Good afternoon and welcome to the Compass Diversified's Second Quarter 2021 Conference Call. Today's call is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to 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's second quarter 2021 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, 2021 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 close, which includes reconciliations of non-GAAP financial measures discussed on this call and is available at the Investor Relations section of our website. Please note that references to EBITDA and the following discussions referred to adjusted EBITDA is reconciled to net income in the company's financial filings. The company does not provide a reconciliation of its full year expected 2021 adjusted EBITDA or 2021 payout ratio, because certain significant reconciling information is not available without unreasonable efforts. 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. And statements related to expected divestitures of Liberty and CODI's future tax structure. Words such as believes, expects, plans, 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-Q as filed with the SEC for the quarter ended June 30, 2021, as well as in other SEC filings. In particular, the domestic and global economic environment, as currently impacted by the COVID-19 pandemic has a significant impact on our subsidiary company. 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 we get started, I'd like to take this opportunity to thank all of our employees for their extraordinary efforts, which continue to impress me as we navigate further through this unprecedented time. We've exited 2020 with strong momentum, and that has carried over in 2021. Before we turn to the financial performance for the quarter, we want to provide an update on our busy start to 2021 and the significant progress we have made against our strategic alternatives. During the second quarter, we took significant steps towards our potential tax reclassification. We have set a date for our special shareholders meeting which will be held on August 3, and we will announce the results of our special proxy vote as soon as practicable, following that meeting. If we receive approval from our shareholders, we expect our Board will seek to effect the tax reclassification, as soon as practicable. We are excited about this potential change, which we believe would present an opportunity to expand CODI's shareholder base and make our company more widely accessible. We believe this would position us to further build on our 15 plus years of success as a public company and provide greater value for all shareholders over time. Subsequent to the second quarter, we announced the execution of a definitive agreement to divest Liberty Safe, which we expect to close in August of 2021. I want to extend a special thanks to the management team and employees of Liberty Safe for 11 years of successful partnership with us. During this time, we established both strong personal and professional relationship while delivering a solid return on invested capital that exceeded our initial underwriting expectations. I wish the Liberty…

Thank Elias. Before I begin in our subsidiary results, I want to talk generally about the quarter. We believe our branded consumer businesses remain very well positioned to benefit from the changing consumer landscape. Each of these businesses exceeded our expectations in the quarter. As a group, our niche industrial businesses also performed above expectations. That said, I also want to reinforce what Elias said about today's dynamic environment. All 10 of our subsidiaries experienced significant increases in costs in the quarter, and many of them face supply chain disruptions. Our management teams showed tremendous skill and adjusting on a real time basis to the fluid conditions and they once again affirmed the strong competence we have in them. Now, on to our subsidiary results, I'll begin with our niche industrial businesses. For the second quarter of 2021, revenue increased by 24.1% and EBITDA increased by 18.4% versus the second quarter of 2020. On a year-to-date basis, revenues increased by 13.6% and EBITDA increased by 10% versus 2020. For the year-to-date period, revenue at Advanced Circuits was approximately flat, and EBITDA declined by 3.4% as compared to the first six months of 2020. Once again in this quarter, bookings outpaced billings, and ACI has built up considerable backlog due to parse shortages, mostly in its assembly business, Arnold Magnetics, revenue increased by 20.8% and EBITDA increase by 47.2% to $9.8 million in the first six months of the year. The increase was driven by several factors including increased sales to aerospace and defense related customers associated with large orders received in 2020, higher gross profit margins associated with positive mix, and the acquisition of Ramco, which was completed on March 1 of this year. Arnold met our expectations for the quarter, despite order volume in the company's aerospace segment not…

Thank you, Pat. Moving to our consolidated financial results for the quarter ended June 30 2021, I will limit my comments largely to the overall results for CODI 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 2021 was $487.4 million, up 46.1% compared to $333.6 million for the prior year period. This year-over-year increase primarily reflects our acquisition of BOA during 2020. In addition, we had strong sales growth at our branded consumer subsidiaries and our niche industrial businesses on a combined basis. Consolidated net loss for the quarter ended June 30 2021 was $11.3 million compared to $7.4 million in the prior year. The increase in net loss was due to a $33.3 million loss on debt extinguishment recorded during the second quarter of 2021. As a result of our bond refinancing. Cash flow available for distribution and reinvestment or CAD for the quarter ended June 30 2021 was $46.6 million, almost three and a half times the prior year period of $13.5 million. Our CAD that we generated during the quarter was significantly above our expectations almost doubled our distribution, and was the highest quarterly CAD we've ever generated. The increase was primarily due to the outstanding performance at our most recent acquisitions, Marucci and BOA as well as continued strong performance at virtually all of our consumer industrial businesses. Other factors impacting our CAD in the second quarter compared to the prior year include slightly higher CapEx spend an increase in cash taxes, higher management fees as a result of our waiver in the second quarter of last year, and higher interest expense. Turning to our balance sheet. As of June 30 2021, we had…

Thank you, Ryan. I would like to close by briefly discussing M&A activity and our go forward growth strategy. In 2020, we took advantage of market conditions and acquired two outstanding platform companies with exceptional growth prospects. And early in 2021, we consummated an add on for our Arnold subsidiary. As we stand today, market conditions have changed rapidly. Asset prices have appreciated materially driven by an increase in M&A activity stemming from an abundance of equity capital, coupled with strong availability of that capital. Despite the frothy market, CODI remains well positioned to succeed. Our permanent capital structure allows us to be flexible and take advantage of market conditions. In addition, the dramatic reduction in our cost of capital over the past few years, allows us to be selectively aggressive on acquisition opportunities that we deem have potential to enhance shareholder returns. Going forward, we will continue to invest in and enhance our subsidiary company's competitive positioning, which includes supporting them as they build and grow their digital transformation strategies. Our differentiated strategy has set us apart for more than a decade, and it remains consistent. In 2021, we will continue to be intensely focused on executing our proven and disciplined acquisition strategy, improving the operating performance of our companies and enhancing our commitment to ESG initiatives across our portfolio and creating long-term shareholder value. With that, operator please open the lines for Q&A.

[Operator Instructions]. Our first question comes from Larry Solow of CGS Securities. Your line is open, please go ahead.

Great. Good afternoon guys. Thanks for taking the questions. Elias, perhaps just a general question kind of a lead in you kind of getting a lead in on your closing comments there. Just in terms of the pending reclassification the tax reclassification and what do you see as sort of the advantages or to that switch beyond sort of the obvious that does create the target investor base and lowering the cost of capital, so does that perhaps make you more aggressive in future growth strategy, maybe try to make your site even bigger with access to lower cost of capital. Then you can just discuss that from a high level any potential changes there, any potential changes on the capital structure, and even thought to that will be great?

Sure, and thanks, Larry, for the question, and I talked to you this afternoon. So when we embarked on this process, and started reviewing the entire tax reclassification, obviously, the first thing that we had to, the look through was holistically as there going to be a bigger tax burden as a result of this or not. Fortunately, based on some tax law changes in 2017, we found that the tax burden was the same holistically, whether we were a C-Corp taxpayer, or a pass through. So the principal benefit of being able to do this, as you've identified it, it really opens up the aperture of the number of investors that can access our company, ETFs are largely unable to given the path through characteristic the K1 of those unrelated business, taxable income that we create, there's a lot of retirement accounts, and frankly more and more institutional potential owners are choosing not to invest in pass through type entity. So, without having a negative from a tax standpoint, but getting the benefit of having additional shareholders, as we've talked to investors about this during the proxy, sort of a no brainer, it's all benefit without kind of any cost associated with it. I think there's some, you know, secondary and tertiary benefits, Larry, that, where you're at right now. I think we would like to move eventually towards a concept of an adjusted EPS in a way from probably CAD, there'll be an overlap period, so that we get compatibility, because we want this to be completely transparent, but I think that helps with a few things, owning public companies like we did with five years ago, as you remember, one of the challenges with CAD is because we were getting the cash flow from a public company, it really put a lot of pressure on us to sell that asset and redeploy it into something that got a cash flow, going forward as we migrate to a more adjusted EPS, which is, I think, also more easily understood and digested by the investor or community. So, hopefully that same - that to your question about kind of our growth initiatives, we've been very transparent and saying, we think this company operates better as a bigger entity, we think that in the next kind of seven to 10 years, this should be a billion dollar EBITDA company, and being able to get there, we were not going to get there only through organic growth, and through use of debt capital, clearly we don't have that kind of leverage ability, nor would we want to take that kind of risk. So we will need access to equity capital, and we think this helps to provide significantly greater depth to the equity capital market that we otherwise wouldn't have had in our partnership structure.

Got it. That's a great answer. Switching gears real fast. I had actually a question on, actually on labor availability and supply chain issues, but I think you touched on that pretty extensively. Just tying that in with sort of your guidance, it appears like you certainly raised your outlook for the year, it looks like most of the wave and we don't dive into the quarter, but looks like most of the raise is from the beat in the quarter, the difference from the expectations? And without getting into specifics, is that sort of, - I am not in the right ballpark here, and you're kind of holding the line in the back half of the year, just because of these uncertainties with labor and supply chain issues? And who knows what actual demand, what trajectory demand is COVID it's still kind of waxing and waning. Is that a fair assessment?

Yeah, Larry, I think that spot on. I would say we were frankly, pleasantly surprised by the strength of our second quarter results. And there's just a lot of uncertainty, I heard from other companies, none of us have ever gone through a pandemic and a reopening of the economy. And what that portends for our businesses is very much uncertain, and as you know, we strive to get reasonable guidance that we can beat. And so we tend to be somewhat conservative when we look at kind of where our guidance is. We wanted to and I think we said in our scripted comments, demand is not the issue. Now, there are certain companies like Sterno or Arnold in the aerospace division, where frankly we would like more demand, and we have the capacity to supply more demand. But broadly across the portfolio, we have demand that remains in excess of what we can supply. And so, what we are seeing are some of the inflationary elements come through, we've talked about and we said in our script, like other companies were passing on price. But it's too early right now, for us to understand with any clarity, what the elasticity of demand is, whether some of those price increases that are meant to protect margin are going to hurt future demand. And so when we're in these inflection points that we feel like right now, I mean if you went back over time, I would say over the last pretty much 15 years that we've been a public company, for the vast majority of that we've sat in a disinflationary environment. And so we're at an inflection now, where we're seeing inflation come in, we're seeing a lot of supply constraints come in, this is something unusual to the past 15 year operating environment we are in. And so we're choosing to be way more conservative in the outlook that we have, and sort of hold where our guidance is, just because we don't know how that is all play out. Now, that being said, I'll continue to reiterate, where we stand through the month of July, so one-third through the quarter, demand is holding up remarkably well, in fact, probably in excess of what our expectations are thus far in July, and if that continues, I think we feel pretty good about the remainder of the year.

Great. Just last question. Like [indiscernible] subsidiary question. I was going to be on 5.11, that's looks like a great number, but we've kind of been stifled there. So just a hands on Sterno, just to clarify. Did you say that was a $5 million hit to EBITDA to sales, I think you said EBITDA and that and that product from Sterno Home.

There is a piece of our Canadian operations that we're restructuring and total it's, I think the accounting rules can't be a one-time charge anymore, but if there will be a sort of extraordinary expense in the back half of the year, that EBITDA of $4 million to $5 million.

Got it. Okay, great, I appreciate that. Okay guys, thanks again.

Thank you, Larry.

Thanks Larry.

Our next question comes from Matt Koranda of ROTH Capital. Your line is open, please go ahead.

Hey, guys, good afternoon. Thanks. I don't want to get too far down the road here. But if we think about sort of the situation post-tax reclassification, just wanted to get your preliminary thoughts on sort of, how should we be thinking about tax expense post, checking the box if and when we get to that point? And then also, you mentioned, probably the ability to present more of an adjusted EPS figure on a go forward basis. So just wanted to give you an opportunity to maybe talk a little bit about how you envisioned sort of presenting that, what are some of the elements that will go into it? How's it going to compare to CAD?

Okay, hi Matt. I'll touch on the tax question. With respect to the second question, I think we're still developing that. And I think internally we're working through that, but the plan is to provide more color on the next earnings call. And then potentially come out with comparable periods, and provide some depth so that people can see trends and things. But that'll be a little bit TBD for now. But with respect to your question on income tax expense, just to take a step back to the structure, all of our companies down below our C-Corp, federal tax payers. So the only income that is coming up to CODI is primarily interest income, because we're their lender, and they're paying us interest as their lender. And that is offset though with interest expense at CODI and that if you look at the subsidiaries, we have an interest income and expense we have that's going to be going forward, at least initially, to be in a negative position, okay. So we'll have more interest expense at CODI's level, then we have interest income, okay. And then the other income streams would be dividend income, if we have some sort of recapitalization of a subsidiary or capital gain tax if we were to sell a business for a gain. So in a year that we don't have a recap or a sizable capital gain, we're going to be in an NOL position, okay. So it's really, we'll be building a benefit in a given year, that can then be applied on a future period, should we have taxable income. Okay, so I think it's always hard to know when we'll have a sale or a recap. But I think from a modeling standpoint, you shouldn't think about us having actual cash tax expense at the CODI level, going out the door until we have one of those two income events. Does that make sense?

Okay, yeah, totally, very helpful. And then maybe one for Elias on M&A. I know at the end you sort of talked a little bit about your views. And maybe my interpretation, as you sounded a little bit more cautious on deployment of cash requisitions, kind of given the environment we're in, multiples expanding and whatnot. So am I hearing that right? And then, are you seeing any pockets that are still interesting, maybe just a little bit more color on where those interesting opportunities may lie if there are any deployment?

Yeah, Matt so, the M&A market came back with bigger and I would say it was probably the shortest period where you could deploy at attractive prices in a recession that I've experienced. And I think there's just the function of if you think of all the capital that sloshing around in the market, I think we all are aware, there's this back that had been raised at a kind of a massive level. And they have timelines, they need to deploy capital, private equity is washed with capital, and debt availability has come back and come back more aggressive than it was at the end of the back cycle. So all of that is just creating an enormous amount of demand for the assets. Now, we are seeing a lot more assets come to market, I mean, it's kind of the natural workings of the marketplace. If you have demand for something eventually prices would go up and supply comes in, but we're just being elevated kind of pricing based on these dynamics, and we expect that to continue. So as we did with the Liberty Safe divestiture, we're always looking for ways to take advantage for our shareholders, even if it means we may have a short term under optimization of our balance sheet. If you're looking at it over a longer period of time, I think being able to capitalize on market condition is always kind of what we strive to do. And right now asset pricing is high. So what it boils down to is, are we looking to deploy capital, you heard in the comments to Larry, our growth goals are to get to a billion dollars of EBITDA, we guided 350 to 374 this year, and that includes Liberty Safe, which is going to…

Makes total sense, thanks for all the detail. And as maybe just in keeping what the theme of asking a second question. Pat, you mentioned that BOA was on a pretty strong run rate since you guys bought it. And that we shouldn't necessarily count on that growth rate to kind of sustain through the back half of this year. So just wanted to get a little bit more granularity on that, what drove the stronger than expected growth rate, as well in the first half, and then what sort of the was the headwinds are contending with the back half of the year?

Sure. I mean, as I mentioned, we're - we've had an explosive first half, I mean, I think we grew by 100%, or sort of doubled. For us to forecast that in the second half, I don't think would be appropriate. Honestly, we had a stronger back half last year than we had this year. I do think we'll grow in the second half of the year, I think we'll have nice growth, we see continued demand. We have some worry that there's a whole restocking aspect or covers were buried in certain number categories, that some of our OEM partners are doing that. We have some worries that there was an ordering ahead, because some of our partners were worried about the supply chain disruptions. But all that being said, we still see strong demand, we do see supply chain issues, just like we do in every other business, but our management team is working definitely through that. We believe we're taking market share and we believe we have a great product and a great technology that the company has developed. And it's just sort of catching on. And it's a really global business. So a lot of it maybe - may not be as visible to us here in North America. But we're very confident in the back half, what we just don't think we're going to quite see those growth rates that we saw in the first half as they were pretty dependent.

Fair enough. Thank you, Pat, I'll jump back in queue here. Thanks, guys.

Our next question comes from Kyle Joseph of Jefferies. Your line is open. Please go ahead.

Hey, afternoon, guys. Congrats on a really good quarter. And thanks for taking my questions. I'll start, Ryan, I think you said it but I missed it. Where is leverage currently and then kind of can you give us a sense where you expect that to be pro forma of the Liberty tail?

Yeah, sure. Kyle, thanks for the question and appreciate the nice comments. It was a great quarter. So we ended leverage at the end of March, just below three times, kind of 2.9 level, we've come down to 2.64, I believe is the exact number. And that's all through organic deleveraging. I mean, that was just truly through cash coming to our balance sheet, through working capital optimization, but also extraordinary EBITDA performance, so really good organic leveraging. The Liberty proceeds, once we receive them, as you might have seen in that release, portion of that will be earmarked to our anticipated special distribution when we check the box, but the delta of that will sit on the balance sheet as cash. So we do not have any pre payable debt right now, we got nothing outstanding on the revolver and just the outstanding bond. So it will sit as cash on our balance sheet as we seek to deploy it. But that will bring our leverage down another sort of 10th, I'd call it. So the expectation is to be sort of closer to 2.5, I'd say, by the end of the third quarter.

Great, thanks. And then just a follow-up for me, as modeling out the companies for ' 22. Any companies you'd highlight as being insulated from whether it'd be supply chain disruption, or inflationary pressures? And then any companies you expect to kind of be more exposed, if you will?

I mean, I think we see supply chain pressures everywhere. I mean, those that are - so I guess it's broad, and it's just a matter of degrees. But again, most of our companies are positioned in a way to where they can have a good chunk of that group and they're working hard to do that. So it's just a matter of degrees. They're all facing it, it's something the entire economy.

Got it. Yes, totally fair. It's kind of like asking to pick your favorite child. So understood. And thanks for answering my questions.

Thank you, Kyle.

Thanks Kyle.

Our next question comes from Chris Kennedy of William Blair. Your line is open, please go ahead.

Hey, guys, thanks for taking the question and a lot of exciting things happening. Elias, can you just talk a little bit about going forward. I remember, at your investor day, you talked about potentially looking into new verticals, beyond the niche industrial and consumer side? Any progress or update on that?

Yeah, Cris, and thanks for the question. It continues to be a priority area for us. I think we believe that healthcare is probably a vertical that we would like to pursue whether it's kind of the next vertical or not a little bit of its fluid, because it's around finding the right individual with the right experience, and the right domain knowledge, and then building out around that. I think the stars all aligned, and that was somebody who had experience in the healthcare space, that is what we're seeking, but it's a little bit of a longer fuse, to be honest, because we have to find the right individual, that person, and make sure that kind of the fit from an investment philosophy from a cultural standpoint is right. So it's something we are working hard on, we would hope over the course of by the end of 22, that we have somebody landed that can start that effort for us. But that's something that we continue to focus on. In the meantime, we continue to add on the HR side, we're in that we're adding on our investment team, almost done a kind of annual basis, we're adding a couple of few people, we continue to staff up because we are building for what we see in the future as a firm that could be substantially larger than we are today. And adding a vertical becomes sort of part and parcel to that.

Fantastic. And then just, I guess the follow-up, as you go towards a billion of EBITDA, does your targets - kind of your target size increase a lot and just kind of talk about how that changes going forward, especially with a lower cost of capital? Thanks a lot, guys.

Sure, and I think that's a great observation, Cris. I mean our goal is to own companies that have going forward have the ability to reach at least $50 million of EBITDA, that sort of internally where we kind of strive to get to some companies, they're going to be able to do it through organic growth. Some companies, they're going to need consolidation opportunities to do it. And frankly, some companies aren't going to be equipped to be able to get there. And I would say look at the most recent divestiture that we made at Liberty Safe is totally in connection with that strategic vision that we want a company to be bigger. I mean, Liberty is a great business, its run by great people, we've had a wonderful relationship with, Steve Allred, Justin Buck, I mean guys that we've worked with, literally for over a decade, it is a company that has delivered over delivered on the expectations that we had. But the reality is, we weren't going to be able to get it to a materially larger size. And that's one of the strategic rationales that we've put in place in our business here is that we want companies that can get to that 50, a 100, even a $150 million EBITDA size over time, and managing a larger pool of companies, or a larger size of companies, not necessarily just a greater number of companies. So that's sort of where we're focused on. I would say, as we think about new platform opportunities, they generally are going to be larger, or they're going to have better growth prospects, if they're smaller organic, like a Marucci, for example, which has outstanding growth prospects, or they have really good consolidation opportunities. I think there's a lot of strategic benefits as you get larger companies in the portfolio. As you know, some of the public company things that we do with respect to stock and compliance that is a little easier to absorb as a public company. And we don't just give lip service to the ESG, efforts that we're putting in place, these are things that we are going to be forcing down on our subsidiary companies, we're doing that at the holding company right now in a really expanded effort. So as we start to put more and more things in place that are more public company in nature and less kind of smaller private company, it helps if we have larger companies in this table.

Great. Thanks a lot, guys.

Thank you.

Our next question comes from Derek Hewitt, of Bank of America. Your line is open, please go ahead.

Good evening, everyone, and congrats on the record quarter. Now 5.11 and Liberty, they represent about 25% to 30% of either revenue or EBITDA. So given the comment earlier that the business really needs to scale, how do you balance opportunities to potentially harvest subsidiaries at attractive valuations versus maybe generating more predictable growth and some sort of adjusted earnings calculation, which could also impact valuation assuming that the C-Corp conversion goes forward?

Yeah, and thanks Derek, this is Elias for the nice comments, it was a record quarter and we're really proud of our team that the subsidiaries are being able to execute and set the high level, and against the backdrop of so much uncertainty. But it's a great question. I mean, our business model is frankly, different than most companies out there, because a portion of what we do is opportunistically diverse. And I think that's really what makes us different and creates more opportunities for shareholder value creation. But sometime, when you are in divestment window and the market gives you the opportunity. And so we have to kind of reap the tea leaves and take what opportunity market is giving us. And as part of that there are going to be times when we will be under earning our balance sheet potential. You saw it in 2019, when we divested in Manitoba harvest cleaner, and we did it at record multiples. There was a period where we were going to have lower EBITDA on its aggregate basis, outright dollar value, we were going to have lower earnings. As you remember, we waive management fee, because it's always been our view, that if we're going to under earn for a potential of time, then the manager should also under its potential. So, we aligned with our shareholders that have done that in the past. But there are times when the best decision that you can make outside of the optics of what you're going to have maybe aggregate lower adjusted EPS or aggregate lower EBITDA, is to have assessment and you're taking advantage of the market conditions. And I think that we've always run the business with a kind of more intermediate and longer view and not next to…

Okay, thank you. And then in terms of your longer-term adjusted EBITDA goal, is that possible with many verticals, do you think you would need to be able to kind of meet that, that longer term goal?

Yeah, I mean, to be honest, we think we probably could build with the verticals that we have, I think that it becomes more probable if we can add another vertical. Over time, I think we would like to probably have one or two more, I think there is a limit to how much we would like. And given that we've had two verticals now for a decade or so once we started to verticalize our business, I don't think we're looking to kind of stamp these out, like at an accelerated pace. But I think if we could do one more, it makes getting to a billion dollars of EBITDA more probable and very achievable. That being said, I want to let everyone know, we still believe that the verticals we're in, there's a broad enough set of target it clear position extremely well, both on capital availability, cost of capital and human capital, to be able to achieve that billion dollar goal, even if we don't add another vertical.

Okay, thank you very much.

Thank you, Derek.

Our next question comes from Matt Tjaden of Raymond James. Your line is open, please go ahead.

Good afternoon everybody and I appreciate you taking my questions. First one for me continuing on the tax reclassification, kind of on a longer term perspective, how does checking the box change, how you think about acquisition candidates, whether that be in terms of a deal pricing or target structure? Any thoughts there would be of interest?

Yeah, Matt, so the checking of the box won't have any impact on the way that we look at acquisition, in terms of how we structure the acquisition, as Ryan has said, kind of, it's, we have a little bit different flavor of income that flows up to the holding company. And so I think on the acquisition side, it really is going to have no impact whatsoever, we're really could have impact is on the divestment side, where the company then will have an incremental tax. But frankly, that was the incremental tax that our shareholders were going to be able to ask to pay in the prior structure. So if I think about it, from a holistic standpoint, there's no incremental tax and there's no kind of view towards a change of strategy and our acquisition or divestment. And if I circle back to Larry's initial question, on benefits of the potential tax structure. We do view having our equity being more accessible by a much broader group of investors, who frankly have shown interest in the past, but for the fact that investing in a partnership was something that was very difficult for a lot of people, we think additional demand on the shares naturally should and were to all of our shareholders benefit through higher share prices, and then to a company with a lower cost of equity capital. So I guess, that could sort of shape a little bit of our acquisition decision making. What I would say in terms of kind of how we run the business, we don't look at this structure changes impacting it at all.

Okay, fair enough. I guess just another quick one for me on Sterno. So I know last quarter, we talked about, venues opening again, having some sort of benefit to Sterno, with cases back on the rise in the delta variant, is there any risk of a near term kind of softening at Sterno?

Yes, it did quite the answer. I'd say, we haven't gotten quite back even before if you think about, June I think was probably our best month since before the pandemic, as far as bookings goes on the sort of food service side. And again, those levels were still materially off of sort of pre pandemic levels. But it's - the food service side is a real time indicator, and as sort of events shrink, and the number of venues that are open to shrink, it will have an impact on the food service segment. So that being said, our consumer side and some of our waxes and our essential oils are a little bit of a natural hedge for that. And that when people spend more time at home, they tend to spend it purchase more of those. It doesn't quite make up for the whole impact that you're talking about, if we were to go back into a lockdown or something like that again, but it is a little bit of a hedge. Does that make sense?

That's it for me. Appreciate the time and congrats on a good quarter.

Thanks, Matt.

There are no further questions on the telephone line. So I'll hand the call back over to Elias Sabo.

Thank you, operator. As always, I'd like to thank everyone again for joining us on today's call and for your continued interest in CODI. We look forward to sharing our progress with you in the future. That ends our remarks, thank you operator.

This concludes today's call. Thank you for joining you may now disconnect your lines.