pass Diversified LLC(CODI) - 2025 Q1 - Quarterly Report

Financial Performance - Net revenues for Q1 2025 increased to $453.775 million, up 10.4% from $410.826 million in Q1 2024[21] - Gross profit for Q1 2025 was $196.032 million, representing a gross margin of 43.2%, compared to $174.952 million in Q1 2024[21] - Operating income for Q1 2025 was $3.441 million, a significant improvement from an operating loss of $12.107 million in Q1 2024[21] - Net loss attributable to Holdings decreased to $29.993 million in Q1 2025, compared to a net loss of $56.177 million in Q1 2024[21] - Basic loss per common share attributable to Holdings improved to $(0.59) in Q1 2025 from $(1.52) in Q1 2024[21] - Total comprehensive loss attributable to Holdings for Q1 2025 was $28.397 million, an improvement from $58.153 million in Q1 2024[23] - The net loss for the three months ended March 31, 2025, was $49.71 million, compared to a net loss of $85.27 million for the same period in 2024, representing a 41.7% improvement[28] - Total segment operating income for the three months ended March 31, 2025, was $25,170,000, compared to $9,270,000 in the same period of 2024, indicating a significant improvement[188] - The company reported a total consolidated operating income of $3,441,000 for Q1 2025, a recovery from a loss of $12,107,000 in Q1 2024[188] - For the three months ended March 31, 2025, the net income from continuing operations attributable to common shares was $(43,619) thousand, compared to $(118,039) thousand for the same period in 2024, reflecting a significant improvement[129] - Basic and diluted earnings per share for the three months ended March 31, 2025, was $(0.59), an improvement from $(1.57) in 2024[131] Assets and Liabilities - Total assets increased to $3.367 billion as of March 31, 2025, up from $3.297 billion as of December 31, 2024[18] - Total liabilities rose to $2.853 billion as of March 31, 2025, compared to $2.767 billion as of December 31, 2024[18] - Total stockholders' equity attributable to Holdings was $680.736 million as of March 31, 2025, compared to $678.620 million as of December 31, 2024[18] - Goodwill net carrying amount as of March 31, 2025, was $895.420 million, slightly down from $895.916 million as of December 31, 2024[79] - Total long-term debt as of March 31, 2025, is $1,860,064,000, an increase from $1,774,290,000 as of December 31, 2024, representing a growth of approximately 4.85%[106] Cash Flow and Financing Activities - Cash and cash equivalents increased significantly to $146.235 million from $59.659 million[18] - Cash flows from financing activities generated net cash of $128.24 million in Q1 2025, compared to $23.07 million in Q1 2024, indicating a significant increase in financing activities[30] - The company issued Trust preferred shares, generating net proceeds of $58.14 million in Q1 2025, compared to $827,000 in Q1 2024[30] - Cash used in operating activities for continuing operations was $29.35 million for Q1 2025, slightly higher than $27.73 million in Q1 2024[28] - Borrowings from the revolving credit facility decreased to $50 million in Q1 2025 from $100 million in Q1 2024, while repayments increased significantly to $160 million[30] - The Company has a total debt of approximately $1,000 million from the 2029 Senior Notes and $300 million from the 2032 Senior Notes, with interest rates of 5.250% and 5.000% respectively[97][99] Acquisitions and Business Operations - As of March 31, 2025, Compass Diversified Holdings operates nine businesses, including The Honey Pot Co. and Lugano Diamonds[33] - The Company reported a total purchase price of approximately $380 million for the acquisition of The Honey Pot Co., funded with cash on hand[55] - The acquisition of The Honey Pot Co. had a purchase price of $380.1 million, with a final allocation of $377.3 million after adjustments[59] - The fair value of identifiable assets acquired from The Honey Pot Co. totaled $313.2 million, while total liabilities assumed were $42.96 million, resulting in net identifiable assets of $270.3 million[59] - Goodwill from the acquisition of The Honey Pot Co. was recorded at $107.0 million, reflecting the strategic fit within the company's branded consumer business[59] - The Company is currently under a forbearance agreement with lenders due to noncompliance with financial covenants under its 2022 Credit Facility[36] - The Company is negotiating an amendment to the 2022 Credit Facility to address the deconsolidation of Lugano, which is undergoing Chapter 11 proceedings[36] Management and Governance - The Company has authorized the issuance of up to 50,000,000 Trust preferred shares[117] - The Company’s management fee structure was amended to include a base management fee of 2% of adjusted net assets up to $3.5 billion, with higher percentages for greater asset levels[168] - The company’s management fees are subject to approval by the Compensation Committee of the Board, and future payments will be reduced by any overpaid amounts[170] - Management fees incurred from December 31, 2021, to March 31, 2025, totaled $239.1 million, with $195.9 million adjusted for restatement, resulting in an overpayment of $43.1 million[172] Legal and Compliance Issues - The Company is currently unable to determine the likelihood of an unfavorable outcome regarding ongoing securities class actions and derivative actions, with management stating that a loss is reasonably possible but cannot estimate a range of potential loss[197][201] - The Company received a notice from the NYSE on May 20, 2025, indicating non-compliance with timely filing criteria, and was granted an extension until January 20, 2026, to cure its filing delinquencies[205] - The Company is cooperating with ongoing investigations by the SEC and DOJ following the withdrawal of reliance on its financial statements for 2022, 2023, and 2024[204] Operational Challenges - The Company recorded a significant increase in management fee limitations to no more than $5 million per fiscal quarter as part of the Second Forbearance Agreement[211] - The Company has suspended its at-the-market offering programs due to the commencement of the Lugano Investigation[207] - The Company entered into a Second Forbearance Agreement on July 25, 2025, with lenders to refrain from exercising rights related to the Lugano Events of Default until October 24, 2025[209]