pass Diversified LLC(US:CODI)2023-05-04 02:15Financial Data and Key Metrics Changes - Consolidated net income for Q1 2023 was $109.6 million, a significant increase from $29.7 million in the prior year, primarily due to a $98 million gain on the sale of Advanced Circuits [16] - Adjusted EBITDA for Q1 2023 was $91.9 million, up 11% from $83.2 million in Q1 2022, driven by the PrimaLoft acquisition [56] - Revenue for Q1 2023 was $542.2 million, a 6% increase compared to $510.5 million in the prior year period [32] Business Line Data and Key Metrics Changes - Niche industrial businesses saw flat revenues but a 19% increase in adjusted EBITDA, with margin expansion of over 250 basis points [11] - Consumer businesses experienced a 2% increase in revenues but a 5% decline in adjusted EBITDA due to excess inventory impacting BOA, PrimaLoft, and Velocity [12] - Lugano reported a strong quarter with revenues and adjusted EBITDA growing by 36% and 38% respectively [13] Market Data and Key Metrics Changes - The affluent consumer segment continues to spend, as evidenced by strong performance at Lugano [9] - BOA is gaining market share despite experiencing significant inventory destocking, which is currently outpacing market share gains [7] - PrimaLoft's performance has not fully met expectations, but it is believed to be taking market share amidst inventory rebalancing [14] Company Strategy and Development Direction - The company is focused on a diversified group of subsidiaries to reach a broad set of end markets and consumer demographics, which has driven strong results [22] - The strategy includes a commitment to high-quality, high-growth assets, with expectations for a snapback in revenue growth once inventory destocking issues are resolved [23][24] - The company plans to prioritize capital allocation towards high-return opportunities within its portfolio, particularly in Lugano and 5.11 [87] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the near-term outlook due to ongoing inventory destocking and macroeconomic headwinds, but remains confident in growth for the second half of 2023 [25][26] - The company anticipates a challenging Q2 but expects strong performance in the second half of the year, driven by strong end demand [25][26] - Management noted that the current inventory issues are expected to correct in the latter half of the year, leading to improved revenue and profitability [92] Other Important Information - The company has substantial liquidity with approximately $53.7 million in cash and $590 million available on its revolver, with leverage at 3.87 times [17] - Capital expenditures for 2023 are anticipated to be between $60 million and $70 million, primarily for new retail salons at Lugano and store expansions at 5.11 [36] - The company received a silver badge from Catalyst 2030 for its commitment to sustainable development goals [37] Q&A Session Summary Question: What is the outlook for Q2 given the strong start to the year? - Management indicated a more conservative outlook for Q2 due to macroeconomic concerns and inventory destocking, but remains confident in achieving annual growth [66][128] Question: How is the DTC business performing? - The DTC business remains positive in Q1, although growth is slightly slower compared to previous periods [70] Question: What is the status of inventory levels and restocking? - Management expects Q2 to be better than Q1, with a gradual improvement in inventory levels as the year progresses [80] Question: What are the plans for acquisitions in the healthcare sector? - The company is focused on add-on acquisitions rather than platform acquisitions due to high pricing in the current market [86][100] Question: How confident is management in the snapback for BOA and PrimaLoft? - Management is confident in a strong snapback but cannot predict the exact timing, expecting improvements in Q3 and Q4 [92][93]