Based on the provided financial report, the title of the article is: "Form 10-K: Compass Diversified Holdings and Compass Group Diversified Holdings LLC Annual Report for the Fiscal Year Ended December 31, 2024

Overview of Compass Diversified Holdings

Compass Diversified Holdings (the “Company”) is an investment holding company that owns and manages a diverse group of middle-market businesses. The Company was formed in 2006 and has since acquired 24 businesses and divested 14 others.

The Company categorizes its businesses into two main groups - branded consumer businesses and industrial businesses. Branded consumer businesses are those that capitalize on a valuable brand name, while industrial businesses focus on manufacturing and selling specific products or services.

Some of the Company’s key branded consumer businesses include 5.11, BOA, Lugano, PrimaLoft, and The Honey Pot Co. Industrial businesses include Altor Solutions, Arnold, and Sterno. The Company aims to acquire market-leading companies in niche industries and then work with management to drive growth and profitability.

2024 Highlights and Recent Events

In 2024, the Company made several notable moves:

• Acquired The Honey Pot Co., a leading feminine care brand, for $380 million
• Sold the Crosman airgun division of Velocity Outdoor for $63 million
• Sold its majority stake in Ergobaby for $104 million

The Company also paid $1.00 per share in distributions to common shareholders and between $1.81 and $1.97 per share in distributions to preferred shareholders in 2024.

Macroeconomic Trends Impacting the Business

The Company is facing a dynamic macroeconomic environment, with ongoing inflationary pressures, rising interest rates, and uncertainty around consumer spending. Specific challenges include:

• Increased labor and freight costs, putting pressure on margins
• Shifts in consumer spending, particularly for discretionary items
• Potential changes to trade policy and tariffs

To address these headwinds, the Company’s businesses are focused on strategies like raising prices, improving supply chain management, and pursuing cost savings.

Consolidated Financial Performance

In 2024, the Company reported:

• Net revenues of $2.20 billion, up 11.9% from 2023
• Gross profit margin of 45.5%, up from 42.4% in 2023
• Operating income of $230.1 million, up from $85.2 million in 2023
• Net income from continuing operations of $42.3 million, compared to a loss of $44.8 million in 2023

The increase in net revenues was driven by strong performance in businesses like Lugano, BOA, and The Honey Pot Co., offsetting declines at Velocity Outdoor. Gross margins improved due to favorable product mix and pricing actions.

Segment Performance Highlights

5.11: This tactical apparel and gear brand saw a slight 0.2% decline in net sales in 2024 due to lower direct-to-consumer and wholesale revenue, though segment operating income remained strong at $38.8 million.

BOA: The maker of the BOA Fit System saw a 22.5% increase in net sales in 2024 as it gained market share across key industries. Segment operating income rose to $47.2 million.

Lugano: The high-end jewelry retailer had an exceptional year, with net sales up 52.7% to $470.7 million and segment operating income of $183.2 million.

PrimaLoft: The synthetic insulation provider saw a 10.7% increase in net sales in 2024, though segment operating income was only $4.0 million after a $57.8 million impairment charge in 2023.

The Honey Pot Co.: This feminine care brand, acquired in 2024, contributed $115.3 million in pro forma net sales and $0.1 million in segment operating income.

Velocity Outdoor: This hunting and archery business saw net sales decline 44.0% in 2024 due to the Crosman divestiture, leading to a $14.2 million operating loss.

Altor Solutions: The custom molded foam solutions provider had a 0.4% increase in net sales, though segment operating income declined to $21.7 million.

Arnold: The engineered magnets and components business grew net sales by 3.1% but saw segment operating income fall to $7.5 million.

Sterno: The portable food warming systems maker had a 1.7% decline in net sales, though segment operating income rose to $31.4 million.

Liquidity and Capital Resources

As of December 31, 2024, the Company had $59.7 million in cash and cash equivalents and $1.8 billion in total debt, including $1.0 billion in 5.250% Senior Notes due 2029 and $300 million in 5.000% Senior Notes due 2032.

The Company’s primary source of cash is from interest and principal payments on loans to its subsidiary businesses. It also has access to a $600 million revolving credit facility to fund operations, acquisitions, and other strategic initiatives.

In January 2025, the Company amended its credit facility to provide an additional $200 million term loan and $100 million in delayed draw commitments. This additional liquidity will be used to pay down revolver borrowings and for general corporate purposes.

Outlook and Key Trends

Looking ahead, the Company expects continued uncertainty around macroeconomic conditions, including inflation, interest rates, and consumer spending patterns. Its businesses are focused on strategies like new product development, pricing actions, cost savings, and market share gains to navigate these challenges.

The Company also remains committed to its disciplined acquisition strategy, using its 2022 Revolving Credit Facility to fund future purchases of market-leading businesses in niche industries. Overall, the Company believes its diversified portfolio of subsidiaries and access to capital position it well to weather the current economic environment and continue growing over the long term.