8-K
GPGI, Inc. (GPGI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities ExchangeAct of 1934
Date of Report (Date of earliest event reported):May 9, 2022
CompoSecure, Inc.
(Exact Name of Registrant as Specified in itsCharter)
| Delaware | 001-39687 | 85-2749902 |
|---|---|---|
| (State or Other Juris- diction of Incorporation) | (Commission<br> File Number) | (IRS Employer Identification No.) |
| 309 Pierce Street | ||
| --- | --- | |
| Somerset**, NewJersey** **** | 08873 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including
area code: (908) 518-0500
Not Applicable
(Former Name or Former Address, if ChangedSince 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 whichregistered |
|---|---|---|
| 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 9, 2022, CompoSecure, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2022 and provided an investor presentation to accompany the press release. Copies of the press release and the investor presentation are furnished herewith as Exhibits 99.1 and 99.2, respectively.*
| Item 7.01 | 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 9, 2022 |
| 99.2 | Investor Presentation, dated May 2022 |
| 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 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 9, 2022 | By: | /s/Timothy Fitzsimmons |
| Timothy Fitzsimmons | ||
| Chief Financial Officer |
Exhibit 99.1
CompoSecure, Inc. Announces First Quarter 2022Financial Results
| · | First quarter Net Sales of $84.2 million, up 32.1% year-over-year |
|---|---|
| · | First<br>quarter Net Income of $26.9 million, up 16% year-over-year |
| --- | --- |
| · | First<br>quarter Adjusted EBITDA of $33.3 million, up 14% year-over-year |
| --- | --- |
| · | Payment<br> card plus Arculus^TM^ digital authentication and/or crypto cold storage selected<br> by several cryptocurrency platforms and fintech partners. |
| --- | --- |
Somerset, NJ – May 9, 2022 – CompoSecure, Inc. (Nasdaq: CMPO), a leading provider of premium financial payment cards and cryptocurrency storage and security solutions, today announced financial results for the first quarter ended March 31, 2022.
“We achieved record first quarter net sales and profitability driven by the strength of our premium payment card business and international growth. We are off to a strong start for 2022 and believe we will continue to see increased demand among new and existing customers, bolstered by solid sales execution and deep relationships,” said CEO Jon Wilk. “In addition, our relentless focus on operational excellence supports our ability to meet growing demand and deliver premium-quality products to our customers while enhancing our overall profitability.”
Wilk added, “It’s exciting to have been selected by several cryptocurrency platforms and fintech partners to launch programs combining our payment card technology plus our Arculus solution. We were also encouraged by the positive consumer response to Arculus at the Bitcoin 2022 conference held in Miami in April, where more than 25,000 digital asset enthusiasts had a chance to experience our best-in-class cold storage wallet. We expect to continue to increase Arculus investment throughout the year to drive further adoption, deliver product enhancements, and support brand momentum, in line with our previously shared marketing strategy.”
First Quarter 2022 Financial Highlights
| · | Net Sales: Net sales for the first quarter of 2022 were $84.2 million, up 32.1% compared to $63.7 million in the first quarter<br>of 2021, and grew 11.8% sequentially from the fourth quarter in 2021. |
|---|---|
| · | Gross Profit/Margin: Gross Profit for the first quarter of 2022 was $49 million, compared to $34 million for the first quarter<br>of 2021. Gross margin for the first quarter of 2022 was 57.9%, compared to 53.9% for the first quarter of 2021. |
| --- | --- |
| · | Net Income: Net Income for the first quarter of 2022 was $26.9 million compared to a net income of $23.2 million in the first<br>quarter of 2021. |
| --- | --- |
| · | Adjusted EBITDA: Adjusted EBITDA for the quarter was $33.3 million, compared to $29.3 million for the first quarter of 2021. |
| --- | --- |
First Quarter 2022 Highlights
| · | Strong international growth with quarterly international net sales of $21.8<br>million, driven by sales execution and growing demand for premium payment cards in international markets. |
|---|---|
| · | Focus on operational excellence drove improved productivity and efficiency,<br>continued high-quality product delivery, and enhanced profitability. |
| --- | --- |
| · | Payment card plus Arculus digital authentication and/or crypto cold storage has been selected by several cryptocurrency platforms and<br>fintech partners—Voyager Digital Ltd., Lode and MassPay. |
| --- | --- |
| · | Strong, positive response from consumers at Bitcoin 2022; more than 25,000<br>attendees were exposed to the Arculus cold storage wallet. |
| --- | --- |
| · | On track for anticipated mid-June Arculus Wallet^TM^<br>update delivering access to the Defi ecosystem through WalletConnect and the ability to visualize NFTs, as well as ongoing expansion of<br>supported cryptocurrencies. |
| --- | --- |
Financial Outlook
| · | Full Year 2022 Guidance: The Company reaffirmed its guidance for expected full year 2022 operating<br>results with net sales expected to be in the range of $336 million to $376 million and adjusted EBITDA expected to be in the range of<br>$100 million to $110 million. |
|---|
Conference Call and Webcast
CompoSecure will host a conference call today at 5:00 p.m. Eastern Time to review the Company’s financial results for the first quarter ended March 31, 2022. To access this call, dial (877) 270-2148 for the U.S. or Canada, or (412) 902-6510 for international callers. A live webcast of the conference call will be accessible from the Investors section of our website at https://ir.composecure.com/news-events/events.
About CompoSecure
Founded in 2000, CompoSecure is a pioneer and leading provider of premium payment cards and cryptocurrency and digital asset storage and security solutions. The company focuses on serving the affluent customers of payment card issuers worldwide using proprietary production methods that meet the highest standards of quality and security. The company offers secure, innovative, and durable proprietary products that implement leading-edge engineering capabilities and security. CompoSecure’s mission is to increase clients’ brand equity in the marketplace by offering products and solutions which differentiate the brands they represent, thus elevating cardholder experience. For more information, please visit www.composecure.com. CompoSecure created Arculus^TM^ with the mission to promote cryptocurrency adoption by making it safe, simple and secure for the average person to buy, swap and store cryptocurrency. With a strong background in security hardware and financial payments, the Arculus^TM^ solution was developed to allow people to use a familiar payment card form factor to manage their cryptocurrency. For more information, please visit www.getarculus.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. Although the Company believes that its plans, intentions, and expectations reflected in or suggested by these forward-looking statements 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, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning the Company’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 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 outcome of any legal proceedings that may be instituted against the Company or others; the impacts of the ongoing COVID-19 pandemic; 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 other economic conditions (including the rapidly evolving conflict between Russian and the Ukraine), business, and/or competitive factors; future exchange and interest rates; and other risks and uncertainties included under “Risk Factors” in other Company filings that have been made or will be made with the Securities and Exchange Commission. 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.
Use of Non-GAAP Financial 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. The Company believes EBITDA and Adjusted EBITDA are useful to investors in evaluating the Company’s financial performance. The Company 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 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. In addition, the Company’s debt agreements contain covenants that use a variation of these measures for purposes 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. EBITDA and Adjusted EBITDA should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA and Adjusted EBITDA 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 operating 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 reconciliation of net income to EBITDA and Adjusted EBITDA for the quarters ended March 31, 2022 and March 31, 2021.
Contacts:
CompoSecure Investor:
Marc Griffin
ICR for CompoSecure
646-277-1290
CompoSecure-IR@icrinc.com
CompoSecure Media:
Wes Robinson
626-201-2928
wrobinson@olmsteadwilliams.com
| CompoSecure, Inc. | ||||||
|---|---|---|---|---|---|---|
| Consolidated Statements of Operations | ||||||
| (in thousands, except per share amounts) | ||||||
| (unaudited) | ||||||
| Three Months Ended March 31, | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| 2022 | 2021 | |||||
| Net sales | $ | 84,183 | $ | 63,722 | ||
| Operating expenses: | ||||||
| Cost of sales | 35,424 | 29,406 | ||||
| Selling, General and administrative | 18,777 | 8,057 | ||||
| Total operating expenses | 54,201 | 37,463 | ||||
| Income from operations | 29,982 | 26,259 | ||||
| Total other income (expense), net | (2,531 | ) | (3,037 | ) | ||
| Income before income taxes | 27,451 | 23,222 | ||||
| Income tax provision | (543 | ) | - | |||
| Net income | 26,908 | 23,222 | ||||
| Net income attributable to non-controlling interests | 22,167 | - | ||||
| Net income attributable to CompoSecure, Inc | $ | 4,741 | $ | 23,222 | ||
| Net loss per share attributable to Class A common stockholders - basic | $ | 0.32 | n/a | |||
| Net loss per share attributable to Class A common stockholders - diluted | $ | 0.16 | n/a | |||
| Weighted average shared used to compute net loss per share attributable to Class A common stockholders - basic | 14,934 | n/a | ||||
| Weighted average shared used to compute net loss per share attributable to Class A common stockholders - diluted | 32,265 | n/a | ||||
| CompoSecure, Inc. | ||||||
| --- | ||||||
| Consolidated Statements of Cash Flows | ||||||
| (in thousands) | ||||||
| (unaudited) | ||||||
| Three Months Ended March 31, | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| 2022 | 2021 | |||||
| CASH FLOWS FROM OPERATING ACTIVITES: | ||||||
| Net income | $ | 26,908 | $ | 23,222 | ||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||
| Depreciation | 2,349 | 2,585 | ||||
| Equity-based compensation expense | 1,006 | 441 | ||||
| Inventory reserve | 620 | - | ||||
| Amortization of deferred finance costs | (4,107 | ) | 385 | |||
| Revaluation of warrant liability | 1,424 | - | ||||
| Change in fair value of earnout consideration liability | 248 | - | ||||
| Deferred tax benefit | 543 | - | ||||
| Changes in assets and liabilities | ||||||
| Accounts receivable | (10,659 | ) | (16,677 | ) | ||
| Inventories | (1,392 | ) | (859 | ) | ||
| Prepaid expenses and other assets | (4,423 | ) | (377 | ) | ||
| Accounts payable | (2,248 | ) | 2,483 | |||
| Deposits and other assets | - | (896 | ) | |||
| Accrued expenses | 3,422 | (4,381 | ) | |||
| Other liabilities | (1,782 | ) | 179 | |||
| Net cash provided by operating activities | 11,909 | 6,105 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Acquisition of property and equipment | (1,417 | ) | (275 | ) | ||
| Net cash used in investing activities | (1,417 | ) | (275 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Proceeds from line of credit | 10,000 | - | ||||
| Payment of line of credit | - | (5,000 | ) | |||
| Payment of term loan | (3,125 | ) | (6,000 | ) | ||
| Distributions to Holdings' members. | - | (3,276 | ) | |||
| Issuance cost related to Business Combination | (23,833 | ) | - | |||
| Net cash used in financing activities | (16,958 | ) | (14,276 | ) | ||
| Net (decrease) increase in cash and cash equivalents | (6,466 | ) | (8,446 | ) | ||
| Cash and cash equivalents, beginning of period | 21,944 | 13,422 | ||||
| Cash and cash equivalents, end of period | $ | 15,478 | $ | 4,976 | ||
| Supplementary disclosure of cash flow information | ||||||
| Cash paid for interest expense | $ | 4,734 | $ | 2,643 | ||
| Supplemental disclosure of non-cash financing activities: | ||||||
| Derivative asset - interest rate swap | $ | 4,036 | $ | - | ||
| CompoSecure, Inc. | ||||||
| --- | ||||||
| Condensed Consolidated Balance Sheet Data | ||||||
| (in thousands) | ||||||
| March 31, 2022 | December 31, 2021 | |||||
| --- | --- | --- | --- | --- | --- | --- |
| (unaudited) | ||||||
| ASSETS | ||||||
| Cash and cash equivalents | $ | 15,478 | $ | 21,944 | ||
| Accounts Receivable, net | 38,584 | 27,925 | ||||
| Inventories | 27,198 | 25,806 | ||||
| Prepaid expenses and other current assets | 7,019 | 2,596 | ||||
| Property and equipment, net | 21,246 | 22,177 | ||||
| Right of use asset, net | 4,979 | 5,246 | ||||
| Deferred tax asset | 24,941 | 25,650 | ||||
| Derivative asset - interest rate swap | 4,036 | - | ||||
| Deposits and other assets | 10 | 10 | ||||
| TOTAL ASSETS | $ | 143,491 | $ | 131,354 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current portion of long-term debt | $ | 14,063 | 12,500 | |||
| Current portion of lease liabilities | 1,134 | 1,119 | ||||
| Accounts payable | 4,810 | 7,058 | ||||
| Accrued expenses | 16,642 | 13,220 | ||||
| Deferred issuance costs | - | 23,107 | ||||
| Bonus payable | 1,737 | 3,512 | ||||
| Long-term debt, net of deferred finance costs | 228,954 | 233,132 | ||||
| Convertible notes, net of debt discount | 127,008 | 126,897 | ||||
| Derivative liability - convertible notes | 800 | 552 | ||||
| Warrant liability | 36,695 | 35,271 | ||||
| Line of credit | 25,000 | 15,000 | ||||
| Earnout liability | 34,320 | 38,427 | ||||
| Lease liabilities | 4,421 | 4,709 | ||||
| Tax receivable agreement liability | 24,500 | 24,500 | ||||
| Total stockholders' equity (deficit) | (376,593 | ) | (407,650 | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 143,491 | $ | 131,354 | ||
| CompoSecure, Inc. | ||||||
| --- | ||||||
| Non-GAAP Adjusted EBITDA Reconciliation | ||||||
| (in thousands) | ||||||
| (unaudited) | ||||||
| Three Months Ended March 31, | ||||||
| --- | --- | --- | --- | --- | --- | |
| 2022 | 2021 | |||||
| Net income | $ | 26,908 | $ | 23,222 | ||
| Add: | ||||||
| Depreciation | 2,349 | 2,585 | ||||
| Interest expense, net | 4,966 | 3,037 | ||||
| Taxes | 543 | - | ||||
| EBITDA | $ | 34,766 | $ | 28,844 | ||
| Equity compensation expense | 1,006 | 441 | ||||
| Mark to market adjustments (1) | (2,435 | ) | - | |||
| Adjusted EBITDA | $ | 33,337 | $ | 29,285 | ||
| (1) Includes the changes in fair value of warrant liability, derivative liability and earnout consideration liability for the quarter ended March 31, 2022. | ||||||
| --- |
Exhibit99.2
| 0 0<br>Q1 2022<br>EARNINGS PRESENTATION<br>May 9, 2022 |
|---|
| 1 1<br>Disclaimers<br>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<br>of management. Although the Company believes that its plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, the Company cannot assure you that it<br>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,<br>including statements concerning the Company’s possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. In some instances, these statements may<br>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<br>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<br>hereof. You should understand that the following important factors, among others, could affect the Company’s future results and could cause those results or other outcomes to differ materially from those<br>expressed or implied in the Company’s forward-looking statements: the outcome of any legal proceedings that may be instituted against the Company or others; the impacts of the ongoing COVID-19 pandemic;<br>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<br>adversely impacted by other economic conditions (including the rapidly evolving conflict between Russia and the Ukraine), business, and/or competitive factors; future exchange and interest rates; and other risks<br>and uncertainties included under “Risk Factors” in other Company filings that have been made or will be made with the Securities and Exchange Commission. The Company undertakes no obligations to update or<br>revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.<br>Non-GAAP Financial Measures<br>This presentation 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<br>non-GAAP financial measures used by other companies. The Company believes EBITDA and Adjusted EBITDA are useful to investors in evaluating the Company’s financial performance. The Company uses these<br>measures internally to establish forecasts, budgets and operational goals to manage and monitor its business, as well as evaluate its underlying historical performance and to measure incentive compensation, as<br>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<br>effectively for the future. In addition, the Company’s debt agreements contain covenants that use a variation of these measures for purposes of determining debt covenant compliance. The Company believes<br>that investors should have access to the same set of tools that its management uses in analyzing operating results. EBITDA and Adjusted EBITDA should not be considered as measures of financial performance<br>under U.S. GAAP, and the items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing the Company’s financial performance. Accordingly, these key business<br>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<br>flows from operating 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 Appendix of this presentation<br>for reconciliation of Net Income to EBITDA and Adjusted EBITDA for the quarters ended March 31, 2022 and 2021 respectively.<br>Industry and Market Information<br>Statements in this presentation concerning our industry and the markets in which we operate, including our general expectations and competitive position, business opportunity and market size, growth and<br>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<br>publicly available information and the information and data referred to above and are based on assumptions and calculations made by us based upon our interpretation of such information and data. The<br>information and data referred to above are imprecise and may prove to be inaccurate because the information cannot always be verified with complete certainty due to the limitations on the availability and<br>reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. As a result, please be aware that the data and statistical information in this presentation may<br>differ from information provided by our competitors or from information found in current or future studies conducted by market research institutes, consultancy firms or independent sources. |
| --- |
| 2 2<br>Key Highlights – Q1 2022<br>Adjusted EBITDA1 of $33M, 14% higher than Q1 ‘21 due to increased customer acquisitions by our clients and a<br>focus on operational excellence and process improvement<br>Strong momentum from Fintechs and traditional banks in the payment card business along with initial Arculus<br>B2B momentum from multiple cryptocurrency platforms selecting Arculus as their digital authentication partner<br>Significant enhancements for Arculus wallet enabling NFT viewing, sending, and receiving, connection to DeFi<br>ecosystem via WalletConnect, and expansion of digital asset/cryptocurrencies on track for Q2 launch<br>Reaffirming 2022 guidance of $336M to $376M of Net Sales and $100M to $110M of Adjusted EBITDA1<br>International Net Sales of $22M, 178% higher than Q1 ‘21 and 96% growth vs. Q4 ‘21 driven by expansion of the<br>international sales team, distributor growth, and demand for premium payment cards<br>Net Sales of $84M, 32% higher than Q1 ‘21 driven by strong sales execution and growth across new and existing<br>clients<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 |
| --- |
| 3 3<br>Company Highlights<br>CompoSecure is driving strong partnership momentum across the payment card and Arculus ecosystems<br>Traditional Banks<br> • Key Sponsor &<br>Panel Speaker at<br>BTC 2022<br>Conference in<br>Miami<br> • BTC purchased 25K<br>cobranded Arculus<br>cold storage cards<br>for attendees<br>Payment Cards<br>Digital<br>Authentication<br>Crypto Cold Storage<br>Bank of America<br>Wells Fargo<br>Capital One<br>FinTechs Events Technology<br>Partners<br>JPM Chase<br>Crypto Exchanges &<br>Fintech Partners |
| --- |
| 4 4<br>2.1<br>2.4 2.6 2.7<br>3.0<br>Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22<br>2016 2019 2021<br>Trends & Momentum<br>U.S. Consumer New Accounts Acquired, Millennial & Gen Z % of Total1<br>American Express Proprietary Cards Acquired1<br>In Millions • New cards acquired growth driven by all-time highs<br>across US Consumer Platinum & Gold as well as US<br>Business Platinum portfolios<br> • Millennials and Gen Z are representing a growing<br>percentage of new accounts acquired<br> • Long runway for growth in the Premium (fee-based) US<br>Consumer target market<br>~40%<br>~60%<br>~50%<br>1%<br>6%<br>12%<br>14%<br>Industry No Fee Industry<br>Premium (Fee)<br>Industry<br>Millennial / Gen<br>Z (Fee)<br>AXP US Platinum<br>/ Gold<br>2017-2021 Consumer Card Growth, CAGR %1<br>~20%<br>AXP U.S.<br>Consumer Share<br>of Industry<br>Premium (Fee-<br>based) Accounts<br>1Source: American Express March Investor Day & Q1 2022 Earnings Presentations<br>Industry<br>account<br>growth: 2%<br>1<br>2<br>3<br>1<br>2 3 |
| --- |
| 5 5<br>Metal Payment Card Survey – Across 18 Countries<br>Metal<br>Attraction<br>Consumers<br>attracted to metal<br>cards due to<br>durability,<br>innovative design,<br>exclusivity, and<br>luxury<br>Retention<br>51% would leave<br>bank for another<br>that offered metal<br>card assuming<br>benefits equal Loyalty<br>58% feel more<br>positive about<br>their bank<br>because they<br>offered metal card<br>Physical Cards<br>56% preferred<br>physical payment<br>card vs. digital<br>wallet or cash for<br>in-person<br>purchases<br>Affluent<br>Metal cards are<br>card of choice for<br>80% of affluent<br>consumers<br>worldwide if<br>benefits equal to<br>plastic card<br>Future<br>Customers<br>Metal cards<br>preferred by 77%<br>of millennials<br>across all regions<br>Sustainability<br>72% would<br>choose payment<br>card made of eco-<br>friendly materials<br>if benefits were<br>equal<br> • Independent<br>study by Edgar,<br>Dunn, & Company<br> • Surveyed 18K<br>consumers |
| --- |
| 6 6<br>Product Portfolio<br>5.2<br>Cards<br>Manufactured in<br>20203<br>8.0<br>Cards<br>Manufactured in<br>20254<br>Variety of Key Capabilities to Meet Customer Demand<br>Payment Card Payment Card +<br>Digital Authentication1<br>Crypto Cold Storage Crypto Cold Storage +<br>Digital Authentication1<br>Payment Card +<br>Crypto Cold Storage +<br>Digital Authentication1<br>1 FIDO2 Certified<br>Available Now<br>Available in 2022<br>Client Pilots in Q2/Q3 |
| --- |
| 7 7<br>Arculus First Half 2022 Priorities<br>Customer/Market Need<br>Arculus Solution<br>Non-Fungible<br>Tokens (NFTs)<br>Cryptocurrency/<br>Digital Asset Support<br>Access to DeFi<br>Ecosystem<br>1 2 3<br>WalletConnect<br>Integration<br>Leading Wallets (>100) Any Dapp (Hundreds) Chain Agnostic<br>Wallet Integration w/Send, Receive, Store, & View<br>Functionality<br>Continue Expansion: Adding 15+<br>in May ’22 |
| --- |
| 8 8<br>Arculus Secures NFTs: Anticipated Mid-June Launch<br>Enables users to view their NFTs and securely send, receive, and securely store the keys to their NFTs |
| --- |
| 9 9<br>Arculus Integrates WalletConnect: Anticipated Mid-June Launch<br>Allows users to securely connect their wallets to DeFi platforms such as OpenSea and UniSwap |
| --- |
| 10 10<br>Arculus Secures DeFi: WalletConnect<br> • Integration of DeFi capabilities unlocks<br>massive new target market for Arculus<br>ecosystem<br> • Secures keys for NFTs and other digital<br>assets<br> • Provides the ease of use of a browser<br>extension with the security of a hardware<br>wallet<br> • Provides secure access to Decentralized<br>Exchanges (Dex) and Decentralized<br>Autonomous Organizations (DAOs)<br> •‘Tap to transact’ experience creates easy<br>entry point for Web3 & Crypto owners not<br>previously considering hardware wallet<br>Dex &<br>Liquidity1<br>Infrastructure1<br>NFT Marketplaces1<br>1 Examples of applications accessible via WalletConnect |
| --- |
| 11 11<br>CoinDesk<br>BitCoin Magazine<br>Google Shopping<br>Yahoo<br>Cluep<br>Morning Brew<br>Brave<br>Arculus Investment<br>5.2<br>Cards<br>Manufactured in<br>20203<br>Leveraging a multi-channel approach to drive B2C and B2B brand awareness, adoption, and engagement<br>BitBoy Crypto<br>Apple Insider<br>Popzara<br>Dealerscope<br>G for Gadget<br>Money2020: Las Vegas<br>CES: Las Vegas<br>BTC: Miami<br>Consensus: Austin<br>Money2020: Europe<br>Targeted Media Social Media<br>Event Strategy Influencers<br>Product Reviews<br>Product Management<br>Sales<br>Software Engineers<br>Solutions Architects<br>Marketing<br>Customer Service<br>Information Technology<br>Attracting Talent<br>GetArculus.com<br>Amazon,com<br>Distribution Channels |
| --- |
| 12 12 |
| --- |
| 13 13<br>Q1 2022 Results<br>Net Sales<br>Gross Margin<br>Adjusted EBITDA1<br>Adjusted EBITDA Margin1<br>Q1 ‘22 Q1 ‘21 % Change Commentary<br>$84mm<br>58%<br>$33mm<br>40%<br>$64mm<br>54%<br>$29mm<br>46%<br>32%<br>407bps<br>14%<br>(636 bps)<br>Strong sales with traditional<br>banks & fintechs across domestic<br> & international regions<br>Process efficiencies benefit<br>Includes (~$6mm) net impact<br>from Arculus and other<br>expenses<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>Net Income $27mm $23mm 16% |
| --- |
| 14 14<br>Net Sales Trend<br>In millions<br>$56<br>$46 $52<br>$64 $62<br>$8<br>$16<br>$14<br>$11<br>$22<br>Q1 21 Q2 21 Q3 21 Q4 21 Q1 22<br> International<br> Domestic<br>$64 $63 $66<br>$75<br>$84<br>International<br>Domestic<br>12%<br>88%<br>26%<br>74%<br>21%<br>79%<br>15%<br>85%<br>26%<br>74% |
| --- |
| 15 15<br>Balance Sheets<br>(Unaudited)<br>Source: Company financials<br>Note: Audits completed to PCAOB standards. Financial position has been derived from CompoSecure’s consolidated financial statements for the quarters ended March 31, 2022 and December 31, 2021 respectively. |
| --- |
| 16 16<br>Earnings per Share<br>Q1 ‘22<br>Net Income<br>= Earnings per Share - Basic<br>$27mm<br>$0.32<br>x Controlling Interest 20%<br>= Net Income for Basic EPS $4.7mm<br> ÷ Class A Outstanding Shares 14.9mm<br>Source: Company financials |
| --- |
| 17 17<br>2022 Guidance<br>Net Sales<br>Adjusted EBITDA1<br>2022E 2021 % Change<br>$268mm<br>$102mm<br>$336mm - $376mm<br>$100mm - $110mm<br>25% - 40%<br>(2%) - 7%<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 |
| --- |
| 18 18<br>ESG Initiatives & Recognition<br>CompoSecure continues to be recognized as an industry leader in sustainability, innovation, and leadership<br>1st Metal Card Manufacturer to receive new ICMA EcoLabel<br>Standard Program<br>Obtained Certification for UL’s Environmental Claim<br>Validation Program<br>Achieved ISO 14001 Certification<br>Conducted Greenhouse Gas Inventory<br>Purchased Renewable Energy to offset 100% of Electricity<br>and Gas Consumption<br>Manufacturing Leadership Award in the Digital<br>Transformation Category<br>(Jon Wilk)<br>NJBIZ Digi-Tech Innovator Award<br>(Adam Lowe)<br>NJ Best Places to Work<br>(CompoSecure) |
| --- |
| 19 19<br>Strategic Priorities<br>A Category Leader of Next-Gen Payment Technology, Security, and Cryptocurrency Solutions<br>Drive premium payment card sales through continued domestic growth, international expansion, and<br>FinTechs<br>Deliver innovative new card constructs and leverage our scale and existing relationships<br>Continue to enhance Arculus capabilities (NFTs, WalletConnect, Coin Expansion, etc…) to drive adoption<br>across key B2B verticals and consumers demanding three factor authentication security solutions<br>Optimize investment in product lines across advertising initiatives, talent, software development, and<br>partnerships to accelerate growth<br>Focus on process efficiencies, materials procurement, and upsell opportunities to maintain strong<br>margins |
| --- |
| 20 20<br>Investor Relations Contact<br>ir.composecure.com<br>Marc Griffin (ICR)<br>646-277-1290<br>CompoSecure-IR@icrinc.com |
| --- |
| 21 21 |
| --- |
| 22 22<br>CompoSecure, Inc. (Nasdaq: CMPO)<br>Summary Equity Capitalization Table (with net exercise model)<br>As of March 31, 2022<br>Holders # of Shares Issued & Outstanding # of Shares Issued & Outstanding<br>Public Shareholders (Class A) 4.6M 4.6M<br>PIPE Investors (Class A) 4.5M 4.5M<br>Roman Sponsor (Class A) 5.8M 5.8M<br>Historic CompoSecure Owners (Class B) 61.1M 61.1M<br>Subtotal 76.1M 76.1M<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)3<br>Merger Rollover Options 5.0M 4.6M<br>Total 81.1M 80.6M<br>Convertible Instruments # of Shares Reserved for Conversion # of Shares Reserved for Conversion<br>(assuming net exercise)<br>Public Warrantholders4 11.6M 4.2M<br>Roman Sponsor Warrantholders5 10.8M 3.9M<br>Exchangeable Noteholders 11.3M 11.3M<br>Grand Total 114.8M 100.0M<br>Notes: The table above excludes shares which may be issued in the future for contingent “earnout”, equity incentive plan, employee stock purchase plan, and 401K plan<br>1 Includes Net Debt of $243M + Convertible of $130M. Equity of 80.6M shares @ $10.00 price/share<br>2 Includes Net Debt of $257M + Convertible of $130M. Equity of 80.6M shares @ $7.71 price/share as of market close 5/6/22<br>3 Assumes exercise net of strike price, valuation at assumed FMV of $10.00<br>4 Assumes exercise net of strike price, valuation at assumed FMV of $10.00<br>5 Assumes treasury stock method, valuation at assumed FMV of $18.00<br>Enterprise Value at de-SPAC was $1,179M1 and the current Enterprise Value is $1,008M2 |
| --- |
| 23 23<br>Statements of Operations<br>(Unaudited)<br>Source: Company financials<br>Note: Financial position has been derived from CompoSecure’s consolidated financial statements for the quarters ended March 31, 2020, 2021 and 2022 respectively.<br>($mm) Q1 2022A Q1 2021A Q1 2020A<br>Revenue<br> Net Sales $84 $64 $80<br> Cost of Sales (35) (29) (39)<br>Gross Profit $49 $34 $42<br>Operating Expenses<br> Selling, general and administrative (19) (8) (12)<br>Income from operations $30 $26 $29<br>Other expense<br> Other income (expense), net (3) (3) (1)<br>Net Income $27 $23 $28 |
| --- |
| 24 24<br>Statements of Cash Flows<br>(Unaudited)<br>Source: Company financials<br>Note: Financial position has been derived from CompoSecure’s consolidated financial statements for the quarters ended March 31, 2020, 2021 and 2022 respectively. |
| --- |
| 25 25<br>Source: Company financials<br>Non-GAAP Adjusted EBITDA Reconciliation<br>(Unaudited)<br>1 Non-Cash Stock Option Expense: Non-cash stock option expenses related to the<br>executive incentive plan<br>2 Nonrecurring Transaction Costs: Transaction related costs associated with<br>prior transaction processes.<br>3 Non-Cash Mark to Market Adjustments: Related to changes in fair value of<br>liabilities for warrants, earnouts and derivatives assets.<br>4 Special Distribution: Adjustment to add back special distributions to Class C<br>unit holders. The distributions are akin to equitydistributions<br>$mm Q1 2022A Q1 2021A Q1 2020A<br>Net Income $27 $23 $28<br>Interest Expense 5 3 1<br>Depreciation and Amortization 2 3 2<br>Taxes 1 - -<br>Unadjusted EBITDA $35 $29 $31<br>Non-Cash Stock Option Expense 1 0 0<br>Non-Recurring Transaction Costs 0 0 1<br>Mark to Market Adjustments (3) - -<br>Special Distribution - - 3<br>Total EBITDA Adjustments ($2) $0 $4<br>Adjusted EBITDA $33 $29 $35<br>1<br>2<br>3<br>4<br>-- |
| --- |