Compass Diversified Holdings

during the first half of the year at least, what's your ability to acquire larger size assets? Would you want to go up to five times plus? How do you look at that? Maybe 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 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 22 and 23, you know, we often say it's hard to fall off the floor. And I think 23 sort of kind of represented the floor. So it's clearly a pickup. And 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 that bodes well. Regarding your question, I think right now we're at 3.7 times leverage. It's a little bit outside of our leverage window. You know, as Ryan mentioned in his commentary, it could float up a little bit. It's not going to 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. 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 three and a half times at the high end, you know, we still feel comfortable doing a deal. And yeah, we could push leverage up into the fours, 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 site. I would tell you, we will not take our leverage to five times. And so that's off the table. But could it go over four times to consummate a deal the size of a honeypot or a little bigger? Absolutely. And given the confidence that we have in our earnings trajectory right now and the cash flow producing power of this business, we are absolutely comfortable with that. And the fact that our deleveraging post an acquisition will bring us back in line to where we need to be.

I appreciate that, Carla. And then just a second question, maybe a two-part question, just on the inventory headwinds of 23, and it feels like maybe those are certainly subsiding significantly, right? And you mentioned maybe when it turns to a tailwind in 24. Can you just discuss sort of specifically, you know, Goa and Primaloft, I think, were the two, you know, bigger brands that were kind of impacted and sort of the underlying trends at both those businesses, maybe a little more color there, and And the upside to guidance, Pat, that you mentioned, would that be kind of maybe if the inventory actually did turn into a tailwind?