Elias Sabo: That is correct, Matt. The guidance assumes sort of the same trajectory we are seeing right now in the first quarter, sort of the slow turning of the boat if you will. And it kind of is improving, and it feels like it is steadily improving. But it doesn’t assume sort of a big snapback and rebound. And what we are hearing is that customers globally after having so much excess inventory are now just being extra cautious. And so — and obviously the cost of carrying inventory is a lot higher now where rates are. So I think, that has a dampening effect on it. But my sense is — just given what we know like if you look at BOA, for example and where we are getting more than 10% annual SKU growth over the last few years, you can start to run the math and say okay, there should be a bigger rebound here, and we probably haven’t cleared all the inventory yet and that kind of had stabilization.
So remember, these companies serve a lot of different end-markets. They are not synchronized by any means. And so maybe rather than a snapback, it is a slow constant build that happened from the beginning of this year into next year, and it surprises by just continuing to build. But I’d say, this does — our forecast doesn’t reflect that inventories have sort of that snapback in or any continued progressive increases although it’s likely that probably will happen, which is why I say I think, we are poised to surprise on the upside, not the other way around as the year unfolds.
Matt Howlett: Right. And just take BOA for example. I mean normalized organic growth could be still something like 20-plus percent easily right, when things get back to normalization. Just talking out loud.
Elias Sabo: Yes. I mean, I think it’s historically until we have some real craziness in the supply chain where we have massive over ordering, which benefited their numbers in late 2021 and early 2022. And then destocking. So if you kind of clear all that noise, BOA has been sort of a 20% plus or minus top-line grower over kind of its history. Now we don’t sign up and say that is what we think the company is going to deliver, but it still has a lot of the same core attributes of relatively low market share, outstanding management, outstanding technology, great strategy and execution. And so it still has all the elements in place. But we don’t like to get out over our [SKUs] (ph), so we’re not going to say that’s kind of what we think its core growth rate is, we’ll be a little bit more modest than that.
But look — those things still exist and it’s been a 20% grower historically. And so I’d expect it to continue to be a really strong grower that is above the portfolio average.
Matt Howlett: Got you. Great. And then just one last one, if I may. I mean Lugano is just an incredible investment, an incredible story. I don’t know, if you’ve done this in the history, but would you — do you look at it as something that you could sell a minority interest, bring in a partner. It is been — it’s so big, you could use it some flexibility to buy another portfolio company. Just do we — how should investors look at this? I mean you have this at your hip pocket, this company that’s growing phenomenally throwing off-cash. I mean what can you tell us what you could do with it, long-term to create even more value than it already has for shareholders?
Elias Sabo: Yeah. I think those options exist, Matt. The problem becomes — it gets a little bit complex when you start bringing in third-party investors into our structure. And you got to look at kind of them benefiting from how we structure our deals by being the lender and the equity, which clearly performed so good at Lugano, do you really want to cut off that strip anymore. So let’s just — suffice to say there’s lots of opportunities. I think those opportunities create complexity, and in general, we are trying to create a little bit more simplification so that we’re an easier story to understand, not harder. But that clearly is a benefit. And I’d say, given the growth rate of Lugano, and frankly our forecast doesn’t assume that it continues to grow at the pace that it has been.
And there is upside. But it also manifests itself through far greater earnings per share. And so I’d hope that, yes, there is greater financing opportunities. But obviously, as our earnings grow, that creates just direct financing opportunities in the business, whether that be on equity financings or whether that be in debt financing. But yes, it will give a plethora of options and having a company like this, which if you remember back, we had Fox Factory, which was an extraordinary investment for us, Lugano is an extraordinary investment. We’ve had a lot of them. BOA is in that same vein. But Lugano just based on its sheer growth rate and mass at this point, it is a little bit unique, and we will clearly think about what we can do to create even more incremental value from owning that asset.
Matt Howlett : I really appreciate it. Thanks a lot.
Elias Sabo : Thank you.
Operator: And thank you. And I’m showing no further questions. I would now like to turn the call back over to Elias Sabo for closing remarks.
Elias Sabo: Thank you, operator. As always I would like to thank everyone again for joining us on today’s call and for your continued interest in CODI. Thank you for your support.
Operator: This concludes Compass Diversified conference call. Thank you and have a great day.
