CompoSecure (CMPO) 6 May 242024 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to CompoSecure's First Quarter 2024 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Steve Feder, General Counsel and Corporate Secretary. Please go ahead.

you Financial us Results. thank First review and XXXX Quarter afternoon, for to joining CompoSecure's Good Financial With Wilk, Officer; Chief CompoSecure's on Chief me the Executive and call Tim is Jon Officer. Fitzsimmons, remarks, and will call Q&A. with They then for begin will open we the prepared

the execute statements to well on to strategy our that will our our statements concerning maintain make forward-looking, regarding our statements prospects. ability acquire other as be growth as considered including we new existing our call, business During and related may plans customers and to and plans

statements subsequent such not upcoming. should often we We to obligation date. as Forward-looking revise These may we or and any be today be identified undertake forward-looking no considered only words anticipate statements. or views of as update with our statements views these our reflect of expect, as

differ of Forward-looking performance actual risks uncertainties statements that future could variety and are to from or not the of promises to a and materially are cause our expectations. guarantees subject results

a in are discussion results, Relations the the reports which material to with factors the important on website on refer please our the other information could filed and affect website section on at annual XX-K that of SEC's and actual report SEC, Form compassecure.com other For Investor our at available our risks of and sec.gov.

any performance with be considered companies. These believes impacting non-GAAP including net Please and management measures note company financial operations. derived other and measures non-GAAP that by financial useful as EBITDA, income be U.S. non-GAAP used the adjusted adjusted certain measures, and from investors income the company's call may net GAAP not adjusted business and to accordance results financial today's different certain similarly information measures should discussion The condition of these on financial measures in an non-GAAP alternative regarding other and EPS. titled or trends includes to financial provide

earnings said, me and to first is the Relations available presentation over Thank that Jon non-GAAP call section quarter Investor release the in website. A of our let press GAAP measures turn to our results. with our available reconciliation discuss of to on And you.

Thank you joining first for and call. quarter our Good Steve. conference you, us afternoon, thank for

has end we quarter first the generated the quarterly of up our consecutive from the sustained our which last period. record net driven year XX% momentum domestic to carried was third into Our compared as growth in year ago business, by sales

During the programs quarter, the customers significant marketplace. that our attention card high-profile several in launched new garnered

in from the Delta our the but cards. card introduce made introduction later these the demand constructs in includes innovative the edition from that Card see from technology drive in card metal execution proud and Gold limited payment airplane. of I'm This effort I'll an new and white a greater to Reserve Robinhood discuss to new to detail and programs team continue call, new

Now by Slide the net sales domestic record in to lower summarize our international primarily growth $XXX offset X. by continued business, driven sales. in a our Net X% increased first million, financial to results on quarter

million, reflecting $XX.X team's profitability to bottom investments simultaneously adjusted our while to and opportunity driving EBITDA our long-term grew focus at Looking continued QX value. X% line, on capture

card card the expressed or Our compared for have intentions to outlook marketing express year. to their and positive prior continue consumer increase issuers maintain to payment a spend

allocation regarding net like would XXXX take with made announcement quarter's momentum year fiscal remain also turning our positive the than investment call. we and for Arculus, of to positive on on mentioned we in expectation see track framework. XXXX, moment be to to comment to I a continue total our the For lower as capital our today last for

doubled and meaningful a million, cash ago. has with balance of more generate We free than continued cash which out $XX X quarter to closed flow have the year from

Board reflects declared with our confidence Class rewarding share a position, unitholders. dividend cash as distribution our corresponding in flow for This shareholders, A special to Given along B $X.XX to our a shareholders. our commitment cash our our well as of the Class per has of generation cash sustainability

to to We framework, investment capital and CompoSecure shareholder paydowns, debt pleased organic allocation incorporate enhance dividends. are another value our recurring securities special means future in includes into repurchases of consideration growth, which and

today, and ranging to million. Finally, our These press $XXX in mentioned our targets profitability range million between net and calls and for sales growth and we our between strength business as our full million in year our reiterating $XXX on as execute earlier continued for adjusted release EBITDA we which guidance, million $XXX reflect expectation are $XXX objectives.

Slide We XX we exciting gold-colored last with Robinhood to very several our to have a call. Card, launched on card card X. new that weighing grams. which since month launched the last a Robinhood program card metal metal share Gold want is veneer Moving programs

As grams. Amex part carat edition edition card made announced limited Delta recycled new of the airplane. program, weighting from gold XX we Delta and a from also card XX created a limited Reserve made

limited may remember success a XXXX. launched You Amex in version great to in black edition

which is version, market. white already The and was generating last week, new the launched buzz in

several You on Bank including this in can customer slide, Lloyds Canada Bank Bradesco Brazil. Rogers the launches in see and in U.K. additional

provide issuer information card reported public and Turning The earlier, based X. trends I'd quarterly insight. is to to further Slide I on information. mentioned like

strong drive in Our purchase XXXX. to continuing largest are customers volume

trends seen we've well strong sustained development investment. business marketing card acquisition continued as Additionally, as and

the payment and Across on overall constructive the the remains several customer in consumer card sentiment and market, partner the Slide state long-term highlighted at we've on X. of the Looking quotes issuer the board, space. payment opportunity

compared increase or intention high-quality customer sustain lean capture several the to to solutions to accounts. XXXX intentions report program into to with citing spend issuers Our

to opportunity outline every clarity platform to our Arculus on I take provide like our always capabilities. call around product to the

including achieve assets recently a we Arculus support across earlier, remain in for we Tim target. addition our their Stellar, our split it momentum perspective, before and mentioned cards same As Arculus different to support which positive multicard XDC, financials net continue to remarks. support the Storage, for Provenance closing to our hand investment operating review allows adding I'll customers multiple and NFTs. to Polygon tokens From on Cold returning on to and device capabilities and for added Ondo track for over see blockchains, expanded now to

Thanks, of good before Jon, the open detailed comparisons variance stated XXXX performance overview it a basis. a our business. card our and QX we growth record Jon increase metal on In sales more was X% in I'll compared for commentary of continued and primarily are Unless a $XX.X level increased million. questions. domestic to to provide by payment and net million to financial $XXX everyone. driven afternoon, QX, year-over-year otherwise, all then turn back call The

pressure $XX.X wages higher derivative year. for year. compared earn-out Net the as mix. driven The margin of change million our was was $XX.X as by for product The in was in due quarter in driven liability from in well sales on differential in the Gross net million million to stock prior consideration gross XX% quarter revaluation a to the increase and the net $X.X increased to and XX% the by primarily decrease warrants, compared noncash items price. income to inflationary XX% prior margin

by year, million Adjusted partially and net EBITDA by to the $XX.X compared was driven to first prior X% increased of million in Arculus. the XX% investment compared in $X.X $XX.X The greater XX% to net margin offset in adjusted in quarter our sales, XXXX. of was QX adjusted EBITDA EBITDA million

QX at in domestic business, record see domestic our closer sales first Looking $XX up of can surpassing remained you between that and split the quarter quarter domestic at our international year-over-year million, net our strong and XX% XXXX.

sales Jon period highlighted domestic was our lower of year. the million, International were $XX quarter which the comparable earlier in net was million by offset net that XXXX for sales. business down $XX last from first international

roughly previously, business more to variable our and mix smaller expect be sales to international our stated to mix. total business account due base. net the to sales XX% of international have annual we customer our we continue a for As

For net in XXXX XXXX. of our sales of XX% were XX% our and mix perspective, net mix total in international sales were

the of balance which total $XXX.X term million This of At of and $XXX Moving sheet. $XXX.X XXXX, $XXX.X million, equivalents million cash includes had million. net loan debt March total notes. on exchangeable of XX, $XX.X resulted debt and to million cash and we of in

by Looking our X.XXx paying increased at based December down debt debt secured EBITDA. March is of leverage overall XXXX, our XX, trailing debt driven $XXX.X and both overall agreement adjusted as X.XXx We with total was to differences. of EBITDA ratios. on bank ratio $XXX.X XX-month bank debt compares agreement million. ] leverage our ratio million improvement the XXXX, ratio leverage our adjusted and provide our TTM calculated At leverage with [ XX, slight and at This

compares $XXX.X of leverage debt based EBITDA XX, had bank million. secured of bank X.XXx X.XXx March At million December XX-month debt total secured XXXX, we on at to a and $XXX XX, This ratio adjusted a of trailing XXXX. agreement

accumulated sustainable position, a cash As supported generation. flow Jon mentioned robust earlier, we by strong cash have

Given this, allocate cash distribution equivalent dividend capital our decided our B of towards our a unitholders. of our has and special a an Board A $X.XX portion to Class shareholders to to Class

be distribution June balance May $XX.X of record and is expected sheet. XX million. and Class be as The B disbursed our funded to of and dividend Both Class of unitholders amount to be will to will the the payable XX A cash our and be on shareholders by total cash approximately

million provided compared by XX. operating cash $XX.X million to our prior Slide quarter. in to $XX.X activities increased year Turning flow statement to cash the XX% on Net

I per want to to turn earnings share. now

EPS method on a of reflect public economic instruments $X.XX adjustments of basic our period. the This of months per allocate diluted XX, for ended changes in among to EPS the As to the and ago X such mark-to-market net diluted year basis. $X.XX our diluted subsidiaries allows per better compares calculating share per instruments per operating March the GAAP and the income in to basic the a company share. basic for and $X.XX XXXX, conversion and on GAAP under reminder, us per actual was share and impact $X.XX

The the on in diluted the footnotes consideration the the increase the slide and the On derivative of through basic Slide included structure liabilities, our through the are of was price. by sales change net due driven earn-out and value well warrants, and as take allocation you changes to the due stock in of complexities as that the that shares you to can XX, primarily fair the income greater the calculations. to Up-C read net

compensation. we're of adjusted adjustments fair this XX, Slide revaluation economics and to stock the adjusted the picture net of the impact operating results. of provides non-GAAP warrants, EPS, company's earn-out also that the On clearer the and which income excludes believe noncash a We value providing

between our per $X.XX reconciliation in turn to income GAAP basic a This to per the period. share find and these it calculations. to per $X.XX closing and year XXXX back non-GAAP compares in $X.XX non-GAAP the the and background, quarter I'll diluted share. that net give ago guidance appendix, share first our now EPS the and was share In basic $X.XX for With you will per used remarks. Jon discuss diluted

Thanks, Tim.

a our points to like is a domestic XXXX evening. sales As EBITDA million driven highlight and of sales $XXX record and between between as I mentioned I'd our continue million start XX, this Slide off covered closing, XXXX we are guidance achieved we sustained earlier, come the $XXX strong in $XXX to million. call to by few range momentum another to quarter and on expect and net we million operations. $XXX reiterating adjusted on to in net In our

have marketing the in intentions program headwinds. that see several programs in Global to reporting excited XXXX attention consumer, or see are customer significant despite grow continue sustain We're to and a launch spend resilient their received inflationary the marketplace. to of issuers high-profile

total we net see XXXX, than our lower be expectation positive remain positive on investment and momentum of For fiscal track XXXX. turning with Arculus, the for to for

sheet. strong generate on and accumulate enabled position to a to cash free which balance robust flow, continue We us cash has sustainable our

With us that, on as As today, dividend growth declared deliver call the to the our profitability announced Q&A. we in like Board and a we continue that up to special another shareholder our I'd shareholders to open to execute and year has a to value reward our with cash result, objectives equip ahead. to tool

question Our first Instructions] the Todaro John line [Operator with comes from of Needham.

beat kind the the Congrats you, two quarter I about versus think Great numbers -- there the growth year, me. quarter. bounces more trying can rest And on growth almost that expect do you're questions to it here. guess surprised of again? there you I domestic this question. First differently, to when the just frame of for guess understand, international was of kind guide One, we we back, the issuing?

or multifactor and the that out second business Arculus thoughts of as And hear then crypto, some of just really well. color wallet I the on just hopeful one, authentication a the get part on didn't outside call to

John, both Thanks, questions. for

So those order. in let try take me and

with consistent business, the in terms quarter felt in really growth of the and yes, some terms performance. was remarks it, we've delivering it international came prepared light, affecting again, customer in what about base, the a his record definitely growth, good past, In of We domestic strong. domestic the Tim macros International talked of in domestic highlighted the the about and of business.

we the As do expect XX% for over look we at year, of account international full sales to roughly time.

strong that got timing it our you've comfortable And more to we've off in think that So we'll of with then aren't just in the updates at overall. I John, ranges making half. overall, time, this to the view we a given some where second but start see there some feel and

Arculus things investment it sort on giving in the the the year versus improve is investment to of continuing of question that net positioning us positive second us and for authenticate, of the to 'XX. clearly one respect for last year net the a is confidence With full

So and to continuing I'd the manage solution investments well well. both authentication seeing as with side that storage as say, as cold the solution on momentum,

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

questions. couple A of

approaching such or different of international sales First going deferring confidence in seeing total delaying they macro online launch of on the the that simply just half, of the customers from what's is XX% environment are international? coming on the be all, hence, your could your the of in a there some the it in -- follow-up second Is programs that front. there case

question, the somewhat. Yes, Thanks for Mark.

of So we've us year of pretty opportunities the give with we got, what that that the visibility we think, that XX%. kind rest like, and looks view know good help see on the approximately

been some And has years XX%.

do year. some year last seen for in And with believe we normalizes later in was it coming of over ranges. XX% think that in on yes, the But orders side time. I it those international we've the

Very good. on but based the have dividend. the we sustainability common with cash cash And of its more the if increased the special, It in dividend definition, flow flow. to be special in trends just free regard they announced Should also the that thinking a is, that by permanent continue free or follow-up cash company's maybe question it's confidence as works?

special is we I'd consider which in point you that, to Mark, or the future we've and said dividends, release, will which includes recurring.

these a down the capital shareholders shareholders framework be the to So the repurchasing reward capital message the the growing we able the to ways, to Board and the try to and this invest looked any overall returning to these shareholders all company use how overall and organically, to capital framework, we'll it's like value business appropriate. in at dividend felt allocation and time. And debt, wanted allocation special was our and at deem to from appropriate as securities deliver is paying of tools continued Board in and tool

the in future. consideration So certainly,

question Flynn Compass Our Joe Point. comes next of with from the line

could Arculus well if any details opportunity was color as the the you Card on on hoping storage an as I First front? this provide if products ultimately, you there. program. on And the maybe to see leverage cold Robinhood

our So they've metal make for proposition veneer the card the the And made splash big broader metal look, that on card value -- right, of a that core and market has that program, strong they program the launch with a we gold announced. in them. gold

think partner announced as about very In gold program. solid the well. card. limited with excited them addition, And We're to a very they excited XX-carat edition I they're

see what holds. that So to excited

Robinhood. we specifically solutions talking you are tell can I'm Joe, our I'm And of capabilities you to are discussions. both presume going storage you to cold going that we But prospects customers if second, to where regard can It's always appropriate. with presume comment authentication all and on our about that not card to and not the having and/or appropriate. is, those it

more comment going beyond I'm specifically. not So to that,

just C the more I from on going has discussion any primarily regard there been Great. it there and to be capital unlocking Or That's is to Up-C through potentially dividends corp? moving helpful. in value into going was internal forward, allocation regular think And the more front, from -- buyback? any

talked dividend deliver over seeing with providing changes the market, this a sold special to but taken of back into time. over all comment in use any step about will power on that units change And earlier, to company structure perspective this say, go that. tools we the of to to market I'd this do there's anticipate -- shareholders that our are we've as and And able time. to a set great We value Look, structure that we've the nothing think shareholders. in I value Joe, deliver understand the to of And we announcement. be able it's We be nothing capability there out about with tool to the it. my to demonstration

[Operator Instructions] comes JPMorgan. Reggie from the next of with Smith line Our question

little that like and year programs had for Congrats it of housekeeping. quarter a fourth maybe of of those the the I and revenues, anything is -- guess, Maybe reads, while initial the I through? curious launch imagine deal was shipment Thinking the quarter. a like the would it quarter flow question kind of I for first revenues both was bit I ago. Robinhood, year. this about last of I'm guess, I if there episodic curious was about in on But talk were a kind how recognized like a the

couple know that, you mentioned a of guys pretty forms. card And exotic then secondarily to I

factors And that card were was some a exotic on or margins your, in those the I Is classic and like that's the also the made guess, the difference lower gold from cards? actually mentioned the the like I there little in card margins how quarter. that airplanes. Delta of to say, two noticed recycled think I in any appreciable you metal cards gross compared this relationship between more Robinhood I'd

No, it's okay.

I'm I Reggie, to think to going start it. margin I could. try I'm gross in with general, reverse going and if And those got in order. take the I

So margins especially in and think are on certainly expectations margin, be should strong, be line about of we with the coming XXs. our gross where with gross in EBITDA should at in the is business north high said in we what and in margins XX%, business, XX% combined our gross our believe those we've margins

just story business. for that the of as baseline So our a

the respect it's are reemphasize. One wages about year-over-year? why talked inflationary impacts to we that typically and constructs, little time. we things with -- at to time There takes just we Second, seen impact to of factors and on of to the gross down card does some have running that second over pressures And margin. as relate I'd bit it those to some new two have Tim get efficiency a launch up from is that level had see expect due a like

ramp we that lower the will So business. think, we in stabilize, in those see kind margins that the up expect overall products we levels yes, of as

a bunch like as those So highlighted broadly out normalize think ramping new us. things, up they generally, someone last we're Tim couple time, quarter different more about see When quarter, can little ways sort how it to do works. And to program, launching of are of levels I'm Reggie, well. bit a comment that And bit is yes, there With just of you we going this when stable a respect to it. for this it over Robinhood, we a little a that talked some of impact. and

preference then build, to is they steady or and really of order volume the just large themselves. and One and just company it's the buyer as steady follow volume with a upfront

revenue going grow. it see specifically their generally, to they're But you I'm it's to certainly will not a program we and how that on and So doing presume like that a build that, thing like time good over any comment time. how see

talked levers. you'll different time, have Reggie, when X those about, I X build, over or and you programs see as of kind And

of of New build later. think acquisition, to see those you'll over natural lost relationship And that we all time, want few over sticky see to customers years stolen, we with you'll a see time. kind that reissue

excited opportunity. So the launch about the and

thinking results ask And pipeline, your I first the be when both in maybe quarter I Any you after it. you X known guess thinking little spoke would talk more. ago? color about can helpful. and there Got relative going you versus the I'm you if could bit if guidance know I any came of are today long I've how to what not to so in first quarter, expectations a about were about But those months raise ask that. one we maybe where you

Yes.

the getting out are range we're So you if the kind we to those appreciate guidance yes, spot Reggie, I ranges. -- right to you each through that other better these. know of on as gates the getting look question. we're of And be move we Look, issued, at in

always with a be We huge the right able to on to pleased to. we someone we And that in with just be if looks do churn it, a expected to and look will need and starts be, better. we're we achieve performing where think off to right right start we're But this wanted from very the hockey need at where your at business to looking in we're they be stick always sitting skeptically, I company the where it to business. results,

So...

get the previous end the the you math of do the first on the quarter. seasonality, did your guidance I at on high like of I towards looking that of just years, X kind first When based your in range, just already quarter, kind using what

That's it I So It again. like guys you wanted guess, the are just that I which but for you to, have. question. impetus seems all said, hear off I to was the

Thank Reggie. Appreciate it. you,

will question-and-answer today's participating. Thank conference today's This concludes call. for session. you conclude That

You may now disconnect.