Compass Diversified Holdings
For the period ended Mar 31, 2025. Filed Dec 18, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed Dec 18, 2025
CODI$11.31-1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-30.
0001345126-24-000063
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-12-18.
0001345126-25-000085
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 283 previous paragraphs and 210 current paragraphs.
77 unchanged; 64 reworded; 64 added; 134 removed; 8 previous and 5 current paragraphs rearranged.
Tables are not compared: 23 previous and 39 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (64)
Current report
Restatement of Previously Issued Financial Statements
Current report
As described in Part 1, Item 1., Note A to the Condensed Consolidated Financial Statements, the Company has restated its Condensed Consolidated Financial Statements as of March 31, 2024 and for the three months ended March 31, 2024. As a result, the previously reported financial information as of March 31, 2024 and for the three months ended March 31, 2024 in this Management's Discussion and Analysis ("MD&A") have been updated to reflect the restatements. See Item 1. Note A - Presentation and principles of consolidation in the Consolidated Financial Statements for additional information related to these restatements, including descriptions of the adjustments and the impacts on the Consolidated Financial Statements.
Current report
As of the date of the filing of this Form 10-Q, the Company is not in compliance with certain covenants under its 2022 Credit Facility. While the Company is currently operating under a forbearance agreement with its lenders under the 2022 Credit Facility while it negotiates an amendment to the 2022 Credit Facility, that agreement is scheduled to expire on December 19, 2025, unless terminated earlier in accordance with its terms. Accordingly, management has determined, applying the going-concern guidance under U.S. GAAP, that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements set forth in this Form 10-Q are issued. For more information concerning this emphasis of matter paragraph and the Company’s ability to continue as a going concern, please see the section titled “Going Concern” under the heading “Liquidity and Capital Resources” in this MD&A.
Current report
Management Strategy and Business Outlook
Current report
Amendment of Credit Agreement
Current report
On January 9, 2025, the LLC entered into a First Incremental Facility Amendment (the “Amendment”) to its existing Credit Agreement (as defined below). The Amendment was by and among the LLC, the lenders party thereto (the “Lenders”), and Bank of America, N.A., as administrative agent for the Lenders (the “Administrative Agent”).
Current report
The Amendment modifies the LLC’s Third Amended and Restated Credit Agreement, dated as of July 12, 2022, as amended, among the LLC, the Lenders, the Administrative Agent and the other financial institutions party thereto (the “Credit Agreement”), to provide for (a) an additional advance of the term loan in the aggregate amount of $200 million (the “Incremental Term Loan”) on the date of the Amendment, and (b) delayed draw term loan commitments in the aggregate amount of $100 million (the “Incremental Delayed Draw Term Loan Commitments,” and the loan drawn thereunder is referred to herein as the “Incremental Delayed Draw Term Loan”), which may be reduced or terminated by the LLC upon five business days’ notice and pursuant to which the Company may make no more than two draws by July 9, 2025. The proceeds from the Incremental Term Loan and the Incremental Delayed Draw Term Loan will be used for new acquisitions, working capital, capital expenditures and other general corporate purposes.
Current report
The Incremental Term Loan, along with the existing term loan under the Credit Agreement, will require quarterly repayments of principal amounts ranging from $3.75 million to $11.25 million, commencing March 31, 2025, with a final payment of principal and interest due on July 12, 2027.
Current report
Please see "Note Q – Subsequent Events” for additional information concerning the Credit Agreement included in the "Notes to the to the Consolidated Financial Statements" included in this Form 10-Q.
Current report
Amendment of Management Services Agreement
Current report
On January 15, 2025, the LLC and the Manager amended the Sixth Amended and Restated Management Services Agreement dated as of September 30, 2014 and originally effective as of May 16, 2006 (the “Existing Agreement”), by entering into a Seventh Amended and Restated Management Services Agreement (the “MSA Amendment”), which restructures the management fee under the Existing Agreement to consist of a base management fee and an incentive management fee. Pursuant to the MSA Amendment, the base management fee will be (i) 2% of the Company’s adjusted net assets when the adjusted net assets are less than or equal to $3.5 billion (the “Initial Threshold Fee”), (ii) the Initial Threshold Fee plus 1.25% of the amount of adjusted net assets exceeding $3.5 billion when the adjusted net assets are more than $3.5 billion but less than $10 billion, or (iii) 1.5% of the adjusted net assets when the adjusted net assets are $10 billion or more. The incentive management fee will be 0.25% of the amount of adjusted net assets exceeding $3.5 billion only when the adjusted net assets are more than $3.5 billion but less than $10 billion and only if the Company’s annualized internal rate of return on equity for the trailing three-years exceeds 12%. Any incentive management fee paid to the Manager may only be distributed by the Manager among the then-current Employees (as defined in the MSA) of the Manager. Such incentive management fee is subject to approval by the Compensation Committee of the Board. The MSA Amendment also eliminates the payment of integration services fee by the Company’s subsidiaries to the Manager and excludes excess cash held by the Company and the Company’s subsidiaries, subject to certain exceptions, from the calculation of the adjusted net assets of the Company, along with certain other changes.
Current report
Three months ended March 31, 2025 compared to three months ended March 31, 2024 (As Restated)
Current report
Net revenues (as Restated)
Current report
Gross Profit (as restated)
Current report
Selling, general and administrative expense
Current report
Consolidated selling, general and administrative expense increased approximately $12.7 million during the three months ended March 31, 2025, compared to the corresponding period in 2024, driven primarily by increases at Lugano ($6.4 million) due to increased investment in salons and headcount, 5.11 ($3.4 million increase) due to increases in headcount and employee compensation, and Altor ($3.5 million increase) due to the acquisition of Lifoam in the fourth quarter of 2024. The Honey Pot Co. was acquired by the Company on January 31, 2024 and had incremental selling, general and administrative expense of $2.1 million during the three months ended March 31, 2025. The increase in selling, general and administrative expense was partially offset by a decrease in expense at Velocity after their disposition of the Crosman product line in the second quarter of 2024.
Current report
At the corporate level, general and administrative expense was $4.6 million in the first quarter of 2025 and $4.9 million in the first quarter of 2024. The decrease in general and administrative expense in the first quarter of 2025 related to the timing of certain expenses versus the prior year and non-recurring professional fees incurred in the first quarter of 2024.
Current report
Management fees
Current report
Company’s adjusted net assets when the adjusted net assets are less than or equal to $3.5 billion (the “Initial Threshold Fee”), (ii) the Initial Threshold Fee plus 1.25% of the amount of adjusted net assets exceeding $3.5 billion when the adjusted net assets are more than $3.5 billion but less than $10 billion, or (iii) 1.5% of the adjusted net assets when the adjusted net assets are $10 billion or more. The incentive management fee will be 0.25% of the amount of adjusted net assets exceeding $3.5 billion only when the adjusted net assets are more than $3.5 billion but less than $10 billion and only if the Company’s annualized internal rate of return on equity for the trailing three-years exceeds 12%. The MSA Amendment also eliminates the payment of integration services fee to the Manager for future acquisitions and excludes excess cash held by the Company and the Company’s subsidiaries, subject to certain exceptions, from the calculation of the adjusted net assets of the Company, along with certain other changes. For the three months ended March 31, 2025, we incurred approximately $18.9 million in management fees as compared to $17.9 million in fees in the three months ended March 31, 2024. The increase in management fees is primarily attributable to the increase in adjusted net assets during the prior year, which was partially offset by the effect of the amendments made to the MSA.
Current report
As a result of the restatement of the financial statements as of December 31, 2024, 2023 and 2022 and for the years ended December 31, 2024, 2023 and 2022, as well as for the period ended December 31, 2021 and revisions made in the quarter ended March 31, 2025, the management fees paid to CGM were in excess of the amounts that should have been due under the MSA. While the MSA does not contain an express mechanism that permits the Company to immediately clawback the overpayment of management fees during the aforementioned periods, the MSA provides that future payments under the MSA will be reduced, on a dollar-for-dollar basis, by the aggregate amount of all overpaid management fees. The Company currently estimates the aggregate amount of overpaid management fees as of March 31, 2025 at approximately$43.1 million, which amount will reduce future payments on a dollar-for-dollar basis.
Current report
Amortization expense (as restated)
Current report
Impairment expense
Current report
In the prior year, Velocity performed an impairment test of their goodwill as part of the annual impairment test at March 31, 2024. The impairment test resulted in Velocity recording impairment expense of$8.2 million in the quarter ended March 31, 2024.
Current report
Interest expense (as restated)
Current report
We recorded interest expense totaling $35.9 million for the three months ended March 31, 2025 compared to $25.3 million for the comparable period in 2024, an increase of $10.6 million. In January 2025, we amended our credit facility to provide for an additional advance of the term loan in the aggregate amount of $200 million on the date of the amendment, and a delayed draw term loan commitment in the aggregate amount of $100 million. The proceeds from the initial $200 million were used to repay amounts outstanding under our revolving credit facility, and the excess amount was held as cash on the balance sheet during the first quarter. In the prior year, the cash proceeds from our sale of Marucci in November 2023 earned interest income during January 2024 before being used to pay for the acquisition of The Honey Pot Co. in January 2024. The result of these transactions was a higher amount outstanding under the credit facility in the first quarter of 2025 compared to the first quarter of 2024, although at lower effective interest rates quarter over quarter, and a higher amount of interest income earned in the first quarter of 2024 as compared to the first quarter of 2025. The interest expense also reflects an increase of $7.2 million in interest expense related to financing arrangements at our Lugano business.
Current report
Other income (expense) (as restated)
Current report
Income taxes (as restated)
Current report
Results of Operations - Operating Segments
Current report
Three months ended March 31, 2025 compared to three months ended March 31, 2024
Current report
Segment operating income for the three months ended March 31, 2025 was $8.6 million, an increase of $0.4 million when compared to segment operating income of $8.2 million for the same period in 2024. The increase in segment operating income was driven by the higher net sales as well as favorable gross margin performance, supported by a higher mix of full-price sales. The increase was offset by an increase in selling, general and administrative expenses primarily attributable to higher payroll expense and marketing spending to drive sales growth. Segment operating margin was consistent quarter over quarter, at 6.6% in the first quarter of 2025 and 6.5% in the first quarter of 2024.
Current report
Segment operating income for the three months ended March 31, 2025 was $13.7 million, an increase of $4.0 million when compared to segment operating income of $9.7 million for the same period in 2024. The increase in segment operating income was driven by higher sales, improved product margins and fixed manufacturing overhead leverage. This was partially offset by an increase in employee related costs. Segment operating margin was 27.9% in the first quarter of 2025 and 22.5% in the first quarter of 2024. The increase in operating margin in the current quarter was driven by both improved gross profit margin as well as operating expense leverage.
Current report
Net sales for the three months ended March 31, 2025 were $26.8 million an increase of approximately $16.1 million, or 148.7%, compared to net sales of $10.8 million in the corresponding quarter ended March 31, 2024. In the current year quarter, Lugano had stronger same store sales growth. Lugano opened its London, England salon in the second quarter of 2024.
Current report
Segment operating loss increased during the three months ended March 31, 2025 to $13.7 million, as compared to $12.4 million in the corresponding period in 2024. This increase was a result of higher selling general and administrative expense driven by increased headcount and employee related costs. Segment operating margin was (50.9)% in the first quarter of 2025 as compared to (114.6)% in the first quarter of 2024 due to the lower revenue base after the restatement that did not correlate to the higher selling, general and administrative spend.
Current report
Net sales for the three months ended March 31, 2025 were $23.6 million, an increase of $1.1 million as compared to net sales of $22.5 million for the three months ended March 31, 2024. The increase in net sales in the current quarter versus the quarter ended March 31, 2024 is attributable to new programs with European and Asia brand partners resulting in an increase in sales for the first quarter of 2025 compared to the first quarter of 2024, as well as an increase in shipments earlier in the period due to the timing of the Chinese New Year in 2025 compared to 2024.
Current report
Segment operating income for the three months ended March 31, 2025 was $4.2 million, an increase of $0.9 million when compared to segment operating income of $3.3 million for the same period in 2024, driven by the increase in net sales. Segment operating margin was 17.6% in the first quarter of 2025 as compared to 14.6% in the first quarter of 2024.
Current report
Segment operating income for the three months ended March 31, 2025 was $4.8 million, an increase of $5.5 million when compared to segment operating loss of $0.7 million for the same period in 2024. Segment operating income in the first quarter of 2024 included certain non-recurring expenses related to the acquisition of The Honey Pot Co. in January 2024, including $2.7 million of inventory step-up amortization expense and $3.5 million in acquisition costs. Operating margin in the first quarter of 2025 was 13.4% as compared to (2.2)% in the first quarter of 2024, with the increase attributable to the non-recurring expenses incurred in the prior year.
Current report
Net sales for the quarter ended March 31, 2025 were $76.3 million, an increase of $22.9 million, or 42.8%, compared to net sales of $53.4 million in the quarter ended March 31, 2024. The increase in net sales during the quarter was driven by the acquisition of Lifoam in October 2024. Lifoam contributed $32.6 million in net sales in the first quarter of 2025. The increase in net sales attributable to Lifoam was offset by lower quarterly sales due to shifting market conditions of perishable and cold chain markets and supplier diversification initiatives on behalf of several of Altor's customers.
Current report
Segment operating income was $5.0 million in the three months ended March 31, 2025, a decrease of $1.6 million as compared to the three months ended March 31, 2024. Segment operating margin was 6.5% in the first quarter of 2025 as compared to 12.4% in the first quarter of 2024, with the decrease driven by a reduction in fixed cost of goods sold coverage due to lower sales levels on the non-Lifoam portion of the business and increases in selling, general and administrative costs related to the acquisition and integration activities.
Current report
Net sales for the three months ended March 31, 2025 were approximately $34.0 million, a decrease of $7.3 million compared to net sales of $41.3 million in the same period in 2024. The decrease in net sales is primarily a result of lower demand in various markets and delays in production startup at new facilities.
Current report
Segment operating loss for the three months ended March 31, 2025 was approximately $0.9 million, a decrease of $5.1 million when compared to the same period in 2024. The decrease in segment operating income (loss) was driven by the sales shortfall, unfavorable product mix and non-recurring move related expenses. Segment operating margin was (2.7)% in the first quarter of 2025 as compared to 10.1% in the first quarter of 2024.
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Removed paragraphs (134)
Previous report
Ergobaby - headquartered in Torrance, California, Ergobaby is a designer, marketer and distributor of wearable baby carriers and accessories, blankets and swaddlers, nursing pillows, strollers, bouncers and related products. Ergobaby primarily sells its Ergobaby and Baby Tula branded products through brick-and-mortar retailers, national chain stores, online retailers, its own websites and distributors and derives more than 50% of its sales from outside of the United States.
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Significant Trends Impacting Our Subsidiary Businesses
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Macroeconomic Trends
Previous report
The macroeconomic environment remains dynamic as global macroeconomic trends, including inflationary pressures and higher interest rates, are impacting consumer spending behavior. We expect uncertainty regarding changing market conditions, inflationary pressures and interest rates to impact consumer spending for the remainder of the year, 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 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 continue to have an impact on margins at our businesses for the remainder of 2024 and into the first part of 2025. 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 report
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. During the third quarter of 2024, our businesses began to see increases in freight costs, particularly ocean freight, as logistics costs, which had begun to moderate after remaining relatively high post pandemic, were negatively impacted by the then anticipated port strike on the east coast in the United States, geopolitical conflicts and higher fuel costs. Accordingly, our liquidity and financial results could be impacted in ways that we are not able to predict today.
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Business Outlook
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Disposition of Crosman
Previous report
On April 30, 2024, Velocity Outdoor entered into a stock purchase agreement to sell Crosman Corporation ("Crosman"), its airgun product division, to Daisy Manufacturing Company, for an enterprise value of approximately $63 million. The sale was completed on the same day. The Company recorded a loss of $24.2 million on the sale of Crosman in the quarter ended June 30, 2024. Velocity received net proceeds of approximately $61.9 million related to the sale of Crosman, which was used to repay amounts outstanding under its intercompany credit agreement. The results of operation of Crosman are included in the accompanying financial statements through the date of sale.
Previous report
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 report
The Company purchased The Honey Pot for a total enterprise value of $380 million, before working capital and certain other adjustments (the “THP Purchase Price”). The Company funded the THP Purchase Price with cash on hand. Certain minority equity holders of THP executed agreements pursuant to which they contributed a portion of their THP equity (the “THP Rollover Equity”) to THP Topco in exchange for THP Topco common stock. THP Topco contributed the THP Rollover Equity to THP Buyer. Certain other members of The Honey Pot Co. management team also contributed cash in exchange for equity in THP Topco. The Company directly owns approximately 85% of THP Topco, which in turn indirectly owns all of the issued and outstanding equity interests of THP and The Honey Pot Co. Concurrent with the Closing, the Company provided a credit facility to THP Buyer, THP and The Honey Pot Co., as borrowers (the “THP Credit Agreement”), pursuant to which a secured revolving loan commitment and secured term loans were made available to Buyer, THP and The Honey Pot Co. (collectively, the “Borrowers”). The initial amount outstanding under these facilities on the Closing Date was approxima tely $110 million.
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Results of Operations - Consolidated
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Net revenues
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Consolidated net revenues for the three months ended September 30, 2024 increased by approximately $61.6 million, or 11.8%, compared to the corresponding period in 2023. During the three months ended September 30, 2024 compared to 2023, we saw notable increases in net revenues at 5.11 ($4.0 million increase)BOA ($8.3 million increase), Lugano ($39.8 million increase), Arnold ($4.3 million increase) and Sterno ($5.0 million increase), offset by decreases in net revenue at Velocity ($25.7 million decrease, primarily as a result of the sale of Crosman) and Altor Solutions ($7.1 million decrease). The Honey Pot Co., which we acquired on January 31, 2024, contributed
Previous report
$31.5 million in net revenues in the third quarter of 2024. Refer to "Results of Operations - Business Segments" for a more detailed analysis of net revenues by subsidiary business segment.
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Cost of revenues
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Consolidated selling, general and administrative expense increased approximately $25.8 million during the three months ended September 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 5.11 ($2.8 million of the increase), BOA ($3.0 million of the increase), and Lugano ($6.5 million of the increase). The Honey Pot Co. had selling, general and administrative expense of $9.8 million in the third quarter of 2024, of which $0.9 million was integration service fees associated with the Company's 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 $5.9 million in the third quarter of 2024 and $3.7 million in the third quarter of 2023. The increase in general and administrative expense in the third quarter of 2024 related to severance paid to our former chief financial officer, who departed during the third quarter, and professional fees associated with the recruitment of our new chief financial officer.
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Fees to manager
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Amortization expense
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In the prior year, Velocity performed an interim impairment test of their goodwill during the quarter ended September 30, 2023 asa result of operating results that were below the forecast that we used in the quantitative annual impairment test of Velocity Outdoor at March 31, 2023. The impairment test resulted in Velocity recording impairment expense of$32.6 million in the quarter ended September 30, 2023.
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We recorded interest expense totaling $27.4 million for the three months ended September 30, 2024 compared to $27.6 million for the comparable period in 2023. There was an average of $125 million outstanding on the revolving credit facility in the third quarter of 2024 and $131 million outstanding in the third quarter of 2023, but the effective interest rate on the amounts outstanding in the third quarter of 2024 on the revolving credit facility was higher than in the comparable quarter in the prior year, resulting in higher interest expense.
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Loss on sale of Crosman
Previous report
On April 30, 2024, Velocity Outdoor sold Crosman Corporation ("Crosman"), its airgun product division. Velocity recorded a loss on the sale of Crosman in the quarter ending June 30, 2024 of $24.6 million, and a gain on the sale in the third quarter of $0.4 million related to proceeds received from the working capital settlement.
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Other income (expense)
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Income taxes
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Net revenues
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Cost of revenues
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On a consolidated basis, cost of revenues increased approximately $29.1 million during the nine months ended September 30, 2024 compared to the corresponding period in 2023. We saw notable increases in cost of revenues at BOA ($7.9 million increase) and Lugano ($39.2 million increase) that correlates with the increase in net revenue in the first nine months of 2024. We saw notable decreases in cost of revenues at Velocity ($36.1 million decrease), Altor ($16.4 million decrease), and Sterno ($9.0 million decrease) that corresponded to the decrease in net revenue noted above. The Honey Pot Co. had cost of revenues of $39.1 million in 2024 post-acquisition. Gross profit as a percentage of net revenues was approximately 47.0% in the nine months ended September 30, 2024 compared to 43.4% in the nine months ended September 30, 2023. The increase in gross profit as a percentage of net revenues in the nine months ended September 30, 2024 as compared to the nine months ended September 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 revenuesof 55.5% in the first nine months of 2024 as compared to 52.2% in the first nine months of 2023, while our industrial businesses had gross profit as a percentage of net revenues of 28.1% in the first nine months of 2024 as compared to 27.5% in the first nine months of 2023. Refer to "Results of Operations - Business Segments" for a more detailed analysis of gross profit by subsidiary business segment.
Previous report
Consolidated selling, general and administrative expense increased approximately $64.0 million during the nine months ended September 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 increases in selling, general and administrative expenses at 5.11 ($2.8 million increase), BOA ($7.6 million of the increase), Ergobaby ($3.9 million of the increase) and Lugano ($22.6 million of the increase). The Honey Pot Co. had selling, general and administrative expense of $28.0 million in the 2024 post-acquisition period, of which $3.5 million was transaction costs and $1.8 million was integration service fees associated with the acquisition. The increase inselling, general and administrative expense was offset by a decrease in expense at Velocity of $7.1 million resulting from the sale of the Crosman division. 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 $14.4 million in the nine months ended September 30, 2024 and $12.6 million the nine months ended September 30, 2023. The increase in general and administrative expense related to severance paid to our former chief financial officer, who departed during the third quarter, and professional fees associated with the recruitment of our new chief financial officer.
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Fees to manager
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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 six months of 2023 than would have normally been due. PrimaLoft was acquired in July 2022.
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Amortization expense
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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 thenine months ended September 30, 2024. In the prior year, Velocity performed an interim impairment test of their goodwill during the quarter ended September 30, 2023 asa result of operating results that were below the forecast that we used in the quantitative annual impairment test of Velocity Outdoor at March 31, 2023. The impairment test resulted in Velocity recording impairment expense of$32.6 million in the quarter ended September 30, 2023.
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Interest expense
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We recorded interest expense totaling $77.5 million for the nine months ended September 30, 2024 compared to $80.4 million for the comparable period in 2023, a decrease in expense of $2.9 million. We received $1.8 million in interest income on our cash balances at the LLC during the nine months ended September 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 2022 Revolving Credit Facility in the first nine months of 2024 as compared to the first nine months of 2023. There was an average of $81 million outstanding on the revolving credit facility in the nine month ended September 30, 2024 and $114 million outstanding in the nine months ended September 30, 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 Revolving Credit Facility.
Previous report
Loss on sale of Crosman
Previous report
On April 30, 2024, Velocity Outdoor sold Crosman Corporation ("Crosman"), its airgun product division. Velocity recorded a loss on the sale of Crosman in the quarter ending June 30, 2024 of $24.6 million, and an offsetting gain on sale of $0.4 million in the quarter ended September 30, 2024 related to the working capital settlement.
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Other income (expense)
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Income taxes
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Results of Operations - Business Segments
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Net sales for the three months ended September 30, 2024 were $139.2 million as compared to net sales of $135.2 million for the three months ended September 30, 2023, an increase of $4.0 million, or 3.0%. This increase was driven by a $5.5 million increase in international sales growth from strong demand, a $1.3 million increase in direct-to-agency sales due to the fulfillment of large contracts, and a $0.7 million increase in domestic wholesale sales due to increased inventory availability, which were offset by a $3.0 million decrease in direct-to-consumer sales due to less promotional sales and lower off price selling early in the quarter.
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Reworded paragraphs (64)
Previous wording
This Item 2 contains forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q are subject to a number of risks and uncertainties, some of which are beyond our control. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware or which we currently deem immaterial could also cause our actual results to differ, including those discussed in the section entitled "Forward-Looking Statements" included elsewhere in this Quarterly Report on Form 10-Q as well as those risk factors discussed in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023 and in the section entitled "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Current wording
This Item 2 contains forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q are subject to a number of risks and uncertainties, some of which are beyond our control. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware or which we currently deem immaterial could also cause our actual results to differ, including those discussed in the section entitled "Forward-Looking Statements" included elsewhere in this Quarterly Report on Form 10-Q as well as those risk factors discussed in the section entitled "Risk Factors" in our Amendment No. 1 to the Company's Annual Report on Form 10-K (“Form 10-K/A”) for the fiscal year ended December 31, 2024 and in the section entitled "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q.
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Compass Diversified Holdings ("Holdings", or the "Trust") was incorporated in Delaware on November 18, 2005. Compass Group Diversified Holdings LLC (the "LLC") was also formed on November 18, 2005. Holdings and the LLC (collectively, the "Company") were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. The LLC is a controlling owner of ten businesses, or operating segments, at September 30, 2024. The segments are as follows: 5.11 Acquisition Corp. ("5.11"), Boa Holdings Inc. ("BOA"), The Ergo Baby Carrier, Inc. ("Ergobaby"), Lugano Holdings, Inc. ("Lugano Diamonds" or "Lugano"), Relentless Topco, Inc. ("PrimaLoft"), THP Topco, Inc. ("The Honey Pot Co." or "THP"), CBCP Products, LLC ("Velocity Outdoor" or "Velocity"), AMTAC Holdings LLC ("Arnold"), FFI Compass, Inc. ("Altor Solutions" or "Altor"), and SternoCandleLamp Holdings, Inc. ("Sterno").
Current wording
Compass Diversified Holdings ("Holdings", or the "Trust") was incorporated in Delaware on November 18, 2005. Compass Group Diversified Holdings LLC (the "LLC") was also formed on November 18, 2005. Holdings and the LLC (collectively, the "Company") were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. The LLC is a controlling owner of nine businesses, or operating segments, at March 31, 2025. The segments are as follows: 5.11 Acquisition Corp. ("5.11"), Boa Holdings Inc. ("BOA"), Lugano Holdings, Inc. ("Lugano Diamonds" or "Lugano"), Relentless Topco, Inc. ("PrimaLoft"), THP Topco, Inc. ("The Honey Pot Co." or "THP"), CBCP Products, LLC ("Velocity Outdoor" or "Velocity"), AMTAC Holdings LLC ("Arnold"), FFI Compass, Inc. ("Altor Solutions" or "Altor"), and SternoCandleLamp Holdings, Inc. ("Sterno").
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We acquired our existing businesses (segments) that we own at September 30, 2024 as follows:
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We acquired our existing businesses (operating segments) that we own at March 31, 2025 as follows:
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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.
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We categorize our subsidiary businesses into two separate groups of businesses: (i) branded consumer businesses, and (ii) industrial businesses. Branded consumer businesses are 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 those businesses that focus on manufacturing and selling particular products and/ or industrial services within a specific market sector. We believe that our industrial businesses are leaders in their specific market sector. We previously announced our desire to acquire businesses in the healthcare sector, with a focus on outsourced pharma, medical manufacturing services and provider services. We have not yet acquired a business in the healthcare sector.
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The following is an overview of each of our subsidiary businesses:
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The following is an overview of each of our operating segments:
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5.11 - 5.11 is a leading provider of purpose-built technical apparel and gear for law enforcement, firefighters, EMS, and military special operations as well as outdoor and adventure enthusiasts. 5.11 is a brand known for innovation and authenticity, and works directly with end users to create purpose-built apparel and gear designed to enhance the safety, accuracy, speed and performance of tactical professionals and enthusiasts worldwide. Headquartered in Costa Mesa, California, 5.11 operates sales offices and distribution centers globally, and 5.11 products are widely distributed in uniform stores, military exchanges, outdoor retail stores, its own retail stores and on 511tactical.com.
Current wording
5.11 - 5.11 is a leading provider of purpose-built technical apparel and gear for law enforcement, firefighters, EMS, and military special operations as well as outdoor and adventure enthusiasts. 5.11 is a brand known for innovation and authenticity, and works directly with end users to create purpose-built apparel and gear designed to enhance the safety, accuracy, speed and performance of tactical professionals and enthusiasts worldwide. 5.11 products are widely distributed in uniform stores, military exchanges, outdoor retail stores, its own retail stores and on 511tactical.com.
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BOA- creator of the revolutionary, award-winning, patented BOA Fit System, partners with market-leading brands to make the best gear even better. Delivering fit solutions purpose-built for performance, the BOA Fit System is featured in footwear across snow sports, cycling, outdoor, athletic, workwear as well as performance headwear and bracing. The system consists of three integral parts: a micro-adjustable dial, high-tensile lightweight laces, and low friction lace guides creating a superior alternative to laces, buckles, Velcro, and other traditional closure mechanisms. Each unique BOA configuration is designed with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the toughest conditions and is backed by The BOA Lifetime Guarantee. BOA is headquartered in Denver, Colorado and has offices in Austria, Greater China, South Korea, and Japan.
Current wording
BOA- creator of the revolutionary, award-winning, patented BOA Fit System, partners with market-leading brands to make the best gear even better. Delivering fit solutions purpose-built for performance, the BOA Fit System is featured in footwear across snow sports, cycling, outdoor, athletic, workwear as well as performance headwear and bracing. The system consists of three integral parts: a micro-adjustable dial, high-tensile lightweight laces, and low friction lace guides creating a superior alternative to laces, buckles, Velcro, and other traditional closure mechanisms. Each unique BOA configuration is designed with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the toughest conditions and is backed by The BOA Lifetime Guarantee.
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Lugano- Lugano is a leading designer, manufacturer and marketer of high-end, one-of-a-kind jewelry sought after by some of the world’s most discerning clientele. Lugano conducts sales via its own retail salons as well as pop-up showrooms at Lugano-hosted or sponsored events in partnership with influential organizations in the equestrian, art and philanthropic community. Lugano is headquartered in Newport Beach, California.
Current wording
Lugano- Luganois a designer, manufacturer, and retailer of high-end jewelry. Lugano conducts sales via its own retail salons as well as pop-up showrooms at Lugano-hosted or sponsored events in partnership with organizations in the equestrian, art, and philanthropic communities. Lugano is headquartered in Newport Beach, California.
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PrimaLoft - PrimaLoft is a leading provider of branded, high-performance synthetic insulation and materials used primarily in consumer outerwear, and accessories. The portfolio of PrimaLoft synthetic insulations offers products that can both mimic natural down aesthetics and provide the freedom to design garments ranging from stylish puffers to lightweight performance apparel. PrimaLoft insulations also offer superior economics to the brand partner and enable better sustainability characteristics through the use of recycled, low-carbon inputs. PrimaLoft is headquartered in Latham, New York.
Current wording
PrimaLoft - PrimaLoft is a leading provider of branded, high-performance synthetic insulation and materials used primarily in consumer outerwear, and accessories. The portfolio of PrimaLoft synthetic insulations offers products that can both mimic natural down aesthetics and provide the freedom to design garments ranging from stylish puffers to lightweight performance apparel. PrimaLoft insulations also offer superior economics to the brand partner and enable better sustainability characteristics through the use of recycled, low-carbon inputs.
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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.
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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. 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.
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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.
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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.
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Altor Solutions - Altor Solutions is a designer and manufacturer of custom molded protective foam solutions and original equipment manufacturer components made from expanded polystyrene and expanded polypropylene. Altor provides products to a variety of end markets, including appliances and electronics, pharmaceuticals, health and wellness, automotive, building and other products. Altor is headquartered in Scottsdale, Arizona and operates 15 molding and fabricating facilities across North America.
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Altor Solutions - Altor Solutions is a designer and manufacturer of custom molded protective foam solutions and original equipment manufacturer components made from expanded polystyrene and expanded polypropylene. Altor provides products to a variety of end markets, including appliances and electronics, pharmaceuticals, health and wellness, automotive, building and other products.
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Arnold - Arnold is a global solutions provider and manufacturer of engineered solutions for a wide range of specialty applications and end-markets, including aerospace and defense, general industrial, motorsport/transportation, oil and gas, medical, energy, reprographics and advertising specialties. Arnold engineers solutions for and produces high performance permanent magnets (PMAG), stators, rotors and full electric motors ("Ramco"), precision foil products (Precision Thin Metals or "PTM"), and flexible magnets (Flexmag™) that are mission critical in motors, generators, sensors and other systems and components. Based on its long-term relationships, Arnold has built a diverse and blue-chip customer base totaling more than 2,000 customers and leading systems-integrators worldwide with a focus on North America, Europe, and Asia. Arnold has built a preferred rare earth supply chain and has leading rare earth and other permanent magnet production capabilities. Arnold is headquartered in Rochester, New York.
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Arnold - Arnold is a global solutions provider and manufacturer of engineered solutions for a wide range of specialty applications and end-markets, including aerospace and defense, general industrial, motorsport/transportation, oil and gas, medical, energy, semiconductor and advertising specialties. Arnold engineers solutions for and produces high performance permanent magnets (PMAG), stators, rotors and full electric motors ("Ramco"), precision foil products (Precision Thin Metals or "PTM"), and flexible magnets (Flexmag™) that are mission critical in motors, generators, sensors and other systems and components. Based on its long-term relationships, Arnold has built a diverse and blue-chip customer base totaling more than 2,000 customers and leading systems-integrators worldwide with a focus on North America, Europe, and Asia. Arnold has built a preferred rare earth supply chain and has leading rare earth and other permanent magnet production capabilities.
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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.
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.
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While our subsidiary businesses have different growth opportunities and potential rates of growth, we actively manage each of our subsidiary businesses to increase the value of, and cash generated by, each business through various initiatives, including making selective capital investments to expand geographic reach, increase capacity or reduce manufacturing costs of our subsidiary businesses; improving and expanding existing sales and marketing programs; and assisting in the acquisition and integration of complementary businesses.
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Our management strategy involves the proactive financial and operational management of the subsidiaries we own in order to increase cash flows and shareholder value. While our subsidiary businesses have different growth opportunities and potential rates of growth, we actively manage each of our subsidiary businesses to increase the value of, and cash generated by, each business through various initiatives, including making selective capital investments to expand geographic reach, increase capacity or reduce manufacturing costs of our subsidiary businesses; improving and expanding existing sales and marketing programs; and assisting in the acquisition and integration of complementary businesses.
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The Company anticipates that the areas of focus for 2024, which are generally applicable to each of our businesses, include:
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The Company'sareas of focus for 2025, which are generally applicable to each of our businesses, include:
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•Pursuing sales growth through a combination of new product development, increasing distribution, new customer acquisitions and international expansion;
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•Pursuing sales growth through a combination of new product development, increasing distribution, new customer acquisitions and selective international expansion;
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•Taking market share, where possible, in each of our niche market leading companies, generally at the expense of less well capitalized competitors;
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•Taking market share, where possible, in each of our niche market leading companies, generally at the expense of less focused or less well capitalized competitors;
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"U.S. GAAP" or "GAAP" refer to generally accepted accounting principles in the United States. A non-GAAP financial measure is a numerical measure of historical or future performance, financial position or cash flow that excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with GAAP in our financial statements, and vice versa for measures that include amounts, or are subject to adjustments that effectively include amounts, that are excluded from the most directly comparable measure as calculated and presented.
Current wording
In addition to the results of operations contained in this report, which have been prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP" or "GAAP"), we have also included supplemental information concerning our results of operations on a non-GAAP basis. A non-GAAP financial measure is a numerical measure of historical or future performance, financial position or cash flow that excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with GAAP in our financial statements, and vice versa for measures that include amounts, or are subject to adjustments that effectively include amounts, that are excluded from the most directly comparable measure as calculated and presented.
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The following discussion reflects a comparison of the historical results of operations of our consolidated business for the three and nine months ended September 30, 2024 and September 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.
Current wording
The following discussion reflects a comparison of the historical results of operations of our consolidated business for the three months ended March 31, 2025 and March 31, 2024, and components of the results of operations for each of our operating segments on a stand-alone basis. The Company has restated its Condensed Consolidated Financial Statements as of March 31, 2024 and for the three months ended March 31, 2024. As a result, the previously reported financial information as of March 31, 2024 and for the three months ended March 31, 2024 in this Management's Discussion and Analysis ("MD&A") have been updated to reflect the restatements.
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In the following results of operations, we provide (i) our actual Consolidated Results of Operations for the three and nine months ended September 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 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 nine months ended September 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.
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In the following results of operations, we provide (i) our actual Consolidated Results of Operations for the three months ended March 31, 2025 and 2024, which includes the historical results of operations of each of our businesses (operating segments) from the date of acquisition in accordance with 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, 2025 and 2024, 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, 2024. 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.
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The following table sets forth our unaudited results of operations for the three and nine months ended September 30, 2024 and 2023:
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The following table sets forth our unaudited results of operations for the periods indicated, in dollars and as a percentage of net revenues:
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Consolidated net revenues for the nine months ended September 30, 2024 increased by approximately $157.6 million, or 10.6%, compared to the corresponding period in 2023. During the nine months ended September 30, 2024 compared to 2023, we saw notable increases in net revenues at BOA ($29.3 million increase), Lugano ($117.4 million increase), PrimaLoft ($3.9 million increase) and Arnold ($8.5 million increase), offset by decreases in net revenue at Velocity ($48.9 million decrease, primarily due to the sale of Crosman in April 2024), Altor Solutions ($23.9 million decrease) and Sterno ($6.0 million decrease). The Honey Pot Co., which we acquired on January 31, 2024, contributed $75.9 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.
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Consolidated net revenues for the three months ended March 31, 2025 increased by approximately $42.9 million, or 10.5%, compared to the corresponding period in 2024. During the three months ended March 31, 2025 compared to 2024, we saw notable increases in net revenues at 5.11 ($4.4 million increase), BOA ($6.0 million increase), Lugano ($16.1 million increase), The Honey Pot Co. ($16.0 million increase ) and Altor ($22.9 million increase). The Honey Pot Co. was acquired on January 31, 2024 and had an incremental revenue increase of $5.4 million quarter over quarter on a pro forma basis. The increase in net revenue at Altor was attributable to the acquisition of Lifoam in October 2024. These increases in net revenue was offset by notable decreases in net revenue at Velocity ($16.7 million decrease, primarily as a result of the sale of Crosman) and Arnold ($7.3 million decrease). Refer to "Results of Operations - Operating Segments" for a more detailed analysis of net revenues by operating segment.
Previous wording
On a consolidated basis, cost of revenues increased approximately $12.3 million during the three months ended September 30, 2024 compared to the corresponding period in 2023. We saw notable increases in cost of revenues at Lugano ($13.3 million increase) and Sterno ($3.6 million increase) that correlates with the increase in net revenue in the third quarter of 2024. We saw notable decreases in cost of revenues at Velocity ($18.7 million decrease, primarily as a result of the sale of Crosman) and Altor ($4.7 million decrease) that corresponded to the decrease in net revenue noted above. The Honey Pot Co. had cost of revenue of $14.6 million in the third quarter of 2024. Gross profit as a percentage of net revenues was approximately 47.1% in the three months ended September 30, 2024 compared to 43.2% in the three months ended September 30, 2023. The increase in gross profit as a percentage of net revenue in the quarter ended September 30, 2024 as compared to the quarter ended September 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 56.0% in the third quarter of 2024 as compared to 51.6% in the third quarter of 2023, while our industrial businesses had gross profit as a percentage of net revenues of 27.8% in the third quarter of 2024 as compared to 27.7% in the third 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, gross profit increased approximately $21.1 million during the three months ended March 31, 2025 compared to the corresponding period in 2024. We saw notable increases in gross profit at 5.11 ($3.8 million increase), BOA ($5.0 million increase) and Lugano ($5.2 million increase), that correlates with the increase in net revenue in the first quarter of 2025. We also saw increases in gross profit at The Honey Pot Co. and Altor attributable to the timing of acquisitions with The Honey Pot Co. acquired by the Company on January 31, 2024 and therefore only two months of activity are included in the three months ended March 31, 2024, and Altor acquiring Lifoam on October 1, 2024. We saw notable decreases in gross profit at Velocity ($3.1 million decrease, primarily as a result of the sale of Crosman) and Arnold ($4.8 million decrease) that corresponded to the decrease in net revenue noted above. Gross profit as a percentage of net revenues was approximately 43.2% in the three months ended March 31, 2025 compared to 42.6% in the three months ended March 31, 2024. The increase in gross profit as a percentage of net revenue in the quarter ended March 31, 2025 as compared to the quarter ended March 31, 2024 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 54.9% in the first quarter of 2025 as compared to 51.4% in the first quarter of 2024, while our industrial businesses had gross profit as a percentage of net revenues of 24.7% in the first quarter of 2025 as compared to 28.6% in the first quarter of 2024. The decrease in gross profit as a percentage of net revenues at our indus trial businesses was attributable to higher fixed overhead costs absorbed on a lower revenue base due to the decrease in sales.
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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 September 30, 2024, we incurred approximately $18.8 million in management fees as compared to $18.5 million in fees in the three months ended September 30, 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. Effective January 15, 2025, the LLC and CGM entered into the MSA amendment to, beginning with the first fiscal quarter for 2025, restructure the management fee under the MSA to consist of a base management fee and an incentive management fee. Pursuant to the MSA Amendment, the base management fee will be (i) 2% of the
Previous wording
Amortization expense for the three months ended September 30, 2024 increased $2.8 million as compared to the three months ended September 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, partially offset by the reduction in amortization expense at Velocity related to the intangible assets that were included in the sale of Crosman.
Current wording
Amortization expense for the three months ended March 31, 2025 increased $0.1 million as compared to the three months ended March 31, 2024 as a result of the amortization expense associated with the intangibles that were recognized in conjunction with the purchase price allocation for Lifoam, the add-on acquisition that Altor completed in the fourth quarter of 2024, partially offset by the reduction in expense associated with the sale of Crosman in the second quarter of 2024.
Previous wording
For the nine months ended September 30, 2024, we recorded $4.3 million in other expense as compared to $2.1 million in other income in the nine months ended September 30, 2023, an increase in expense of $6.4 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 nine months ended September 30, 2024, the other expense reflects a loss on an equity method investment at Altor Solutions and the accrual of a legal settlement at the corporate level.
Current wording
For the quarter ended March 31, 2025, we recorded $13.7 million in other expense as compared to $47.4 million in other expense in the quarter ended March 31, 2024, a decrease in expense of $33.8 million. In both periods, the other expense primarily represents expense recognized at Lugano related to losses resulting fromthe accounting for the transactions associated with the off-balance sheet arrangements ($13.8 million in expense in the three months ended March 31, 2025 and $44.6 million in the three months ended March 31, 2024). A significant portion of the expense associated with the Lugano financing arrangements was recognized in the historical restatement period (the years ending December 31, 2024, 2023 and 2022) which resulted in lower expense in the current year. 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 expense also reflected a non-recurring loss on an equity method investment at Altor Solutions.
Previous wording
We had an income tax provision of $10.8 million during the three months ended September 30, 2024 compared to an income tax provision of $3.8 million during the same period in 2023, an increase of $6.9 million due to the increase in income from continuing operation before income taxes. Our effective tax rate in the quarter ended September 30, 2024 was 25.5%, compared to an effective income tax rate of (37.8)% 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% and our effective income tax rate in the third quarter was the limitations on the net operating loss carryforwards and utilization of tax credits at our subsidiaries.
Current wording
We had an income tax provision of $2.5 million during the three months ended March 31, 2025 compared to an income tax provision of $3.1 million during the same period in 2024, a decrease of $0.6 million due to the increase in income from continuing operation before income taxes. Our effective tax rate in the quarter ended March 31, 2025 was (5.4)%, compared to an effective income tax rate of (3.6)% during the same period in 2024. 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% and our effective income tax rate for the three months ended March 31, 2025 and 2024 was the limitations on the net operating loss carryforwards and utilization of tax credits at our subsidiaries.
Previous wording
Net sales for the nine months ended September 30, 2024 were $387.4 million as compared to net sales of $385.7 million for the nine months ended September 30, 2023, an increase of $1.7 million, or 0.4%. This increase was driven by a $8.5 million increase in international sales from strong demand and a $1.5 million increase in direct-to-agency sales due to the fulfillment of large contracts. These increases were offset by a $7.9 million decrease in direct-to-consumer sales due to less promotional sales and lower off-price selling, as well as a $0.3 million decrease in domestic wholesale sales due to inventory availability.
Current wording
Net sales for the three months ended March 31, 2025 were $129.4 million as compared to net sales of $125.0 million for the three months ended March 31, 2024, an increase of $4.4 million, or 3.5%. This increase was driven bya $5.5 million increase in domestic wholesale sales from strong demand and the fulfillment of large contracts, as well as a $3.2 million increase in direct-to-consumer sales due to an increase in full-price sales for new products. These increases were offset by a $2.9 million decrease in international sales and a $1.4 million decrease in direct-to-agency sales due to the timing of large contracts.
Previous wording
Net sales for the three months ended September 30, 2024 were $45.6 million as compared to net sales of $37.3 million for the three months ended September 30, 2023, an increase of $8.3 million, or 22.3%. The increase was reflected across key industries including Cycling, Athletic, Workwear, Outdoor 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 March 31, 2025 were $48.9 million as compared to net sales of $42.9 million for the three months ended March 31, 2024, an increase of $6.0 million, or 13.9%. The increase was reflected across key industries including Cycling, Workwear, Outdoor, Helmets 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
In the following results of operations, we provide comparative proforma results of operations for The Honey Pot Co. for the three and nine months ended September 30, 2024 and September 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.
Current wording
In the following results of operations, we provide comparative proforma results of operations for The Honey Pot Co. for the three and three months ended March 31, 2025 and March 31, 2024 as if we had acquired the business on January 1, 2024. The results of operations that follow include relevant proforma adjustments for the pre-acquisition period 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 on January 31, 2024.
Previous wording
•Incremental stock compensation expense of $0.3 million for the nine months ended September 30, 2024 and $0.3 million and $1.1 million, respectively, for the three and nine months ended September 30, 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 three months ended March 31, 2024. This amount is included in SG&A 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 $1.3 million for the nine months ended September 30, 2024 and $4.0 and $12.0, respectively, for the three and nine months ended September 30, 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 three months ended March 31, 2024. This amount reduces segment operating income.
Previous wording
Net sales for the three months ended September 30, 2024 were $31.5 million, an increase of $6.0 million or 23.4% from net sales of $25.6 million for the three months ended September 30, 2023. The increase in net sales is primarily due to strong volume growth due to market share gain in our Period Care product line.
Current wording
Net sales for the three months ended March 31, 2025 were $36.2 million, an increase of $5.4 million or 17.4% from net sales of $30.8 million for the three months ended March 31, 2024. The increase in net sales is primarily due to strong volume growth due to market share gain in our Period Care product line, particularly in mass retail, drugstores and online. Overall, volume and share growth continues to be fueled by compelling innovation, targeted investments in demand generation, and disciplined investments in capabilities to accelerate growth.
Previous wording
On April 30, 2024, Velocity Outdoor sold its Crosman airgun product division. The results of operations for the nine months ended September 30, 2024 and the three and nine months ended September 30, 2023 presented below include the results from the Crosman airgun product division through the date of sale.
Current wording
On April 30, 2024, Velocity Outdoor sold its Crosman airgun product division. The results of operations for the three months ended March 31, 2024 presented below include the results from the Crosman airgun product division.
Previous wording
Net sales for the three months ended September 30, 2024 were $28.8 million, a decrease of $25.7 million or 47.1%, compared to the same period in 2023. The decrease in net sales for the three months ended September 30, 2024 is driven by the divestiture of Crosman. The remaining product categories, which consist of the archery and hunting apparel product categories decreased 8.4% compared to the same period in 2023 due to softness in the overall Hunting and Fishing market as well as retailers reducing levels of inventory on hand.
Current wording
Net sales for the three months ended March 31, 2025 were $13.2 million, a decrease of $16.7 million or 55.8%, compared to net sales of $29.9 million inthe same period in 2024. The decrease in net sales for the three months ended March 31, 2025 was driven by the divestiture of Crosman. The remaining product categories, which consist of the archery and hunting apparel product categories, increased 37.6% compared to the same period in 2024 due to increased archery sales through the dealer and distributor channels and improved online sales of apparel.
Previous wording
Segment operating income for the three months ended September 30, 2024 was $1.5 million compared to segment operating loss of $28.6 million for the same period in 2023. The loss in the prior year was driven primarily by the goodwill impairment expense.
Current wording
Segment operating loss for the three months ended March 31, 2025 was $2.8 million compared to segment operating loss of $12.4 million for the same period in 2024. The loss in the prior year was driven primarily by the goodwill impairment expense of $8.2 million recognized in the first quarter of 2024. Segment operating margin was (21.4)% in the first quarter of 2025 as compared to (41.6)% in the first quarter 2024. Despite an improvement in gross margin quarter over quarter attributable to the sale of the Crosman product line, the decrease in net sales led to a decrease in operating expense leverage, with selling, general and administrative expense as a percentage of net sales of 37.0% in the quarter ended March 31, 2025 as compared to 27.5% in the quarter ended March 31, 2024.
Previous wording
Net sales for the three months ended September 30, 2024 were approximately $85.2 million, an increase of $5.0 million, or 6.2%, compared to the same period in 2023. The net sales variance reflects higher sales volume at Rimports driven by strong retail consumption.
Current wording
Net sales for the three months ended March 31, 2025 were approximately $65.4 million, an increase of $0.5 million,or 0.8%, compared to net sales of $64.9 million inthe same period in 2024. The net sales variance reflects a slight increase in sales volume for wax, fragrance oil, and multi-use oils.
Previous wording
Our liquidity requirements primarily relate to our debt service requirements, payments of our common and preferred share distributions, management fees paid to our Manager, working capital needs and purchase commitments at our subsidiaries. As of September 30, 2024, we had $1,000.0 million of indebtedness associated with our 5.250% 2029 Notes, $300.0 million of indebtedness associated with our 5.000% 2032 Notes, $377.5 million outstanding on our 2022 Term Loan, and $110.0 million outstanding on our 2022 Revolving Credit Facility. Only our 2022 Term Loan has required principal payments. Long-term debt liquidity requirements consist of the payment in full of our Notes upon their respective maturity dates, amounts outstanding under our 2022 Revolving Credit Facility upon its maturity date, and principal payments under our 2022 Term Loan. The 2022 Term Loan requires quarterly payments ranging from $2.5 million to $7.5 million, commencing September 30, 2022, with a final payment of all remaining principal and interest due on July 12, 2027, which is the 2022 Term Loan’s maturity date. At September 30, 2024, approxim ately 27% of our outstanding debt was subject to interest rate changes.
Current wording
As of March 31, 2025, we had $1,000.0 million of indebtedness associated with our 5.250% Senior Notes due 2029 (the "2029 Notes" or "2029 Senior Notes"), $300.0 million of indebtedness associated with our 5.000% Senior Notes (the "2032 Notes" or "2032 Senior Notes") and $571.3 million outstanding on our 2022 Term Loan. Only our 2022 Term Loan has required principal payments. Long-term debt liquidity requirements consist of the payment in full of our Notes upon their respective maturity dates, amounts outstanding under our 2022 Revolving Credit Facility upon its maturity date, and principal payments under our 2022 Term Loan. The 2022 Term Loan requires quarterly payments commencing September 30, 2022, with a final payment of all remaining principal and interest due on July 12, 2027, which is the 2022 Term Loan’s maturity date. At March 31, 2025, approxim ately 31% of our outstanding debt was subject to interest rate changes.
Previous wording
At September 30, 2024, we had approximately $71.9 million of cash and cash equivalents on hand, a decrease of $378.5 million as compared to the year ended December 31, 2023. In November 2023, we sold our Marucci subsidiary, receiving approximately$484.0 million of total proceeds at closing. A portion of the proceeds from the Marucci sale were used to pay down outstanding debt under the Company’s 2022 Revolving Credit Facility and the remaining amount was held in short term investment and savings accounts at December 31, 2023. On January 31, 2024, the Company completed the acquisition of The Honey Pot Co. using cash held on our balance sheet. The majority of our cash is in non-interest bearing checking accounts or invested in short-term money market accounts and is maintained in accordance with the Company’s investment policy, which identifies allowable investments and specifies credit quality standards. Our availability under our 2022 Revolving Credit Facility at September 30, 2024 was $486.6 million. Subsequent to the end of third quarter on October 1, 2024, we drew $140 million on our 2022 Revolving Credit Facility to finance the Altor acquisition of Lifoam. The change in cash and cash equivalents for the nine months ended September 30, 2024 and 2023 is as follows:
Current wording
At March 31, 2025, we had approximately $146.2 million of cash and cash equivalents on hand, an increase of $86.6 million as compared to the year ended December 31, 2024. The majority of our cash is in non-interest bearing checking accounts or invested in short-term money market accounts and is maintained in accordance with the Company’s investment policy, which identifies allowable investments and specifies credit quality standards.
Showing the first 40 of 64 pairs. Open the source sections for the rest.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
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 stores across the U.S. through mass merchants, drug and grocery retail chains, and online.
Current report — wording carried from elsewhere
Consolidated Results of Operations (As Restated):
Current report — wording carried from elsewhere
Below is a summary of the change in cash and cash equivalents for the three months ended March 31, 2025 and 2024 is as follows :
Current report — wording carried from elsewhere
Oxley Act of 2002, as amended, and align the acquired entity's policies and procedures with our other subsidiaries. Integration services fees are recorded as selling, general and administrative expense in the consolidated statement of operations. The amendment to the Management Service Agreement entered into in January 2025 eliminated the payment of integration services for future acquisitions.
Current report — wording carried from elsewhere
Related Party Vendor Purchases -Lugano purchases inventory from a vendor who is a related party to Lugano through one of the executive officers of Lugano. The related party relationship commenced in 2024. During the three months ended March 31, 2025, Lugano purchased approximately $1.9 million in inventory from the vendor.
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
Acquisition of The Honey Pot Co.
Previous report — wording carried elsewhere
For the quarter ended September 30, 2024, we recorded $0.1 million in other expense as compared to $1.0 million in other income in the quarter ended September 30, 2023, an increase in expense of $1.1 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.
Previous report — wording carried elsewhere
We do not generate any revenues apart from those generated by our subsidiaries. We may generate interest income on the investment of available funds, but expect such earnings to be minimal. We make loans from the Company to our subsidiary businesses and also hold equity interests in those businesses. Cash flows coming to the Trust and the LLC are the result of interest payments on those loans, amortization of those loans and additional principal payments on those loans. However, on a consolidated basis, these items will be eliminated.
Previous report — wording carried elsewhere
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 nine months ended September 30, 2024, we incurred approximately $55.7 million in management fees as compared to $51.5 million in fees in the nine months ended September 30, 2023. The increase in management fees is primarily attributable to our acquisition of The Honey Pot Co. in January 2024.
Previous report — wording carried elsewhere
Amortization expense for the nine months ended September 30, 2024 increased $8.6 million as compared to the nine months ended September 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, partially offset by the reduction in amortization expense at Velocity related to the intangible assets that were included in the sale of Crosman.
Previous report — wording carried elsewhere
We had an income tax provision of $41.0 million during the nine months ended September 30, 2024 compared to an income tax provision of $15.1 million during the same period in 2023, an increase of $25.9 million. Our effective tax rate in the nine months ended September 30, 2024 was 67.0%, compared to an effective income tax rate of 118.2% 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% 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, the impairment expense recognized at Velocity in the first quarter of 2024 and the third quarter of 2023, and the loss on the sale of Crosman in the second quarter of 2024.
Previous report — wording carried elsewhere
Net sales for the nine months ended September 30, 2024 were $142.7 million as compared to net sales of $113.4 million for the nine months ended September 30, 2023, an increase of $29.3 million, or 25.8%. The increase was reflected across key industries including Cycling, Athletic, Workwear, Outdoor 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 report — wording carried elsewhere
PrimaLoft, which was acquired in July 2022, entered into an ISA with CGM whereby PrimaLoft paid CGM a total integration services fee of $4.8 million, payable quarterly over a twelve-month period ended June 30, 2023.