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CODI Compass Group Diversified

Participants
Leon Berman IR
Elias Sabo Founding Partner and CEO
David Swanson Partner, CGM
Pat Maciariello Partner
Ryan Faulkingham EVP, CFO and Co-Compliance Officer
Lawrence Solow CJS Securities
Douglas Mewhirter SunTrust Robinson Humphrey
Robert Dodd Raymond James
Call transcript
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Operator

Good morning and welcome to Compass Diversified Holdings' 2018 First Quarter Conference Call. Today's call is being recorded. All lines have been placed on mute. [Operator Instructions] At this time, I would like to turn the conference over to Leon Berman of the IGB Group for introductions and the reading of the Safe Harbor statement. Please go ahead, sir.

Leon Berman

to Holdings' welcome conference quarter and call. you, Compass first Diversified XXXX Thank today CODI'S Faulkingham, Elias founding the are Representing company Sabo, Compass management partner Group CEO and Ryan CFO. of a and are Dave management, Group review Also joining will us Swanson Pat of who Maciariello, performance. subsidiaries and our Compass partners today

call. our the significant of to of SEC The in ratio also last is non-GAAP distribution reinvestment a to available the its available limited without but of to to CODI taxes, reconciled this and we company's be refer financial distribution to www.compassdiversifiedholdings.com. Directors. Before night, financial refer note filings. not financial Holdings its non-GAAP income which tables certain EBITDA Diversified adjusted includes is quarterly like company provide This capital as for company. that measures does Board call, cash reconciliations current company's flow unreasonable approved discussed its on that efforts company's and QX net on Please information future discussions at the point the to paid filed EBITDA are to references Throughout by will expenditures website not the distribution. or our begin, including as company not with we the available following to in the would as Compass earnings, reconciliation of press estimated because this XX-K financial the The and measure out I release, the Form reconciliations, including

me statement. the Now to safe harbor read allow following

the These results with domestic as expressions including future are required in by future as some whether undertakes expects, statements, statement, ended are material filed to certain forward-looking turn factor Certain of well the to such projects revise other XX-K similar as In to to statements. and new on subject forward-looking Except I forward-looking the to call, like performance these obligation regard has future factors over discussions in projected conditions. to December law, information our identify filings. time, a a intended global could particular, from as result this results actual differ CODI enumerated we Words or as basis companies. conference are of events predicting impact update During environment make these Exchange with statements, SEC economic publicly believes, and the forward-looking no future At Form factors and on as Commission the the a and Securities in call the Sabo. statements will of or forward-looking any XX, CODI. to this cause uncertainties those year in significant would for XXXX, the inherent subsidiary Elias otherwise. or in risk statements and

Elias Sabo

Good morning. for I all highlights call. and will to begin your quarter. quarter Thank conference of reviewing welcome the you first time earnings our by the first

Products. the custom manufacturer Foam Foam diversified a capitalize on designer acquisition the add-on growth protective opportunity. Fabricators competitive cash that experienced strong market in position Foam a key free seek a team, acquisition, management platform compelling and the packaging flow qualities solutions. we including a and base, possesses customer Sterno strong of Rimports Fabricators opportunities compelling molded the acquisition and continue Fabricators platform completing and to quarter, first We of of for in market is leading

to expect accretive in be are starting cash with acquisition flow current quarter. the Foam We Fabricators to pleased and the

quarter. channel presence. is be starting Products the cash and The Sterno’s to accretive add-on retail continued Sterno’s to diffusers and since line the We also expected offering expand for product the completed a complementary Rimports XXXX. Sterno in subsidiaries acquisition acquisition also of business our acquiring second will in to in of and reinvest oils essential candles, liquid acquisition third flow to This scented Product add

Given January for on information acquired XXXX. Sterno the we Sterno Rimports as size providing Rimports had to be X, combined will forma pro of

to have We and our steps capital structure. taken also strengthen and enhance liquidity position

During shares X.XXX% $XX.X stock proceeds preferred million. B we million of of first an net yielding X offering Series quarter, the of completed

April loan the credit Following of refinanced for existing we we amount facility specifically $XXX the credit the million revolving and end and in $XXX extended our facilities signed the a quarter in maturity, a million. of credit agreement totaling term facility

notes CODI diversifying a we our capital our offering to piece X% of of structure $XXX new rate further capital These due related addition, senior objectives important completed private structure. capital accomplish recently financing adding our to have a of unsecured diluting enabled shareholders. In fixed million to XXXX completed without

liquidity these long-term stable enhanced have ratio build now to a to XXXX. our we pursue Due value higher cash these our coverage that We ability $XXX provide from financial have XX%. financings, of distribution million coverage acquisition additional ratio to shareholder of down and previously to to financings, XXXX, for and to our With XX% associated XX% expect be communicated the support flexibility XX% XX% distribution financing we now distribution. in costs with

quarter On meeting we performance, basis, EBITDA expectation. first declined the a chosen a pro first as attributable having the to our agency Harvest by well quarter quarter produced as make basis, Manitoba the faster XXXX order forma X.XX of adjusted the have EBITDA met subsidiaries revenue of Turning in and investments large direct from did XXXX. occur first we decline X.X% a that is X.XX our quarterly in of results forma our our XXXX XXXX, consolidated of The in in growing first of to two not quarter our of first growth from pro to On adjusted exceeding our quarter our X.X% expectations. expectations.

X, our January performance XXXX. on Foam Before as of for and were Rimports throughout we EBITDA adjusted I that for forma industrial the results, branded businesses presentation pro and niche Crosman, consumer I mention businesses to refer and should quarter, will discuss Fabricators when the these revenue acquired be

in our Revenues above industrial XXXX. while details Our year prior expectation first second Dave from from XXXX, his We forma will of increase meet for business industrial niche in comment. grew further pro exceed of and X.X% the quarter anticipate combined the to our first provide solid generated will remainder niche EBITDA or results, has quarter X.X% businesses quarter period. expectation. the continue performing

achieve Our pro first EBITDA forma branded combined consumer however increased results slightly quarter by businesses that were Revenue expectation. our XX.X%. X.X%, below decline

resulting we temporary growth As are earlier, I operating in mentioned higher heavily of in our two investing in reductions earnings. our subsidiaries,

XXXX. branded will our that anticipate XXXX in second we EBITDA in of ahead, quarter than businesses produce lower quarter the consumer the second of Looking

full we these have be the will despite comments. further provide faster businesses longer-term increase investments made in to However, growth. significant details we XXXX roughly to with XXXX, EBITDA in to year expect continue his in a Pat in line

XXXX, Ryan cash further comments. flow in XX, we reinvestment distribution $XX will CODI refer For details the months three of which available to his as cash provide and CAD, ended million. generated for flow March or

For of X.X%. a cash XXXX cumulative This quarter, per the current brings share, IPO yield since first to we distribution common $X.XX $XX.XX CODI’s of paid per paid share. distribution representing a

performance. call on We also preferred approximately will paid I of our niche subsidiaries a quarterly X.XX% over share cash industrial turn review distribution now shares. on Dave our to to the April $X.XX A Series XXth per

David Swanson

year's and Starting from from our with year's with increased Magnetics increased first Elias. by in last last quarter, line quarter expectations. increased first by EBITDA and X.X% Arnold by Advanced revenue Thanks, X.X% XX.X% Circuits, exceeding XX% expectations. EBITDA revenue increased

compared revenue Clean Earth's call, EBITDA in Earth's on and our increased Products in X% company’s XX.X% we confirmation growth As XXXX we prices year period quarter XXXX temporarily a Rimports strong increased from increased expectations. the period respectively expect we the of quarter on increased in Foam In integration first forma this causing the expectations. XXXX. and in Based Arnold line on solid solid the results to to in business declined for we of mentioned material QX increased first in expectations. quarter with achieve performance, going year first in and as Clean compress. believe Clean XXXX. company EBITDA to quarter expectations view expectations in prior is line Earth's to perform The XXXX. revenue the is of line raw last Fabricators basis XXXX the first of the our and Sterno of X.X% margins with bottomed quarter, results X.X% XXXX, the with that X.X% the track believe pro exceeding exceed and EBITDA with and remainder on compared we revenue first our XX.X% well, will prior

allows customers a for into quarterly, As a prior some material certain however a price that their primary Fabricators pass-through has of reminder, their raw contracts effect. of to going changes Foam business majority in significant lag typically with with representing

our review I Fabricators Pat over branded Foam expect performance. remainder line quarterly the the call subsidiary's will to perform XXXX. for with turn to to We expectations of consumer now in

Pat Maciariello

X.X% and Thanks, by Safe, quarter the from revenue first in Dave. XXXX, EBITDA declined Beginning of Liberty expectations. with line XX.X% with increased

Safe retail XXXX. of reminder, a quarter first a had the XXXX Liberty first national comparisons in distorted and bankruptcy and have revenue a of quarter as As been result, XXXX the customer major throughout declared

ERGObaby's quarter in line were for liquidation by retailer EBITDA a XXXX, the results receivable customers, did the largest attributable first revenue expectations. XXXX domestic and customer, the expand. X% quarter. decreased of a accounts prior entering in period which with ERGObaby's bankruptcy causing of operating to first in declined to quarter of Additionally, one had compared year Safe national its Liberty this with quarter affected XX.X% margins not filing first in fourth write-down and in the recur

we prior performance revenue first results were relatively to of persist will quarter, second EBITDA we noted guidance full Manitoba XX.X% anticipate are flat while in ERGObaby's XX.X% year-over-year. by As year the XXXX. on the that increased declined the maintaining our we headwinds from these and quarter call, Harvest and expected, be

stated, heavily to we awareness. brand previously raise sales As in we investing and are marketing

are First quarter grow expectations we than and anticipated. see exceeded starting our to faster results revenue

essentially prior with line year, will we remainder quarter business on the X.X% and believe to flat Crosman's year increased in the basis. revenue the period expectations a compared expectations. with would For first the of our of EBITDA top-line the exceed XXXX in continue

Lastly, prior X.X% compared X.XX's decreased with revenue period. XX.X% grew the and EBITDA year

XXXX, first direct the previously which had X.XX quarter-to-quarter. virtually mentioned shipments, of unpredictable agency no as we are quarter During

increased direct Excluding agency business, over Revenues the XX%.

EBITDA making capture growth compelling In we to investments in opportunities. been addition, first have by X.XX quarter also affected significant was

newly expanded XXXX, We in a to shipping later expenses. will decline new in doubling more these in significantly move the system Specifically, capacity. in following warehouse, of ERP than X.XX's costs into completion April. we our and moved implementation our increased believe The sold the April, warehouse part we operating the an start of ERP

quarter' operating results the associated some expect move. frictional to include we the However, cost with second additional

first XXXX made are quarter. have our With a X.XX's we call financial will to results the the direct-to-consumer to second in on the expect evidenced comments of results. to investments the and over add results I producing half We we turn by that, of normalize XX% reassured tangible Ryan now that growth are in as his

Ryan Faulkingham

up accretive I discuss XX-Q for Today, compared revenue with for in million, period. our was for the results a the Thank March $XXX.X year-over-year our of X.XX you, as to year flow of Net business and acquisition Foam LaserMax, increased Solutions XXXX. acquisition as the its of Sterno's quarter million and our available distribution $X.X million, net for commercial as loss the to Fabricators XX, $XX.X Cash February. ended the loss of for results for add-on overall consolidated subsidiary, Pat. the in we prior the to the March acquisition Rimports expect March XXXX. since growth of $XXX will acquisitions CAD company well in from for XXXX Form of prior quarter-ended was which and the acquisition subsidiary of the was refer XX.X% Crosman compared SEC reinvestment for period. contributions and XXXX quarter. XX, yesterday. This detailed limit we Recycling my will and basis, revenue for XXXX, earnings CAD revenue XX, will Foam to subsidiaries, also our individual year was full due each comments financial Earth meaningfully prior $XX for XXXX. results primarily from On largely notable in million quarter the I year Manitoba to exceed Clean we the expectations increase million March are of consolidated and reflects Rimports, filed Harvest the year our completed quarter XXXX It contribution distribution Fabricators at that on including $XX.X our a AERC to the Based ended as our reflects recent ended million XX, compared

XXXX. we as mentioned payout in be anticipate level common distribution XX% our assuming and in XXXX As Elias the XXXX ratio of between distributions earlier, to XX% same in

prior and facility. in cash on as X In borrowings million of company equivalents capital revolving balance to million $XX.X March million under Series cash our outstanding the XX, approximately March outstanding We prior $XXX.X Moving $XXX term we our million XXXX. our sheet, shares of had and in Preferred of and XXXX, had Shares. net an million X.XX% loans working B $XXX offering completed credit its of

we our diversify mentioned, shareholders, financial have Elias capital recently As steps structure growth. while significantly our diluting for flexibility further without taken to enhancing

of $XXX loan decline The of basis on unlocked amount and and term credit the $XXX our fix notes middle private would In the points on term of of additional grade strengthening eight-year XXXX, replaces spread like leading previous term In our from levels. company the agreement debt The increasing unsecured related recent to due $XXX agreement revolving financings. approximately total XXXX, to on leverage April on company a facility $XXX without these businesses. facility a have closing more attractive credit basis accomplished pursue the in million XXXX. outstanding acquisitions Importantly, loan we also detail revolver objectives have spread loan our credit that I'll our increased facility million for I of million our to our revolving grade, previous X% agreement. in flexibility to market without XX credit new to increasing notes. XX highlight provide points offering a approximately the rate we signed now applicable a important by our addition completed million. financial senior April liquidity and the totaling across be and

under are to to refinanced the terms. loans in have existing favorable and We extent pleased our respectively and revolver and of debt term maturities XXXX XXXX

during prior capital expenditures, incurred the in $X.X maintenance Turning period. first compared we to quarter capital now of of $X to expenditures the XXXX million year million

anticipated the spend and maintenance to quarter expect the slightly first we CapEx than was during Our lower shortfall spend of XXXX. remainder

continue X.XX million we quarter, first invest quarter. to during primarily growth capital the During the spending $X.X

million subsidiaries. For the XXXX, for we between continue CapEx between million $XX expect anticipated CapEx in and of growth of million as growth our and long-term to $XX $XX the we and remainder invest incurred to maintenance spend of $XX million

will to XXXX on the growth. few capabilities be expect X.XX's new We of our make majority invest advance support a growth its spend I support growth would manufacturing to to to and at CapEx like now objectives long-term comments circuits CAD.

With X.XX in occurring we businesses previous calls anticipate Form commentary and second I the QX, As turn the incremental quarter back cash XX-Q, given past certain seasonal therefore we've in on last typically to CAD. are QX discussed our will in Elias in QX flow nature on year’s provided well CAD now approximate quarter quarters. our producing of are and and our call Further, by our as some that, over second will as Elias. CapEx spend highest

Elias Sabo

you, Ryan. Thank

accelerate prospects the of a revenue, grew to steps of and first subsidiaries. shareholders important generated to and quarter solid growth our we provided number the flow, our During sizable took distributions cash future

on in market like first beginning the since completed I are have close opportunities forward strategy. and capitalized M&A activity by would the we pleased acquisitions quarter discussing also two compelling and briefly to to our accretive the of team growth Our year.

equity During availability the terms strategic buyers of to capital steady. middle deal that drive activity. deploy with first available favorable to combined The with seeking continued capital quarter to flow and financial market remain continues

our well to proven attractive value course our upon growth beneficial for acquisitions as this create strategy. related maintaining of deploying attributes subsidiaries. Going investment to shareholders. the continue forward, management and By will well-positioned disciplined we term to platform CODI’s continue to capital to we add-on our to execute long strengths to our draw will acquisitions approach accelerate ownership as remain We and our pursue following

hosting Before Q&A Investor up would June York I announce on XXXX open I New that to the be lines like for will Analyst XX. Luncheon we in our

happy Products CEO you concludes well. attendance will addition Hinshaw, you This questions of see this of In remarks of please lines? phone open to the in our Operator, as take event. We CODI’s opening Sterno many we’ll hope at and members have. to from senior may any Don management be team the to be presenting presentations

Operator

question [Operator first And you. Instructions] comes Thank our Solow. Larry from

proceed. may You

Lawrence Solow

Great, morning, Good guys. thanks.

Elias Sabo

Larry. morning, Good

Lawrence Solow

it moving sort a guess the know you like guys I on just just maybe on then to structure a normally you just financing thought quarter color is guess to slightly last less like due but which of I'm basically or not summarize all parts, you updated lower maybe in Just the or slightly looks to that. on guide your a is ratio CAD it Thanks. get in the had trying maybe it’s that it, themselves us just give I I doing year the you payout little little start are started looks to it

Ryan Faulkingham

Larry. sure Yeah,

CAD, terms year CAD in from is with change are costs. in of be only question, expect guided business The part expectations basis performing of XXXX to but start a latter So, and line on your our with mind financing I’ll the really generation quarter. we we is what the increase full real the our in a in I the standpoint last think

Lawrence Solow

Okay.

Elias Sabo

of to into. revolver that notes moving Just senior capital by cost some of that the outstanding

Lawrence Solow

like just of Right. pretty that’s there if you could business, what great just largest you core and financing cheers tweak Fabricators newest in some discuss to the Foam implementation platform and ERPM the you -- sort point disguise being like issues the had X.XX impressive. obviously very okay That’s just holding seems could modest outside then of your growth so a if just it’s maybe

are was impact them in more have I could European maybe won’t if and issues maybe a the what more Warehouse boosting on us quarter. little you’re of both to confidence sort money that it just sort give and to you source of So, there guess Why then the continue quantify still you to and color linger?

Elias Sabo

Sure.

Larry, Elias. it’s So,

implementation well ERP a everyone September implementing went say of things the did part markedly operation really along aware would think anticipated and I flow I the disruption. them operation system with the of operation in the to cause a the it quarter. is year cut implemented beginning new in entire flow in we cause but because anticipated your cause these kind as everything fine, to fourth last new did - system it

- why were incredibly business, growth. to of great of and into, building of into lot issues has a investing we’re ran so that’s is money the Some long-term demand thing we that’s that been we going a demand the because strong, the

That is news the warehouse As business. of demand implementation. also of outright our backlog the continue has continue and are kind quarter, of increase which capacity shipping beginning all we demand we what to been expected fully ERP in process to this greater is, part move significantly were we grow do now the is not it’s in the strengthen, in that time found good continues first warehouse, but had the backlog catch start the for than have down into is now what into The to quarter news built much expanded we first especially a the we kind bad at and we pace us the distribute being of at had got capacity when limitation. were to in the up had to hard from that with

are delays is our new are the the inventory that quarter, a that We running warehouse happen are is able larger, significantly catch believe cause to up into and moving kind going kind the at our to into but throughput quarter. will our a some start to million gaining already and only ship of couple we kind seeing we’re had. moved obviously May. on to backlog over because of quarter. going we an third and And in gains So, here cleared end and of need buildings be whatever that getting to the also and is in one start second not we trajectory $XXX efficiency increasing, plus demand to in to we That be efficiency shipping is of there you into consolidating from that increase believe good likely April a get the up move April

mean position we a we on this, direct to extraordinary two same it’s you costs just growth, lot a the been in frictional far to there investments kind didn’t time, opportunity we that I we the stronger believe XX% So, is was was thought. from never brand than projects the ERP The been with are go its in to is run the north capture consumer reception of consumer the distribution, say had as a the associated the of that when first both periods really to we through top of major but brand this there. opportunities growth and what it has kind reality point But if at make in I painful X.XX unfortunate these we of quarter. get would transition and would expanded in

have last suffered that lump, quarters. So, three over no about we some is doubt there the

quarter for creation these kind expect up and to us. of of these be us the second optimize focused profits be sub-optimize with warehouse in kind year of and generating We ability as getting get to But to running operating brand the level. fully run and things the we and businesses, behind we our half the back we’re be now our of things these expect the as continued expect on demand behind capable also

Lawrence Solow

suppose whatever searching sort I I am going growth cutting got to half you to problems once imaging mean your it to margins pains growth. And once even this but behind enhanced not the I you profitability. up. that say, – some – you long the these I suppose In you was trajectory, behind, or I run will continuing in it get Is on rapid just of fair get growing

Elias Sabo

historic to more to levels going margins profitability our to consumer. as our our and profitability continue is what think our we levels overtime believe we to we to are historical transition back reverse can actually direct Yeah, beyond grow

from absolutely and and in we margin think we what is think the the ERP the the in second the nine there move from is I kind and the we this we with the quarter even think due growth last backed potential. with power had in accelerated right in will as months the see mean earnings business have we the take we to and of those outliers growth so, disruption compression And

Now that been has able expansion we’re capital very think with margin we invested, some be experience to to going even expansion. significant growth, strong

earnings, a it’s have or as – business So, been we our operating in investments temporary but these reductions we've some as ever remain caused more enthused about this had.

Lawrence Solow

Right. things And much a came you seem good in is it in than potential even the sounds of term greater seem transitory short lot longer-term like and issues like stuff where are there. nature. growth that have type The

absolutely. So

Okay, queue. the gears quick in let get real and just I'll and someone switching back

This but it's primarily out Toys due pressure the maybe company still of to return it won't from ERGObaby, to forward, if be look out whatever? obviously, not I Just may going term R some be be had in fast, guess maybe some that in growth long type sort sustainable few Us. seen this low quarters do, now the But on as of as double-digit we not an But not come the Toys of or on R could easy which year top-line. growth last Us the equation. there we exclude high-single

Pat Maciariello

is believe, Larry We Pat. so this

U.S. the addition I retailer to R think large to-Babies in Us in and in addition the

fine and has even indication their we there think our is Asia sort and working distributor facilities there that's as large it's though consolidated customer to a having a that is sell-throughs well, headwind inventory in reduce of a well. So, as have are I that still

able answer believe lot couple believe path short of we we get we term, is throughout do growth on the well. back the a that positive there will of there as signs be and things of short is is, are So to world a

Lawrence Solow

Appreciate Thanks. great. Okay, it.

Operator

next Mewhirter Doug comes SunTrust. with our question And from

may You proceed.

Douglas Mewhirter

morning. good Hi,

return hedging business? Any the also, see was a you being there is is contracts looks in not, Did Just of that executed? when any might a Clean to increases growth of revenue any see couple questions pretty there that subsidiaries. the you like part year-over-year And to ability some on rebound if healthy. Earth

David Swanson

Sure.

Dave. So, this is

year-over-year last bit the growth growth on So, really we is a acquisition driver not I'd the lot. of The visibility the AERC biggest did that but it little some we the line benefit is business. contaminated relates from been dredge, in There say big of dredge of And have going expect recently not also of has we've that a dirt much seen of time. the kind as year. we're until first to projects quarter to summer a

So, near-term, that. on year, but visibility have later should the some we this not in

but really So, our a little that bit of dredge wasn't growth Earth's drag the Clean good quarter.

Douglas Mewhirter

margins maybe other business. sort for maybe thin I the the thanks know jumps if there gross rest LaserMax know than the Or in And had like - that. quarter. any It the that And moving your to cost seems turning extra around little other was I now Crosman. Okay, there margins of gross of I were lower quarter? in in else anything because seasonality. But don't there didn't this know was

David Swanson

Crosman. Yeah, on which for one topic, is light I'd seasonally quarter it is a say hit you'd

to issues. mixed say gross a terms lower slightly in out is But mostly it. the I'd of year-over-year, take hard of So lot margin

overtime. our, sales of price I margin there material Some But versa. in higher and mitigate pressure were I'd material had price think raw some to plans we also are there lower increases some well. raw that slightly vice have also as And we'd

Douglas Mewhirter

know higher from I price? Because you I of quarter. didn't Thanks. if help. a last on nice tailwind base your performance that know And Really Are customer Magnetics. a of the in Arnold question part getting oil service that my is wealth

David Swanson

here more with business out some oil seen to a have little see point we’re less. due take would it's first see not and if you Arnold market the but lot markets, good chutes it of that agree downturn the higher a end end aerospace driven to question. forward I'd historically, but and say tailwind could that a think quarter that as less. lot I’d that Yeah, I be seen have defense that more with reflected in gas the industry starting industry but going for that I stay oil you downturn in we and bit say have not business and a with was green gas prices by is a quarter.

Douglas Mewhirter

all thanks. questions. Okay, my That’s

Elias Sabo

Doug. Thanks,

Operator

Robert Raymond comes our with And next from James. question Dodd

proceed may You sir.

Robert Dodd

grow months guys. risk I on accelerate, problems business what’s great going this? can Circuits. to for coming growth look X.XX and XX road? to are XX of little, that months been Advanced the keeps the there to direct-to-consumer of we’re capacity any step more then big a Suffice there done the again with any couple of if Hi, but now issue potential growing one kind And problem obviously if from A because on prevent down $X.XX for at a kind like it’s today comes is warehouse

Pat Maciariello

Robert if it’s kind disclosure new efficient get I few throughput running warehouse, have designed warehouse is, fully so to takes right you get we to and think given the how there, when an to a full bring a equipment up operation. of it a then in our running size now new months completely what just when expected efficiently we Yeah, new and our you

in International for so with a knock kind and that in more multi-year other that when support domestically. is capacity. there growth seeing domestic our by doubled than believe view arrangements we we’re the we have kind of growth distribution of old capacity the current runway to and we of that think notwithstanding we to our growth this our us so, not have be will that I kind constrained so Internationally facility able And add we get provides our

the of distribution right. be to was years somewhere kind something type growth smaller five moving was or to were we longer So, optimize, one fast adding facilities a to down just we now pretty term, intermediate to went we to because enough one from We facility, in very grown it move inefficient disruptive country had second and think the a the years opportunities any that. else good large I few feel that four two warrant this so into part probably the also grab I going think from handle and further potentially of next able in have for of we’re facility second disruption

I long far we capacity of would two think the domestically think of that a feel doubled of and out we number kind the business it’s be and ample sort one. less disruptive size kind way number to one potentially of really way have double so it

Robert Dodd

you. Thank

or well, the anything of active didn’t did just activity direct-to-agency quarter-on-quarter you overall to kind less direct-to-consumer same one, the of can I levels you say tell About very you get volatile the obviously sort deemphasized of on because a acronym you quarter if what mean trying pipeline for roll this. On going in have is has more have last a coming sense the that that’s that us? so this in of percolating anything obviously I side - of is mean see in changed RFP

Pat Maciariello

strong four, take orders think think I Pat, million, will year. The manifest itself believe lumpy in is is lumpiness I it’s long-term we our XXXX to $XX just there’s had provision. often overall as the been, be some this lower last mean $X and a term that that as No, we quite XXXX. year to whole for I sales with DTA business will six It slightly be in to not short we’re pipeline come strong this than going five, direct-to-agency a is as million business as years dealing as

Robert Dodd

from one in growth are that flocks stable as think kind you then just of flow were in has business? CapEx about between are to mean at little down, stable revenues number been its and incredibly an just accelerate my this a Circuits, of that benefit right. five or what here the highlighted X.XX. Is that on the the business of the kind continued putting that’s generating cash you. to obviously advanced very stability And plan you circuits year Thank been to going up stable, is has some good things of years do -- it flat, ago you very, of that Okay, like where modeling a little they a Advanced you, I I for years a all support a been and beyond

Pat Maciariello

that didn't accelerate to will I allow us We think think growth.

layout. and brought, upgrading vision are basically we're legacy more to more of we this business moving that. technologies, one and a do, a defense now more have attract frankly advanced company sort facility So, I and our a of to upgrading to that Arizona and we're This hope better quite of our moving to handle was facilities facility

of it we're different of hope why making attract types more I difference. to So, the capabilities. will facility and a be with able this new customers with our That's new

Robert Dodd

you. it. Thank Got

Elias Sabo

you. Thank

Operator

Chunk [Operator [ph] And Newfleet next Management. from with our Instructions] Ryan Asset comes question

proceed. may You

Unidentified Analyst

Hi.

how was are in X.XX, much to going clarifying QX, Just question zero? the agency on drop of sales a we direct that the

Ryan Faulkingham

lot, we I think be of the going DTA can be get I a not to number. the It's in half of most expect the sales year… back that to

Pat Maciariello

year. question have number follow-up I But have before ended you number one, that we sales can DTA up. a did we get last if

Unidentified Analyst

can watch Can a we the me the to The Fabricators, only little lower raw come pass what you I margin kind on business your seems you back was just like if and on out are it to materials one year-over-year through? Yes, there back Foam even play what's gross have and those remind your for step-up. new that. the just

Pat Maciariello

Yes.

you primary the and EPS correlate of think The you poly quoted. siring prices, can on IHS, to expanded if natural raw going see derived heavily So, daily so that prices. is oil from, few what being kind material and gas quoted is is that is

that. we've to or a vast with for increase in And oil, have seen that price. so, customers, expected change our kind price we as we of of The material in pass-through see contract raw an the the of majority allow an increase any in had

or Now, down. this could up be

through. moving is that higher, ability and we with pass so, have lag. there to those material typically happens prices Typically, raw a the And quarterly,

had we they first kind get the until so in raw second increase through our material and in pass quarter have quarter, the and price lag. don't So, of that you

for because our but through of over variability pass margin margin or can some the quarter-to-quarter variability the business, But other the course it's with on raw contract down material have low, of the So, you company the we variability to customers. have expect slight based year or through moving this before is customers. margin in really up the we prices one love in it I much so the the we is things margins, about think very

Unidentified Analyst

all Thank Okay, me. you. for great. That's

Pat Maciariello

can I QX I'm having then an it $X the would million IT less tell here you in tune than significantly it to issue of was million. QX and right around $X to

Elias Sabo

the the of not XXXX the expect fourth we don't in There first as lot of was quarter as we But quarter expect in this direct of of of some in will some material the quarter -- second second quarters quarter have so much be but in first Ryan the Yes, in business Pat XXXX. year. the like second of there DTA as XXXX. do some and in third comes quarter, a there said, that

Unidentified Analyst

you. Thank it. Got

Operator

and call Thank you. does I of our this would portion the the conference. Ladies turn gentlemen conclude now like Q&A Elias to back Sabo. to

sir. begin may You

Elias Sabo

future. I would CODI. for progress and interest sharing continued like our to Operator? forward in today's call We thank the on again joining with look to your everyone us for in you

Operator

does all for conclude attending gentlemen, disconnect. the great This today's thank conference. a and you you may Ladies day. have and as Everyone, program,