pass Diversified LLC(US:CODI)2022-05-06 21:10Financial Data and Key Metrics Changes - For Q1 2022, consolidated revenue was $510.5 million, a 25% increase from $408.6 million in the prior year period, primarily driven by the acquisition of Lugano and strong growth from BOA, Marucci Sports, and Outdoor Solutions [24] - Consolidated net income for Q1 2022 was $29.7 million, a 35% increase compared to $22 million in the prior year [25] - Adjusted earnings for Q1 2022 were $36 million, up 38% from the previous year [25] - The company raised its full-year 2022 adjusted EBITDA outlook to between $410 million and $430 million, an increase of $10 million at both ends of the range [30] Business Line Data and Key Metrics Changes - Niche industrial businesses saw revenues increase by 19.5% and adjusted EBITDA by 9.4% year-over-year [15] - Consumer businesses experienced a revenue increase of 14% and adjusted EBITDA growth of 13% compared to Q1 2021 [17] - BOA Technologies reported over 55% revenue growth in Q1 2022, achieving a record $25 million in quarterly EBITDA [17][9] - Lugano's pro forma adjusted EBITDA grew by over 46%, with a strong correlation between inventory investment and revenue growth [11][17] Market Data and Key Metrics Changes - The company noted that supply chain constraints, inflationary pressures, and labor shortages were significant challenges during the quarter [9] - Demand for catering products at Sterno grew significantly, while scented wax products saw reduced demand compared to a strong Q1 2021 [16] Company Strategy and Development Direction - The company is focusing on enhancing its ESG practices, believing that sound ESG strategies can manage risk and enhance long-term returns [34][35] - The M&A market remains depressed, with expectations for a gradual uptick in activity in the latter half of the year if economic headwinds moderate [33] - The company plans to continue investing in its subsidiaries and pursuing acquisition opportunities as they arise [27][54] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to navigate economic headwinds and maintain strong performance, despite challenges [12][30] - The company remains confident in its long-term growth prospects, particularly for BOA Technologies, which has significant market share potential [10][62] - Management acknowledged that inflation is impacting purchasing power, particularly for lower-end consumers, but noted strong demand from more affluent customers [40][42] Other Important Information - The company had approximately $97.3 million in cash as of March 31, 2022, with no amounts drawn on its revolver [27] - Capital expenditures for Q1 2022 were $10.4 million, up from $7.3 million in the prior year, primarily due to retail store expansion [29] Q&A Session Summary Question: Insights on consumer behavior in Q1 - Management noted strong consumer spending across the board, with some weakness in lower-end products due to inflation impacting purchasing power [39][40] Question: BOA's growth and revenue pull-forward - Management indicated that demand at BOA is broad-based and sustainable, with some potential pull-forward from future quarters [44] Question: Marucci's market share growth - Management highlighted that Marucci is strategically using airfreight to gain shelf space and is expanding into various categories [46] Question: Update on Lugano's performance - Management stated that Lugano has seen significant growth in underlying demand and is not at a normalized run rate yet [48] Question: M&A environment outlook - Management expressed that the M&A environment remains challenging, with muted expectations for both platform and add-on acquisitions [49][53] Question: Impact of rising interest rates - Management indicated that rising interest rates have minimal impact on the company due to its long-duration debt structure [72][76]