Thank you for standing by, and welcome to CompoSecure's Fourth Quarter and Full Year 2023 Earnings Conference Call. I would now like to hand the call over to CompoSecure's Investor Relations adviser, Sean Mansouri, with Elevate IR. Please go ahead.

Good afternoon, and thank you for joining us to review CompoSecure's fourth quarter and full year 2023 financial results. With me on the call is Jon Wilk, CompoSecure's Chief Executive Officer; and Tim Fitzsimmons, Chief Financial Officer. They will begin with prepared remarks, and then we will open the call for Q&A. During the call, we will make statements related to our business that may be considered forward-looking including statements concerning our plans to execute on our growth strategy and our ability to maintain existing and acquire new customers as well as other statements regarding our plans and prospects. Forward-looking statements may often be identified with words such as we expect, we anticipate or upcoming. These statements reflect our views only as of today and should not be considered our views as of any subsequent date. We undertake no obligation to update or revise these forward-looking statements. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to the information in our annual report on Form 10-K and other reports filed with the SEC, which are available on the Investor Relations section of our website at composecure.com and on the SEC's website at sec.gov. Please note that the discussion on today's call includes certain non-GAAP financial measures including adjusted EBITDA, adjusted net income, adjusted EPS and free cash flow. The company believes these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends impacting the company's financial condition and results of operations. These non-GAAP financial measures should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation of GAAP to non-GAAP measures is available in our press release and earnings presentation available on the Investor Relations section of our website. Thank you. And with that, let me turn the call over to Jon to discuss our fourth quarter and full year results.

Thank you, Sean. Good afternoon, everyone, and thank you for joining us for our Fourth Quarter and Full Year Conference Call. Our fourth quarter results delivered a strong close to 2023, capping off another year of record revenue and adjusted EBITDA, while providing strong free cash flow. I'd like to take a moment to acknowledge the efforts of our team in 2023. While we face challenges in the macroeconomic environment, our deep client relationships, best-in-class products and a thoughtful approach to managing our business allowed us to deliver adjusted EBITDA in line with our original guidance issued back in March 2023. We accomplished a lot last year. We extended long-term contracts with our top two clients and produced more than 31 million metal cards, which is another record for the business. And we introduced several innovations such as the Echo Mirror card that are clear examples of how CompoSecure delivers unique value for our customers. I'll share more on this shortly. Now to summarize our financial results on Slide 3. Net sales in the fourth quarter increased to $100 million due primarily to growth in our domestic business, which exceeded our previous quarterly record set in the third quarter. Looking at our bottom line, Q4 adjusted EBITDA grew more than 20% to $37 million, reflecting our most profitable quarter of the year. As we have often stated, our team is acutely focused on profitability while simultaneously driving investments to capture long-term opportunity and value. I want to call out a few additional highlights. In 2023, we supported more than 150 new and ongoing card programs for our customers, up from more than 125 programs in 2022. This past December, ABI Research ranked CompoSecure as the market leader in its assessment of the metal payment card market. We believe momentum is also building for our Arculus products as fintechs are beginning to leverage and market our innovative technology. More to come on this later in the call. Card issuers reported growth in 2023 and have maintained a positive outlook for the year ahead, indicating continued investments in customer acquisition and retention due to sustained customer demand. For 2024, we are issuing net sales guidance of $408 million to $428 million, and for adjusted EBITDA, we're targeting a range between $147 million and $157 million. These targets reflect our expectation for continued strength in our business. Our adjusted EBITDA target also factors in a net investment for Arculus. If you remember, in 2022, we had a net investment of $21 million which we reduced to $14 million in 2023. For 2024, we expect that number to improve once again before turning positive for fiscal year 2025. I am also very excited to announce that our Board has approved a securities repurchase program for up to $40 million over three years, providing us with a mechanism to acquire securities in CompoSecure. We believe our securities trade at a discounted valuation for a growing business that commands a leading market share with gross margins north of 50%, adjusted EBITDA margins in the high 30s and meaningful free cash generation, and we are trading at only 5x trailing enterprise value to EBITDA. Moving on to Slide 4. We wanted to share several new metal card programs since our last call. Let's begin with one of the unique innovations I mentioned earlier, our Echo Mirror card. The card's surface is as shiny as a mirror, hence the name. Trade Republic, a European fintech, began marketing the card recently, and it's proven to be extremely popular. As a matter of fact, the Echo Mirror card has become the main backsplash image on Trade Republic's homepage. You can also see several vertical-focused programs on this slide, such as the BMW or Fan Inc card as well as international examples for Kotak in India and Banque Palatine in Europe. Continuing on Slide 5, I wanted to share how our customers are leveraging our products and brand in their marketing efforts. I already mentioned Trade Republic, but you can see an example of how they are marketing this on social. In the past, I've mentioned Chainge Finance. Chainge is an international fintech that has started selling a company-branded cold storage wallet powered by Arculus. Venus.io, a Latin American-based company, is using a similar approach for their branded cold storage wallet. And for Radix, a DeFi-based fintech, we also created a co-branded card that allows them to leverage the strength of our Arculus brand in the market for their cold storage wallet. On Slide 6, I mentioned card issuer trends earlier, and I'd like to provide some further insight. The information is based on quarterly reported public information. After seeing accelerated growth driven by pent-up demand during the pandemic, our large customers continue to see strong purchase volume. In addition, you'll notice similar trends around new card acquisitions, as well as a continued commitment to marketing spend. Looking at the overall payment card market, we highlighted several customer and partner quotes on Slide 7. We're hearing positive sentiment related to growth and consumer spending in 2024, backed by a strong labor market and wage growth. Consumer demand for products is expected to continue and card issuers remain committed to marketing investment to drive customer acquisition. These factors point towards continued growth for the premium payment card market. I always like to take the opportunity to outline our Arculus platform on every call to provide clarity around our product capabilities. Let me start on the right side with our Arculus B2B cold storage, which allows users to securely store, send and receive digital assets. As you know, we offer both white label and co-branded solutions for our customers. On the left, you can see several use cases for our Arculus authenticate offering, such as secure login, new device authentication and high-risk transaction verification. On Slide 9, we recently partnered with Forbes to help us better understand business leader perceptions related to fraud and user authentication as we drive forward on Arculus opportunities. Forbes surveyed 200 U.S.-based leaders from medium to large organizations across a variety of financial institutions. The results showed that passwords remain a challenge for the industry with negative impacts on consumer experience, organizational efficiency and the bottom line. While passwords are a clear issue, the real challenge highlighted by the research continues to be how do businesses deliver a higher level of security while maintaining or improving the consumer experience. We believe that Arculus technology tied to a payment card can help deliver the right solution for both improved security and an enhanced customer experience. With that, I'll hand it over to Tim to review our financials before returning for closing remarks.

Thanks, Jon, and good afternoon, everyone. I'll provide a more detailed overview of our Q4 and full year 2023 financial performance and then turn it back to Jon before we open the call for questions. Unless stated otherwise, all comparisons and variance commentary are on a year-over-year basis. In Q4, net sales increased 7% to $99.9 million compared to $93.8 million. The increase was driven by continued domestic growth in our metal payment card offerings, partially offset by lower international sales, which is a more variable market due to customer mix and a smaller sales base. Gross margin for the quarter was 53% compared to 54% in the prior year. The decrease was primarily due to lower production efficiencies from new card constructions and customer designs. Net income for the quarter increased 39% to $31 million compared to $22.4 million in the prior year. The increase was driven by prudent operating expense controls as reflected by a reduction in selling and general administrative expenses as well as changes to the fair value of warrants, earn-out consideration and derivative liabilities. Adjusted EBITDA in Q4 increased 22% to $37.2 million compared to $30.6 million in the prior year, and our adjusted EBITDA margin increased approximately 461 basis points to 37% compared to 33% in the fourth quarter of 2022. The increase in adjusted EBITDA was driven by net sales growth and the aforementioned operating expense controls. On Slide 12, you can see our full year performance. Net sales were up 3% to a record $390.6 million driven by continued strong U.S. demand, partially offset by our international business, which was impacted by global economic conditions. Our full year gross margin was 54% compared to 58% in the prior year due to lower production efficiencies from new card constructions and customer designs. Net income from the year was $112.5 million compared to $131.8 million in the prior year. The lower net income was driven primarily by the noncash changes in the fair value of the warrant, earn-out consideration and derivative liabilities. Adjusted EBITDA for 2023 increased 6% to a record $145 million compared to $136 million in the prior year. Adjusted EBITDA margin for the full year increased 114 basis points to 37% compared to 36% in year '22. Looking closer at the split between domestic and international, you can see that our fourth quarter domestic net sales remained strong at $86 million, which is up 9% year-over-year and surpassed our record results in Q3. International net sales for the fourth quarter of 2023 were $14 million, which was up sequentially but down year-over-year. As we have communicated in the past, we expect our international business to account roughly 20% of our annual total net sales mix. It was 18% of the mix in 2023 and 22% in 2022. Moving on to the balance sheet. At December 31, 2023, we had cash and cash equivalents of $41.2 million and total debt of $340.3 million, which includes $210 million of term loan and $130 million of exchangeable notes. This resulted in a total net debt of $298.5 million. In addition, I want to mention our inventory levels. Jon often shares our thoughtful approach to managing the business while effectively balancing our investments. One such example is that we have proactively increased inventory levels near the end of 2023 to ensure we are in the best position to deliver on our clients' needs throughout 2024. As always, we provide both our overall debt leverage ratio and our bank agreement secured debt leverage ratio as our bank agreement is calculated with slight differences. At December 31, 2023, our overall leverage ratio was 2.35x based on a total net debt of $340.3 million and trailing 12-month adjusted EBITDA of $145 million. This compares to 2.6x at December 31, 2022, with the improvement driven by paying down debt and increased TTM adjusted EBITDA. At December 31, 2023, we had a bank agreement secured debt leverage ratio of 1.39x based on a total secured debt of $210.3 million and trailing 12-month bank adjusted EBITDA of $151 million. This compares to 1.62x at December 31, 2022. Turning to Slide 15. At December 31, 2023, we had free cash flow of $55 million based on $104 million in net cash from operations, less investment in capital equipment of $11 million and tax distributions of $38 million. This resulted in a free cash flow yield of 13% based on a market cap of $429 million. This compares to a free cash flow at December 31, 2022, of $47 million, which also gave us a free cash flow yield of 13%. Note, you can see the GAAP cash flow statement and a footnote on the calculations of market cap on this slide. I want to turn now to earnings per share. As a reminder, our method under GAAP for calculating basic and diluted EPS allows us to allocate changes in adjustments of mark-to-market instruments among the public company and the operating subsidiaries to better reflect the actual economic impact of the conversion of such instruments on our net income and our per share basis. GAAP EPS for the three months ended December 31, 2023, was $0.17 per basic and diluted share. This compares to $0.14 per basic and diluted share in the year ago period. The increase was driven by operating expense controls as well as changes to the fair value of the warrants, earn-out consideration and derivative liabilities primarily due to changes in our stock price. You could read through the footnotes on this slide that take you through the complexities of the allocation of net income due to the UP-C structure and the shares that are included in the basic and diluted calculations. Turning to Slide 17 for our full year GAAP EPS, which was $1.03 per basic share and $0.96 per diluted share. This compares to $1.21 and $1.13 per basic and diluted share, respectively, in 2022. Again, this was impacted by the same factors I outlined on the previous slides as noncash adjustments can have either a positive or negative impact on net income. On Slide 18, we're also providing a non-GAAP adjusted net income and adjusted EPS, which excludes the impact of noncash fair value adjustments for the warrants, earn-out revaluations and stock compensation. We believe that this provides a clearer picture of the economics of the company's operating results. With that background, our non-GAAP EPS for the fourth quarter of 2023 was $0.29 per basic share and $0.26 per diluted share. This compares to $0.23 per basic share and $0.20 per diluted share in the year ago period. In the appendix, you'll find a reconciliation between the GAAP and non-GAAP net income used in these calculations. Turning to Slide 19. Adjusted EPS for the 12 months ended December 31, 2023, put us at $1.12 per basic share and $0.97 per diluted share. This compares to $1.10 and $0.94 per basic and diluted share, respectively, in 2022. I'll now turn it back to Jon to discuss our guidance and give closing remarks.

Thanks, Tim. As I mentioned earlier, we expect our 2024 net sales to range between $408 million and $428 million, and adjusted EBITDA to come in between $147 million and $157 million. Turning to Slide 21. I want to conclude by summarizing a few key themes that we covered today. As I've stated in the past, we've always had a thoughtful approach to managing the business while effectively balancing our investments, which has resulted in a long history of delivering profitable growth. Our team delivered a record year in 2023 including meeting our original adjusted EBITDA guidance. The consumer continues to prove resilient and global issuers are actively expanding their metal payment card programs to satisfy that growing demand. We believe Arculus is starting to gain momentum as fintechs seek to leverage our innovative technology to expand their capabilities. As mentioned, we expect the net investment for Arculus to continue to improve and turn positive for fiscal 2025. And last, we believe our current market valuation reflects a discount for a category-leading business and the securities repurchase program we announced today equips us with another tool to deliver shareholder value as we execute on our growth and profitability objectives. With that, I'd like to open up the call to Q&A.

The operator provided instructions on how to ask questions. Our first question comes from the line of John Todaro of Needham & Company.

I just have one here. You mentioned the net investment for Arculus turning positive in 2025. Is there any metrics we can get on Arculus in that growth? Because, just thinking Bitcoin around all-time highs here, a lot of volume activity has picked up in the space. Is there almost a night and day difference in what we're starting to see in Arculus now versus maybe six months ago? And if not, what environment is needed for Arculus to start contributing?

Thanks, John, for the question. We're not disclosing deeper metrics at this point. We are going to continue to show you and others examples of Arculus executions like Chainge Finance, Radix, Venus.io and others where we are seeing exactly the types of things we want to see, John, where people are white labeling, co-branding the solution in various alternatives and delivering those to the market through their channels. So we are seeing that kind of momentum in both executions, in our pipeline and the discussions that we're having as well. And yes, we've seen an uptick from the market, and I think the increase in crypto prices is certainly, we believe, a positive. If you look at the net investment in Q4 at roughly 2.4, it's headed in exactly the right direction that we want. And we think that will improve again next year while turning positive in '25.

Our next question comes from the line of Hal Goetsch of B. Riley Securities.

You guys mentioned inventories. They've been actually flat since the Q1 report, but you called out it being maybe elevated versus year-end 2022. Where do you think inventories are in the channel? And do you think over time inventory levels around 2022 levels are possible again? Or are you just really comfortable at this level going forward?

Yes. So Hal, we separate those issues of inventory in the channel. We touched on it briefly last time we spoke with a couple of limited examples of people managing inventory on their end. We think those have largely subsided. From our perspective, we were almost inventory limited for a long time in terms of our ability to ensure that we had enough chips, metal and other key items for us. And we feel comfortable at the levels that we're operating to ensure that we can deliver against the growth that we've outlined.

If I can ask one follow-up on new program wins. That was some great new information going from 125 to 150 or so. How many of them are in new products like Echo Mirror and some of the other products? Can you just give us a feel of how many of those new products are part of those programs?

Yes. Those new products, products like our LED card, Echo Mirror and others are definitely part of those wins. And typically, we see those ramps build from initial executions with clients that make a big splash and have early success, followed by others in the market. So we're quite encouraged by the take-up of some of these new products and look forward to seeing that build with products like our Lux Glass card that we expect to see tick up here over time.

Our next question comes from the line of Mark Palmer of Benchmark.

What would you say are the main swing factors between the top end and the lower end of your guidance for net sales and adjusted EBITDA for 2024? And what portion of that is simply due to the macro?

Thanks, Mark. Look, we've laid out a range for sales. We've got, we think, very good visibility as we look out into the year through our top clients and as in any year, there are things that we need to lock down both with our largest clients and the visibility that we've been given with high confidence as well as the other identified opportunities. And so it's just essentially executing against what we can see in front of us. And that's how we laid out that range and feel quite good about it.

And just one follow-up. With regard to the $40 million repurchase program over the next three years, what will drive the decision making with regard to the allocation across common stock, warrants and converts?

So Mark, our Board has been and will continue to look at capital allocation. Historically, it's been focused on driving organic growth and paying down debt. We've had the conversations throughout about all of the different things we could do with capital to help drive shareholder value. And the Board authorized the plan to enable us to do any of those things that we outlined. And we will continue those discussions with the Board around which of those avenues we pursue. All of those decisions will be made in consultation with the Board as we execute.

Our next question comes from the line of Joe Flynn of Compass Point Research and Trading.

I know we're still relatively early until ultimately the deal closes, but if you guys could comment maybe on the Capital One discovery deal and ultimately your outlook of how that impacts the volume of metal cards longer term, that would be really helpful.

Thanks, Joe. When we think about that deal, Capital One is a client today. We do cards like Venture X, Venture, Spark and others. Discover, we have very little business. We see this as neutral to positive for us as it may open up an additional opportunity, but no additional comments beyond that.

I wanted to ask one more question on the capital allocation side. You guys have definitely shown increased flexibility with focusing on paying debt down and now the buyback. I just wanted to spread the discussions over potentially doing share distributions to potentially lower some of the impact of the UP-C structure? Or anything you could provide there would be helpful.

Yes. Just foundationally, as I said in my prepared remarks, we believe our stock is undervalued. We have a market-leading company with strong gross margins north of 50% and EBITDA margins at 37%. We're trading near 5x enterprise value to EBITDA. We fundamentally believe our stock is undervalued. The Board has authorized additional flexibility around stock buybacks, warrants, notes or other levers that we and the Board deem appropriate to drive shareholder value. This is us leaning in and saying we believe we're undervalued and we want the necessary tools to address that in the market. You've commented correctly that we've been successful in paying down debt. Our leverage ratios are 2.4x total debt and 1.4x on our bank leverage. We paid down additional debt this year and ended the year with substantially increased cash. Beyond that, I'm not going to get more specific at this point, but we've got the tools in our tool set we believe to address challenges we see and to drive shareholder value.

Our next question comes from the line of Reggie Smith of JPMorgan.

I was hoping that you could maybe talk a little bit about the revenue cadence for next year. Should we think about a similar profile to previous years? Or how are you thinking about that? I have a follow-up as well.

Thanks, Reggie. We don't generally see seasonality in our business driven by time of year. It's typically driven by timing of different programs as we move through the year. Beyond that, it's not something we look at and say X quarter is always typically higher or lower than others, and we believe we're well positioned to hit the total ranges that we've laid out for the year.

Got it. And then historically your revenue growth rate has bounced around quite a bit. Obviously, 2022 was a record year in terms of growth. I know you've talked about double-digit growth longer term. What's your current thinking on the long-term outlook for metal cards in your business in general? And if it's significantly higher than what it is today, is it macro or is it adoption? What's the bridge to get back to that longer-term growth profile?

Thanks, Reggie. When we look at the growth rate of this company over the last five to ten years, it's a double-digit grower. We have done that consistently over that time frame. So yes, over time we still believe this business is a double-digit grower. When you talk about what helps it get there over time, I go back to the core tenets: continued domestic expansion outside of our top clients, international growth, and fintechs U.S. and international that help drive that growth. We've continued to demonstrate progress with the number of new clients that we're opening among the top 10 and top 20 U.S. banks. International did vary this year, coming in right around 20% of sales, a little under our historical target, but we see that continuing to grow and be important. On top of that, we continue to build out the sales force and distribution partners and execute on those opportunities. That's how we think about achieving long-term double-digit growth.

Thank you. As I show no further questions in queue, that does conclude today's conference call. Thank you for participating. You may now disconnect.