Good afternoon, and welcome to the Compass Diversified Second Quarter 2020 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 Mr. Matt Berkowitz of the IGB Group for introductions and the reading of the safe harbor statement. Please go ahead, sir.

Thank you, and welcome to Compass Diversified Holdings First Quarter 2020 Conference Call. Representing the company today are Elias Sabo, CODI's CEO; Ryan Faulkingham, CODI's CFO; and Pat Maciariello, COO of Compass Group management. Before we begin, I would like to point out that the Q2 2020 press release, including the financial tables and non-GAAP financial measure reconciliations are available at the Investor Relations section on the company's website at www.compassdiversified.com. The company also filed its Form 10-Q with the SEC today after the market closed, which includes reconciliations of non-GAAP financial measures discussed on this call. Please note that references to EBITDA in the following discussions refer to adjusted EBITDA, as reconciled to net income in the company's financial filings. Throughout this call, we will refer to Compass Diversified as CODI or the Company. Now allow me to read the following safe harbor statement. During this conference call, we may make certain forward-looking statements, including statements with regard to the future performance of CODI and its subsidiaries, words such as believes, expects, projects and future or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ on a material basis from those projected in these forward-looking statements. And some of these factors are enumerated in the risk factor discussion in the Form 10-K as filed with the Securities and Exchange Commission for the year ended June 30, 2020 as well as in other SEC filings. In particular, the domestic and global economic environment has currently impacted by the Covid-19 pandemic has a significant impact on our subsidiary companies. Except as required by law, CODI undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. At this time, I would like to turn the call over to Elias Sabo.

Good afternoon. Thank you all for your time and welcome to our second quarter earnings conference call. Before discussing our results, I would like to take a brief moment to acknowledge the continued impact of the COVID-19 pandemic. The last few months have been challenging in many ways for so many people. And we hope that you and your families are well and managing through this period of change. As we said on our last call, the safety and well-being of our employees remains our top priority. We are continuing to follow national, state and local guideline and implement industry-wide practices to protect our employees. We recognized that our teammate are one of our most valuable asset and we are committed to making sure they feel comfortable and supportive during this time. Despite the challenges we experienced during the last few months, I am pleased to report that our second quarter results substantially exceeded our expectations. Excluding Marucci, consolidated subsidiary adjusted EBITDA for the second quarter was $54 million, compared to $55.2 million in the second quarter of 2019. These results were significantly better than the guidance range of $28 million to $38 million provided during our first quarter earnings call. While the impact of the response to the pandemic has been widespread and continues to pose challenges for each of our subsidiary company. We've been impressed with the ongoing effort of our management team to position our company for long-term success. Together we reduce spending and monetize working capital throughout the quarter to maximize cash flow. Our strong results and continued distribution payments demonstrate the benefits of owning a family of diversified, uncorrelated subsidiary companies, the extent of which has never been so pronounced. While some of our subsidiaries have been acutely impacted by the pandemic, with market demand…

Thanks, Elias. Before I begin on our subsidiary results for the quarter, we guys as a whole exceeded our expectations. I want to touch generally on the effects of the pandemic throughout our companies. Broadly speaking, our niche industrial businesses sales and earnings were impacted more negatively than our branded consumer businesses as work stoppages or disruptions impacted several of the end markets our industrial businesses serve, among them aerospace, appliances and hospitality. However, our branded consumer business has been benefited significantly from increased consumer demand and outdoor categories, and as a result experienced strong sales and earnings growth. Now on to our subsidiary results for the quarter. I'll begin with our niche industrial businesses. For the second quarter of 2020. Revenues declined by 12.4% and EBITDA decreased by 19.1% over the comparable quarter in 2019. For the year to date period, revenues declined by 9.7% and EBITDA decreased by 14.8% over the comparable period in 2019. Advanced circuits continued at steady performance with EBITDA in the quarter growing slightly over prior year. The growth CapEx investment we made last year in a new facility in [Indiscernible] continues to pay dividends as this manufacturing facility is producing strong growth over prior year. Foam Fabricators EBITDA was down 20% in the second quarter and a 23% revenue decrease. Foam Fabricators margins benefited from lower input costs and other cost containment initiatives. During the quarter, many Foam Fabricators customers were forced to temporarily suspend production due to the COVID-19 pandemic, resulting in decreased demand. Revenue strengthened during the quarter however, and thus far in July, revenues are trending close to a year ago levels. Arnold Magnetic EBITDA declined by 18% in the second quarter from the year ago period. We believe the longer term prospects for Arnold remain strong as their product…

Thank you, Pat. Before I discuss our consolidated financial results for the second quarter of 2020, I want to highlight our second quarter distributions that were recently paid to shareholders. On July 23, 2020, we paid shareholders a cash distribution of $0.36 per common share, representing a current yield of approximately 8.9%. Including this distribution we have paid approximately $19.68 per share in cumulative distribution since CODI's 2006 IPO. This reflects 131% of the IPO price. Further, tomorrow, we will pay cash distributions of approximately $0.45 per share on our 7.25 Series A preferred shares, and approximately $0.49 per share on our 7.78 Series B and Series C preferred shares. All three preferred distributions cover the period from and including April 30, 2020, up to, but excluding July 30 2020. Moving to our consolidated financial results for the quarter ended June 30, 2020. I will limit my comments largely to the overall results for our company, since the individual subsidiary results are detailed in our Form 10-Q that was filed with the SEC earlier today. On a consolidated basis, revenue for the quarter ended June 30, 2020 was $333.6 million, down less than 1% compared to $336.1 million for the prior year period. This year-over-year decrease reflects the challenging economic conditions as a result of the COVID-19 pandemic. Strong sales growth at our branded consumer subsidiaries, velocity outdoor and liberty was offset by declines and other of our businesses previously discussed. Consolidated net loss for the quarter ended June 30 2020 was $7.4 million. consolidated net income for the prior year second quarter was $218.2 million and included a $206.5 million gain recorded in connection with the sale of Clean Earth. CAD for the quarter ended June 30, 2020 was $13.5 million, down from $26.2 million in the prior year…

Thank you, Ryan. I would like to close by briefly discussing M&A activity and our go forward growth strategy. As I mentioned earlier, we took steps in 2019 to prepare for the unexpected, and those decisions have positioned us well to weather the storm and emerge stronger on the other side. We have the balance sheet strength to support our companies as they operate in these highly unusual times. Our companies are leaders in their respective industries, and are poised to gain additional market share in the months and years to come. Our balance sheet strength has allowed us to pursue growth initiatives unavailable to others as the debt markets closed to all, but the highest quality issuers. We believe the best opportunities to generate long term shareholder value occur during market dislocations like we are currently experiencing, and we are constantly evaluating the best ways to enhance our portfolio, while prioritizing the financial health of our subsidiaries. We entered the year with significant balance sheet strength and further solidified it with the capital raised in May. With our enhanced balance sheet position and the resiliency of our subsidiary companies, we feel increasingly prepared to capitalize on new opportunities while taking a patient and disciplined approach to executing our growth priority. Our strategy has differentiated CODI for more than two decades, and remains consistent as we navigate the uncertainty ahead and position our subsidiary companies for long term success. We are intensely focused on executing our proven and disciplined acquisition strategy, improving the operating performance our company, opportunistically divesting, enhancing our commitment to ESG initiatives across our portfolio, distributing sizable distributions and creating long term shareholder value. With that, operator, please open up the lines for Q&A.

That is noted. [Operator Instructions] Our first question comes from the line of Larry Solow from CJS Securities. Your line is now open.

Great. Thank you. Good afternoon guys.

Good afternoon, Larry.

Just a couple of subsidiaries and then maybe one more general question. Just on Velocity Outdoor, obviously, benefiting from the demand for outdoor products. They started sort of as COVID sort of came out these guys -- you guys are sort of undergoing restructuring there. Has that come into play, though, can you just sort of speak to velocity sort of mid term outlook? And do you expect sort of this demand and these kind of performance numbers to continue in the back half of the year? I realized that its not that easy to -- yes go ahead?

Yes. So I think on the manage, Larry, this is Pat. I think on the management side, Tom McGann, Kelly Grindle and the team beneath them have really done an exceptional job, managing through this, and we couldn't be happier. As it relates to demand, I mean, I can't speak to October and November. I can tell you we don't see any slowing down in July and probably August. And we'll see from that. If you remember, Q3 is a big quarter for them, seasonally anyway, as it relates to hunting and outdoor activities. So that's -- how's that were forgotten. I can talk about the next few months. I can't tell you what December is going to look like.

No. That's what I was saying again, my question that I really it's not easy. I get it. I get it. Now that's all. So then on Sterno, obviously much better than feared. Certainly down year-over-year, but with PCB business basically being temporarily wiped out or close to zero. Can you speak sort of reports [ph] and the actual year-over-year growth at that business? I got to imagine it's pretty material?

It's material. There's no doubt its material, but we've also seen hand sanitizer sales, some of the outdoor more camping fire starter sales help through the retail channels. So I don't think we talk -- it is a material growth. But I don't think we speak directly to subsidiaries or pieces of businesses. But the other part of it is kind of a transition to hand sanitizer and some demand for those other non shaping fuel related product external sales

Right. And it's pretty commendable to be able to shift into that, start making the hand sanitizer just on a qualitative basis. Did it sounds like it actually quantitatively moved the needle somewhat and helped performance?

Yes. And I think -- Larry, I think the team really needs to be commended here for this. It isn't easy to bring up a new line. I think everybody's aware or probably a lot of people are aware. There's something like 75 companies that have had hand sanitizer recall lately by the FDA. Lot of them are imports or their companies that tried to get quickly into the market. There's actually quite a bit that you have to go through from a regulatory standpoint to be able to do this. And this is a process that requires special manufacturing conditions like explosion proof room. Sterno have that all available to them and the management team really moved at light speed to be able to do this. And what excites us about this product category. One is, we think it's now a new category that's here to stay in the hospitality industry, by and large before it wasn't there, because most restaurants encourage their employees to wash their hands rather than to use hand sanitizer. But now guests are using hand sanitizer. So it's a big change. So this is a new market that's kind of up and open for grabs. And Sterno's quality has always been number one with Sterno. And we have 100-year track record of establishing quality product, distribution capabilities. And so, lot of companies have come in with products that may not be up to spec. Our product is and it passes kind of all the requirement. And so the team has done a great job and we think this is a nice adjacent market that is probably here to stay at some level and will be complimentary to the shaping line when that business comes back.

Right. Good. Yes, absolutely. Okay. Shifting gears probably on 5.11. Can you just remind this roughly normalized? What's the percentage of business that's on the professional side? What is that roughly? What was it in 2019?

Professional was a little greater than 50% of the business. And I'm going to talk about professional being both domestic and international with sort of 55% of the business in 2019. Given the differential in growth rates, we anticipated that 2020 that would reverse In fact, it has, especially as the consumer business, you see some of these trends. Pat mentioned the growth in same store sales, which clearly includes e-commerce. But if you compare that to a lot of household brand names that are out there that sell apparel and footwear, some of these guys are doing 30%, 40% in this company, the same store sales growth accelerated from kind of 7% to 10% from Q1 to Q2. So really is, I think strong testament to this brand and its emergence and how much it speaks to its consumer. But you know, just in terms of percentages, the consumer business is now running larger than the professional business. So, if it was 55, 45 last year, it's sort of flip flopping this year.

Right. Very impressive. And then, it sounds like you guys have -- I know you look like stopping or kind of on a little bit of a pause. But it sounds like you found some new locations and a little bit of CapEx going into -- I assume a restart maybe a slower ramp and near term on the store openings, any color to that?

Yes. We're opportunistically opening up stores. We've authorized some. We won't have the same number of new stores in 2020 likely that we had in 2019. But there's opportunities out there as landlords are feeling the effect of this market to, even if -- so that's what we're doing.

Right. Okay. And then you guys said, transformational to the entire company. That just sort of the -- obviously it's your biggest or your second biggest holding today are right there with start off. That's just the growth outlook. Is that potential monetization of the asset? What's sort of do you mean by that? Or any thoughts on that?

Yes. So Larry, we think this is a company that more likely they not will follow the Fox path, if it continues with the growth that it's been on and would be an IPO candidate for us. I think when you consider companies that are more on trend and have really long term -- first off, we talked about the same store sales comps, which in any type of business like this is going to be really meaningful the value of company. But if you just think of some of some of the drivers that are kind of in path, a numerated a few of them that are really aiding in that growth. You think about how early the company is in its rollout of stores, e-commerce continuing to grow along with that. And as we continue to enable more consumer services, we think we're just really early in this consumer component of the company's growth. And as a result of that, we think that multiples are generally pretty high for companies that demonstrate these type of characteristics. Very low cyclicality in the depths of the pandemic, really high growth rates driven by a lot of white space and kind of just new opportunities to put down retail stores, but then strong same store sales growth. And when you combine bunch of those factors, we think this is not just a fast growing company for us, but it's also a really high valuation multiple. Based on that and I think when you look at it where some of its competitors, or just people broadly in the consumer lifestyle business that are on trend are trading with these type of growth profiles are trading on a multiple basis, you could easily see how it could help re-rate the share price of CODI, if it was to be a standalone public company trading anywhere near where some of these other kind of consumer lifestyle brands are trading.

Right. Got it. Again, appreciate the color. Thanks a lot. And congrats again on a good quarter.

Thank you, Larry. Appreciate the support.

Your next question comes from the line of Matt Koranda from ROTH Capital. Your line is now open.

Hey guys. Thanks for taking the questions. Just wanted to start on 5.11. Can you guys comment maybe on just the breakout the growth in store sales versus online? It's great to see the comp up in Q2 overall. But how much did that kind of skew toward a quite a bit of e-comm growth?

Yes. So Matt, we don't break it out in that level. Typically I would say, we don't break out what our same store sales growth is. We just wanted to do this, because it's such a highly unusual time. And because companies, I think there was a lot of concern about having a multi channel retailer. Even though this is really an omnichannel company and it's a products company. It does have a retail component. And I know there was a lot of concern out there. So we gave more granularity into kind of the growth rates than we typically would. All that being said, I'll try to directionally give you some idea. Our e-commerce business was growing really rapidly, sort of circles double what it was over prior year. Our retail business was down slightly, and you would anticipate that being the case, because we close to the general public for one of the three months. And then, when we reopen, we went to extremely limited kind of hours. So, it was obviously, it skews towards e-commerce. I think when we talk about CapEx and I know this isn't part of your question, but just to get out there, a lot of the growth CapEx we're putting in right now is really enabling much more seamless consumer experiences between our e-commerce and our retail, and as those lines get blurrier, frankly, it gets a lot harder to be able to tell where you're generating revenue. Is it coming because of the store. For example, if you order online and have it ship from store, you get the store, the credit or online. If you order online and pick up from store, does the store get a credit. Where do returns come back? Do they go against kind of online because it's small by channel? Or does it go against the store. So this is going to continue to get blurrier and blurrier. And I think that's why the convention has always been to look at same store sales as e-commerce being one box. But kind of directionally the e-commerce was growing at a really rapid rate. And we would expect that to continue to. And I think the brands that are more e-commerce native, like 5.11. And they have the e-commerce side foreign advance of having a consumer retail side, those brands are holding up far, far better than brands that are mostly retail reliant with small e-commerce percentages.

Very helpful color. Thanks a lot. And just a follow up on 5.11. I mean, I guess my expectation would be that higher net numbers generally should translate or correlate at some rough way to your future consumer sales expectations. So could you help us kind of calibrate our expectations around that? Because, obviously, we seen a big acceleration and data points there. Help us understand sort of how that does translate to the consumer sales side of 5.11 on a go forward basis?

Yes. I would say, your net numbers, you're talking about background checks and a certain background check. I'd say we see more of a correlation with that at Liberty than I think we've seen at 5.11. I mean, I can't speak to correlation is not causation, right. And when you buy a gun, hopefully you're getting a safe to. It's not quite that directed 5.11 is what we see. So I caution you from making that direct comparison.

Okay. Fair enough. That's fair. And then just shifting gears, one on Foam and then one more follow up just kind of overall. But on Foam, the Polyfoam add on help us kind of understand the positioning there. It looks interesting, kind of with exposure to cold chain storage. But maybe thoughts on does that change sort of the revenue growth outlook profile for Foam at all, or the margin profile in the way that we should be modeling that going forward?

Not materially. I mean, we're hoping to increase the margins on Polyfoam as we move forward. There's some synergies in any acquisition. It is more cold chain related or concentrated than the rest of our business. So if you have a different view on the growth in the cold chain, slightly it could. But it wasn't a huge, I mean, you've seen the financial disclosures wasn't a huge acquisition, so I wouldn't think it would change necessarily the profile that significantly.

Okay. Got it. And then just on the M&A environment overall, guys, it sounds like obviously, taking my takeaway from your prepared remarks is that you're going to be more aggressive in terms of your posture on M&A. I think he said exactly that. But anything you guys can provide in terms of details, like bias toward add-ons versus platform? Any quantification of the pipeline that you can help out with? And just overall, maybe allies, what are you seeing on the multiples front? Has anything kind of shaken loose since the pandemic or is there a lot of money still kind of chasing fewer acquisitions that are available?

Yes. So it's a great question, Matt. And your observation is correct. We have moved from being pretty much risk off in a net divestiture to now being risk on and then new investor. We think that when you have this kind of volatility that's caused by the pandemic, these are sort of the market dislocation. When a dislocation like this happen, it's the most opportune time to put money to work and really benefit our shareholder over the longer term. Generally what fuels the M&A market, especially with competing private equity firms is access to credit markets. And the credit markets are really weak right now. I would say, if you're a large public company borrower and the Federal Reserve as we know kind of dabbled into some investment grade bonds and that obviously pushed money out of IG and into lower class bonds, capital access has been much stronger. But if you're trying to do a middle market, one-off acquisition, the market for credit there, I don't want to say it's completely disappeared, but it's severely reduced. And so as a result of that, our private equity peers that is disadvantaged today, relative to us, where if you went back a year ago, they were massively advantage because credit standards were as loose as they've been in the 20 plus years I've been doing this. And it was just fueling kind of a massive run up in prices. So that's sort of why we look at now is a great opportunity to be aggressive in M&A. And frankly, it's why we took a lot of balance sheet capital coming into the year and rose more capital, because we want to take advantage of these conditions. And we don't know how long these conditions are going to remain. Typically,…

Super helpful. Appreciate all the color. Congrats and I'll jump back. Thanks.

Thank you, Matt.

Your next question comes from the line of Kyle Joseph from Jefferies. Your line is now open.

Hey, good afternoon guys. Most of my questions have been addressed. Just one more on Marucci obviously a challenging time for the business, but stepping back and if you can even think about this in this day and age, but like kind of ex COVID, can you give us your expectations for the overall size of that business? And given the addressable market and if you can kind of step back and do that pre COVID?

Yes. So Kyle, this is this is Dave. So, I would say, clearly some headwinds this year, and I think, at least, short into the medium term there'll be a little hangover just in terms of some inventory and in the channel and maybe huge tournaments [ph] being down a little bit. But to your question, I think we feel even better about kind of the medium term here in particular due to the impact of the current environment on some of our competitors. So, we feel like there's some nice opportunity to take some market share, expand product offering, international opportunities. But the hangover from this year in terms of maybe competitor discounting and inventory in the channel is likely to last a little while. But -- so hard to predict kind of timing. But we would expect this company to resume its growth profile when those -- when that situation remedies.

Sure. Thanks. And then one follow up for me. Just you talked about e-commerce trends at 5.11. But looking at the other consumer companies, which companies have seen the biggest offset or the most benefit from shift to e-commerce trends?

Yes, Kyle. So I would say, all of our companies on the consumer side have benefited from their ecommerce side of their business has benefited. And one of the things that I think when we've chatted before we've talked to you about kind of getting our companies aligned, and in terms of their distribution channels, making sure that e-commerce was becoming a larger component, and really even more so than that becoming less reliant on a physical footprint. And so, for an Ergobaby, and one of their other brands that's in their tool [ph], how do you create communities where, if you're seeing the products walking through a bye-bye baby, that's great. But if that's going to be more limited in the go forward, how do you still get that sense of community that you need to have in order to pull and get product sales through that? And we've really been emphasizing that with all of our companies. When we talked about the restructuring that needed to happen at velocity, part of it was bringing in a management team that understood that we needed to have, we needed to build communities, we need to be less reliant on the physical footprint that we were going through historically, because those channels were just changing. And so, we've been working with our companies for years now and being able to get ready for that. And whether that's using social platforms to build communities or YouTube, which is part of, I guess, social platforms. But all the different aspects of being able to better connect to your customer and do that electronically, and then have distribution capabilities that go along with that has been something that we've been working really aggressively on with our company. So I think it's one of the…

Got it. Very helpful. Thanks very much for answering my questions, and congratulations on good quarter.

Thank you, Kyle.

Your last question comes from the line of Robert Dodd from Raymond James. Your line is now open.

Hi, guys, and Congrats. A really impressive quarter in a bizarre environment. Some follow-ups really. On Velocity and Liberty kind of the Outdoor we've seen and obviously in all the data in terms of consumers. Really, we're having a lot of hobby [ph] Outdoor et cetera. So, that surprising, that it did so well since where we were couple of months ago. But how confident are you that the demand you're continuing to see now is really end market demand versus inventory rebuild. I mean, in your prepared remarks you mentioned the couple of times the inventory channels of the distributors and wholesales were pretty thin because of the strength of demand. But how confident are you? Obviously, you said, you feel really good about in July, August. Any information, any data you've got that shows that's really flowing through to end user purchases versus just restocking?

Yes, Robert. So right now what we're seeing is of the inventory levels of our partners are the lowest we've seen in years. And in fact take a Velocity for example, the biggest challenge and you're right, if you think about it, its probably not surprising that some of the outdoor brands and kind of hobby things like this when you're limited and what you can do out here was going to grow. So we are all pleasantly surprised by that. But I would say, we think this is probably a little bit more durable in terms of the demand. Right now, I would say, we are very confident that only is this not just end market demand that's represent in the sales, but our sales don't even represent the full end market demand, because our inventory levels that are distributor partners are so low right now. And so, we think there is a considerable period of just rebuilding inventory backup to the right level. And frankly, what we're seeing even in July right now is that demand at the store level and demand remains really robust and kind of elevated at levels significantly greater than where it was a year or two or three year ago. So we feel very confident that this is end market -- this is all end market demand plus. Now, whether this will a year from now? We'll still be talking about if there is a vaccine and there's better therapeutic and things are back to normal then we'll address this end. But I would say, for the immediate future, this business looks to have -- these both of those businesses look to have demand that is there to fulfill and more of the challenges on the supply chain and the manufacturing capacity that we have both to add our Velocity and Liberty subsidiaries.

Got it. Very appreciate that. I mean, the follow-up to those, how fast could you increase that manufacturing capacity? Is that in the plan? Because obviously, it doesn't look the growth CapEx increase, sounds like its mostly 5.11 rather than putting in other line and velocity for example. So are there any plan from them as well?

Yes. It takes a little bit longer. I mean, part of it is, we have complex supply chain specially at Velocity. And our supplier partners are fully max out as well. And so, its not as easy to ramp up supply. When you're talking about demand growth that is been this material, it takes a little while to ramp it up. So I would say, in the near term sort of 2020, its going to be difficult to ramp supply up. Now on Liberty, this is pretty big pieces of equipment and you're building safe. There is just constrains in terms of the physical location, getting new equipment. And I will tell you, we're being a little bit cautious. And we recognize that the pandemic has created many dislocations that are out there. Look, people aren't traveling right now. They are not doing other leisure activities. So there is more disposable dollars that can be used in other areas. They are doing more outdoor things. I would say, what we are being guarded against is investing too much in supply growth to the extend that some of the demand increase is not long term sustainable. So we'd like to -- if we would rather be more methodical with the way that we plan out the supply growth, the amount of investment that is really required. And so, we will bring on more supply. We're working aggressively to fill all of the demand and make sure that we can be good partners to all of our distributors. But at the same time, we want to be responsible and not overbuild for given the current condition. And as we all have to just appreciate, the uncertainty today is greater than it's been kind of probably at any point and composite history right over the last 20 plus years. And so, we just need to be a little bit more cautious with the way that we plan supply growth.

Got it. I appreciate that. I'm going to ask you on 5.11, you talked about obviously increasing growth capacity on the stores lease signings has given this disruption and the opportunity to be opportunistic. I mean, is this creating an opportunity for maybe to change. Which locations you pick? I mean, are you aiming for -- what would have been a more expensive location before but now lease pricing is more reasonable given the environment. Can you give us any color? Is anything changing about that the selections of those and why you're signing the new leases, and where you're signing the new leases now?

Yes. Right now, we're still looking at the places that have been -- the locations that have been proven to work for us, right? So through a signage, we know the co-tenants that work well for us, stuff like that. We're not yet opening up 5.11 South Coast Plaza, for example. And nor do I see that as near term in our future. So I'd say we're able to find these locations easier now and kind of those ideal locations, the same ones that kind of fit our profile easier now, and are able to drive better lease economics. But we're not yet sort of expanding the aperture to that other kind of higher affluence mall.

Got it. And then one more if I can. On the acquisition front, I mean, most of these are follow-up, so two questions. I mean, you talked about, obviously, an additional platform acquisition adds diversification to the portfolio. At the same time, a new platform acquisition in this environment given the level of uncertainty I think adds more risk to the portfolio versus given that there's less known about that business versus an add-on. So, I mean, how would you -- I mean you said, obviously that the platforms may be further out. But is that simply because the market and the due diligence for those takes time or you want to wait for more visibility, stability, information about how this pandemic is going to pan out before adding a platform? And do the portfolio add-ons just make more sense given more of this known about those industries and end markets at this point?

Yes. And that's a -- its a great observation, Robert. I mean, clearly add-ons are less risk, because we have the management team already in place. That's a platform we own. And we have systems in place we can generally plug those in. We know better about the industry. We and thinking about new platforms, I would say right now, the reason I would say, I mentioned, it may be a little longer to transact on a new platform is because the M&A market for new platforms has really dwindled. And we see fewer opportunities right now, just because of the dynamics that I talked about earlier with kind of government stimulus. And the banks have taken a much more kind of let's just wait and see approach, giving forbearance to companies and not really forcing action, that would generally create a lot of kind of potentially good company, bad balance sheet situation, where it forces the business to recapitalize with a new owner, such as Compass. So that's really the reason that I see it taking longer to do a new platform than an add-on. Now to your question about risk profile. Clearly I get your point, and that's 100% the case. I think, if we were to consummate a new platform, it would have to be a really high quality company that we understood, really well what the growth drivers were. What its downside risks was. The dynamics of the business. And we would have to get comfortable, because as you stated, there's a greater level of uncertainty today than there was kind of a year or two ago when we had economic conditions that were supportive. Now you've got kind of the pandemic. You've got the economy that's more reliant on government assistance. And so there's clearly…

Got it. I appreciate it. Congratulations on an impressive quarter again. Thanks.

Thank you, Robert.

I am showing no further questions. I'd like to turn the conference back to Mr. Elias Sabo.

I would like to thank everyone again for joining us on today's call, and for your continued interest in Cody. We look forward to sharing our progress with you in the future. That concludes our call, operator.

Ladies and gentlemen, that concludes today's conference call. Thank you for participating. You may now disconnect.