Compass Diversified Holdings

Good afternoon and welcome to Compass Diversified's fiscal 2025 fourth quarter conference call. Today's call is being recorded. All participants are in a listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. At this time, I would like to turn the call over to Ben Tapper, Vice President, Investor Relations. Ben, please go ahead.

Thank you and welcome to Compass Diversified's fourth quarter 2025 conference call. Representing the company today are Elias Szabo, Cody's Chief Executive Officer, and Stephen Keller, Cody's Chief Financial Officer. Before we begin, I'd like to remind everyone that during the course of this call, Cody will make certain forward-looking statements including discussions of forecasts and targets, future business plans, future performance of Cody and its subsidiaries, and other forward-looking statements regarding COTI and its financial results. 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 many risks and 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, as well as in other SEC filings and press releases. Except as required by law, COTI undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise. During the call, we will refer to certain non-GAAP financial measures. The Q4 and full-year 2025 press release including the financial tables and non-GAAP financial measure reconciliations for the adjusted EBITDA and subsidiary adjusted EBITDA are available at the investor relations section on the company's website at www.compassdiversified.com. Please note that references to EBITDA in the following discussion refer to adjusted EBITDA as reconciled to net income or loss from continuing operations in Cody's press release and SEC filings. The company does not provide a reconciliation of its full year expected 2026 subsidiary adjusted EBITDA because certain significant reconciling information is not available without unreasonable efforts. Throughout this call, we will refer to Compass Diversified as CODI or the company. At this time, I would like to turn the call over to Elias Szabo. Elias?

Thank you, Ben, and good afternoon to everyone. 2025 was painful. It was humbling. but it also proved that COTI is resilient. Our subsidiaries are strong, our people deliver, and the core of this model works. That's the foundation we're building from. We've discussed last year's events in detail on prior calls, and as we highlighted in our third quarter update, conditions are improving and operations are normalizing. Against that backdrop, today's call will center on the performance of the businesses we currently control and our outlook for 2026. Excluding Lugano, 2025 saw us generate mid-single-digit revenue growth with operating leverage that further accelerated subsidiary-adjusted EBITDA growth to high single digits. Each of our consumer businesses grew adjusted EBITDA. despite a consumer environment that presented real headwinds throughout the year. On the industrial side, in 2025, we saw modest growth in adjusted EBITDA. Acquisition-driven performance at Altor was offset by short-term challenges at Arnold as they navigated sustained periods of near-complete rare earth export restrictions out of China. Our outlook for 2026 is solid as we expect to generate subsidiary adjusted EBITDA growth in the mid single digits. This reflects our belief that our diversified collection of businesses are positioned to grow across a variety of economic conditions. In 2026, we are focused on executing against our strategic plan and working to regain market confidence. Our path forward is clear. Our first priority is reducing our leverage ratio. We're addressing this on two fronts. Drive organic growth with strong cash conversion and executing attractive divestitures where proceeds and timing support deleveraging and shareholder value creation. Medium term, we're focused on closing what we believe is a meaningful gap between our share price and our intrinsic value. That view will guide us as we deploy capital to the highest risk-adjusted returns. In the current environment, if the current environment and conditions continue, that could include share repurchases. Longer term, when capital markets allow, we're committed to reigniting the CODI model. That means combining selective acquisitions with strong operations to generate durable shareholder value. Everything starts with subsidiary performance. While the macroeconomic environment remains uncertain, our subsidiary teams are focused on what they can control, and they are delivering. Let me walk you through a few examples. For anyone who watched the 2026 Winter Games, athletes equipped with the BOA Fit systems tallied more than 100 medals in Nordic skiing, snowboarding, and freestyle skiing. That's up from 10 podium winners just four years ago, and we're confident BOA's presence will be even greater four years from now. The honeypot had a great year, establishing a leading position in better-for-you feminine care. Our consumer metrics, like net promoter score, the honeypot is outpacing both conventional and better-for-you competition. with significant additional runway to grow in brand awareness. The Honeypot strong product portfolio is driving increased consumer adoption and distribution across many key retailers. The team has successfully taken the brand beyond its origins in washes and wipes into the much larger period care category with a significant opportunity to grow market share over time. Finally, Arnold ended the year with a backlog more than 40% higher than the prior year end and is well-positioned to capitalize on favorable trends across aerospace and defense, among other end markets. Companies are desperate to find reliable, geopolitically secure sources of rare earth magnets, and Arnold is exactly that. Quoting activity is at an all-time high. It's also important to note that China has recently reinstated export restrictions ahead of bilateral talks with the U.S. While this may create some near-term disruption, it only further demonstrates Arnold's long-term value as a reliable, geopolitically secure supplier. And Arnold continues to make progress ramping its Thailand facility with initial production already underway, bringing online valuable additional capacity and redundancy. As we have discussed, although our business model is to acquire and grow, given our current leverage position, we believe divesting one or more of our subsidiary businesses at attractive valuations is the most efficient path to meaningfully deleveraging and restoring financial flexibility. We believe this positions us to drive long-term value creation and ultimately help close our discount to intrinsic value. There are four things I hope you take away from our remarks today. First, we have initiated multiple sale processes and are actively engaged with qualified counterparties and advisors to drive this forward. Second, on timing, processes for mid-market businesses typically take about six months end-to-end. This does not necessarily mean six months from today. While no transaction is ever certain, we're already well into multiple processes. Third, our priority is to drive shareholder value by both deleveraging and maintaining a sharp operating focus across our businesses. And fourth, We are moving with urgency to maximize value and keep these processes moving. Fast, focused, and disciplined. These goals are not in conflict. It is our job to balance them. The bottom line is simple. We are moving decisively. We are running disciplined processes, optimizing for the right outcome, and will provide updates to you when we have something definitive to report. For the past three months or more, we have candidly shared our plans to reduce our leverage. However, the ultimate objective has always been to maximize long-term shareholder value. Our belief is that our shares are trading at a significant and elevated discount to intrinsic value, and we are committed to closing the gap. We believe deleveraging and, when appropriate, returning capital to shareholders through share buybacks can help close the gap. However, if it does not, we will continue to evaluate additional value-maximizing alternatives for our shareholders, strengthening our balance sheet, improving performance, and making the hard choices required to put Cody in the strongest position going forward. It won't happen overnight, but we are operating with urgency and discipline because that's what our situation demands. Our incentives are aligned with shareholders. Everything we do is guided by one objective, maximizing long-term shareholder value. With that, I'll turn the call over to Stephen to walk through the financial results.