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): August 7, 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:
| ¨ | 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 Operations and Financial Condition |
|---|
On August 7, 2024, CompoSecure, Inc. (the “Company”) issued a press release announcing its financial results for the three months ended June 30, 2024, and provided an investor presentation to accompany the press release. The press release and investor presentation provide business updates, including with respect to an amendment to the credit facility with JPMorgan Chase Bank, National Association, and a transaction pursuant to which Resolute Holdings will acquire a majority interest in CompoSecure with a $372 million personal investment from The David Cote Family.
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 |
|---|
On August 7, 2024, the Company and Resolute Holdings I, LP and its affiliated vehicles (“Resolute”), an investment firm led by David Cote and Tom Knott, announced that certain Class B stockholders of the Company entered into stock purchase agreements with Resolute, pursuant to which Resolute will acquire a majority interest in the Company and eliminate its dual-class structure (the “Transaction”). The Transaction is subject to customary closing conditions and regulatory approval, including Hart-Scott-Rodino clearance.
In connection with the Transaction, on August 7, 2024, the Company and a subsidiary entered into a Letter Agreement with an investment entity affiliated with Resolute (the “Letter Agreement”) to establish the terms of the transition of governance of the Company. In addition to the Letter Agreement, in connection with the Transaction, the Company entered into Amendment No. 1 to the Tax Receivable Agreement, dated as of August 7, 2024, (the “TRA”) which amends the Tax Receivable Agreement, dated as of December 27, 2021, by and among the Company and each of the other parties thereto, to, among other things, prevent acceleration of TRA payments that would otherwise be payable as a result of the Transaction. The amendment of the TRA is contingent upon, and shall only be effective, upon the closing of the Transaction.
If the Transaction is completed, it is anticipated it will result in a “Fundamental Change” with respect to the Company’s exchangeable notes issued pursuant to the Indenture, dated as of December 27, 2021.
In addition, on August 7, 2024, subsidiaries of the Company entered into the Fourth Amended and Restated Credit Agreement with JPMorgan Chase Bank, National Association, as administrative agent, and the lenders party thereto, which, amongst other matters, extended the maturity date to August 2029, lowered the interest rate on the credit facility, amended certain change of control covenants, and provides for a $200 million term facility and a $130 million revolving credit facility.
On August 7, 2024, the Company issued a press release announcing the Transaction. A copy of the press release, which is attached hereto as Exhibit 99.3 and incorporated by reference herein, is hereby furnished pursuant to this Item 7.01.
Attached hereto as Exhibit 99.2 and incorporated herein by reference is an investor presentation that will be used by the Company on a conference call today with investors and other persons.
The information included under Item 2.02 of this Current Report on Form 8-K is incorporated into this Item 7.01 by reference.*
The terms of the Transaction, the amendment of the TRA and the amended credit facility will be described in a subsequent filing on Form 8-K.
| Item9.01 | Exhibits |
|---|
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release of the Company, dated August 7, 2024 |
| 99.2 | Investor Presentation, dated August 7, 2024 |
| 99.3 | Joint Press Release of the Company and Resolute, dated August 7, 2024 |
| 104 | Cover Page Interactive Data File (embedded with the Inline XBRL<br>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: August 7, 2024 | By: | /s/Timothy Fitzsimmons |
| Timothy Fitzsimmons | ||
| Chief Financial Officer |
Exhibit 99.1
CompoSecure ReportsRecord Second Quarter 2024 Financial Results; Narrows 2024 Full Year Guidance to High End of Range
Q2**Net Sales up 10% to $108.6 million; Q2 Net Income up 3% to $33.6 million; Q2 Adj. EBITDAup 8% to $40.0 million
Narrows fiscal2024 guidance; now anticipates Net Sales between $418-$428 million and Adjusted EBITDA between $150-$157 million
David Cote, former CEO of Honeywell and currentexecutive chairman of Vertiv, to become executive chairman of CompoSecure following the acquisition of a majority interest in the Companyby the David Cote Family; Expected to simplify corporate structure and unlock shareholder value
SOMERSET,N.J., August 7, 2024 -- CompoSecure, Inc. (Nasdaq: CMPO), a leader in metal payment cards, security, and authentication solutions, today announced its operating results for the second quarter ended June 30, 2024.
“I am pleased to report another record quarter of Net Sales and Adjusted EBITDA, driven by continued growth in our domestic business and strong international demand from the launch of new programs,” said Jon Wilk, President and CEO of CompoSecure. We continue to support our customer’s ability to offer highly attractive premium card programs such as the limited edition Amex White Gold Card and the first Wells Fargo and Expedia co-branded metal card, as well as driving growth with innovative products through our Echo Mirror Card and LED card.
“I am also excited to announce an expansion of our strategic partnership with Fiserv to include the marketing and reselling of Arculus Authenticate. Building on our already successful metal payment card collaboration, this partnership will enhance the ability to bring FIDO 2 secure authentication capabilities to Fiserv’s extensive customer base of financial institutions and fintechs.”
As just announced in a separate press release, the David Cote Family is investing $372 million through Resolute and Dave Cote will become the executive chairman of the board of directors of CompoSecure upon closing of the transaction. Resolute will become the majority shareholder of the Company and will focus on deploying operational and M&A best practices to drive long-term value creation for all shareholders. Importantly, the transaction will remove the dual-share structure, delivering higher retained annual cash flow and better alignment of all shareholders with the elimination of the tax distributions related to the Class B units.
Mr. Wilk continued, “I am thrilled to have David Cote serve as Executive Chairman of the Board of Directors. David’s career and track record is unparalleled, setting the standard for how organizations can simultaneously drive both short and long-term performance to realize their full potential. We believe his experience steering global public companies, such as Honeywell and Vertiv, will be invaluable to CompoSecure as we enter a new phase of growth and value creation for shareholders, employees, and customers.”
Wilk added, “Today, we have also amended our credit facility with lower rates, an upsized revolving line of credit, a longer term and more flexible covenants. This reflects the confidence our lenders have in our business and provides capacity for continued growth and to retire our exchangeable notes maturing in December 2026.”
Financial Highlights(Q2 2024 vs. Q2 2023 )
| · | Net Sales: Net Sales increased 10% to $108.6 million compared to $98.5 million. The increase<br> was primarily driven by continued domestic growth and improved international demand. |
|---|---|
| · | Gross Profit: Gross Profit was $56.1 million or 52% of Net Sales, compared to $53.9 million<br> or 55%. The decrease in gross margin was primarily due to product mix, as well as inflationary<br> pressure on wages. |
| --- | --- |
| · | Net Income/EPS: Net Income increased 3% to $33.6 million compared to $32.7 million. Net Income<br> per share attributable to Class A common shareholders was $0.44 (Basic) and $0.32 (Diluted),<br> compared to $0.31 (Basic) and $0.29 (Diluted) in the year-ago period. |
| --- | --- |
| · | Adjusted Net Income/Adjusted EPS: Adjusted Net Income (a non-GAAP measure) increased 10% to $25.2<br> million compared to $22.9 million in the year-ago period. Adjusted EPS (a non-GAAP measure),<br> which includes both Class A and Class B shares, was $0.31 (Basic) and $0.27 (Diluted)<br> compared to $0.29 (Basic) and $0.25 (Diluted) in the year-ago period (see reconciliation<br> of non-GAAP measures shown in table below). |
| --- | --- |
| · | Adjusted EBITDA: Adjusted EBITDA (a non-GAAP measure) increased 8% to $40.0 million compared to<br> $36.9 million, with the increase driven by net sales growth. |
| --- | --- |
Liquidity andCapital Structure
BalanceSheet: At June 30, 2024, CompoSecure had $35.4 million of cash and cash equivalents and $330.9 million of total debt, which included $200.9 million of term loan and $130 million of exchangeable notes. This compares to cash and cash equivalents of $41.2 million and total debt of $340.3 million at December 31, 2023, and cash and cash equivalents of $22.6 million and total debt of $358.1 million at June 30, 2023. CompoSecure’s secured debt leverage ratio was 1.29x at June 30, 2024 compared to 1.39x at December 31, 2023 and 1.60x at June 30, 2023.
SharesOutstanding: At June 30, 2024, CompoSecure had 81.7 million shares outstanding which included 29.8 million Class A shares and 51.9 million Class B shares. This includes the effect of the May 2024 underwritten secondary offering of approximately 8.1 million shares of Class A common stock, which were converted from shares of Class B common stock (for more information on shares outstanding, both Basic and Diluted, please refer to CompoSecure’s SEC filings and the earnings presentation).
OperationalHighlights
| · | Expanded<br> partnership with Fiserv to market and resell Arculus Authenticate capabilities to Fiserv’s<br> customer base |
|---|---|
| · | Customer<br> card programs launched include Wells Fargo Expedia Onekey Card, the Amex White Gold Card,<br> Turkish Airlines, and Atlas, a leading fintech. |
| --- | --- |
| · | Arculus<br> highlights: |
| --- | --- |
| ◦ | Remain<br> on track for Arculus total net investment to be lower than 2023, with the expectation of<br> turning positive for fiscal 2025 |
| --- | --- |
| ◦ | Showcased<br> Arculus innovation around Web3 payment capabilities using digital assets for everyday purchases<br> at point of sale |
| --- | --- |
| · | CompoSecure<br> recognition: |
| --- | --- |
| ◦ | Won<br> three 2024 International Card Manufactures Awards Elan Award: Best Metal Cards, Best Environmentally-Friendly<br> Cards, and Best Secure Payment Cards |
| --- | --- |
| ◦ | Jon<br> Wilk, CEO, Visionary CEO Award from the Banking Tech Awards USA |
| --- | --- |
| ◦ | Steve<br> Feder, General Counsel, NJBIZ Leaders in Law Awards |
| --- | --- |
| · | Released<br> inaugural ESG Report |
| --- | --- |
2024 FinancialOutlook
The Company has narrowed its previously issued fiscal 2024 guidance and now expects Net Sales to range between $418-$428 million (previously $408-428 million) and Adjusted EBITDA to range between $150-$157 million (previously $147-$157 million).
Conference Call
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: Wednesday, August 7, 2024
Time: 5:00 p.m. Eastern Time
Dial-in registration link
Live webcast registration link
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 completion of the transactions contemplated by the proposed transactions with Resolute Partners; 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 may include 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.
Corporate Contact
Anthony Piniella
Head of Global Communications, CompoSecure
(917) 208-7724
apiniella@composecure.com
Investor RelationsContact
Sean Mansouri, CFA
Elevate IR
(720) 330-2829
CMPO@elevate-ir.com
Consolidated Balance Sheet Data
(in thousands)
| December 31,<br><br> 2023 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| CURRENT ASSETS | |||||
| Cash and cash equivalents | 35,391 | $ | 41,216 | ||
| Accounts receivable, net | 39,648 | 40,488 | |||
| Inventories | 57,514 | 52,540 | |||
| Prepaid expenses<br> and other current assets | 3,928 | 5,133 | |||
| Total current assets | 136,481 | 139,377 | |||
| Property and equipment, net | 23,739 | 25,212 | |||
| Right of use assets, net | 6,449 | 7,473 | |||
| Deferred tax asset | 41,082 | 23,697 | |||
| Derivative asset - interest rate swap | 5,182 | 5,258 | |||
| Deposits and other<br> assets | 422 | 24 | |||
| Total assets | 213,355 | $ | 201,041 | ||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||
| CURRENT LIABILITIES | |||||
| Accounts payable | 9,431 | 5,193 | |||
| Accrued expenses | 12,183 | 11,986 | |||
| Commission payable | 5,010 | 4,429 | |||
| Bonus payable | 5,473 | 5,616 | |||
| Current portion of long-term debt | 13,437 | 10,313 | |||
| Current portion of lease liabilities | 2,029 | 1,948 | |||
| Current portion<br> of tax receivable agreement liability | 1,425 | 1,425 | |||
| Total current liabilities | 48,988 | 40,910 | |||
| Long-term debt, net of deferred finance<br> costs | 186,244 | 198,331 | |||
| Convertible notes | 128,088 | 127,832 | |||
| Derivative liability - convertible notes<br> redemption make-whole provision | 544 | 425 | |||
| Warrant liability | 10,087 | 8,294 | |||
| Lease liabilities, operating | 5,077 | 6,220 | |||
| Tax receivable agreement liability | 43,060 | 23,949 | |||
| Earnout consideration<br> liability | 383 | 853 | |||
| Total liabilities | 422,471 | 406,814 | |||
| Commitments and contingencies (Note 13) | |||||
| Redeemable non-controlling<br> interest | 516,489 | 596,587 | |||
| Preferred stock, 0.0001 par value; 10,000,000<br> shares authorized, no shares issued and outstanding | — | — | |||
| Class A common stock, 0.0001 par<br> value; 250,000,000 shares authorized, 29,847,338 and 19,415,123 shares issued and outstanding as of June 30, 2024 and December 31,<br> 2023, respectively. | 3 | 2 | |||
| Class B common stock, 0.0001 par<br> value; 75,000,000 shares authorized, 51,908,422 and 59,958,422 shares issued and outstanding as of June 30, 2024 and December 31,<br> 2023, respectively. | 5 | 6 | |||
| Additional paid-in capital | 36,258 | 39,466 | |||
| Accumulated other comprehensive income | 4,848 | 4,991 | |||
| Accumulated deficit | (766,719 | ) | (846,825 | ) | |
| Total stockholders'<br> deficit | (725,605 | ) | (802,360 | ) | |
| TOTAL LIABILITIES<br> AND STOCKHOLDERS' DEFICIT | 213,355 | $ | 201,041 |
All values are in US Dollars.
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
| Three months<br> ended June 30, | Six months<br> ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Net sales | $ | 108,567 | $ | 98,527 | $ | 212,577 | $ | 193,843 | ||||
| Operating expenses: | ||||||||||||
| Cost of sales | 52,495 | 44,590 | 101,292 | 86,552 | ||||||||
| Selling, general<br> and administrative expenses | 24,279 | 23,588 | 48,357 | 47,532 | ||||||||
| Total operating<br> expenses | 76,774 | 68,178 | 149,649 | 134,084 | ||||||||
| Income from operations | 31,793 | 30,349 | 62,928 | 59,759 | ||||||||
| Total other income (expense), net | 2,062 | 3,331 | (12,836 | ) | (16,605 | ) | ||||||
| Income before income taxes | 33,855 | 33,680 | 50,092 | 43,154 | ||||||||
| Income tax (expense) benefit | (258 | ) | (970 | ) | 578 | 293 | ||||||
| Net income | $ | 33,597 | $ | 32,710 | $ | 50,670 | $ | 43,447 | ||||
| Net income attributable to redeemable<br> non-controlling interests | $ | 22,498 | $ | 26,973 | $ | 33,629 | $ | 35,347 | ||||
| Net income attributable to CompoSecure, Inc. | $ | 11,099 | $ | 5,737 | $ | 17,041 | $ | 8,100 | ||||
| Net income per share attributable to Class A common stockholders<br> - basic | $ | 0.44 | $ | 0.31 | $ | 0.74 | $ | 0.45 | ||||
| Net income per share attributable to Class A common stockholders<br> - diluted | $ | 0.32 | $ | 0.29 | $ | 0.49 | $ | 0.41 | ||||
| Weighted average shares used to compute net income per share<br> attributable to Class A common stockholders - basic (in thousands) | 25,438 | 18,537 | 23,003 | 18,087 | ||||||||
| Weighted average shares used to compute net income per share<br> attributable to Class A common stockholders - diluted (in thousands) | 96,641 | 35,528 | 96,438 | 35,155 |
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Six months ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 50,670 | $ | 43,447 | ||
| Adjustments to reconcile net income to<br> net cash provided by operating activities | ||||||
| Depreciation and amortization | 4,601 | 4,171 | ||||
| Stock-based compensation expense | 9,635 | 8,415 | ||||
| Amortization of deferred finance costs | 669 | 700 | ||||
| Change in fair value of earnout consideration<br> liability | (470 | ) | (4,221 | ) | ||
| Revaluation of warrant liability | 1,793 | 7,968 | ||||
| Change in fair value of derivative liability | 119 | 513 | ||||
| Deferred tax (benefit) | (2,922 | ) | (1,770 | ) | ||
| Changes in assets and liabilities | ||||||
| Accounts receivable | 840 | 738 | ||||
| Inventories | (4,974 | ) | (6,515 | ) | ||
| Prepaid expenses and other assets | 1,205 | (272 | ) | |||
| Accounts payable | 4,238 | (492 | ) | |||
| Accrued expenses | 197 | 612 | ||||
| Other liabilities | 399 | (313 | ) | |||
| Net cash provided<br> by operating activities | 66,000 | 52,981 | ||||
| Cash flows from investing activities: | ||||||
| Purchase of property and equipment | (3,129 | ) | (5,697 | ) | ||
| Capitalized software<br> expenditures | (398 | ) | — | |||
| Net cash used in investing<br> activities | (3,527 | ) | (5,697 | ) | ||
| Cash flows from financing activities: | ||||||
| Proceeds from employee stock purchase<br> plan and exercises of equity awards | 221 | 389 | ||||
| Payments for taxes related to net share<br> settlement of equity awards | (8,482 | ) | (2,483 | ) | ||
| Payment of tax receivable agreement liability | — | (2,193 | ) | |||
| Payment of term loan | (9,375 | ) | (5,017 | ) | ||
| Tax distributions to non-controlling members | (26,167 | ) | (29,008 | ) | ||
| Special distribution to non-controlling<br> members | (15,573 | ) | — | |||
| Dividend to Class A<br> shareholders | (8,922 | ) | — | |||
| Net cash used in financing<br> activities | (68,298 | ) | (38,312 | ) | ||
| Net (decrease) increase in cash and cash<br> equivalents | (5,825 | ) | 8,972 | |||
| Cash and cash equivalents, beginning of<br> period | 41,216 | 13,642 | ||||
| Cash and cash equivalents,<br> end of period | $ | 35,391 | $ | 22,614 | ||
| Supplementary disclosure of cash flow information: | ||||||
| Cash paid for interest expense | $ | 12,890 | $ | 13,626 | ||
| Supplemental disclosure of non-cash financing<br> activities: | ||||||
| Derivative asset - interest rate swap | $ | (143 | ) | $ | (373 | ) |
Non-GAAP Adjusted EBITDA Reconciliation
(in thousands)
(unaudited)
| Three months<br> ended June 30, | Six months<br> ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| (in thousands) | ||||||||||||
| Net income | $ | 33,597 | $ | 32,710 | $ | 50,670 | $ | 43,447 | ||||
| Add: | ||||||||||||
| Depreciation and amortization | 2,380 | 2,131 | 4,601 | 4,171 | ||||||||
| Interest expense, net (1) | 5,648 | 5,849 | 11,394 | 12,345 | ||||||||
| Income tax expense (benefit) | 258 | 970 | (578 | ) | (293 | ) | ||||||
| EBITDA | $ | 41,883 | $ | 41,660 | $ | 66,087 | $ | 59,670 | ||||
| Stock-based compensation expense | 5,238 | 4,393 | 9,635 | 8,415 | ||||||||
| Mark-to-market adjustments, net (2) | (7,710 | ) | (9,180 | ) | 1,442 | 4,260 | ||||||
| Secondary offering transaction costs | 586 | — | 586 | — | ||||||||
| Adjusted EBITDA | $ | 39,997 | $ | 36,873 | $ | 77,750 | $ | 72,345 | ||||
| (1) | Includes amortization of deferred financing cost for the three and six months ended June 30, 2024 and 2023, respectively. | |||||||||||
| --- | --- | |||||||||||
| (2) | Includes the changes in fair value of warrant liability, derivative liabilities and earnout consideration liability for the three and six months ended June 30, 2024 and 2023, respectively. |
Non-GAAP Adjusted EPS Reconciliation
(in thousands)
(unaudited)
| Three months<br> ended June 30, | Six months<br> ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| (in thousands)<br> except per share amounts | ||||||||||||
| Basic and Diluted: | ||||||||||||
| Net Income | $ | 33,597 | $ | 32,710 | $ | 50,670 | $ | 43,447 | ||||
| Add (less): provision (benefit) for income<br> taxes | 258 | 970 | (578 | ) | (293 | ) | ||||||
| Income before income taxes | 33,855 | 33,680 | 50,092 | 43,154 | ||||||||
| Income tax expense (1) | (6,982 | ) | (6,190 | ) | (13,387 | ) | (11,771 | ) | ||||
| Adjusted net income before adjustments | 26,873 | 27,490 | 36,705 | 31,383 | ||||||||
| (Less) add: mark-to-market adjustments (2) | (7,532 | ) | (8,985 | ) | 1,323 | 3,747 | ||||||
| Add: Secondary offering transaction costs | $ | 586 | — | 586 | — | |||||||
| Add: stock-based compensation | 5,238 | 4,393 | 9,635 | 8,415 | ||||||||
| Adjusted net income | $ | 25,165 | $ | 22,898 | $ | 48,249 | $ | 43,545 | ||||
| Common shares outstanding used in computing net income per<br> share, basic: | ||||||||||||
| Class A and Class B common<br> shares (3) | 81,151 | 78,496 | 80,838 | 78,046 | ||||||||
| Common shares outstanding used in computing net income per<br> share, diluted: | ||||||||||||
| Warrants (Public and Private) (4) | 8,094 | 8,094 | 8,094 | 8,094 | ||||||||
| Equity awards | 2,490 | 3,991 | 2,600 | 4,068 | ||||||||
| Total Shares outstanding used in computing<br> net income per share - diluted | 91,735 | 90,581 | 91,532 | 90,208 | ||||||||
| Adjusted net income per share -basic | $ | 0.31 | $ | 0.29 | $ | 0.60 | $ | 0.56 | ||||
| Adjusted net income per share -diluted | $ | 0.27 | $ | 0.25 | $ | 0.53 | $ | 0.48 |
1) Calculatedusing the Company's blended tax rate.
2) Includesthe changes in fair value of warrant liability and earnout consideration liability.
3) Assumes bothClass A shares and Class B shares participate in earnings and are outstanding at the end of the period.
4) Assumes treasurystock method, valuation at assumed fair market value of $18.00.
5) The Companydid not include the effect of Exchangeable Notes in its total shares outstanding used in diluted adjusted net income per share.
Exhibit 99.2
| Q2 2024<br>Earnings Presentation<br>August 7, 2024 |
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| Disclaimers 2 |
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| 3 Stock Purchase Agreement Terms & Benefits<br> • All Class B shares converted to Class A<br> • Resolute Holdings purchases 49.3 million out of 51.9<br>million converted Class A shares at $7.55 per share.<br>Represents an equity investment of $372 million by<br>The David Cote Family<br> • Represents majority control of CompoSecure;<br>Company remains public<br> • Tax Receivable Agreement (TRA) with Class B<br>shareholders amended to exclude right to<br>acceleration for this transaction<br> • David Cote to serve as executive chairman of the<br>board of directors<br>Terms<br> • Removes dual-class share structure — all equity<br>holders will be represented by a single class of<br>common stock<br> • Simplifies tax structure and eliminates the tax<br>distributions to Class B holders<br> • Eliminates a capital markets overhang from large<br>financial investor expected to monetize<br> • Transaction expected to increase Company's<br>annualized free cash flow by more than $20 million<br> • Opportunity to reinvest free cash flow savings to drive<br>growth of the Company and increase shareholder<br>value<br>Benefits to Class A Shareholders |
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| 4 |
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| Summary<br>Narrows fiscal 2024 full year guidance; now anticipates Net Sales between $418mm to $428mm and<br>Adjusted EBITDA of $150mm to $157mm.<br>Expanded our partnership with Fiserv to include the marketing and reselling of Arculus Authenticate<br>capabilities; enhances our ability to bring FIDO2 secure authentication to Fiserv’s extensive customer base of<br>financial institutions and fintechs.<br>Net Sales: Q2 ’24 vs. Q2 ‘23 increased 10% to a record $109mm compared to $99mm; Adjusted EBITDA1<br>:<br>Q2 ‘24 vs. Q2 ‘23 increased 8% to $40mm compared to $37mm.<br>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<br>5<br>Amended credit facility: Lower rates, an upsized revolving line of credit, a longer term, and more flexible<br>covenants; provides capacity to continue driving growth along with the ability to retire our exchangeable notes<br>maturing December 2026 |
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| New Metal Card Programs 6<br>American Express White Gold<br>Turkish Airlines Premier Atlas<br>Wells Fargo - Expedia One Key+ |
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| Recent Trends across Payment Cards<br>1 American Express & JP Morgan Chase Earnings Presentations<br>2American Express Earnings Presentations<br>CompoSecure’s Largest Customers Report Continued<br>Purchase Volume Growth vs. Prior Year<br>Year over Year Purchase Volume Growth1<br>7<br>American Express Hit 3.3mm New Cards in Q2 ’24<br>Behind Robust Investments<br>New Card Acquisitions & Investment<br>2 |
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| Card Issuer and Payment Network Sentiment<br>1 Q2 ‘24 Earnings Transcripts<br>2 Q3 ‘24 Earnings Transcript<br>"In fact, we now expect to invest around $6 billion in marketing this year, up about<br>$800 million versus last year, all of it funded from the results of our core business.<br>And we continue to attract large numbers of high-quality premium customers with<br>our superior products, as seen in the consistently strong new account acquisitions<br>and 24 consecutive quarters of double-digit growth in card fee revenue we've<br>delivered.<br>For example, as we execute our strategy of regularly refreshing our products, we<br>focused on embedding additional value in our premium cards to make them highly<br>attractive to customers across generations and geographies. This enables us to<br>add large numbers of new premium card members to our customer base, drive<br>greater engagement with existing customers, and price for the value we add. We<br>are on track to refresh approximately 40 products globally by the end of the year." –<br>Stephen Squeri (Chairman & CEO)1<br>8<br> “First, we are integrating Click to Pay and the Visa Payment Passkey Service, enabling a customer to authenticate themselves using biometrics. Already, we have hundreds<br>of issuers enabled for passkeys in Europe and a number of issuers who represent more than 50% of our e-commerce payments volume in Europe piloting the solution.<br>Second, we crossed 10 billion tokens this quarter, a significant milestone.<br>And in 2023 alone, Visa tokens helped generate more than an estimated $40 billion in incremental e-commerce revenue for businesses globally and saved more than $600<br>million in fraud. Third is the ability to tap for more use cases on a mobile device. With tapping as one of the best in-person commerce experiences, we want to provide Visa<br>users with more ways to tap, including tap to pay, tap to authenticate an identity, tap to add a card, or tap to send money to family or friends. And finally, this quarter, Tap to<br>Pay grew 4 percentage points from last year to 80% of face-to-face transactions globally, excluding the U.S.” – Ryan McInerney (CEO)<br>2<br>"Total company marketing expense in the quarter was $1.1 billion, up 20% year<br>over year. Our choices in domestic card are the biggest driver of total company<br>marketing. We continue to see compelling growth opportunities in our domestic<br>card business.<br>Our marketing continues to deliver strong new account growth across the domestic<br>card business. Compared to the second quarter of 2023, domestic card marketing<br>in the quarter included increased marketing to grow originations at the top of the<br>marketplace, higher media spend, and increased investment in differentiated<br>customer experiences like our travel portal, airport lounges, and Capital One<br>Shopping<br>Pulling up, marketing is a key driver of current and future growth and value creation<br>across the company, and we're leaning hard into our marketing investments. We<br>expect total company marketing in the second half of 2024 to be meaningfully<br>higher than the first half, similar to the pattern we saw last year.” – Richard<br>Fairbank (Chairman & CEO)<br>1 |
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| Arculus Capabilities<br>Enabled Arculus Web3 payment capabilities using digital assets for everyday purchases at point of sale<br>9<br>Arculus Authenticate Arculus Cold Storage<br>Hardware-bound PassKey authenticator<br> • Secure login on any iPhone, Android phone, or platform<br>enabled with FIDO2 technology<br> • New device authentication (on-boarding new phone)<br> • Customer support authentication to call center<br> • Step-up authentication for high-risk transactions<br> • Secure account and prevent hackers from gaining<br>access to banking or social media app<br> • White-labeled or co-branded solution sold through<br>businesses for usage by their customer base<br> • Generate, store, and secure keys for digital assets such as<br>Bitcoin, Ethereum, Cardano, Solano, and many more<br> • White-labeled or co-branded solution sold through<br>businesses for usage by their customer base<br> • Direct to consumer<br>Capability<br>Use Cases<br>Example<br>Distribution<br>Channels<br>Crypto and NFT hardware cold storage wallet<br> • Advanced three-factor authentication (biometric, PIN, and<br>tapping card)<br> • Securely store, send, and receive digital assets via user-friendly mobile application<br> • Secure element with NFC connectivity (no battery or<br>charging required) |
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| Financial<br>Overview |
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| Q2 2024 Results<br>$40.0mm<br>Q2 ‘24 Q2 YTD ‘22<br>Net Sales $108.6mm<br>36.8%<br>$33.6mm<br>51.6%<br>$98.5mm<br>$32.7mm<br>54.7%<br>$36.9mm<br>37.4%<br>10%<br>Up $10.0mm, or 10% from Q2 '23. Primarily due to<br>domestic up $7.2mm and international up $2.8mm<br>3%<br>(309.6 bps)<br>8%<br>(58.3bps)<br>Net Income<br>Gross Margin<br>Adjusted EBITDA1<br>Adjusted EBITDA Margin1<br>Q2 ‘23 Change Commentary<br>1 Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial metrics. For a reconciliation of Adjusted EBITDA to the most-comparable GAAP metric, please see the Appendix to this presentation<br>The decline was mainly due to product mix,<br>specifically the ramp-up of new card construction and<br>inflationary pressure on wages<br>Includes $1.5mm negative impact when comparing<br>Q2 ‘24 vs. Q2 ‘23 from re-valuation of warrant,<br>earnout consideration, & derivatives liability driven<br>by change in stock price<br>Excludes net change from re-valuation of earnout<br> & warrants<br>Includes net investment in Arculus investment<br>in Q2 ’24 ($2.3mm) vs. Q2 ’23 ($4.2mm)<br>11<br>0.5474336 |
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| YTD June 2024 Results<br>$77.8mm<br>YTD Jun ‘24 Q2 YTD ‘22<br>Net Sales $212.6mm<br>36.6%<br>$50.7mm<br>52.4%<br>$193.8mm<br>$43.4mm<br>55.3%<br>$72.3mm<br>37.3%<br>10%<br>Up $18.7mm, or 10% from YTD '23. Primarily due to<br>domestic up $26.3mm offset by international down<br>$7.6mm<br>17%<br>(299.9bps)<br>7%<br>(74.6 bps)<br>Net Income<br>Gross Margin<br>Adjusted EBITDA1<br>Adjusted EBITDA Margin1<br>YTD Jun ‘23 Change Commentary<br>1 Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial metrics. For a reconciliation of Adjusted EBITDA to the most-comparable GAAP metric, please see the Appendix to this presentation<br>The decline was mainly due to product mix,<br>specifically the ramp-up of new card construction and<br>inflationary pressure on wages<br>Includes $2.8mm positive benefit when comparing<br>YTD June ‘24 vs. YTD June ‘23 from re-valuation of<br>warrant, earnout consideration, & derivatives liability<br>driven by change in stock price<br>Excludes net change from re-valuation of earnout<br> & warrants<br>Includes net investment in Arculus investment<br>in YTD Jun ’24 ($4.0mm) vs. YTD Jun ’23<br>($8.7mm)<br>12 |
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| Net Sales Trend<br>International mix for year to date June '24 was over 16% of total net sales<br>In millions<br>International<br>Domestic<br>14%<br>86%<br>13%<br>87%<br>11%<br>89%<br>13<br>79%<br>International - YTD Q2 '24<br>$34.6mm (16.3% of Total)<br>(18)% vs. YTD Q2 '23<br>Domestic - YTD Q2 '24<br>$178.0mm (83.7% of Total)<br>17.4% vs. YTD Q2 '23<br>22%<br>78%<br>21%<br>0.22916 |
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| Balance Sheet & Credit Facility<br>(Unaudited)<br>Source: Company financials<br>Note: Financial position has been derived from CompoSecure’s consolidated financial statements for the periods ended June 30, 2024 and December 31, 2023, respectively<br>14<br>in millions Q2 2024 Q4 2023<br>Assets<br>Current Assets<br>Cash and cash equivalents $ 35.4 $ 41.2<br>Accounts receivable, net 39.6 40.5<br>Inventories 57.5 52.5<br>Prepaid expenses and other current assets 3.9 5.1<br>Total current assets $ 136.4 $ 139.3<br>Property and equipment, net 23.7 25.2<br>Deferred tax asset 41.1 23.7<br>Other assets 12.1 12.8<br>Total Assets $ 213.3 $ 201.0<br>Liabilities and Members' Equity<br>Current Liabilities<br>Accounts payable $ 9.4 $ 5.2<br>Accrued expenses 12.2 12.0<br>Other current liabilities 13.9 13.4<br>Current portion of long-term debt 13.4 10.3<br>Total current liabilities $ 48.9 $ 40.9<br>Long term debt, net of deferred finance costs 186.2 198.3<br>Convertible Debt, net of debt discount 128.1 127.8<br>Other liabilities 59.2 39.7<br>Total Liabilities $ 422.4 $ 406.8<br>Members' Equity (209.1) (205.8)<br>Total Liabilities and Members' equity $ 213.3 $ 201.0<br>Amended Credit Facility Summary<br>Majority of lender participants in<br>existing facility to continue<br> • Led by JP Morgan Chase with Bank<br>of America and TD Bank as joint<br>book runners<br>Key benefits include:<br> • Lower rates<br> • Longer Term (5 years)<br> • Upsized revolving line of credit<br> • More flexible covenants |
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| Statement of Cash Flows<br>(Unaudited)<br>Source: Company financials<br>Note: Cash flows have been derived from CompoSecure’s consolidated financial statements for the six months ended June 30, 2024 and 2023 respectively<br>15<br>in millions<br>Six months ended<br>June 30, 2024<br>Six months ended<br>June 30, 2023<br>Cash flows from operating activity:<br>Net income $ 50.7 $ 43.4<br>Depreciation 4.6 4.2<br>Equity-based compensation expense 9.6 8.4<br>Amortization of deferred finance costs 0.7 0.7<br>Change in fair value of earnout, warrant and derivative 1.4 4.3<br>Deferred tax (benefit) (2.9) (1.8)<br>Changes in assets and liabilities 1.9 (6.2)<br>Net cash provided by operating activity $ 66.0 $ 53.0<br>Cash flows from investing activity:<br>Acquisition of of property and equipment (3.1) (5.7)<br>Capitalized software expenditures (0.4) —<br>Net cash used in investing activity $ (3.5) $ (5.7)<br>Cash flows from financing activity<br>Proceeds from employee stock purchase plan and exercises of equity awards 0.2 0.4<br>Payments for taxes related to net share settlement of equity awards (8.5) (2.5)<br>Payment of tax receivable agreement liability — (2.2)<br>Payment of term loan (9.4) (5.0)<br>Tax distributions to non-controlling members (26.2) (29.0)<br>Special distribution to non-controlling members (15.6) —<br>Dividend to Class A shareholders (8.9) —<br>Net cash used in financing activity $ (68.4) $ (38.3)<br>Net (decrease) increase in cash and cash equivalents $ (5.8) $ 9.0<br>Cash and cash equivalents, beginning of period $ 41.2 $ 13.6<br>Cash and cash equivalents, end of period $ 35.4 $ 22.6<br>Supplementary disclosure of cash flow information:<br>Cash paid during the year for interest expense 12.9 13.6<br>Non-cash, derivative asset - interest rate swap (0.1) (0.4) |
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| Q2 Earnings per Share: GAAP<br>25.4mm3<br>Basic<br>Q2 YTD ‘22<br>GAAP Net Income $33.6mm<br>$0.44<br>$11.1mm1<br>Three Months Ended<br>June 30, 2024<br>Three Months Ended<br>June 30, 2023<br>$33.6mm<br>$30.5mm2<br>96.6mm4<br>$0.32<br>$32.7mm $32.7mm<br>$5.7mm $10.1mm<br>18.5mm 35.5mm<br>$0.31 $0.29<br>Net Income used in EPS<br>Total Shares used in EPS<br>Earnings per Share<br>Diluted Basic Diluted<br>16<br>Source: Company Financials<br>1 36.5% of net income of $35.4mm of operating entities plus 100% of C-Corp net loss of $1.8mm.<br>2 36.5% of net income of $35.4mm of operating entities plus 100% of C-Corp net loss of $1.8mm. plus exchangeable notes, equity awards and Class B shares of $19.4mm<br>3 Weighted-average outstanding Class A Shares.<br>4 Outstanding Class A Shares 25.4mm plus equity awards 2.5m, exchangeable notes 13.0mm and Class B units of 55.7mm |
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| Q2 Adjusted Earnings per Share<br>81.2mm3<br>Basic<br>Q2 YTD ‘22<br>GAAP Net Income $33.6mm<br>$0.31<br>$25.2mm1<br>Three Months Ended<br>June 30, 2024<br>Three Months Ended<br>June 30, 2023<br>$33.6mm<br>$25.2mm1<br>91.7mm4<br>$0.27<br>$32.7mm $32.7mm<br>$22.9mm2 $22.9mm2<br>78.5mm3 90.6mm5<br>$0.29 $0.25<br>Adjusted Net Income<br>Total Shares used in EPS<br>Adjusted EPS6<br>Diluted Basic Diluted<br>17<br>Source: Company Financials<br>1 GAAP Net Income of $33.6mm less additional tax provision of $6.7mm less $1.7mm comprised of fair value/mark-to-market changes for warrants and earnouts, equity awards adjustment and secondary offer transaction costs.<br>2 GAAP Net Income of $32.7mm less additional tax provision of $5.2mm less $4.6mm comprised of fair value/mark-to-market changes for warrants and earnouts and equity awards adjustment.<br>3 Weighted average outstanding Class A plus Class B Shares.<br>4 Outstanding Class A plus Class B Shares plus 8.1mm public warrants (converted using treasury stock method) and 2.5mm equity awards.<br>5 Outstanding Class A plus Class B Shares plus 8.1mm public warrants (converted using treasury stock method) and 4.0mm equity awards<br>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. |
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| YTD Earnings per Share: GAAP<br>23.0mm3<br>Basic<br>Q2 YTD ‘22<br>GAAP Net Income $50.7mm<br>$0.74<br>$17.0mm1<br>Six months ended<br>June 30, 2024<br>Six months ended<br>June 30, 2023<br>$50.7mm<br>$46.9mm2<br>96.4mm4<br>$0.49<br>$43.4mm $43.4mm<br>$8.1mm $14.2mm<br>18.1mm 35.2mm<br>$0.45 $0.41<br>Net Income used in EPS<br>Total Shares used in EPS<br>Earnings per Share<br>Diluted Basic Diluted<br>18<br>Source: Company Financials<br>1 36.5% of net income of $53.0mm of operating entities plus 100% of C-Corp net loss of $2.3mm.<br>2 36.5% of net income of $53.0mm of operating entities plus 100% of C-Corp net loss of $2.3mm. plus exchangeable notes, equity awards and Class B shares of $29.9mm<br>3 Weighted-average outstanding Class A Shares.<br>4 Weighted-average outstanding Class A Shares 23.0mm plus equity awards 2.6m, exchangeable notes 13.0mm and Class B units of 57.8mm |
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| YTD Adjusted Earnings per Share<br>80.8mm3<br>Basic<br>Q2 YTD ‘22<br>GAAP Net Income $50.7mm<br>$0.60<br>$48.2mm1<br>Six months ended<br>June 30, 2024<br>Six months ended<br>June 30, 2023<br>$50.7mm<br>$48.2mm1<br>91.5mm4<br>$0.53<br>$43.4mm $43.4mm<br>$43.5mm2 $43.5mm2<br>78.0mm3 90.2mm5<br>$0.56 $0.48<br>Adjusted Net Income<br>Total Shares used in EPS<br>Adjusted EPS6<br>Diluted Basic Diluted<br>19<br>Source: Company Financials<br>1 GAAP Net income of $50.7mm less additional tax provision of $14.0mm plus $11.5mm comprised of fair value/mark-to-market changes for warrants and earnouts, equity awards adjustment and secondary offer transaction costs.<br>2 GAAP Net Income of $43.4mm less additional tax provision of $12.1mm less $12.2mm comprised of fair value/mark-to-market changes for warrants and earnouts and equity awards adjustment.<br>3 Outstanding Class A plus Class B Shares.<br>4 Outstanding Class A plus Class B Shares plus 8.1mm public warrants (converted using treasury stock method) and 2.6mm equity awards.<br>5 Outstanding Class A plus Class B Shares plus 8.1mm public warrants (converted using treasury stock method) and 4.1mm equity awards<br>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. |
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| 2024 Guidance<br>Narrows full year Net Sales and Adjusted EBITDA guidance<br>Net Sales<br>Adjusted EBITDA1<br>2023A<br>$391mm<br>$145mm<br>1 Adjusted EBITDA is a non-GAAP financial metric. For a reconciliation of Adjusted EBITDA to the most-comparable GAAP metric, please see the Appendix to this presentation<br>$418mm - $428mm<br>$150mm - $157mm<br>2024F<br>B/(W) vs. ‘23 +7% / +10%%<br>B/(W) vs. ’23 +3% / +8%<br>20 |
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| 2024 Company Objectives<br>Grow and diversify metal<br>payment cards while<br>delivering exceptional<br>quality to our customers<br>Innovate across products,<br>processes and platforms<br>to differentiate from<br>competition and continue<br>emphasis on<br>environmental impact<br>Drive Arculus<br>Authenticate and Cold<br>Storage by demonstrating<br>to our customers the<br>value proposition of both<br>hardware and software<br>solutions<br>Maintain margins<br>through improved<br>quality, production<br>efficiency, sourcing<br>optimization, and<br>automation<br>Grow Metal<br>Payment Cards<br>21<br>Innovate Across<br>Functions<br>Demonstrate<br>Arculus Success<br>Enhance<br>Efficiency<br>1 2 3 4<br>Continue to evolve as a world-class organization, innovator, and employer of choice to<br>deliver unparalleled customer and shareholder value<br>Focus On<br>Our People<br>5 |
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| Investor Relations Contact<br>ir.composecure.com<br>Sean Mansouri<br>720-330-2829<br>ir@composecure.com<br>22<br>22 |
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| Appendix |
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| CompoSecure, Inc. (Nasdaq: CMPO)<br>Summary Equity Capitalization Table (with net exercise model)<br>As of June 30, 2024<br>Holders # of Shares Issued & Outstanding # of Shares Issued & Outstanding<br>Public Shareholders: Class A 29.8mm 29.8mm<br>Historic CompoSecure Owners: Class B 51.9mm 51.9mm<br>Subtotal 81.7mm 81.7mm<br>Holders # of Shares Reserved for Immediately<br>Exercisable In-The-Money Options<br># of Shares Reserved for Immediately<br>Exercisable In-The-Money Options<br>(assuming net exercise)<br>1<br>Merger Rollover Options 1.5mm 0.8mm<br>Subtotal 83.2mm 82.5mm<br>Convertible Instruments # of Shares Reserved for Conversion<br># of Shares Reserved for Conversion<br>(assuming net exercise)<br>Public Warrants2 22.4mm 8.1mm<br>Exchangeable Notes3 11.8mm 11.8mm<br>Grand Total 117.4mm 102.4mm<br>Notes: The table above excludes shares which may be issued in the future for contingent “earnout”, equity incentive plan, employee stock<br>purchase plan, and 401K plan<br>1 Assumes exercise net of strike price, valuation at assumed FMV of $10.00<br>2 Assumes treasury stock method, $11.50 strike price, & valuation at assumed FMV of $18.00<br>3 Assumes $10.98 strike price with redemption (at company’s discretion) after three years if FMV exceeds $14.27<br>24 |
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| Statement of Operations<br>(Unaudited)<br>25<br>Source: Company financials<br>Note: Operating results have been derived from CompoSecure’s consolidated financial statements for the three and six months ended June 30, 2024 and 2023.<br>Note: Totals may not sum due to rounding<br>1<br>Includes other income (expense) and income tax (expense) benefit as presented in the interim financial statements<br>in millions Q2 2024 Q2 2023 YTD 2024 YTD 2023<br>Revenue<br>Net Sales $ 108.6 $ 98.5 $ 212.6 $ 193.8<br>Cost of sales 52.5 44.6 101.3 86.6<br>Gross Profit $ 56.1 $ 53.9 $ 111.3 $ 107.2<br>Operating Expenses<br>Selling, general and administrative 24.3 23.6 48.4 47.5<br>Income from operations $ 31.8 $ 30.3 $ 62.9 $ 59.7<br>Other income (expense)<br>Other income (expense), net1 1.8 2.4 (12.3) (16.3)<br>Net Income $ 33.6 $ 32.7 $ 50.6 $ 43.4 |
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| Non-GAAP Adjusted EBITDA Reconciliation<br>(Unaudited)<br>26<br>in millions Q2 2024 Q2 2023 YTD 2024 YTD 2023<br>Net Income $ 33.6 $ 32.7 $ 50.7 $ 43.4<br>Interest expense 5.6 5.8 11.4 12.3<br>Depreciation and amortization 2.4 2.1 4.6 4.2<br>Income tax expense (benefit) 0.3 1.0 (0.6) (0.3)<br>Unadjusted EBITDA $ 41.9 $ 41.6 $ 66.1 $ 59.6<br>Non- Cash Stock Comp Expense1 5.2 4.4 9.6 8.4<br>Mark-to-market adjustments2<br>(7.7) (9.2) 1.4 4.3<br>Secondary offering transaction costs 0.6 — 0.6 —<br>Total EBITDA Adjustments $ (1.9) $ (4.8) $ 11.6 $ 12.7<br>Adjusted EBITDA $ 40.0 $ 36.8 $ 77.7 $ 72.3<br>Adjusted EBITDA% 36.8 % 37.4 % 36.6 % 37.3 %<br>Source: Company financials<br>1 Equity based expenses related to the equity incentive plan<br>2 Non-cash mark-to-market adjustments representing changes in fair value of liabilities for warrants, earnouts and derivatives assets. |
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| Non-GAAP EPS Reconciliation<br>(Unaudited)<br>27<br>Source: Company financials<br>1 Assumes treasury stock method, valuation at assumed FMV of $18.00<br>2<br>Includes options, RSUs, and ESPP shares<br>Three months ended June 30, 2024 Three months ended June 30, 2023<br>in millions BASIC DILUTED BASIC DILUTED<br>GAAP Net Income $ 33.6 $ 33.6 $ 32.7 $ 32.7<br>Adjust for tax (benefit) expense 0.3 0.3 1.0 1.0<br>Tax Provision (7.0) (7.0) (6.2) (6.2)<br>Tax Adjusted Net Income $ 26.9 $ 26.9 $ 27.5 $ 27.5<br>Stock Based Compensation and Fair Value Adjustment (1.7) (1.7) (4.6) (4.6)<br>Adjusted Net Income $ 25.2 $ 25.2 $ 22.9 $ 22.9<br>Class A + Class B Shares 81.2 81.2 78.5 78.5<br>Public Warrants1 — 8.1 — 8.1<br>Equity Awards2 — 2.5 — 4.0<br>Total Shares 81.2 91.8 78.5 90.6<br>EPS $ 0.31 $ 0.27 $ 0.29 $ 0.25 |
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| Non-GAAP EPS Reconciliation<br>(Unaudited)<br>28<br>Source: Company financials<br>1 Assumes treasury stock method, valuation at assumed FMV of $18.00<br>2<br>Includes options, RSUs, and ESPP shares<br>Six months ended June 30, 2024 Six months ended June 30, 2023<br>in millions BASIC DILUTED BASIC DILUTED<br>GAAP Net Income $ 50.7 $ 50.7 $ 43.4 $ 43.4<br>Adjust for tax (benefit) expense (0.6) (0.6) (0.3) (0.3)<br>Tax Provision (13.4) (13.4) (11.8) (11.8)<br>Tax Adjusted Net Income $ 36.7 $ 36.7 $ 31.3 $ 31.3<br>Stock Based Compensation and Fair Value Adjustment 11.5 11.5 12.2 12.2<br>Adjusted Net Income $ 48.2 $ 48.2 $ 43.5 $ 43.5<br>Class A + Class B Shares 80.8 80.8 78.0 78.0<br>Public Warrants1 — 8.1 — 8.1<br>Equity Awards2 — 2.6 — 4.1<br>Total Shares 80.8 91.5 78.0 90.2<br>EPS $ 0.60 $ 0.53 $ 0.56 $ 0.48 |
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Exhibit 99.3
Resolute Holdings to Acquire Majority Interestin CompoSecure with $372 million Personal Investment via David Cote Family
August 7, 2024
David Cote to Become Executive Chairman
Transaction Unlocks Value with Simplificationof Corporate Structure
CompoSecure to Become the First Investmentof Resolute Holdings
New York, NY and Somerset, NJ, August 7,2024 –Resolute Holdings I, LP and its affiliated vehicles (“Resolute”), an investment firm under the leadership of David Cote and Tom Knott, and CompoSecure, Inc. (Nasdaq: CMPO) (“CompoSecure” or the “Company”), a leader in metal payment cards, security, and authentication solutions, today announced that certain shareholders of CompoSecure have entered into Stock Purchase Agreements (collectively, the “SPA”) with Resolute, pursuant to which Resolute will acquire a majority interest in CompoSecure and eliminate its dual-class structure.
The David Cote Family is investing $372 million through Resolute and Dave Cote will become the executive chairman of the board of directors of CompoSecure upon closing of the transaction. Resolute will become the majority shareholder of the Company and will focus on deploying operational and M&A best practices to drive long-term value creation for all shareholders. Importantly, the transaction will remove the dual-share structure, delivering higher retained annual cash flow and better alignment of all shareholders with the elimination of the tax distributions related to the Class B units.
David Cote said, “CompoSecure meets all the criteria I look for when making an investment and I am thrilled that Resolute will become the Company’s majority shareholder. CompoSecure has a high-quality management team led by CEO Jon Wilk, a leading market position in its industry, attractive long-term growth prospects, technological differentiation, and robust free cash flow generation. Tom and I see significant opportunity to continue growing CompoSecure while also diversifying the business and customer base through incremental M&A. In our view, it is the perfect first investment for Resolute and we are excited to get started creating additional shareholder value.”
CompoSecure CEO, Jon Wilk said, “I am very pleased to announce this strategic transaction that will simplify our corporate structure and continue to unlock shareholder value. I am also thrilled to have David Cote serve as executive chairman of the board of directors. David’s career and track record is unparalleled, setting the standard for how organizations can simultaneously drive both short and long-term performance to realize their full potential. We believe his experience steering global organizations, such as Honeywell and Vertiv, will be invaluable to CompoSecure as we enter a new phase of growth and value creation for shareholders, employees, and customers.”
Mitchell Hollin, Partner at LLR Partners, a long-term CompoSecure Class B stockholder, added, “LLR is grateful to have been part of CompoSecure’s growth since our investment in the company in 2015. Michele Logan, Jon and the rest of the CompoSecure team have built a market leader that I believe is well positioned for the long-term. We look forward to seeing CompoSecure’s continued success in partnership with David, Tom and Resolute.”
The Stock Purchase Agreements
Under the terms of the SPA, the selling shareholders will exchange the entirety of their Class B units and associated Class B shares for Class A shares, eliminating the current dual-share class structure. Resolute will subsequently purchase 49.3 million of the corresponding Class A shares to acquire majority control of the Company. As a result of the transaction, The David Cote Family is expected to have voting control of approximately 60% of total shares outstanding as of the closing date.
The Company’s current management team, including Jon Wilk, CompoSecure’s chief executive officer, are expected to continue in their current roles at the Company, while the board of directors will include the appointment of Dave Cote, Tom Knott and other representatives from Resolute to replace Mitchell Hollin, of LLR Partners, and Michele Logan, co-founder of CompoSecure, who will depart from the board of directors upon closing of the transaction. Upon closing of the transaction, the size of the board will be expanded to eleven members, and a majority of the Board will be independent directors.
Goldman Sachs & Co. LLC is serving as financial advisor to Resolute, and Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as legal advisor.
A special committee of CompoSecure’s Board of Directors, which is comprised solely of independent directors and was formed in connection with the transaction (the “Special Committee”), after receiving advice from an independent legal counsel and financial advisor, unanimously approved the proposed transactions to which CompoSecure is a party. The Special Committee was advised by Potter Anderson & Corroon LLP (Wilmington, DE) and retained Houlihan Lokey, Inc..
The transaction is expected to close by September 30, 2024, subject to customary closing conditions and regulatory approvals, including Hart-Scott-Rodino clearance.
About Resolute Holdings
Resolute Holdings is an investment firm, controlled by Dave Cote, former CEO of Honeywell International, Inc. (“Honeywell”) and current Executive Chairman of Vertiv Holdings Co (“Vertiv”), and Tom Knott, former Head of Permanent Capital Strategies at The Goldman Sachs Group, Inc. (“Goldman Sachs”). Mr. Cote and Mr. Knott formed Resolute Holdings to invest in businesses that can benefit from the systematic deployment of the operating system Mr. Cote has developed over his career.
Mr. Cote completed approximately 170 M&A transactions during his tenure as CEO of Honeywell and as current Executive Chairman at Vertiv. Mr. Cote brings over 40 years of operating experience across a wide range of industrial sectors with a proven track record of delivering outsized shareholder value through disciplined portfolio management and accretive M&A.
Mr. Knott was formerly the Head of Permanent Capital Strategies in the Asset Management Division of Goldman Sachs and was also CEO of GS Acquisition Holdings Corp and GS Acquisition Holdings Corp II, respectively bringing public both Vertiv and Mirion Technologies, Inc. Mr. Knott brings over 14 years of investing experience across a wide range of sectors.
About CompoSecure
Founded in 2000, CompoSecure 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.
Contacts
For Resolute Holdings
Tom Knott
info@resoluteholdings.com
For CompoSecure
Anthony Piniella
Head of Communications
(917) 208-7724
apiniella@composecure.com
Sean Mansouri, CFA
Elevate IR
(720) 330-2829
CMPO@elevate-ir.com
Forward-Looking Statements
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 or Resolute Holdings, as appliable. Although CompoSecure and Resolute Holdings, as applicable, believes that its plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, CompoSecure, Resolute Holdings and their affiliates 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 or Resolute Holdings’ 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 these forward-looking statements: the ability to consummate the transactions contemplated by the SPA; the ability of CompoSecure to diversify its business and customer base; the ability of CompoSecure to create value for its shareholders and generate robust free cash flow; 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, Resolute Holdings 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 and Resolute Holdings undertake 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.