Good afternoon, and welcome to Compass Diversified's Q4 and full year 2023 conference call. Today's call is being recorded. All lines have been placed in mute. If you would like to ask a question at the end of the prepared remarks, please press the star key, then the number one in your touchtone phone. At this time, I would like to turn the conference over to Cody Slach of Gateway Group for introductions and the reading of the Safe Harbor statement. Please go ahead, sir. Thank you, and welcome to Compass Diversified's Q4 and full year 2023 conference call. Representing the company today are Elias Sabo, Compass Diversified's CEO, Ryan Faulkingham, Compass Diversified's CFO, and Pat Maciariello, COO of Compass Group Management. Before we begin, I'd like to point out that the Q4 2023 press release, including the financial tables and non-GAAP financial measure reconciliations for subsidiary adjusted EBITDA, adjusted EBITDA, adjusted earnings, and pro forma net sales, are available at the investor relations section on the company's website at compassdiversified.com. The company also filed its Form 10-K with the SEC today after the market close, which includes reconciliations of certain non-GAAP financial measures discussed on this call and is also available at the investor relations section of the company's website. Please note that references to EBITDA in the following discussions refer to adjusted EBITDA as reconciled to net income or loss from continuing operations in the company's financial filings. The company does not provide a reconciliation of its full-year expected 2024 adjusted earnings, adjusted EBITDA, or subsidiary adjusted EBITDA because certain significant reconciling information is not available without unreasonable efforts. Throughout this call, we will refer to Compass Diversified as Cody or the company. Now allow me to read the following Safe Harbor statement. During this call, we may make certain forward-looking statements, including statements with regard to the expectations related to the future performance of Cody and its subsidiaries, the impact and expected timing of acquisitions and divestitures, and future operational plans such as ESG initiatives. Words such as believes, expects, anticipates, plans, projects, should, and future or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ on a material basis from those projected in these forward-looking statements, and some of these factors are enumerated in the risk factor discussion in the Form 10-K as filed with the SEC for the year ended December 31, 2023, as well as in other SEC filings. In particular, the domestic and global economic environment, supply chain, labor disruptions, inflation, and rising interest rates all may have a significant impact on CODI and our subsidiary companies. Except as required by law, CODI undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise. At this time, I would like to turn the call over to Elias Sabo. Good afternoon, everyone, and thanks for joining us today. I'm pleased to report a strong Q4, capping off another exceptional year for CODI. Our results continue to demonstrate that owning premium businesses with defensible competitive moats can drive financial outperformance, even during periods of economic uncertainty. These results are highly intentional. In 2018, we embarked on a strategy to own and manage high-growth, innovative, and disruptive businesses. This transformation is driving a significant tailwind for our business, as evidenced by our Q4. Despite experiencing unique challenges in our business, 2023 marked our fifth straight year of Subsidiary Adjusted EBITDA growth. Our branded consumer businesses produced essentially flat pro forma Subsidiary Adjusted EBITDA results compared to prior year. On the other hand, our industrial businesses produced 18% annual growth in Subsidiary Adjusted EBITDA. Our diversification yet again led to a reduction of financial volatility, which we believe will be further reduced as we add more subsidiaries and enter into the healthcare vertical. In our branded consumer vertical, inventory destocking issues masked the underlying strength of most of the brands we owned throughout 2023. Lugano once again delivered remarkable growth, producing 53% annual revenue growth and 65% Adjusted EBITDA growth. As we have repeatedly mentioned, Lugano has created a very innovative and disruptive business model within the high jewelry industry. We continue to fund capital investment to expand the company's footprint and inventory position, realizing exceptionally strong returns on invested capital that is fueling the company's rapid growth. In the Q4, our branded consumer businesses experienced strong Subsidiary Adjusted EBITDA growth of 26% over prior year as inventory destocking headwinds started to subside. You will remember the year—the prior year's Q4 started a major inventory destocking trend that lasted throughout 2023. We believe channel inventory will continue to right size and turn into a tailwind in 2024, which we expect will enable a much higher level of growth for many of our consumer businesses, making up for the growth we didn't experience in 2023. Our industrial businesses generated double-digit subsidiary EBITDA, subsidiary adjusted EBITDA growth in the Q4 and full year. The easing of inflationary pressures boosted margins and resulted in adjusted EBITDA growth above long-term trends. We expect this tailwind to normalize as we progress through 2024 and for our industrial vertical to revert back towards trend growth. We remain optimistic about our industrial vertical in 2024, since backlogs remain at very healthy levels. Now, I'd like to return to our competitive positioning. The strategy we outlined last month's Investor Day detailed our focus on buying and managing more innovative and disruptive businesses. We unveiled this strategy with our management change in 2018. Since then, we have been opportunistically divesting our subsidiaries that grew alongside their industry and focused our efforts towards acquiring more innovative and disruptive businesses with fundamentally faster growth rates. We've seen the efforts of this transition really begin to manifest in the numbers, as evidenced by our results in the Q4 and full year. This important shift has boosted the power of our growth engine to produce a more consistent, faster level of growth. So when one or two of our subsidiaries aren't growing near trend, for example, what we experienced in 2023 with both BOA and PrimaLoft, we have other subsidiaries growing at or above trend, like Lugano and our industrial vertical did in 2023. This diversification in growth drivers not only reduces financial volatility, but it also increases the likelihood of us achieving our core growth rate on an annual basis. As we outlined at our Investor Day, another way in which we create value for our shareholders is through opportunistic M&A transactions. Although the M&A markets were weak for most of 2023, we were able to consummate the divestiture of Marucci Sports, realizing a significant gain for our shareholders. In early 2024, we acquired the Honey Pot Company, an innovative, disruptive company in the feminine, feminine hygiene space. We believe opportunistic M&A transactions, like Marucci and Honey Pot, create value for our shareholders, accelerate our core growth rate, and minimize the likelihood of long-term growth decay on a consolidated basis. Before passing the call over to Pat, I'd like to discuss 2 topics. First, a few macro trends we're seeing, and second, address the shift to the way we guide our business, which we believe will simplify how you think about evaluating Cody. First, a few thoughts on how macroeconomic conditions are affecting our business. Including the Honey Pot Company, approximately 70% of our consolidated subsidiary adjusted EBITDA is generated by our branded consumer vertical. So far in 2024, the U.S. consumer is looking healthy, notwithstanding tighter monetary conditions that have existed over the past 2 years. Unemployment continues to be at historically low levels, wages continue to grow above trend, and the easing of inflationary pressures is causing real wages to grow again after declining for much of the past two years. Excess savings continue to exist from pandemic-led government transfer payments, albeit at lower levels as savings buffered high inflation rates over the past couple of years. Taken together, we believe this bodes well for our branded consumer business in 2024. Regarding our industrial vertical, which represented approximately 30% of consolidated Subsidiary Adjusted EBITDA in 2023, global growth is expected to remain positive, but at subdued levels due to the negative impact of tight monetary conditions and global tensions. We believe our industrial subsidiaries are positioned to continue to take market share through innovation, as evidenced by Altor Solutions being first to market with a biodegradable solution, and Arnold Technologies leading the market in advanced materials used to generate green energy. We believe our industrial businesses will continue to perform well again in 2024 as a stable macroeconomy and company-led innovation is expected to lead to another year of growth. Thus far in 2024, our results have exceeded our expectations. While we are reiterating our outlook we provided just a few weeks ago at our Investor Day, we are certainly optimistic about 2024 and believe upside exists based on the trends we are currently experiencing. Speaking of our outlook, we are adjusting how we communicate our guidance to help simplify the analysis of our business. Today, we currently own 10 subsidiary businesses across the consumer and industrial verticals, and at some point, we expect to enter the healthcare market. We expect to own and manage 15 companies one day, and perhaps more than that in the future. To help quantify this scale more simply, we will provide Subsidiary-Adjusted EBITDA guidance ranges on a branded consumer and industrial level. Despite this change, as part of our governance protocols, we remain focused on transparency, and we will continue to disclose the same level of detail as we have done previously. We are shifting the narrative as we believe it will be easier for you to follow Cody as we continue to expand the number of subsidiaries we own. With that, I will now turn the call over to Pat. Thanks, Elias. As a reminder, throughout this presentation, when we discuss Pro Forma results, it will be as if we own PrimaLoft as of January 1, 2022. In addition, we have not included The Honey Pot in our 2023 results as it was acquired after year-end. I am pleased to report on a very successful year for CODI in 2023, one in which we exited the year far stronger than we entered, thanks to the quality and positioning of our businesses.... On a consolidated basis for the year, revenue was approximately flat, and Pro Forma subsidiary adjusted EBITDA grew by 4.4%. As Elias mentioned, in the Q4, on a consolidated basis, we saw a material acceleration as many of the headwinds facing our businesses over the last year began to abate. As a result, in the Q4, revenue and Subsidiary Adjusted EBITDA growth exceeded our expectations, growing by 7% and 27.4%, respectively. Both our industrial and branded consumer verticals had strong quarters, growing Subsidiary Adjusted EBITDA by 30.2% and 26.3%, respectively. For the full year, within our industrial vertical, revenues decreased by 5.1%, and Subsidiary Adjusted EBITDA increased by 18.3% versus 2022. In this quarter, we saw broad earning strength in our industrial businesses as positive revenue mix to higher margin products, combined with lower input and shipping costs. In many cases, we passed on the benefits from lower costs to our customers, leading to the slight revenue decline. However, our industrial management teams continued to operate efficiently and drive solid margin growth. For the year, both Arnold and Altor grew Adjusted EBITDA by over 20% and Sterno by over 11%. A continued return to travel and more pre-pandemic activities continues to have a positive impact on several areas of our industrial business, and we believe this trend will be ongoing. In addition, specifically at Arnold, we want to once again point out the investments in research and development made over the last several years. As a result of Arnold's Technology Center, the team continues to add new product, projects, and, though not a significant driver of growth in 2023, the company is growing rapidly in new industries, including medical devices. Turning to our consumer vertical. For 2023, revenues increased by 2.7%, and Pro Forma subsidiary Adjusted EBITDA was approximately flat versus 2022. Growth accelerated in the back half of the year, however, and for the Q4, revenue and Subsidiary Adjusted EBITDA grew by 13.4% and 26.3%, respectively, versus Q4 2022. As Elias mentioned, we believe this quarter represents a transitional period where, though inventory-related distortions in the supply chain have not fully dissipated, the headwind they have had on our consumer revenues has weakened significantly. Specifically, to give color on two of our businesses furthest up the supply chain, though challenges at PrimaLoft remain, they appear to be abating somewhat, and we are seeing improvements. Brand partners are delaying the timing of their orders often to the latest possible moment, but many indicate solid order expectations on a full-year basis. Conversely, BOA Technology's return to growth and adjusted EBITDA in the quarter, and we are further encouraged by double-digit growth in bookings thus far in 2024. Lugano, once again, led our growth for the quarter and for the year as both revenue and adjusted EBITDA grew by 53% and close to 65%, respectively. We grew revenue in every salon in 2023 and saw meaningful increases in average transaction value. In addition, in the Q4, we benefited from the relocation and expansion of our flagship Palm Beach salon. We are excited about the opening of our London salon in the Q2 of this year and continue to evaluate additional markets. As a whole, we are very pleased with the performance of our subsidiary businesses in 2023 and particularly in the Q4. We are confident in the positioning of our businesses and the outlook for 2024. I will now turn the call over to Ryan for additional comments on our financial results. Thank you, Pat. Moving to our consolidated financial results for the quarter ended December 31, 2023, I will limit my comments largely to the overall results for CODI, since the individual subsidiary results are detailed in our Form 10-K that was filed with the SEC earlier today. As a reminder, our sale of Marucci occurred in the Q4 of 2023, and its results have been reclassified to discontinued operations for all periods. On a consolidated basis, revenue for the quarter ended December thirty-first, 2023, was $567 million, up 7% compared to $529.7 million for the prior year period. This increase was primarily a result of strong growth at Lugano and 5.11, partially offset by lower revenue at Sterno, Altor, and Velocity. Consolidated net income for the Q4 was $139.4 million, compared to a net loss of $11.8 million in the prior year. The Q4 net income was primarily due to the gain on the sale of Marucci, partially offset by impairment expense recorded at PrimaLoft. Adjusted EBITDA in the Q4 was $94.8 million, up 35%, compared to $70 million in the prior year. The increase was due to strong growth at Lugano and 5.11, as well as an expansion in EBITDA margin at our industrial businesses. Included in adjusted EBITDA in the Q4s of 2023 and 2022 were management fees and corporate costs of $20.9 million and $20.8 million, respectively. Adjusted earnings for the Q4 were significantly above our expectations, coming in at $38.1 million. This was up significantly from $16.3 million in the prior year quarter and up 29% sequentially. Adjusted earnings was above our expectations due to strong performances at Lugano and 5.11 and by our industrial businesses. In addition, our adjusted earnings was positively impacted throughout 2023 by much lower taxes than we anticipated at our subsidiaries, primarily Velocity and PrimaLoft, where we had weaker performance and related income tax benefits.... We believe that for modeling purposes, the tax provision at our subsidiaries on a consolidated basis will approximate 10% of subsidiary adjusted EBITDA. However, in 2023, our tax provision was only 7% of subsidiary adjusted EBITDA. Now, on to our financial outlook. At our Investor Day in January, we mentioned that we would be enhancing our guidance to the street to reduce confusion. Providing guidance on our adjusted earnings and subsidiary adjusted EBITDA will continue and remain the same. However, we are adding a third guidance metric called adjusted EBITDA. This differs from subsidiary adjusted EBITDA in that we deduct corporate-level expenses and corporate-level management fees. One additional note: we will refer to subsidiary adjusted EBITDA on a pro forma basis upon acquisitions, but we will not provide adjusted EBITDA nor adjusted earnings on a pro forma basis. We are also enhancing guidance by providing subsidiary adjusted EBITDA separately for our consumer and industrial verticals, as Elias previously mentioned. Now moving to our 2024 guidance. As a reminder, we acquired the Honey Pot Company on February 1 of this year. We expect full year 2024 subsidiary adjusted EBITDA, consistent with the range we provided at our Investor Day, of between $480 million and $520 million. The midpoint of this range, $500 million, implies an 11% growth rate over 2023. This is pro forma for the acquisition of the Honey Pot. The subsidiary adjusted EBITDA range for our industrial businesses will be between $125 million and $135 million. The subsidiary adjusted EBITDA range for our branded consumer businesses will be between $355 million and $385 million. Moving to our new adjusted EBITDA guidance, we expect full year 2024 adjusted EBITDA to be between $390 million and $430 million. This range factors in an expected $86 million in corporate-level overhead and management fees in 2024. This compares to $341 million in Adjusted EBITDA in 2023. Now on to Adjusted Earnings. We expect full year 2024 Adjusted Earnings to be between $145 million and $160 million. At the midpoint of this range, and assuming the same share count as at December 31, 2023, of 75.3 million shares, we expect to earn $2.03 in Adjusted Earnings per common share. Given the discontinued operations in 2023, it's challenging to compare 2024 Adjusted Earnings to 2023 Adjusted Earnings. However, as I mentioned earlier, last year's Adjusted Earnings benefited by approximately $13 million from lower taxes at our subsidiaries than we had anticipated. Turning to our balance sheet. As of December 31, 2023, we had approximately $450.5 million in cash, approximately $598 million available on a revolver, and our leverage was 3.11x. During the Q4, we sold Marucci, providing approximately $480 million in cash at closing. We also sold 3.5 million common trust shares in a private placement, yielding approximately $74 million in cash proceeds. Subsequent to the end of the Q4, we acquired The Honey Pot Company for an enterprise value of $380 million. We used cash on our balance sheet to fund our $343 million investment, with the remainder of the purchase price provided by minority shareholders. After closing the Honey Pot acquisition, our total leverage increased to approximately 3.7x. As a reminder, the first and Q2 are traditionally our lower cash flow quarters. In addition, we pre-funded Lugano with significant inventory early in the Q1 of 2024 in preparation for the London salon opening, which is planned in the Q2, and thus, we anticipate our leverage will increase during the first and Q2, then decline sequentially in the third and Q4 as a result of strong growth we expect in our subsidiaries' Adjusted EBITDA. We have substantial liquidity, and as previously communicated, we have the ability to upsize our revolver capacity by an additional $250 million. With our liquidity and capital, we stand ready and able to provide our subsidiaries with the financial support they need, invest in subsidiary growth opportunities, and act on compelling acquisition opportunities as they present themselves. Turning now to cash flow provided by operations. During the Q4 of 2023, we received $21.1 million of cash flow from operations, primarily due to strong operating performance. This is up $10 million from the prior year's comparable period. During the Q4, we used $24.4 million in working capital, a decrease from use of $27.7 million in the prior year. For the full year 2023 period, cash flow provided by operations increased $106 million as compared to the prior year. During 2023, Lugano invested $157 million in inventory to fund its growth. This inventory investment has generated an exceptional return on invested capital and enabled the strong growth Lugano has experienced. Outside of Lugano, our remaining subsidiaries monetized significant working capital during 2023. And finally, turning to capital expenditures. During the Q4 of 2023, we incurred $17.2 million of capital expenditures at our existing subsidiaries, compared to $23.7 million in the prior year period. The decrease was primarily a result of the timing of retail build-outs at Lugano to support their continued growth. For the full year of 2024, we anticipate total CapEx of between $50 million and $60 million. We continue to see strong returns on invested capital at several of our growth subsidiaries and believe they will have short payback periods. Capital expenditures in 2024 will primarily be at Lugano for new retail salons. With that, I'll now turn the call back over to Elias. Thank you, Ryan. I would like to close by briefly providing an update on the M&A market and our strategic initiatives. In the Q4, we not only saw an increase in deal activity, but also in the quality of businesses coming to market. Our competitors continued to struggle with leveraged buyout financing as a function of the current environment, specifically in consumer. We are seeing our cost of capital advantage significantly expand in this environment, which leads us to believe that now is a great time for us to be an acquirer. Our acquisition of The Honey Pot Company in February is a perfect example. Our competitors in the consumer market pulled back dramatically, just as their financing partners have, which is how we were able to get this deal done. For an on-trend company in the personal health and well-being space, we were able to transact at a multiple that was lower than the historic average. Today's market reminds us of the financing market of 2020, when large uncertainties driven by COVID kept competition sidelined. Yet our permanent capital structure allowed us to buy quality assets like Marucci and BOA. Today, we have a level of optimism that we haven't had in years. We're able to consummate M&A at more attractive valuations with better shareholder return prospects than in past years. On the ESG front, our focus continues to not only be about compliance, but ESG is integral to our mission, reflecting our commitment to transparency and responsible business practices. This focus is essential for our continued success and the creation of long-term value for our investors and stakeholders. We will release our first sustainability report in Q2, which we expect to include details of our greenhouse gas emissions, human capital initiatives, and governance practices. Additionally, we will continue to seek partnerships and acquisitions that align with our sustainability values, ensuring that our growth is both responsible and aligned with our long-term vision. Our most recent acquisition of the Honey Pot exemplifies the type of company that aligns with CODI's strategic vision and objectives. To conclude, we continue to make great strides, improving upon the quality of our subsidiaries as a whole. In addition, we remain steadfast in our efforts to identify and acquire similar disruptive businesses to further build upon our track record of delivering growth for our shareholders. I'd like to thank the entire CODI team for their tireless efforts in transitioning this business into a different and stronger company than we were six years ago. With that, operator, please open the lines for Q&A. Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone, in order to ask question, please press star, then the number 1 on your telephone keypad. You will hear a 3-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. If you would like to withdraw from the question queue, please press star 2. If you're using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Larry Solow of CJS Securities. Your line is already open. Great. Thanks. Good evening, guys. I guess first question on maybe a lot, just on the acquisition environment. Sounds like, as you expressed last month, too, it's gotten a lot better and it kind of fits right into your sweet spot. I'm just curious, with your leverage, it's gonna be sounds like around 4x during the first half year, at least. What, you know, what's your ability to acquire, you know, larger size assets? You know, would you, would you be willing to go up to 5x plus, or how do you look at that? Maybe would you might entertain the idea of selling some of your smaller subsidiaries? Yeah, Larry, I would say, and, thank you for the question, and good afternoon. I would say the acquisition market is better. I don't know that I'd refer to it as a lot better. It's clearly not- Okay ... 2021 when we were seeing deals, you know, kind of at a very high level and some good quality companies that were coming. But, you know, compared to 2022 and 2023, you know, we often say it's hard to fall off the floor, and I think 2023 sort of kinda represented the floor. So it's clearly a pickup. And, you know, not only are we seeing a pickup in the number of deals, but we're also seeing some quality companies come through as well. So, you know, that bodes well. You know, regarding your question, I think, you know, right now we're at 3.7 times leverage. It's a little bit outside of our, you know, kind of leverage window. You know, as Ryan mentioned in his commentary, it could float up a little bit. It's not gonna be a material floating up in the beginning of the first half of the year, and then it will come down. It's partly just the funding of inventory growth at Lugano. So, you know, we're opening a London salon. Yep. And, you know, so we expect really strong growth. So I would say because of both the cash flow, you know, kind of generation power of the company, as well as the growth and the expected deleveraging back down into our financial policy target range, which, you know, goes to kind of 3.5 times at the high end, you know, we still feel comfortable doing a deal. And, yeah, we could push leverage up into the 4s... you know, kind of temporarily here, at the beginning of the year, but then we expect it to fall, you know, kind of, you know, back down below that. You know, obviously, it's dependent on size of deal, it's dependent on multiple that we pay, and so it's a little hard to be precise until we have something, you know, kind of in our sight. I would tell you, we will not take our leverage to 5x, and so that's off the table. But could it go over 4x to consummate a deal the size of the Honey Pot or a little bigger? Absolutely. And given the confidence that we have in our earnings trajectory right now and the cash flow producing, you know, power of this business, we are absolutely comfortable with that, and the fact that our de-leveraging post an acquisition will bring us back in line to where we need to be. I appreciate that color. Then just a second question, and maybe a two-part question, just on the inventory headwinds of 2023, and it feels like maybe those are certainly subsiding significantly, right? And you mentioned maybe even it turned into a tailwind in 2024. Can you just discuss sort of specifically, you know, BOA and PrimaLoft, I think, were the two, you know, bigger brands that were kinda impacted and sort of the underlying trends at both those businesses, maybe a little more color there and the upside to guidance, Pat, that you mentioned, would that be kind of maybe if the inventory actually did turn into a tailwind? Yeah, so I'm gonna let Pat speak specifically to some of the trends we're seeing at BOA and PrimaLoft- Yep. - and how that headwind, which we think sort of turned neutral in Q4, it was not a headwind nor a tailwind, how that will- Right ... you know, hopefully build into 2024. But let me address the last part of that first, which is built into our guidance. Yep. We have not built a tailwind from inventory and sell-in matching sell-through. We have not embedded that into our guidance. And that's why if there's one thing, you know, I would say to take from this call, is it's just too early. Right. We gave you three weeks ago a guidance range. It would be too early for us to increase that right now, and I think that would be irresponsible. However, if we were reissuing guidance today, we'd probably be more optimistic. And, you know, I think there are clear catalysts for, you know, kind of us to exceed the range here, and it could be material. And one of those catalysts could be inventory changes starting to become a tailwind, where sell-in just has to match sell-through. Forget the fact that there could be inventory building again at some point, you know. We just want to get back to the point where inventories are no longer depleting, which has been sort of- Sure ... a constant theme over 2023. So, you know, there's absolutely upside that is available for that. You know, I would tell you that we were a little bit shell-shocked by kind of the depth of the inventory changes of 2023, and so we've been hesitant to build that in, but we think that's some nice upside that could exist as we go forward. And I'll ask Pat to comment on your questions on both PrimaLoft and BOA. Yeah, so BOA is strengthening. Hey, Larry. Hey, Pat. It's tough to kind of tease out, you know, what part of that is model count, what part of that is an easing of pressure, you know, model count growth, what part of that is an easing of these headwinds that we talked about, and what part of it is just, you know, really strong execution by the management team. Clearly, there's aspects of each, and I can't point you to kind of, you know, percentages, but I can tell you that collectively, those are each having, you know, each driving kind of bookings to be better than we saw on a year ago basis, right? So at PrimaLoft, I'd say the, you know, the language from customers is clearly that these headwinds are easing. The language from customers is clearly that, you know, we're going to have a more stable, solid 2024. However, you know, many of the brands are willing to chase the season, if you will, and not sort of order in advance. So there's just a little bit of a lag. But that's how I differentiate kind of those two, if that makes sense. It feels like the easing at BOA is a little bit ahead of the easing at PrimaLoft. I appreciate the call. Thanks, guys. Thank you, Larry. Your next question comes from Matt Koranda of ROTH MKM. Your line is already open. Hey, guys. It's Mike Zaverin on for Matt. Maybe just starting with the 2024 guide. I need to cut the industrial segment adjusted EBITDA to get to the midpoint of $140. I guess just based on recent underperformance relative to our expectations, I wanted to cut out of Sterno, but at the same time, we are facing two straight years of negative growth there. So I guess just, are we still expecting low to mid-single-digit growth in the industrial segment for 2024? And maybe just give a bit more color on where we're seeing headwinds in the industrial segment and, which, I guess, business we expect to be the heaviest drag in 2024. Yeah, so I'll let maybe Pat touch on kind of the industrial drivers, but I think you might be off on your numbers. So industrial, for full year, produced adjusted EBIT of $128.6. So the midpoint of our guidance that we provided implies kind of a 1%-2% growth as we think about 2024. I think we'd all agree that's, you know, a little bit conservative. Yep. As you mentioned, you know, there's not a lot to cut here, right? Altor is performing well, Arnold's performing well, same with Sterno. So I think we feel like there's upside to that midpoint. But Pat, do you want to provide any other, you know, kind of color on, you know, the industrial trends that you think will benefit 2024? ... Yeah, I just don't know about the underperformance external. I'm not seeing that. I mean, by our count and what we published, we grew sort of 11%-12% there. And I don't see, you know, I guess I can't answer your question 'cause I don't agree with the basis of your question, if that makes sense, respectfully. Yeah. No, sorry, just, just meant underperforming relative to our numbers that we had in our model. Got it. But, totally understand where you're coming from. Yeah. Maybe just anything, anything stimulating growth in 2024, and kind of, yeah, just where we expect the growth in industrial to come from in 2024? Yeah. So let me just give kind of a high level here. So we grew mid-teens on a consolidated basis in 2023, over 2022. That is far in excess of our core growth rate in industrials. And so I think we're all a little hesitant to get over our skis right now and say that you can back up an extraordinary year where you sort of triple your core growth rate and have not some payback that could happen from that. A lot of that is due to margin expansion that occurred in 2023 as a result of commodity price deflation. And as we've been saying, we've passed a lot of that commodity deflation to our customers, which is why revenues were down slightly, but EBITDA grew so rapidly. So, you know, our industrial businesses performed exceedingly well in 2023, and they enter 2024 with really healthy backlogs. Now, that said, you know, I think we're a little cautious, which is why we only guided to sort of, you know, kind of 1%-2% growth here. And that's, you know, that—it's not really based on what we're seeing in numbers manifest right now. It's much more based on the fact that, you know, we came off of a really extraordinary year. You know, we don't know if that, you know, will get paid back some in 2024. But frankly, there's really no reason to expect that the company is not gonna grow back at it, or the industrial group isn't gonna grow at its, you know, kind of normal, longer term rate of mid-single digit. I would say, you know, as Ryan mentioned, it is being conservative, and we think that's just kind of prudent given the macro outlook right now. I mean, remember, there are global tensions and wars that are happening, you know, kind of in, in Europe. And so, you know, you just have to be cognizant of, you know, kind of those threats that are out there, and we wanna make sure that, you know, we are guiding appropriately. But I would say some upside exists to our guidance numbers. You know, specifically, Arnold is doing really well. You know, Sterno, as Pat said, you know, kind of grew double digits year over year. You know, it's we have decent expectations for them to grow again. And Altor is, you know, performing really well, and we have an exceptional management team there. So there's, like, no real, like, issues that I could point to in any one of the companies other than to say, you know, again, when you've tripled sort of your core growth rate in a year, you're a little hesitant to go too far out on your skis in the following year. But there is no reason we should underperform our core growth rate of mid-single digits this year. Got it. Makes sense. Thank you for clarifying, Elias. Switching to the consumer side, at 5.11, given we're pausing store growth strategy this year, maybe just speak to where we're planning to deploy that capital at 5.11 and just help us level set growth expectations for 2024. Sure. So first, kinda going backwards, outside, we believe we will have another year of growth, probably similar to this year, outside of what we alluded to earlier, that there might be some charges for the PFAS transition, right? So we think we will have a growth level that's consistent with prior years' growth in 2024, if that makes sense. As far as where we're reallocating, I mean, we're trying to be best in class, sort of in the DTC sector. So we're trying to get better at customer service. You know, everybody's always trying to get better at customer service, but we're really trying to provide best-in-class experience to our customers online as well and drive that online business, if that makes sense. Secondarily, we're seeing... You know, we mentioned that, we've mentioned some of the geopolitical tensions. Well, that drives our professional growth as well, and we're seeing strong growth in professional, and we believe we'll continue to see strong growth in professional. Got it. That's all for me, guys. Thank you. Thank you. Your next question comes from Kyle Joseph of Jefferies. Your line is already open. Hey, good afternoon, guys. Thanks for taking my questions. Ryan, obviously, the portfolio has evolved over the past couple of years, but can you just kind of refresh us? I think you touched on this in your commentary, but on the seasonality in terms of adjusted earnings. Yeah. So seasonality adjusted earnings, it's, you know... I think if you look back at prior years, it's pretty representative. I mean, similar to what we said on cash flow is, you know, the Q1 is generally first and Q2 are kind of generally slightly weaker than the third and Q4 'cause a lot of our businesses have, you know, momentum to close out the, the year, whether it be, you know, the outdoor season or the holiday season, et cetera. So no, you know, no one business in particular. Lugano obviously is a pretty significant percentage of our business now. That business doesn't have a tremendous amount of seasonality, given the fact that there's- ... you know, events or, you know, anniversaries or birthdays, et cetera, you know, all year. But they do tend to have a little bit more in the Q4 around the holiday season. People generally, I guess, you know, become gift-giving around that. So outside of that, I'd say again, kinda, if I were modeling, I'd say roughly 60% back half, 40% front half, is how I would think about it. Got it. Helpful. And then, in terms of Adjusted Earnings guidance, I think you talked about on a dollar per share basis being relatively flat year-over-year. So the headwinds there, just a higher share count and the tax rate, I think you mentioned, or anything else we should be thinking about? Because you get it to do model for- Yeah. So, You guys did a really, really strong EBITDA growth. Yeah. So, Kyle, I mean, last year... It's always tough to compare Adjusted Earnings when you have a discontinued operations, right? So last year, we pulled out ACI and Marucci, right? So that lowers our Adjusted Earnings. So the way I would think about it is, we had guided on the Q3 earnings call, Adjusted Earnings between $100-$140 million, roughly. You know, I think if we had owned Marucci the whole Q4, you know, we certainly would have beat that guidance. But we see, you know, this year being up slightly to 2023. So, you know, I think there is growth in Adjusted Earnings. I think the challenge that we have with respect to Adjusted Earnings is Lugano, because Lugano's growth carries with it, you know, less leverage of Adjusted Earnings because you've got, you know, it's a taxpayer, number one. And number two, it's got a pretty high non-controlling interest shareholder, right? The management team owns, you know, north of 40% of the business, so that creates a pretty high level of non-controlling interest that lowers Adjusted Earnings. So, you know, we're gonna have, as we've indicated, you know, pretty substantial Subsidiary Adjusted EBITDA growth year-over-year, but not as high of Adjusted Earnings growth, given that most of our growth would be Lugano. Yeah, but Kyle, just to- Yeah, that makes sense. ... point out your- Sorry. You could. Yeah, just to point out, the tax rate differential is a significant drag coming into 2024. We had a roughly 7% of adjusted EBITDA, a subsidiary adjusted EBITDA, and we're modeling in 10% now. So if you take that 300 basis points on $500 million bucks, it's $15 million dollars, it's 20 cents a share. So if you were at 2.23 versus 2.03, and that's just having a same tax rate, the adjusted earnings growth per share or in adjusted earnings would, you know, be commensurate to the adjusted EBITDA growth. And what Ryan has said is also true. You know, when Lugano carries higher growth, it comes with lower adjusted EPS growth because of the minority interest in capital investment. But I just want to be, like, you know, very clear here that if the tax rate is to stay the same, we would expect to get some leverage on Adjusted Earnings and adjusted EPS from our Adjusted Subsidiary EBITDA. I got it. No, that's, that's very helpful. That makes, that makes it all make sense. Appreciate it, guys. Thanks for taking my questions. Thank you. Thanks, Kyle. Your next question comes from Matt Feldman of William Blair. Your line is already open. Hey, guys. Thanks for taking the questions here. So just a question with, you know, some of the recent management changes. I know you've had changes at 5.11 Tactical and PrimaLoft. Can you just talk to, you know, any major changes in strategies at both of those companies or priorities? You know, with PrimaLoft, obviously, there's a lot of interest in expanding into newer verticals and new products. So just any update you can provide. Sure. I mean, in PrimaLoft, it's a couple of things. It's state of course, it's got a great business, a great IP. I think we probably would like to invest in brand at PrimaLoft a little bit more and bring forth a little bit more of what PrimaLoft provides to the end user. And Ann Cavazza's experience there is very strong, and so we're excited to have her. At 5.11, Troy Brown, who of very high positions at Zumiez for many years, along with many other businesses like that and relevant businesses, is really, we believe, you know, a very strong at operational excellence. And he'll be working with Francisco Morales there, as Francisco understands brand and product development and will stay on as Executive Chairman. Troy, you know, we just believe is very strong at driving operational efficiencies and at delivering for the end customer in a DTC environment. We think that combination will really yield tremendous benefits. Got it. Appreciate that. And then I guess, you know, one other question as it relates to the consumer brands. You know, you talked about 5.11 and BOA inventory destocking, but I guess, you know, one other subsidiary that would be impacted would be Velocity. So if you could just talk about trends there and anything else that you're foreseeing, and then, you know, any changes in strategies with that business going forward? Yeah, it's a tough—I mean, it's two or three businesses, but in the, you know, in the archery side, we've seen some of that same destocking, and some, you know, some inventory reduction levels, that have hit the business. I'd say we're excited about the new products that we're coming out with this year in archery, and we think it will be, really, they'll be well-received later in the year by customers. ... on the sort of more, Crosman side, it just continues to have slightly weaker or weaker POS than we would hope, really driven by a lot of buying kind of during the pandemic era. And so, a lack of replenishment really needed. So, you know, we're working every day to right the course there. But that's also one of the benefits of having a diversified business of, you know, 10 companies, right? And so, but we continue to be focused and working every day there. Great. Thanks for taking my questions. Your next question comes from Robert Dodd of Raymond James. Your line is already open. Hi, guys. Back to Larry's question. On the leverage question, I mean, when would it be realistic for you to be entering the healthcare vertical? I mean, you said you'd be willing to take up leverage a little bit, but healthcare businesses do tend to go for pretty high multiples. I mean, Next Gen, which is probably a different scale than you're looking at, and we went for 30x EBITDA. So, with that dynamic, you know, if the leverage did go up to the mid-fours, would you be then out of the acquisition market for maybe a couple of years to grow EBITDA to get the leverage down into your three-3.5 target range? Or, what's the thought there on making an acquisition now, potentially reducing your ability to take incremental opportunities unless you make a sale? Obviously, but that's a different... That's question two. Yeah, Robert, I would say, one, we're not paying 30x EBITDA for a business, so, that's off the table. You know, I think that the businesses we're looking at are trading at, you know, a premium to where the, you know, kind of innovative and disruptive consumer businesses are trading right now. Call it, you know, those are in the 12x-14x range, you know, good innovative healthcare businesses that have real good, you know, kind of moats around them, you know, are probably a 20% premium to that. Just to give, you know, kind of a, ... some type of, you know, kind of baseline. So I think, you know, if we were to do a deal today in healthcare, you know, it's gonna bring us temporarily probably to, you know, kind of mid-fours, maybe, or, you know, depending on the size of the deal. Again, it's, you know, we'd have to figure out how big the company is. If it's a $50 million EBITDA company, it's gonna bring the leverage up more than if it's a $20 or 30 million EBITDA company. You know, a little bit of that is fluid. I will tell you that, you know, we have been, over the last few years, opportunistically divesting some businesses. That's not gonna stop. You know, part of our commentary and our script is we are trying to move away from businesses that grow in line with their industry. Look, we own some great businesses that grew in line with their industry, and we still have some in our portfolio. A lot of times they're really niche businesses or niche, you know, kind of industries that they're in. They're market share leaders, probably create good cash flow. You know, we've really moved to wanna own companies more like BOA and PrimaLoft and Lugano and, you know, Marucci, which we had a huge, you know, kinda, you know, transaction and sale on recently. So, you know, those are the companies that we've been consciously moving towards, and at the same time, we've been making a concerted effort to sort of get rid of some of the companies that grow, you know, kind of with their industry. So, you know, I think there, we will always be looking at making those portfolio changes, and as we, you know, kind of gear up and buy another business, whether it's in healthcare or consumer, there's probably gonna be, you know, a couple more divestitures over the next 12-24 months. That helps to bring leverage down, and because the companies that we're growing and are more core to our portfolio are growing at such a higher growth rate, you know, we feel a real conviction that our leverage comes down pretty dramatically just through free cash flow generation and through growth in the portfolio. And so I get, you know, your concern, and, you know, clearly that's something we're managing every day, too, which is how much, you know, acquisition dry powder do we have? Where do we want to deploy it? What are the best opportunities? And when we get to a leverage level, that sort of, you know, gets to... It's at a point where we're comfortable, but any more leverage would push us out of our comfort zone, then it really kinda, you know, dictates that we look at raising capital, selling, you know, some of the companies to continue the portfolio repositioning. You know, those things are on the table. Look, historically, you know, we've raised capital opportunistically in, you know, kind of interesting ways. The ATM has been used historically when the stock price reflects closer to fair value. You know, we don't feel that's the case right now. We've issued preferreds, which are non-dilutive. So there are other components of capital that we think, you know, can become available to us that don't necessarily dilute shareholder, you know, equity to the extent we have a, you know, great opportunity. Now, ultimately, we're always balancing what is the cost of that capital versus what is the new opportunity that we're bringing in. And if we can drive a significant enough discount on the upfront purchase price, we're willing to pay a little bit more for our capital. And so it's a balancing act right now. I can tell you that we feel, you know, firmly in the market for both healthcare and consumer businesses. We are comfortable taking our leverage up a little bit. But, you know, it's hard for me to say, does the next deal then prevent us from being back in the acquisition market? Because I don't know what our leverage profile is gonna look like upon that next deal, and, you know, you all wouldn't be privy to what we're, you know, currently working on, that may be divestitures, too, until we get, you know, kind of those closed. But, you know, this portfolio transformation that has been, you know, kind of a big undertaking of the entire management team since, you know, I took over in 2018, is not going to stop until we get sort of the portfolio that we are, you know, looking for. Which is, you know, as I said, and you're gonna hear these words a lot, we're looking for great, innovative, disruptive businesses, and that's at some point, what we will own in our portfolio. We were not going to be owning companies that are more growing in line with their industries. That was sort of a legacy business model, and we will transition this portfolio over from, you know... So what we had in legacy to sort of the new vision, and that's gonna free up capital to continue to deploy. I think, you know, the other thing to keep in mind is that these businesses are generating faster levels of growth. And so, you know, our full expectation is, as we continue to execute on this, our growth rate is going to continue to pick up, our core growth rate. And one should be more comfortable with a slightly higher level of leverage. When you have better quality businesses with more defensibility around those companies, they have better growth profiles longer term, because they're able to take market share, not just grow in line with their industries. Very helpful. Thank you. I appreciate all that, Colin. Now, flipping it the other way, if I can, companies have been almost, put air quotes around, "too successful." I mean, Lugano, I mean, it looks on back of the envelope for me, it looks like it could be as much as a third of consolidated subsidiary EBITDA next year, because it's been so successful. At what point does it get too big? Like, it's very successful. It's not growing in line with its industry. It's massively outgrowing that. But at what point does it become too much, or is there just no line at which it's just too much of a share of subsidiary EBITDA, then it becomes a concern for you that you don't have the counter cyclicality? If it's dominating everything, then you would join the company. Yeah, and it's a great question, Robert. I mean, clearly, the D in CODI, and we keep talking about the benefits of diversification, start to slow down, and we don't really have those benefits to the extent that one of our companies, you know, starts representing too large of a component of our overall earnings. Like, it's a valid question, and Lugano's growth rate and sort of what, Modi and Adit have built there, it is just truly phenomenal. It's honestly one of the businesses that, you know, I've just never seen anything like it. I don't think there's many businesses that are as good as this company that are out there. And so on the one hand, you know, you kinda don't wanna let go. I think, you know, kinda rule number one in portfolio management theory, and we're not stock traders, so, you know, this doesn't really apply, but you kinda ride your winners and you get out of your losers. You know, it's you know, kind of that rule applies here a little bit. You know, this is a business that... Look, it's got a massive TAM. It's got huge market potential and opportunity. It's got a visionary founder and leadership team, and we have the capital to support its growth needs. So that argues for holding it and continuing to, you know, let that growth, you know, benefit our shareholders. On the other hand, there is a point where it becomes too big, and it sort of overwhelms the system, and so that's something that, you know, we're on the lookout for. I think if it becomes a third of our EBITDA, like you referenced, we're gonna have a really good year this year. Because you're talking about, you know, a business that's gonna generate kind of growth rates similar to 2023, and I promise you, that is not built into our guidance at all. I think if we're getting there, it probably is something where, you know, if we're looking at the end of 2024 and saying, "This company represents a third of EBITDA," and it's still growing at double the growth rate or triple the growth rate of our overall company, then we're probably considering, you know, different options for financing the business. And I think there are a plethora of opportunities where we could continue to, you know, kind of participate in the growth and, you know, and but not have it be, you know, all funded by us. So that will be explored, sort of depending on how 2024 develops. But this is a really high-class problem for us to have, and your point is a good one, and I would tell you, this isn't- you know, this is not a company that we look at and say, "We want this to represent 50% of our EBITDA." So, you know, if it continues to grow at historical growth rates, it's gonna be a really great 2024, and we're gonna evaluate, you know, kind of, what that means going forward and how we would wanna think about financing in that context, the business as it goes forward. Got it. Got it. Thank you. And yeah, it's just been a truly tremendous success, so it is a high-class problem. Thanks. Thank you. Thank you, operator. Very well. As always- Hi ...... I'd like to thank everyone again for joining us on today's call and for your continued interest in CODI. Thank you for your support. Thank you. This concludes Compass Diversified's conference call. Thank you, and have a great day. You may now disconnect.