- Quarterly Sales Growth: Net sales rose 3.5% YoY to $472.6M, with year-to-date consolidated sales up 8.6% to $1.4B (6.1% excluding Lugano).
- Adjusted EBITDA Growth: Subsidiary adjusted EBITDA increased 5.8% to $257M, driven by double-digit gains at Honey Pot, Sterno, and LifePhone acquisition.
- 2026 Deleveraging Targets: Tightened EBITDA guidance to $335–355M; expects year-end leverage of 5.3x, aiming to reduce via organic growth and asset sales.
- Arnold Recovery Outlook: Supply chain disruptions from China caused a $6–8M EBITDA hit, but normalization expected by Q4 2025, with growth potential into 2026.
- Free Cash Flow Projections: Anticipates $50–100M in 2026 free cash flow post-Lugano, enabling debt reduction and strategic capital returns.
Segment Performance
The company's subsidiary adjusted EBITDA, excluding Lugano, was $257 million, a 5.8% increase over 2024, driven by double-digit growth at the Honey Pot and Sterno, as well as Altor's acquisition of LifePhone. CODI's consumer vertical sales grew low single digits, with the Honey Pot driving continued share gains and category growth. As CEO Elias Sabo highlighted, "the company's commitment to generating sustained, long-term shareholder value, with a focus on reducing leverage, investing for growth, and returning capital to shareholders."
Outlook and Guidance
The company expects to organically deleverage in 2026 through solid growth in subsidiary adjusted EBITDA. CODI tightened its expected subsidiary adjusted EBITDA range, excluding Lugano, to between $335 million and $355 million. The company's year-end leverage ratio, excluding Lugano results, is expected to be around 5.3 times. Analysts estimate next year's revenue growth at 6.9%, indicating a positive outlook.
Valuation and Leverage
With a current P/E Ratio of -2.83 and EV/EBITDA of 20.54, the market is pricing in significant growth expectations. The Net Debt / EBITDA ratio stands at 16.79, indicating a high level of leverage. However, the company aims to deleverage organically and through asset sales, with a focus on maximizing shareholder value.
Supply Chain Disruptions and Growth Opportunities
The trade tensions with China caused significant issues, particularly with rare earth materials, resulting in a $6-8 million EBITDA hit. However, China has since loosened export controls, and products are flowing back out of China. Arnold, which works with aerospace and defense customers, is well-positioned to secure additional business and drive growth. The company expects normalization in the fourth quarter and a backlog to drive growth into 2026.
Free Cash Flow and Deleveraging
The company expects to generate $50-100 million of free cash flow in 2026, driven by the elimination of Lugano, which was a significant user of working capital, and the absence of a common dividend. This will enable the company to organically delever and pursue strategic delevering activities, with a focus on reducing leverage and returning capital to shareholders.