Full Year 2022 - 2024 Compass Diversified Financial Results Restatement Call

December 4, 2025

Speaker #1: Thank you for standing by and welcome to Compass Diversified's conference call. At this time, all participants are in a listen-only mode. Today's call is being recorded.

Operator: Thank you for standing by, and welcome to Compass Diversified's conference call. At this time, all participants are in a listen-only mode. Today's call is being recorded. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press Star 11 on your telephone. To remove yourself from the queue, you may press Star 11 again. I would now like to hand the call over to Ben Tapper, VP Investor Relations. Please go ahead.

Speaker #1: After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone.

Speaker #1: To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Ben Tapper, VP Investor Relations.

Speaker #1: Please go

Speaker #1: ahead. Thank you.

Ben Tapper: Thank you, and welcome to Compass Diversified's conference call to discuss the restatement of our financial statements for the fiscal years 2022 through 2024. Representing the company today are Elias Sabo, Cody's Chief Executive Officer, and Stephen Keller, Cody's Chief Financial Officer. We are also joined by Pat Maciariello of Compass Group Management LLC. Today's call is focused on the restatement of our financial statements, our audit committee's internal investigation of Lugano, the actions we are taking in response, and an update on our eight other businesses which have continued to perform during 2025. Before we begin, I'd like to remind everyone that during the course of this call, Cody will make certain forward-looking statements, including discussions of forecasts and targets, future business plans, future performance of Cody and its subsidiaries, and other forward-looking statements regarding Cody and its financial results.

Speaker #2: And welcome to Compass Diversified's conference call to discuss the restatement of our financial statements for the fiscal years 2022 through 2024, representing the company today are Elias Sabo, Cody's Chief Executive Officer, and Stephen Keller, Cody's Chief Financial Officer.

Speaker #2: We are also joined by Pat Mazzarello of Compass Group Management LLC. Today's call is focused on the restatement of our financial statements, our audit committee's internal investigation of Lugano, the actions we are taking in response, and an update on our eight other businesses, which have continued to perform during 2025.

Before we begin, I'd like to remind everyone that during the course of this call, Cody will make certain forward-looking statements, including discussions of forecasts and targets, future business plans, future performance of Cody and its subsidiaries, and other forward-looking statements regarding Cody and its financial results.

Speaker #2: Before we begin, I'd like to remind everyone that during the course of this call, Cody will make certain forward-looking statements, including discussions of forecasts and targets, future business plans, future performance of Cody and its subsidiaries, and other forward-looking statements regarding Cody and its financial results.

Speaker #2: Words such as "believes", "expects", "anticipates", "plans", "projects", "should", and "future" or similar expressions are intended to identify forward-looking statements. While these statements represent our best current judgment about future results, performance, and plans as of today, our current results and operations are subject to many risks and uncertainties that could cause actual results and operations to differ materially from what we expect.

Ben Tapper: Words such as believes, expects, anticipates, plans, projects, should, and future, or similar expressions are intended to identify forward-looking statements. While these statements represent our best current judgment about future results, performance, and plans as of today, our current results and operations are subject to many risks and uncertainties that could cause actual results and operations to differ materially from what we expect. 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. In addition to any risks that we highlight during this call, important factors that may affect our future results, performance, and plans are described in our most recent SEC reports and press release. During the call, we will refer to certain non-GAAP financial measures.

Words such as believes, expects, anticipates, plans, projects, should, and future, or similar expressions are intended to identify forward-looking statements. While these statements represent our best current judgment about future results, performance, and plans as of today, our current results and operations are subject to many risks and uncertainties that could cause actual results and operations to differ materially from what we expect.

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. In addition to any risks that we highlight during this call, important factors that may affect our future results, performance, and plans are described in our most recent SEC reports and press release. During the call, we will refer to certain non-GAAP financial measures.

Speaker #2: 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.

Speaker #2: In addition to any risks that we highlight during this call, important factors that may affect our future results, performance, and plans are described in our most recent SEC reports and press release.

Speaker #2: During the call, we will refer to certain non-GAAP financial measures. 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 Cody's financial filings.

Ben Tapper: 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 Cody's financial filings. At this time, I would like to turn the call over to Elias.

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 Cody's financial filings. At this time, I would like to turn the call over to Elias.

Speaker #2: At this time, I would like to turn the call over.

Speaker #2: to Elias. Thank you,

Elias Sabo: Thank you, Ben, and good afternoon to everyone. Today, we will walk you through the fraud that occurred at Lugano and how it led us to the decision to restate our 2022, 2023, and 2024 financial results. We will also summarize the key findings of our audit committee's independent investigation and the remediation efforts we've already made and are continuing to make to people, processes, and structure in response to the Lugano situation. Finally, we will put this in the context of Cody's broader business and the performance we see across our other eight subsidiaries. I want to begin by saying that this has been, without question, the most challenging period in Cody's history. We recognize the impact this situation has had on our shareholders, creditors, employees, and partners.

Speaker #3: Ben. Good afternoon to everyone. Today, we will walk you through the fraud that occurred at Lugano and how it led us to the decision to restate our 2022, 2023, and 2024 financial results.

Speaker #3: We will also summarize the key findings of our audit committee's independent investigation and the remediation efforts we've already made and are continuing to make to people, processes, and structure in response to the Lugano situation.

Finally, we will put this in the context of Cody's broader business and the performance we see across our other eight subsidiaries. I want to begin by saying that this has been, without question, the most challenging period in Cody's history. We recognize the impact this situation has had on our shareholders, creditors, employees, and partners.

Speaker #3: Finally, we will put this in the context of Cody's broader business and the performance we see across our other eight subsidiaries. I want to begin by saying that this has been, without question, the most challenging period in Cody's history.

Speaker #3: We recognize the impact this situation has had on our shareholders, creditors, employees, and partners. Cody has always taken pride in being a disciplined, transparent steward of shareholder capital, and that standard continues to guide every decision we make.

Elias Sabo: Cody has always taken pride in being a disciplined, transparent steward of shareholder capital, and that standard continues to guide every decision we make. There are four key messages I want you to take away from today's call. The fraud at Lugano was pervasive, complex, and isolated to that business. In retrospect, Lugano was a unique, un-Cody-like acquisition in terms of structure, industry, and capital intensity. Based on what we've learned, we are refining our acquisition criteria and governance expectations. We are making changes designed to further enhance our people, processes, and structure, building on our long track record of accountability and transparency. Four, Cody's diversified business model has been battle-tested. Our remaining subsidiaries continue to collectively perform and support our focus on deleveraging, regaining market confidence, and maximizing shareholder returns going forward.

Cody has always taken pride in being a disciplined, transparent steward of shareholder capital, and that standard continues to guide every decision we make. There are four key messages I want you to take away from today's call. The fraud at Lugano was pervasive, complex, and isolated to that business. In retrospect, Lugano was a unique, un-Cody-like acquisition in terms of structure, industry, and capital intensity.

Speaker #3: There are four key messages I want you to take away from today's call. The fraud at Lugano was pervasive, complex, and isolated to that business.

Speaker #3: In retrospect, Lugano was a unique, un-Cody-like acquisition in terms of structure, industry, and capital intensity. Based on what we've learned, we are refining our acquisition criteria and governance expectations.

Based on what we've learned, we are refining our acquisition criteria and governance expectations. We are making changes designed to further enhance our people, processes, and structure, building on our long track record of accountability and transparency. Four, Cody's diversified business model has been battle-tested. Our remaining subsidiaries continue to collectively perform and support our focus on deleveraging, regaining market confidence, and maximizing shareholder returns going forward.

Speaker #3: We are making changes designed to further enhance our people, processes, and structure. Building on our long track record of accountability and transparency. Four, Cody's diversified business model has been battle-tested, our remaining subsidiaries continue to collectively perform and support our focus on deleveraging, regaining market confidence, and maximizing shareholder returns going forward.

Speaker #3: For anyone who hasn't followed our situation closely, in early May, we announced that our audit committee had initiated an investigation into the financing, accounting, and inventory practices of Lugano.

Elias Sabo: For anyone who hasn't followed our situation closely, in early May, we announced that our audit committee had initiated an investigation into the financing, accounting, and inventory practices of Lugano. In that same release, we announced that Lugano's founder and former CEO had resigned and stepped off the Lugano board without severance. It is our understanding that shortly after the investigation was initiated, he and his family fled the US and permanently relocated to Israel. The audit committee's investigation has now concluded, and the findings are deeply troubling. What the audit committee discovered was deliberate and systemic fraud. The former Lugano CEO engaged in a scheme to significantly overstate Lugano's sales and profits, misrepresent the existence and value of Lugano's inventory, and keep potential financial liabilities off Lugano's books and records. His efforts to hide his fraud were extensive.

For anyone who hasn't followed our situation closely, in early May, we announced that our audit committee had initiated an investigation into the financing, accounting, and inventory practices of Lugano. In that same release, we announced that Lugano's founder and former CEO had resigned and stepped off the Lugano board without severance. It is our understanding that shortly after the investigation was initiated, he and his family fled the US and permanently relocated to Israel.

Speaker #3: In that same release, we announced that Lugano's founder and former CEO had resigned and stepped off the Lugano board without severance. It is our understanding that shortly after the investigation was initiated, he and his family fled the U.S. and permanently relocated to Israel.

The audit committee's investigation has now concluded, and the findings are deeply troubling. What the audit committee discovered was deliberate and systemic fraud. The former Lugano CEO engaged in a scheme to significantly overstate Lugano's sales and profits, misrepresent the existence and value of Lugano's inventory, and keep potential financial liabilities off Lugano's books and records. His efforts to hide his fraud were extensive.

Speaker #3: The audit committee's investigation has now concluded, and the findings are deeply troubling. What the audit committee discovered was deliberate and systemic fraud. The former Lugano CEO engaged in a scheme to significantly overstate Lugano's sales and profits, misrepresent the existence and value of Lugano's inventory, and keep potential financial liabilities off Lugano's books and records.

Speaker #3: His efforts to hide his fraud were extensive. He created fake sales transactions to inflate Lugano's reported revenues. Claimed inventory that either didn't exist or didn't belong to Lugano.

Elias Sabo: He created fake sales transactions to inflate Lugano's reported revenues, claimed inventory that either didn't exist or didn't belong to Lugano, and entered into numerous unreported financing arrangements with third parties that he kept off Lugano's balance sheet. These arrangements directly violated multiple Cody policies, as well as the terms of Cody's intercompany credit agreement with Lugano. In support of his fraud, he relied on a complex network of undisclosed counterparties and financing arrangements and prepared false documents and records to support these transactions and evade detection by Cody's management and auditors. Importantly, the audit committee's investigation found no evidence that this fraud extended beyond Lugano to Cody or to any of Cody's other subsidiaries. Further, the audit committee's investigation makes clear that the former Lugano CEO's actions were not mistakes or errors in judgment.

He created fake sales transactions to inflate Lugano's reported revenues, claimed inventory that either didn't exist or didn't belong to Lugano, and entered into numerous unreported financing arrangements with third parties that he kept off Lugano's balance sheet. These arrangements directly violated multiple Cody policies, as well as the terms of Cody's intercompany credit agreement with Lugano. In support of his fraud, he relied on a complex network of undisclosed counterparties and financing arrangements and prepared false documents and records to support these transactions and evade detection by Cody's management and auditors.

Speaker #3: And entered into numerous unreported financing arrangements with third parties that he kept off Lugano's balance sheet. These arrangements directly violated multiple Cody policies as well as the terms of Cody's intercompany credit agreement with Lugano.

Speaker #3: In support of his fraud, he relied on a complex network of undisclosed counterparties and financing arrangements and prepared false documents and records to support these transactions and evade detection by Cody's management and auditors.

Importantly, the audit committee's investigation found no evidence that this fraud extended beyond Lugano to Cody or to any of Cody's other subsidiaries. Further, the audit committee's investigation makes clear that the former Lugano CEO's actions were not mistakes or errors in judgment.

Speaker #3: Importantly, the audit committee's investigation found no evidence that this fraud extended beyond Lugano to Cody or to any of Cody's other subsidiaries. Further, the audit committee's investigation makes clear that the former Lugano CEO's actions were not mistakes or errors in judgment.

Speaker #3: This was intentional fraud carried out through a deliberate scheme to bypass controls that were put in place to prevent this type of misconduct. This fraud persisted for multiple reporting periods and increased in magnitude.

Elias Sabo: This was intentional fraud carried out through a deliberate scheme to bypass controls that were put in place to prevent this type of misconduct. This fraud persisted for multiple reporting periods and increased in magnitude. Before I move on, I want to take a minute to explain why this situation has been so personally and professionally challenging. When we decided to acquire Lugano four years ago, we did so on the basis we do for every acquisition on its financial merits. But I was especially excited about this opportunity because it appeared to closely align with Cody's core values. Lugano presented itself as a company that made community service a fundamental part of its business model. Its customer-only club, for example, required significant philanthropic commitments before a client could even be invited.

This was intentional fraud carried out through a deliberate scheme to bypass controls that were put in place to prevent this type of misconduct. This fraud persisted for multiple reporting periods and increased in magnitude. Before I move on, I want to take a minute to explain why this situation has been so personally and professionally challenging.

Speaker #3: Before I move on, I want to take a minute to explain why this situation has been so personally and professionally challenging. When we decided to acquire Lugano four years ago, we did so on the basis we do for every acquisition.

When we decided to acquire Lugano four years ago, we did so on the basis we do for every acquisition on its financial merits. But I was especially excited about this opportunity because it appeared to closely align with Cody's core values. Lugano presented itself as a company that made community service a fundamental part of its business model. Its customer-only club, for example, required significant philanthropic commitments before a client could even be invited.

Speaker #3: On its financial merits. But I was especially excited about this opportunity because it appeared to closely align with Cody's core values. Lugano presented itself as a company that made community service a fundamental part of its business model.

Speaker #3: Its customer-only club, for example, required significant philanthropic commitments before a client could even be invited. The former CEO, among other honors, was an Ellis Island Medal of Honor recipient—an award given to individuals who have distinguished themselves through service to humanity.

Elias Sabo: The former CEO, among other honors, was an Ellis Island Medal of Honor recipient, an award given to individuals who have distinguished themselves through service to humanity. To later discover that these initiatives were only a façade for fraud, greed, and personal gain has been deeply disappointing. At Cody, our values are not a marketing exercise. They guide us because we believe it is the right way to do business and because we believe they differentiate us in a way that ultimately benefits our shareholders. What we uncovered at Lugano is fundamentally inconsistent with our philosophy. With that background, I'll now hand the call over to Stephen to explain how the events at Lugano impacted our financial statements for the periods we restated.

The former CEO, among other honors, was an Ellis Island Medal of Honor recipient, an award given to individuals who have distinguished themselves through service to humanity. To later discover that these initiatives were only a façade for fraud, greed, and personal gain has been deeply disappointing. At Cody, our values are not a marketing exercise.

Speaker #3: To later discover that these initiatives were only a facade for fraud, greed, and personal gain has been deeply disappointing. At Cody's, at Cody, our values are not a marketing exercise.

Speaker #3: They guide us because we believe it is the right way to do business and because we believe they differentiate us in a way that ultimately benefits our shareholders.

They guide us because we believe it is the right way to do business and because we believe they differentiate us in a way that ultimately benefits our shareholders. What we uncovered at Lugano is fundamentally inconsistent with our philosophy. With that background, I'll now hand the call over to Stephen to explain how the events at Lugano impacted our financial statements for the periods we restated.

Speaker #3: What we uncovered at Lugano is fundamentally inconsistent with our philosophy. With that background, I'll now hand the call over to Steven to explain how the events at Lugano impacted our financial statements for the periods we restated.

Speaker #2: Thanks, Elias. Early in the investigation, the audit committee confirmed that the fraud and financial misconduct were isolated to Lugano. Our other eight subsidiaries were not involved, and there has been no change in our other subsidiaries' previously reported financials.

Ben Tapper: Thanks, Elias. Early in the investigation, the audit committee confirmed that the fraud and financial misconduct were isolated to Lugano. Our other eight subsidiaries were not involved, and there has been no change in our other subsidiaries' previously reported financials. Our corporate structure and business strategy were purposefully designed to ensure that operating challenges at one subsidiary do not directly impact our other businesses. We believe our ability to continue to drive growth collectively across all our other subsidiaries amidst this backdrop of fraud is a testament to the resiliency of the Cody business model and to the strength of our operating teams. The fraud committed by the former Lugano CEO impacted Cody's financial statements in multiple ways, all of which will be detailed in our as-filed financial statements, which we anticipate filing very shortly. At a high level, the restatement significantly reduced our reported inventory.

Stephen Keller: Thanks, Elias. Early in the investigation, the audit committee confirmed that the fraud and financial misconduct were isolated to Lugano. Our other eight subsidiaries were not involved, and there has been no change in our other subsidiaries' previously reported financials. Our corporate structure and business strategy were purposefully designed to ensure that operating challenges at one subsidiary do not directly impact our other businesses.

Speaker #2: Our corporate structure and business strategy were purposefully designed to ensure that operating challenges at one subsidiary do not directly impact our other businesses. We believe our ability to continue to drive growth collectively across our other subsidiaries amidst this backdrop of fraud is a testament to the resiliency of the Cody business model and to the strength of our operating teams.

We believe our ability to continue to drive growth collectively across all our other subsidiaries amidst this backdrop of fraud is a testament to the resiliency of the Cody business model and to the strength of our operating teams. The fraud committed by the former Lugano CEO impacted Cody's financial statements in multiple ways, all of which will be detailed in our as-filed financial statements, which we anticipate filing very shortly. At a high level, the restatement significantly reduced our reported inventory.

Speaker #2: The fraud committed by the former CEO of Lugano impacted Cody's financial statements in multiple ways, all of which will be detailed in our as-filed financial statements, which we anticipate filing very shortly.

Speaker #2: At a high level, the restatement significantly reduced our reported inventory, consolidated inventory for 2024 was reduced by greater than 375 million dollars or nearly 40%.

Ben Tapper: Consolidated inventory for 2024 was reduced by greater than $375 million, or nearly 40%. All of this is related to Lugano. It also brought into our balance sheet additional short-term debt related to previously undisclosed financing arrangements at Lugano. And further, Lugano's revenue declined by more than 85% from previously reported levels following the removal of the fraudulent revenue. All of these adjustments will be reflected in our financial statements. And again, they're all driven by changes in Lugano's financials. Ultimately, the Lugano business was significantly smaller than initially reported. As a result, its cost structure was misaligned with its true scale, and it generated significant losses. Inventory levels were material below what we had previously understood. Lugano, at the direction of the independent board of directors, filed for Chapter 11 protection on 16 November 2025, and commenced a Section 363 sale process.

Consolidated inventory for 2024 was reduced by greater than $375 million, or nearly 40%. All of this is related to Lugano. It also brought into our balance sheet additional short-term debt related to previously undisclosed financing arrangements at Lugano. And further, Lugano's revenue declined by more than 85% from previously reported levels following the removal of the fraudulent revenue. All of these adjustments will be reflected in our financial statements.

Speaker #2: All of this is related to Lugano. It also brought into our balance sheet additional short-term debt related to previously undisclosed financing arrangements at Lugano.

Speaker #2: And further, Lugano's revenue declined by more than 85% from previously reported levels following the removal of the fraudulent revenue. All of these adjustments will be reflected in our financial statements.

Speaker #2: And again, they're all driven by changes in Lugano's finance financials. Ultimately, the Lugano business was significantly smaller than initially reported. As a result, its cost structure was misaligned with its true scale and it generated significant losses.

And again, they're all driven by changes in Lugano's financials. Ultimately, the Lugano business was significantly smaller than initially reported. As a result, its cost structure was misaligned with its true scale, and it generated significant losses. Inventory levels were material below what we had previously understood. Lugano, at the direction of the independent board of directors, filed for Chapter 11 protection on 16 November 2025, and commenced a Section 363 sale process.

Speaker #2: Inventory levels were material below what we had previously understood. Lugano, at the direction of the independent board of directors, filed for Chapter 11 protection on November 16, 2025, and commenced a Section 363 sale process.

Speaker #2: Lugano expects recovery from the sale of existing inventory, refunded taxes, as well as potential insurance claims, civil recoveries, and other sales of assets.

Ben Tapper: Lugano expects recovery from the sale of existing inventory, refunded taxes, as well as potential insurance claims, civil recoveries, and other sales of assets. Lugano's recoveries, net of expenses, will be distributed to Lugano's creditors. Cody is Lugano's senior secured creditor, but all recovery is subject to court approval. Regardless of what we ultimately recover from Lugano bankruptcy, the cost of the Lugano fraud will, by a wide margin, represent the most significant loss Cody has experienced since its inception. I do not want in any way to minimize that fact. With that acknowledgment, I do want to describe several structural offsets to Lugano loss that will lessen the impact of Cody's shareholders over time.

Lugano expects recovery from the sale of existing inventory, refunded taxes, as well as potential insurance claims, civil recoveries, and other sales of assets. Lugano's recoveries, net of expenses, will be distributed to Lugano's creditors. Cody is Lugano's senior secured creditor, but all recovery is subject to court approval. Regardless of what we ultimately recover from Lugano bankruptcy, the cost of the Lugano fraud will, by a wide margin, represent the most significant loss Cody has experienced since its inception.

Speaker #2: Lugano's recoveries never expenses will be distributed to Lugano's creditors. Cody is Lugano's senior secured creditor, but all recoveries subject to court approval. Regardless of what we ultimately recover from Lugano bankruptcy, the cost of the Lugano fraud will by a wide margin represent the most significant loss Cody has experienced since its inception.

Speaker #2: I do not want in any way to minimize that fact. With that acknowledgement, I do want to describe several structural offsets to the Lugano loss that will lessen the impact on Cody's shareholders over time.

I do not want in any way to minimize that fact. With that acknowledgment, I do want to describe several structural offsets to Lugano loss that will lessen the impact of Cody's shareholders over time.

Speaker #2: These offsets include a tax shield on future capital gains roughly equivalent to the loss we realized at Lugano, a reimbursement of overpayment of management fees paid by Cody to the manager during the impacted periods, all of which we expect to be completed by the end of 2026.

Ben Tapper: These offsets include a tax shield on future capital gains, roughly equivalent to the loss we realized at Lugano, a recoupment of overpayment of management fees paid by Cody to the manager during the impacted periods, all of which we expect to be completed by the end of 2026, a reduction in profit allocation payments due to the loss we realized at Lugano. In connection with the Chapter 11 process, Lugano will be deconsolidated from Cody's consolidated financial statements effective as of the bankruptcy filing date. The bankruptcy isolates Lugano's financial and legal obligations to the bankruptcy estate. While painful, Lugano's Chapter 11 process provides a defined and orderly progression to bring the Lugano matter towards resolution. I want to turn now to the steps we are taking as a result of what the audit committee's investigation uncovered at Lugano.

These offsets include a tax shield on future capital gains, roughly equivalent to the loss we realized at Lugano, a recoupment of overpayment of management fees paid by Cody to the manager during the impacted periods, all of which we expect to be completed by the end of 2026, a reduction in profit allocation payments due to the loss we realized at Lugano. In connection with the Chapter 11 process, Lugano will be deconsolidated from Cody's consolidated financial statements effective as of the bankruptcy filing date.

Speaker #2: A reduction in profit allocation payments is due to the loss we realized at Lugano. In connection with the Chapter 11 process, Lugano will be deconsolidated from Cody's consolidated financial statements effective as of the bankruptcy filing date.

The bankruptcy isolates Lugano's financial and legal obligations to the bankruptcy estate. While painful, Lugano's Chapter 11 process provides a defined and orderly progression to bring the Lugano matter towards resolution. I want to turn now to the steps we are taking as a result of what the audit committee's investigation uncovered at Lugano.

Speaker #2: The bankruptcy isolates Lugano's financial and legal obligations to the bankruptcy estate. While painful, Lugano's Chapter 11 process provides a defined and orderly progression to bring the Lugano matter toward resolution.

Speaker #2: I want to now turn I want to turn now to the steps we are taking as a result of what the audit committee's investigation uncovered at Lugano.

Speaker #2: While our ownership model and governance framework have supported a long and successful track record across our subsidiaries, this situation has reinforced that we must always look for ways to improve.

Ben Tapper: While our ownership model and governance framework have supported a long and successful track record across our subsidiaries, this situation has reinforced that we must always look for ways to improve. At the conclusion of the investigation, we conducted a thorough assessment and are implementing enhancements to our processes, structures, and controls. These actions build on rather than replace the framework that has served our shareholders well over many years and are designed to further strengthen our risk management and enhance our oversight. Lugano was a departure from the capital-light, cash-flow-positive, professionally managed businesses that have driven our success for over two decades. Uniquely, we partnered with a founder who retained significant ownership, continued to serve as CEO, and was instrumental in most aspects of the business.

While our ownership model and governance framework have supported a long and successful track record across our subsidiaries, this situation has reinforced that we must always look for ways to improve. At the conclusion of the investigation, we conducted a thorough assessment and are implementing enhancements to our processes, structures, and controls.

Speaker #2: At the conclusion of the investigation, we conducted a thorough assessment and are implementing enhancements to our processes, structures, and controls. These actions build on rather than replace the framework that has served our shareholders well over many years and are designed to further strengthen our risk management and enhance our oversight.

These actions build on rather than replace the framework that has served our shareholders well over many years and are designed to further strengthen our risk management and enhance our oversight. Lugano was a departure from the capital-light, cash-flow-positive, professionally managed businesses that have driven our success for over two decades. Uniquely, we partnered with a founder who retained significant ownership, continued to serve as CEO, and was instrumental in most aspects of the business.

Speaker #2: Lugano was a departure from the capital-light, cash flow positive, professionally managed businesses that have driven our success for over two decades. Uniquely, we partnered with a founder who retained significant ownership, continued to serve as CEO, and was instrumental in most aspects of the business.

Speaker #2: While we took steps to address this after the acquisition, he exploited the ownership structure and concentrated key man risk to circumvent our controls. Based on these learnings, we are refining our acquisition criteria and governance expectations so that overreliance on a founder CEO, coupled with atypical industry-specific practices, will be avoided in future acquisition decisions.

Ben Tapper: While we took steps to address this after the acquisition, he exploited the ownership structure and concentrated key man risk to circumvent our controls. Based on these learnings, we are refining our acquisition criteria and governance expectations so that over-reliance on a founder-CEO, coupled with atypical industry-specific practices, will be avoided in future acquisition decisions. Further, we are focused on strengthening our compliance, risk management, and internal audit functions. We have made the decision to move to an outsourced model and expect to add an additional risk and compliance oversight role reporting directly to our audit committee. We believe an outsourced model will allow us to more easily scale our internal audit resources to the size and complexity of our business at any given time. Further, it will allow us to add specialized resources with relevant industry experience to meet the changing needs of our subsidiaries.

While we took steps to address this after the acquisition, he exploited the ownership structure and concentrated key man risk to circumvent our controls. Based on these learnings, we are refining our acquisition criteria and governance expectations so that over-reliance on a founder-CEO, coupled with atypical industry-specific practices, will be avoided in future acquisition decisions.

Further, we are focused on strengthening our compliance, risk management, and internal audit functions. We have made the decision to move to an outsourced model and expect to add an additional risk and compliance oversight role reporting directly to our audit committee. We believe an outsourced model will allow us to more easily scale our internal audit resources to the size and complexity of our business at any given time. Further, it will allow us to add specialized resources with relevant industry experience to meet the changing needs of our subsidiaries.

Speaker #2: Further, we are focused on strengthening our compliance risk management and internal audit functions. We have made the decision to move to an outsourced model and expect to add an additional risk and compliance oversight role reporting directly to our Audit Committee.

Speaker #2: We believe an outsourced model will allow us to more easily scale our internal audit resources to size and complexity of our business at any given time.

Speaker #2: Further, it will allow us to add specialized resources with relevant industry experience to meet the changing needs of our subsidiaries. Finally, an outsourced model will also allow us to better leverage and adopt industry best practices as they evolve.

Ben Tapper: Finally, an outsourced model will also allow us to better leverage and adopt industry best practices as they evolve. Outside of risk and compliance, we are also working to introduce refinements to our acquisition process, including the standardization of guidelines for deal structuring and post-close management, supplemental due diligence requirements, and stronger credit committee oversight, approval, and monitoring of all intercompany loans to our subsidiaries. Finally, we are working on modifications to our management services agreements to create even greater alignment between our external manager and Cody's shareholders, and to ensure that management fees overpaid over the course of our Lugano ownership are fully offset by the end of 2026. These actions are intended to augment and reinforce the processes we have in place so we can operate more effectively and continue our emphasis on ethics and compliance and deliver strong results for shareholders over time.

Finally, an outsourced model will also allow us to better leverage and adopt industry best practices as they evolve. Outside of risk and compliance, we are also working to introduce refinements to our acquisition process, including the standardization of guidelines for deal structuring and post-close management, supplemental due diligence requirements, and stronger credit committee oversight, approval, and monitoring of all intercompany loans to our subsidiaries.

Speaker #2: Outside of risk and compliance, we are also working to introduce refinements to our acquisition process, including the standardization of guidelines for deal structuring and post-close management, supplemental due diligence requirements, and stronger credit committee oversight approval and monitoring of all intercompany loans to our subsidiaries.

Finally, we are working on modifications to our management services agreements to create even greater alignment between our external manager and Cody's shareholders, and to ensure that management fees overpaid over the course of our Lugano ownership are fully offset by the end of 2026. These actions are intended to augment and reinforce the processes we have in place so we can operate more effectively and continue our emphasis on ethics and compliance and deliver strong results for shareholders over time.

Speaker #2: Finally, we are working on modifications to our management services agreements to create even greater alignment between our external manager and Cody shareholders, and to ensure that management fees overpaid over the course of our Lugano ownership are fully offset by the end of 2026.

Speaker #2: These actions are intended to augment and reinforce the processes we have in place so we can operate more effectively and continue our emphasis on ethics and compliance, delivering strong results for shareholders over time.

Speaker #2: I will now hand it back to Elias to provide an update on the rest of our subsidiaries. Thanks, Stephen. Despite a choppy macro environment, collectively, our other eight subsidiaries continue to perform.

Ben Tapper: I will now hand it back to Elias to provide an update on the rest of our subsidiaries.

I will now hand it back to Elias to provide an update on the rest of our subsidiaries.

Elias Sabo: Thanks, Stephen. Despite a choppy macro environment, collectively, our other eight subsidiaries continue to perform. These businesses are category leaders that operate in attractive markets, cater to enthusiastic customers, and we believe are well-positioned to deliver strong and durable financial results. In addition to filing the restated financials, we intend to file our Q1, Q2, and Q3 2025 financials over the coming weeks. So I can't share as much detail about 2025 performance as I'd like at this time. However, in the aggregate, excluding Lugano, we have been driving growth in both sales and EBITDA. We're encouraged by the progress we are seeing across our diverse brands. For example, Boa is driving share gains across multiple footwear categories based on real and measurable performance improvement. The Honey Pot is now the fastest dollar growth Better For You feminine care brand in the market.

Speaker #2: These businesses are category leaders that operate in attractive markets, cater to enthusiastic customers, and we believe are well positioned to deliver strong and durable financial results.

Speaker #2: In addition to filing the restated financials, we intend to file our first, second, and third quarter 2025 financials over the coming weeks. So, I can't share as much detail about 2025 performance as I'd like at this time.

Speaker #2: However, in the aggregate, excluding Lugano, we have been driving growth in both sales and EBITDA. We're encouraged by the progress we are seeing across our diverse brands.

However, in the aggregate, excluding Lugano, we have been driving growth in both sales and EBITDA. We're encouraged by the progress we are seeing across our diverse brands. For example, Boa is driving share gains across multiple footwear categories based on real and measurable performance improvement. The Honey Pot is now the fastest dollar growth Better For You feminine care brand in the market.

Speaker #2: For example, Boa is driving share gains across multiple footwear categories based on real and measurable performance improvement. The Honeypot is now the fastest dollar growth, better-for-you feminine care brand in the market.

Speaker #2: Meanwhile, anyone who has followed the recent rare earth discourse knows Arnold Magnetics can play an important role in providing companies with domestically produced rare earth magnet solutions.

Elias Sabo: Meanwhile, anyone who has followed the recent Rare Earth discourse knows Arnold Magnetics can play an important role in providing companies with domestically produced Rare Earth magnet solutions. Altor, we believe, sits in a prime position to capture long-term growth in the attractive cold chain market. We believe we have exceptional subsidiaries across both our consumer and industrial verticals. That isn't to disregard the inherent uncertainty in the global economy today. While no businesses are immune to broader economic headwinds, we believe our subsidiary businesses are navigating them as effectively, if not better, than most. I'll now pass it back to Stephen once more to quickly discuss our path to reduce leverage and our financial outlook for the remainder of the year.

Meanwhile, anyone who has followed the recent Rare Earth discourse knows Arnold Magnetics can play an important role in providing companies with domestically produced Rare Earth magnet solutions. Altor, we believe, sits in a prime position to capture long-term growth in the attractive cold chain market. We believe we have exceptional subsidiaries across both our consumer and industrial verticals.

Speaker #2: And Altor, we believe, sits in a prime position to capture long-term growth in the attractive cold chain market. We believe we have exceptional subsidiaries across both our consumer and industrial verticals.

That isn't to disregard the inherent uncertainty in the global economy today. While no businesses are immune to broader economic headwinds, we believe our subsidiary businesses are navigating them as effectively, if not better, than most. I'll now pass it back to Stephen once more to quickly discuss our path to reduce leverage and our financial outlook for the remainder of the year.

Speaker #2: That isn't to disregard the inherent uncertainty in the global economy today. While no businesses are immune to broader economic headwinds, we believe our subsidiary businesses are navigating them as effectively, if not better, than most.

Speaker #2: I'll now pass it back to Stephen once more to quickly discuss our path to reduce leverage and our financial outlook for the remainder.

Speaker #2: of the year. Thanks,

Speaker #3: Elias. Before I walk you through our deleveraging plans, I want to clarify where we sit today. Our leverage ratio is significantly above our leverage covenants and also above where we'd like to operate from a long-term risk perspective.

Ben Tapper: Thanks, Elias. Before I walk you through our deleveraging plan, I want to clarify where we sit today. Our leverage ratio is significantly above our leverage covenants and also above where we'd like to operate from a long-term risk perspective. We are in active discussions with our senior lenders regarding an amendment to our credit agreement that would provide additional flexibility around our current leverage profile. Based on the progress of those discussions, we currently expect to finalize and announce the amendment in the coming weeks. I'd also like to take a moment to walk through our leverage in more detail, as there are several structural and operational factors that work in our favor. Excluding Lugano, we would expect our leverage ratio to drop from above 6 times now to approximately about 5.6x.

Stephen Keller: Thanks, Elias. Before I walk you through our deleveraging plan, I want to clarify where we sit today. Our leverage ratio is significantly above our leverage covenants and also above where we'd like to operate from a long-term risk perspective. We are in active discussions with our senior lenders regarding an amendment to our credit agreement that would provide additional flexibility around our current leverage profile.

Speaker #3: We are in active discussions with our senior lenders regarding amendments to our credit agreements that would provide additional flexibility around our current leverage profile.

Speaker #3: Based on the progress of those discussions, we currently expect to finalize and announce the amendment in the coming weeks. I'd also like to take a moment to walk through our leverage in more detail, as there are several structural and operational factors that work in our favor.

Based on the progress of those discussions, we currently expect to finalize and announce the amendment in the coming weeks. I'd also like to take a moment to walk through our leverage in more detail, as there are several structural and operational factors that work in our favor. Excluding Lugano, we would expect our leverage ratio to drop from above 6 times now to approximately about 5.6x.

Speaker #3: Excluding Lugano, we would expect our leverage ratio to drop from above 6 times now to approximately about 5.6 times. When you then factor in the expected growth in our full year 2025 subsidiary-adjusted EBITDA, we expect to end 2025 with a leverage ratio of around 5.2 to 5.3 times.

Ben Tapper: When you then factor in the expected growth in our full year 2025 subsidiary-adjusted EBITDA, we expect to end 2025 with a leverage ratio around 5.2x to 5.3x. This is still clearly outside our current covenant of 5x. However, it is significantly lower than one might anticipate given our current situation. To quickly get back into compliance and to move closer to our long-term target level between 3x to 3.5x, we have a dual-pronged approach. First, we are focused on ensuring that our subsidiaries continue to perform and drive solid growth in EBITDA and cash flow. We believe that based on the strength of our underlying businesses, we can organically return to compliance in 2026.

When you then factor in the expected growth in our full year 2025 subsidiary-adjusted EBITDA, we expect to end 2025 with a leverage ratio around 5.2x to 5.3x. This is still clearly outside our current covenant of 5x. However, it is significantly lower than one might anticipate given our current situation.

Speaker #3: This is still clearly outside our current covenant of five times. However, it is significantly lower than one might anticipate given our current situation. To quickly get back into compliance and to move closer to our long-term target level between three to three and a half times, we have a dual-pronged approach.

To quickly get back into compliance and to move closer to our long-term target level between 3x to 3.5x, we have a dual-pronged approach. First, we are focused on ensuring that our subsidiaries continue to perform and drive solid growth in EBITDA and cash flow. We believe that based on the strength of our underlying businesses, we can organically return to compliance in 2026.

Speaker #3: First, we are focused on ensuring that our subsidiaries continue to perform and drive solid growth in EBITDA and cash flow. We believe that, based on the strength of our underlying businesses, we can organically return to compliance in 2026.

Speaker #3: Second, although our business model is to acquire, manage, and grow our subsidiaries, we believe that as a prudent to explore the investiture of one or more of our subsidies in subsidiaries in the near term to accelerate our deleveraging.

Ben Tapper: Second, although our business model is to acquire, manage, and grow our subsidiaries, we believe that it's prudent to explore the divestiture of one or more of our subsidiaries in the near term to accelerate our deleveraging. To that end, we are actively working with our investment banking partners to look for ways to maximize value for shareholders, and we will be disciplined in our execution. Management is committed to reducing leverage, and we continue to drive sales and EBITDA growth at the subsidiary level. Finally, I'd like to briefly address our outlook for the remainder of the year. At the start of the year, we guided to subsidiary-adjusted EBITDA of $570 million to $610 million, including Lugano. We now expect full-year subsidiary-adjusted EBITDA of $330 million to $360 million, excluding Lugano.

Second, although our business model is to acquire, manage, and grow our subsidiaries, we believe that it's prudent to explore the divestiture of one or more of our subsidiaries in the near term to accelerate our deleveraging. To that end, we are actively working with our investment banking partners to look for ways to maximize value for shareholders, and we will be disciplined in our execution.

Speaker #3: To that end, we are actively working with our investment banking partners to look for ways to maximize value for shareholders, and we will be disciplined in our execution.

Management is committed to reducing leverage, and we continue to drive sales and EBITDA growth at the subsidiary level. Finally, I'd like to briefly address our outlook for the remainder of the year. At the start of the year, we guided to subsidiary-adjusted EBITDA of $570 million to $610 million, including Lugano. We now expect full-year subsidiary-adjusted EBITDA of $330 million to $360 million, excluding Lugano.

Speaker #3: Management is committed to reducing leverage, and we continue to drive sales and EBITDA growth at the subsidiary level. Finally, I'd like to briefly address our outlook for the remainder of the year.

Speaker #3: At the start of the year, we guided to subsidiary-adjusted EBITDA of $570 million to $610 million, including Lugano. We now expect full-year subsidiary-adjusted EBITDA of $330 million to $360 million, excluding Lugano.

Speaker #3: On a like-for-like basis, this represents mid-single digit plus growth in subsidiary-adjusted EBITDA excluding Lugano and it is consistent with our original guidance. We expect to publish our quarterly results in the coming weeks in the coming weeks and we'll provide more detail at that time.

Ben Tapper: On a like-for-like basis, this represents mid-single digit plus growth in subsidiary-adjusted EBITDA, excluding Lugano, and it is consistent with our original guidance. We expect to publish our quarterly results in the coming weeks, and we'll provide more detail at that time. Because we haven't yet filed our 2025 Qs, I'll also provide a brief note on our current liquidity position. As of 30 September, our most recent quarter closed, we had $65 million of consolidated cash on hand, $6 million drawn, and just under $4 million of letters of credit outstanding on our $60 million revolver. We expect our subsidiaries to continue to generate meaningful cash flow as we move throughout the year. I'll now pass it back to Elias for some closing remarks.

On a like-for-like basis, this represents mid-single digit plus growth in subsidiary-adjusted EBITDA, excluding Lugano, and it is consistent with our original guidance. We expect to publish our quarterly results in the coming weeks, and we'll provide more detail at that time.

Because we haven't yet filed our 2025 Qs, I'll also provide a brief note on our current liquidity position. As of 30 September, our most recent quarter closed, we had $65 million of consolidated cash on hand, $6 million drawn, and just under $4 million of letters of credit outstanding on our $60 million revolver. We expect our subsidiaries to continue to generate meaningful cash flow as we move throughout the year. I'll now pass it back to Elias for some closing remarks.

Speaker #3: Because we haven't yet filed our 2025 Qs, I'll also provide a brief note on our current liquidity position. As of September 30th, our most recently our most recent quarter closed, we had 65 million dollars of consolidated cash on hand, 6 million drawn, and just under 4 million of letters of credit outstanding on our 60 million dollar revolver.

Speaker #3: We expect our subsidiaries to continue to generate meaningful cash flow as we move throughout the year. I'll now pass it back to Elias for some closing remarks.

Speaker #2: As we move forward, we are operating with a renewed sense of purpose, determination, and focus. We recognize the gravity of the Lugano fraud and the impact it's had on our shareholders and other stakeholders.

Elias Sabo: As we move forward, we are operating with a renewed sense of purpose, determination, and focus. We recognize the gravity of the Lugano fraud and the impact it's had on our shareholders and other stakeholders. We are committed to rebuilding your trust and will do that through the transparency, accountability, and discipline that have defined Cody since inception. We provide permanent and patient capital focused on driving long-term value creation at each of our subsidiaries. We acquire controlling interests in high-quality, high-growth, mid-market companies. Our long-term focus has enabled us to acquire and manage innovative and disruptive businesses that deliver outsized growth. We believe that this approach generates superior returns, and our track record supports that. We also pride ourselves on appointing and working closely with high-quality management teams to deliver on the potential of each of our subsidiaries.

Speaker #2: We are committed to rebuilding your trust and will do that through the transparency, accountability, and discipline that have defined Cody since inception. We provide permanent and patient capital focused on driving long-term value creation at each of our subsidiaries.

Speaker #2: We acquire controlling interests in high-quality, high-growth mid-market companies. Our long-term focus has enabled us to acquire and manage innovative and disruptive businesses that deliver outsized growth.

We acquire controlling interests in high-quality, high-growth, mid-market companies. Our long-term focus has enabled us to acquire and manage innovative and disruptive businesses that deliver outsized growth. We believe that this approach generates superior returns, and our track record supports that. We also pride ourselves on appointing and working closely with high-quality management teams to deliver on the potential of each of our subsidiaries.

Speaker #2: We believe that this approach generates superior returns, and our track record supports that. We also pride ourselves on appointing and working closely with high-quality management teams to deliver on the potential of each of our subsidiaries.

Speaker #2: As we've described today, we are taking meaningful steps to strengthen our processes, structures, and controls, and to sharpen our acquisition criteria and governance to assist so that a situation like Lugano is not repeated.

Elias Sabo: As we've described today, we are taking meaningful steps to strengthen our processes, structures, and controls, and to sharpen our acquisition criteria and governance so that a situation like Lugano is not repeated. Meanwhile, our remaining eight businesses continue to perform, and we believe Cody's business model has been tested and proven resilient. We are committed to demonstrating once again how successful this strategy has been and can continue to be, notwithstanding our experience with Lugano. We are focused on reducing leverage, regaining market confidence, and maximizing long-term returns for our shareholders. I would also like to take this opportunity to thank our subsidiary leadership teams and employees who have continued to execute at a high level and remain focused on serving customers throughout this entire process. Finally, I want to recognize the broader Cody team for their hard work and professionalism.

As we've described today, we are taking meaningful steps to strengthen our processes, structures, and controls, and to sharpen our acquisition criteria and governance so that a situation like Lugano is not repeated. Meanwhile, our remaining eight businesses continue to perform, and we believe Cody's business model has been tested and proven resilient. We are committed to demonstrating once again how successful this strategy has been and can continue to be, notwithstanding our experience with Lugano.

Speaker #2: Meanwhile, our remaining eight businesses continue to perform, and we believe Cody's business model has been tested and proven resilient. We are committed to demonstrating once again how successful this strategy has been and can continue to be, notwithstanding our experience with Lugano.

Speaker #2: We are focused on reducing leverage, regaining market confidence, and maximizing long-term returns for our shareholders. I would also like to take this opportunity to thank our subsidiary leadership teams and employees who have continued to execute at a high level and remain focused on serving customers throughout this entire process.

We are focused on reducing leverage, regaining market confidence, and maximizing long-term returns for our shareholders. I would also like to take this opportunity to thank our subsidiary leadership teams and employees who have continued to execute at a high level and remain focused on serving customers throughout this entire process. Finally, I want to recognize the broader Cody team for their hard work and professionalism.

Speaker #2: Finally, I want to recognize the broader Cody team for their hard work and professionalism. Nothing about this experience has been easy, and we greatly appreciate their dedication and perseverance.

Elias Sabo: Nothing about this experience has been easy, and we greatly appreciate their dedication and perseverance. As always, thank you for your continued support. With that, Stephen and I will now take your questions. Operator, please open the line.

Nothing about this experience has been easy, and we greatly appreciate their dedication and perseverance. As always, thank you for your continued support. With that, Stephen and I will now take your questions. Operator, please open the line.

Speaker #2: As always, thank you for your continued support. With that, Stephen and I will now take your questions. Operator, please open the line.

Speaker #3: Thank you, sir. As a reminder to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again.

Operator: Thank you, sir. As a reminder to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Please limit yourself to one question and one follow-up to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster. Again, that's star 11 to ask a question. Our first question comes from the line of Chris Kennedy of William Blair. Your line is open, Chris.

Speaker #3: Please limit yourself to one question and one follow-up to allow everyone the opportunity to participate.

Speaker #1: "Again, that's star one one to ask a question. Our first question comes from the line of Chris Kennedy of William Blair."

Speaker #1: Your line is open . Chris .

Speaker #2: Yeah . Good afternoon . Thanks for the update . We understand you're focused on reducing leverage , but can you just talk about the philosophy of returning capital to common shareholders , going forward ?

Chris Kennedy: Yeah, good afternoon. Thanks for the update. We understand you're focused on reducing leverage, but can you just talk about the philosophy of returning capital to common shareholders going forward?

Speaker #3: Yeah , Chris , I would say , you know , our first priority is to reduce leverage because I think that is good for everybody in the capital structure .

Elias Sabo: Yeah, Chris, I would say, you know, our first priority is to reduce leverage because I think that is good for everybody in the capital structure. And clearly, being out of compliance with our senior debt, it makes it, you know, kind of requirement number one. We also have, you know, kind of in working with our bondholders, you know, when we issued this, we kind of had notionally always established and with the rating agencies that we would have a 3.5x kind of ceiling on leverage for our normal operations. And so just to be clear, we feel that is the most important thing to do is to divest assets and harvest free cash flow from our businesses to get down below that leverage level. Once we get there, I think we'll have to assess, to be honest, what our capital allocation strategy is.

Speaker #3: And clearly being out of compliance is with our senior debt . It makes it kind of requirement number one , we also have , you know , kind of in working with our bondholders , you know , when we issued this , we kind of had notionally always established and with the rating agencies that we would have a three and a half times kind of ceiling on leverage for our normal operations .

We also have, you know, kind of in working with our bondholders, you know, when we issued this, we kind of had notionally always established and with the rating agencies that we would have a 3.5x kind of ceiling on leverage for our normal operations. And so just to be clear, we feel that is the most important thing to do is to divest assets and harvest free cash flow from our businesses to get down below that leverage level. Once we get there, I think we'll have to assess, to be honest, what our capital allocation strategy is.

Speaker #3: And so , just to be clear , we feel that is the most important thing to do is to divest assets and harvest free cash flow from our businesses to get down below that leverage level .

Speaker #3: Once we get there, I think we'll have to assess, to be honest, what our capital allocation strategy is. We do believe in the return of capital.

Speaker #3: As you know , it has been a historic pillar to what we have done . The form in which that would take . And you know how that would exist is really going to be based on the facts and circumstances at the time .

Elias Sabo: We do believe in return of capital. As you know, it has been a historic pillar to what we have done. The form in which that would take and, you know, how that would exist is really going to be based on the facts and circumstances at the time. So it's, you know, hard for me to say right now where we're sitting, what return of capital policies will take effect after our leverage gets back down to an appropriate point. But it is something that has been a pillar of what we have done. And, you know, we will address that as, you know, kind of we get our leverage as we bring our leverage down to a more reasonable point.

We do believe in return of capital. As you know, it has been a historic pillar to what we have done. The form in which that would take and, you know, how that would exist is really going to be based on the facts and circumstances at the time.

Speaker #3: It's hard for me to say right now where we're sitting and what return of capital policies will take effect after our leverage gets back down to an appropriate point.

So it's, you know, hard for me to say right now where we're sitting, what return of capital policies will take effect after our leverage gets back down to an appropriate point. But it is something that has been a pillar of what we have done. And, you know, we will address that as, you know, kind of we get our leverage as we bring our leverage down to a more reasonable point.

Speaker #3: But it is something that has been a pillar of what we have done . And , you know , we will address that as , kind of we you know , get our leverage as we bring our leverage down to a more reasonable point .

Speaker #2: Understood . Thank you for that . And then just broadly , I know we'll get the financials over the next couple of weeks , but across the are there eight businesses , any standouts in terms of , you know , performance relative to expectations , either good or bad ?

Chris Kennedy: Understood. Thank you for that. And then just broadly, I know we'll get the financials over the next couple of weeks, but across the eight businesses, are there any standouts in terms of, you know, performance relative to expectations, either good or bad? Thanks for taking the questions.

Speaker #2: Thanks for taking the questions .

Speaker #3: Yeah , I would say there's a couple I'm just going to hit on the outliers because most of the things are frankly within sort of a small band our of what expectations are .

Elias Sabo: Yeah, I would say there's a couple. I'm just going to hit on the outliers because most of the things are, frankly, within sort of a small band of what our expectations are. Probably the two largest outliers, one positive, one negative. On the negative, I'll say is Arnold Magnetic Technologies. With Arnold, the entire, you know, kind of political, I guess, football or the trade wars that have been created with China have caused significant problems with export control licenses on any type of rare earth material or finished product from a rare earth material. Arnold does have a big presence in China. Most of the product that we produce there is exported, and a lot of it is used in the aerospace and defense industries.

Speaker #3: Probably the two largest outliers , one positive , one negative on the negative . I'll say , is Arnold Magnetics with Arnold , the entire the , you know , kind of political , I guess football or the trade wars that have been created with China have caused significant problems with export control licenses on any type of rare earth material or finished product from a rare earth material .

With Arnold, the entire, you know, kind of political, I guess, football or the trade wars that have been created with China have caused significant problems with export control licenses on any type of rare earth material or finished product from a rare earth material. Arnold does have a big presence in China. Most of the product that we produce there is exported, and a lot of it is used in the aerospace and defense industries.

Speaker #3: Arnold does have a big presence in China. Most of the products that we produce there are exported, and a lot of it is used in the aerospace and defense industries.

Speaker #3: Because of the way that China has set up their export controls . It was just impossible to for the company to comply . For us to be able to comply with what they're requirements were so virtually all of that product got delayed and shipping for , you know , I don't know , call it five , six months over the course of the negotiations between the US and China .

Elias Sabo: Because of the way that China set up their export controls, it was just impossible for the company to comply, for us to be able to comply with what their requirements were. So virtually all of that product got delayed in shipping for, you know, I don't know, call it five, six months over the course of the negotiations between the US and China. And that's going to have a negative impact this year on what their operating result. I think the good news is we are seeing, as a result of that, significant orders coming in and demand being placed. And frankly, the, you know, RFQs that are coming out from some of our customers looking to re-domicile their supply outside of China is quite significant.

Because of the way that China set up their export controls, it was just impossible for the company to comply, for us to be able to comply with what their requirements were. So virtually all of that product got delayed in shipping for, you know, I don't know, call it five, six months over the course of the negotiations between the US and China.

Speaker #3: And that's going to have a negative impact this year on what their operating results . I news think the good is we seeing as are a result that , significant orders coming in and demand being placed , and frankly , the , you know , rfqs that are coming out from some of our customers looking to domicile their supply outside of China is quite significant .

And that's going to have a negative impact this year on what their operating result. I think the good news is we are seeing, as a result of that, significant orders coming in and demand being placed. And frankly, the, you know, RFQs that are coming out from some of our customers looking to re-domicile their supply outside of China is quite significant.

Speaker #3: So although negative in the short term , I would say , you know , we think is net bullish over the kind of immediate to , you know , kind of intermediate to long term , even starting in next year .

Elias Sabo: So although negative in the short term, I would say, you know, we think is net bullish over the kind of immediate to long, you know, kind of intermediate to long term, even starting in next year. On the positive side, the Honey Pot has really performed far better than expectations. It is now the fastest growth in terms of dollar value in the feminine care market in North America, in the United States. It's, you know, continuing to take shelf space. We moved very successfully from the hygiene category and now have extended the brand into the menstrual category. It really opens up a huge part of the market. And I think, you know, more importantly, also demonstrates the expandability of this brand into adjacent categories within feminine care. And so that company's growth rate, both top line and EBITDA, is significantly exceeding what our expectations were.

So although negative in the short term, I would say, you know, we think is net bullish over the kind of immediate to long, you know, kind of intermediate to long term, even starting in next year. On the positive side, the Honey Pot has really performed far better than expectations. It is now the fastest growth in terms of dollar value in the feminine care market in North America, in the United States. It's, you know, continuing to take shelf space. We moved very successfully from the hygiene category and now have extended the brand into the menstrual category.

Speaker #3: On the positive side, the honeypot has really performed far better than expectations. It is now experiencing the fastest growth in terms of dollar value in the feminine care market in North America.

Speaker #3: United In the States , it's , you know , continuing to take shelf space . We move very successfully from the hygiene category .

Speaker #3: And now have extended the brand into the menstrual category . It really opens up a huge part of the market . And I think , you know , more importantly , also demonstrates the the expandability of this brand into adjacent categories within feminine care .

It really opens up a huge part of the market. And I think, you know, more importantly, also demonstrates the expandability of this brand into adjacent categories within feminine care. And so that company's growth rate, both top line and EBITDA, is significantly exceeding what our expectations were.

Speaker #3: And so that company's growth rate , both top line and EBITDA is is significantly exceeding what our expectations were . I'd say everything else is kind of , you know , within a 5% band of where our expectations probably are understood .

Elias Sabo: I'd say everything else, Chris, is kind of, you know, within a 5% band of where our expectations broadly are.

I'd say everything else, Chris, is kind of, you know, within a 5% band of where our expectations broadly are.

Speaker #2: Thanks for all the details, and thanks for taking the questions.

Speaker #3: Thank you .

Speaker #1: Thank . Our next you question comes line of from the Larry Solow of CJS securities , Inc. . Please go ahead . Larry .

Chris Kennedy: Understood. Thanks for all the details, and thanks for taking the questions.

Elias Sabo: Thank you.

Operator: Thank you. Our next question comes from the line of Larry Solow of CJS Securities, Inc. Please go ahead, Larry.

Speaker #4: Great . Thanks . Good afternoon and welcome back . I just first question just following up on Chris's question on 25 , I realize you're somewhat compromised , but could you just give us any any high level view on free cash flow ?

Chris Kennedy: Great. Thanks. Good afternoon and welcome back. Just the first question that's following up on Chris's question on 25, I realize you're somewhat compromised, but could you just give us any high-level view on free cash flow? And I know, obviously, Lugano was kind of the drainer there, so hoping that free cash flow is at least commensurate with your EBITDA growth.

Larry Solow: Great. Thanks. Good afternoon and welcome back. Just the first question that's following up on Chris's question on 25, I realize you're somewhat compromised, but could you just give us any high-level view on free cash flow? And I know, obviously, Lugano was kind of the drainer there, so hoping that free cash flow is at least commensurate with your EBITDA growth.

Speaker #4: I you know , I know obviously the kind of Lugano was drainer there . So hoping that free cash flow is at least commensurate with your EBITDA growth .

Speaker #5: So Yeah . so I'd say two things . One , we obviously , as you said , we Lugano is always a a working capital hog .

Stephen Keller: Yeah. So I'd say two things. One, we obviously, as you said, Lugano is always a working capital hog. The other businesses actually generate very significant free cash flow. And so the other businesses collectively together are generating very substantial free cash flow. The only caveat I would have to say, though, is that obviously there's a meaningful amount of investigation and restatement-related costs that, you know, outside of subsidiaries, that we are having to use some cash for that. But the businesses themselves are generating significant free cash flow.

Speaker #5: The other businesses actually generate very significant free cash flow. And so the other businesses, collectively together, are generating very substantial free cash flow.

Speaker #5: The only caveat I would have to say though , is that obviously there's a meaningful of of investigation and restatement related costs that , you know , outside of subsidiaries that we are having to use some cash for that .

Speaker #5: But the businesses themselves are doing very well and are generating significant free cash flow.

Speaker #4: Okay . If I could just squeeze in two , just will we get the restated financials tonight ? Is that coming out very shortly ?

Speaker #4: Imminently . And then can you just discuss the Lugano just the chapter 11 proceedings . Kind of the length of it . I realized it's in the court hands .

Elias Sabo: Okay. If I could just squeeze in too, just will we get the restated financials tonight? Is that coming out very shortly, imminently? And then can you just discuss the Lugano, just the Chapter 11 proceedings, kind of the length of it? I realize it's in the court's hands, so some of it's out of your control, but kind of the next steps we should look for on that side of it. Thanks.

Larry Solow: Okay. If I could just squeeze in too, just will we get the restated financials tonight? Is that coming out very shortly, imminently? And then can you just discuss the Lugano, just the Chapter 11 proceedings, kind of the length of it? I realize it's in the court's hands, so some of it's out of your control, but kind of the next steps we should look for on that side of it. Thanks.

Speaker #4: So some of that you control kind of the . But next steps we should look for on that side of it . Thanks .

Speaker #5: Sure . So yeah , you can , you can expect the , the US to file the financials shortly . Probably not today , but it'll be .

Stephen Keller: Sure. So yeah, you can expect us to file the financials shortly. Probably not today, but it'll be shortly.

Speaker #5: But shortly .

Speaker #4: Okay .

Speaker #3: And then .

Speaker #5: The Lugano bankruptcy . We're the process is is actually today is the I think it's today . Today is the last day for people to eject object to the original filings .

Elias Sabo: Okay. And then the Lugano bankruptcy, where the process is, is actually today is the, I think it's today, today is the last day for people to object to the original filings. It then moves into a process, like the 363 process. As soon as no objections, they would move forward. There'd be, I think the bids are available on the, would have to be submitted by the 11th. It might be the 12th, 11th or 12th. And then the, we do know that we, after the 363 filing date, we signed 15, or the credit committee signed 15 NDAs with interested parties who want to participate in the auction. So there does seem to be some interest there. So basically, we'll kind of see where we stand.

Okay. And then the Lugano bankruptcy, where the process is, is actually today is the, I think it's today, today is the last day for people to object to the original filings. It then moves into a process, like the 363 process. As soon as no objections, they would move forward. There'd be, I think the bids are available on the, would have to be submitted by the 11th. It might be the 12th, 11th or 12th. And then the, we do know that we, after the 363 filing date, we signed 15, or the credit committee signed 15 NDAs with interested parties who want to participate in the auction. So there does seem to be some interest there. So basically, we'll kind of see where we stand.

Speaker #5: It then moves into a a a process like the 363 process , assuming there's no objections , they would move forward . There'd be I think the bids are available on the would have to be by the submitted 11th .

Speaker #5: I think it might be a 12th , 11th or 12th . And the then we do know that the we after the 363 filing that we've signed , 15 or the credit committee signed 15 NDAs with interested parties who want to participate in the auction .

Speaker #5: So there does seem to be some interest there .

Speaker #4: Okay .

Speaker #5: So yeah , and so . So basically we'll kind of see where stand . we I think the one thing that's is there's unless someone buys it as a , going concern , think of it as an orderly liquidation of the existing inventory .

Elias Sabo: I think the one thing that's important, though, is there's unless someone buys it as a going concern, think of it as an orderly liquidation of the existing inventory. That will be a defined period. There will also be a recovery of the taxes. That will take a little bit longer. There is a significant amount of taxes that was overpaid, around $70 million. That would expect to go back to Lugano estate. That's obviously not fully in management controls. You have to file amended tax returns, et cetera. And so we expect that to take, you know, a lot of it to come back relatively soon, and then some could take up to three years.

I think the one thing that's important, though, is there's unless someone buys it as a going concern, think of it as an orderly liquidation of the existing inventory. That will be a defined period. There will also be a recovery of the taxes. That will take a little bit longer. There is a significant amount of taxes that was overpaid, around $70 million. That would expect to go back to Lugano estate. That's obviously not fully in management controls. You have to file amended tax returns, et cetera. And so we expect that to take, you know, a lot of it to come back relatively soon, and then some could take up to three years.

Speaker #5: That will be a defined period. There will also be a recovery of the taxes that will take a little bit longer. There is a significant amount of taxes.

Speaker #5: That was overpaid , around $70 million that would expect to go back to Lugano estate . That's obviously not fully in management controls .

Speaker #5: You have to file an amended tax returns , etc. and so we expect that to take , you know , a lot of it to come back relatively soon and then some could take up to three years .

Speaker #5: But the intention but the and then but the intention is to continue to just make sure that that that credit committee and the and the chief restructuring officer is focused on maximizing recovery .

Elias Sabo: But the intention is to continue to just make sure that the credit committee and the chief restructuring officer is focused on maximizing recovery, and that's what they're doing. Obviously overseen by the bankruptcy court, not by us. Okay. Great. I appreciate all that call. Thanks.

But the intention is to continue to just make sure that the credit committee and the chief restructuring officer is focused on maximizing recovery, and that's what they're doing. Obviously overseen by the bankruptcy court, not by us.

Speaker #5: And that's what they're doing. Obviously, being overseen by the bankruptcy court, not by us.

Speaker #4: Okay , great . I appreciate all that . Thanks .

Speaker #1: Thank you. Our next question comes from the line of Timothy D'Agostino from B. Riley Securities. Your line is open, Timothy.

Larry Solow: Okay. Great. I appreciate all that call. Thanks.

Operator: Thank you. Our next question comes from the line of Timothy D'Agostino, B. Riley Securities. Your line is open, Timothy.

Speaker #6: Yeah . Hi . Thank you . Kind of falling off the last question regarding legal proceedings , any overhang with Lugano bankruptcy in for 25 results when they come out , should we expect you know obviously heightened legal fees and expenses .

Timothy D'Agostino: Yeah. Hi. Thank you. Kind of following up the last question regarding legal proceedings and any overhang with Lugano bankruptcy. Q1 '25 results when they come out, should we expect, you know, obviously heightened legal fees and expenses? And can you just provide any color around that? Thank you.

Speaker #6: And can you just provide any color around that? Thank you.

Speaker #5: Yeah . So you will you'll see a substantially elevated amount of of of kind of corporate overhead costs driven by the driven by the restatement and the investigation .

Stephen Keller: Yeah. So you will see a substantially elevated amount of kind of corporate overhead costs driven by the restatement and the investigation. So probably, you know, again, probably around, I think you can expect about $50 to $60 million of additional costs that will be accrued for.

Speaker #5: So probably , you know , again , probably around I expect it's about 50 to $60 million of additional costs . That will be accrued for .

Speaker #5: .

Speaker #6: Okay , And then just if I can ask a second one here , I don't believe you provided any updates at velocity and their 25 performance .

Timothy D'Agostino: Okay. Great. And then just if I can ask a second one here, I don't believe you provided any updates at Velocity and like their 25 performance. I was wondering if you could just touch on that very quickly. Thank you.

Speaker #6: I was wondering if you could just touch on that very quickly. Thank you.

Speaker #5: Velocity I mean , velocity is after the sale of velocity is a very small part of our portfolio . They're performing relative , you know , they've resized their business like for like basis .

Stephen Keller: I mean, Velocity is after the sale of Crosman, Velocity is a very small part of our portfolio. They're performing relatively, you know, they've resized their business on a like-for-like basis. They are doing okay. They're doing pretty, I mean, pretty well, but it's a very small part of the portfolio at this point.

Speaker #5: They are doing okay. They're doing pretty, I mean, pretty well. But it's a very small part of the portfolio at this point.

Speaker #6: Okay. Great. Thank you so much.

Speaker #1: Thank you. Our next question comes from the line of Matt Koranda of Roth Capital. Please go ahead, Matt.

Timothy D'Agostino: Okay. Great. Thank you so much.

Operator: Thank you. Our next question comes from the line of Matt Koranda of Roth Capital. Please go ahead, Matt.

Speaker #4: I .

Speaker #7: Guess for doing the call here . I wanted to maybe just first , Steven , if you could just give a quick rundown of what the balance sheet looked like as of September 30th , I know you just quickly gave I think , revolver metrics , but just full debt on on the balance sheet As of .

Matt Koranda: Hi, guys. Thanks for doing the call here. I wanted maybe just first, Stephen, if you could just give a quick rundown of what the balance sheet looked like as of 30 September. I know you just quickly gave, I think, revolver metrics, but just full debt on the balance sheet as of 30 September. And then just clarify for us, I think I'm clear on this, but I want to make totally clear. There are no obligations to Lugano creditors that are going to be retained on the balance sheet. Does it all be wiped and essentially with Lugano and the Chapter 11 proceeding?

Speaker #7: 930. And then just to clarify for us, I think I'm clear on this, but I want to be clear: there are no obligations to Lugano creditors that are going to be retained on the balance sheet.

Speaker #7: Those would all be wiped, and essentially with Lugano and the Chapter 11 proceeding.

Speaker #5: Correct . So , so , so that's a little bit of a tricky thing . So the once it's deconsolidated . So as of November 16 , 2025 , then that will all be all those things will be wiped .

Stephen Keller: Correct. So that's a little bit of a tricky thing. So once it's deconsolidated, so as of 16 November 2025, then that will all be, all those things will be wiped. It'll be elevated at the end of the quarter, Q3, just because we'll still have, we'll still have those short-term kind of off-balance-sheet debt that will now be on-balance-sheet. So that's where the right way to think of it is, you know, I think, again, I think the first three quarters of this year, which will still contain, we will still consolidate Lugano in our first three quarters. They will be, again, I think you just think of they will just be a little bit messy because of that. Once we deconsolidate, then it'll be a much more cleaner state.

Speaker #5: It'll be elevated at the end of the quarter . Q3 just because they'll still have we'll still have those short term kind of off sheet debt that will now be on balance sheet .

Speaker #5: So that's that's where right way to the think of it is I think . again , I You know , think the first three quarters of this year , which will still contain we will still consolidate Lugano in our first three quarters .

So that's where the right way to think of it is, you know, I think, again, I think the first three quarters of this year, which will still contain, we will still consolidate Lugano in our first three quarters. They will be, again, I think you just think of they will just be a little bit messy because of that. Once we deconsolidate, then it'll be a much more cleaner state.

Speaker #5: They will be again , I think you just think of they will just be a little bit messy because of that . Once we deconsolidate then it'll be a much more cleaner , cleaner state .

Speaker #5: But you know , our our again , total net debt , you know , should be , you know , kind of excluding Lugano piece will be about about one point , you know , 1.9 a little bit under 1.9 billion .

Stephen Keller: You know, again, our total net debt, you know, should be, you know, kind of excluding the Lugano piece will be about, is about $1.9 billion, a little bit under $1.9 billion.

You know, again, our total net debt, you know, should be, you know, kind of excluding the Lugano piece will be about, is about $1.9 billion, a little bit under $1.9 billion.

Speaker #7: Okay . All right . That's helpful . And then just wanted to hear a little bit more about how we're thinking about asset sales I guess I wanted to hear your philosophy Elias .

Matt Koranda: Okay. All right. That's helpful. And then just wanted to hear a little bit more about how we're thinking about asset sales. I guess wanted to hear your philosophy, Elias, on how we think about knocking down net debt, because obviously you've got some really good core assets that are unaffected by this that either, you know, maybe you want to retain because they're really healthy for the long run, but maybe also would be good opportunistic divestitures that would immediately help you on the leverage front. So just wanted to hear a little bit more about how you're thinking about divestitures.

Speaker #7: On on how we think about knocking down net debt . Because obviously you've got some really good core assets that are unaffected by this , that either maybe you want to retain because they're really healthy for the long run , but maybe also would be good opportunistic divestitures that would immediately help you on the leverage front .

Speaker #7: So just wanted to hear a little bit more about how you're thinking about divestitures .

Speaker #3: Sure . So I would say Matt , in general , and this has always been the case at the right price . All of our businesses are for sale .

Elias Sabo: Sure. So I would say, Matt, in general, and this has always been the case, at the right price, all of our businesses are for sale. And, you know, that is always going to be the case, and it always has been the case. And so, you know, we've always said that all, you know, I guess now eight of our companies are open and available for sale. In terms of how we approach and would target the market, you know, and which companies, we, as you know, do not say what companies we are bringing to market or thinking about engaging in potential divestiture transactions with.

Speaker #3: And , you know , that is always going to be the case and it always case . has been the And so , you know , we've always said that all , you know , I guess now eight of the companies are open and available for sale terms in of how we approach and would target the market , you know , and , and which companies we , as you know , do not what say companies we are bringing to market or about thinking engaging in potential divestiture transactions with .

Speaker #3: However , I would say our philosophy here is , you know , there are a few assets that we think are , you know , kind of timely to be able to divest right now where the market backdrop is accommodative and where the valuation could be interesting to Cody's stakeholders .

Elias Sabo: However, I would say our philosophy here is, you know, there are a few assets that we think are, you know, kind of timely to be able to divest right now where the market backdrop is accommodated and where the valuation could be interesting to Cody's stakeholders and provide with meaningful deleverage. And so we are with multiple of our assets in different stages of conversations about a potential, you know, kind of process. You know, some could be all the way to appointing an investment banker. Some could be a little bit earlier than that. But our goal would be to have a few companies that we are approaching market.

However, I would say our philosophy here is, you know, there are a few assets that we think are, you know, kind of timely to be able to divest right now where the market backdrop is accommodated and where the valuation could be interesting to Cody's stakeholders and provide with meaningful deleverage. And so we are with multiple of our assets in different stages of conversations about a potential, you know, kind of process. You know, some could be all the way to appointing an investment banker. Some could be a little bit earlier than that. But our goal would be to have a few companies that we are approaching market.

Speaker #3: And and provide with meaningful deleverage . And so we are with multiple of our assets in different stages of conversations about a kind of potential , you know , process .

Speaker #3: You know, some could be all the way to appointing an investment banker; some could be a little bit earlier than that.

Speaker #3: But our goal would be to have a few companies we are that approaching market . And what we believe is that it's not to say we're going to sell a few companies .

Speaker #3: Matt , but it's very difficult . If I said , hey , we're going to take one company out and we're going to hang all of our hopes that that one company sells , okay , we can guarantee a sale , but we may not like the price .

Elias Sabo: What we believe is that's not to say we're going to sell a few companies, Matt, but it's very difficult if I said, "Hey, we're going to take one company out and we're going to hang all of our hopes that that one company sells." Okay. We could guarantee a sale, but we may not like the price. So we're going to put a couple of companies, you know, kind of out in market, put out feelers, see where, you know, kind of valuation is, and then we'll hone in on an asset or two that will allow us to achieve, you know, kind of meaningful deleveraging. We are keeping in mind having, you know, kind of assets that we want as a core that could, you know, kind of over time serve as a good base to rebuild from.

What we believe is that's not to say we're going to sell a few companies, Matt, but it's very difficult if I said, "Hey, we're going to take one company out and we're going to hang all of our hopes that that one company sells." Okay. We could guarantee a sale, but we may not like the price.

Speaker #3: And so we're going to put a couple of companies , you know , of out kind in market , put out feelers , see where , you know , kind of valuation is .

So we're going to put a couple of companies, you know, kind of out in market, put out feelers, see where, you know, kind of valuation is, and then we'll hone in on an asset or two that will allow us to achieve, you know, kind of meaningful deleveraging. We are keeping in mind having, you know, kind of assets that we want as a core that could, you know, kind of over time serve as a good base to rebuild from.

Speaker #3: And then we'll hone in on an asset or two that will allow us to achieve, you know, kind of meaningful deleveraging.

Speaker #3: We are keeping in mind having , you know , kind of assets that we want as a core that could , you know , kind of over time , serve as a good base to rebuild from those assets would need to fetch a far higher price .

Speaker #3: Obviously , for us to be able to divest . But in general , I would say , you know , there's a couple of we're looking at this situation as unique in that , you know , we may need to forego some future opportunity on a great asset if we can get a great price today , because it assists in the deleveraging efforts , which we think is sort of from a strategy standpoint .

Elias Sabo: Those assets would need to fetch a far higher price, obviously, for us to be able to divest. But in general, I would say, you know, we're looking at this situation as unique in that, you know, we may need to forego some future opportunity on a great asset if we can get a great price today because it assists in the deleveraging efforts, which we think is sort of from a strategy standpoint, the number one top priority, and it trumps sort of the longer-term strategy of what we hold, you know, over time just because of the need to get our leverage down and the need to restore confidence back in the market.

Those assets would need to fetch a far higher price, obviously, for us to be able to divest. But in general, I would say, you know, we're looking at this situation as unique in that, you know, we may need to forego some future opportunity on a great asset if we can get a great price today because it assists in the deleveraging efforts, which we think is sort of from a strategy standpoint, the number one top priority, and it trumps sort of the longer-term strategy of what we hold, you know, over time just because of the need to get our leverage down and the need to restore confidence back in the market.

Speaker #3: The number one top priority . And it trumps sort of the longer term strategy of what we hold up . You know , over time , just because of the need to get our leverage need to restore confidence back in the market .

Speaker #7: Okay . Very fair . If I could just sneak one more in , I guess the question about restatement incremental costs has already been asked , but what I wanted to get a sense for is what happens with corporate expense .

Matt Koranda: Okay. Very fair. If I could just sneak one more in, I guess the question about incremental restatement costs has already been asked, but what I wanted to get a sense for is what happens with corporate expense if we X out Lugano and, you know, once we're through with some of the restatement costs, I would assume that should be substantially lower over time. Any sort of bracketing you're willing to do there for us?

Speaker #7: If we exclude Lugano, and you know, once we're through with some of the restatement costs, I would assume that should be substantially lower over time.

Speaker #7: Any sort of bracketing you're willing to do there for us?

Speaker #5: Yeah. So I for sure that the restatement costs are one-time and they're not part of the ongoing thing. I think you can think of on the management and the management fees.

Stephen Keller: Yeah. So for sure, that obviously the restatement costs are one time and they're not part of the ongoing thing. I think you can think of on the management, on the management fees. I think you've heard us talk and I've heard the last talk before that we think that, so first in 2026, those will be down substantially primarily because we overpaid in previous periods and we will be, and we'll be earning those costs back. So cash costs will be much lower. In terms of corporate overhead, the public company costs, and corporate other costs, I would say they'll be kind of a little bit more on par. There would, and then really, yes, it's a little bit of a smaller business.

Speaker #5: I think you've heard us talk , and I've heard a lot of talk before that we think that . So first , in 2026 , those will be down substantially , primarily because we overpaid in previous periods .

Speaker #5: And we will be and will be earning those those costs back . So cash costs will be much lower in terms of corporate over public company the costs and other corporate costs .

Speaker #5: I would say they'll be kind of on a little bit more on their par. And the real... Yes, it's a bit of a smaller business.

Speaker #5: We've made some decisions to add some resources in internal audit, risk, and just compliance, kind of to make given kind of situation that we're in.

Stephen Keller: We've made some decisions to add some resources in internal audit and risk and compliance, just kind of to make, given the kind of situation that we're in. So those costs will be, you know, on par, but for a slightly smaller business. So we've increased them a little bit, you know, because of the additional, you know, additional support that we're going to be providing.

We've made some decisions to add some resources in internal audit and risk and compliance, just kind of to make, given the kind of situation that we're in. So those costs will be, you know, on par, but for a slightly smaller business. So we've increased them a little bit, you know, because of the additional, you know, additional support that we're going to be providing.

Speaker #5: So those costs will be , you know , on par . But for a slightly smaller business . So we've increased them a little bit , you know because of the additional , you know , additional support that we're going to be providing .

Speaker #7: Okay . Thanks guys .

Speaker #5: Reductions are going to come from management fees.

Speaker #7: Steve, thanks. Got it.

Matt Koranda: Okay. Thanks, guys.

Speaker #1: Thank you. Our next question comes from the line of Robert Dodd of Raymond James. Your line is open. Robert.

Stephen Keller: The bigger reduction is going to come from management fees.

Matt Koranda: Got it. Thanks, Steve.

Matt Koranda: Got it. Thanks, Steph.

Operator: Thank you. Our next question comes from the line of Robert Dodd of Raymond James. Your line is open, Robert.

Speaker #8: Hi , guys . And sort of , sort of related to that question on the the incremental investments . I mean , you mentioned going to an outsourced model , adding more staff , separating the fact that that .

Robert Dodd: Hi, guys. And sort of related to that question, on the incremental investments, I mean, you mentioned, you know, going to an outsource model, you know, adding more staff, separating the fact that the corporate overhead might be flattish versus where it was before. But can you give us an idea of like how much incremental cost are you sinking into the business on a go-forward basis in terms of additional compliance, risk management, et cetera? You know, so I mean, if it's flat, how much is the mix? Like just how much more money are you spending on monitoring, et cetera, between internal new hires, et cetera, plus you mentioned going to, you know, obviously an outsource model for parts of it?

Speaker #8: The corporate overhead might be flattish versus where it was before, but can you give us an idea of how much incremental cost are you?

Speaker #8: Thinking into the business on , go a forward basis in terms of additional compliance , risk management , etc. ? You know , so , I mean , if it's flat , how much , how much mix ?

But can you give us an idea of like how much incremental cost are you sinking into the business on a go-forward basis in terms of additional compliance, risk management, et cetera? You know, so I mean, if it's flat, how much is the mix? Like just how much more money are you spending on monitoring, et cetera, between internal new hires, et cetera, plus you mentioned going to, you know, obviously an outsource model for parts of it?

Speaker #8: Like is the just how much more money are you spending on on monitoring etc. . Between internal new hires etc. ? Plus you mentioned going to you know , obviously an outsourced model for parts of it .

Speaker #5: Yeah . So again , for the so actually all of the risk management , including this new that resource that we've identified will all be outsourced .

Speaker #5: We made the decision to outsource risk to outsource that risk and compliance and risk management and internal audit . Again , what I would say is the the the best way to say it , the cost , the total cost should be , you know , very the total cost for public company should be only slightly higher .

Stephen Keller: Yeah. So again, for the, so actually all of the risk management, including this new resource that we've identified, will all be outsourced. We made a decision to outsource risk, to outsource that risk, compliance, risk management, and internal audit. Again, what I would say is the best way to say it, the cost, the total cost should be, you know, very, the total cost for a public company should be only slightly higher, but again, it's on a slightly smaller business, a smaller business without Lugano. So we've increased costs from that on a relative basis, but not absolute.

Speaker #5: But again, it's on a slightly, slightly smaller business and a smaller business without Lugano. So we've increased cost from that on a relative basis, but not absolute.

Speaker #8: Okay . Fair enough . And then if I can on on , you know , if we move past Lugano know , the like , you next kind of , you know , big business was Boa and I think you made some , some comments about it at the beginning that I think it was doing pretty well .

Robert Dodd: Okay. Fair enough. And then if I can on, you know, if we move past Lugano, like, you know, the next kind of, you know, big business I was focused on was Boa. And I think you made some comments about it at the beginning that I think it was doing pretty well. And you've, you know, obviously given some updates on some of the other businesses, but how are design wins, et cetera, going for Boa/Taras having any impact? Because obviously that's probably now your most significant and valuable business.

Speaker #8: And you've , you've obviously given some updates on some of the other businesses , but how , how are design wins , etc. , going for Boa slash tariffs , having any impact ?

Speaker #8: Because, obviously, that's probably now your most significant and valuable business.

Speaker #3: Yeah Robert for sure it is our most valuable business . say I would . And just based on its multiple and its size and its , you know , it continues to perform extremely well in terms of customer wins .

Elias Sabo: Yeah, Robert, for sure it is our most valuable business, I would say, and just based on its multiple and its size. And it's, you know, it continues to perform extremely well. In terms of customer wins, we continue to get more placement. Our Alpine strategy is going really well and now moving, you know, kind of into the uppers and lowers and having both systems. You know, we just are broadly getting a lot more wins. In terms of, so, you know, from that standpoint, I would say it's business as usual. They continue to, you know, plug along, getting, you know, kind of similar type of double-digit SKU growth, you know, that we kind of work year over year. So the company is doing well on that, or SKU count, I should say. In terms of the tariffs, you remember like this and PrimaLoft are both ingredient brands.

Speaker #3: We continue to get more placement . Our alpine strategy is going really well . And now moving , kind of into the uppers and lowers , having both systems , you know , we just are broadly getting a lot more in wins terms of .

Speaker #3: So you know , from that standpoint , I would say it's business as usual . They continue to you know , plug along getting you know , kind of similar type of double digit skew growth .

Speaker #3: You know , that we kind of work year over year . So the company is doing well on that or skew count , I should say , in terms of the tariffs , you remember like this .

They continue to, you know, plug along, getting, you know, kind of similar type of double-digit SKU growth, you know, that we kind of work year over year. So the company is doing well on that, or SKU count, I should say. In terms of the tariffs, you remember like this and PrimaLoft are both ingredient brands.

Speaker #3: And Primaloft are both ingredient brands . And so the tariffs actually don't impact either of those companies . However , they will impact the products that those , you know , companies products go on .

Elias Sabo: And so the tariffs actually don't impact either of those companies. However, they will impact the products that those, you know, companies' products go on. So if we're going on a, you know, piece of footwear that is made in China and then sold in the US and it's got a 40% tariff, obviously our brand partner has to figure out how they're dealing with that and whether they're pushing through that cost. So it's clearly from a standpoint of unit volume, you clearly have seen some headwind in all consumer products. And, you know, they would say it's fair to say that both Boa and PrimaLoft are experiencing, their customers are experiencing those same headwinds due to tariff costs, but those are not directly impacting.

And so the tariffs actually don't impact either of those companies. However, they will impact the products that those, you know, companies' products go on. So if we're going on a, you know, piece of footwear that is made in China and then sold in the US and it's got a 40% tariff, obviously our brand partner has to figure out how they're dealing with that and whether they're pushing through that cost.

Speaker #3: So if we go on a, you know, a piece of footwear that is made in China and then sold in the U.S., and it's got a 40% tariff, obviously our brand partner has to figure out how they're dealing with that and whether they're pushing through that cost.

Speaker #3: Say it's clearly from a standpoint of unit volume , you clearly have seen some headwind in all consumer products . And , you know , I would say it's fair to say that both Boa and Primaloft are experienced .

So it's clearly from a standpoint of unit volume, you clearly have seen some headwind in all consumer products. And, you know, they would say it's fair to say that both Boa and PrimaLoft are experiencing, their customers are experiencing those same headwinds due to tariff costs, but those are not directly impacting.

Speaker #3: Their customers are experiencing those same headwinds due to tariff costs . But those are not directly impacting the tariff costs . Do not impact Boa or Primaloft at any level other than , you know , kind of that indirect through our customers , you know , kind of unit volume .

Elias Sabo: The tariff costs do not impact Boa or PrimaLoft at any level other than, you know, kind of that indirect through our customers, you know, kind of unit volume that's happening. I will mention one thing about Boa, and that is, you know, we do do some business in Asia with all of the trade, you know, wars that are going on or the tariffs and then kind of retaliation that's happening. We do find in one of our Asian markets some revenue that has fallen off, but the rest of the business is growing and making up for it. And it was expected as we were going through this. And so it's not, you know, it's performing right in line with what we would have expected.

The tariff costs do not impact Boa or PrimaLoft at any level other than, you know, kind of that indirect through our customers, you know, kind of unit volume that's happening. I will mention one thing about Boa, and that is, you know, we do do some business in Asia with all of the trade, you know, wars that are going on or the tariffs and then kind of retaliation that's happening.

Speaker #3: That's happening . I will mention one thing about Boa , and that is , you know , we have you know , there's we do do some business in Asia with all of the trade , you know , wars and that are going on or the tariffs and then kind of retaliation that's happening .

Speaker #3: We do find that in one of our Asian markets, some revenue has fallen off. But the rest of the business is growing.

We do find in one of our Asian markets some revenue that has fallen off, but the rest of the business is growing and making up for it. And it was expected as we were going through this. And so it's not, you know, it's performing right in line with what we would have expected.

Speaker #3: And making up for it. And it was expected as we were going through this. And so it's not, you know, it's performing right in line with what we would have expected.

Speaker #3: But I would say if there's a negative to what's happening in trade, it's, you know, kind of the political climate is spilling over into the international business opportunity.

Elias Sabo: But I would say if there's a negative to what's happening in trade, it's, you know, kind of the political climate is spilling over into the international business opportunity. Boa saw it a little bit, but, you know, really all of our businesses are finding international business harder to, it's harder today than they would have, call it a year ago before tariffs and retaliatory measures have been put in place.

But I would say if there's a negative to what's happening in trade, it's, you know, kind of the political climate is spilling over into the international business opportunity. Boa saw it a little bit, but, you know, really all of our businesses are finding international business harder to, it's harder today than they would have, call it a year ago before tariffs and retaliatory measures have been put in place.

Speaker #3: But saw it a little bit . But , you know , really all of our businesses are finding international business harder to it's harder today than they would have call it a year ago before tariffs and retaliatory measures have been put in place .

Speaker #8: Got it. Thank you.

Speaker #1: Thank you once again , to ask a question , please press star one one on your telephone . Again , that's star one one on your telephone to ask a question .

Robert Dodd: Got it. Thank you.

Operator: Thank you. Once again, to ask a question, please press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question. Our next question comes from the line of Ryan Shelley of Bank of America. Your line is open, Ryan.

Speaker #1: Our next question comes from the line of Ryan Shelley of Bank of America. Your line is open, Ryan.

Speaker #9: Hey, guys. Thanks for the question, and thanks for doing this call today. My question was surrounding litigation following up everything that happened with Lugano.

Ryan Shelley: Hey guys, thanks for the question and thanks for doing this call today. My question was surrounding litigation following everything that happened with Lugano. So both ways, can you just give us an overview of litigation you're pursuing against both, you know, the founder as well as, you know, participants in the fraud? And then if there's any litigation currently outstanding against Cody itself. Thanks again.

Speaker #9: So both ways , can you just give us an overview of litigation ? You're pursuing against both ? You know , the founder as well as participants in the fraud , and then if they're just if there's any litigation currently outstanding against Cody itself .

Speaker #9: Thanks again .

Speaker #5: Yeah. So, a couple of things here. Again, we have a little bit separate Lugano from Cody in this particular case because, again, Lugano is now under control of the bankruptcy court.

Stephen Keller: Yeah. So a couple of things here. Again, we have to a little bit separate Lugano from Cody in this particular case because again, Lugano is now under control of the bankruptcy court. A lot of the claims that will be pursued will be pursued by Lugano, which, and hope, and to the extent there's recovery, we would expect to get that as kind of senior, senior secured. But Lugano is pursuing a significant, is pursuing a lot of different avenues, specifically, you know, civil recoveries against the former CEO. There's some lawsuits that have been announced, and I'm sure they're going to. There'll be additional things that they're working through.

Speaker #5: A lot of the claims that will be pursued on will be pursued by Lugano , which and hope and extent and to there's recovery .

Speaker #5: We would expect to get that as kind of senior senior secured . But Lugano is is is pursuing a significant is pursuing a lot of different avenues specifically , you know , civil recoveries against the former CEO .

Speaker #5: There are some lawsuits that have been announced. I'm sure there will be additional things that they are working through, and that's an important part of the extent.

Speaker #5: To the that if there's anyone else , any other third parties who are involved in the schemes , I think you would expect the chief restructuring officer to pursue all avenues to to recover in terms of so , so Lugano will be very Lugano and the bankruptcy and the chief restructuring officer , we believe will be very aggressive to pursue avenues all from our perspective , there will be we will we will also look at any opportunities for recovery from at the Cody level .

Stephen Keller: That will be, that's an important part to the extent that if there's anyone else, any other third parties who are involved in the schemes, I think you would expect the chief restructuring officer to pursue all avenues to recover. In terms of, so Lugano will be very, Lugano and the bankruptcy and the chief restructuring officer, we believe will be very aggressive to pursue all avenues. From our perspective, there will be, we will also look at any opportunities for recovery from the Cody level, but again, those will be more related to our investment than anything that happened as part of the investment as opposed to Lugano going after the people involved in Lugano business.

That will be, that's an important part to the extent that if there's anyone else, any other third parties who are involved in the schemes, I think you would expect the chief restructuring officer to pursue all avenues to recover. In terms of, so Lugano will be very, Lugano and the bankruptcy and the chief restructuring officer, we believe will be very aggressive to pursue all avenues.

From our perspective, there will be, we will also look at any opportunities for recovery from the Cody level, but again, those will be more related to our investment than anything that happened as part of the investment as opposed to Lugano going after the people involved in Lugano business.

Speaker #5: But again , those will be more related to our investment than anything that happened as part of the investment . As opposed to Lugano going after the people involved in Lugano business , there obviously have been in terms of other lawsuits , there have been a number of lawsuits that have been filed , both shareholder lawsuits as well as Cody being named in lawsuits related to Lugano .

Stephen Keller: There obviously have been, in terms of other lawsuits, there have been a number of lawsuits that have been filed, both shareholder lawsuits, as well as Cody being named in lawsuits related to Lugano things. Most of those, as the bankruptcy had stayed, most of those lawsuits, and we would expect the lawsuits that were named that are really lawsuits against Lugano, we would expect those to be, you know, we would expect those to be dismissed from our perspective. But there are, you know, there are a number of lawsuits that have been filed, and we're, you know, we'll obviously defend ourselves vigorously.

There obviously have been, in terms of other lawsuits, there have been a number of lawsuits that have been filed, both shareholder lawsuits, as well as Cody being named in lawsuits related to Lugano things. Most of those, as the bankruptcy had stayed, most of those lawsuits, and we would expect the lawsuits that were named that are really lawsuits against Lugano, we would expect those to be, you know, we would expect those to be dismissed from our perspective. But there are, you know, there are a number of lawsuits that have been filed, and we're, you know, we'll obviously defend ourselves vigorously.

Speaker #5: Things most of those as the bankruptcy had stayed. Most of those lawsuits, and we would expect the lawsuits that were named that are really lawsuits against Lugano.

Speaker #5: We would expect those to be , you know , we would expect those to be dismissed from our perspective . But there are , you know , there are a number of lawsuits that have been filed , and we're , you know , we'll obviously defend ourselves vigorously .

Speaker #9: Got it, got it. Thank you. So it sounds like most of the lawsuits would be related to activity at Lugano.

Speaker #9: Not at Cody level.

Ryan Shelley: Got it. Got it. Thank you. So it sounds like most of the lawsuits would be related to activity at Lugano, not at Cody level.

Speaker #5: Oh , yeah . For sure . I mean , look , there will be there will be , there will be lots of people who name Cody and lawsuits related to Lugano are expectation is that those should be that we're not the right you know that those should be just focus on the Donald .

Stephen Keller: Yeah, for sure. I mean, look, there will be lots of people who name Cody in lawsuits related to Lugano. Our expectation is that those should be, that we're not the right, you know, that those should be just focused on Lugano.

Speaker #9: Yeah , totally understand . Thanks for the time , guys . Really appreciate it .

Speaker #5: Thank you .

Speaker #1: Thank you. I would now like to turn the conference back to Ben Tapper for closing remarks. Sir.

Ryan Shelley: Yeah. Totally understand. Thanks for the time, guys. Really appreciate it.

Stephen Keller: Yeah. Thank you.

Operator: Thank you. I would now like to turn the conference back to Ben Tapper for closing remarks. Sir?

Speaker #3: This is Elias. Thank you all for your time today. We look forward to talking with you in the next couple of weeks.

Speaker #3: As we final , as we file our financials and get caught up through Q3 and plan on having a we call to discuss our year to date financials after we file our Q3 financials .

Elias Sabo: This is Elias. Thank you all for your time today, and we look forward to talking with you in the next couple of weeks as we file our financials and get caught up through Q3. We plan on having a call to discuss our year-to-date financials after we file our Q3 financials. Thank you.

Speaker #3: Thank you .

Speaker #5: Thank you .

Stephen Keller: Thank you.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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