CODI earnings analysis
What we found in CODI's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
CODI delivered a materially improved second quarter on profitability and cash generation, with gross margin rising to 47.2%, operating income reaching $29.0M, and diluted EPS turning positive at $0.86. However, revenue declined 11.4% year over year due to the Sterno divestiture, Lugano deconsolidation and weakness at Altor and Rimports, while the $182.3M Sterno gain and $58.0M Lugano fair-value charge materially affected reported earnings. Debt reduction and improved liquidity are positives, but unresolved material weaknesses, ongoing Lugano litigation and recovery uncertainty, and the need to continue deleveraging support a neutral assessment.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Gross margin expanded despite lower revenue
- Second-quarter revenue was $424.0M, down 11.4% from $478.7M in the prior-year quarter and down from $427.0M in Q1 2026. Gross margin improved to 47.2% from 43.6% year over year and 44.4% in Q1 2026.
- Operating profitability and EPS rebounded
- Operating income was $29.0M, or a 6.8% margin, versus a $27.2M operating loss and a negative 5.7% margin in Q2 2025; this also improved from a negative 0.5% margin in Q1 2026. Diluted EPS was $0.86 versus negative $0.88 in Q2 2025 and negative $0.62 in Q1 2026.
- Consumer growth led by BOA and Honey Pot
- Growth was strongest at BOA, with revenue up 22.1% to $59.1M and operating income up 42.8% to $20.1M; The Honey Pot revenue rose 17.0% to $38.4M and operating income rose 71.6% to $6.4M.
- Arnold showed meaningful operating recovery
- Arnold revenue increased 12.5% to $43.2M and operating income rose to $3.6M from $0.2M. Management attributed demand growth to non-China-sourced permanent magnets and noted that six-month operating income improved by $6.6M to $5.9M.
- Cash generation improved and capex fell
- Operating cash flow was $53.6M for the first six months versus cash used of $64.5M in the prior-year period. Capital expenditures were $11.3M versus $24.0M, implying approximately $42.3M of six-month cash generation after capex, although the filing does not label this measure free cash flow.
- Asset sale accelerated deleveraging
- The Sterno food-service sale generated approximately $282M of proceeds and a $182.3M gain; the proceeds were used to repay senior secured debt. Total debt declined to $1.582B from $1.877B at December 31, 2025.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Material weaknesses remain unresolved
- Management concluded disclosure controls were ineffective because material weaknesses in internal control over financial reporting had not been fully remediated as of June 30, 2026. The company also incurred $29.3M of corporate expense in the first six months, including costs related to the Lugano investigation, litigation, governance and remediation.
- Lugano recovery remains uncertain
- The estimated fair value of the Lugano receivable fell from $97.0M at December 31, 2025 to $39.0M at June 30, 2026, producing a $58.0M non-cash charge. Recovery depends on creditor approval, bankruptcy-court confirmation and effectiveness of the proposed liquidation plan.
- Altor faces volume and input-cost pressure
- Altor revenue fell 21.2% to $65.7M and operating margin declined to 1.6% from 8.7%, as lower volumes, fixed-cost deleveraging and raw-material inflation pressured results. Management reported a 21% increase in the index driving Altor's primary raw-material purchase price.
- Deleveraging and refinancing remain critical
- The company had $1.582B of total debt at June 30, 2026, including $252.3M of term loans and $1.338B of senior notes. Under the August 6 amendment, a $4.0M milestone fee is required if the term loans are not repaid by December 31, 2026.
- Portfolio divestiture masks Rimports weakness
- Rimports revenue declined 42.8% to $44.3M after the Sterno food-service sale; excluding Sterno, Rimports-only revenue was $30.9M, down 14.8% year over year due primarily to reduced private-label distribution.
- PrimaLoft remains impairment-sensitive
- PrimaLoft recorded a $20.5M goodwill impairment in the first quarter, and its six-month segment operating result was a $9.9M loss versus $9.0M of income in the prior-year period. The 2026 impairment test used a 13.4% discount rate versus 11.3% in 2025.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $0.86
- Gross margin
- 47.2%
- Operating margin
- 6.8%
- Segment
- 5.11: $126.5M revenue, down 3.8% year over year; $12.2M segment operating income, up 25.6%.
- Segment
- BOA: $59.1M revenue, up 22.1%; $20.1M segment operating income, up 42.8%.
- Segment
- PrimaLoft: $29.7M revenue, up 19.7%; $7.7M segment operating income, up 58.1%.
- Segment
- The Honey Pot Co.: $38.4M revenue, up 17.0%; $6.4M segment operating income, up 71.6%.
- Segment
- Velocity Outdoor: $17.1M revenue, up 12.5%; $0.9M segment operating loss versus a $0.9M loss in the prior-year quarter.
- Segment
- Altor Solutions: $65.7M revenue, down 21.2%; $1.0M operating income, down 85.9%.
- Segment
- Arnold: $43.2M revenue, up 12.5%; $3.6M segment operating income versus $0.2M in the prior-year quarter.
- Segment
- Rimports: $44.3M revenue, down 42.8%; $7.4M segment operating income, down 33.4%.
What they said about what is next.
No quantitative revenue or EPS guidance was provided. Management expects full-year 2026 capital expenditures of approximately $30M-$40M. Management also stated that reducing leverage is its top financial priority and expects the Ninth MSA to reduce total management fees in 2027, although no total fee estimate was provided.
The filing reads about the same as the one before it.
What came before.
- 10-Q · May 6, 2026
- Compass Diversified (CODI) reported disappointing Q1 2026 results, missing revenue expectations with $426.9 million while EPS losses deepened to -$0.62. The company highlighted the recent sale of its Sterno food service…
- 10-K · February 27, 2026
- Compass Diversified (CODI) 10-K centers on the Lugano Investigation, material restatements for 2022–2024, and Lugano’s Chapter 11 filing on November 16, 2025 which resulted in deconsolidation. Portfolio operations show…
- 10-Q · January 14, 2026
- Compass Diversified reported net revenues of $472.6M for the quarter ended September 30, 2025, up $16.0M versus the prior-year quarter, but posted an operating loss of $11.1M and a net loss attributable to Holdings of…
- 10-Q · December 29, 2025
- Compass Diversified reported quarter (three months ended June 30, 2025) net revenues of $478.69M, up from $426.71M a year earlier, but produced an operating loss of $27.238M and a net loss attributable to Holdings of…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
Read the next one first.
We read every filing CODI makes the day it lands, and put it next to what the options market did about it. Members get both, and an alert when a filing arrives.
Cancel anytime · Month to month · Switch tiers whenever