Compass Diversified (CODI) Earnings Call Transcript & Summary

Well, hello and thank you for coming. I'm Patrick Maciariello. I'm the Chief Operating Officer here at Compass and we just wanted to welcome you, and again, just to tell you how much we appreciate your support in being here. Before I get started, before I introduce Mike Joyce, I want to just say thank you to the Compass team, [ Ka ] and [ Kara ] and [ John Lynn ] who put this on. It was really fabulous. So thank you all. And I also want to say thank you to each of our subsidiary management teams who displayed their products with such professionalism and I was just -- I'm humbled to be associated with them. So thank you. It's my honor to introduce Mike Joyce. Mike, in 2012, after a 24-year career at Albany International, which culminated in being the President of the Applied Technology Group, Mike led the buyout from Albany International of PrimaLoft through focusing relentlessly on innovation and sustainability and through tremendous drive, he more than the -- that he and his management team more than doubled the business and then more than doubled it again. So no pressure, Mike. But Mike is a graduate from UMass Dartmouth and a graduate from the Advanced Management Program at Harvard Business School. Mike is on the Advisory Board of M&T Bank in the Capital Region and is also a member of the Outdoor Retailer Association. Mike is becoming quickly a good friend, and it's my honor again to introduce our partner, Mike Joyce.

Good afternoon, everyone. Pat, thank you for your introduction. I appreciate that. It's my great pleasure to be here today. I really enjoy talking about the PrimaLoft story and explaining our beginnings, the progress that we've made as well as opportunities moving into the future. Slide's not advancing. So I'm going to spend a few minutes giving you an overlay of who we are. You've heard in the quarterly meetings a little bit about the business, but really not deep enough. So I'm going to go a little bit deeper about who we are, what our recent performance has been and then talk a little bit about where we see our growth opportunities going in the future. So in the videos that you saw leading up to the dinner -- or I should say lunch, we talked about advanced material technology. And we make advanced material technology that's felt by the planet, and what we mean by that is advanced materials are core of what we do. It's the DNA. It is how we started the business. It is how we started the business, it is how we innovate and it's how we differentiate ourselves to our brand partners in the industry. But we're also a premium brand. It's an interesting combination. Not only do we have expertise in advanced materials, but we're also known as a premier brand within our industry, and that's a pretty powerful combination. Our products can't be seen. They're inside garments, they're inside shoes or inside apparel. However, we wrap the body and we directly impact experience and so think of us as almost like Intel Inside or maybe something closer to us in our industry would be GORE-TEX, right? We directly impact experience. Our belief and our success is based on unleashing the full potential of people, products and the planet. And what we mean by that is people is the consumers, unleash their potential. Products is the products we make. And the planet is how we make those, make them in a responsible way. And I'd argue that that's been a core to our growth in the last several years is really abiding by that belief. We have the capability as an advanced material technology company to go into the actual material itself and change the behavior of that material. So we can go into the polymer of the material. If we change the behavior of the material, then we can change the behavior of the final product. And so you have tremendous leverage when you are able to do that. We have the capability, and we've done it in the past. Good examples would be our Aerogel technology that we use Aerogel particulates and we embed them into materials and it improves the thermal performance of the product. Or our PrimaLoft biotechnology where we take biodegrading additives and embed them into materials so that now polyester can biodegrade and landfill can -- and seawater and in wastewater. Nobody's done that before. Relentlessly Responsible is, and you saw this in the lead-in video, is our sustainable platform. It's how we think about how we make products. So this involves products and technology, and we build those products and technology, but we build them on a sustainable chassis. So think of it as an automotive assembly line where we take our technologies and our materials, but we use a sustainable chassis to build out these products. And this involves not only what we make, the actual product we make, but it also involves how we make it. An example of what we make would be the PrimaLoft Bio material that biodegrades. That's what we make. How we make it is an example of that is our P.U.R.E. technology platform, where we've been able to modify our materials, change the way we make products and reduce our carbon emissions by 70%. So it's not just what we make it, it's also how you make it. and that's been gaining a lot of traction in our market as well. We have -- we've been in business for 40 years. So we've been around a while. And we have a long history of being first to market with new technology. That's the chosen path we've taken. There's nothing wrong with fast to follow, but that's never been what we were about. We're always trying to be the first to market. It started going all the way back 1983 when the Department of Defense, through the Special Operation Forces, approached the company with the project of eliminating down from their cold weather fighting uniforms. Up until that point, the military was using duck down and goose down in their cold weather fighting uniforms. And it's a wonderful material. It has very high warmth, very lightweight, compressible, so you can pack it away. The problem with it is when it gets wet, as you all know, down collapses and it loses its thermal performance. And so our project was to create a product that had the loft and the warmth and the weight and the compressibility of down, but maintain warmth when wet. And in 1983, the company patented the PrimaLoft fiber with first of its kind. The typical fiber size that we use, to give you a reference, if you took a human hair and you splice that 7x, one of those strands is about the size of our average fiber. Or another way to look at it is it's half the diameter of cashmere. So as you pull that one fiber out of your cashmere sweater, our material's half the size of that. So it was never done before. So we're first in market there. We still do a tremendous amount of U.S. military business, Special Operation Forces, to this day. Soon after, L.L.Bean got note of this new technology and in 1990 launched the mountain [ lined ] parka. That was our first product that went into retail. And they used that in expedition over to Everest. Right at the end of the cold war, they had a peace climb. Some people might actually remember that. There was a peace climb to Mount Everest. L.L.Bean was the sponsor of that climb and all the climbers had PrimaLoft on their backs. That's about the same year Ralph Lauren Polo found our products and Ralph liked the thin silhouette, warm, thin and great drape. Both, L.L.Bean and Polo, are our customers today, one of our top customers today. So really a 40-year history with those 2 companies. I won't look at -- I won't pick out every single bullet here on this slide. But in 1997, we came out with the first recycled content product using footwear. Nobody wanted it, nobody asked for it, but we had the ability to use recycled materials and be able to make super-fine fibers out of this second-grade plastic and we've been able to produce insulations used in footwear because we could do it and we knew it was the right thing to do. And from there, the sustainable trends came many years later, but we were the first in market for that. More recently, we launched our PrimaLoft Bio in insulation in 2018, first ever. 2019, we moved that to fabric. So now we make a PrimaLoft biodegradable fabric, first of its kind at that point. And then just recently, in 2020, we partnered with Patagonia, and we launched our PrimaLoft P.U.R.E. and P.U.R.E. stands for Produced Using Reduced Emissions. And again, that's how we make the product. We can reduce the carbon footprint of our products up to 70%. We started with Patagonia, an iconic sustainable brand, gave them 1-year exclusive, and now it's through the industry and growing quite rapidly. And then lastly, I'll just tell you that over the last 10 years since 2012 and the leverage buyout, we've accelerated new product launches tremendously. We do business with over 950 brands around the world, global brands. These are the most iconic brands in the world. No one customer is more than 6% of our revenue. And that creates a very long revenue tail. That also creates stability in terms of your revenue line. We have a diverse list of customers, globally and by segment. So we do business with Patagonia, which is a technical apparel brand, all the way to street -- like more of a street brand like Vans or a lifestyle brand like Land's End to a high fashion brand like Moncler, a ski brand like Spyder or a hiking brand, climbing brand like Black Diamond. We have large retail customers like adidas and Nike and we have the small regional player like a Schoffel in Germany. So we play in a lot of places and that, again, provide stability to our business. These leading brands prominently support and display our brand on garment, at retail, online and they have since the first beginning. And they do that because we stand for performance and sustainability. We stand for best of the best. And that allows them to charge a price premium, to encourage high velocity of sell-through and also attract new consumers to their brand. When they see the red logo, they know that means quality and they get attracted to that brand. Typically, our tags that we use on the garment are permanently placed on that garment. So we have over 200 million tags were placed in garments over the last several years. Now the upper section, the blue jacket, that's an Maloja jacket and that's typically a small sewn-in label on the inside of their jacket. We also have brands that put us on the outside of the jacket, and it's happening more. An example of that is Nike. Nike has a 6-inch embroidered PrimaLoft logo on the sleeves of those jackets that are out there. Stone Island is a high-fashion technical brand who prints on every jacket exactly the contents and why they use PrimaLoft. Lululemon is in the bottom, that's a hang tag. Lululemon has created their own hang tag. And on that hang tag, Lululemon is not mentioned, just PrimaLoft, and they talk about our genesis in military. And so one must ask, why would someone like Nike, who protects their brand as much as they do, want and encourage and come to us and ask if they could put our 6-inch embroidered logo on the outside of the jacket? It's because we're delivering value to them, we are attracting new consumers and we're raising their position in terms of performance. Those are the reasons why that happens. We historically have been, and we have a core competency in what I call B2B marketing. That's historically what we've done. We've associated ourselves with some of these large brands and we've rode their coattails very effectively. So we'll go with the North Face and PrimaLoft with North Face or PrimaLoft with Patagonia. And it's a partnership marketing arrangement that's been very successful. In 2022, we decided, we're going to pivot a bit. We're going to continue making those investments on B2B. But we believe that we have the size and the scale to start moving direct-to-consumers. And so we started this program where we're starting to talk to consumers about PrimaLoft agnostic from the brand. We want to tell our story, we want them to understand who we are and what we stand for and create demand -- consumer demand. So they'll walk into the store and say, do you have a PrimaLoft jacket? Similar to what they do now with GORE-TEX, is that a GORE-TEX jacket? That's the direction in which we're moving. We've been very pleased with the results. To give you an example, just looking at this slide, we've got a lot of acknowledgment and validation that our technology is relevant from companies like Fast Company, where we were chosen as the Brands That Matter 2022. Or I'm particularly pleased and happy about Popular Science. 2020, we entered in a competition with Popular Science and we won the grand winning position for our PrimaLoft P.U.R.E., which is our reduced emissions technology. And we won first place against Abbott Laboratories, Navidea, Google. Some of these most iconic innovative, consumer brands and PrimaLoft won best-in-class for that, for our PrimaLoft P.U.R.E. So that gives me particular pleasure in knowing that. So that's kind of who we are, the markets we play in, the focus on innovation, performance and sustainability and balance. But let me talk a little bit about the financial side. And I think the best way for me to really talk about shifting from product in markets to finance is to tell you why I decided to change my career at the age of 48 and lead a management buyout. And that was because I was familiar with the company. It was part of the parent company that I was involved with. I love the fact that it was an advanced material technology company and a recognized brand. You don't find people, companies that have a prominent position in both. I thought that was very unique. We had a history of growth going all the way back to the beginning. We have a compelling business model: high gross margin, asset-light meaning we have 16-factory partners that make products for us. We cluster those around where the garment is being manufactured, so we have efficiencies. That in itself drops my fixed cost basis. So I have a low fixed cost. I have low CapEx requirements as a result of that. And what's very unique about our business is we have negative working capital. And you can say -- you scratch your head and say, how do you get negative working capital? Well, for the last 30 years when we're doing business with these third-party manufacturers, we require prepayment. So we get the money coming in, hits -- wires in and then we ship the goods and we have terms off the back end. So we have a really nice float, and we can generate negative working capital. And the most important thing that I -- that allowed me to make the decision and sleep well at night was our free cash flow conversion was extraordinarily high. And I like companies that generate lots of cash. And so I made a business decision. Now I knew that the success of this company going forward was we need to introduce new product technology, we need to grow our revenue and I need to be a good steward of the business model that I so admire. And so if you look at what we've done with that, I think we've been successful. We've expanded the gross margin profile of our business through new product introduction priced at a premium. We've managed our cost very well. And because we have an asset-light model, we're able to have a flexible supply chain and that helps us with redundancy and it also helps us with, at times, price arbitrage opportunities. And we've been able to expand the margins very, very nicely. We've balanced our growth with investment appropriately. So if you look at our EBITDA return, it's over 40%. We've made very nice progress there relative to our sales increase. And then our free cash flow, that blip you see that went down, that's 2020, that's an anomaly. But we've been able to maintain very high free cash flow. And so we've been able to live up to that, those standards. Maybe shifting more on a forward-looking posture in terms of opportunities. We compete in a very large insulation market, and we define that as apparel, accessories and bedding. We do not look at synthetic versus down. We look at both together because we have products that compete, can compete head-to-head with both. And we've been winning share of market against both. So tremendously large addressable market. We're gaining share. Over the last several years, we've gained share almost 3x that of the industry average. We've gained it against down. We've gained it against synthetics. So we continue to eat away at share based upon our focus on innovation, performance and sustainability. And we've recently deployed our technologies into adjacent space. And one might ask, well, why would you move your technology into adjacent space? And it's for this reason: the purpose of our company is to unleash the full potential of people, products and the planet. We sit on technologies, let's say, like our biodegradation technology. We're sitting on this. We're using it for apparel. Why are we not utilizing it in other places? So we elected to start -- the tip of the spear is in the nonwoven hygiene market that is clamoring for this type of technology. We just launched into this. We're making tremendous progress, but we believe that using this technology as a licensing opportunity to create revenue flow is in the best interest of the company. And again, it's very early in the process, but we're making some very strong progress there. I'll go back. There's one other point I wanted to make is consumer tailwinds. We're seeing more emphasis on health and wellness across the board. Health and wellness for our apparel customers is getting outdoors, enjoying nature, lowering your stress level by being in nature. It's really moving in that direction. In the bedding business, wellness is about quality of sleep. We're seeing an increasing expansion of that focus. Secondly, there is an increased participation in the outdoors. If there is a silver lining coming out of 2020, 2021 is that people got outdoors. And most recreation, by the way, happens within 10 miles of one's home. And so you need goods, you need products and you need technology and equipment to go and do that. And so we're seeing a larger commitment to the outdoors and this is the next generation and many believe that this is the new norm, and that's good for our industry. And lastly, there's an increase in intensity to move towards sustainable solutions. Consumers want sustainable solutions. They want performance. They want quality performance, styling. And the next generation is looking for sustainable products, and they're willing to pay more for that. So these are compelling tailwinds that bodes very well for our company. With these favorable tailwinds plus our leadership position in both product and brand, the considerable white space that we have in our addressable market, we have white space within current customers. We have white space with new customers that are coming on board every day. And we have tremendous opportunities in this adjacent space that is yet to be tapped in and around nonwovens and hygiene. So I believe that PrimaLoft is positioned to continue its exceptional growth for some time in the future because the markets are aligning with our purpose of people, product and the planet. Now the key to success going forward is the continued focus on innovation. That's what got us where we are today. That's what's where -- that's going to get us to where we need to be. And again, it's through the advanced material technology component creating innovative, distinct products that lays on top of a sustainable chassis is what's going to get us going in the future. Expand our direct-to-consumer marketing that we've just started, expand that, increase it, start creating the stories for the consumers so that we create demand and they come in and they ask for our product outright. And then lastly, continue leveraging the asset-light model and the free cash flow profile that we've enjoyed over the years, continue to manage that as we grow the top line. I'm going to end with a little bit of a brand video. And then after that, I can open it up for questions. Okay? [Presentation]

Thank you. Thank you for your time, and I believe we might have maybe 10 or 15 minutes for Q&A.

If [ Ka ] is here or [ Kara ] might have the microphone. Great. Right here, this gentleman here.

Could you talk a little bit about the white space with current customers and new customers in terms of when you have a customer, how often are you 100% of their needs versus 10% of their needs? And then when you have over 950 customers, how many are out there that you don't have?

Yes. We have several customers, we have over 90% of their business, for sure. But generally, there is white space in their pyramid of product. So I'll give you an example. Patagonia has everything from the highest end product line all the way down to children's wear. Our products are premium priced. So we may not be as exposed to their children's wear, where you get one year out of the garment, and then it goes -- and then the child grows out of it. But where we have dominance in that best -- their best of the best and the good. Good, better, best, that's where we play. So there is space. As you drop down, you get more price sensitivity, right? But there is space within each of those brands. There are brands like Helly Hansen, we have virtually everything. Lululemon, we have all of their insulated -- synthetic insulated business. We're working on the down version of it now, but -- there's space within there. There are some brands that we don't have business or a large amount of business, Colombia could be one. We have business there, but it's only in our gold series, our best of the best. We're not necessarily penetrated down through, a little different business model on their part. They tend to innovate within their company, then do it, but most others don't.

Matt Koranda with ROTH Capital, by the way. So I noticed in the long-term share chart that you put out that if I do the calculation, you guys have like less than 3% market share in the category. Just curious if you could maybe spitball for us how much share could you potentially gain over the next several years if we look at that 2025 number? What percentage penetration would you be happy with over the next several years as we think about your opportunity to sort of penetrate the overall market, which is -- which looks relatively large? And then just one other part of this is, if you look at the long-term chart of revenue growth, there are -- it's not a straight line to the top. There are some stair steps and some down years. What's the commonality between the down years or the flat years for you? Is it just like an inventory destocking issue? What's the -- how should we think about that?

Yes. So we try to focus on those things that are in our control, right? So we really can't control inventory, brands' inventory. There could be a myriad of reasons why one's inventory is high or low. It could be -- a brand, could be a regional brand in Germany and there's no snow in the Alps, inventory issues. It could be a ski brand during COVID when they shut down the ski resorts. We really don't focus on their inventory. What we try to focus in on are we winning and are we retaining programs? I'll give you an example. The Patagonia Nano Puff. We could have an up year or a down year and that depends upon how they -- what their production planning schedule is, what color choices, it could be a color they didn't sell. And there's ebbs and flows there. The key for our success is do not lose a SKU, do not lose a program because that inventory will usually flush through and come back the next year. So that's how we think about it. So those little ebbs and flows you see, those are probably inventory-related issues because we really don't -- we haven't really lost too many programs. We usually gain and keep those programs. On the share market, if you look at our share of market, really hard to get your arms around that, especially when you're trying to figure out volumes in Asia and volumes in Europe, easier in North America because you usually have retail receipts that you can use. We have a pretty dominant share on the best -- the better and the best categories across apparel and even bedding, so Serena & Lily and Boll & Branch and those types. But as you start dropping into the pyramid of mass market, right, where the volume is, our share is weaker. So what our strategy is, is how do we move into some of the larger space below us without going too far. You'll never find us in big box. We're not going to be at Walmart. Nothing's wrong with Walmart, but we elect not to play there because we believe if we're in Walmart, then I'm going to lose Moncler on the top, okay? You might find us in Costco, but we won't be in the Kirkland brand, we'll be in Eddie Bauer or we'll be in another well-positioned brand as -- but not in the Kirkland brand. So we're very particular in how we want to kind of work that whole market, the pyramid.

This is [ Mark ] from William Blair. So just kind of a question on the whole competitive landscape. So I guess, how would you segment it out? And who are you competing with, right? Or where are you competing right now? And as you expand that out, what are you going to be competing with? And then just a tack-on question to that with the Nike ACG jacket, we saw that when PrimaLoft was acquired by CODI. How does that progress further into other brands because we see all the stuff on the outside with the product experiences. Just curious about that.

So the first question was on the competitive landscape. We are competing against generally generic synthetics, okay? So that's the plant down the street somewhere in China that's making products for the automobile industry or some more industrial applications and they have extra capacity and they make that available. So it's really the kind of the plant down the street kind of thing. And we've been winning on that front because they don't have the sustainability profile that we have and they're not addressing the needs of the consumer, and they're not innovating. So -- but they are being used in some of that lower-end market. On the down side, it's just generic down, right? It's -- and the down is a byproduct of the meat consumption industry, right? So it's the leftovers from the meat consumption industry. So you have tremendous price volatility there, and we've been winning against that. A good example is that Nike ACG Lunar jacket is we're replacing down with our product. And our product is starting to look like down. It feels like down. It's warm like down. So now you have something that's readily available. 70% of the down in the world is produced in China. You don't have any geopolitical risk when you can use our products. So we really think the biggest competitor is the unbranded. Within the branded world, I would probably argue it would be Thinsulate. They're probably the biggest branded player. But again, they play in a slightly different place in the pyramid. They're playing below our position in the pyramid. We do bump into them on occasion, but nothing that keeps me up at night. Your other question was the external branding and what influenced -- what's interesting is the Nike adoption of Thermoplume and their decision to put us on the outside. Started with them looking into the fashion industry and seeing what we're doing at Ralph Lauren Polo. And they saw what they were doing at Ralph Lauren Polo, and they called us and had us come in and start to talk to them about replacing down. And that's how we get into the -- we've always had Nike business, but not to this scale. And we're not -- and we haven't been able to get into the down side. So now we're into the down side. So that allows this external labeling. And we use that as leverage to go to the other brands and say, external brands. So tag's on the outside, thermal embossing. Thermal embossing on the inside. So that's why you see a Black Diamond with the -- all the information on the inside of the jacket. We love to have things on the outside. This is about location, location, location, right? I first want it on the outside. If I can't get it on the outside, I want it in the back of the collar. If I can't get the back of the collar, I want it in the inside label. It's location, location, location because this lives with the garment for the useful life of a garment. So every time a consumer puts on, they see our logo and it reminds them of why they purchased it. So the Nike being on the outside, I think, is a big plus for us as we move forward.

We have time for one more question. Two more.

On the sustainability front, you said 70% reduced carbon emissions. Is that a byproduct of the materials being recycled? Or is that a byproduct of the manufacturing process? I mean you have 16 different manufacturers, where are they located? How are you able to control their source of energy? And by the way, to that effect, also, how do raw material prices fluctuations impact you guys?

Okay. I'll start with raw material. We have not had a big impact on our raw materials for the reason that -- there's a couple of reasons. That virgin materials, fibers don't necessarily follow the oil price because it's a byproduct of oil. It's those by-components, the benzene, caprolactam paraxylenes, these derivatives are the things that really drive cost. It's not so much the cost of the oil. But the big impact for us is over 80% of everything we make has recycled fiber in it. And the recycled fiber skips the oil side. It's already made. So we're taking plastic bottles. We bring them in, we grind them down, we melt them down and we extrude them into a secondary product. And so our recycled prices have been extraordinarily stable over the last 10 years. So that's a good thing. On the P.U.R.E. manufacturing, we have about -- we have a cluster of -- we -- our model is the Coca-Cola model, which is wherever there's a Coca-Cola plant, there's usually a bottling plant close by. So our product is 95% air. So we can't afford to ship air all around the world. So we tend to cluster where those manufacturers are. So that's right now, it's China, Vietnam, increasingly in Bangladesh. We have resources in Korea, resources in the U.S. for our military business that needs to be very compliant. And now we have a growing need in Europe where Europe is really starting to repatriate some of their manufacturing. And so that's kind of how we think about our footprint. The technology, it's a combination of the recycled materials that we use, how we modify those materials so that we can utilize more energy-efficient equipment. And then we use alternative energy sources to power that equipment. So it's a multi-phased approach to it. It's just not product, it's not the material. It's a combination of the materials, modifying the recipes of our products and then using alternative energy sources to be able to process it. And as a result -- and we have the independent studies of the consumption. And we're up to -- 1 product is up to 70% reduction. We guarantee 50%, 50% to 70%. And we have that all documented independently.

Yes. You mentioned GORE-TEX a couple of times, I think, in your presentation. And I think everyone is very familiar with GORE-TEX. It's almost like the Kleenex model, right? GORE-TEX essentially means waterproof. Like how big is GORE-TEX? And is that kind of the model you envision following?

I think directionally, that's the model I want to move towards. They've done a -- historically, have done a great job branding themselves into the minds of the consumer. When I entered into this industry, I mean, GORE-TEX was guaranteed to keep you dry, pretty simple, straightforward. And they've done a good job with that. So yes, directionally, that's really where we think that we should be going. Interestingly enough, they really -- they've abandoned some of that consumer. If you think about -- when was the last time you saw a GORE-TEX ad? It's been decades, right? But they've done such a good job early on, that just lingers through. So we think that shifting from -- we're going to continue to B2B because that's important. But we want to increase our investment in direct-to-consumer. So we can start talking about our story, about innovation, sustainability and balance. And with those tailwinds, the consumer tailwinds that I talk about, I think we're in a perfect time to be doing that. So we have consumers coming in on occasion and asking for a PrimaLoft jacket. I mean L.L.Bean's jacket they have out there is called the PrimaLoft Packaway. I mean, they literally use our name. So we're making progress, but it's going to take patient investment and some time to start getting that message across. Right. Thank you.

Sorry for the technical difficulties here. Cody, can you get us back to the first page? Well, while we're waiting, I'll say thank you, Mike. It's really refreshing when you have a company who can do what's right and also make a lot of money doing it. And one of the reasons that we loved PrimaLoft when we saw this opportunity is because it aligns so closely with our values. And I think you guys all know, it's sort of been our kind of viewpoint that we can do what's right by our people and our planet. And we can also make a lot of money while we're doing it. And so when we acquired PrimaLoft, it really is aligned with the value set that we have at Compass. And thank you, Mike, for everything that you do and reducing our carbon footprint and for the environment and creating great products at the same time. So I'm Elias Sabo, I'm CEO of Compass. With me today is Ryan Faulkingham, our CFO; Pat Maciariello, Chief Operating Officer; and then a couple of new people that I'll introduce, Kurt Roth, who joined us in November as Head of Healthcare. A quick background on Kurt. Kurt was an investment banker with Robert W. Baird. For many years, we worked with him actually on the Fox Factory IPO. They were the lead bank on that, and we became very close with Kurt during that process. He then went to Sotera Health and led their strategic department and consummated a number of acquisitions. So the intersection of familiarity with Kurt, transaction experience and operating experience made him an ideal candidate to be the person to run our Healthcare group. Sitting to the right of Kurt and left on from you guys is Zoe Koskinas. Zoe joined us about a year ago. She moved from Australia in order to run our ESG program. Zoe previously worked for a U.K.-based company called Lendlease in their ESG effort and corporate sustainability missions, and she'll talk about all the exciting things that we're doing in ESG in her section. So a couple of things just real quickly on who we are. As you know, we came public in 2006. And our mission was to acquire middle-market companies typically reserved for private equity investment using permanent capital with public shareholders. Over that 16-year period, you can see we've consummated over $7 billion of transactions. Today, we have 11 businesses, 7 within the consumer space, 4 in the industrial space. And we generate just under $0.5 billion of EBITDA. So real quickly on our history. Became public in 2006. At the time, we were very unique in terms of what our strategy was in terms of the way that we organize ourselves and provide financing to the company. That created a lot of confusion in the financial markets. And as a result, the cost of capital that we had was extraordinarily high. So it shaped the way that we could approach the acquisition market, and we generally bought companies that were good, stable businesses but lacked a growth profile to them. Shifting to 2014. This was the first time that we were able to bring a more recognized national syndicate of banks and lower our cost of capital, bring term loans to our capitalization. In 2018, I became CEO of the business, and you've heard us say this over and over, our guiding light is to reduce our cost of capital. It is a competitive advantage that allows us to execute our strategy of buying great businesses with great growth profiles, but our capital cost had to align to enable that. It was the first time in 2018 that we entered into the unsecured bond market. We issued a $400 million bond, 8-year, 8% bond. And as we go forward, you'll see how we've gained a lot of trust and confidence in that market. In 2019, just real quickly, we were 10th year of an economic cycle. We felt the opportunities were to divest some businesses. And strategically, we were trying to increase what our core growth rate is. We sold 2 of our companies for just under $1 billion. You see the multiple was extraordinary at about 19x EBITDA. And despite the fact that we had record amounts of liquidity and new capital in our capitalization, we consummated no new acquisitions because the market really favored divestitures over acquisitions at that time. That ended up serving us really well in 2020 as we were able to acquire both Marucci Sports and BOA Technologies, and you can see the first year multiple that we paid for those businesses relative to where we divested the 2 companies prior to that. There is a huge multiple arbitrage that we were able to achieve. But these were companies that we could acquire because of our financing that was secured when the market was so dislocated at the time of the pandemic and our competitors were largely out of the business. I've harped on this a lot, but I'll point out this out again, especially given coming into '23 with a really clouded outlook. During the pandemic, the breadth of diversity in our firm allowed us to achieve positive organic growth of 1%. Now granted, that's not great growth, but it's also not negative. And juxtaposed against the background of a pandemic that was raging globally, we're really proud of the ability of our company to sustain growth even in the most difficult of economic times. We continued to execute on the strategy in '21. We bought Lugano Diamonds. This has massively exceeded our expectations. Generally, you can't buy companies for 4.5x first year EBITDA that are growing north of 50%, but this company continues to perform at that level. And we divested Liberty Safe. And Liberty had an amazing run during the pandemic, more than doubling EBITDA, and we felt that was a great time to be able to capitalize that earnings stream for our shareholders and reinvest that into faster-growing assets. And as we come into '22, we acquired PrimaLoft, as you know. Stepping back for 1 second, in '21, the success and the strength of our business allowed us to go back into the unsecured bond market, refinance the bonds that we had issued 3 years earlier and the savings were really remarkable. We did a $1 billion bond tranche at 5 1/4%, 8-year tenure, remember that's down from 8%, 8-year tenure. And then we followed that up later in the year and did a $300 million tranche, which was a long-dated tenure. It doesn't mature until after 2030, and that was at 5%. So the important thing there is we opened up all of our secured capacity on the debt side, and that's what enabled us to buy PrimaLoft. And today, in an era where markets are so dislocated, cost of financing is so high, if we had to enter the bond market in order to finance it, it probably would have been a high single-digit to double-digit rate that we would have paid. But instead, having all that secured capacity open allowed us now to pay in that sort of 6%, 7% context on a floating rate. And I think we all hope that comes down as the Fed stops raising rates here or hopefully will stop. So what has this done for our business? You can see here just a couple of highlights that I'll point out. We are growing at a very high rate in '22. This is year-to-date September. We generated 16.5% top line growth, 17% adjusted EBITDA growth. The important thing there is you all realize that we're dealing with unprecedented levels of inflation, supply chain problems have been acute. To be able to expand margins in a time where you're dealing with that is nothing short of remarkable, and it's a testament to the companies that we own and the quality of the management teams that we have in each of those businesses. Mike touched on this, about free cash flow. We love free cash flow. It allows us the liquidity to have a lot of options either to redeploy back in new M&A, to do a buyback like we announced today, to pay down debt. We convert an incredible amount of our adjusted EBITDA into free cash flow. And on a 20% EBITDA margin, 18% is our operating cash flow margin, which we think is just exceptional, having that amount of -- or that little amount of leakage. So I want to take a couple of minutes, and as we talk about, going forward and achieving our plans, what are the assets that are really driving the business and the transformation and increase in core growth rate? So I'll start quickly with BOA, which we acquired in 2020. It's a company that has disruptive technology, significant IP, very low market share, has been growing historically 30%. And because of its market share -- and all of these companies have one thing in common, they address huge markets and they all have relatively low market share with either disruptive products or disruptive service models. And in the case of BOA and PrimaLoft, significant IP that protects that. Lugano is growing greater than 50%. Mike just talked about PrimaLoft, and it's a high IP, disruptive business, rooted in sustainability, growing north of 20%. And as you know, with 5.11, this has been a business we've held since 2016 and has grown double digits over our ownership period. So consolidated, what does this mean? This is 52% of our EBITDA where we have low market share, disruptive products or services in the market and these companies are collectively growing at strong double-digit rates and have a long-term expectation of being able to continue that growth. That's what gives us confidence that our core growth rate has been leveraged up as much as it has. So where are we going in '23 and beyond? We have stated numerous times, our goal is to get to $1 billion of EBITDA. When we said that, we said we had a 7-year plan to do it. So we're creeping up every year, gets 1 year shorter. By '28, how do we get to $1 billion? So we anticipate that we will have a core growth rate of 8% to 10%. You see the numbers that we've been able to produce over the last 3 years. Now if you take that and you run that on a similar core growth rate with where EBITDA is, that produces over $700 million of EBITDA by '28. It creates a gap of about $300 million, just less than $300 million. And that gap is roughly $50 million of EBITDA per year. That is well within the ability of the company to achieve and that was even before we added a health care vertical, which should significantly open up the aperture for the number of acquisition targets that we have. So what does the future state look like? We think we're -- diversification continues to be a big item for us. It's in our company name. We think we will have over 15 companies by the time we get there. Average sized company will be greater than $50 million. And there are some benefits that this creates for shareholders. Ryan is going to talk about the increasing level of free cash flow and cash retention, we expect that number only to grow as we execute against this. We expect the rating agencies to continue to view favorably the execution against this strategy. And we have said numerous times, our goal is to become an investment-grade rated company. That has more impact than just narrowly increasing earnings in the short term. It gives us such a competitive advantage for these type of assets, which typically are bought by small middle market private equity firms. We don't compete with the Blackstones and the KKRs of the world that have access to much cheaper financing. We're competing these assets against smaller PE firms that as we lower our cost of capital, it creates an economic moat around our business and it allows us to buy the best businesses that are trading in the marketplace that year. So I want to take a second to touch on what our financial targets are, and this is the first time we've shown something like this. As you know, we've done a number of, what I'll call, restructuring. I think that word gets the bad kind of -- it's a bad word in some cases. But we've restructured our organization and our structure in order to become a C-corporation for tax purposes. At the end of '21, we then came out with an adjusted earnings. The problem is for all of you, you haven't seen that and you haven't seen how adjusted earnings grow, you only see what the organic growth of the EBITDA has. So when we look at this, and a caveat here, in '22, this is our midpoint of guidance for -- that we issued at the end of Q3. Right now, you could look at this and say, is this guidance for '23 and that you're creating essentially flat guidance? The answer is it's not official guidance, but we're probably not going to put something up here that we would likely change in 3 weeks when we do come out with our official guidance. It is very cloudy out there. All of the increases in monetary policy and rate have yet to be seen. We don't know how that's going to impact, what the economy is globally. I would further say we are seeing active inventory destocking that's happening right now, and that's going to put a near-term headwind on earnings and on our consumer companies as inventory comes out of the system. Ryan is going to highlight a little bit the inventory that we expect to monetize. So we're doing the same thing to our vendors that vendor -- customers are doing to us right now. It creates a very short-term headwind, but that's not something that we think is going to persist long term. And in fact, if anything, after we get by this, we would likely expect our long term -- or our growth rate coming out probably to have tailwinds rather than the headwinds that it has right now. So assuming even if we had a '23 flat, which is sort of the best indication that we have right now with the viewpoint starting in January, we expect 8% to 10% adjusted EBITDA growth that produces $715 million of EBITDA, but that gets leveraged up by 50% to 12% to 15% adjusted earnings growth. And the reason for that is our management fees and corporate overhead are mostly fixed as are our financing costs. And Ryan will walk through again how much of our financing costs are fixed, but it is the overwhelming majority of it. And that produces, you can see the kind of numbers of north of $250 million of adjusted earnings out into '23. What was not included in any of those slides was a recent announcement that we had of a divestiture of Advanced Circuits. This was our longest held asset. I think it really signifies our model quite well. We bought this business in 2005, predated the IPO. It was one of the 4 companies that was part of the IPO in 2006, and this was a phenomenal business for us. It was diversified in its customer base. It produced incredible free cash flow. Similar to Mike's business, had negative working capital for much of its period, very low CapEx. But the company didn't have a great growth profile. And so this was a business that about a year ago we entered into a sale transaction with a SPAC. That SPAC ended up not being able to get financing to close the transaction, and we were able to pivot quickly and sell to a strategic that's owned by a private equity firm. The result for shareholders will be exceptional. It's a $220 million all-cash divestiture, which produces about $100 million to $110 million pretax gain. If you think about that, that means we doubled the enterprise value of the company. And along the way, we clipped a cash flow yield that was north of 20% a year. So this will absolutely be a great investment for us but yet was not consistent with our strategic outlook to have a slightly faster growth profile with our company. So we've already talked about how do we drive value. We think that we are a low double-digit EPS grower consistently based on the long-term growth rate that we have, core growth rate in the company. On top of that, we pay a 5% yield. So being able to achieve double-digit growth is not by reinvesting all of our capital, we give some of that capital back through a $1 per share dividend on an annual basis. But we think there's opportunities to improve upon that. And that's what our model is set up to do. So how do we do it? Well, M&A transactions. We can buy companies, sell companies. We just do -- and since 2018, we've acquired 4 businesses. We now will have divested 4 when Advanced circuits closes. These numbers do not reflect Advanced Circuits, but we have averaged a multiple of about 16x on the companies that we've sold, and we've acquired companies at half the multiple going forward. That's a huge arbitrage that allows our earnings growth to accelerate in a stair-step manner when we're able to achieve that. Now one of the things we hear from shareholders all the time, when you sell a business, your earnings are going to go down. And you're right, temporarily, they will. We probably can't achieve a high enough multiple even in the rate environment that we're in today that's higher to be able to pay down debt and get our earnings to grow in that period. But I want to be very clear here, this is a temporary blip in earnings. And our history has shown that we can take that capital, we can redeploy it at a much more accretive rate for our shareholders. And so temporary reduction in earnings power is followed by a big step-up in our earnings power when we redeploy that capital. We will continue to focus on lowering our cost of capital. And as I said earlier, it's not just to get a current earnings increase in the year that we do it, but it's about creating the sustainable competitive advantage that allows us to continue to buy A+ businesses and really the best businesses that are trading in the sectors that we operate in, in any given year. And I think we've proven that over the last couple of years, a BOA, for example, a PrimaLoft. These are clearly the best-in-class companies that are coming out in their respective years. And then finally, I'll hit on the buyback that we announced today. We have gone to great lengths to explain that our goal is to get to $1 billion of EBITDA and that is going to take capital in order for us to achieve that. And so you would look at this and say, well, it seems inconsistent that you're actually going to return capital through a share buyback if your goal was to get to $1 billion of EBITDA and you need capital to do that. It's 100% true. However, when I look today and our team assembles and said, can we find M&A opportunities that are better than what we can redeploy for our shareholders by buying our shares back? The answer is no. And so our stock came down by 40% in 2022. And yet, we produced record earnings in '22. We had 17% growth. We beat and raised in every single quarter, and our stock due to macro-led turbulent fell dramatically. I think in order to create the most value for our shareholders, we may temporarily need to deviate from the long-term strategic plan and repurchase shares because it's such a great opportunity on all your behalf to accrete value. And we run this business with a long-term view. And if we have to make short-term sacrifices in the near term that create the most value for shareholders, we're committed to doing that. I'll now hand it over to Pat, who will walk through the state of the M&A market.