Summary of CODI Q2 2026 Earnings Call

1Key Financial Results and Metrics

Net Sales: $424 million, down from $479 million year-over-year.

Income from Continuing Operations: $82 million, compared to a loss of $81 million in the prior year.

Earnings Per Share: $0.86, compared to a loss of $0.88 in the prior year.

Adjusted EBITDA: Approximately $66 million, with subsidiary adjusted EBITDA at $94 million (including Sterno's prior to its sale).

Cash Generation: Generated $30 million in operating cash flow for the quarter, totaling over $50 million year-to-date.

Total Debt: Approximately $1.6 billion, reduced by nearly $300 million since year-end.

Covenant Leverage Ratio: Improved to 4.8x from 5.3x in the previous quarter.

2Strategic Updates and Business Highlights

Divestiture: Completed the sale of Sterno's Food Service business, applying over $280 million to debt reduction.

Management Services Agreement (MSA) Amendment: Reduced management fees and aligned compensation more closely with shareholder returns, expected to save approximately $20 million in 2027.

Leadership Transition: CEO Elias Sabo announced his retirement at year-end, with COO Zach Sawtelle set to succeed him.

Strong Performance Across Subsidiaries: Notable growth in adjusted EBITDA across all branded consumer businesses, with BOA up 27% and The Honey Pot up 32%.

3Forward Guidance and Outlook

Fiscal 2026 Total Subsidiary Adjusted EBITDA Outlook: Maintained at $320 million to $365 million, including $9 million from the Food Service business prior to its sale.

Branded Consumer Adjusted EBITDA: Expected to be between $235 million and $270 million.

Industrial Adjusted EBITDA: Expected to be between $85 million and $95 million, reflecting a softer outlook compared to branded consumer businesses.

4Bad News, Challenges, or Points of Concern

Altor Performance: Adjusted EBITDA declined by approximately 50% due to tariff disruptions and lower demand, with expectations of gradual improvement over the next 4-5 quarters.

Corporate Costs: Elevated public company costs related to Lugano litigation and investigations, with ongoing professional fees impacting overall expenses.

Market Pressures: High input costs and competition affecting certain subsidiaries, particularly Altor.

5Notable Q&A Insights

Long-term Growth Projections: Consumer businesses expected to grow at high single-digit to double-digit rates, while industrial businesses projected mid-single-digit to high single-digit growth.

Free Cash Flow: Expected to remain around $50 million for the year, contingent on no significant divestitures.

Corporate Cost Structure: Anticipated to be closer to $50 million in total corporate expenses, with management fees projected between $30 million and $35 million.

Asset Sales: Management emphasized the importance of additional divestitures to accelerate deleveraging and close the gap between share price and intrinsic value.

Consumer Demand: No significant weakness observed in consumer demand, with Q2 performance slightly above expectations. This summary encapsulates the key financial results, strategic initiatives, and challenges faced by Compass Diversified in Q2 2026, providing a balanced view of the company's current status and future outlook.