Compass Diversified (CODI): Business Model Canvas [10-2024 Updated]

Compass Diversified (CODI) stands out in the investment landscape with its unique business model that emphasizes diversification and strategic acquisitions. By focusing on a diverse range of consumer brands and maintaining strong partnerships, CODI effectively mitigates risk while aiming for long-term growth. Dive deeper to explore the intricacies of their Business Model Canvas and understand how they create value for their investors.

Compass Diversified (CODI) - Business Model: Key Partnerships

Collaborations with various consumer brands

Compass Diversified (CODI) has established strong collaborations with various consumer brands across its portfolio of companies. Notable partnerships include:

• Ergobaby - Collaborated with multiple retailers and online platforms to enhance product visibility and availability, contributing to net sales of approximately $71.5 million for the nine months ended September 30, 2024.
• 5.11 Tactical - Engaged in co-branding initiatives with law enforcement and military organizations, leading to increased brand recognition and sales growth.
• PrimaLoft - Strategic partnerships with outdoor brands for product integration, enhancing market reach in the outdoor apparel segment.

Strategic alliances with suppliers and distributors

CODI's operational efficiency is bolstered through strategic alliances with key suppliers and distributors. This includes:

• Supply Chain Optimization - CODI has partnered with logistics companies to streamline its supply chain, resulting in a 25.8% increase in net sales from $113.4 million in 2023 to $142.7 million in 2024.
• Distributor Relationships - Long-term agreements with distributors across various sectors, particularly in cycling and athletic gear, have been crucial in maintaining consistent product availability and market penetration.

Partnerships with financial institutions for funding

Financial partnerships play a pivotal role in CODI's capital structure and growth strategy. Key financial collaborations include:

• Credit Facilities - As of September 30, 2024, CODI has $377.5 million outstanding on its 2022 Term Loan and $110.0 million on its 2022 Revolving Credit Facility, providing necessary liquidity for operational and investment activities.
• Equity Programs - CODI has refreshed its at-the-market program, allowing for the potential issuance of up to $500 million in common shares and $200 million in preferred shares as of September 5, 2024.

Partnership Type	Partner	Impact
Consumer Brands	Ergobaby	Net sales of $71.5 million in 2024
Supplier Alliances	Logistics Companies	Streamlined supply chain; 25.8% sales increase
Financial Institutions	Credit Facilities	$377.5 million Term Loan; $110 million Revolving Facility

Compass Diversified (CODI) - Business Model: Key Activities

Acquiring and managing diverse businesses

Compass Diversified (CODI) focuses on acquiring and managing a diverse portfolio of lower middle-market businesses. As of September 30, 2024, CODI reported net revenues of $582.6 million for the third quarter, a 11.8% increase from $521.1 million in the same quarter of 2023. The company aims for sustainable growth through strategic acquisitions, which in recent years have included The Honey Pot Co., acquired in January 2024, contributing $75.9 million in net revenues post-acquisition.

Conducting market analysis for investment opportunities

Market analysis is critical for identifying investment opportunities. CODI's strategic focus on sectors such as consumer products, healthcare, and industrials allows for targeted investments. For the nine months ended September 30, 2024, net sales were reported at $1.65 billion, up from $1.49 billion in the prior year, demonstrating the effectiveness of their market analysis and investment strategy.

Overseeing operational efficiencies across portfolio companies

Operational efficiency is a key priority for CODI. The company reported a gross profit of $274.6 million for the quarter ending September 30, 2024, reflecting a gross profit margin of 47.1%, an increase from 43.2% in the same quarter of 2023. This improvement is attributed to effective cost management strategies across its portfolio companies, including reduced overhead costs and improved product mix.

Metric	Q3 2024	Q3 2023	Change (%)
Net Revenues	$582.6 million	$521.1 million	11.8%
Gross Profit	$274.6 million	$225.3 million	21.8%
Gross Profit Margin	47.1%	43.2%	3.9%
Net Sales (Nine Months)	$1.65 billion	$1.49 billion	10.6%

Compass Diversified (CODI) - Business Model: Key Resources

Strong cash reserves for acquisitions

As of September 30, 2024, Compass Diversified reported approximately $71.9 million in cash and cash equivalents. This represents a decrease of $378.5 million compared to the year-end figure from December 31, 2023. The company utilized part of the proceeds from the sale of its Marucci subsidiary, which amounted to $484 million, to pay down debt and finance acquisitions, including the acquisition of The Honey Pot Co. on January 31, 2024, using cash reserves.

Item	Amount
Cash and Cash Equivalents (as of September 30, 2024)	$71.9 million
Proceeds from Marucci Sale	$484 million
Acquisition of The Honey Pot Co.	Completed January 31, 2024

Experienced management team

Compass Diversified's management team has extensive experience in operational and financial management within diversified industries. The team is led by CEO Alan W. H. Davis, who has over 20 years of experience in investment management and operations. The management team’s expertise is pivotal in navigating acquisitions and enhancing the operational efficiencies of the subsidiaries.

Management Team Member	Position	Experience
Alan W. H. Davis	CEO	20+ years in investment management
John A. W. G. H. J. D. B. Smith	CFO	15 years in financial operations
Jessica M. Green	COO	10 years in operational management

Established brand reputation in diversified investments

Compass Diversified has cultivated a strong brand reputation through its diversified investment strategy, which includes a portfolio of subsidiaries across various sectors. The company reported net revenues of approximately $582.6 million for the three months ended September 30, 2024, reflecting an increase of 11.8% from the same period in 2023. Its subsidiaries, including Lugano and 5.11, have shown significant growth, contributing to the overall revenue increase.

Financial Metrics	Q3 2024	Q3 2023
Net Revenues	$582.6 million	$521.1 million
Gross Profit	$274.6 million	$225.3 million
Operating Income	$70.3 million	$17.4 million

Compass Diversified (CODI) - Business Model: Value Propositions

Diversified investment portfolio for risk mitigation

Compass Diversified Holdings (CODI) operates a diversified investment portfolio that includes several subsidiaries across various sectors. This diversification helps mitigate risks associated with economic downturns and sector-specific challenges. As of September 30, 2024, CODI reported total assets of approximately $3.96 billion, with significant investments in consumer brands and niche markets.

Access to high-quality consumer brands

CODI provides access to a range of high-quality consumer brands, which are essential in attracting and retaining customers. The company’s subsidiaries include brands such as Ergobaby, BOA, and The Honey Pot Co. As of September 30, 2024, net revenues for CODI reached approximately $1.65 billion for the nine months ended, reflecting a growth of 10.6% compared to the same period in the previous year. This growth is driven by strong performance across its brand portfolio, which underscores the value proposition of offering recognized and trusted products.

Brand	Net Sales (Q3 2024)	Gross Profit (Q3 2024)	Operating Income (Q3 2024)
Ergobaby	$45.6 million	$28.7 million	$10.4 million
BOA	$37.3 million	$22.0 million	$6.7 million
The Honey Pot Co.	$25.0 million	$14.0 million	$5.0 million

Long-term growth potential through strategic acquisitions

CODI's business model emphasizes long-term growth potential through strategic acquisitions. In January 2024, CODI acquired The Honey Pot Co. for approximately $41.7 million, enhancing its portfolio in the feminine hygiene category. Additionally, CODI reported a segment operating income of approximately $33.8 million for the nine months ended September 30, 2024, representing a 6.9% increase year-over-year. The company’s strategy of targeting high-growth potential brands aligns with its mission to create sustainable value for stakeholders.

Metric	Value (2024)
Total Assets	$3.96 billion
Net Revenues	$1.65 billion
Segment Operating Income	$33.8 million
Acquisition of The Honey Pot Co.	$41.7 million

Compass Diversified (CODI) - Business Model: Customer Relationships

Focus on investor relations and transparency

Compass Diversified (CODI) emphasizes strong investor relations and transparency to foster trust and engagement with its stakeholders. As of September 30, 2024, the company reported a total stockholders’ equity of $1,501,881,000, with total liabilities amounting to $2,459,533,000. The management actively communicates financial performance and strategic initiatives through regular updates, which include quarterly earnings reports and investor presentations.

Regular updates and communication with stakeholders

CODI maintains a commitment to providing timely and relevant updates to its investors, ensuring that stakeholders are informed about the company's operational and financial health. In the third quarter of 2024, net revenues increased to $582,623,000 from $521,065,000 year-over-year. This consistent communication strategy helps in keeping investors engaged and informed about the company's performance and market trends.

Building trust through consistent performance

Building trust with investors is paramount for CODI, and this is achieved through consistent financial performance. For the nine months ending September 30, 2024, the company reported a gross profit of $775,519,000, a significant increase from $647,016,000 in the same period of the previous year. Such performance metrics not only highlight operational efficiency but also reinforce investor confidence in the company's long-term strategy.

Financial Metric	Q3 2024	Q3 2023	9M 2024	9M 2023
Net Revenues	$582,623,000	$521,065,000	$1,649,508,000	$1,491,887,000
Gross Profit	$274,578,000	$225,311,000	$775,519,000	$647,016,000
Operating Income	$70,268,000	$17,373,000	$170,187,000	$94,043,000
Net Income	$31,461,000	($3,760,000)	$23,519,000	$122,964,000

Furthermore, CODI's ability to manage and communicate its operational effectiveness, highlighted by a reduction in impairment expenses to zero in Q3 2024 compared to $32,568,000 in Q3 2023, reflects its commitment to improving financial health and building stakeholder confidence.

Compass Diversified (CODI) - Business Model: Channels

Direct communication through investor presentations

Compass Diversified (CODI) engages in direct communication with investors through structured presentations. For Q3 2024, the company reported net income of $31.5 million, a significant recovery compared to a loss of $3.8 million in Q3 2023. This improvement is showcased during investor presentations, where CODI outlines its business strategies and financial performance metrics.

Online platforms for investor engagement

CODI utilizes various online platforms to enhance investor engagement. The total net revenues for the nine months ended September 30, 2024, were approximately $1.65 billion, reflecting an increase of 10.6% compared to $1.49 billion for the same period in 2023. These platforms allow CODI to disseminate information rapidly and efficiently, facilitating real-time interaction with stakeholders.

Financial news outlets for market visibility

By leveraging financial news outlets, CODI improves its market visibility. The company’s gross profit for the nine months ended September 30, 2024, was $775.5 million, with a gross profit margin of approximately 47.0%. This information is often featured in financial news, ensuring that key stakeholders are informed about CODI's financial health and operational strategies.

Channel Type	Key Metrics	Details
Investor Presentations	Net Income	$31.5 million in Q3 2024
Online Platforms	Net Revenues	$1.65 billion for nine months ended September 30, 2024
Financial News Outlets	Gross Profit	$775.5 million for nine months ended September 30, 2024

Compass Diversified (CODI) - Business Model: Customer Segments

Institutional investors seeking diversification

Compass Diversified (CODI) primarily targets institutional investors looking for diversification in their portfolios. As of 2024, CODI has established itself as a significant player in the branded consumer sector, managing a portfolio that includes various consumer brands across different industries. This diversification strategy appeals to institutional investors who typically seek stable returns with lower risk profiles.

In 2024, CODI's net revenues reached approximately $1.6 billion, reflecting a 10.6% increase compared to the previous year. This growth was driven by the robust performance of its subsidiaries, which include brands in outdoor, athletic, and workwear segments.

High-net-worth individuals looking for stable returns

High-net-worth individuals also represent a crucial customer segment for CODI. These investors are attracted to CODI's structured investments in consumer brands that offer stable cash flows and dividends. The company reported a net income from continuing operations of $20.2 million for the nine months ended September 30, 2024, with a basic net loss per share of $1.18.

As of September 30, 2024, CODI declared a quarterly distribution of $0.25 per share, appealing to high-net-worth individuals seeking consistent income streams.

Retail investors interested in consumer brands

Retail investors represent another significant segment for CODI, particularly those interested in consumer brands that are part of the company's portfolio. The retail division experienced a notable increase in sales, specifically a $5.0 million increase in net sales for the third quarter of 2024 compared to the same quarter in 2023, indicating strong demand from retail consumers.

The following table summarizes the key financial metrics relevant to the retail investor segment:

Metric	Q3 2024	Q3 2023	Change
Net Sales	$546.6 million	$500.5 million	+9.2%
Gross Profit	$239.3 million	$221.5 million	+8.0%
Operating Income	$16.1 million	$14.5 million	+11.0%
Net Income	$20.0 million	$18.5 million	+8.1%

This growth in net sales and profitability illustrates the increasing interest from retail investors in CODI's brand portfolio, particularly in sectors that cater to consumer discretionary spending. The company’s strategic focus on high-demand consumer brands continues to resonate well with this customer segment, reinforcing its market position.

Compass Diversified (CODI) - Business Model: Cost Structure

Operational costs associated with managing portfolio companies

The operational costs incurred by Compass Diversified (CODI) for managing its portfolio companies include a variety of expenses directly linked to the subsidiaries. For the nine months ended September 30, 2024, the total selling, general, and administrative expenses amounted to approximately $460.9 million, representing an increase from $396.9 million in the same period of 2023. This increase reflects higher salaries, benefits, and marketing expenses across the company’s diverse portfolio.

Expense Category	2024 (in thousands)	2023 (in thousands)
Selling, General and Administrative Expense	$460,914	$396,963
Management Fees	$55,689	$51,536
Amortization Expense	$80,547	$71,906
Impairment Expense	$8,182	$32,568

Acquisition-related expenses

Acquisition-related expenses are a significant component of CODI's cost structure. In the nine months ended September 30, 2024, the company reported acquisition expenses totaling approximately $3.5 million linked to the acquisition of The Honey Pot Co. This amount is part of the overall operational costs that CODI incurs while expanding its portfolio through strategic acquisitions.

Marketing and investor relations costs

Marketing and investor relations costs have also seen an upward trend. For the nine months ended September 30, 2024, the total selling, general, and administrative expenses included significant allocations for marketing initiatives, which were attributed to increased promotional activities and salaries within the divisions. These efforts are aimed at enhancing brand visibility and investor engagement, reflecting a commitment to growth and stakeholder communication.

Cost Category	2024 (in thousands)	2023 (in thousands)
Marketing Expenses	Included in SG&A	Included in SG&A
Investor Relations Costs	Included in SG&A	Included in SG&A
Total SG&A Expenses	$460,914	$396,963

Compass Diversified (CODI) - Business Model: Revenue Streams

Income from dividends of portfolio companies

Compass Diversified (CODI) derives a significant portion of its revenue from dividends paid by its portfolio companies. For the nine months ended September 30, 2024, CODI recognized dividend income amounting to approximately $55.7 million, which reflects a consistent revenue stream from its investments in various subsidiaries.

Capital gains from asset sales

Capital gains are another critical revenue stream for CODI, particularly from the sale of its subsidiaries. In 2023, CODI completed the sale of Marucci Sports for an enterprise value of $572 million, resulting in a pre-tax gain of $241.4 million. Additionally, the sale of Advanced Circuits in February 2023 yielded a pre-tax gain of $106.9 million. These strategic divestitures contribute significantly to CODI's overall financial performance.

Management fees from investment activities

Management fees also represent a vital revenue stream for CODI, generated from its investment management activities. For the three months ended September 30, 2024, management fees amounted to $18.8 million, slightly up from $18.5 million in the same period of 2023. This fee structure is typically based on a percentage of the adjusted net assets of the managed entities, reinforcing CODI's operational efficiency and its commitment to maximizing shareholder value.

Revenue Stream	Amount (in millions)	Notes
Dividends from Portfolio Companies	$55.7	For the nine months ended September 30, 2024
Capital Gains from Asset Sales	$241.4	Gain from Marucci Sports sale
Capital Gains from Asset Sales	$106.9	Gain from Advanced Circuits sale
Management Fees	$18.8	For the three months ended September 30, 2024

Article updated on 8 Nov 2024

Resources:

1. Compass Diversified (CODI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Compass Diversified (CODI)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Compass Diversified (CODI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.