Compass Diversified (NYSE:CODI) Q3 2023 Earnings Call Transcript

Compass Diversified (NYSE:CODI) Q3 2023 Earnings Call Transcript November 2, 2023

Compass Diversified beats earnings expectations. Reported EPS is $0.57, expectations were $0.42.

Operator: Good afternoon, and welcome to Compass Diversified’s Third Quarter 2023 Conference call. Today’s call is being recorded. All lines are placed on mute. [Operator Instructions]. At this time I would like to turn the conference over to Cody Slach of Gateway Group for introduction and the reading of the Safe Harbor statement. Please go ahead sir.

Cody Slach: Thank you and welcome to Compass Diversified’s Third Quarter 2023 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 Q3 2023 press release including the financial tables and non-GAAP financial measure reconciliations for adjusted EBITDA, adjusted earnings and pro forma net sales are available at the Investor Relations section on the company’s website at compassdiversified.com. The company also filed its Form 10-Q with the SEC today after the market closed, which includes reconciliations of certain non-GAAP financial measures discussed on this call and is also available at the Investor Relations section of the company’s website.

A financial adviser talking to a client in their office about an investment plan.

Please note that references to EBITDA and the following discussions refer to adjusted EBITDA as reconciled to net income or loss from continuing operations in the company’s financial filings. The company does not provide a reconciliation of its full year expected 2023 adjusted earnings, or adjusted EBITDA 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 call, we may make certain forward-looking statements, including statements with regard to expectations related to the sale of Marucci and the future performance of CODI and its subsidiaries, the impact and expected timing of acquisitions, and divestitures including the divestiture of Marucci and future operational plans, such as ESG initiatives.

Words such as believes, expects, anticipates, plans, projects, should and future or similar expressions are intended to 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 SEC for the year ended December 31, 2022, as well as in other SEC filings. In particular, the domestic and global economic environment, supply chain, labor disruptions, inflation and rising interest rates all may have a significant impact on CODI and 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.

Elias Sabo: Good afternoon, everyone, and thanks for joining us today. Before I discuss our third quarter results, I would like to cover the press release we issued this afternoon announcing the agreement to divest Marucci Sports to Fox Factory Holding Company at an enterprise value of $572 million. CODI expects to realize a pre-tax gain on the sale of between $225 million to $245 million, and we expect the net proceeds will be used to pay down outstanding debt and for general corporate purposes. We are extremely proud of the growth Marucci has experienced under our ownership. And we feel fortunate to have been able to partner with their outstanding team. We acquired the business in April, 2020, based on our confidence in both Marucci’s brand and management.

Keep in mind, this was at a time when few transactions were being completed due to the pandemic, but our flexible capital structure and our commitment to seizing strong opportunities, even in times of economic uncertainty, allowed us to execute at a time when others weren’t. Since then, the Marucci team has acted decisively, strengthening their brand and growing their core business. They have gained share in new markets like fielding gloves and softball. We have also expanded the Marucci product portfolio by acquiring lizard skins and Baum Bat. We are honored to have partnered in this success. Thank you to Kurt and the entire Marucci team for their contributions over the last several years. We wish them nothing but continued success. Now on to our third quarter.

We are pleased to report remarkably strong third quarter results, which once again, exceeded our expectations and have us raising our full year outlook. Our consistently strong results reflect not only the diversification of our subsidiaries, but our ability to find excellent businesses that produce category leading growth. To underscore this point, since 2019, we have grown consolidated subsidiary adjusted EBITDA for four straight years, despite volatile economic cycles and a once in a generation pandemic. I am pleased to tell you, given our increased subsidiary adjusted EBITDA guidance that Ryan will highlight shortly, we fully expect 2023 to be a fifth straight year of growth. During the third quarter, pro forma consolidated revenue declined by 1%, while Pro forma adjusted EBITDA grew 11%.

EBITDA margins expanded by approximately 250 basis points to a record 21.9% in the quarter. The decline in revenue was due to our industrial businesses. While they benefited from lower commodity input costs, driving the 19% EBITDA growth, we passed some of those lower input costs onto our customers and experienced a mixed shift to higher margin categories, resulting in an 8% decline in revenues. When you look at year-to-date EBITDA performance, our industrial businesses have performed exceptionally well, posting 14% growth. We expect this segment to produce strong growth in the fourth quarter and into 2024. Our branded consumer businesses exceeded our expectations by growing in the third quarter. Pro forma revenues increased by 2%, and EBITDA increased by almost 9%.

This represents the first quarter of positive EBITDA growth this year. As we have stated many times before, inventory-related de-stocking headwinds have significantly lowered our consumer growth rate in 2023. Even though these headwinds still existed in the third quarter, we were able to produce solid growth. While we expect inventory de-stocking to continue in the fourth quarter, comparisons to prior year are expected to ease, and we expect growth rates will further accelerate. Given the broader difficult macroeconomic backdrop, we are certainly pleased with our subsidiaries’ resilience and performance to date, and we remain confident at an even stronger 2024. With that, I will now turn the call over to Pat.

Pat Maciariello: Thanks, Elias. Throughout this presentation, when we discuss pro forma results, it will be as if we owned Primaloft from January 1st, 2022. As Elias mentioned, performance in Q3 materially exceeded our expectations, and we experienced significant growth in both our consumer and niche industrial segments. Lugano continued to perform extremely well, driven by new salon openings, a strong management team, and a disruptive business model. Last quarter, we mentioned that we faced headwinds in several segments due to correcting inventory levels in the supply chain. These headwinds have eased in certain areas, but remain in others. Specifically, in Q3, though financial performance was muted at BOA, bookings turned positive.

Primaloft, on the other hand, continued to seek to reduce demand as apparel makers remain cautious about consumer demand in 2024. Though a significant headwind to CODI’s performance in 2023, we continue to expect these businesses to become a tailwind as the rate of inventory to stocking continues to decrease. Though it may not happen at the same time for Primaloft and BOA due to different industry dynamics, we are confident it will happen for both. Now, on to our subsidiary results, I’ll begin with our niche industrial businesses. For the year-to-date period ending September 2023, revenues declined by 5.7%. However, adjusted EBITDA increased by 14.5% versus the same period last year. For the third quarter, adjusted EBITDA increased by 19%. On a combined basis, our industrial businesses expanded margins in the quarter significantly and consolidated adjusted EBITDA margins grew by over 400 basis points versus the prior year’s quarter.

Though adjusted EBITDA declined slightly for Arnold in the third quarter, for the year-to-date period, the company continued to show solid growth and revenue in adjusted EBITDA as they gained traction securing new projects across markets. Demand levels in the aerospace and defense markets remain elevated driven by the commercial aerospace sector. And for the year-to-date period, the company’s book-to-bill ratio remains above one. Altor continued to show profit growth in the quarter as adjusted EBITDA increased by almost 21% in the year-to-date September period. Though revenue continues to be pressured as lower margin, more cyclical end market space headwinds and the company passed on contractual raw material savings, the efficiency gains made by the management team at Altor significantly more than offset these revenue headwinds.

At Sterno, revenue declined by approximately 8% in the year-to-date September period compared to a year ago, again driven by lumpiness in the company’s centred wax business. Despite this decline, the company continued to operate efficiently and benefit from reduced input and shipping costs, leading to growth in EBITDA of over 40% in the quarter and 12.5% on a year-to-date basis. Turning to our consumer businesses, for the year-to-date September 2023 period, revenues increased marginally and adjusted EBITDA declined by 2.2% as compared to the prior year. As a group, these businesses showed significant improvement in the third quarter, however, as revenue and adjusted EBITDA increased by 2.1% and 8.6% respectively for its Q3 2022. We are hopeful that Q3 represented a turning point for BOA, while the company continued to show a decline in adjusted EBITDA through the year-to-date period, bookings were positive in Q3 versus prior year, and our belief is that the worst of the inventory de-stocking headwinds are behind us for this business.

As we approach ski season, the buzz surrounding the launch of Alpine Boots incorporating our technology continues to gain momentum, and we anticipate a strong launch. Lugano’s growth accelerated further in the third quarter, and for the year-to-date period, revenues and adjusted EBITDA grew by 48% and over 56% respectively compared to prior year. The company benefited from a solid increase in average transaction size in the quarter and saw strong growth in many of its salons, including Washington, DC, and its new Greenwich Connecticut salon. Progress continues to be made on our second flagship salon in Palm Beach, and we anticipated opening in the fourth quarter. Similarly, construction of the company’s London salon is scheduled to begin prior to year-end, and we anticipate opening in the first half of 2024.

The management team at Lugano continues to execute at an incredibly high level, and we look forward to 2024. Marucci once again had an exceptional quarter, and for the year-to-date period, revenue and adjusted EBITDA grew by over 17% and over 50% respectively compared to the year ago period. Primaloft continued to show modest declines in both revenue and adjusted EBITDA in the September year-to-date period as compared to the prior year. As we enter booking season for fall winter of 2024, brands remain cautious, though the company is adding new programs and customers, and we have experienced very little customer attrition. We anticipate a muted Q4, but remain optimistic about the company’s prospects in 2024 and beyond. Under CODI ownership, Primaloft remains well-positioned, and we believe it will prosper following industry-wide inventory de-stocking trends in the apparel business.

5.11 had another solid third quarter, and for the year-to-date September 2023 period, revenue and adjusted EBITDA grew by 10% and 8.6% respectively. Though the company is not immune to the headwinds facing consumers today, 5.11 once again benefited from its diverse channel mix as its professional sales increased both domestically and internationally during the quarter. We continue to see this momentum in the fourth quarter. Velocity continued to struggle in the third quarter, though performance didn’t prove significantly on a sequential basis. We continue to focus both on cost controls and demand stimulation, and believe performance will improve in 2024. Before turning the call over to Ryan, I wanted to discuss a regulatory change coming in the near future impacting our business.

As has been broadly covered, California and several other states have enacted laws banning the sale and distribution of textiles containing PFAS chemicals effective January 1st, 2025. These chemicals are used broadly to impart water resistance and oil repellency and prevent staining. Amongst our subsidiaries, this regulatory change will have the most impact on 5.11. However, they have been proactive in sourcing non-PFAS versions of impacted products and will be transitioning in 2024. As a whole, we are pleased with our performance in the third quarter, as it came in significantly above our expectations. While inevitably there will always be challenges in a broad group of diversified businesses, the quarter’s performance once again demonstrated the strength of our model, and we look forward to growth in the fourth quarter and in 2024.

I will now turn the call over to Ryan for his comments on our consolidated financial results.

Ryan Faulkingham: Thank you, Pat. Moving to our consolidated financial results for the quarter ended September 30th, 2023, I will limit my comments largely to the overall results for CODI, since the individuals 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 September 30th, 2023, was $569.6 million down 1% compared to 575.8 million for the prior year period, this slight year over year decrease primarily reflects declines at velocity and therefore as a result of inventory de-stocking headwinds, partially offset by strong revenue growth at Lugano and Marucci. Consolidated net loss for the third quarter was $3.8 million compared to net income of $2.6 million in the prior year.

The decrease was primarily due to impairment expense recorded at velocity outdoor of $32.6 million, partially offset by strong consolidated gross margin performance. Adjusted EBITDA in the third quarter was $103.9 million, up 13% compared to $91.9 million in the third quarter of 2022. The increase was due to an expansion in EBITDA margin at a consolidated level, as our industrial companies expanded margin significantly as Pat highlighted earlier. EBITDA margin expansion at our consumer businesses were primarily due to Lugano and Marucci. Adjusted earnings for the third quarter was significantly above our expectations at $41 million. This was down from $41.6 million in the prior year quarter, primarily due to increased interest expense, but up sequentially by over 15%.

Adjusted earnings were above our expectations also due to the strong performance at Lugano and Marucci. Now onto our financial outlook. We are pleased to announce that we are raising our full year adjusted EBITDA and adjusted earnings guidance as a result of the strong performance in the third quarter. We are continuing to include Marucci in our guidance ranges as we are not certain the timing of the close of that sale process. For the full year 2023, we now expect consolidated subsidiary adjusted EBITDA to range between $450 million and $465 million, an increase of $12.5 million at the midpoint. This implies 4% growth over the prior full year adjusted EBITDA, pro forma for the acquisition of Primaloft, and implies our fourth quarter 2023, consolidated subsidiary adjusted EBITDA will be up over 10% from the prior year comparable period.

For the full year 2023, we expect adjusted earnings to range between $130 million and $140 million, an increase of over $13 million at the midpoint. Turning to our balance sheet, as of September 30th, 2023, we had approximately $64.7 million in cash, approximately $486 million available on a revolver, and our leverage was 4.03 times. Our leverage decreased sequentially, and we expect it to decline in the fourth quarter. We had substantial liquidity, and as previously communicated we have the ability to upsize our revolver capacity by an additional $250 million. Upon the close of the Marucci sale process, which we expect in the fourth quarter, we anticipate using the proceeds to pay down existing debt, and for general corporate purposes. With our liquidity and capital, we stand ready and able to provide our subsidiaries with the financial support they need, invest in subsidiary growth opportunities, and act on compelling acquisition opportunities as they present themselves.

Turning now to cash flow provided by operations. During the third quarter of 2023, we received $19.7 million of cash flow from operations, primarily result of strong operating performance. This is up $24.3 million from the prior year’s comparable period. During the third quarter, we used $48.7 million in working capital, a substantial decrease from $62.8 million in the prior year, when we needed to support many of our businesses’ inventory levels as a result of supply chain disruptions. For the year-to-date period, cash flow provided by operations has increased almost $100 million as compared to the prior year. Year-to-date Lugano has consumed $139 million in working capital to fund its inventory growth, which has generated exceptional return on invested capital, and enabled the strong year-to-date growth rate we have experienced.

We expect to continue to monetize working capital across the business in Q4, with the exception of Lugano, as we continue to fund its growth objectives. And finally, turning to capital expenditures, during the third quarter of 2023, we incurred $12.1 million of capital expenditures at our existing subsidiaries, compared to $15 million in the prior year period. The decrease was primarily a result of the timing of retail build-outs at Lugano and 5.11 to support their continued growth. For the full year of 2023, we anticipate total capital expenditures of between $60 million and $70 million. We continue to see strong returns on invested capital at several of our growth subsidiaries, and believe they will have short payback periods. Capital expenditures in the fourth quarter will primarily be at Lugano for new retail salons.

With that, I’ll now turn the call back over to Elias.

Elias Sabo: Thank you, Ryan. I would like to close by briefly providing an update on the M&A market and our strategic initiatives. In terms of M&A, we have seen some green shoots emerge with a few higher quality deals being reviewed, but overall, markets are weak. Of course, the current economic backdrop suppresses M&A activity with rising borrowing costs and treasury yields hitting 20 year highs. The lack of visibility continues, and as we remain on the sidelines, we continue to strengthen our pipeline of targets for each of our verticals, including healthcare, and fully expect to capitalize once the broader market headwinds ease. In the realm of ESG, our steadfast objective has always been to create tangible social and environmental benefits that resonate with our core values while delivering robust financial returns for our stakeholders.

Transparency and accountability have remained the cornerstones of our business ethos, driving us to invest in people, refine processes, and explore growth avenues that pave the way for transformative long-term changes within our companies. Throughout 2023, we have developed a systemic approach to ESG initiatives. We focused on climate action with a number of new programs aimed at waste reduction and emissions, both scopes one and two. We have made progress on social responsibility with diverse new hires, new programs designed to improve the wellbeing of our employees, and by strengthening partnerships with community organizations. We’ve recently developed our human rights and labor policy, and through sound corporate governance, we continue to uphold the highest standards of ethics, transparency, and accountability in order to safeguard our shareholders’ interests.

We are also collaborating with each of our subsidiaries so that they too can create their own ESG strategies that align with our vision. I extend my gratitude to our dedicated employees, shareholders, and all stakeholders who have partnered with us in our journey towards positive change and sustainable value creation. Moving forward, Compass remains committed to driving positive change and leading the industry to become the model of choice through our unwavering commitment to ESG principles. We will continue to innovate, collaborate, and set an example for others, ensuring our business practices not only meet the demands of the present, but also enhance the future. In conclusion, we’re proud of our third quarter results. They continue to highlight the benefits of our strategy.

Owning a diversified group of strong, disruptive, and industry-leading businesses is how we were able to produce the robust, double-digit adjusted EBITDA growth we saw this quarter. As we continue to work through this period of uncertainty, we are entering the end of the year from a position of strength. The strategic decision to divest Marucci will allow us to de-leverage our balance sheet and provide ourselves with strong liquidity to act when we feel is appropriate. I’d like to extend my thanks to the entire CODI family for their strong execution during the quarter amidst the persistent, challenging environment. Before turning over to Q&A, I’d like to mention that we will be hosting our investor and analyst date in Newport Beach, California on January 17th, 2023.

We will be showcasing our Lugano Diamonds subsidiary with presentations from Lugano and CODI Management, and we will hold the event at their newest membership club, Prive [ph]. Expect more details in the coming weeks, but we hope to see you all there. With that, operator, please open the lines for Q&A.

See also 25 Least Racist States in the US and 25 Least Forested Countries in Europe.

Q&A Session

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

Larry Solow: Great. Good afternoon, guys and congrats on the announced sale. It looks like 11.5 times trailing EBITDA, but I don’t remember the credit I’ve been about what you have paid for it, but of course, you’ve run the business quite long since. So I guess the first question related in terms of reducing the debt, are there any restrictions or you’ll be able to reduce sort of the, I guess, the very old piece first, right?

Ryan Faulkingham: Yes, Larry, this is Ryan.

Larry Solow: Yes.

Ryan Faulkingham: Yes, sorry. There’s no inability of us. We could pay our revolver back and our term loan, both are pre-payable.

Larry Solow: Got it. Okay, great. And then just switching gears, Elias, you gave us a good kind of state of the union on the M&A environment. How about just in terms of, obviously, it feels like the consumer has certainly gotten a little bit better through the year and certainly, or not as worse as we thought it was going to be in the beginning of the year, and it looks like finally your inventory of the stocking might be starting to wane, but just kind of what’s your assessment where you stand today from where we were in the beginning of the year in terms of your average consumer. I know you had kind of gotten a little bit more optimistic that a lot of your businesses, your consumers weren’t being impacted by this, the flow that in the economy, but any kind of update on that, those thoughts would be great?

Elias Sabo: Sure Larry. I would say if you went back to a year from today or at the beginning of the year, we are much more constructive and positive really across the board. Obviously, our industrial businesses have had a great year, a lot of that. I know there’s some revenue headwind, but a big chunk of that is due to the declines in commodity costs and us sharing those with our customers. So I think you need to look through that because unit growth is still present and the companies are performing exceptionally well on a kind of earnings generation standpoint. We would expect that to continue. The big change from a year ago and from the beginning of the year is how we look at kind of our consumer businesses. And so, when you think about end consumer demand, it’s held up better than I think anybody has anticipated over the course of the year.

That’s not just for us, that’s just consumption broadly. And we see strong wage growth that’s still out there and employment growth. And I think that’s a great underpinning. Clearly, it’s, kind of counter balancing some of the increased, kind of interest cost and monetary headwinds that we’re all suffering from. But the consumer has broadly held up. For us, the big issue because a lot of our earnings are generated at the wholesale level where we’re selling into, a retailer, even farther down in the case of a Primaloft or a BOA. We’ve — the whole year been sounding the alarm bells that this inventory de-stocking is a headwind that, frankly, a year and a half ago we didn’t anticipate. I don’t think anybody really did. And it’s sort of a generational type of thing.

I mean, this is all the result of distortions that came out of the pandemic, supply chain issues requiring us to over order kind of across the board, and then dealing with all that excess inventory. So, we were very cautious that was going to create a depression to depress our earnings on our consumer side. And it, in fact did. Where we stand today isn’t to say that those headwinds are gone completely, but the comparisons have become so easy now as we come into the fourth quarter. We feel it’s very easy to lap those with companies like BOA, Primaloft, Velocity, 5.11, everybody who’s through the consumer wholesale market. And as we come into 2024, eventually sell-through will match sell-in. And when that happens, we expect a real strong snapback in kind of earnings from BOA, Primaloft, all the companies that have that wholesale exposure are either, are even farther down.

I will say for now, we’re seeing some sequential improvement in terms of order patterns out of those companies, but it isn’t back to where it was a year and a half ago, but the comparisons have become so easy, they’re no longer headwinds. So, we are very bullish. We feel Q4 and what we’ve seen so far in October lead us to believe we’re going to have another great quarter. And as we come into 2024, we’re preparing for what we think is going to be a really strong year.

Larry Solow: Awesome. And you gave a lot of detail, Lugano obviously really, really not going to cover up the ball, just on BOA, which obviously, one of your larger consumer brands and probably been taking the big impact from the de-stocking. Can you just speak to some of sort of the operating trends outside of that de-stocking? I know you had, I think in the beginning of the year, kind of projected or called out that you thought SKUs would be up over 10% by this fall compared to last fall. And for what it’s worth, I have seen a lot more BOA and REI circular and whatnot. So it does seem to be, at least anecdotally, getting more into the U.S., but just any color on trends that we might not actually be seeing in the reported numbers would be great? Thanks.

Pat Maciariello: Sure. I would just, this is Pat. Larry, how are you? I would just say, we touched on it that the headwinds and bookings are starting to not be as much headwinds anymore. And I touched on that specifically. We are continuing to grow SKUs and at every quarterly board meeting, I see solid growth in our SKUs. I don’t have the exact numbers in front of me, but it’s in that same realm, and as you look out to 2025 kind of project, and beyond 2024 projected SKUs are strong too. We mentioned Alpine. It’s getting a really strong start. If you go in the, any of the ski outfitters and ski stores, I think they’ll tell you the same thing. It’s taking a significant chunk of demand there. And then there’s other pockets. I mean, we have some strong momentum in some of our Asian businesses, and you’ve probably seen the Under Armour slip speed, which is being pushed very well, and is a really amazing shoe.

I’m wearing them right now. So, there’s a lot of other pockets of sort of success and growth there.

Larry Solow: Great. Thanks, Pat. Appreciate it. Thanks for the color, guys.

Pat Maciariello: Thank you, Larry.

Operator: Your next question comes from the line of Matt Koranda from ROTH Capital. Your line is now open. Your next question comes from Robert Dodd from Raymond James.

Robert Dodd: Hi, guys. Congrats on the call. On the leverage, I mean, to your point, you’re for those three here, after Marucci, the Marucci sale, whatever exactly that is, you’re likely at least down to the bottom end of your target range of three times, I think, maybe even slightly below that. Does that increase the likelihood of expanding more vigorously into the healthcare vertical in 2024, given you will have quite a lot of available capital at that stage by the standards of where you normally make large acquisitions, if that makes sense?

Elias Sabo: Robert, this is Elias, and thank you for the question. The answer is yes, if I want to be very specific. Clearly, we were being cautious as our leverage had been outside of the stated leverage range that we wanted to be in, and it just so happened to be at a time when M&A activity is at basically 20 year lows. So it wasn’t that hard to be patient and disciplined during this time. Having capital available right now, and as you mentioned, being now well within our leverage targets is a really good opportunistic spot for us. And generally in conditions where it’s murkiest, the outlook and kind of, you can’t turn on CNBC or Bloomberg or any of the other financial outlets without hearing kind of what is going to be the economic outcome from all of this monetary tightening and how our consumer is going to hold up.

And you can name the whole myriad of kind of issues and problems that everybody is looking at right now and how that’s going to impact kind of the economy. And generally, that causes buyers to really tense up. We’ve found, historically, when we can be active in markets, because we have permanent capital, our capital is committed from our banks, as you know. And we have very — a lot of flexibility. We’ve found that these are the most ideal times to be an aggressive acquirer. And so, it really works out quite well that we’re opening up all this balance sheet capacity at a time when economic kind of murkiness is probably reaching its peak. And generally, that creates really good opportunities. To the extent we could deploy and acquire a healthcare company or two, that would be outstanding.