale of advanced circuits.

Paul: Adjusted EBIT in the first quarter was $94 8 million up 28% compared to $74 1 million in the prior year.

Paul: The increase was due to the acquisition of a honeypot company and strong growth at Lugano in Butler.

Ryan J. Faulkingham: Included in Adjusted EBITDA in the first quarters of 2024 and 2023 were management fees and corporate costs of $21.4 million and $19.4 million, respectively. Adjusted earnings for the first quarter were above our expectations, coming in at $34.3 million. This was up significantly from $19.8 million in the prior year quarter due to strong performances at Lugano and Boa. Now, moving to our 2024 guidance. As a result of the strong performance in the first quarter and our expectations for the remainder of the year, we are raising our subsidiary adjusted EBITDA guidance by $10 million. However, with the sale of Crossman, we are reducing our guidance by a similar amount.

Paul: Included in adjusted EBITDA in the first quarters of 2024, and 2023, where management fees and corporate costs of $21 4 million and $19 4 million respectively.

Paul: Adjusted earnings for the first quarter were above our expectations coming in at $34 3 million. This was up significantly from $19 8 million in the prior year quarter due to strong performances at Lugano in Butler.

Ryan J. Faulkingham: Thus, our full-year 2024 subsidiary adjusted EBITDA is consistent with what we provided on our last earnings call of between $480 million and $520 million, despite the sale of Crossman. The subsidiary adjusted EBITDA range for our industrial vertical remains $125 million to $135 million. The subsidiary adjusted EBITDA range for our branded consumer vertical remains between $355 million and $385 million. We expect full year 2024 adjusted EBITDA to be between $390 million and $430 million. This range factors in an expected $86 million in corporate level overhead and management fees in 2024.

Speaker Change: So now moving to our 2020 for guidance.

Paul: As a result of the strong performance in the first quarter and our expectations for the remainder of the year, we are raising our subsidiary adjusted EBITDA guidance by $10 million.

Paul: However, with the sale of Crossman, we are reducing our guidance by a similar amount thus.

Paul: Thus our full year 2024 subsidiary adjusted EBITDA is consistent with what we provided on our last earnings call.

Paul: Between $480 million and $520 million, despite the sale of Craftsman.

Paul: The subsidiary adjusted EBITDA range for our industrial vertical remains $125 million to $135 million.

Paul: The subsidiary adjusted EBITDA range for our branded consumer vertical remains 355 billion and $385 million.

Paul: We expect full year 2024, adjusted EBITDA to be between $390 million and $430 million.

Paul: This range factors in an expected $86 million in corporate level overhead and management fees in 2020 for.

Ryan J. Faulkingham: This compares to $341 million in adjusted EBITDA in 2023. Now on to Adjusted Earnings, with a paydown of Revolver debt outstanding of approximately $60 million, which includes proceeds from the sale of Crossbow. We are increasing our full-year 2024 Adjusted Earnings Guidance Range by $3 million and expect it to be between $148 million and $163 million. At the midpoint of this range, and assuming the same share count at March 31, 2024, of 75.3 million shares, we expect to earn $2.07 in adjusted earnings per common share in 2024. A note for investors and analysts: the Crossman sale will not be recorded as discontinued operations.

Paul: This compares to $341 million and adjusted EBITDA in 2023.

Paul: Now onto adjusted earnings.

Paul: With the Paydown of revolver debt outstanding of approximately $60 million, which includes proceeds from the sale of Crossman, we are increasing our full year 2024, adjusted earnings guidance range by $3 million and expect it to be between $148 million and $163 million at.

Paul: At the midpoint of this range and assuming the same share count at March 31, 2024 of $75 3 million shares we expect to earn $2 seven.

Paul: And adjusted earnings per common share in 2024.

Paul: A note for investors and analysts the crossman sale will not be recorded as discontinued operations.

Ryan J. Faulkingham: And thus, we expect we will record a relatively small financial statement impact from the sale in the second quarter. We plan to offset any positive or negative impact from the sale in our adjusted earnings calculation in the second quarter and for the full year of 2024. Turning to our balance sheet, as of March 31st, 2024, we had approximately $64.7 million in cash, approximately $552 million available on our revolver, and our total leverage ratio was 3.84 times.

Paul: And thus we expect we will record a relatively small financial statement impact from the sale in the second quarter, we plan to offset any positive or negative impact from the sale and our adjusted earnings calculation in the second quarter and for the full year of 2024.

Paul: Turning to our balance sheet as of March 31, 2024, we had approximately $64 7 million in cash approximately $552 million available on our revolver and our total leverage ratio was 384 times.

Ryan J. Faulkingham: Our leverage at the end of the quarter was lower than we anticipated as a result of strong operating performance. We used our proceeds from the sale of Crossman to pay down Revolver debt outstanding, and thus, absent any acquisitions in Q2, we expect our total leverage ratio to decline in the second quarter. We have substantial liquidity, and as previously communicated, we have the ability to upsize our revolver capacity by an additional $250 million.

Paul: Our leverage at the end of the quarter was lower than we anticipated as a result of strong operating performance. We used our proceeds from the sale of crossman to pay down revolver debt outstanding and thus absent any acquisitions in Q2, we expect our total leverage ratio to decline in the second quarter.

Paul: We have substantial liquidity and as previously communicated we have the ability to upsize, our revolver capacity by an additional $250 million.

Ryan J. Faulkingham: With our liquidity and capital, we stand ready and able to provide our subsidiaries with the financial support they need, invest in subsidiary growth opportunities, and act on compelling acquisition opportunities as they present themselves. Turning now to cash flow provided by Operations. During the first quarter of 2024, we used $13 million of cash flow from operations. Lugano used $65 million in cash flow from operations to support its continued extraordinary growth. Outside of Lugano, our subsidiaries produced $52 million in cash flow from operations in the first quarter, allowing us to reduce our leverage, as stated earlier.

Paul: With our liquidity and capital we stand ready enable to provide our subsidiaries with the financial support they need invest in subsidiary growth opportunities and act on compelling acquisition opportunities as they present themselves.

Paul: Turning now to cash flow provided by operations.

Paul: During the first quarter of 2024, we used $13 million of cash flow from operations.

Paul: <unk> used $65 million in cash flow from operations to support its continued extraordinary growth.

Paul: Outside of Lugano, our subsidiaries produced $52 million in cash flow from operations in the first quarter, allowing us to reduce our leverage as stated earlier.

Ryan J. Faulkingham: And finally, turning to capital expenditures, during the first quarter of 2024, we incurred $7.7 million of capital expenditures at our existing subsidiaries, compared to $14.9 million in the prior year period. The decrease was primarily a result of a decline in 511 store rollouts in 2024. For the full year of 2024, we anticipate total CapEx of between $50 million and $60 million. We continue to see strong returns on invested capital at several of our growth subsidiaries and believe they will have short payback periods. Capital expenditures in 2024 will primarily be at Lugano for new retail salons. With that, I will now turn the call back over to Elias.

Paul: And finally, turning to capital expenditures.

Paul: During the first quarter of 2024, we incurred $7 $7 million of Capex at our existing subsidiaries compared to $14 9 million in the prior year period. The decrease was primarily a result of a decline in 511 store Rollouts in 2024.

Paul: For the full year of 2024, we anticipate total capex of between $50 million and $60 million. We continued to see strong returns on invested capital at several of our growth subsidiaries and believe they will have short payback periods.

Paul: <unk> expenditures in 2024 will primarily be at Lugano for new retail salons.

Paul: With that I'll now turn the call back over to Elias.

Elias Joseph Sabo: Thank you Ryan.

Elias Joseph Sabo: I would like to close by recognizing a significant ESG milestone and also by giving you a brief update on our view of the current M&A activity. On the ESG front, I am proud to announce that earlier this week, we released our inaugural sustainability report. The report provides insight into how we manage ESG, both at Cody and at our subsidiaries. It outlines our ESG framework and the actions we have taken designed to bring about social and environmental benefits.

Elias Joseph Sabo: I would like to close by recognizing a significant ESG milestone and also by giving you a brief update on our view of the current M&A market.

Elias Joseph Sabo: On the ESG front.

Elias Joseph Sabo: I am proud to announce that earlier this week, we released our inaugural sustainability report.

Elias Joseph Sabo: The report provides insight into how we manage ESG, both at Cody and at our subsidiaries.

Elias Joseph Sabo: Lines, our ESG framework and the actions we have taken designed to bring about social and environmental benefits.

Elias Joseph Sabo: This report underscores our belief that ESG is an ongoing commitment, and we are dedicated to achieving substantial, deliberate progress. You can view the report on our website to learn more about our vision and our progress to date.

Elias Joseph Sabo: This report underscores our belief that ESG is an ongoing commitment.

Elias Joseph Sabo: And we are dedicated to achieving substantial deliberate progress you can view the report on our website to learn more about our vision and our progress to date.

Elias Joseph Sabo: We have made significant strides over the last few years, and this progress wouldn't have been possible without the engagement of our board, our leadership team, and, most importantly, the participation of our employees, both at Cody and at our subsidiary. Our goal remains to make improvements that align with our company values and create strong financial returns for our stakeholders. I would like to thank our head of ESG, Zoe Koskinas, and her team for their passion and all the work they've put in to get us to this point.

Elias Joseph Sabo: We have made significant strides over the last few years and this progress would it have been possible without the engagement of our board our leadership team and most importantly, the participation of our employees both at Cody and that our subsidiaries.

Elias Joseph Sabo: Our goal remains to make improvements that align with our company values.

Elias Joseph Sabo: <unk> strong financial returns for our stakeholders.

Elias Joseph Sabo: I would like to thank our head of ESG <unk> and her team for their passion and all the work they've put in to get us to this point.

Elias Joseph Sabo: When it comes to the M&A markets, we feel a level of optimism that we have not felt in years. We continue to see an improvement in the quality of businesses coming to market. We also see our competitors continue to struggle with leveraged buyout finance, specifically when it comes to branded consumer business. This only creates more opportunities for us. When debt markets are weak for single asset buyouts, our competitive advantage grows. We believe today's market landscape allows our competitive advantage to shine, setting the stage for consummating M&A at more attractive valuations, which, of course, leads to improved shareholder return.

Elias Joseph Sabo: When it comes to the M&A market, we feel a level of optimism that we have not felt in years.

Elias Joseph Sabo: We continue to see an improvement in the quality of businesses coming to market.

Elias Joseph Sabo: We also see our competitors continue to struggle with leverage buyout financing specifically when it comes to branded consumer businesses.

Elias Joseph Sabo: This only creates more opportunities for us when debt markets are weak for single asset buyouts or competitive advantage grows we believe today's market landscape allows our competitive advantage to shine.

Elias Joseph Sabo: Setting the stage for consummating M&A at more attractive valuations, which of course leads to improve shareholder returns.

Elias Joseph Sabo: We remain steadfast in our efforts to identify, acquire, and manage disruptive and innovative companies, and, as Ryan mentioned, our strong liquidity position enables us to act on acquisition opportunities and also invest in our subsidiaries to further build upon our track record of delivering growth for our shareholders. While I have tremendous confidence in our strategy and our competitive advantages, I'd also like to take a minute to recognize our employees who deliver these outstanding results day in and day out. Thank you to our subsidiary management teams and employees and to the entire Cody team for your hard work executing this growth strategy. With that said, Operator, please open the lines for Q&A.

Elias Joseph Sabo: We remain steadfast in our efforts to identify acquire and manage disruptive and innovative companies and as Ryan mentioned, our strong liquidity position enables us to act on acquisition opportunities and also invest in our subsidiaries to further build upon our track record of delivering growth for our.

Elias Joseph Sabo: Shareholders.

Elias Joseph Sabo: While I have tremendous confidence in our strategy and our competitive advantages.

Elias Joseph Sabo: Also like to take a minute to recognize our employees who deliver these outstanding results day in and day out. Thank.

Elias Joseph Sabo: Thank you to our subsidiary management teams and employees and to the entire Coty team for your hard work executing this growth strategy.

Speaker Change: With that operator, please open the lines for Q&A.

Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster and one moment for our first question.

Operator: Please stand by while we compile the Q&A roster, and one moment for our first question. And our first question comes from Larry Solow from CJS Securities.

Elias Joseph Sabo: And our first question comes from Larry Solow from CJS Securities. Your line is now open.

Lawrence Scott Solow: Great, good afternoon guys. I guess my first question is just Elias, just sort of following up on your, I appreciate the commentary on the M&A market and it sounds like you sound very enthusiastic there, so I'm just curious with your leverage still relatively relatively, you know, sort of at the higher end of the range you'd, you know, like it to be at. What's your, you know, what's your appetite at these levels?

Elias Joseph Sabo: Great.

Lawrence Scott Solow: Afternoon, guys.

Lawrence Scott Solow: I guess I guess first question just Elias just sort of following up on your I appreciate the commentary on the M&A market and it sounds like.

Lawrence Scott Solow: You sound very enthusiastic there so I'm just curious.

Lawrence Scott Solow: What would your leverage still relatively sort of at the higher end I think of the range.

Lawrence Scott Solow: Like it to be.

Lawrence Scott Solow: Sure.

Speaker Change: Whats your.

Elias Joseph Sabo: And maybe the sailacrossman, maybe other things in the wings, maybe, you know, that you might be able to do also to improve that leverage lower, you know, be maybe even more aggressive. Sounds like an opportunity. Yeah. Yeah, sure.

Speaker Change: What's your appetite at these levels and maybe the sale of crossman maybe other other.

Elias Joseph Sabo: Things in the wings that you might be able to do also to improve that.

Elias Joseph Sabo: Leverage lower so you could you may be even more aggressive.

Speaker Change: It sounds like opportunity, yes, so Larry.

Elias Joseph Sabo: So, you know, and I think we mentioned this on the last call, there is the ability to consummate acquisitions. And, you know, we're comfortable bringing our leverage up higher than where it is today. The reason we're comfortable is, you know, frankly, what we've demonstrated here in the first quarter and in the fourth quarter and what we expect is going to continue not only this year but well into 25 and beyond. You know, we've repositioned the company to just have a dramatically faster growth rate.

Lawrence Scott Solow: Yes, sure. So I think we mentioned this on the last call there is the ability to accountants.

Lawrence Scott Solow: Consummate acquisitions, and we're comfortable bringing our leverage up higher than where it is today.

Lawrence Scott Solow: The reason we're comfortable is frankly, what we've demonstrated here in the first quarter and in the fourth quarter and what we expect is going to continue not only this year, but well into 'twenty five and beyond.

Elias Joseph Sabo: And our ability to create cash flow and deleverage is really strong now. And so, you know, I think the company profile allows it to handle more leverage temporarily because the earnings growth profile is so strong and our cash flow profile. And remember, you know, Lugano used $65 million of cash, but it delivered 83% growth in EBITDA. Outside of that, our business delivered north of $50 million in free cash flow from operations.

Elias Joseph Sabo: We've repositioned the company to just have a dramatically faster growth rate.

Elias Joseph Sabo: And our ability to create cash flow and deleverage is really strong now and so.

Elias Joseph Sabo: The company profile allows it to handle more leverage temple temporarily because the earnings growth profile is so strong and our cash flow profile will remember.

Elias Joseph Sabo: Lugano used $65 million of cash, but it delivered 83% growth in EBITDA outside of that our business delivered north of $50 million free cash flow from operations and I do think you have to separate Lugano out given the extraordinary growth rate and the returns on invested capital there. So.

Elias Joseph Sabo: And I do think you have to separate Lugano out given the extraordinary growth rate and the returns on invested capital there. So, you know, we look at kind of how the company is positioned today. And with, as you mentioned, the sale of Crosman, the proceeds of which will go to delever even further, we feel that we have a very strong deleveraging trend that's coming not only in the second quarter but beyond.

Elias Joseph Sabo: Look at kind of how the company is positioned today and with as you mentioned the sale of Crossman, which the proceeds of which will go to delever even further.

Elias Joseph Sabo: We feel that we have a very strong.

Elias Joseph Sabo: Deleveraging trend, that's coming not only in the second quarter, but beyond and as a result of that it's going to open up more capacity now.

Elias Joseph Sabo: And as a result of that, it's going to open up more capacity. Now, you know, to the other part of your question, you know, we have been, since, you know, 2018, when I took over and Pat became COO, you know, we've been kind of moving the portfolio around and creating, you know, a much higher percentage of businesses that are, you know, more disruptive and innovative and can materially outgrow their core growth You know, the sale of Crosman is an extension of that, but that isn't done yet.

Speaker Change: The other part of your question.

Elias Joseph Sabo: Have been since 2018, when I took over and Pat became COO.

Elias Joseph Sabo: Been kind of moving the portfolio around.

Elias Joseph Sabo: And creating a much higher percentage of businesses that are more disruptive and innovative and can materially outgrow their core growth rate.

Elias Joseph Sabo: The sale of Crossman is an extension of that but that has been done yet and so I would say there are other assets in the portfolio, which.

Elias Joseph Sabo: And so I would say, you know, there are other assets in the portfolio which are not growing at the level or expected to, so we will continue to make some divestitures. And so, we feel that there are adequate sources of capital that will be coming in both through continued portfolio repositioning as well as growth in the portfolio and free cash flow generation. And then lastly, you know, kind of when we can, you know, find opportunities to run the common and preferred. I appreciate all that color.

Elias Joseph Sabo: Not growing at the level or expected to that we will continue to make some divestitures and so we feel that there is adequate sources of capital that will be coming in both through continued portfolio repositioning as well as growth in the portfolio free cash flow generation and then lastly.

Elias Joseph Sabo: Kind of when we can find opportunities to run the common and preferred Atms.

Elias Joseph Sabo: And just the second point, just on sort of the outlook, it sounds like maybe the macro, I think obviously interest rates are staying up longer than some had hoped. So maybe from a macro level, things are slightly worse for you guys, but it sounds like you have some specific offshoots at a bunch of your companies that are basically offsetting that all in. And then you have Lugana, which is still kicking it, you know, kicking ass there. And that's why the guidance is going off. Is that kind of a good way to sort of summarize the outlook in a broad brush? Yeah, I mean,

Speaker Change: Okay I appreciate all that color and just just just.

Speaker Change: The second point, just on the sort of the outlook. It sounds like maybe the macro I think obviously interest rates are staying out longer than I guess somewhat hoped.

Speaker Change: So maybe from a macro level things are slightly worse for you guys, but it sounds like you have some specific offshoots had a bunch of companies that are basically offsetting that.

Speaker Change: All in and then you have Lugano, which is still kicking it.

Speaker Change: Is there and Thats why the guidance is going up is that kind of a good way to sort of summarize the outlook and a broad brush, yes. I mean, we all saw Q1 GDP came in kind of disappointing with inflation.

Elias Joseph Sabo: Yeah, I mean, we all thought Q1 GDP came in kind of disappointing, with inflation, you know, increasing a little bit. So I think that kind of needs to be taken into consideration. And frankly, we're seeing it a little bit in our industrial businesses; there's a little bit of weakness, but you know, over 70% of our EBITDA comes from consumers, and we aren't seeing that same weakness there, Larry.

Speaker Change: <unk> a little bit so I think that was kind of needs to be taken into consideration and frankly, we're seeing it a little bit in our industrial businesses. There is a little bit of weakness, but over 70% of our EBITDA comes from consumer and we arent seeing that same weakness there Larry I mean, the consumer remains.

Elias Joseph Sabo: I mean, the consumer remains, you know, very strong and resilient. Now, clearly, depending where the consumer is, the more inflation has impacted a consumer, you know, that spending patterns are a little lower. But remember, we skew towards the upper end of the consumer globally for the vast majority of our portfolio. And then we do have, you know, things that were massive headwinds last year, like inventory de-stocking that hit all of our consumer businesses and caused sell-in to be far below sell-through. You know, that headwind is dissipating.

Speaker Change: Very strong and resilient now clearly depending where the consumer is the more inflation has impacted consumer spending.

Speaker Change: Spending patterns a little lower.

Speaker Change: But remember we skew towards the upper end consumer globally for the vast majority of our portfolio and then we do have things that were massive headwinds last year like these inventory destocking.

Speaker Change: All of our consumer businesses.

Speaker Change: And caused <unk> to be far below sell through.

Speaker Change: Headwind is dissipating. So there is a factor that sort of unique to our group of subsidiaries right now that give us confidence that we're more likely to be surprising going forward on the upside than we or the other way.

Elias Joseph Sabo: So there's a factor that's sort of unique to our, you know, kind of group of subsidiaries right now that gives us confidence that, you know, we're more likely to be surprising going forward on the upside than we are, you know, the other way around.

Lawrence Scott Solow: Okay, great. Fair enough. I appreciate the call. Thanks a lot.

Speaker Change: Okay, Great fair enough I appreciate the color. Thanks a lot.

Operator: And thank you. In one moment for our next question, and our next question comes from Mark Feldman from William and Blair. Your line is now open.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Marc Feldman from William and Blair. Your line is now open.

Mark Feldman: Hi guys, thanks for taking the question. I guess, you know, on my first question, can you talk about, you know, any initiatives that you have at Velocity? Also, you guys came off of a demand surge during COVID. And, you know, you obviously saw the inventory, the stocking trends that you saw with Primaloft and BOA as well. So can you talk about any initiatives to work through that going forward now that we have sold off the Crossman division?

Marc Feldman: Hi, guys. Thanks for taking the question I guess my first one can you talk about any initiatives that you have at velocity.

Speaker Change: Also.

Marc Feldman: Guys came off of a demand surge during COVID-19.

Marc Feldman: Yes, you are obviously saw the inventory destocking trends that you saw private office as well. So can you talk about.

Marc Feldman: Mission is to work through that going forward now that we.

Marc Feldman: Sold off the Craftsman dimension.

Patrick A. Maciariello: Sure, initiative. Yeah, I mean, I would say, in short, it's a focus on technology and new product development. I think if you look at the archery side, we have some exciting new technologies coming out that, you know, we think could help accelerate sales and, you know, in twenty five. And then, if you look, the company subsidiary King's is just a really on-trend hunting apparel business that each year continues to take market share granted from a small base. So we're excited about both those things.

Marc Feldman: Sure.

Speaker Change: Yes, I mean I would say.

Speaker Change: In short, it's a focus on technology and new product development I think if you look at the archery side, we have some exciting new technologies.

Speaker Change: Coming out that we think could help accelerate sales.

Speaker Change: In 'twenty five and then if you look.

Speaker Change: The company's subsidiary King is.

Speaker Change: Just a really on trend.

Speaker Change: Hunting apparel business.

Speaker Change: The each year continues to take market share granted from a small base.

Speaker Change: So we're excited about both of those businesses.

Mark Feldman: Great, thank you for that. And then, you know, another one also on the stocking here.

Speaker Change: Great. Thank you for that and then another one also on the stocking here.

Speaker Change: So it's great to hear with the double digit growth of bookings with prime aloft.

Speaker Change: Just talk about timing of when we can actually see those convert to revenue I know there is seasonality built in ordering.

Speaker Change: And when does have to be done by the team and the actual results for the year. Thank you.

Speaker Change: So we believe we will grow in the second quarter and finalized we believe will grow topline and we believe we will grow EBITDA quarters bookings are not fully in yet, but I would just say all signs are pointing to growth.

Mark Feldman: So it's great to hear about the double-digit growth in bookings with Primaloft. But can you just talk about the timing of when we can actually see those convert to revenue? I know there's seasonality built in with ordering, and you know when those have to be done by to see the actual results for the year.

Speaker Change: As soon as this quarter.

Speaker Change: Great. Thanks for taking the questions.

Patrick A. Maciariello: Thank you.

Patrick A. Maciariello: So we believe we'll grow in the second quarter if I'm lost. We believe we'll grow Topline, and we believe we'll grow EBITDA. The quarter's bookings are not fully in yet, but I would just say all signs are pointing to growth as soon as this quarter. Great, thanks for taking me

Mark Feldman: Great, thanks for taking the question. Thank you, and good luck!

Speaker Change: Thank you.

Speaker Change: And thank you.

Operator: And one moment for our next question. One moment for our next question, and our next question comes from Derek Summers from Jeffries. Your line is now open.

Speaker Change: And one moment our next question.

Speaker Change: One moment our next question.

Speaker Change: And our next question comes from Derek Summers from Jefferies. Your line is now open.

Derek Russell Hewett: Hey, good afternoon, everyone. Just on the industrial segment, on the revenue decline, is that more of a price story or a unit or quantity story? And then, you know, kind of, EBITDA margins held up a little bit better there, you know, what's happening on the expense side of the P&L to have those hold up a little bit better.

Derek Russell Hewett: Hey, good afternoon, everyone just on the industrial segment.

Derek Russell Hewett: On the revenue decline is that more of a price story or units or quantity story.

Derek Russell Hewett: Then kind of.

Derek Russell Hewett: EBITDA margins held up a little bit better David.

Derek Russell Hewett: What's happening on the expense side of the P&L.

Derek Russell Hewett: Have those hold ups.

Patrick A. Maciariello: Yeah, so I'd say on the revenue versus quantity front, it is a little bit of both. On the Sterno side, we did see some pressure on our wax melt business, which is predominantly sort of a middle income and below purchaser. And then I think your second question, as it relates to margins and margin improvement, our management teams are doing a good job. As we mentioned before, and we've touched on the new management team at Altor, which continues to drive efficiency gains.

David: Yes, so I'd say on the revenue bridge quantity it is a little bit of both.

David: On the.

Derek Russell Hewett: On the Sterno side, we did see some pressure in our wax milk business, which is predominantly sort of a middle income and below.

Derek Russell Hewett: Purchaser.

Speaker Change: And then I think your second question as it relates to margins and margin improvement.

Speaker Change: Our management teams are doing a good job, we mentioned before and we've touched on the new management team outdoor which continues to drive efficiency gains.

Patrick A. Maciariello: We have a strong management team now at Sterno, and as well as we have at Arnold, they just got caught with the timing of some expenses this quarter, as I mentioned, on some professional services and marketing.

Speaker Change: We have a strong management team now external that's there now and as well as we have.

Speaker Change: Arnold They just had some got caught with the timing of some expenses this quarter as I mentioned on some professional services and marketing expenses.

Derek Russell Hewett: Got it. And then just to pivot to Lugano, on the London store rollout, you know, kind of what's the Do you guys expect like a 12-month runway to get this, you know, fully kind of operational in a good spot or kind of what's the timeline for implementation, so to speak, there?

Speaker Change: Got it.

Speaker Change: And then just to conclude Lugano.

Speaker Change: London store rollout kind of what's the.

Speaker Change: Do you guys have stuck like a 12 month runway to get this fully operational in a good spot or kind of what's the timeline for implementation so to speak there.

Patrick A. Maciariello: I mean, I think our stores, our salons usually take some time to get up to sort of, you know, become optimized. I would say it is going to have sales and be a driver of sales, though, as soon as this week.

Speaker Change: I mean, I think our stores our salons, usually takes some time to get up to sort of.

Speaker Change: <unk>.

Speaker Change: To become optimized I would say it is going to have sales can be a driver of sales, though as soon as this week.

Speaker Change: Good story that we have a lot of expectations on ex break there on may break there in Mayfair, it's in a great location in beautiful Theyre doing a lot of promotion around it. So we're confident it's going to have a partner.

Derek Russell Hewett: It's a good store that we have a lot of expectations for. It's right there on Mayfair, right there in Mayfair. It's in a great location. It's beautiful. They're doing a lot of promotion around it, so we're confident it's going to have a positive impact on revenue almost immediately.

Speaker Change: A positive impact on revenue almost immediately.

Derek Russell Hewett: Got it. That's all for me. Thank you.

Speaker Change: Got it that's all for me thank you.

Operator: And thank you. And one moment for our next question, and our next question comes from Matt Koranda from Roth MKM. Your line is now open.

Speaker Change: And thank you.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Matt Koranda from Roth MKS. Your line is now open.

Matthew Butler Koranda: I guess thanks for taking the questions. I guess on the Crosman portfolio action, I'm curious, why only carve out Crosman? Why not just sort of divest of the entire velocity segment? Are we waiting for some improvement at Raven and the other subsidiaries there? And I just wanted to understand, just on sort of your posture toward acquisitions going forward. It sounds a lot like we'd be comfortable making acquisitions first and then selling down certain assets to drop leverage. Not necessarily, but we don't necessarily need to wait for divestitures as a gating item to get to the acquisitive stuff. So maybe just put a finer point on that for us if you could as well.

Matthew Butler Koranda: Hey, guys. Thanks for taking the questions.

Matthew Butler Koranda: I guess on the crossman portfolio action I'm curious.

Matthew Butler Koranda: Why only carve out Crosby and why not just sort of divest of the entire velocity segment are we waiting for some improvement at Raven and the other subsidiaries there and I just wanted to understand.

Speaker Change: On on sort of your posture toward acquisitions going forward it sounds a lot like <unk>.

Speaker Change: We'd be comfortable making acquisitions first and then selling down certain assets to drop leverage not necessarily we don't necessarily need to wait for divestitures.

Speaker Change: As a gating item to get to the acquisitive steps. So maybe just put a finer point on that for US if you got as well.

Elias Joseph Sabo: Yeah, Matt. So, you know, with Velocity, I would say the airgun business was, you know, performing okay. And, you know, we just felt that it made sense, and there was a natural buyer out there who could combine the businesses, both of which, you know, the industry has created some excess capacity over the last few years of decline. It kind of makes sense that those businesses would be combined. And I think Daisy, you know, has a great asset, and they'll be able to, you know, create a lot of efficiencies out of putting those businesses together.

Speaker Change: Yes, Matt so with.

Speaker Change: With velocity I would say.

Speaker Change: Aragon business was performing okay.

Speaker Change: And we just felt that it made sense and there was a natural buyer out there we're combining the businesses, both which the industry has created some excess capacity over the last few years of declines.

Speaker Change: Makes sense that those businesses would be combined in.

Speaker Change: I thank daisy.

Speaker Change: Have a great asset and we'll be able to create a lot of efficiency you've got of putting those businesses together and so I think there is more value to be created by separating the two businesses and having the airgun business kind of be sold offers.

Elias Joseph Sabo: And so, I think there's more value to be created by separating the two businesses and having the airgun business, you know, kind of sold off first, in terms of what is left, and why not have sold the whole thing. We think what remains, as Pat said, has some really exciting new technology that's coming next year and has the, you know, the potential to really reinvigorate the category and provide some substantial upside growth in, you know, And so, I think it makes more sense, given, you know, that's kind of consistent with what we like in our businesses, you know, kind of highly innovative businesses that can, you know, drive, you know, category growth, and we're going to, you know, we expect to see that here in Velocity next year.

Speaker Change: In terms of what is left and why not having sold but the whole thing. We think what remains as Pat said it has some really exciting new technology, that's coming next year and has the potential to really reinvigorate the category and provide some substantial upside growth in.

Speaker Change: Kind of 'twenty five 'twenty six.

Speaker Change: I think it makes more sense given.

Speaker Change: Consistent with what we like in our businesses.

Speaker Change: Highly innovative businesses that can drive kind of category growth and we're going to we expect to see that here in velocity next year.

Elias Joseph Sabo: So, you know, I think there's a better path to maximizing value out of the overall Velocity asset by having split the business up and, you know, kind of doing it as we are right now. And I think it's, you know, very much consistent with our strategy, and, you know, frankly, I think it is consistent with what our ESG strategy is, as well, to move on from that asset. With respect to your second question and leverage, the answer, you know, simply is yes.

Speaker Change: No.

Speaker Change: There is a better path to maximizing value out of the overall velocity asset by having split the business up and.

Speaker Change: Kind of doing it as we are right now.

Speaker Change: And I think it's very much consistent with our strategy and frankly I think it is.

Speaker Change: Consistent along what our ESG strategy is as well to.

Speaker Change: To move on from that asset.

Speaker Change: With respect to your second question and leverage the answer simply is yes, we're comfortable taking on leverage now more then we have to fund an acquisition.

Elias Joseph Sabo: We're comfortable taking on leverage now more than we have to fund an acquisition. And there could be, you know, the deleveraging activities that will happen after that, anywhere from, you know, selling under the ATMs to potential further divestitures. You know, those are all there. And so, the timing doesn't need to be, you know, fund on the ATMs or, you know, divest an asset in order to acquire. If we find a great half a billion dollar acquisition opportunity, we're going to. And we feel very comfortable with where our leverage is now, especially pro forma for the sale of the Crosman business and repayment of those proceeds towards, you know, debt reduction.

Speaker Change: And there could be the deleveraging activities that will happen after that anywhere from.

Speaker Change: Selling under the Atms to potential further divestitures those are all there and so the timing doesn't need to be.

Speaker Change: Fund on the Atms or.

Speaker Change: Divest announced that in order to acquire if we find a great half of $1 billion.

Speaker Change: Acquisition opportunity, we're going to execute against it.

Speaker Change: And we feel very comfortable with where our leverage is now, especially pro forma for the sale of the Crosby business and repayment of those proceeds towards.

Elias Joseph Sabo: And so we're very comfortable now going out and doing an acquisition. And again, you know, Matt, given the strength of the business, given the, you know, kind of growth in earnings that we are really confident about, especially in Q2, but really more so for the rest of the year and how it looks into 25, we're just comfortable having a little bit more leverage right now. And so the timing of, you know, kind of the portfolio repositioning is a little bit less relevant.

Speaker Change: Debt reduction.

Speaker Change: And so we're very comfortable now going out and doing an acquisition and again.

Speaker Change: Matt given the strength of the business.

Speaker Change: Given the kind of.

Speaker Change: Growth in earnings that we are really confident about especially in Q2, but really more so for the rest of the year and how it looks into 'twenty five.

Speaker Change: We're just comfortable having a little bit more leverage right now and so the timing of the portfolio.

Speaker Change: <unk> repositioning is a little bit less relevant now we're not going to go haywire and go outside of kind of reasonable parameters, but bringing our leverage up another half a turn or three quarters of a turn for a temporary period would not distress us given all the signs were seeing of growth and deleveraging in our business.

Elias Joseph Sabo: Now we're not going to go haywire and go outside of, you know, kind of reasonable parameters, but bringing our leverage up another half a turn or three quarters of a turn for a temporary period would not distress us given all the signs we're seeing of growth and deleveraging in our business.

Matthew Butler Koranda: Okay, I'm super clear and appreciate all that detail, Elias. I guess on the Lugano front, obviously it was not an issue this quarter to lap some pretty big two-year sort of stack comps there, but just wondering as we progress through this year why the confidence level is so high that we sort of continue to see the large growth rate that Lugano has been on for the last several quarters. Maybe just unpacking the drivers of that growth a little bit more clearly for us would be helpful, like how much is related It'd just be helpful to hear a little bit more than that.

Speaker Change: Okay Super clear and I appreciate all that detail Elias.

Speaker Change: I guess on the Lugano front.

Speaker Change: Obviously, it was not an issue this quarter to lap some pretty big two year stack comps there.

Speaker Change: But just wondering as we progress through this year.

Speaker Change: Why the confidence level is so high that we sort of continue to see the the.

Speaker Change: The large growth rate that legato is been on for the last several quarters, maybe just unpacking.

Speaker Change: The drivers of that growth a little bit more clearly for us would be helpful. Like how much is related to kind of salon expansion and some of the international expansion that youre alluding to versus just kind of like for like.

Speaker Change: Growth at existing salons, and maybe <unk> growth.

Speaker Change: Just be helpful to hear a little bit more on that.

Elias Joseph Sabo: Yeah, Matt, that's a lot to unpack. Let me take a shot at it.

Speaker Change: Yeah, Matt that's a lot to unpack, let me take let me take a shot at it.

Elias Joseph Sabo: So first and foremost, I think, you know, the market penetration is incredibly low at Lugano. Particularly, we think we're converting non-jewelry buyers to jewelry buyers as well. So the market penetration when you include that is even lower, right?

Matthew Butler Koranda: So first and foremost I think the market penetration is incredibly low.

Matthew Butler Koranda: <unk>.

Matthew Butler Koranda: Particularly we think we're on.

Matthew Butler Koranda: Converting non jewelry buyers too to jewelry buyers as well so the market penetration when you include that.

Elias Joseph Sabo: Number two, we're investing significantly in inventory, as you can see and as we've told you. And, you know, we're more and more getting the right pieces in the right places at the right times to be sold. Number three, I think you will still see some maturation of some of the stores that, you know, we invested in in the last couple years, be that DC, particularly the Palm Beach flagship salon, particularly Newport Beach. I think you'll still see continued growth there.

Matthew Butler Koranda: Is even lower rate number one number two we're investing significantly in inventory.

Matthew Butler Koranda: As you can see and as we told you.

Matthew Butler Koranda: And we're more and more getting the right pieces in the right places at the right time.

Matthew Butler Koranda: To be sold number three.

Matthew Butler Koranda: You will still see some maturation of some of the stores that.

Matthew Butler Koranda: We invested in the last couple of years be that DC, particularly the Palm Beach flagship Salon, particularly Newport Beach, I think youll still see continued growth there.

Elias Joseph Sabo: You know, as those stores, salons, excuse me, just continue to grow. And then, I'd say lastly, there will be geographic growth. Obviously, having a London salon now open will drive growth. There are a couple more areas or cities we're looking into, though I wouldn't expect any announcements probably till the fourth quarter at the earliest.

Matthew Butler Koranda: As those stores salons excuse me just continued to mature and then I'd say lastly, there will be geographic growth, obviously, having a London Salon now open and will drive growth. There are a couple more areas of cities. We're looking in so I wouldn't expect any announcements probably till the fourth quarter at the earliest so I think it's a combination.

Elias Joseph Sabo: So I think it's a combination of all of the things you said plus, you know, investing in the right products. And I'll just remind you, you know, this is a disruptive business that's able to convey a lot of value to its customers through its disruptive supply chain as well, right? We believe we're able to buy very well and pass on that value to the end customer.

Matthew Butler Koranda: All of the things you said plus.

Matthew Butler Koranda: Investing in the right product and I'll just remind you.

Matthew Butler Koranda: This is a disruptive business, that's able to convey a lot of value to their customers.

Matthew Butler Koranda: Through their disruptive supply chain as well right. We believe we are able to buy very well and pass on that value to the end customer.

Speaker Change: Okay Super.

Matthew Butler Koranda: Okay, super. Can I sneak one more in just on Honeypot since it's kind of newer? Just curious, the growth drivers that you're seeing there, I think you guys alluded to kind of additional shelf space with some key retailers. Maybe just a little bit more on where you're seeing those shelf space gains, maybe in which product categories and which types of retailers you're seeing some gains there, and just sort of the growth runway you see there.

Speaker Change: Let's take one more time, just on how many pods and thats kind of newer just curious.

Speaker Change: The growth drivers that Youre seeing there I think you guys alluded to kind of additional shelf space with some key retailers, maybe just a little bit more on where youre seeing those shelf space gains, maybe on which product categories, and which types of retailers youre seeing some gains there and just sort of the growth runway you see there.

Patrick A. Maciariello: Sure. So there are a couple big box retailers that sort of dominate the industry. We are, you know, strong with both of them, particularly one that's getting stronger. Outside of that, it's really growth in drug and grocery channels, which we've been under indexed to historically. And then, you know, there are some new projects hitting the shelf now. We're very excited about, you know, sort of the new product pipeline in 25 and 26

Speaker Change: Sure.

Speaker Change: So there is a couple of big box.

Speaker Change: Retailers that sort of dominate the industry.

Speaker Change: We are.

Speaker Change: Strong with both of them.

Speaker Change: Particularly one getting stronger outside of that it's really <unk>.

Speaker Change: Growth in drug and grocery channels, which we've been under indexed to historically.

Speaker Change: And then there are some new products projects hitting the shelves now we're very excited about sort of the.

Speaker Change: New product pipeline, and 25% and 26 as well.

Matthew Butler Koranda: Okay, great. I'll take the rest of my offline guys. Thank you.

Speaker Change: Okay, Great I'll take the rest of mine offline guys. Thank you.

Speaker Change: Thank you.

Operator: and thank you. In one moment for our next question, and our next question comes from Robert Dodd from Raymond James. Your line is now open.

Speaker Change: Thank you.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Robert Dodd from Raymond James Your line is now open.

Robert James Dodd: Hi guys, and congratulations on the quarter. On Primaloft, I recognize everything you said about the bookings, etc. And I know it's difficult to get see-through to the end consumer on this and the Inventory Channel. But do you know the source of the building? Is it the same products that are finally ramping back up, or is this new SKU wins or new client relationships or any color on what's driving the turnaround? Is it just inventory clearing out, or are there other factors at play? with this webinar.

Operator: Sure.

Robert James Dodd: Hi, guys congratulations.

Robert James Dodd: On prime at all.

Ryan J. Faulkingham: That kind of everything you said about the bookings et cetera.

Robert James Dodd: And I know, it's difficult to get through to the end consumer.

Robert James Dodd: And inventory channel, but do you know the source of that is it.

Robert James Dodd: Same products that are funding ramping back up with this new <unk> wins on new client relationships. So any color on what's driving the turnaround is it just inventory clearing out or other factors at play.

Patrick A. Maciariello: No, we're adding to some products. A couple of products have rolled off, but we're also adding, you know, particularly in the performance segment, some new customers and some new project wins. And then I would say as far as, It's also, it's just what we're hearing as far as, you know, later, later order patterns, etc. It's just what we're hearing from our brand partners. And so I can't point to data specifically about that. But in general, they're saying that the supply chain is improving.

Ryan J. Faulkingham: With this one.

Elias Joseph Sabo: No we're adding to.

Robert James Dodd: Some products a couple of products have rolled off but we're also adding.

Particularly in the performance segment.

Patrick A. Maciariello: Some new some new customers and some new project wins as well.

Robert James Dodd: And then I would say as far as.

Robert James Dodd: It's also it's just what we're hearing as far as.

Robert James Dodd: Later later order patterns et cetera, it's just what we're hearing from our brand partners and so I can't point to data specifically to <unk>.

Patrick A. Maciariello: But in general they are saying that.

Patrick A. Maciariello: Supply chain is improving.

Robert James Dodd: Got it. Thank you.

Speaker Change: Got it thank you and all the.

Robert James Dodd: The same kind of question.

Robert James Dodd: Very strong quarter this quarter, it's been one that.

Robert James Dodd: Its mix has been historically a lot of snow boots seasonality in.

Speaker Change: Good morning.

Patrick A. Maciariello: Almost the same kind of question with BoA, right? Very strong quarter this quarter. It's been one that, you know, its mix has historically been a lot of snow boots and seasonality and snowboarding shoes. But you've been adding a lot of SKUs. You've been adding, you know, or trying to add new product verticals. I mean, how much is the new responsible for this rebound versus the old? Because I don't want to call it old because the products aren't that old, but the older verticals versus newer verticals driving it, how much was the contribution?

Robert James Dodd: Absolutely.

Speaker Change: But you've been adding a lot of SK <unk> been adding.

Patrick A. Maciariello: We're trying to add new product vertical I mean, how much is the new.

Patrick A. Maciariello: Responsible for this rebound versus I don't want to call it holes, but.

Patrick A. Maciariello: The older verticals versus newer vertical commenced.

Speaker Change: Driving how much what's the contribution.

Robert James Dodd: Boy, that's a tough one to unpack. And I actually have some data on this to say that it's roughly half and half, it feels. We are growing, you know, our number of SKUs, but we're growing revenue at a faster rate than that. And so I think our SKUs are also gaining market share.

Patrick A. Maciariello: Alright.

Patrick A. Maciariello: Tough one on pack.

Speaker Change: I actually have some data on this to say that it's roughly half and half the deals we.

Speaker Change: We are growing our number of skus, but we're growing revenue.

Robert James Dodd: At a faster rate than that and so I think our skus are also taking market share.

Patrick A. Maciariello: Got it. Thank you. And then the last one, if I can, on... Logano.

Speaker Change: Got it. Thank you and then last one if I can.

Robert James Dodd: I mean, obviously, London's open now. Are you willing to articulate more? Are there other international locations that have been scouted in the process? Or is it still, Are you just not willing to name names in terms of countries and cities? Not willing to name names, but Ben Scowcroft is not yet in the process.

Ryan Faulkingham: I mean, obviously it does open now.

Robert James Dodd: Are you willing to articulate the bulk.

Robert James Dodd: Are there.

Elias Joseph Sabo: The international locations instead of.

Robert James Dodd: Been scouted in process or is it still.

Speaker Change: So you're just not willing to.

Robert James Dodd: In terms of countries not willing to name names, but.

Robert James Dodd: Yet in practice currently being cut.

Speaker Change: Got it thank you.

Patrick A. Maciariello: and thank you. And one moment for our next question. And our next question comes from Matt Howlett from B. Reilly Securities. Your line is now open.

Speaker Change: You got it.

Speaker Change: And thank you.

Matthew Philip Howlett: And one moment our next question.

Patrick A. Maciariello: And our next question comes from Matt Howlett from B Riley Securities. Your line is now open.

Matthew Philip Howlett: Hey guys, thanks for taking my question. Just on the guidance, you know, this inventory de-stocking, you know, this headwind that's going to turn into a tailwind, the guidance does not incorporate the snapback that we've all discussed over the last few quarters, that there could be, you know, a re-acceleration at some point if this is really the case.

Matthew Philip Howlett: Hey, guys. Thanks for taking my question just on the guidance this inventory destocking.

Matthew Philip Howlett: This headwind that's going to turn into a tailwind the guidance does not incorporate the snapback.

Matthew Philip Howlett: I'll discuss over the last few quarters.

Matthew Philip Howlett: There could be that it could be a reacceleration at some point. If this is really at the end of it.

Elias Joseph Sabo: That is correct, Matt. The guidance assumes sort of the same trajectory we're seeing right now in the first quarter, sort of the slow turning of the boat, if you will. And it, you know, kind of is improving, and it feels like it's steadily improving, but it doesn't assume, you know, sort of a big snap back and rebound. And, you know, what we're hearing is that customers globally, after having so much access to inventory, are now just being extra cautious. And obviously, the cost of carrying inventory is a lot higher now, you know, where rates are, so I think that has a dampening effect on it.

Speaker Change: That is correct Matt.

Elias Joseph Sabo: Our guidance assumes.

Elias Joseph Sabo: Sort of the same trajectory, we're seeing right now in the first quarter sort of the slow turning off the boat if you will.

Elias Joseph Sabo: And it kind of is improving and it feels like it's steadily improving but it doesn't assume sort of a big snapback and rebound.

Elias Joseph Sabo: And what we're hearing is that customers globally ever after having so much access to inventory are now just being extra cautious and so and obviously the cost of carrying inventories a lot higher now where rates are so I think that has a dampening effect on it but my sense is.

Matthew Philip Howlett: But, you know, my sense is, just given what we know, like if you look at Ebola, for example, and where we're getting more than 10% annual skew growth over the last few years, you can start to run the math and say, okay, there should be a bigger rebound here. And we probably haven't cleared all the inventory, you know, yet, and that kind of had stabilization. So, remember, these companies serve a lot of different end markets.

Matthew Philip Howlett: Just given what we know like if you look at a BOE for example.

Matthew Philip Howlett: Where we're getting more than 10% annual SKU growth over the last few years.

Matthew Philip Howlett: You can start to run the math and say okay.

Matthew Philip Howlett: There should be a bigger rebound here.

Matthew Philip Howlett: And we probably haven't cleared all of the inventory.

Matthew Philip Howlett: Yeah, and that kind of had stabilization. So remember these companies serve a lot of different end markets. There are not synchronized by any means and so maybe rather than a snapback, it's a slow constant build that happened.

Matthew Philip Howlett: They're not, you know, synchronized by any means. And so, you know, maybe rather than a snapback, it's a slow, constant build that happens, you know, from the beginning of this year into next year, and it surprises you by, you know, just continuing to build. But I would say this does, our forecast doesn't reflect that inventories have sort of that snapback in or any continued progressive increases, although it's likely that that probably will happen, which is why, you know, I say I think we're poised to surprise on the upside, not the other way around as the year unfolds.

Matthew Philip Howlett: From the beginning of this year into next year and it surprises by just continuing.

Matthew Philip Howlett: Continuing to build but I would say this does our forecast doesn't reflect that inventories have sort of that snapback, yet or any continued progressive increases, although it's likely that that probably will happen, which is why I say I think we're poised to surprise on the.

Matthew Philip Howlett: Outside not the other way around as the year unfolds.

Elias Joseph Sabo: Right, and just take BOA for example, I mean, normalized organic growth could still be something like 20 plus percent easily when things, you know, get back to normal. Just talking out loud.

Speaker Change: Right and just take Boa for example, I mean.

Elias Joseph Sabo: Normalized organic growth could be still something like 20 plus percent easily right.

Elias Joseph Sabo: Get back to normalization, just just talking out loud.

Matthew Philip Howlett: Yeah, I mean, historically, until we had some real craziness in the supply chain where we had massive overordering, which benefited their numbers in late 21 and early 22, and then destocking. So if you kind of clear all that noise, BOA has been sort of a 20% plus or minus top line grower over its entire history.

Elias Joseph Sabo: Yes, I mean, I think it's historically until we had some real craziness in the supply chain where.

Matthew Philip Howlett: We had massive over ordering which benefited their numbers in late 'twenty. One in early 'twenty, two and then destocking. So if you kind of clear all that noise.

Matthew Philip Howlett: <unk> always been sort of a 20% plus or minus top line grower.

Matthew Philip Howlett: Over.

Elias Joseph Sabo: Now, you know, we don't sign up and say that's what we think the company is going to deliver. But it still has a lot of the same core attributes of relatively low market share, you know, outstanding management, outstanding technology, you know, great strategy and execution. And so it still has all the elements in place. But we don't like to get out overseas.

Matthew Philip Howlett: <unk> history now, we don't sign up and say that's what we think the company is going to deliver.

Elias Joseph Sabo: But it still has a lot of the same core attributes of relatively low market share outstanding management outstanding technology.

Elias Joseph Sabo: Great strategy and execution and so it still is.

Elias Joseph Sabo: All the elements in place, but we don't like to get out over our skis. So we're not going to say that's kind of what we think its core growth rate is we'll be a little bit more modest than that.

Matthew Philip Howlett: So we're not going to say that's kind of what we think its core growth rate is; we'll be a little bit more modest than that. But look, those things still exist, and it's been a 20% grower historically. And so, you know, I would expect it to continue to be a really strong grower that is above the portfolio average.

Matthew Philip Howlett: But look those things still exist and it's been a 20% grower historically and so.

Matthew Philip Howlett: I would expect it to.

Matthew Philip Howlett: Continue to be a really strong grower that is above the portfolio average.

Elias Joseph Sabo: Gotcha. Great. And then just one last one, if I may.

Speaker Change: Got you Great and then just one last one if I may.

Elias Joseph Sabo: Legato is just an incredible investment and incredible story I don't know if you've done this in the history, but if you look at it as something that you could sell a minority interest bringing in a partner it's been it's still a bit you could use it some flexibility to buy another portfolio company and just.

Elias Joseph Sabo: How should investors look at this I mean, you have this at your hip pocket.

Elias Joseph Sabo: The company is growing phenomenally throwing off cash.

Speaker Change: What can you tell us what you could do with it.

Matthew Philip Howlett: I mean, Lugano is just an incredible investment, an incredible story. I don't know if you've ever done this in history, but would you, do you look at it as something that you could sell a minority interest in, bring in a partner, it's been, it's so big, you could use it for some flexibility to, you know, buy another portfolio company or just do we, how should investors look at this? I mean, you have this in your hip pocket, you know, this company is growing phenomenally, throwing off cash. I mean, what can you tell us what you could do with it? You know, long term to create even more value than it already has.

Elias Joseph Sabo: Long term to create even more value than I already asked for shareholders.

Elias Joseph Sabo: Yeah, I think those options exist, Matt. The problem becomes it gets a little bit, you know, complex when you start bringing in third-party investors into our structure. And you got to look at, you know, kind of them betting, you know, benefiting from how we structure our deals by being the lender and the equity, which clearly performs so well at Lugano. Do you really want to, you know, cut off that strip anymore?

Speaker Change: Yes, I think those options exist.

Elias Joseph Sabo: Problem becomes it gets a little bit.

Elias Joseph Sabo: <unk> when you start bringing in third party investors into our structure and you got to look at it kind of been betting benefiting from how we structure our deals by being the lender and the equity, which clearly performed so good at Lugano do you really want to cut off that strip anymore.

Elias Joseph Sabo: So, let's just suffice to say there is lots of opportunities I think those opportunities create complexity.

Elias Joseph Sabo: So let's just suffice to say there are lots of opportunities. I think those opportunities create complexity. And in general, we're trying to create a little bit more simplicity, so that we're an easier story to understand, not harder.

Elias Joseph Sabo: And in general we're trying to create a little bit more simplification. So that we're an easier story to understand not harder.

Elias Joseph Sabo: But that clearly is a benefit. And I would say, you know, given the growth rate of Lugano, and, you know, frankly, our forecast doesn't assume that it continues to grow at the pace that it has been. And there's upside, but, you know, it also manifests itself through far greater earnings per share. And so I would hope that, you know, there are creative financing opportunities. But obviously, as our earnings grow, that creates just direct financing opportunities for the business, whether that be equity financing or whether that be debt financing. But yeah, it will give us a plethora of options.

Elias Joseph Sabo: But that clearly is a benefit and I would say.

Elias Joseph Sabo: Given the growth rate of Lugano frankly.

Elias Joseph Sabo: Our forecast doesn't assume that it continues to grow at the pace that it has been.

Elias Joseph Sabo: And there is upside, but it also manifests itself through far greater earnings per share.

Elias Joseph Sabo: So I would hope.

Elias Joseph Sabo: Yes, there is creative financing opportunities, but obviously as our earnings grow that creates just direct financing opportunities in there.

Elias Joseph Sabo: Our business, whether that be on equity financings or whether that be in debt financings.

Matthew Philip Howlett: And having a company like this, which, you know, if you look back, we had Fox Factory, which was an extraordinary investment for us. You know, Lugano is an extraordinary investment. We've had a lot of them. BOA, you know, is in that same vein. But, you know, Lugano, just based on its sheer growth rate and mass at this point, it is a little bit unique. And, you know, we'll, you know, clearly think about what we can do to create even more incremental value from owning that asset.

Matthew Philip Howlett: But yes, it will give a plethora of options and having a company like this which if you remember back we have Fox factory, which was an extraordinary <unk>.

Matthew Philip Howlett: Investment for us.

Matthew Philip Howlett: <unk> is an extraordinary investment we've had a lot of them Boa.

Matthew Philip Howlett: Is in that same vein, but lugano just based on this share growth rate and mass at this point.

Matthew Philip Howlett: It is a little bit unique.

Matthew Philip Howlett: We'll clearly think about what we can do to create even more incremental value from owning that asset.

Elias Joseph Sabo: I really appreciate it. Thanks, Elias. Thank you.

Speaker Change: I really appreciate it thanks Les.

Operator: Thank you. And thank you. And I'm showing no further questions. I would now like to turn the call back over to Elias Sabo for closing remarks.

Elias Joseph Sabo: Thank you and thank you and I'm showing no further questions I would now like to turn the call back over to Elias Sabo for closing remarks.

Elias Joseph Sabo: As always, I'd like to thank everyone again for joining us on today's call and for your continued interest in CODI. Thank you for your support.

Elias Joseph Sabo: Thank you operator as always I'd like to thank everyone again for joining us on today's call and for your continued interest in Cody. Thank you for your support.

Operator: This concludes the Compass Diversified conference call. Thank you, and have a great day.

Speaker Change: This concludes compass diversified conference call. Thank you and have a great day.

Operator: Okay.

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