8-K
GPGI, Inc. (GPGI)
UNITED STATES
SECURITIES AND EXCHANGECOMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13or 15(d)
of the Securities ExchangeAct of 1934
Date of Report(Date of earliest event reported): May 6, 2024
CompoSecure, Inc.
(Exact Name of Registrantas Specified in its Charter)
| Delaware | 001-39687 | 85-2749902 |
|---|---|---|
| (State or Other Juris-diction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 309 Pierce Street<br><br> <br>Somerset, New Jersey | 08873 | |
| --- | --- | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including
area code: (908) 518-0500
Not Applicable
(Former Name or FormerAddress, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Class A Common Stock, $0.0001 par value | CMPO | Nasdaq Global Market |
| Redeemable warrants, each whole warrant exercisable for one share of Class A Common Stock | CMPOW | Nasdaq Global Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02 | Results of Operation and Financial Condition |
|---|
On May 6, 2024, the CompoSecure, Inc. (the “Company”) issued a press release announcing its financial results for the three months ended March 31, 2024, and provided an investor presentation to accompany the press release. The press release and business presentation provide business updates, including the declaration of a special cash dividend of $0.30 per share to the Company’s Class A stockholders and an accompanying distribution of $0.30 per share to Class B unitholders of the Company’s subsidiary, CompoSecure Holdings, L.L.C. The total amount of cash to be disbursed to Class A stockholders and Class B unitholders is expected to be approximately $24.2 million. Both the special cash dividend and the distribution will be paid on June 11, 2024 to Class A stockholders and Class B unitholders of record as of May 20, 2024. Copies of the press release and the investor presentation are furnished herewith as Exhibits 99.1 and 99.2, respectively.*
| Item7.01 | Regulation FD Disclosure |
|---|
The information included under Item 2.02 of this Current Report on Form 8-K is incorporated into this Item 7.01 by reference.*
| Item 9.01 | Exhibits |
|---|
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release of the Company, dated May 6, 2024 |
| 99.2 | Investor Presentation, dated May 6, 2024 |
| 104 | Cover Page Interactive Data File (embedded with the Inline XBRL document) |
* The information in Items 2.02 and 7.01 of this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| COMPOSECURE, INC. | ||
|---|---|---|
| Date: May 6, 2024 | By: | /s/Timothy Fitzsimmons |
| Timothy Fitzsimmons | ||
| Chief Financial Officer |
Exhibit 99.1
CompoSecureReports Record First Quarter 2024 Financial Results and Declares Special Cash Dividend
Q1 Net Salesup 9% to $104.0 Million; Q1 Net Income up 59% to $17.1 Million; Q1 Adjusted EBITDA up 6% to $37.8 Million
DeclaresSpecial Cash Dividend of $0.30 per Share
SOMERSET,N.J., May 6, 2024 -- CompoSecure, Inc. (Nasdaq: CMPO), a leader in metal payment cards, security, and authentication solutions, today announced its operating results for the first quarter ended March 31, 2024.
“We are off to a strong start in 2024 as we generated a record quarter of revenue, driven by continued momentum in our domestic business,” said Jon Wilk, President and CEO of CompoSecure. “We were excited to see several high-profile customer programs that garnered significant attention in the marketplace including a new, limited edition version of a payment card made from a recycled airplane and the Robinhood Gold Card. CompoSecure continues to generate meaningful free cash flow and ended the quarter with a cash balance of $55 million, which has more than doubled from one year ago.”
Mr. Wilk continued, “Given the Company’s robust cash position, our Board of Directors has declared a special cash dividend of $0.30 per share. This announcement reflects our commitment to rewarding CompoSecure shareholders as well as our confidence in continuing to generate strong free cash flow. We are pleased to incorporate another avenue for enhancing shareholder value into our capital allocation framework, which now encompasses organic growth investments, debt paydowns, securities repurchases, and consideration of additional dividends.”
Q1 2024Financial Highlights (vs. Q1 2023)
| · | Net Sales: Net Sales increased 9% to $104.0 million compared to $95.3 million. The increase<br> was primarily driven by a record quarter for CompoSecure’s metal payment card business. |
|---|---|
| · | Gross Profit: Gross Profit increased 3% to $55.2 million or 53.1% of Net Sales, compared to<br> $53.4 million or 56.0% of Net Sales. The decrease in gross margin was primarily due to inflationary<br> pressure on wages as well as product mix. |
| · | Net Income/EPS: Net Income increased 59% to $17.1 million compared to $10.7 million. The<br> increase was primarily driven by higher net sales and changes to the fair value of warrant<br> liabilities, earnout consideration liability and derivative liability. Net Income per share<br> attributable to class A shareholders was $0.20 (Basic) and $0.17 (Diluted), compared to $0.13<br> (Basic) and $0.11 (Diluted) in the year-ago period. |
| · | Adjusted Net Income/Adjusted EPS: Adjusted Net Income (a non-GAAP measure) increased 12% to $23.1<br> million compared to $20.6 million in the year-ago period. Adjusted EPS (a non-GAAP measure),<br> which includes both class A and class B shares, was $0.29 (Basic) and $0.25 (Diluted) compared<br> to $0.27 (Basic) and $0.23 (Diluted) in the year-ago period (see reconciliation of non-GAAP<br> measures shown in table below). |
| · | Adjusted EBITDA: Adjusted EBITDA (a non-GAAP measure) increased 6% to $37.8 million compared to<br> $35.5 million, with the increase driven by higher Net Sales. |
Liquidityand Capital Structure
| · | Balance Sheet: At March 31, 2024, CompoSecure had $55.1 million of cash and cash equivalents<br> and $335.6 million of total debt, which included $205.6 million of term loan, and $130.0<br> million of exchangeable notes. This compares to cash and cash equivalents of $41.2 million<br> and total debt of $340.3 million at December 31, 2023, and cash and cash equivalents<br> of $22.6 million and total debt of $362.8 million at March 31, 2023. CompoSecure’s<br> secured debt leverage ratio was 1.34x at March 31, 2024 compared to 1.39x at December 31,<br> 2023 and 1.60x at March 31, 2023. |
|---|---|
| · | Shares Outstanding: At March 31, 2024, CompoSecure had 80.6 million shares outstanding<br> which included 20.6 million class A shares and 60.0 million class B shares (for more information<br> on shares outstanding, both Basic and Diluted, please refer to CompoSecure’s SEC filings<br> and the accompanying earnings presentation). |
OperationalHighlights
| · | Strong<br> domestic growth demonstrated by 26% increase in Net Sales compared to Q1 2023. |
|---|---|
| · | Several<br> high-profile customer card programs launched this quarter, including a new limited edition<br> version of the Delta Reserve card made from a recycled airplane, the Robinhood Gold Card,<br> Lloyds Bank in the UK, and Rogers Bank in Canada, among others. |
| · | Product<br> highlights: |
| o | Echo<br> Mirror Card now available in black and gold, in addition to silver |
| --- | --- |
| o | Arculus<br> Cold Storage multi-card/wallet support, allowing customer to split assets among multiple<br> Arculus cards |
| o | Arculus<br> Cold Storage support for additional blockchains including XDC, Provenance, and Stellar as<br> well as Ondo tokens and Polygon NFTs |
| · | CompoSecure<br> Leadership recognition: |
| --- | --- |
| o | Tim<br> Fitzsimmons, CFO, NJBIZ Leaders in Finance Award |
| --- | --- |
| o | Greg<br> Maes, COO, finalist, 2024 Manufacturing Leadership Awards |
SpecialCash Dividend
CompoSecure’s Board of Directors (the “Board”) has declared a special cash dividend of $0.30 per share to Class A shareholders. The Company has also declared a corresponding distribution of $0.30 per share to Class B unitholders of CompoSecure Holdings, L.L.C. Both the dividend and distribution will be payable on June 11, 2024 to Class A shareholders and Class B unitholders of record as of May 20, 2024 and will be funded by cash on the Company’s balance sheet. The total amount of cash disbursed to Class A shareholders and Class B unitholders is expected to be approximately $24.2 million. The Board may consider future special and recurring dividends and distribution payments in accordance with the Company’s governance documents and borrowing arrangements.
2024 FinancialOutlook
CompoSecure is reiterating its previously issued full year 2024 guidance, which calls for Net Sales for the full year to range between $408-$428 million and adjusted EBITDA to range between $147-$157 million.
ConferenceCall
CompoSecure will host a conference call and live audio webcast today at 5:00 p.m. Eastern Time to discuss its financial and operational results, followed by a question-and-answer period.
Date: Monday, May 6, 2024
Time: 5:00 p.m. Eastern Time
Dial-in registration link: here
Live webcast registration link: here
If you have any difficulty registering or connecting with the conference call, please contact Elevate IR at (720) 330-2829.
A live webcast and replay of the conference call will be available on the investor relations section of CompoSecure’s website at https://ir.composecure.com/news-events/events.
About CompoSecure
Founded in 2000, CompoSecure (Nasdaq: CMPO) is a technology partner to market leaders, fintech’s and consumers enabling trust for millions of people around the globe. The company combines elegance, simplicity and security to deliver exceptional experiences and peace of mind in the physical and digital world. CompoSecure’s innovative payment card technology and metal cards with Arculus security and authentication capabilities deliver unique, premium branded experiences, enable people to access and use their financial and digital assets, and ensure trust at the point of a transaction. For more information, please visit www.CompoSecure.com and www.GetArculus.com.
Forward-LookingStatements
This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management. Although CompoSecure believes that its plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, CompoSecure cannot assure you that it will achieve or realize these plans, intentions, or expectations. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning CompoSecure’s possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. In some instances, these statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” or the negatives of these terms or variations of them or similar terminology. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the date hereof. You should understand that the following important factors, among others, could affect CompoSecure’s future results and could cause those results or other outcomes to differ materially from those expressed or implied in CompoSecure’s forward-looking statements: the timing and amount of the special cash dividend; the ability of CompoSecure to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees; the possibility that CompoSecure may be adversely impacted by other global economic, business, competitive and/or other factors; the outcome of any legal proceedings that may be instituted against CompoSecure or others; future exchange and interest rates; and other risks and uncertainties, including those under “Risk Factors” in filings that have been made or will be made with the Securities and Exchange Commission. CompoSecure undertakes no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Use of Non-GAAPFinancial Measures
This press release includes certain non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and that may be different from non-GAAP financial measures used by other companies. CompoSecure believes EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and Free Cash Flow are useful to investors in evaluating CompoSecure’s financial performance. CompoSecure uses these measures internally to establish forecasts, budgets and operational goals to manage and monitor its business, as well as evaluate its underlying historical performance and/or to measure incentive compensation, as we believe that these non-GAAP financial measures depict the true performance of the business by encompassing only relevant and controllable events, enabling CompoSecure to evaluate and plan more effectively for the future. Due to the forward-looking nature of the financial guidance included above, specific quantification of the charges excluded from the non-GAAP financial measures included in such financial guidance, including with respect to depreciation, amortization, interest, and taxes, that would be required to reconcile the non GAAP financial measures included in such financial guidance to GAAP measures are not available, so it is not feasible to provide accurate forecasted non-GAAP reconciliations without unreasonable effort. Consequently, no disclosure of estimated comparable GAAP measures is included, and no reconciliation of the forward-looking non-GAAP financial measures is included. In addition, CompoSecure’s debt agreements contain covenants that use a variation of these measures for purposes of determining debt covenant compliance. CompoSecure believes that investors should have access to the same set of tools that its management uses in analyzing operating results. EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and Free Cash Flow should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and Free Cash Flow are significant components in understanding and assessing CompoSecure’s financial performance. Accordingly, these key business metrics have limitations as an analytical tool. They should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of CompoSecure’s liquidity and may be different from similarly titled non-GAAP measures used by other companies. Please refer to the tables below for the reconciliation of GAAP measures to these non-GAAP measures.
CorporateContact
Anthony Piniella
Head of Communications, CompoSecure
(917) 208-7724
apiniella@composecure.com
InvestorRelations Contact
Sean Mansouri, CFA
Elevate IR
(720) 330-2829
CMPO@elevate-ir.com
CompoSecure, Inc.
Condensed Consolidated Balance Sheet Data
(inthousands)
| March 31, 2024 | December 31, 2023 | |||||
|---|---|---|---|---|---|---|
| (unaudited) | ||||||
| ASSETS | ||||||
| Cash and cash equivalents | $ | 55,146 | $ | 41,216 | ||
| Accounts receivable, net | 35,110 | 40,488 | ||||
| Inventories | 55,197 | 52,540 | ||||
| Prepaid expenses and other current assets | 5,252 | 5,133 | ||||
| Property and equipment, net | 24,604 | 25,212 | ||||
| Right of use assets, net | 6,964 | 7,473 | ||||
| Deferred tax asset | 25,529 | 23,697 | ||||
| Derivative asset - interest rate swap | 5,745 | 5,258 | ||||
| Deposits and other assets | 24 | 24 | ||||
| TOTAL ASSETS | $ | 213,571 | $ | 201,041 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Accounts payable | $ | 4,747 | $ | 5,193 | ||
| Accrued expenses | 13,473 | 11,986 | ||||
| Commission payable | 5,442 | 4,429 | ||||
| Bonus payable | 3,405 | 5,616 | ||||
| Current portion of long-term debt | 11,875 | 10,313 | ||||
| Current portion of lease liabilities | 1,988 | 1,948 | ||||
| Current portion of tax receivable agreement liability | 1,425 | 1,425 | ||||
| Long-term debt, net of deferred finance costs | 192,299 | 198,331 | ||||
| Convertible notes, net of debt discount | 127,959 | 127,832 | ||||
| Derivative liability - convertible notes redemption make-whole provision | 722 | 425 | ||||
| Warrant liability | 15,691 | 8,294 | ||||
| Earnout consideration liability | 2,312 | 853 | ||||
| Lease liabilities, operating | 5,655 | 6,220 | ||||
| Tax receivable agreement liability | 23,949 | 23,949 | ||||
| Total stockholders' (deficit) | (197,371 | ) | (205,773 | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 213,571 | $ | 201,041 |
CompoSecure, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| Net sales | $ | 104,010 | $ | 95,316 | ||
| Operating expenses: | ||||||
| Cost of sales | 48,797 | 41,962 | ||||
| Selling, General and administrative | 24,077 | 23,944 | ||||
| Total operating expenses | 72,874 | 65,906 | ||||
| Income from operations | 31,136 | 29,410 | ||||
| Total other (expense), net | (14,899 | ) | (19,936 | ) | ||
| Income before income taxes | 16,237 | 9,474 | ||||
| Income tax benefit | 836 | 1,263 | ||||
| Net income | 17,073 | 10,737 | ||||
| Net income attributable to non-controlling interests | 13,048 | 8,408 | ||||
| Net income attributable to CompoSecure, Inc | 4,025 | 2,329 | ||||
| Net income per share attributable to Class A common stockholders -basic | $ | 0.20 | $ | 0.13 | ||
| Net income per share attributable to Class A common stockholders - diluted | $ | 0.17 | $ | 0.11 | ||
| Weighted average shared used to compute net income per share attributable to Class A common stockholders - basic (in thousands) | 20,567 | 17,632 | ||||
| Weighted average shared used to compute net income per share attributable to Class A common stockholders - diluted (in thousands) | 96,235 | 94,736 |
CompoSecure, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| CASH FLOWS FROM OPERATING ACTIVITES: | ||||||
| Net income | $ | 17,073 | $ | 10,737 | ||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||
| Depreciation | 2,221 | 2,040 | ||||
| Stock-based compensation expense | 4,397 | 4,022 | ||||
| Amortization of deferred finance costs | 345 | 559 | ||||
| Change in fair value of earnout consideration liability | 1,459 | 1,973 | ||||
| Revaluation of warrant liability | 7,397 | 10,759 | ||||
| Change in fair value of derivative liability | 297 | 708 | ||||
| Deferred tax (benefit) expense | (1,867 | ) | (2,034 | ) | ||
| Changes in assets and liabilities | ||||||
| Accounts receivable | 5,378 | (1,915 | ) | |||
| Inventories | (2,657 | ) | (8,901 | ) | ||
| Prepaid expenses and other assets | (119 | ) | (373 | ) | ||
| Accounts payable | (446 | ) | 8,367 | |||
| Accrued expenses | 1,486 | 2,069 | ||||
| Other liabilities | (1,213 | ) | (3,114 | ) | ||
| Net cash provided by operating activities | 33,751 | 24,897 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Acquisition of property and equipment | (1,613 | ) | (3,666 | ) | ||
| Net cash used in investing activities | (1,613 | ) | (3,666 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Proceeds from employee stock purchase plan and exercise of equity awards | 107 | 146 | ||||
| Payments for taxes related to net share settlement of equity awards | (3,476 | ) | (2,409 | ) | ||
| Payment of term loan | (4,688 | ) | (330 | ) | ||
| Distributions | (10,151 | ) | (9,714 | ) | ||
| Net cash used in financing activities | (18,208 | ) | (12,307 | ) | ||
| Net increase (decrease) in cash and cash equivalents | 13,930 | 8,924 | ||||
| Cash and cash equivalents, beginning of period | 41,216 | 13,642 | ||||
| Cash and cash equivalents, end of period | $ | 55,146 | $ | 22,566 | ||
| Supplementary disclosure of cash flow information | ||||||
| Cash paid for interest expense | 4,175 | 4,567 | ||||
| Supplemental disclosure of non-cash financing activity: | ||||||
| Derivative asset - interest rate swap | 452 | (1,649 | ) |
CompoSecure, Inc.
Non-GAAPAdjusted EBITDA Reconciliation
(inthousands)
(unaudited)
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| Net income | $ | 17,073 | $ | 10,737 | ||
| Add: | ||||||
| Depreciation | 2,221 | 2,040 | ||||
| Interest expense, net (1) | 5,746 | 6,496 | ||||
| Income tax benefit | (836 | ) | (1,263 | ) | ||
| EBITDA | $ | 24,204 | $ | 18,010 | ||
| Stock-based compensation | 4,397 | 4,022 | ||||
| Mark to market adjustments (2) | 9,153 | 13,440 | ||||
| Adjusted EBITDA | $ | 37,754 | $ | 35,472 |
(1) Includes amortization of deferred financing cost for the three months ended March 31, 2024 and 2023, respectively.
(2) Includes the changes in fair value of warrant liability, derivative liabilities and earnout consideration liability for the three months ended March 31, 2024 and 2023, respectively
CompoSecure, Inc.
Non-GAAP Adjusted EPS Reconciliation
(inthousands)
(unaudited)
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| (in thousands) except per share amounts | ||||||
| Basic and Diluted: | ||||||
| Net income | $ | 17,073 | $ | 10,737 | ||
| Less: benefit for income taxes | (836 | ) | (1,263 | ) | ||
| Income before Income taxes | 16,237 | 9,474 | ||||
| Income tax expense (1) | (6,405 | ) | (5,581 | ) | ||
| Adjusted net income before adjustments | 9,832 | 3,893 | ||||
| Add: mark-to-market adjustments (2) | 8,856 | 12,732 | ||||
| Add: stock-based compensation | 4,397 | 4,022 | ||||
| Adjusted net income | $ | 23,085 | $ | 20,647 | ||
| Common shares outstanding used in<br>computing earnings per share, basic: | ||||||
| Class A and Class B common shares (3) | 80,525 | 77,591 | ||||
| Common shares outstanding used in computing earnings per share, diluted: | ||||||
| Warrants (Public and Private) (4) | 8,094 | 8,094 | ||||
| Equity awards | 2,710 | 4,145 | ||||
| Total Shares<br> outstanding used in computing adjusted earnings per share - diluted | 91,329 | 89,830 | ||||
| Adjusted net income per share- basic | $ | 0.29 | $ | 0.27 | ||
| Adjusted net income per share- diluted | $ | 0.25 | $ | 0.23 | ||
| 1)<br> Calculated using the Company's blended tax rate. | ||||||
| --- | ||||||
| 2)<br> Includes the changes in fair value of warrant liability and earnout consideration liability. | ||||||
| 3)<br> Assumes both Class A shares and Class B shares participate in earnings and are outstanding at the end of the period. | ||||||
| 4)<br> Assumes treasury stock method, valuation at assumed fair market value of $18.00. | ||||||
| 5)<br> The Company did not include the effect of Exchangeable Notes to its total shares outstanding used in diluted adjusted net income<br> per share. |
Exhibit 99.2
Q1 2024 Earnings Presentation May 6, 2024
Disclaimers 2 Forward Looking Statements This presentation contains forward - looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management. Although the Company believes that its plans, intentions, and expectations reflected in or suggested by these forward - looking st atements are reasonable, the Company cannot assure you that it will achieve or realize these plans, intentions, or expectations. Forward - looking statements are inherently subject to risks, uncerta inties, and assumptions. Generally, statements that are not historical facts, including statements concerning the Company’s possible or assumed future actions, business strategies, events, or resu lts of operations, are forward - looking statements. In some instances, these statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “foreca sts ,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” or the negatives of these terms or variations of them or similar terminology. Forward - looking statements are not guara ntees of performance. You should not put undue reliance on these statements which speak only as of the date hereof. You should understand that the following important factors, among others, cou ld affect the Company’s future results and could cause those results or other outcomes to differ materially from those expressed or implied in the Company’s forward - looking statements: the ability of the Company to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees; the possibility that the Company may be adversely impacted by global economic, business, competitive and/or other factors; the outcome of any legal proceedings that may be instituted against the Company or others; future exchange and in terest rates; and other risks and uncertainties indicated in this report, including those under “Risk Factors” in filings that have been made or will be made with the SEC . The Company undertakes no obligations to update or revise publicly any forward - looking statements, whether as a result of new information, future events or otherwise, except as required by law. Non - GAAP Financial Measures This presentation includes certain non - GAAP financial measures that are not prepared in accordance with accounting principles ge nerally accepted in the United States (“GAAP”) and that may be different from non - GAAP financial measures used by other companies. The Company believes EBITDA, Adjusted EBITDA, Adjusted Net I ncome, and Adjusted EPS are useful to investors in evaluating the Company’s financial performance. The Company uses these measures internally to establish forecasts, budgets and operation al goals to manage and monitor its business, as well as evaluate its underlying historical performance and/or to measure incentive compensation, as we believe that these non - GAAP financial measures depict the true performance of the business by encompassing only relevant and controllable events, enabling the Company to evaluate and plan more effectively for the future. Due to the for ward - looking nature of the financial guidance included below, specific quantification of the charges excluded from the non - GAAP financial measures included in such financial guidance, including with respect to depreciation, amortization, interest, and taxes, that would be required to reconcile the non GAAP financial measures included in such financial guidance to GAAP measures are not availab le, so it is not feasible to provide accurate forecasted non - GAAP reconciliations without unreasonable effort. Consequently, no disclosure of estimated comparable GAAP measures is included, a nd no reconciliation of the forward - looking non - GAAP financial measures is included. In addition, the Company’s debt agreements contain covenants that use a variation of these measures for pu rposes of determining debt covenant compliance. The Company believes that investors should have access to the same set of tools that its management uses in analyzing operating results. EBI TDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA, Adjusted EBITDA, Adj usted Net Income, and Adjusted EPS are significant components in understanding and assessing the Company’s financial performance. Accordingly, these key business metrics have limitations as an analytical tool. They should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from ope rat ing activities as a measure of the Company’s liquidity and may be different from similarly titled non - GAAP measures used by other companies. Please refer to the tables below for the reconciliati on of net income to EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS. Industry and Market Information Statements in this presentation concerning our industry and the markets in which we operate, including our general expectatio ns and competitive position, business opportunity and market size, growth and share, are based on information from independent industry organizations and other third - party sources, data from our internal research and management estimates. Management estimates are derived from publicly available information and the information and data referred to above and are based on ass ump tions and calculations made by us based upon our interpretation of such information and data. The information and data referred to above are imprecise and may prove to be inaccurate because th e i nformation cannot always be verified with complete certainty due to the limitations on the availability and reliability of raw data, the voluntary nature of the data gathering process and other li mitations and uncertainties. As a result, please be aware that the data and statistical information in this presentation may differ from information provided by our competitors or from information foun d i n current or future studies conducted by market research institutes, consultancy firms or independent sources.
Summary Reiterating guidance for f ull y ear 2024 n et s ales expected to be in the range of $ 408 mm to $ 428 mm a nd adjusted EBITDA of $147mm to $157mm Given strong cash generation, the Board of Directors declared a special cash dividend of $0.30 per share reflecting commitment to delivering value to stockholders as well as confidence in continuing to generate strong free cash flow Card issuers reported growth in Q1 ‘24 and have maintained a positive outlook for the year ahead, indicating continued investments in customer acquisition and retention due to sustained consumer demand Net Sales: Q1 ’24 vs. Q1 ‘23 increased 9% to a record $104mm compared to $95mm driven by strongest domestic quarter ever offset by lower international net sales 1 Adjusted EBITDA is a non - GAAP financial measure. For reconciliation of Adjusted EBITDA to the most directly comparable measure prepared in accordance with GAAP, please see the Appendix 3 Adjusted EBITDA 1 : Q1 ‘24 vs. Q1 ‘23 increased 6% to $38mm compared to $35mm driven by higher net sales High - profile customer card programs launched this quarter including limited edition American Express Delta Reserve, Robinhood Gold Card, and variety of fintechs and international banks
Key Highlights – New Metal Card Programs 4 TP Bank - Vietnam Robinhood - US Delta Reserve (Amex) - US Citibanamex - Mexico Bradesco (Amex) - Brazil Atlas – US Rogers Bank - Canada Lloyds Bank - UK
- 32% 30% 14% 4% 51% 9% -40% -20% 0% 20% 40% 60% Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q4 '22 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 American Express JP Morgan Chase Recent Trends across Payment Cards 1 American Express & JP Morgan Chase Earnings Presentations 2 American Express Earnings Presentations CompoSecure’s Largest Customers Report Continued Purchase Volume Growth vs. Prior Year Year over Year Purchase Volume Growth 1 5 American Express Hit 3.4mm New Cards in Q1 ’24 Behind Robust Investments New Card Acquisitions & Investment 2 2.9 2.6 2.5 1.0 1.4 1.7 2.1 2.4 2.6 2.7 3.0 3.2 3.3 3.0 3.4 3.0 2.9 2.9 3.4 - 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Q3 '19 Q4 '19 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q4 '22 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 New Cards (MM) Marketing & Business Development Spend ($B)
Card Issuer and Payment Network Sentiment 1 Q1 ‘24 Earnings Transcripts 2 Q2 ‘24 Earnings Transcript “We are pleased with this growth and continue to expect to exit the year with some further momentum reflecting our cycle of product refreshes. In the quarter, we acquired 3.4 million new cards, demonstrating the demand we are seeing for our products and the investments we've made. Importantly, acquisition of our premium fee - based products accounted for around 70% of new accounts and the spend revenue and credit profiles of our new card members continue to look strong. On the marketing line, we increased investments to $1.5 billion in the first quarter. We continue to be pleased with the strong, high - quality customer acquisition and engagement we see as a result of these actions, and we are on track to increase marketing spend in 2024 versus last year. ” – Christophe Le C aillec (CFO) 1 6 “Consumers remain financially healthy, supported by a resilient labor market. While cash buffers have largely normalized, balances are still above pre - pandemic levels and wages are keeping pace with inflation. When looking at a stable cohort of customers, overall spend is in line with the prior year .” – Jeremy Barnum (CFO) 1 “ There is a very long runway ahead and I remain excited about Visa’s future growth opportunity in consumer payments. We continue to capture that growth by delivering innovative and secure payment solutions for buyers and sellers, including new credentials and issuance, tap - to - pay and e - commerce.” – Ryan McInerney (CEO) “Total company marketing expense of about $1 billion for the quarter was up 13% year over year. Total company marketing drives growth and builds franchise in our Domestic Card and Consumer Banking businesses and builds and leverages the value of our brand. Our choices in Domestic Card are the biggest driver of total company marketing. We continue to see attractive growth opportunities in our Domestic Card business. Our opportunities are enhanced by our technology transformation. Our marketing continues to deliver strong new account growth across the domestic Card business…We continue to lean into marketing to drive resilient growth and enhance our Domestic Card franchise.” – Rich Fairbank (CEO) 1
Arculus Capabilities The Arculus Cold Storage wallet has recently launched multi - card/wallet support allowing customers to split assets among multiple cards 7 Arculus Authenticate Arculus Cold Storage Hardware - bound PassKey authenticator • Secure login on any iPhone, Android phone, or platform enabled with FIDO2 technology • New device authentication (on - boarding new phone) • Customer support authentication to call center • Step - up authentication for high - risk transactions • Secure account and prevent hackers from gaining access to banking or social media app • White - labeled or co - branded solution sold through businesses for usage by their customer base • Generate, store, and secure keys for digital assets such as Bitcoin, Ethereum, Cardano, Solano, and many more • White - labeled or co - branded solution sold through businesses for usage by their customer base • Direct to consumer Capability Use Cases Example Distribution Channels Crypto and NFT hardware cold storage wallet • Advanced three - factor authentication (biometric, PIN, and tapping card) • Securely store, send, and receive digital assets via user - friendly mobile application • Secure element with NFC connectivity (no battery or charging required)
Financial Overview
Q1 2024 Results $37.8mm Q1 ‘24 Q2 YTD ‘22 Net Sales $104.0mm 36.3% $17.1mm 53.1% $95.3mm $10.7mm 56.0% $35.5mm 37.2% 9% Record domestic quarter offset by lower international sales 59% (289 bps) 6% (92 bps) Net Income Gross Margin Adjusted EBITDA 1 Adjusted EBITDA Margin 1 Q1 ‘23 % Change Commentary 1 Adjusted EBITDA and Adjusted EBITDA Margin are non - GAAP financial metrics. For a reconciliation of Adjusted EBITDA to the most - c omparable GAAP metric, please see the Appendix to this presentation The decrease was primarily due to inflationary pressure on wages as well as product mix Includes $4.3mm positive benefit when comparing Q1 ‘24 vs. Q1 ‘23 from re - valuation of warrant, earnout consideration, & derivatives liability driven by change in stock price Excludes net change from re - valuation of earnout & warrants Q1 ‘24 includes ($1.8mm) net impact from Arculus investment 9
$74 $78 $84 $86 $93 $22 $21 $13 $14 $11 $95 $99 $97 $100 $104 Q1 '23 Q2 '23 Q3 '23 Q4 '23 Q1 '24 International Domestic Net Sales Trend International mix for the trailing 12 months was 15% of total net sales, but is expected to increase in the balance of year to be more in line with long range view of business of approximately 20% In millions International Domestic 13% 87% 21 % 79 % 14% 86% 10 23 % 77 % TTM = $59mm (15% of Total) - 29% vs. Prior TTM TTM = $341mm (85% of Total) +11% vs. Prior TTM 11% 89%
Balance Sheet (Unaudited) Source: Company financials Note: Financial position has been derived from CompoSecure’s consolidated financial statements for the quarters ended March 3 1, 2024 and December 31, 2023 respectively 11 Q4 202 3 A Q 1 202 4 A ($mm) Assets Current Assets $41 $55 Cash & cash equivalents 40 35 Accounts receivable, net 53 55 Inventories 5 5 Prepaid expenses and other Current assets 139 150 Total Current Assets 25 25 Property and equipment, net 24 26 Deferred tax assets 13 13 Other assets $201 $214 Total assets Liabilities and Members' Equity Current Liabilities $5 $5 Accounts payable 12 13 Accrued expenses 14 12 Other current liabilities 10 12 Current portion of long - term debt 41 42 Total current liabilities 198 192 Long - term debt, net of deferred finance costs 128 128 Convertible Debt, net of debt discount 40 49 Other liabilities $407 $411 Total liabilities (206) (197) Members' Equity $201 $214 Total liabilities and members' equity
Statement of Cash Flows (Unaudited) Source: Company financials Note: Cash flows have been derived from CompoSecure’s consolidated financial statements for the three months ended March 31, 202 4 and 2023 respectively 12
Q1 Earnings per Share: GAAP 20.6mm 3 Basic Q2 YTD ‘22 GAAP Net Income $17.1mm $0.20 $4.0mm 1 Three months ended 3/31/24 Three months ended 3/31/23 $17.1mm $16.0mm 2 96.2mm 4 $0.17 $10.7mm $10.7mm $2.3mm $10.7mm 17.6mm 94.7mm $0.13 $0.11 Net Income used in EPS Total Shares used in EPS Earnings per Share Diluted Basic Diluted 13 Source: Company Financials 1 25.6% of net income of $17.5mm of operating entities plus 100% of C - Corp net loss of $0.5mm. 2 25.6% of net income of $17.5mm of operating entities plus 100% of C - Corp net loss of $0.5mm. plus exchangeable notes, equity awa rds and Class B shares of $12.0mm 3 Weighted - average outstanding Class A Shares . 4 Outstanding Class A Shares 20.6mm plus equity awards 2.7mm, exchangeable notes 13.0mm and Class B units of 59.9mm
Q1 Adjusted Earnings per Share 80.5mm 3 Basic Q2 YTD ‘22 GAAP Net Income $17.1mm $0.29 $23.1mm 1 Three months ended 3/31/24 Three months ended 3/31/23 $17.1mm $23.1mm 1 91.3mm 4 $0.25 $10.7mm $10.7mm $20.6mm 2 $20.6mm 2 77.6mm 3 89.8mm 5 $0.27 $0.23 Adjusted Net Income Total Shares used in EPS Adjusted EPS 6 Diluted Basic Diluted 14 Source: Company Financials 1 GAAP Net Income of $17.1mm less Additional Tax Provision of $7.2mm plus Fair Value/Mark to Market Changes for Warrants and Ea rn outs and Equity Awards Adjustment of $13.2mm. 2 GAAP Net Income of $10.7mm less Additional Tax Provision of $6.9mm plus Fair Value/Mark to Market Changes for Warrants and Ea rn outs and Equity Awards Adjustment of $16.8mm. 3 Outstanding Class A plus Class B Shares. 4 Outstanding Class A plus Class B Shares plus 8.1mm Public Warrants (Converted Using Treasury Stock Method) and 2.7mm Equity A wa rds. 5 Outstanding Class A plus Class B Shares plus 8.1mm Public Warrants (Converted Using Treasury Stock Method) and 4.1mm Equity A war ds 6 Adjusted Net Income and Adjusted EPS are non - GAAP financial measures. For reconciliation of these non - GAAP measures to the most directly comparable measures prepared in accordance with GAAP, please see the Appendix
2024 Guidance Reaffirming full year net sales and adjusted EBITDA guidance Net Sales Adjusted EBITDA 1 2023A $391mm $145mm 1 Adjusted EBITDA is a non - GAAP financial metric. For a reconciliation of Adjusted EBITDA to the most - comparable GAAP metric, plea se see the Appendix to this presentation $408mm - $428mm $147mm - $157mm 2024F +4% / +10% B/(W) vs. ‘23 +1% / +8% B/(W) vs. ’23 15
2024 Company Objectives Grow and diversify metal payment cards while delivering exceptional quality to our customers Innovate across products, processes and platforms to differentiate from competition and continue emphasis on environmental impact Drive Arculus Authenticate and Cold Storage by demonstrating to our customers the value proposition of both hardware and software solutions Maintain margins through improved quality, production efficiency, sourcing optimization, and automation Grow Metal Payment Cards 16 Innovate Across Functions Demonstrate Arculus Success Enhance Efficiency 1 4 3 2 Continue to evolve as a world - class organization, innovator, and employer of choice to deliver unparalleled customer and shareholder value Focus On Our People 5
Investor Relations Contact ir.composecure.com Sean Mansouri 720 - 330 - 2829 ir@composecure.com 17 17
Appendix
CompoSecure, Inc. (Nasdaq: CMPO) Summary Equity Capitalization Table (with net exercise model) As of March 31, 2024 Holders # of Shares Issued & Outstanding # of Shares Issued & Outstanding Public Shareholders: Class A 20.6mm 20.6mm Historic CompoSecure Owners : Class B 60.0mm 60.0mm Subtotal 80.6mm 80.6mm Holders # of Shares Reserved for Immediately Exercisable In - The - Money Options # of Shares Reserved for Immediately Exercisable In - The - Money Options (assuming net exercise) 1 Merger Rollover Options 3.3mm 2.6mm Subtotal 83.9mm 83.2mm Convertible Instruments # of Shares Reserved for Conversion # of Shares Reserved for Conversion (assuming net exercise) Public Warrants 2 22.4mm 8.1mm Exchangeable Notes 3 11.3mm 11.3mm Grand Total 117.6mm 102.6mm Notes: The table above excludes shares which may be issued in the future for contingent “earnout”, equity incentive plan, emp loy ee stock purchase plan, and 401K plan 1 Assumes exercise net of strike price, valuation at assumed FMV of $10.00 2 Assumes treasury stock method, $11.50 strike price, & valuation at assumed FMV of $18.00 3 Assumes $11.50 strike price with redemption (at company’s discretion) after three years if FMV exceeds $14.95 19
Statement of Operations (Unaudited) 20 Source: Company financials Note: Operating results have been derived from CompoSecure’s consolidated financial statements for the three months ended Mar ch 31, 2024 and 2023 and twelve months ended December 31, 2023 and 2022 respectively Note: Totals may not sum due to rounding 1 Includes other income (expense) and income tax (expense) benefit as presented in annual and interim financial statements FY 2022A FY 2023A Q1 2023A Q1 2024A ($mm) Revenue $378 $391 $95 $104 Net Sales (159) (182) (42) (49) Cost of Sales $220 $209 $53 $55 Gross Profit Operating Expenses (105) (90) (24) (24) Selling, general and administrative $115 $119 $29 $31 Income from operations Other expense 17 (6) (18) 14 Other income (expense), net 1 $132 $113 $11 $17 Net Income
Non - GAAP Adjusted EBITDA Reconciliation (Unaudited) Source: Company financials Non - Cash Equity Awards : Equity based expenses related to the equity incentive plan Non - Cash Mark - to - Market Adjustments : Related to changes in fair value of liabilities for warrants, earnouts and derivatives assets . 1 2 1 2 21 FY 2022A FY 2023A Q1 2023A Q1 2024A $mm $131.8 $112.5 $10.7 $17.1 Net Income 22.5 24.1 6.5 5.7 Interest Expense 8.5 8.4 2.0 2.2 Depreciation and Amortization 4.4 4.6 (1.2) (0.8) Tax benefit $167.2 $149.6 $18.0 $24.2 Unadjusted EBITDA 11.5 17.5 4.0 4.4 Non - Cash Stock Comp Expense (42.5) (22.1) 13.4 9.2 Mark - to - market Adjustments ($31.0) ($4.6) 17.4 13.6 Total EBITDA Adjustments $136.2 $145.0 $ 35. 5 $37.8 Adjusted EBITDA 35.9% 37.1% 37.2% 36.3% Adjusted EBITDA %
Non - GAAP EPS Reconciliation (Unaudited) 22 Source: Company financials 1 Assumes treasury stock method, valuation at assumed FMV of $18.00 2 Includes options, RSUs, and ESPP shares Three Months Ended March 31, 2023 Three Months Ended March 31, 2024 DILUTED BASIC DILUTED BASIC ($mm) $10.7 $10.7 $ 17. 1 $ 17. 1 GAAP Net Income (1.2) (1.2) (0.8) (0.8) Adjust for tax (benefit) expense (5.6) (5.6) (6.4) (6.4) Tax Provision $3.9 $3.9 $9.8 $9.8 Tax Adjusted Net Income $16.7 $16.7 $13.2 $13.2 Stock Based Compensation and Fair Value Adjustment $20.6 $20.6 $ 23. 1 $ 23. 1 Total Adjusted Net Income 77.6 77.6 80.5 80.5 Class A + Class B Shares 8.1 - 8.1 - Public & Private Warrants 1 4.1 - 2.7 - Equity Awards 2 89.8 77. 6 91.3 80.5 Total Shares $0.23 $0.27 $0.25 $0.29 EPS 1 Calculated using the Company’s blended tax rate 2 Includes changes in fair value of warrant liability and earnout consideration liability 3 Assumes both Class A shares and Class B shares participated in earnings and are outstanding at the end of the period. 4 Assumes treasury stock method, valuation at assumed FMV of $18.00 5 The Company did not include the effect of Exchangeable Notes in its total shares outstanding used in diluted adjusted net inc om e per share.