Compass Diversified Holdings

Previous wording

We categorize our subsidiary businesses into two separate groups of businesses: (i) branded consumer businesses, and (ii) industrial businesses. Branded consumer businesses are characterized as those businesses that we believe capitalize on a valuable brand name in their respective market sector. We believe that our branded consumer businesses are leaders in their particular product category. Industrial businesses are characterized as those businesses that focus on manufacturing and selling particular products and industrial services within a specific market sector. We believe that our industrial businesses are leaders in their specific market sector. We recently announced the launch of our healthcare effort as our third grouping of companies. We believe healthcare has multiple attractive, high-growth segments with strong industry tailwinds, is an acyclical vertical that we expect will bring diversification and stability to the current group of companies, and has strong alignment with the Company’s existing subsidiary priorities.

Current wording

We categorize our subsidiary businesses into two separate groups of businesses: (i) branded consumer businesses, and (ii) industrial businesses. Branded consumer businesses are characterized as those businesses that we believe capitalize on a valuable brand name in their respective market sectors. We believe that our branded consumer businesses are leaders in their respective particular product categories. Industrial businesses are characterized as those businesses that focus on manufacturing and selling particular products and industrial services within a respective specific market sectors. We believe that our industrial businesses are leaders in their specific market sector. We recently announced the launch of our healthcare effort as our third grouping of companies. We believe healthcare has multiple attractive, high-growth segments with strong industry tailwinds, is an acyclical vertical that we expect will bring diversification and stability to the current group of companies, and has strong alignment with the Company’s existing subsidiary priorities.

Previous wording

The Honey Pot Co.- The Honey Pot Co. is a leading “better-for-you” feminine care brand, powered by plant-derived ingredients and clinically tested formulas. Founded in 2012 by CEO Beatrice Dixon, The Honey Pot Co. is rooted in the belief that all products should be made with healthy and efficacious ingredients that are kind to and safe for skin. The company offers an extensive range of holistic wellness products across the feminine hygiene, menstrual, personal care, and sexual wellness categories. The Honey Pot Co.'s mission is to educate, support, and provide consumers around the world with tools and resources that promote menstrual health and vaginal wellness. Their products can be found in more than 33,000 stores across the U.S. through mass merchants, drug and grocery retail chains, and online. The Honey Pot Co. is headquartered in Atlanta, Georgia.

Current wording

The Honey Pot Co.- The Honey Pot Co. is a leading “better-for-you” feminine care brand, powered by plant-derived ingredients and clinically tested formulas. Founded in 2012 by CEO Beatrice Dixon, The Honey Pot Co. is rooted in the belief that all products should be made with healthy and efficacious ingredients that are kind to and safe for skin. The company offers an extensive range of holistic wellness products across the feminine hygiene, menstrual, personal care, and sexual wellness categories. The Honey Pot Co.'s mission is to educate, support, and provide consumers around the world with tools and resources that promote menstrual health and vaginal wellness. Its products can be found in more than 33,000 stores across the U.S. through mass merchants, drug and grocery retail chains, and online. The Honey Pot Co. is headquartered in Atlanta, Georgia.

Previous wording

Velocity Outdoor- is a leading designer, manufacturer, and marketer of airguns, archery products, laser aiming devices, hunting apparel and related accessories. Velocity Outdoor offers its products under the Crosman, Benjamin, LaserMax, Ravin, CenterPoint and King's Camo brands that are available through national retail chains, mass merchants, dealer and distributor networks. The airgun product category consists of air rifles, air pistols and a range of accessories including targets, holsters and cases. Velocity Outdoor's other primary product categories are archery, with products including CenterPoint and Ravin crossbows, consumables, which includes steel and plastic BBs, lead pellets and CO2 cartridges, lasers for firearms, and airsoft products. The apparel category offers high-performance, feature rich hunting and casual apparel of uncompromised quality utilizing King’s own proprietary camo patterns. Velocity Outdoor is headquartered in Bloomfield, New York.

Current wording

Velocity Outdoor- is a leading designer, manufacturer, and marketer of archery products, hunting apparel and related accessories. The archery product category consists of products including Ravin crossbows and CenterPoint archery products, and the apparel category offers high-performance, feature rich hunting and casual apparel under the King's Camo brand, utilizing King’s own proprietary camo patterns. Velocity Outdoor offers its products through national retail chains and dealer and distributor networks. Velocity Outdoor is headquartered in Rochester, New York.

Previous wording

Sterno - Sterno is a leading manufacturer and marketer of portable food warming systems, creative indoor and outdoor lighting, and home fragrance solutions for the consumer markets. Sterno also manufactures creative indoor and outdoor lighting and home fragrance solutions for consumer markets. Sterno offers a broad range of wick and gel chafing systems, butane stoves and accessories, liquid and traditional wax candles, catering equipment and lamps through Sterno Products, as well as scented wax cubes, warmer products, outdoor lighting and essential oils used for home decor and fragrance systems through Rimports. Sterno is headquartered in Plano, Texas.

Current wording

Sterno - Sterno is a leading manufacturer and marketer of portable food warming systems, creative indoor and outdoor lighting, and home fragrance solutions for the consumer markets. Sterno offers a broad range of wick and gel chafing systems, butane stoves and accessories, liquid and traditional wax candles, catering equipment and lamps through Sterno Products, as well as scented wax cubes, warmer products, outdoor lighting and essential oils used for home decor and fragrance systems through Rimports. Sterno is headquartered in Plano, Texas.

Previous wording

The macroeconomic environment remains dynamic as global macroeconomic trends, including inflationary pressures and higher interest rates, are impacting consumer spending behavior. We expect changing market conditions and continued inflationary pressures to continue to impact consumer spending, particularly for discretionary items purchased by low and middle income consumers, even as overall consumer sentiment among other income brackets appears to be improving going into 2024. While overall inflation increased at a slower pace domestically in 2023, prices remain significantly elevated as compared to the pre-COVID-19 environment, and inflation rates remain above central banks' targets. We continue to experience modest inflationary cost increases in our materials and rising labor costs, particularly at our businesses where hourly employees comprise a larger part of the workforce. We expect that low unemployment rates and increasing wage and benefit costs will have an impact on margins at our businesses in 2024. Certain locales that our businesses operate in have also significantly increased the minimum wage over the past two years with more increases scheduled in coming years, which adds additional wage pressure to the rates we pay hourly workers in these locales.

Current wording

The macroeconomic environment remains dynamic as global macroeconomic trends, including inflationary pressures and higher interest rates, are impacting consumer spending behavior. We expect changing market conditions and inflationary pressures to continue to impact consumer spending, particularly for discretionary items purchased by low and middle income consumers, even as overall consumer sentiment among other income brackets appears to be improving. While overall inflation has increased at a slower pace domestically in the first half of 2024, prices remain significantly elevated as compared to the pre-COVID-19 environment, and inflation rates remain above central banks' targets. We continue to experience modest inflationary cost increases in our materials and rising labor costs, particularly at our businesses where hourly employees comprise a larger part of the workforce. We expect that low unemployment rates and increasing wage and benefit costs will have an impact on margins at our businesses in 2024. Certain locales that our businesses operate in have also significantly increased the minimum wage over the past two years with more increases scheduled in coming years, which adds additional wage pressure to the rates we pay hourly workers in these locales.

Previous wording

Our lead-times for inventory have stabilized, which we expect will allow for more accurate forecasting in 2024. Several of our consumer brand businesses experienced a decrease in net revenues in 2023 resulting from higher than anticipated end market inventory levels due to supply chain normalization and a corresponding inventory ordering surge experienced in 2022. Transportation costs have also decreased from a peak, but global geopolitical threats that arose in the latter half of 2023 continue to pressure both fuel and freight costs. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.

Current wording

Our lead-times for inventory have stabilized, which we expect will allow for more accurate forecasting in 2024. Several of our consumer brand businesses experienced a decrease in net revenues in 2023 resulting from higher than anticipated end market inventory levels due to supply chain normalization and a corresponding inventory ordering surge experienced in 2022. Transportation costs have also decreased from a peak, but global geopolitical threats that arose in the latter half of 2023 continue to pressure both fuel and freight costs. Our businesses have begun to see increases in freight costs, particularly ocean freight, which we expect to impact us in the latter half of 2024. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.

Previous wording

On January 31, 2024 (the "Closing Date"), the LLC, through its newly formed acquisition subsidiaries, THP Topco, Inc., a Delaware corporation (“THP Topco”) and THP Intermediate, Inc., a Delaware corporation (“THP Buyer”), acquired The Honey Pot Company Holdings, LLC (“THP”) and certain of its affiliated entities pursuant to a Merger and Stock Purchase Agreement (the “THP Purchase Agreement”) dated January 14, 2024 by and among THP Buyer, THP, VMG Honey Pot Blocker, Inc. (“Blocker I”), NVB1, Inc. (“Blocker II”), VMG Tax-Exempt IV, L.P., New Voices Fund, LP, THP Merger Sub, LLC (“THP Merger Sub”), VMG Honey Pot Holdings, LLC, as the Sellers’ Representative, and certain remaining equity holders of THP. Pursuant to the THP Purchase Agreement, subsequent to certain internal reorganizations, THP Buyer acquired all of the issued and outstanding equity of Blocker I and Blocker II and, thereafter, THP Merger Sub merged with and into THP (the “THP Merger”), with THP surviving such that the separate existence of THP Merger Sub ceased, with THP surviving the THP Merger as a wholly-owned, indirect subsidiary of the THP Topco. THP is the parent company of The Honey Pot Company (DE), LLC (“The Honey Pot Co.”).

Current wording

On January 31, 2024 (the "Closing Date"), the LLC, through its newly formed acquisition subsidiaries, THP Topco, Inc., a Delaware corporation (“THP Topco”) and THP Intermediate, Inc., a Delaware corporation (“THP Buyer”), acquired The Honey Pot Company Holdings, LLC (“THP”) and certain of its affiliated entities pursuant to a Merger and Stock Purchase Agreement (the “THP Purchase Agreement”) dated January 14, 2024 by and among THP Buyer, THP, VMG Honey Pot Blocker, Inc. (“Blocker I”), NVB1, Inc. (“Blocker II”), VMG Tax-Exempt IV, L.P., New Voices Fund, LP, THP Merger Sub, LLC (“THP Merger Sub”), VMG Honey Pot Holdings, LLC, as the Sellers’ Representative, and certain remaining equity holders of THP. Pursuant to the THP Purchase Agreement, subsequent to certain internal reorganizations, THP Buyer acquired all of the issued and outstanding equity of Blocker I and Blocker II and, thereafter, THP Merger Sub merged with and into THP (the “THP Merger”), such that the separate existence of THP Merger Sub ceased, with THP surviving the THP Merger as a wholly-owned, indirect subsidiary of the THP Topco. THP is the parent company of The Honey Pot Company (DE), LLC (“The Honey Pot Co.”).

Previous wording

The following discussion reflects a comparison of the historical results of operations of our consolidated business for the three months ended March 31, 2024 and March 31, 2023, and components of the results of operations as well as those components presented as a percent of net revenues, for each of our subsidiary businesses on a stand-alone basis.

Current wording

The following discussion reflects a comparison of the historical results of operations of our consolidated business for the three and six months ended June 30, 2024 and June 30, 2023, and components of the results of operations as well as those components presented as a percent of net revenues, for each of our subsidiary businesses on a stand-alone basis.

Previous wording

In the following results of operations, we provide (i) our actual Consolidated Results of Operations for the three months ended March 31, 2024 and 2023, which includes the historical results of operations of each of our businesses (operating segments) from the date of acquisition in accordance with generally accepted accounting principles in the United States ("GAAP" or "US GAAP), and (ii) comparative historical components of the results of operations for each of our businesses on a stand-alone basis for the three months ended March 31, 2024 and 2023, where all periods presented include relevant pro forma adjustments for pre-acquisition periods and explanations where applicable. For the acquisition of The Honey Pot Co. in January 2024, the pro forma results of operations for The Honey Pot Co. business segment has been prepared as if we purchased this business on January 1, 2023. We believe this is the most meaningful comparison for the operating results of acquired business segments. The following results of operations at each of our businesses are not necessarily indicative of the results to be expected for a full year.

Current wording

In the following results of operations, we provide (i) our actual Consolidated Results of Operations for the three and six months ended June 30, 2024 and 2023, which includes the historical results of operations of each of our businesses (operating segments) from the date of acquisition in accordance with generally accepted accounting principles in the United States ("GAAP" or "US GAAP), and (ii) comparative historical components of the results of operations for each of our businesses on a stand-alone basis for the three and six months ended June 30, 2024 and 2023, where all periods presented include relevant pro forma adjustments for pre-acquisition periods and explanations where applicable. For the acquisition of The Honey Pot Co. in January 2024, the pro forma results of operations for The Honey Pot Co. business segment has been prepared as if we purchased this business on January 1, 2023. We believe this is the most meaningful comparison for the operating results of acquired business segments. The following results of operations at each of our businesses are not necessarily indicative of the results to be expected for a full year.

Previous wording

The following table sets forth our unaudited results of operations for the three months ended March 31, 2024 and 2023:

Current wording

The following table sets forth our unaudited results of operations for the three and six months ended June 30, 2024 and 2023:

Previous wording

On a consolidated basis, cost of revenues increased approximately $3.6 million during the three months ended March 31, 2024 compared to the corresponding period in 2023. We saw notable increases in cost of revenues at BOA ($1.5 million increase) and Lugano ($12.5 million increase) that correlates with the increase in net revenue in the first quarter of 2024. We saw notable decreases in cost of revenues at Velocity ($2.6 million decrease), Altor ($7.6 million decrease), and Sterno ($11.3 million decrease) that corresponded to the decrease in net revenue noted above. The Honey Pot Co. had cost of sales of $11.6 million in the first quarter of 2024 post-acquisition. Gross profit as a percentage of net revenues was approximately 46.1% in the three months ended March 31, 2024 compared to 42.4% in the three months ended March 31, 2023. The increase in gross profit as a percentage of net sales in the quarter ended March 31, 2024 as compared to the quarter ended March 31, 2023 is driven by the mix of products sold, with increases in net revenue at our higher margin businesses, particularly Lugano. Our branded consumer businesses had gross profit as a percentage of net revenues of 53.8% in the first quarter of 2024 as compared to 52.0% in the first quarter of 2023, while our industrial businesses had gross profit as a percentage of net revenues of 28.6% in the first quarter of 2024 as compared to 25.7% in the first quarter of 2023. Refer to "Results of Operations - Business Segments" for a more detailed analysis of gross profit by subsidiary business segment.

Current wording

On a consolidated basis, cost of revenues increased approximately $13.2 million during the three months ended June 30, 2024 compared to the corresponding period in 2023. We saw notable increases in cost of revenues at BOA ($4.8 million increase) and Lugano ($13.4 million increase) that correlates with the increase in net revenue in the second quarter of 2024. We saw notable decreases in cost of revenues at Velocity ($14.8 million decrease, primarily as a result of the sale of Crosman) and Altor ($4.1 million decrease) that corresponded to the decrease in net revenue noted above. The Honey Pot Co. had cost of sales of $12.9 million in the second quarter of 2024. Gross profit as a percentage of net revenues was approximately 47.8% in the three months ended June 30, 2024 compared to 44.5% in the three months ended June 30, 2023. The increase in gross profit as a percentage of net sales in the quarter ended June 30, 2024 as compared to the quarter ended June 30, 2023 is driven by the mix of products sold, with increases in net revenue at our higher margin businesses, particularly Lugano. Our branded consumer businesses had gross profit as a percentage of net revenues of 56.7% in the second quarter of 2024 as compared to 53.1% in the second quarter of 2023, while our industrial businesses had gross profit as a percentage of net revenues of 28.1% in the second quarter of 2024 as compared to 29.3% in the second quarter of 2023. Refer to "Results of Operations - Business Segments" for a more detailed analysis of gross profit by subsidiary business segment.

Previous wording

Pursuant to the Management Services Agreement ("MSA"), we pay CGM a quarterly management fee equal to 0.5% (2.0% annually) of our consolidated adjusted net assets. We accrue for the management fee on a quarterly basis. For the three months ended March 31, 2024, we incurred approximately $18.1 million in management fees as compared to $16.3 million in fees in the three months ended March 31, 2023. The increase in management fees is primarily attributable to our acquisition of The Honey Pot Co. in January 2024.

Current wording

Pursuant to the Management Services Agreement ("MSA"), we pay CGM a quarterly management fee equal to 0.5% (2.0% annually) of our consolidated adjusted net assets. We accrue for the management fee on a quarterly basis. For the three months ended June 30, 2024, we incurred approximately $18.9 million in management fees as compared to $16.8 million in fees in the three months ended June 30, 2023. The increase in management fees is primarily attributable to our acquisition of The Honey Pot Co. in January 2024.

Previous wording

CGM entered into a waiver of the MSA for a period through June 30, 2023 to receive a 1% annual management fee related to PrimaLoft, rather than the 2% called for under the MSA, which resulted in a lower management fee paid in the first quarter of 2023 than would have normally been due. PrimaLoft was acquired in July 2022.

Current wording

CGM entered into a waiver of the MSA for a period through June 30, 2023 to receive a 1% annual management fee related to PrimaLoft, rather than the 2% called for under the MSA, which resulted in a lower management fee paid in the second quarter of 2023 than would have normally been due. PrimaLoft was acquired in July 2022.

Previous wording

Amortization expense for the three months ended March 31, 2024 increased $2.3 million as compared to the three months ended March 31, 2023 as a result of the amortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for The Honey Pot Co., which was acquired in January 2024.

Current wording

Amortization expense for the three months ended June 30, 2024 increased $3.5 million as compared to the three months ended June 30, 2023 as a result of the amortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for The Honey Pot Co., which was acquired in January 2024.

Previous wording

For the quarter ended March 31, 2024, we recorded $2.9 million in other expense as compared to $1.2 million in other income in the quarter ended March 31, 2023, a decrease of $4.0 million. Other income (expense) typically reflects the movement in foreign currency at our subsidiary businesses with international operations, gains or (losses) realized on the sale of property, plant and equipment, and expenses incurred or income earned that are not considered a part of our operations. In the quarter ended March 31, 2024, the other expense reflects a loss on an equity method investment at Altor Solutions.

Current wording

For the quarter ended June 30, 2024, we recorded $1.4 million in other expense as compared to $0.1 million in other expense in the quarter ended June 30, 2023, an increase in expense of $1.3 million. Other income (expense) typically reflects the movement in foreign currency at our subsidiary businesses with international operations, gains or (losses) realized on the sale of property, plant and equipment, and expenses incurred or income earned that are not considered a part of our operations. In the quarter ended June 30, 2024, other expense reflects the accrual of a legal settlement at the corporate level.

Previous wording

We had an income tax provision of $8.7 million during the three months ended March 31, 2024 compared to an income tax provision of $6.9 million during the same period in 2023, an increase of $1.8 million. Our effective tax rate in the quarter ended March 31, 2024 was 78.1%, compared to an effective income tax rate of 81.1% during the same period in 2023. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In addition to state income taxes, the items with the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% percent and our effective income tax rate in 2024 was the limitations on the net operating loss carryforwards and utilization of tax credits at our subsidiaries and the impairment expense recognized at Velocity in the first quarter of 2024.

Current wording

We had an income tax provision of $21.5 million during the three months ended June 30, 2024 compared to an income tax provision of $4.3 million during the same period in 2023, an increase of $17.2 million. Our effective tax rate in the quarter ended June 30, 2024 was 276.0%, compared to an effective income tax rate of 30.1% during the same period in 2023. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In addition to state income taxes, the items with the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% percent and our effective income tax rate in the second quarter was the limitations on the net operating loss carryforwards and utilization of tax credits at our subsidiaries and the loss on the sale of Crosman recognized at Velocity in the second quarter of 2024.

Previous wording

Consolidated net revenues for the three months ended March 31, 2024 increased by approximately $40.4 million, or 8.3%, compared to the corresponding period in 2023. During the three months ended March 31, 2024 compared to 2023, we saw notable increases in net revenues at BOA ($4.9 million increase) and Lugano ($39.2 million increase), offset by decreases in net revenue at Velocity Outdoor ($4.1 million decrease), Altor Solutions ($8.1 million decrease) and Sterno ($10.2 million decrease). The Honey Pot Co., which we acquired on January 31, 2024, contributed $20.2 million in net revenues in the first quarter of 2024. Refer to "Results of Operations - Business Segments" for a more detailed analysis of net revenues by subsidiary business segment.

Current wording

Consolidated net revenues for the six months ended June 30, 2024 increased by approximately $96.1 million, or 9.9%, compared to the corresponding period in 2023. During the six months ended June 30, 2024 compared to 2023, we saw notable increases in net revenues at BOA ($21.0 million increase) and Lugano ($77.6 million increase), offset by decreases in net revenue at Velocity ($23.3 million decrease), Altor Solutions ($16.8 million decrease) and Sterno ($11.0 million decrease). The Honey Pot Co., which we acquired on January 31, 2024, contributed $44.3 million in net revenues in 2024 post-acquisition in January 2024. Refer to "Results of Operations - Business Segments" for a more detailed analysis of net revenues by subsidiary business segment.

Previous wording

Consolidated selling, general and administrative expense increased approximately $20.5 million during the three months ended March 31, 2024, compared to the corresponding period in 2023. We saw increases in selling, general and administrative expenses at several of our consumer brands due to increased investment in marketing and headcount, increases in employee compensation and increases in fulfillment costs. We saw notable increase in selling, general and administrative expenses at BOA ($1.7 million of the increase), Ergobaby ($1.3 million of the increase) and Lugano ($7.1 million of the increase). The Honey Pot Co. had selling, general and administrative expense of $8.9 million in the first quarter of 2024 post-acquisition, of which $3.5 million was transaction costs associated with the acquisition. Refer to "Results of Operations - Business Segments" for a more detailed analysis of selling, general and administrative expense by subsidiary business segment. At the corporate level, general and administrative expense was $4.9 million in the first quarter of 2024 and $4.8 million in the first quarter of 2023, an increase of $0.1 million.

Current wording

Consolidated selling, general and administrative expense increased approximately $38.1 million during the six months ended June 30, 2024, compared to the corresponding period in 2023. We saw increases in selling, general and administrative expenses at several of our consumer brands due to increased investment in marketing and headcount, increases in employee compensation and increases in fulfillment costs. We saw notable increase in selling, general and administrative expenses at BOA ($4.6 million of the increase), Ergobaby ($2.8 million of the increase) and Lugano ($16.0 million of the increase). The Honey Pot Co. had selling, general and administrative expense of $18.1 million in the first half of 2024 post-acquisition, of which $3.5 million was transaction costs and $0.9 million was integration service fees associated with the acquisition. Refer to "Results of Operations - Business Segments" for a more detailed analysis of selling, general and administrative expense by subsidiary business segment. At the corporate level, general and administrative expense was $8.9 million in both the first half of 2024 and the first half of 2023.

Previous wording

In connection with our annual goodwill impairment test, we tested the goodwill at the Velocity reporting unit quantitatively. The impairment test resulted in Velocity recording impairment expense of$8.2 million in the quarter ended March 31, 2024.

Current wording

In connection with our annual goodwill impairment test, we tested the goodwill at the Velocity reporting unit quantitatively. The impairment test resulted in Velocity recording impairment expense of$8.2 million in thesix months ended June 30, 2024.

Previous wording

We recorded interest expense totaling $23.6 million for the three months ended March 31, 2024 compared to $26.2 million for the comparable period in 2023, a decrease of $2.6 million. We received $1.8 million in interest income on our cash balances at the LLC during the three months ended March 31, 2024 related to the proceeds from our sale of Marucci. The remaining decrease in interest expense in the current quarter reflects the lower average amount outstanding under our revolving credit facility in the first quarter of 2024 as compared to the first quarter of 2023. There was an average of $29 million outstanding on the revolving credit facility in the first quarter of 2024 and $107 million outstanding in the first quarter of 2023. The amount outstanding on the revolving credit facility in the last year was impacted by the timing of our dispositions and acquisitions in the past year, with the proceeds from the sale of Advanced Circuits in February 2023 used to pay down outstanding balances on the facility, and the proceeds from the sale of Marucci in November 2023 used to pay for the acquisition of The Honey Pot Co. rather than using the availability under the facility.

Current wording

We recorded interest expense totaling $50.1 million for the six months ended June 30, 2024 compared to $52.8 million for the comparable period in 2023, a decrease in expense of $2.7 million. We received $1.8 million in interest income on our cash balances at the LLC during the six months ended June 30, 2024 related to the proceeds from our sale of Marucci, prior to using these funds for our acquisition of The Honey Pot in January 2024. The remaining decrease in interest expense in the current period reflects the lower average amount outstanding under our revolving credit facility in the first half of 2024 as compared to the first half of 2023. There was an average of $59 million outstanding on the revolving credit facility in the first half of 2024 and $105 million outstanding in the first half of 2023. The amount outstanding on the revolving credit facility in the last year was impacted by the timing of our dispositions and acquisitions in the past year, with the proceeds from the sale of Advanced Circuits in February 2023 used to pay down outstanding balances on the facility, and the proceeds from the sale of Marucci in November 2023 used to pay for the acquisition of The Honey Pot Co. rather than using the availability under the facility.

Previous wording

Net sales for the three months ended March 31, 2024 were $125.0 million as compared to net sales of $124.5 million for the three months ended March 31, 2023, an increase of $0.5 million, or 0.4%. This increase was driven largely by a $2.7 million increase in international sales growth from strong demand, which was partially offset by a $1.1 million decrease in direct-to-consumer sales, and a $0.8 million decrease in domestic wholesale sales due to decreased inventory availability.

Current wording

Net sales for the three months ended June 30, 2024 were $123.2 million as compared to net sales of $126.0 million for the three months ended June 30, 2023, a decrease of $2.8 million, or 2.2%. This decrease was driven by a $3.8 million decrease in direct-to-consumer sales due to lower off price selling and a $0.2 million decrease in domestic wholesale sales due to decreased inventory availability, which were offset by a $0.5 million increase in international sales growth from strong demand.

Previous wording

Selling, general and administrative expense for the three months ended March 31, 2024 was $55.3 million, or 44.3% of net sales compared to $54.8 million, or 44.1% of net sales for the comparable period in 2023. The increase in selling, general and administrative expense was largely driven by the costs associated with additional retail stores and increased headcount from March 31, 2023, which was offset by a decrease in outside service and bonus related expenses.

Current wording

Selling, general and administrative expense for the three months ended June 30, 2024 was $54.4 million, or 44.1% of net sales as compared to $54.9 million, or 43.5% of net sales for the comparable period in 2023. The decrease in selling, general and administrative expense was largely driven by a decrease in depreciation, bonus related expenses, outside service and bad debt expenses, offset by slight increases in the costs associated with additional retail stores and increased headcount from June 30, 2023.

Previous wording

Gross profit was $65.9 million in the three months ended March 31, 2024 as compared to $64.9 million in the three months ended March 31, 2023, an increase of $1.0 million. Gross profit as a percentage of net sales was 52.8% in the first quarter of 2024 as compared to 52.2% in the first quarter of 2023. Gross profit as a percentage of net sales was favorably impacted by decreased product costs.

Current wording

Gross profit was $133.4 million in the six months ended June 30, 2024 as compared to $132.8 million in the six months ended June 30, 2023, an increase of $0.6 million. Gross profit as a percentage of net sales was 53.8% in the first half of 2024 as compared to 53.0% in the first half of 2023. Gross profit as a percentage of net sales was favorably impacted by decreased lower off price selling.

Previous wording

Net sales for the three months ended March 31, 2024 were $42.9 million as compared to net sales of $38.0 million for the three months ended March 31, 2023, an increase of $4.9 million, or 12.9%. The increase was reflected across key industries including Cycling, Athletic, Workwear and Snow Sports. The increase in sales was a result of the improvement of end market inventory levels, coupled with market share gains in many of our key industries.

Current wording

Net sales for the three months ended June 30, 2024 were $54.2 million as compared to net sales of $38.1 million for the three months ended June 30, 2023, an increase of $16.0 million, or 42.1%. The increase was reflected across key industries including Cycling, Athletic, Workwear and Snow Sports. The increase in sales was a result of the improvement of end market inventory levels, coupled with market share gains in many of our key industries.

Previous wording

Gross profit was $26.2 million in the three months ended March 31, 2024 as compared to $22.8 million for the three months ended March 31, 2023, an increase of $3.4 million. Gross Profit as a percentage of net sales was 61.1% in the three months ended March 31, 2024 as compared to 60.0% for the three months ended March 31, 2023. The increase in gross profit as a percentage of net sales was driven by manufacturing overhead leverage, reduced freight and warranty costs as well as product mix.

Current wording

Gross profit was $34.1 million for the three months ended June 30, 2024 as compared to $22.8 million for the three months ended June 30, 2023, an increase of $11.3 million. Gross Profit as a percentage of net sales was 62.9% for the three months ended June 30, 2024 as compared to 59.8% for the three months ended June 30, 2023. The increase in gross profit as a percentage of net sales was driven by manufacturing overhead leverage as well as product mix.

Previous wording

Selling, general and administrative expense for the three months ended March 31, 2024 was $12.4 million, or 28.9% of net sales compared to $10.7 million, or 28.1% of net sales for the comparable period in 2023. The increase in selling, general, and administrative expense is primarily due to increased employee costs related to BOA’s bonus plan and equity program.

Current wording

Selling, general and administrative expense for the three months ended June 30, 2024 was $13.4 million, or 24.7% of net sales compared to $10.6 million, or 27.7% of net sales for the comparable period in 2023. The increase in selling, general, and administrative expense is primarily due to increased employee costs related to BOA’s bonus plan and equity program.

Previous wording

Net sales for the three months ended March 31, 2024 were $21.2 million, a decrease of $1.2 million, or 5.4%, compared to the same period in 2023. During the three months ended March 31, 2024, international sales were approximately $12.1 million, representing a decrease of $1.5 million over the corresponding period in 2023, primarily as a result of timing of Asia-Pacific distributor orders and an European warehouse transition during March causing delayed shipments. Domestic sales were $9.1 million in the first quarter of 2024, reflecting an increase of $0.3 million compared to the corresponding period in 2023. The increase in domestic sales was primarily due to increases from online channels across brands.

Current wording

Net sales for the three months ended June 30, 2024 were $28.6 million, an increase of $2.4 million, or 9.2%, compared to the same period in 2023. During the three months ended June 30, 2024, international sales were approximately $18.1 million, representing an increase of $1.9 million over the corresponding period in 2023, primarily as a result of timing of distributor sales and a strong quarter from key international accounts. Domestic sales were $10.5 million in the second quarter of 2024, reflecting an increase of $0.5 million compared to the corresponding period in 2023. The increase in domestic sales was primarily due to increases from online channels.

Previous wording

Gross profit as a percentage of net sales was 65.8% for the three months ended March 31, 2024, as compared to 63.0% for the three months ended March 31, 2023. The increase in gross profit as a percentage of sales was due to shifts in channel mix and reduced costs.

Current wording

Gross profit as a percentage of net sales was 64.4% for the three months ended June 30, 2024, as compared to 64.3% for the three months ended June 30, 2023. The increase in gross profit as a percentage of sales was due to shifts in channel mix.

Previous wording

Selling, general and administrative expense increased $1.3 million quarter over quarter, with expense of $13.0 million, or 61.2% of net sales for the three months ended March 31, 2024 as compared to $11.7 million or 52.4% of net sales for the same period of 2023. The increase in selling, general and administrative expense in the three months ended March 31, 2024 as compared to the comparable period in the prior year isdue to increased outbound freight, warehousing and marketing expenses, as well as increased legal fees.

Current wording

Selling, general and administrative expense increased $1.6 million quarter over quarter, with expense of $13.9 million, or 48.6% of net sales for the three months ended June 30, 2024 as compared to $12.3 million or 47.0% of net sales for the same period of 2023. The increase in selling, general and administrative expense in the three months ended June 30, 2024 as compared to the comparable period in the prior year isdue to increased outbound freight, warehousing and marketing expenses, as well as increased legal fees.

Previous wording

Ergobaby had segment operating loss of $1.0 million for the three months ended March 31, 2024, a decrease of $1.4 million compared to the same period in 2023, based on the factors noted above.

Current wording

Ergobaby had segment operating income of $1.6 million for the six months ended June 30, 2024, a decrease of $1.4 million compared to the same period in 2023, based on the factors noted above.

Previous wording

Net sales for the quarter ended March 31, 2024 increased approximately $39.2 million, or 61.3%, to $103.0 million, compared to the corresponding quarter ended March 31, 2023. Lugano sells high-end jewelry primarily through retail salons in California, Florida, Texas, Washington D.C., Colorado and Connecticut, and via pop-up showrooms at multiple equestrian, social and charitable functions each year. In the current year period, Lugano has experienced strong same store sales growth as it has invested in building out its inventory as well as its sales, marketing and event staff, while increasing the number of social and charitable functions it has attended. Lugano also opened its

Current wording

Net sales for the quarter ended June 30, 2024 increased approximately $38.4 million, or 63.0%, to $99.4 million, compared to the corresponding quarter ended June 30, 2023. Lugano sells high-end jewelry primarily through retail salons in California, Florida, Texas, Washington D.C., Colorado, Connecticut, and London, England, as well as via pop-up showrooms at multiple equestrian, social and charitable functions each year. In the current year period, Lugano has experienced strong same store sales growth as it has invested in building out its inventory as well as its sales, marketing and event staff, while increasing the number of social and charitable functions it has attended. Lugano opened its Greenwich, Connecticut location in September 2023, and its London, England salon in the second quarter of 2024, and expects to open more retail locations in the near term to further expand sales opportunities.

Previous wording

Selling, general and administrative expense was $20.2 million for the three months ended March 31, 2024 as compared to $13.1 million in selling, general and administrative expense in the three months ended March 31, 2023. Selling, general and administrative expense represented 19.6% of net sales in the three months ended March 31, 2024 and 20.5% of net sales for the same period of 2023. The increase in selling, general and administrative expense is primarily due to increased marketing spend and personnel costs, and variable costs that correlate to the increase in revenue. Lugano continues to increase its head count as it invests in additional professionals to support its growth.

Current wording

Selling, general and administrative expense was $24.1 million for the three months ended June 30, 2024 as compared to $15.1 million in selling, general and administrative expense in the three months ended June 30, 2023. Selling, general and administrative expense represented 24.3% of net sales in the three months ended June 30, 2024 and 24.8% of net sales for the same period of 2023. The increase in selling, general and administrative expense is primarily due to overhead expenses from newly opened locations, increased marketing spend and personnel costs, and variable costs that correlate to the increase in revenue. Lugano continues to increase its head count as it invests in additional professionals to support its growth and geographic expansion.

Previous wording

Segment operating income increased during the three months ended March 31, 2024 to $39.3 million, as compared to $19.8 million in the corresponding period in 2023. This increase was a result of the factors noted above.

Current wording

Segment operating income increased during the three months ended June 30, 2024 to $33.2 million, as compared to $17.1 million in the corresponding period in 2023. This increase was a result of the factors noted above.

Previous wording

Gross profit as a percentage of net sales totaled approximately 59.1% and 53.7% for the quarters ended March 31, 2024 and March 31, 2023, respectively. Lugano has an extensive network of suppliers through which they procure high quality diamonds and gemstones, which make up a significant percentage of the cost of sales. The increase in margins is attributable to pricing and product mix, especially in its higher priced jewelry pieces.

Current wording

Gross profit as a percentage of net sales totaled approximately 59.1% and 54.5% for the six months ended June 30, 2024 and June 30, 2023, respectively. Lugano has an extensive network of suppliers through which they procure high quality diamonds and gemstones, which make up a significant percentage of the cost of sales. The increase in margins is attributable to pricing and product mix, especially in its higher priced jewelry pieces.

Previous wording

Selling, general and administrative expense for the three months ended March 31, 2024 was $5.3 million, or 23.5% of net sales compared to $5.1 million, or 20.8% of net sales for the three months ended March 31, 2023. Selling, general and administrative expense in the prior year quarter included $1.2 million in integration services fees associated with the Company's acquisition of PrimaLoft. The increase in selling, general and administrative expense is due to the increase in headcount as PrimaLoft continues to focus on future growth.

Current wording

Selling, general and administrative expense for the three months ended June 30, 2024 was $5.1 million, or 20.1% of net sales compared to $5.7 million, or 25.7% of net sales for the three months ended June 30, 2023. Selling, general and administrative expense in the prior year quarter included $1.2 million in integration services fees associated with the Company's acquisition of PrimaLoft. Excluding the integration service fee, selling, general and administrative expense increased approximately $1.2 million due to the increase in headcount as PrimaLoft continues to focus on future growth.

Previous wording

Gross profit for the quarter ended March 31, 2024 decreased $1.5 million as compared to the three months ended March 31, 2023. Gross profit as a percentage of net sales for the three months ended March 31, 2024 was 62.3%, as compared to gross profit as a percentage of sales of 63.5% for the three months ended March 31, 2023. The decrease in gross profit as a percentage of net sales in the quarter ended March 31, 2024 as compared to the quarter ended March 31, 2023 is due to product margin shift.

Current wording

Gross profit for the six months ended June 30, 2024 increased $0.5 million as compared to the six months ended June 30, 2023. Gross profit as a percentage of net sales for the six months ended June 30, 2024 was 62.9%, as compared to gross profit as a percentage of sales of 63.3% for the six months ended June 30, 2023. The decrease in gross profit as a percentage of net sales in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 is due to product mix shift.

Previous wording

In the following results of operations, we provide comparative pro forma results of operations for The Honey Pot Co. for the three months ended March 31, 2024 and March 31, 2023 as if we had acquired the business on January 1, 2023. The results of operations that follow include relevant pro-forma adjustments for pre-acquisition periods and explanations where applicable. The operating results for The Honey Pot Co. have been included in the consolidated results of operation from the date of acquisition in January 2024.

Current wording

In the following results of operations, we provide comparative proforma results of operations for The Honey Pot Co. for the three and six months ended June 30, 2024 and June 30, 2023 as if we had acquired the business on January 1, 2023. The results of operations that follow include relevant proforma adjustments for pre-acquisition periods and explanations where applicable. The operating results for The Honey Pot Co. have been included in the consolidated results of operation from the date of acquisition in January 2024.

Previous wording

Pro forma results of operations include the following pro forma adjustments as if we had acquired The Honey Pot Co. on January 1, 2023:

Current wording

Proforma results of operations include the following proforma adjustments as if we had acquired The Honey Pot Co. on January 1, 2023:

Previous wording

•Incremental stock compensation expense of $0.2 million for the three months ended March 31, 2024 and $0.3 million for the three months ended March 31, 2023. This amount is included in SG&A above and reduces segment operating income.

Current wording

•Incremental stock compensation expense of $0.3 million for the six months ended June 30, 2024 and $0.3 million and $0.6 million, respectively, for the three and six months ended June 30, 2023. This amount is included in SG&A above and reduces segment operating income.

Previous wording

•Amortization expense associated with the intangible assets recorded in connection with the purchase price allocation for THP of $1.2 million for the three months ended March 31, 2024 and $3.5 for the three months ended March 31, 2023. This amount reduces segment operating income.

Current wording

•Amortization expense associated with the intangible assets recorded in connection with the purchase price allocation for THP of $1.3 million for the six months ended June 30, 2024 and $4.0 and $8.0, respectively, for the three and six months ended June 30, 2023. This amount reduces segment operating income.