Financial Data and Key Metrics Changes - For Q3 2025, net sales were $472.6 million, an increase of 3.5% year-over-year [20] - Year-to-date consolidated net sales reached $1.4 billion, an increase of 8.6% over the prior year, or 6.1% excluding the impact of Lugano [21] - Year-to-date subsidiary-adjusted EBITDA was $257 million, an increase of 5.8% over 2024 [23] - The consolidated net loss year-to-date was $215 million, which includes a $155 million loss at Lugano [24] Business Line Data and Key Metrics Changes - In the consumer vertical, sales were up 3.1%, driven by strong growth at The Honeypot, while BOA experienced a slight decline due to exiting a lower-value business in China [22] - The industrial vertical saw sales growth of 10.5%, primarily driven by Altor's acquisition of Lifoam [22] - The Honeypot achieved strong double-digit EBITDA growth, while Sterno also delivered double-digit EBITDA growth [24] Market Data and Key Metrics Changes - The rare earth magnetics market faced disruptions due to geopolitical factors, creating long-term opportunities for Arnold [16] - Demand for a more secure rare earth supply chain is increasing, with Arnold positioned to benefit from this trend [16][102] Company Strategy and Development Direction - The company is focused on reducing leverage to mitigate risk and ensure long-term financial flexibility while also aiming to return capital to shareholders [19] - The management emphasized a commitment to generating sustained long-term shareholder value through capital allocation priorities [34] - The company is open to divesting any business if it maximizes shareholder value, maintaining a disciplined approach to valuation [44][46] Management's Comments on Operating Environment and Future Outlook - The management noted that 2025 was marked by uncertainty due to geopolitical risks and a fluid tariff environment, impacting performance [11] - Despite challenges, the company expects to achieve organic growth and free cash flow in 2026, with a focus on deleveraging [62] - Management expressed confidence in the long-term growth potential of Arnold, particularly in light of supply chain shifts [102] Other Important Information - The company has restored compliance with SEC filings and credit facility requirements, returning to a normal operating cadence [6] - The management team has undergone changes, with Zach Sawtelle stepping in as COO following Pat Maciariello's retirement [8] Q&A Session Summary Question: Performance of The Honeypot - The Honeypot has significantly outperformed expectations, gaining more shelf space and achieving faster inventory turns due to successful brand extension into new categories [38][41] Question: Asset Divestiture Strategy - The company maintains that all assets are for sale if the valuation is attractive, with a focus on maximizing shareholder value [43][44] Question: Economic Outlook - The management acknowledged a slowdown in growth but expects to return to a growth trajectory in 2026, driven by strong free cash flow and portfolio growth [62] Question: Management Fees and Financial Outlook - The normalized management fee is expected to be around $55 million for the next year, with a significant reduction in cash payments due to overpaid management fees [67][70] Question: Supply Chain Disruption at Arnold - The supply chain disruptions are expected to normalize, with a backlog providing a tailwind for growth in 2026 [100][102]

Financial Data and Key Metrics Changes - For Q3 2025, net sales were $472.6 million, an increase of 3.5% year-over-year. Year-to-date consolidated net sales reached $1.4 billion, up 8.6% over the prior year, or 6.1% excluding the impact of Lugano [13][14] - The GAAP net loss for the quarter was $87.2 million, which includes expenses related to the Lugano investigation and operations [13] - Year-to-date subsidiary-adjusted EBITDA was $257 million, an increase of 5.8% over 2024 [15] Business Line Data and Key Metrics Changes - In the consumer vertical, sales grew 3.1%, driven by strong growth at The Honeypot, while BOA's sales declined slightly due to exiting a lower-value business in China [14][15] - The industrial vertical saw a 10.5% increase in sales, primarily due to Altor's acquisition of Lifoam, although Arnold faced near-term headwinds from geopolitical uncertainties [14][15] Market Data and Key Metrics Changes - The consumer market experienced low single-digit growth, while the industrial market delivered mid-single-digit growth [9][10] - The rare earth magnetics market faced disruptions due to export restrictions from China, impacting Arnold's performance but creating long-term growth opportunities [10][11] Company Strategy and Development Direction - The company is focused on reducing leverage to mitigate risk and ensure long-term financial flexibility while also aiming to return capital to shareholders [12] - There is a commitment to executing strategic transactions, including potential divestitures, to maximize shareholder value [30] Management's Comments on Operating Environment and Future Outlook - The management noted that 2025 was marked by uncertainty due to geopolitical risks and a fluid tariff environment, but they expect to return to growth in 2026 [8][40] - Management expressed confidence in the long-term growth potential of Arnold, particularly as customers seek more stable supply chains for rare earth materials [73] Other Important Information - The company has restored compliance with SEC filings and credit facility requirements, allowing for a return to normal operations [4] - The management team has undergone changes, with Zach Sawtelle stepping into the COO role following Pat Maciariello's retirement [5][6] Q&A Session Summary Question: Performance of The Honeypot - Management indicated that The Honeypot is outperforming expectations due to increased shelf space and successful product launches in new categories [24][26] Question: Asset Divestiture Strategy - Management stated that all businesses are available for sale if the valuation is attractive, emphasizing a disciplined approach to divestments [28][30] Question: Economic Outlook - Management acknowledged a slowdown in growth but remains optimistic about future performance, expecting to achieve organic growth and free cash flow in 2026 [36][42] Question: Supply Chain Disruptions at Arnold - Management noted that supply chain disruptions from China are beginning to normalize, with expectations for improved performance in 2026 [71][73] Question: Free Cash Flow Expectations - Management anticipates generating between $50 million and $100 million of free cash flow in 2026, a significant improvement from previous years [83]

Company Overview - Compass Diversified (CODI) manages a diverse group of middle-market businesses [9] - CODI has a permanent capital base and long-term ownership approach [9] - As of December 31, 2024, CODI's aggregate acquisitions totaled $9.5 billion [10] - The company's invested capital is $5.3 billion [10] - TTM Proforma Revenue is $2.2 billion [10] - TTM Proforma Subsidiary Adjusted EBITDA is $516.5 million [10] - TTM Adjusted Earnings is $161.6 million [10] Financial Performance & Guidance - TTM Proforma Revenue Growth is 6.6% [10] - TTM Proforma Subsidiary Adjusted EBITDA Growth is 18.7% [10] - For 2025, the company projects Subsidiary Adjusted EBITDA between $570 million and $610 million [62] - 2025 Adjusted EBITDA (Less Corporate & Mgmt Fees) is expected to be $480 million to $520 million [62] - Adjusted Earnings for 2025 are projected to be $170 million to $190 million [62]