Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 02, 2022 | |
Entity Listings [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2022 | |
Document Transition Report | false | |
Entity File Number | 001-39687 | |
Entity Registrant Name | CompoSecure, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 85-2749902 | |
Entity Address, Address Line One | 309 Pierce St. | |
Entity Address, City or Town | Somerset | |
Entity Address, State or Province | NJ | |
Entity Address, Postal Zip Code | 08873 | |
City Area Code | 908 | |
Local Phone Number | 518-0500 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001823144 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Class A Common Stock | ||
Entity Listings [Line Items] | ||
Title of 12(b) Security | Class A Common Stock, $0.0001 par value per share | |
Trading Symbol | CMPO | |
Security Exchange Name | NASDAQ | |
Entity Common Stock, Shares Outstanding | 15,759,668 | |
Class B Common Stock | ||
Entity Listings [Line Items] | ||
Entity Common Stock, Shares Outstanding | 60,586,800 | |
Warrants | ||
Entity Listings [Line Items] | ||
Title of 12(b) Security | Redeemable Warrants, each whole warrant exercisable for one share of Class A Common Stock | |
Trading Symbol | CMPOW | |
Security Exchange Name | NASDAQ |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 15,430 | $ 21,944 |
Accounts receivable, net | 45,797 | 27,925 |
Inventories | 39,128 | 25,806 |
Prepaid expenses and other current assets | 2,821 | 2,596 |
Total current assets | 103,176 | 78,271 |
Property and equipment, net | 22,822 | 22,177 |
Right of use asset, net | 9,268 | 5,246 |
Deferred tax asset | 25,103 | 25,650 |
Derivative asset - interest rate swap | 9,392 | 0 |
Deposits and other assets | 24 | 10 |
Total assets | 169,785 | 131,354 |
CURRENT LIABILITIES | ||
Current portion of long-term debt | 9,685 | 12,500 |
Current portion of lease liabilities | 1,815 | 1,119 |
Accounts payable | 12,626 | 7,058 |
Accrued expenses | 20,424 | 10,131 |
Issuance costs payable | 0 | 23,107 |
Commission payable | 14,924 | 3,089 |
Bonus payable | 7,467 | 3,512 |
Total current liabilities | 66,941 | 60,516 |
Long-term debt, net of deferred finance costs | 220,532 | 233,132 |
Convertible notes | 127,232 | 126,897 |
Derivative liability - convertible notes redemption make-whole provision | 367 | 552 |
Warrant liability | 18,908 | 35,271 |
Line of credit | 10,000 | 15,000 |
Lease liabilities | 8,133 | 4,709 |
Tax receivable agreement liability | 25,752 | 24,500 |
Earnout consideration liability | 16,751 | 38,427 |
Total liabilities | 494,616 | 539,004 |
Commitments and contingencies (Note 14) | ||
Redeemable non-controlling interest | 602,840 | 608,311 |
Preferred stock, $0.0001 par value; 10,000,000 shares authorized, no shares issued and outstanding | 0 | 0 |
Additional paid-in capital | 21,055 | 12,261 |
Accumulated other comprehensive income | 8,999 | 0 |
Accumulated deficit | (957,733) | (1,028,229) |
Total stockholders' deficit | (927,671) | (1,015,961) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | 169,785 | 131,354 |
Class A common stock, $0.0001 par value; 250,000,000 shares authorized, 15,757,535 and 14,929,982 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | ||
CURRENT LIABILITIES | ||
Common stock | 2 | 1 |
Class B common stock, $0.0001 par value; 75,000,000 shares authorized, 60,586,800 and 61,136,800 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | ||
CURRENT LIABILITIES | ||
Common stock | $ 6 | $ 6 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2022 | Dec. 31, 2021 |
Preferred stock, par value (usd per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized (shares) | 10,000,000 | 10,000,000 |
Preferred stock, issued (shares) | 0 | 0 |
Preferred stock, outstanding (shares) | 0 | 0 |
Class A Common Stock | ||
Common stock, par value (usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized (shares) | 250,000,000 | 250,000,000 |
Common stock, issued (shares) | 15,757,535 | 14,929,982 |
Common stock, outstanding (shares) | 15,757,535 | 14,929,982 |
Class B Common Stock | ||
Common stock, par value (usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized (shares) | 75,000,000 | 75,000,000 |
Common stock, issued (shares) | 60,586,800 | 61,136,800 |
Common stock, outstanding (shares) | 60,586,800 | 61,136,800 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | ||
Income Statement [Abstract] | |||||
Net sales | $ 103,305 | $ 66,183 | $ 284,687 | $ 192,648 | |
Cost of sales | 41,547 | 30,035 | 115,318 | 87,074 | |
Gross profit | 61,758 | 36,148 | 169,369 | 105,574 | |
Operating expenses: | |||||
General and administrative expenses | 32,752 | 9,222 | 70,979 | 27,517 | |
Selling expenses | 3,364 | 5,330 | 8,346 | 5,831 | |
Income from operations | 25,642 | 21,596 | 90,044 | 72,226 | |
Other income (expense): | |||||
Revaluation of earnout consideration liability | 2,636 | 0 | 21,676 | 0 | |
Revaluation of warrant liability | (1,678) | 0 | 16,363 | 0 | |
Change in fair value of derivative liability - convertible notes redemption make-whole provision | 246 | 0 | 185 | 0 | |
Interest expense, net | (5,299) | (2,499) | (14,537) | (7,635) | |
Amortization of deferred financing costs | (551) | (403) | (1,825) | (1,195) | |
Other income | 1,291 | 0 | 1,291 | 0 | |
Total other income (expenses), net | (3,355) | (2,902) | 23,153 | (8,830) | |
Income before income taxes | 22,287 | 18,694 | 113,197 | 63,396 | |
Provision for income taxes | (393) | 0 | (3,738) | 0 | |
Net income | 21,894 | 18,694 | 109,459 | 63,396 | |
Net income attributable to redeemable non-controlling interests | 19,077 | 0 | 93,973 | 0 | |
Net income attributable to CompoSecure, Inc. | $ 2,817 | $ 18,694 | $ 15,486 | $ 63,396 | |
Net income per share attributable to Class A common stockholders - basic (usd per share) | $ 0.18 | $ 1.02 | |||
Net income per share attributable to Class A common stockholders - diluted (usd per share) | [1] | $ 0.18 | $ 0.94 | ||
Weighted average shares used to compute net income per share attributable to Class A common stockholders - basic (shares) | 15,433,438 | 15,141,169 | |||
Weighted average shares used to compute net income per share attributable to Class A common stockholders - diluted (shares) | 19,662,060 | 32,814,683 | |||
[1]Net income attributable to CompoSecure, Inc.is adjusted for net effects of stock options for the three months ended September 30, 2022, and for net effects of stock options and Exchangeable Notes for the nine months ended September 30, 2022 to calculate diluted net income attributable to CompoSecure, Inc. See note 13. |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 21,894 | $ 18,694 | $ 109,459 | $ 63,396 |
Other comprehensive income, net: | ||||
Unrealized gain on derivative - interest rate swap (net of tax) | 3,642 | 0 | 8,999 | 0 |
Unrealized gain on derivative - interest rate swap, net of tax | 3,642 | 0 | 8,999 | 0 |
Comprehensive income | $ 25,536 | $ 18,694 | $ 118,458 | $ 63,396 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Deficit (Unaudited) - USD ($) $ in Thousands | Total | As reported | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Accumulated Deficit As reported | Class A Common Stock Common Stock | Class B Common Stock Common Stock |
Beginning balance (shares) at Dec. 31, 2020 | 0 | 61,136,800 | ||||||
Beginning balance at Dec. 31, 2020 | $ (192,553) | $ 6,148 | $ 0 | $ (198,707) | $ 0 | $ 6 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Distributions | (3,276) | (3,276) | ||||||
Stock-based compensation | 441 | 441 | ||||||
Net income | 23,222 | 23,222 | ||||||
Ending balance (shares) at Mar. 31, 2021 | 0 | 61,136,800 | ||||||
Ending balance at Mar. 31, 2021 | (172,166) | 6,589 | 0 | (178,761) | $ 0 | $ 6 | ||
Beginning balance (shares) at Dec. 31, 2020 | 0 | 61,136,800 | ||||||
Beginning balance at Dec. 31, 2020 | (192,553) | 6,148 | 0 | (198,707) | $ 0 | $ 6 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Proceeds from exercise of stock options | 0 | |||||||
Net income | 63,396 | |||||||
Unrealized gain on derivative - interest rate swap, net of tax | 0 | |||||||
Ending balance (shares) at Sep. 30, 2021 | 0 | 61,136,800 | ||||||
Ending balance at Sep. 30, 2021 | (150,366) | 7,272 | 0 | (157,644) | $ 0 | $ 6 | ||
Increase (Decrease) in Redeemable Non-Controlling Interest [Roll Forward] | ||||||||
Net income | 0 | |||||||
Beginning balance (shares) at Dec. 31, 2020 | 0 | 61,136,800 | ||||||
Beginning balance at Dec. 31, 2020 | (192,553) | 6,148 | 0 | (198,707) | $ 0 | $ 6 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | $ 13,512 | |||||||
Ending balance (shares) at Dec. 31, 2021 | 14,929,982 | 61,136,800 | ||||||
Ending balance at Dec. 31, 2021 | (1,015,961) | 12,261 | 0 | (1,028,229) | $ 1 | $ 6 | ||
Increase (Decrease) in Redeemable Non-Controlling Interest [Roll Forward] | ||||||||
Net income | 69,902 | |||||||
Ending balance at Dec. 31, 2021 | 608,311 | |||||||
Beginning balance (shares) at Mar. 31, 2021 | 0 | 61,136,800 | ||||||
Beginning balance at Mar. 31, 2021 | (172,166) | 6,589 | 0 | (178,761) | $ 0 | $ 6 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Distributions | (11,326) | (11,326) | ||||||
Stock-based compensation | 343 | 343 | ||||||
Net income | 21,480 | 21,480 | ||||||
Ending balance (shares) at Jun. 30, 2021 | 0 | 61,136,800 | ||||||
Ending balance at Jun. 30, 2021 | (161,669) | 6,932 | 0 | (168,607) | $ 0 | $ 6 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Distributions | (7,731) | (7,731) | ||||||
Stock-based compensation | 340 | 340 | ||||||
Net income | 18,694 | 18,694 | ||||||
Unrealized gain on derivative - interest rate swap, net of tax | 0 | |||||||
Ending balance (shares) at Sep. 30, 2021 | 0 | 61,136,800 | ||||||
Ending balance at Sep. 30, 2021 | (150,366) | 7,272 | 0 | (157,644) | $ 0 | $ 6 | ||
Increase (Decrease) in Redeemable Non-Controlling Interest [Roll Forward] | ||||||||
Net income | 0 | |||||||
Beginning balance (shares) at Dec. 31, 2021 | 14,929,982 | 61,136,800 | ||||||
Beginning balance at Dec. 31, 2021 | (1,015,961) | 12,261 | 0 | (1,028,229) | $ 1 | $ 6 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Issuance costs related to Business combination | (726) | (726) | ||||||
Stock-based compensation | 1,006 | 1,006 | ||||||
Net income | 4,741 | $ 4,741 | ||||||
Restricted stock units issued pursuant to equity-based plans (in shares) | (25,000) | |||||||
Unrealized gain on derivative - interest rate swap, net of tax | 3,869 | 3,869 | ||||||
Adjustment of redeemable non-controlling interests to redemption value | 22,167 | 22,167 | ||||||
Ending balance (shares) at Mar. 31, 2022 | 14,954,982 | 61,136,800 | ||||||
Ending balance at Mar. 31, 2022 | (984,904) | 12,541 | 3,869 | (1,001,321) | $ 1 | $ 6 | ||
Increase (Decrease) in Redeemable Non-Controlling Interest [Roll Forward] | ||||||||
Net income | $ 22,167 | |||||||
Adjustment of redeemable non-controlling interests to redemption value | (22,167) | |||||||
Ending balance at Mar. 31, 2022 | 608,311 | |||||||
Beginning balance (shares) at Dec. 31, 2021 | 14,929,982 | 61,136,800 | ||||||
Beginning balance at Dec. 31, 2021 | (1,015,961) | 12,261 | 0 | (1,028,229) | $ 1 | $ 6 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 11,938 | |||||||
Ending balance (shares) at Jun. 30, 2022 | 15,118,532 | 60,986,800 | ||||||
Ending balance at Jun. 30, 2022 | (941,924) | 17,610 | 5,357 | (964,899) | $ 2 | $ 6 | ||
Beginning balance at Dec. 31, 2021 | 608,311 | |||||||
Increase (Decrease) in Redeemable Non-Controlling Interest [Roll Forward] | ||||||||
Net income | 75,628 | |||||||
Ending balance at Jun. 30, 2022 | 606,818 | |||||||
Beginning balance (shares) at Dec. 31, 2021 | 14,929,982 | 61,136,800 | ||||||
Beginning balance at Dec. 31, 2021 | (1,015,961) | 12,261 | 0 | (1,028,229) | $ 1 | $ 6 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Proceeds from exercise of stock options | 2 | |||||||
Net income | 15,486 | |||||||
Unrealized gain on derivative - interest rate swap, net of tax | 8,999 | |||||||
Ending balance (shares) at Sep. 30, 2022 | 15,757,535 | 60,586,800 | ||||||
Ending balance at Sep. 30, 2022 | (927,671) | 21,055 | 8,999 | (957,733) | $ 2 | $ 6 | ||
Beginning balance at Dec. 31, 2021 | 608,311 | |||||||
Increase (Decrease) in Redeemable Non-Controlling Interest [Roll Forward] | ||||||||
Net income | 93,973 | |||||||
Ending balance at Sep. 30, 2022 | 602,840 | |||||||
Beginning balance (shares) at Mar. 31, 2022 | 14,954,982 | 61,136,800 | ||||||
Beginning balance at Mar. 31, 2022 | (984,904) | 12,541 | 3,869 | (1,001,321) | $ 1 | $ 6 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Distributions | (25,729) | (25,729) | ||||||
Stock-based compensation | 3,014 | 3,014 | ||||||
Net income | 8,474 | 8,474 | ||||||
Restricted stock units issued pursuant to equity-based plans (in shares) | (163,550) | (150,000) | ||||||
Restricted stock units issued pursuant to equity-based plans | 1 | $ 1 | ||||||
Unrealized gain on derivative - interest rate swap, net of tax | 1,488 | 1,488 | ||||||
Tax receivable agreement liability | 2,055 | 2,055 | ||||||
Adjustment of redeemable non-controlling interests to redemption value | 53,677 | 53,677 | ||||||
Ending balance (shares) at Jun. 30, 2022 | 15,118,532 | 60,986,800 | ||||||
Ending balance at Jun. 30, 2022 | (941,924) | 17,610 | 5,357 | (964,899) | $ 2 | $ 6 | ||
Beginning balance at Mar. 31, 2022 | 608,311 | |||||||
Increase (Decrease) in Redeemable Non-Controlling Interest [Roll Forward] | ||||||||
Net income | 52,184 | |||||||
Adjustment of redeemable non-controlling interests to redemption value | (53,677) | |||||||
Ending balance at Jun. 30, 2022 | 606,818 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Distributions | (18,706) | (18,706) | ||||||
Stock-based compensation | 3,715 | 3,715 | ||||||
Proceeds from exercise of stock options | 2 | 2 | ||||||
Net income | 2,817 | 2,817 | ||||||
Restricted stock units issued pursuant to equity-based plans (in shares) | (639,003) | (400,000) | ||||||
Unrealized gain on derivative - interest rate swap, net of tax | 3,642 | 3,642 | ||||||
Tax receivable agreement liability | (272) | (272) | ||||||
Adjustment of redeemable non-controlling interests to redemption value | 23,055 | 23,055 | ||||||
Ending balance (shares) at Sep. 30, 2022 | 15,757,535 | 60,586,800 | ||||||
Ending balance at Sep. 30, 2022 | (927,671) | $ 21,055 | $ 8,999 | $ (957,733) | $ 2 | $ 6 | ||
Increase (Decrease) in Redeemable Non-Controlling Interest [Roll Forward] | ||||||||
Net income | 19,077 | |||||||
Adjustment of redeemable non-controlling interests to redemption value | (23,055) | |||||||
Ending balance at Sep. 30, 2022 | $ 602,840 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities: | |||
Net income | $ 21,894 | $ 109,459 | $ 63,396 |
Adjustments to reconcile net income to net cash provided by operating activities | |||
Depreciation and amortization | 2,010 | 6,577 | 7,813 |
Stock-based compensation expense | 7,736 | 1,124 | |
Amortization of deferred finance costs | 1,798 | 1,167 | |
Change in fair value of earnout consideration liability | (2,636) | (21,676) | 0 |
Revaluation of warrant liability | 1,678 | (16,363) | 0 |
Change in fair value of derivative liability | (246) | (185) | 0 |
Deferred tax expense | 3,191 | 0 | |
Changes in assets and liabilities | |||
Accounts receivable | (17,871) | (24,576) | |
Inventories | (13,322) | 3,708 | |
Prepaid expenses and other assets | (225) | 216 | |
Deposits and other assets | (14) | (5,330) | |
Accounts payable | 5,568 | (1,912) | |
Accrued expenses | 10,293 | 2,261 | |
Other liabilities | 15,885 | 180 | |
Net cash provided by operating activities | 90,851 | 48,047 | |
Cash flows from investing activities: | |||
Purchase of property and equipment | (7,221) | (3,900) | |
Net cash used in investing activities | (7,221) | (3,900) | |
Cash flows from financing activities: | |||
Proceeds from exercise of stock options | 2 | 2 | 0 |
Payment of line of credit | (5,000) | (5,000) | |
Payment of term loan | (16,878) | (18,000) | |
Distributions | (44,435) | (22,333) | |
Payment of issuance costs related to business combination | (23,833) | 0 | |
Net cash used in financing activities | (90,144) | (45,333) | |
Net decrease in cash and cash equivalents | (6,514) | (1,186) | |
Cash and cash equivalents, beginning of period | 21,944 | 13,422 | |
Cash and cash equivalents, end of period | $ 15,430 | 15,430 | 12,236 |
Supplementary disclosure of cash flow information: | |||
Cash paid for interest expense | 14,937 | 7,635 | |
Supplemental disclosure of non-cash financing activities: | |||
Derivative asset - interest rate swap | $ 9,392 | $ 0 |
DESCRIPTION OF ORGANIZATION AND
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS | DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS CompoSecure, Inc. (“CompoSecure” or the “Company”) is a manufacturer and designer of complex metal, composite and proprietary financial transaction cards. The Company started operations in 2000 and provides products and services primarily to global financial institutions, plastic card manufacturers, government agencies, system integrators, and security specialists. The Company is located in Somerset, New Jersey. The Company is a leading provider of premium financial payment cards and Cryptocurrency and Digital Asset storage and security solutions. For two decades, through its combination of large-scale, advanced manufacturing capabilities and deep technological expertise, the Company has driven key Payments Industry innovations in materials science, Metal Form Factor design, dual interface functionality, and security. The distinct value proposition of the Company’s products has resulted in widespread adoption by major banks, financial institutions and leading FinTech innovators to support their acquisition and retention of consumer and business card customers. The Company maintains trusted, highly-embedded and long-term customer relationships with an expanding set of global issuers. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements are presented in conformity U.S. GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”). The accompanying consolidated financial statements include the results of operations of the Company and its majority owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to conform to the current year presentation. All dollar amounts are in thousands, unless otherwise noted. Share and per share amounts are presented on a post-conversion basis for all periods presented, unless otherwise noted. Our significant accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC. The Business Combination was accounted for as a reverse recapitalization and treated as the equivalent of Holdings issuing stock for the net assets of Roman DBDR, accompanied by a recapitalization. The net assets of Roman DBDR were stated at historical cost, with no goodwill or other intangible assets recorded. While Roman DBDR was the legal acquirer in the Business Combination, because Holdings was deemed the accounting acquirer, the historical financial statements of Holdings became the historical financial statements of the combined company, upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Holdings prior to the Business Combination; (ii) the combined results of the Company and Holdings following the closing of the Business Combination; (iii) the assets and liabilities of Holdings at their historical cost; and (iv) the Company’s equity structure for all periods presented. In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company's common stock, $0.0001 par value per share issued to Holdings' equity holders in connection with the recapitalization transaction. As such, the shares and corresponding capital amounts and earnings per share related to Holdings' common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination Agreement. Interim Financial Statements The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP and Article 10 of Regulation S-X of the SEC for interim financial information. and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The financial statements presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management, the Financial Statements reflect all adjustments, consisting solely of normal, recurring adjustments, necessary for the fair presentation of the financial statements for the periods presented. The results disclosed in the Consolidated Statements of Operations for the three month period and nine month period ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year. COVID-19 The global outbreak of the COVID-19 pandemic continues to rapidly evolve. The Company has taken a number of measures to monitor and mitigate the effects of COVID-19, such as safety and health measures for the employees and securing the supply of materials that are essential to the Company’s production process. At this stage, the impact on the Company’s business and results has not been significant. However, the ultimate impact of the pandemic on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicated with confidence, including the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, required social distancing and any additional preventative and protective actions that governments, or the Company, may direct, which could result in an extended period of continued business disruption, reduced customer, collaborator, or supplier traffic and reduced operations . Use of Estimates The preparation of the consolidated financial statements requires management to make a number of estimates and assumptions relating to the reported amount of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. The Company bases its estimates on historical experience, current business factors and various other assumptions believed to be reasonable under the circumstances, all of which are necessary in order to form a basis for determining the carrying values of assets and liabilities. Actual results may differ from those estimates and assumptions. The Company evaluates the adequacy of its reserves and the estimates used in calculations on an on-going basis. Significant areas requiring management to make estimates include the valuation of equity instruments, measurement of changes in the fair value of earnout consideration liability, estimates of derivative liability associated with the Exchangeable Notes, which are marked to market each quarter based on a Lattice model approach, derivative asset for the interest rate swap, changes in the fair value of warrant liabilities, valuation allowances on deferred tax assets which are based on an assessment of recoverability of the deferred tax assets against future taxable income and estimates of the inputs used to calculate the tax receivable agreement liability. Revenue Recognition The Company recognizes revenue in accordance with ASC 606 when the performance obligations under the terms of the Company’s contracts with its customers have been satisfied. This occurs at the point in time when control of the specific goods or services as specified by each purchase order are transferred to customers. Specific goods refers to the products offered by the Company, including metal cards, high security documents, and pre-laminated materials. Transfer of control passes to customers upon shipment or upon receipt, depending on the agreement with the specific customers. ASC 606 requires entities to record a contract asset when a performance obligation has been satisfied or partially satisfied, but the amount of consideration has not yet been received because the receipt of the consideration is conditioned on something other than the passage of time. ASC 606 also requires an entity to present a revenue contract as a contract liability in instances when a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (e.g. receivable), before the entity transfers a good or service to the customer. The Company did not have any contract assets or liabilities as of September 30, 2022 or December 31, 2021. The Company invoices its customers at the time at which control is transferred, with payment terms ranging between 15 and 60 days depending on each individual contract. As the payment is due within 90 days of the invoice, a significant financing component is not included within the contracts. The majority of the Company’s contracts with its customers have the same performance obligation of manufacturing and transferring the specified number of cards to the customer. Each individual card included within an order constitutes a separate performance obligation, which is satisfied upon the transfer of goods to the customer. The contract term as defined by ASC 606 is the length of time it takes to deliver the goods or services promised under the purchase order or statement of work. As such, the Company's contracts are generally short term in nature. Revenue is measured in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenue is recognized net of variable consideration such as discounts, rebates, and returns. The Company’s products do not include an unmitigated right of return unless the product is non-conforming or defective. If the goods are non-conforming or defective, the defective goods are replaced or reworked or, in certain instances, a credit is issued for the portion of the order that was non-conforming or defective. A provision for sales returns and allowances is recorded based on experience with goods being returned. Most returned goods are re-worked and subsequently re-shipped to the customer and recognized as revenue. Historically, returns have not been material to the Company. Additionally, the Company has a rebate program with certain customers allowing for a rebate based on achieving a certain level of shipped sales during the calendar year. This rebate is estimated and updated throughout the year and recorded against revenues and the related accounts receivable. Segment Information The Company is managed and operated as one business as the entire business is managed by a single management team that reports to the Chief Executive Officer and President. The Company's chief operating decision-maker is its Chief Executive Officer and President, who makes resource allocation decisions and assesses performance based on financial information presented on an aggregate basis. The Company does not operate separate lines of business with respect to any of its products and does not prepare discrete financial information to allocate resources to separate products or by location. Accordingly, the Company views its business as one reportable operating segment. Net Income Per Share The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per common share is computed by dividing net income attributable to controlling interest by the weighted average number of common shares outstanding for the period. The weighted-average number of common shares outstanding during the period includes Class A common stock but is exclusive of Class B common stock as these shares have no economic or participating rights. Effective April 1, 2022, the Company changed its methodology to apply the accounting policy to calculate the basic and diluted earnings per share as well as it determined that it would push down the changes in fair value of the mark-to-market liabilities related to the Company's warrants and earnout consideration liability to its operating subsidiary, Holdings, resulting in a change to the net income attributable to the controlling interest and non-controlling interest. Diluted net income per share is computed by dividing the net income allocated to potential dilutive instruments attributable to controlling interest by the basic weighted-average number of common shares outstanding during the period, adjusted for the potentially dilutive shares of common stock equivalents resulting from the assumed exercise of the warrants, payment of the earnouts, exercise of the equity awards, exchange of the Class B units and Exchangeable Notes ("securities") only if the effect is not anti-dilutive. The Company has prospectively adopted this change in methodology to apply the accounting policy described above to allocate its net income and to calculate its basic and dilutive earnings per share. The Company has provided the appropriate disclosures as required in ASC 250-10. See note 13. Recent Accounting Pronouncements – Adopted In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequently amended by ASU 2019-04 and ASU 2019-05 which introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. This new standard amends the current guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model known as current expected credit loss (CECL) model that is based on expected losses rather than incurred losses. Under the new guidance, an entity will recognize as an allowance its estimate of expected credit losses. Expected credit losses are determined on the basis of how long a receivable has been outstanding (e.g., under 30 days, 31–60 days) as each customer has its own specific term. This method is used to estimate the allowance for bad debts on trade receivables. A trade receivable is considered past due when its past due one day over its specific payment term. The Company determines the write-offs of the allowance on a customer by customer approach. The Company has not experienced any significant write-offs in the past. The ASU is effective for the Company for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years with early adoption permitted. The Company adopted this guidance effective January 1, 2022. The adoption of this guidance did not have a material impact on the consolidated financial statements. Recent Accounting Pronouncements – Not Yet Adopted In March 2022, the FASB issued ASU 2022-02, which eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors in ASC 310-402 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancing and restructurings for borrowers experiencing financial difficulty. The amendments in ASU 2020-04 are effective for years beginning after December 15, 2022 for entities that have adopted CECL. The Company is evaluating the impact of this ASU on the Company's financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform ("ASU 2020-04"). ASU 2020-04 provides optional guidance for a limited period of time to ease potential accounting impact associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate ("LIBOR"). The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued. The amendments in ASU 2020-04 can be adopted as of March 12, 2020 and are effective through December 31, 2022. However, it cannot be applied to contract modifications that occur after December 31, 2022. LIBOR was expected to be phased out at the end 2021. We do not currently have any contracts that have been changed to a new reference rate, but we will continue to evaluate our contracts and the effects of this standard on our consolidated financial statements prior to adoption. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2022 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES The major classes of inventories were as follows: September 30, 2022 December 31, 2021 Raw materials $ 39,994 $ 27,474 Work in process 2,217 582 Finished goods 448 363 Inventory reserve (3,531) (2,613) $ 39,128 $ 25,806 The Company reviews inventory for slow-moving or obsolete amounts based on expected product sales volume and provides reserves against the carrying amount of inventory as appropriate. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT Property and equipment consisted of the following: Useful Life September 30, 2022 December 31, 2021 Machinery and equipment 5 - 10 years $ 63,458 $ 59,437 Furniture and fixtures 3 - 5 years 987 955 Computer equipment 3 - 5 years 927 925 Leasehold improvements Shorter of lease term or estimated useful life 11,788 11,358 Vehicles 5 years 264 264 Software 1 - 3 years 2,889 2,889 Construction in progress 3,721 985 Total 84,034 76,813 Less: Accumulated depreciation and amortization (61,212) (54,636) Property and equipment, net $ 22,822 $ 22,177 Depreciation and amortization expense on property and equipment was $2,010 and $2,640 for the three months ended September 30, 2022 and 2021, respectively. Depreciation and amortization expense on property and equipment was $6,577 and $7,813 for the nine months ended September 30, 2022 and 2021, respectively. |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Exchangeable Senior Notes On April 19, 2021, concurrent with the execution of the Merger Agreement, the Company and its wholly owned subsidiary, Holdings, entered into subscription agreements (the “Note Subscription Agreements”) with certain investors ("Notes Investors") pursuant to which such Notes Investors, severally and not jointly, purchased on the Closing Date of the Business Combination, senior notes (the “Exchangeable Notes”) issued by the Company and guaranteed by the Company's wholly owned subsidiary, Holdings in an aggregate principal amount of up to $130,000 that are exchangeable into shares of Class A common stock at a conversion price of $11.50 per share, subject to the terms and conditions of an Indenture entered by the Company and its wholly owned subsidiary, Holdings, and the trustee under the Indenture. The Exchangeable Notes bear interest at a rate of 7% per year, payable semiannually in arrears on each June 15 and December 15, commencing on June 15, 2022, to holders of record at the close of business on the preceding June 1 and December 1 (whether or not such day is a Business Day), respectively. The Exchangeable Notes mature in five years on December 27, 2026. The Company will settle any exchange of the Exchangeable Notes in shares of Class A common stock, with cash payable in lieu of any fractional shares. In connection with the issuance of the Exchangeable Notes, the Company entered into a Registration Rights Agreement, pursuant to which the Notes Investors received certain registration rights with respect to the Class A common stock. After the three-year anniversary of the Closing Date, the Exchangeable Notes will be redeemable at any time and from time to time by the Company, in whole or in part, (i) if the Last Reported Sale Price of the Class A common stock exceeds 130% of the exchange price as defined in Indenture then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption and (ii) so long as a registration statement registering the resale of all Exchange Shares is effective and available for use by holders of Exchangeable Notes during the entirety of the period from and including the date notice of redemption is given to and including the date of redemption. The notice period for any redemption will be no less than 30 scheduled trading days. The redemption price in any such redemption shall be equal to (a) 100% of the principal amount of the Exchangeable Notes to be redeemed, plus (b) accrued and unpaid interest to, but excluding, the redemption date. The redemption price is payable in cash. Per the terms of the Indenture, holders of Exchangeable Notes in connection with any such redemption will receive a make-whole payment equal to the aggregate dollar value of all interest payable from the date the Company delivers notice of such redemption through the maturity of the Exchangeable Notes. The redemption Make-Whole Amount is payable, at the Company’s option, in cash or through an increase in the exchange rate then applicable to the Exchangeable Notes by an amount equal to (i) the redemption Make-Whole Amount divided by (ii) the five day Volume Weighed Average Price ("VWAP") with regard to the Class A common stock during the five Holders of Exchangeable Notes may exchange their notes in whole or in part, at any time or from time to time, for shares of the Company’s Class A common stock, par value $0.0001 per share up, to a maximum exchange rate of 99.9999 shares per $1,000 principal amount after adjustments as defined in the indenture. The Exchangeable Notes contain customary anti-dilution adjustments, taking into account the agreed terms in the Indenture. To avoid doubt, among other customary adjustments, this includes anti-dilution protections for dividends and distributions of the Company's capital stock, assets and indebtedness. Per the terms of the Indenture, the following are the anti-dilution adjustments of the Exchange Rate: a. If the Company exclusively issues shares of common stock as a dividend or distribution on shares of the common stock, or if the Company effects a share split or share combination; b. If the Company issues to all or substantially all holders of the common stock any rights, options or warrants (other than pursuant to a stockholders rights plan) entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to subscribe for or purchase shares of the common stock at a price per share that is less than the average of the last reported sale prices of the common stock for the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the date of announcement of such issuance; c. If the Company distributes shares of its capital stock, evidences of its indebtedness, other assets or property of the Company or rights, options or warrants to acquire its capital stock or other securities of the Company, to all or substantially all holders of the common stock; d. If any cash dividend or distribution is made to all or substantially all holders of the common stock; e. If the Company or any of its Subsidiaries make a payment in respect of a tender or exchange offer for the common Stock, to the extent that the cash and value of any other consideration included in the payment per share of the common stock exceeds the average of the last reported sale prices of the common stock over the 10 consecutive trading day period commencing on, and including, the trading day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer. The exchange rate will in no event be adjusted down pursuant to the provisions described above, except to the extent a tender or exchange offer is announced but not consummated. If the Company undergoes a “fundamental change” (as defined in the Indenture), subject to certain conditions, the Exchange Rate will be adjusted per the adjustment table included in the Indenture. If a fundamental change occurs at any time prior to the maturity date, each holder shall have the right, at such holder’s option, to require the Company to repurchase for cash all of such holder’s Exchangeable Notes at a repurchase price equal to 100% of the principal amount of the Exchangeable Notes to be repurchased, plus accrued and unpaid interest thereon. There is no make-whole payment associated with a fundamental change redemption. Holders of Exchangeable Notes will be entitled to the resale registration rights under the resale Registration Rights Agreement. If a Registration default occurs, additional interest will accrue, equal to 0.25% in the first 90 days and 0.50% after the 91 st day after the Registration Default (which includes that the Registration Statement has not been filed, or deemed effective or ceases to be effective). The Indenture contains customary terms and covenants and events of default. Upon an event of default as defined in the Indenture, the trustee or the holders of at least 25% in aggregate principal amount of the Exchangeable Notes may declare 100% of the principal of, and accrued and unpaid interest on, all the Exchangeable Notes to be due and payable immediately, and upon any such declaration, the same shall become and shall automatically be immediately due and payable. Upon an event of default in the payment of interest, the Company may elect the sole remedy to be the payment of additional interest of 0.25% for the first 90 days after the occurrence of such an event of default and 0.50% for day s 91-180 after the occurrence of such an event of default. The Company assessed all of the terms and features of the Exchangeable Notes in order to identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the Exchangeable Notes, including the conversion, put and call features. In consideration of these provisions, the Company determined that the optional redemption with a make-whole provision feature required bifurcation as it is a derivative. The fair value of this derivative was determined based on the difference between the fair value of the Exchangeable Notes with the redemption with a make-whole provision feature and the fair value of the Exchangeable Notes without the redemption with a make-whole provision feature. The Company employed a Lattice model to determine the fair value of the derivative upon issuance of the Exchangeable Notes and recorded this amount as derivative liability with an offsetting amount as a debt discount as a reduction to the carrying value of the Exchangeable Notes on the Closing Date, or December 27, 2021. The optional redemption with a make-whole provision feature is measured at fair value on a quarterly basis and the change in the fair value for the period is recorded on the consolidated statements of operations. The Company performed a valuation of the derivative liability for the quarter ended September 30, 2022 and determined that the fair value of the derivative liability was $367 at September 30, 2022 representing a change in fair value of $246 and $185 for the three and nine months ended September 30, 2022, respectively. The expected term of the Exchangeable Notes was equal for the period through December 27, 2026 as this represents the point at which the Exchangeable Notes will mature unless earlier converted in accordance with their terms prior to such date. For the quarter ended September 30, 2022, the Company recognized $2,407 of interest expense related to the Exchangeable Notes at the effective interest rate of 7.4%. For the nine months ended September 30, 2022, the Company recognized $7,127 of interest expense related to the Exchangeable Notes at the effective interest rate of 7.4%. The fair value of the Company’s Exchangeable Notes approximate the carrying value of the debt. In connection with the issuance of the Exchangeable Notes, the Company incurred approximately $2,600 of debt issuance costs, which primarily consisted of underwriting fees, and allocated these costs to the liability component and recorded as a reduction in the carrying amount of the debt liability on the balance sheet. The portion allocated to the Exchangeable Notes is amortized to interest expense over the expected term of the Exchangeable Notes using the effective interest method. Term Loan On July 26, 2016, the Company entered into a $120,000 credit facility with JP Morgan Chase (“JPMC”) acting as the lending agent (“2016 Credit Facility”). In July 2019, the Company amended its 2016 Credit Facility with JPMC, increasing the maximum aggregate amount available under the revolver to $60,000 and the amount of the term loan to $140,000. In addition, the maturity dates of both the revolver and term loan were amended to July 2, 2022. In November 2020, the Company entered into a new agreement with JPMC to refinance its July 2019 credit facility, increasing the maximum aggregate amount available under the term loan to $240,000 bringing total credit facility to $300,000. In addition, the maturity date of both the revolver and term loan was amended to November 5, 2023. This amendment was accounted for as a modification and approximately $3,200 of additional costs incurred in connection with the modification were capitalized as debt issuance costs. In December 2021, the Company entered into a new agreement with JPMC to refinance its then existing November 2020 credit facility, increasing the maximum aggregate amount available under the term loan to $250,000 bringing total credit facility to $310,000. In addition, the maturity dates of both the revolver and term loan were amended to December 16, 2025. This amendment was accounted for as a modification and approximately $1,800 of additional costs incurred in connection with the modification were capitalized as debt issuance costs. Interest on the Revolver and Term Loan are based on the outstanding principal amount during the interest period multiplied by the fluctuating bank prime rate plus the applicable margin of 2.00% or for portions of the debt converted to Euro Loans the quoted LIBOR rate plus the applicable margin of 3.00%. At September 30, 2022 and 2021, the effective interest rate on the Revolver and Term Loan was 5.15% and 4.36% per year, respectively. Interest is payable monthly in arrears or upon maturity of the Euro loans that can run 30, 90, 120, 180 day time periods. The Company must pay quarterly an annual commitment fee of 0.40% on the unused portion of the $60 million Revolver. The credit facility is secured by substantially all of the assets of the Company. The Company recognized $3,439 and $2,902 of interest expense related to the Revolver and the Term Loan for the quarter ended September 30, 2022 and 2021, respectively. The Company recognized $9,609 and $8,830 of interest expense related to the Revolver and the Term Loan for the nine months ended September 30, 2022 and 2021, respectively. The terms of the credit facilities contain certain financial covenants including a minimum interest coverage ratio, a maximum total debt to EBITDA ratio and a minimum fixed charge coverage ratio. The Company made an excess cash flow payment of $13,753 related to the credit facilities in the nine-month period ended September 30, 2022 per the terms of the facilities. At September 30, 2022 and December 31, 2021, the Company was in compliance with all financial covenants. As of September 30, 2022 and December 31, 2021, there were $10,000 and $15,000 balances outstanding on the Revolver. At September 30, 2022, there was $50,000 of availability for borrowing under the Revolver. The balances payable under all borrowing facilities are as follows: September 30, December 31, Total debt $ 363,122 $ 380,000 Less: current portion of term loan (scheduled payments) (9,685) (12,500) Less: deferred financing costs, net (5,673) (7,471) Total long-term debt $ 347,764 $ 360,029 Derivative liability - redemption with make-whole provision $ 367 $ 552 The maturity of all the borrowings facilities is as follows: Remainder of 2022 $ — 2023 14,372 2024 18,750 2025 200,000 2026 130,000 Total debt $ 363,122 The Company is exposed to interest rate risk on variable interest rate debt obligations. To manage interest rate risk, the Company had entered into an interest rate swap agreement on November 5, 2020 to hedge forecasted interest rate payments on its variable rate debt. In January 2022, the Company cancelled the November 2020 swap agreement and entered into a new interest rate swap agreement. The Company recognized $400 gain upon the settlement of the November 2020 interest rate swap agreement. At September 30, 2022, the Company’s interest rate swap contract outstanding had a notional amount of $125,000 maturing in December 2025. The Company has designated the interest rate swap agreement as a cash flow hedge for accounting purposes, that was determined to be effective. The Company determined the fair value of the interest rate swap to be zero at the inception of the agreement and $9,392 at September 30, 2022. The Company reflects the realized gains and losses of the actual monthly settlement activity of the interest rate swap in its consolidated statements of operations. The Company reflects the unrealized changes in fair value of the interest rate swap at each reporting period in other comprehensive income and a derivative asset or liability will be recognized at each reporting period in the Company’s financial statements. |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2022 | |
Leases [Abstract] | |
LEASES | LEASES In February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842, which amended the guidance in former ASC Topic 840, Leases. The Company adopted the new lease guidance effective January 1, 2021 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information was not updated and the disclosures required under the new standard were not provided for dates and periods before January 1, 2021. The Company elected the package of practical expedients which permits to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. The Company did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change the Company’s previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. The adoption of the new guidance resulted in the recognition of ROU assets of $6,298 and lease liabilities of $6,875. The difference between the ROU assets and the lease liabilities were primarily due to unamortized lease incentive and deferred rent related to the Company’s operating leases at December 31, 2020. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilized its incremental borrowing rate (“IBR”), which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In calculating the present value of the lease payments, the Company elected to utilize its incremental borrowing rate based on the remaining lease terms as of the January 1, 2021 adoption date. The Company utilized a synthetic credit rating model including fundamental analysis per S&P Global Market Intelligence. The Company then utilized the Bloomberg BVAL Pricing Source to determine the option-adjusted spread and added the United States Treasury Constant Maturity for the applicable terms to determine the term structure of the IBR. Based on these calculations, the Company determined applicable discount rates for various points along the yield curve as of January 1, 2021. As a reasonableness check for the yield curve, the Company considered its revolving credit agreement amendment on November 5, 2020, which extended the term of the agreement through November 5, 2023. The base interest rate on the loan was calculated as LIBOR plus 300 bps which approximates 3.4%. This rate was generally consistent with the yield curve derived, thus the Company determined that the yield curve was appropriate for determining the discount rates for its leases. The Company then interpolated the discount rates in the yield curve to determine the discount rate for each of its existing leases at January 1, 2021. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives incurred, if any. The Company’s lease terms may include options to extend the lease when it is reasonably certain that we will exercise that option. Our leases have remaining lease terms of 1 year to 7 years, some of which include options to extend the lease term for up to 3 years. The Company has elected the practical expedient to combine lease and non-lease components as a single component. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as right-of-use assets, current operating lease liabilities and non-current operating lease liabilities. The new standard also provides practical expedients and certain exemptions for an entity’s ongoing accounting. The Company has elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases where the initial lease term is one year or less or for which the ROU asset at inception is deemed immaterial, the Company will not recognize ROU assets or lease liabilities. Those leases are expensed on a straight line basis over the term of the lease. Operating Leases The Company, through its wholly-owned subsidiary Holdings, leases certain office space and manufacturing space under arrangements currently classified as operating leases under ASC 842. The Company recognizes lease expense for these leases on a straight-line basis over the lease terms. Most leases include one or more options to renew, with renewal options ranging from 1 to 5 years. The exercise of lease renewal options is at the Company’s sole discretion. Effective April 1, 2012, the Company entered into a 10-year lease for its office and manufacturing facilities in Somerset, New Jersey terminating in 2022. The lease contains escalating rental payments, exclusive of required payments for increases in real estate taxes and operating costs over base period amounts. The agreement provides for a five year renewal option. The lease provides for monthly payments of rent during the lease term. These payments consist of base rent, and additional rent covering customary items such as charges for utilities, taxes, operating expenses, and other facility fees and charges. The base rent is currently approximately $338 per year, which reflects an annual 3% escalation factor. The Company exercised its renewal option in December 2020. Effective August 1, 2014, the Company entered into a 4-year lease for additional office and manufacturing space in Somerset, New Jersey terminating on July 31, 2018. The lease contains escalating rental payments. The Company has the option to extend the term for two periods of two years each. The Company amended its lease agreement to exercise both renewal options with the last one exercised in 2020, for additional three years expiring on August 31, 2023. The base rent is currently approximately $106 per year, which reflects an annual 3% escalation factor. Effective June 16, 2016, the Company entered into a 10-year lease for a new facility. The lease contains escalating rental payments and terminates on September 30, 2026. The agreement also provides for a renewal option at a fixed rate. The base rent is currently approximately $850 per year, which reflects an annual 3% escalation factor. Effective May 1, 2022, the Company entered into a 7-year lease for a new facility primarily for warehouse operations in Somerset, New Jersey terminating in 2029. The lease contains escalating rental payments, exclusive of required payments for increases in real estate taxes and operating costs over base period amounts. The agreement provides for two five year renewal options. The lease provides for monthly payments of rent during the lease term. These payments consist of base rent, management fee and additional rent covering customary items such as charges for utilities, taxes, operating expenses, and other facility fees and charges. The base rent is currently approximately $686 per year, which reflects an annual 3.8% escalation factor. Effective July 1, 2022, the Company entered into a 3-year lease for a new office facility in Somerset, New Jersey terminating in 2025. The lease contains escalating rental payments, exclusive of required payments for increases in real estate taxes and operating costs over base period amounts. The agreement provides for one five year renewal option. The lease provides for monthly payments of rent during the lease term. These payments consist of base rent and additional rent covering customary items such as charges for utilities, taxes, operating expenses, and other facility fees and charges. The base rent is currently approximately $147 per year, which reflects an annual 3% escalation factor. The Company’s leases have remaining lease terms of 1 to 7 years. The Company does not include any renewal options in lease terms when calculating lease liabilities as the Company is not reasonably certain that it will exercise these options. Two of the leases include the early termination option in the lease term, however, it was not included in the lease terms when calculating the lease liability since the Company determined that it is reasonably certain it will not terminate the leases prior to the termination date. The weighted-average remaining lease term for the operating leases was 5.2 years at September 30, 2022. The weighted-average discount rate was 3.83% at September 30, 2022. ROU assets and lease liabilities related to the operating leases are as follows: Balance Sheet Classification September 30, 2022 December 31, 2021 Right-of-use assets Right of use assets $ 9,268 $ 5,246 Current lease liabilities Current portion of lease liabilities 1,815 1,119 Non-current lease liabilities Non-current portion of lease liabilities 8,133 4,709 The Company has lease agreements that contain both lease and non-lease components. The Company accounts for lease components together with non-lease components (e.g., common-area maintenance). The components of lease costs were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Operating lease cost $ 544 $ 341 $ 1,309 $ 979 Variable lease cost 176 123 473 322 Total lease cost $ 720 $ 464 $ 1,782 $ 1,301 Future minimum commitments under all non-cancelable operating leases are as follows: 2022 (excluding the nine months ended September 30, 2022) $ 538 2023 2,149 2024 2,146 2025 2,176 2026 1,882 Later years 2,117 Total lease payments 11,008 Less: Imputed interest (1,060) Present value of lease liabilities $ 9,948 Supplemental cash flow information and non-cash activity related to our operating leases are as follows: Nine Months Ended September 30, 2022 2021 Operating cash flow information: Cash paid for amounts included in the measurement of lease liabilities $ 1,204 $ 954 Non-cash activity: Right-of-use assets obtained in exchange for lease obligations $ 5,104 $ — |
EQUITY STRUCTURE
EQUITY STRUCTURE | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
EQUITY STRUCTURE | EQUITY STRUCTURE Shares Authorized As of September 30, 2022, the Company had authorized a total of 250,000,000 shares for issuance designated as Class A common stock, 75,000,000 designated as Class B common stock and 10,000,000 shares designated as preferred stock. As of September 30, 2022, there were 15,757,535 shares of Class A Common Stock issued and outstanding, 60,586,800 shares of Class B Common Stock issued and outstanding and no shares of Preferred Stock issued and outstanding. Warrants As of September 30, 2022, the Company had 10,837,400 private warrants outstanding. Each private warrant entitles the registered holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment, at any time commencing 30 days after the completion of the Business Combination. The exercise price and number of common shares issuable upon exercise of the private warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. However, the private warrants will not be adjusted for issuance of common stock at a price below its exercise price. As of September 30, 2022, the Company had 11,578,000 public warrants outstanding. Each public warrant entitles the registered holder to purchase one share of the Company’s Class A Common Stock at a price of $11.50 per share, subject to adjustment, at any time commencing 30 days after the completion of the Business Combination. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares. Non-Controlling Interest Non-controlling interests represent direct interests held in Holdings other than by the Company immediately after the Business Combination. The non-controlling interests in the Company are represented by Class B Units, or such other equity securities in the Company as the Board may establish in accordance with the terms hereof. Since the non-controlling interests are redeemable for cash at the option of the Company subject to the terms and conditions, they have been classified as temporary equity on the consolidated balance sheet in accordance with ASC 480. Income tax benefit or expense is applied to the income attributable to the controlling interest as the income attributable to the non-controlling interest is pass-through income. The non-controlling interest has been adjusted to redemption value as of September 30, 2022 in accordance with ASC 480-10. This measurement adjustment results in a corresponding adjustment to shareholders’ deficit through adjustments to additional paid-in capital and retained earnings. The redemption value of the Class B Units was $602,840 on September 30, 2022. The redemption value was calculated by multiplying the 60,586,800 Class B Units outstanding at September 30, 2022 by the $9.95 trading price of our Class A common stock on December 27, 2021. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The following table summarizes share-based compensation expense included in general and administrative expenses within the consolidated statements of operations: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Stock option expense $ 273 $ 311 $ 956 $ 960 Restricted stock unit expense 3,442 — 6,741 — Incentive units — 29 39 164 Total stock-based compensation expense $ 3,715 $ 340 $ 7,736 $ 1,124 The following table sets forth the stock compensation activity under the Holdings' equity plan, which was assumed by the Company, for the nine month period ended September 30, 2022: Stock Option Activity Number of Shares Weighted Average Exercise Price Per Shares Weighted Average Aggregate Outstanding at January 1, 2022 5,409,771 $ 1.27 4.1 $ 37,542 Granted — — Exercised (237,148) $ 0.01 2.6 $ 1,186 Forfeited — — Outstanding at September 30, 2022 5,172,623 $ 1.33 3.4 $ 19,423 Vested and expected to vest at September 30, 2022 5,172,623 $ 1.33 3.4 $ 19,423 Exercisable at September 30, 2022 4,973,073 $ 1.15 3.3 $ 19,384 Restricted Stock and Performance Stock Unit Activity Number of Shares Outstanding at January 1, 2022 — Granted 6,069,578 Vested (48,057) Forfeited (47,650) Nonvested at September 30, 2022 5,973,871 Earnouts Number of Shares Outstanding at January 1, 2022 657,160 Granted — Vested — Forfeited — Nonvested at September 30, 2022 657,160 Incentive Units Upon consummation of the Business Combination on December 27, 2021, all of the incentive units, whether vested or unvested, outstanding immediately prior to the merger that were not settled as part of the transaction, were assumed by the Company and converted into class B common stock. The incentive units converted into class B common stock outstanding were 1,236,027 as of September 30, 2022. Unrecognized compensation cost for unvested stock options, restricted stock awards, incentive units and performance stock units as of September 30, 2022 totaled $35,256, and is expected to be recognized over a weighted average period of approximately 2.8 years. |
RETIREMENT PLANS
RETIREMENT PLANS | 9 Months Ended |
Sep. 30, 2022 | |
Retirement Benefits [Abstract] | |
RETIREMENT PLANS | RETIREMENT PLANS Defined Contribution Plan The Company has a 401(k) profit sharing plan for all full-time employees who have attained the age of 21 and completed 90 days of service. The Company matches 100% of the first 1% and then 50% of the next 5% of employee contributions. Retirement plan expense for the three months ended September 30, 2022 and 2021 was approximately $319 and $252, respectively. Retirement plan expense for the nine months ended September 30, 2022 and 2021 was approximately $1,156 and $786, respectively. Deferred Compensation Plan |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The Company determines fair value in accordance with ASC 820 which established a hierarchy for the inputs used to measure the fair value of financial assets and liabilities based on the source of the input, which generally range from quoted prices for identical instruments in a principal trading market (i.e. Level 1) to estimates determined using significant unobservable inputs (i.e. Level 3). The fair value hierarchy prioritizes the inputs, which refer to assumptions that market participants would use in pricing an asset or liability, based upon the highest and best use, into three levels as follows: The standard describes three levels of inputs that may be used to measure fair value:: • Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. • Level 2: Observable inputs other than unadjusted quoted prices in active markets for identical assets or liabilities such as: ◦ Quoted prices for similar assets or liabilities in active markets ◦ Quoted prices for identical or similar assets or liabilities in inactive markets ◦ Inputs other than quoted prices that are observable for the asset or liability ◦ Inputs that are derived principally from or corroborated by observable market data by correlation or other mean • Level 3: Unobservable inputs in which there is little or no market data available, which are significant to the fair value measurement and require the Company to develop its own assumptions. The Company’s financial assets and liabilities measured at fair value on a recurring basis, consisted of the following types of instruments as of the following dates: Level 1 Level 2 Level 3 Total September 30, 2022 Assets Carried at Fair Value: Derivative asset - interest rate swap $ — $ — $ 9,392 $ 9,392 Liabilities Carried at Fair Value: Public warrants 9,262 — — 9,262 Private warrants — — 9,646 9,646 Earnout consideration — — 16,751 16,751 Derivative liability - redemption with make-whole provision — — 367 367 December 31, 2021 Liabilities Carried at Fair Value: Public warrants $ 17,714 $ — $ — 17,714 Private warrants — — 17,557 17,557 Earnout consideration — — 38,427 38,427 Derivative liability - redemption with make-whole provision — — 552 552 Additional information is provided below about assets and liabilities remeasured at fair value on a recurring basis and for which the Company utilizes Level 3 inputs to determine fair value. Derivative asset - interest rate swap The Company is exposed to interest rate risk on variable interest rate debt obligations. To manage interest rate risk, the Company entered into an interest rate swap agreement on January 5, 2022. At September 30, 2022, the Company’s interest rate swap contract outstanding had a notional amount of $125,000 maturing in December 2025. The Company has designated the interest rate swap as a cash flow hedge for accounting purposes. The Company determined the fair value of the interest rate swap to be zero at the inception of the agreement and $9,392 at September 30, 2022. The Company reflects the unrealized changes in fair value of the interest rate swap at each reporting period in other comprehensive income and a derivative asset or liability is recognized at each reporting period in the Company’s consolidated financial statements. The fair value of interest rate swap has been classified as a Level 3 asset as its valuation requires estimation of factors that are not currently readily observable in the market. If different assumptions were used for the various inputs to the valuation approach, the estimated fair value could be significantly higher or lower than the fair value determined. Warrant liabilities As a result of the Business Combination, the Company assumed warrant liability related to previously issued warrants in connection with Roman DBDR's initial public offering. The warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our consolidated balance sheet. The warrant liabilities were remeasured at September 30, 2022, with changes in fair value presented within revaluation of warrant liabilities in the consolidated statement of operations. The following table provides a reconciliation of the ending balances for the warrant liabilities remeasured at fair value: Warrant Liabilities Estimated fair value at December 31, 2021 $ 35,271 Change in estimated fair value (16,363) Estimated fair value at September 30, 2022 $ 18,908 The Public Warrants were valued using the quoted market price as the fair value at the end of each balance sheet date. The Private Placement Warrants were valued using the Black Scholes Option Pricing Model. The following assumptions were used to determine the fair value of the private warrants as of September 30, 2022: September 30, 2022 Exercise Price $ 11.50 Risk-free interest rate 4.13 % Expected volatility 46 % Expected dividends 0 % Expected term (years) 4.24 Common Stock market value $ 5.01 The fair value of private warrants has been classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently readily observable in the market. If different assumptions were used for the various inputs to the valuation approach, the estimated fair value could be significantly higher or lower than the fair value determined. Earnout Consideration Holdings' equity holders have the right to receive an aggregate of up to 7,500,000 additional (i) shares of the Company's class A common stock or (ii) Holdings Units (and a corresponding number of shares of the Company's class B common stock), as applicable, in Earnout consideration based on the achievement of certain stock price thresholds. Earnout Considerations held by Holdings' holders (not including the holders under ASC 718) were determined to be derivative instruments in accordance with ASC 815 and were accounted as derivative liabilities, initially valued at fair value in accordance with ASC 815-40-30-1. The liability for Earnouts are remeasured at each reporting period at fair value, with changes in fair value recorded in earnings in accordance with ASC 815. The Company established the initial fair value for the earnouts at the closing date on December 27, 2021 using a Monte Carlo simulation model. The following table provides a reconciliation of the ending balances for the earnout consideration liabilities remeasured at fair value: Earnout Consideration Liability Estimated fair value at December 31, 2021 $ 38,427 Change in estimated fair value (21,676) Estimated fair value at September 30, 2022 $ 16,751 The following assumptions were used to determine the fair value of the Earnout considerations as of September 30, 2022: September 30, 2022 Valuation date share price $ 5.01 Risk-free interest rate 4.23% Expected volatility 75% - 77.5% Expected dividends 0 % Expected term (years) 2.2 - 3.2 years The fair value of Earnouts has been classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently readily observable in the market. If different assumptions were used for the various inputs to the valuation approach, the estimated fair value could be significantly higher or lower than the fair value determined. |
GEOGRAPHIC INFORMATION AND CONC
GEOGRAPHIC INFORMATION AND CONCENTRATIONS | 9 Months Ended |
Sep. 30, 2022 | |
Risks and Uncertainties [Abstract] | |
GEOGRAPHIC INFORMATION AND CONCENTRATIONS | GEOGRAPHIC INFORMATION AND CONCENTRATIONS The Company headquarters and substantially all of its operations, including its long-lived assets, are located in the United States. Geographical sales information based on the location of the customer was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net sales by region: Domestic 83,842 51,728 216,335 154,454 International 19,463 14,455 68,352 38,194 Total $ 103,305 $ 66,183 $ 284,687 $ 192,648 The Company’s principal direct customers as of September 30, 2022 consist primarily of leading international, foreign and domestic banks and other credit card issuers primarily within the U.S., Europe, Asia, Latin America, Canada, and the Middle East. The Company periodically assesses the financial strength of these customers and establishes allowances for anticipated losses, if necessary. Three customers individually accounted for more than 10% of the Company’s revenue or 76.4%, combined, of total revenue for the three months ended September 30, 2022. Three customers individually accounted for more than 10% of the Company’s revenue or 75.6%, combined, of total revenue for the three months ended September 30, 2021.Three customers individually accounted for more than 10% of the Company’s revenue or 76.8%, combined, of total revenue for the nine months ended September 30, 2022. Two customers individually accounted for more than 10% of the Company’s revenue or 70.4%, combined, of total revenue for the nine months ended September 30, 2021. Four customers individually accounted for more than 10% of the Company’s accounts receivable or approximately 88% and two customers individually accounted for more than 10% or approximately 66% of total accounts receivable as of September 30, 2022 and December 31, 2021, respectively. One individual vendor accounted for more than 10% of purchases of supplies for the nine months ended September 30, 2022 or approximately 15% of total purchases for the nine months ended September 30,2022. The Company primarily relied on three vendors that individually accounted for more than 10% of purchases of supplies for the nine months ended September 30, 2021 or approximately 32% of total purchases for the nine months ended September 30, 2021. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXESThe Company recorded income tax provisions of $393 and $3,738 for the three and nine months ended September 30, 2022, respectively. No provisions or benefits were made for federal or state income taxes for the three months and the nine months ended September 30, 2021 as prior to the Business Combination completed on December 27, 2021, the Company was not subject to income taxes due to the then equity structure of the Company and was subject to pass through income taxes. Federal, state and local income tax returns for years prior to 2018 are no longer subject to examination by tax authorities. In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon currently known facts and circumstances and applies that rate to its year-to-date earnings or losses. The Company’s effective tax rate is based on expected income and statutory tax rates and takes into consideration permanent differences between financial statement and tax return income applicable to the Company in the various jurisdictions in which the Company operates. The effect of discrete items, such as changes in estimates, changes in enacted tax laws or rates or tax status, and unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the result of new judicial interpretations or regulatory or tax law changes. The Company's interim effective tax rate, inclusive of any discrete items, was 1.76% and 3.30% for the three and nine months ended September 30, 2022, respectively. T he Company’s effective income tax rate differs from the U.S. statutory rate primarily due to the non-controlling interest adjustment as the income attributable to the non-controlling interest is pass-through income. The Company continues to evaluate the realizability of its deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, and the progress of ongoing tax audits. Any changes to the valuation allowance or deferred tax assets and liabilities in the future would impact the Company's income taxes. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | EARNINGS PER SHARE The following table sets forth the computation of net income used to compute basic and diluted net earnings per share of Class A common stock for the three months and nine months ended September 30, 2022. No earnings per share are presented for the periods ended September 30, 2021 as only the Class B common shares would have been outstanding in historical periods pursuant to the reverse recapitalization and the Class B common shares do not participate in the Company's income or loss and are therefore not participating securities. Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 Basic and diluted: Net income $ 21,894 $ 109,459 Less: Net income attributable to non-controlling interest (19,077) (93,973) Net income attributable to Class A Common Stockholders $ 2,817 $ 15,486 Plus: adjustment due to net effect of stock options and exchangeable notes to net income 733 15,446 Net income attributable to Class A Common Stockholders after adjustment $ 3,550 $ 30,932 Weighted average common shares outstanding used in computing net income per share - 15,433,438 15,141,169 Plus: net effect of dilutive stock options and exchangeable notes 4,228,622 17,673,514 Weighted average common shares outstanding used in computing net income per share—diluted 19,662,060 32,814,683 Net income per share—basic $ 0.18 $ 1.02 Net income per share—diluted $ 0.18 $ 0.94 Securities that could potentially be dilutive are excluded from the computation of diluted earnings per share when the exercise price exceeds the average closing price of the Company’s common stock during the period, because their inclusion would result in an antidilutive effect on per share amounts. The Company applied the if-converted method for the Exchangeable Notes to calculate diluted earnings per share in accordance with ASU 2020-06. The following amounts were not included in the calculation of net earnings per diluted share because their effects were anti-dilutive: Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 Potentially dilutive securities: Warrants 22,415,400 22,415,400 Class B common shares 60,586,800 60,586,800 Exchangeable notes 12,999,978 — Earnout consideration shares 7,500,000 7,500,000 Stock options and restricted common shares 3,753,590 3,453,590 Change in Accounting Policy for net income per share: Effective April 1, 2022, the Company had changed its methodology to apply its accounting policy to calculate the basic and diluted earnings per share as well as determined that it would push down the changes in fair value of the mark-to-market liabilities that related to the Company's warrants and earnout consideration liability to its operating subsidiary, Holdings, resulting in a change to the net income attributable to the controlling and non-controlling interest. The Company observed diversity in practice due to lack of specific guidance in ASC 810 related to earnings per share due to the Company's Up-C structure. The method adopted effective April 1, 2022 was voluntary and more appropriately represented the economics of the net income allocation upon the conversion of the potential dilutive instruments due to the fact that the issuance of Class A Common Stock would result with a corresponding issuance of a Class A Common Unit in Holdings. Further, for similar reasons, pushing down the changes in fair value of the mark-to-market liabilities to Holdings, and therefore allocating the changes between the controlling and non-controlling interest would provide more appropriate information to the users of the financial statements. The Company determined that, accordingly, this change would more appropriately reflect the allocation of the consolidated Company’s net assets between the controlling and non-controlling interest, and the respective basic and dilutive earnings per share presented in the Company’s consolidated financial statements. Below is a summary of the impact of the change in accounting policy for the periods indicated: Three-month period ended September 30, 2022 Three-month period ended September 30, 2022 Income Statement Items: Under No-allocation method Adjustment As reported Net income per share attributable to Class A common stockholders - basic $ 0.23 $ (0.05) $ 0.18 Net income per share attributable to Class A common stockholders - diluted $ 0.12 $ 0.06 $ 0.18 Net income attributable to CompoSecure, Inc. 3,577 (760) 2,817 Net income attributable to redeemable non-controlling interests $ 18,314 $ 763 $ 19,077 Nine-month period ended September 30, 2022 Nine-month period ended September 30, 2022 Income Statement Items: Under No-allocation method Adjustment As reported Net income per share attributable to Class A common stockholders - basic $ 3.17 $ (2.15) $ 1.02 Net income per share attributable to Class A common stockholders - diluted $ 1.21 $ (0.27) $ 0.94 Net income attributable to CompoSecure, Inc. 48,072 (32,586) 15,486 Net income attributable to redeemable non-controlling interests $ 63,785 $ 30,188 $ 93,973 Six-month period ended June 30, 2022 Six-month period ended June 30, 2022 Income Statement Items: Under No-allocation method Adjustment As reported Provision for income taxes $ 948 $ 2,397 $ 3,345 Net income 89,963 (2,397) 87,566 Net income attributable to CompoSecure, Inc. 44,050 (32,112) 11,938 Net income attributable to redeemable non-controlling interests 45,913 29,715 75,628 Net income per share attributable to Class A common stockholders - basic $ 2.94 $ (2.14) $ 0.80 Net income per share attributable to Class A common stockholders - diluted $ 0.97 $ (0.22) $ 0.75 Three-month period ended June 30, 2022 Three-month period ended June 30, 2022 Income Statement Items: Under No-allocation method Adjustment As reported Income tax expense $ 405 $ 2,397 $ 2,802 Net income 63,055 (2,397) 60,658 Net income attributable to CompoSecure, Inc. 38,437 (29,963) 8,474 Net income attributable to redeemable non-controlling interests 24,619 27,565 52,184 Net income per share attributable to Class A common stockholders - basic $ 2.55 $ (1.99) $ 0.56 Net income per share attributable to Class A common stockholders - diluted $ 0.68 $ (0.16) $ 0.52 June 30, June 30, Balance Sheet Items: Under No-allocation method Adjustment As reported Deferred tax asset $ 25,098 $ (321) $ 24,777 Retained earnings (962,502) (2,397) (964,899) Deferred tax asset was adjusted cumulatively in the period ended June 30, 2022 due to the change in accounting policy. The Company determined that the effect on deferred tax assets and provision for income taxes for the periods ended March 31, 2022 and December 31, 2021 were immaterial and therefore were not adjusted retrospectively. Three-month period ended March 31, 2022 Three-month period ended March 31, 2022 Income Statement Items: As reported Adjustment Under re-allocation method Net income per share attributable to Class A common stockholders - basic $ 0.32 $ (0.09) $ 0.23 Net income per share attributable to Class A common stockholders - diluted $ 0.16 $ 0.07 $ 0.23 Net income attributable to CompoSecure, Inc. 4,741 (1,347) 3,394 Net income attributable to redeemable non-controlling interests 22,167 1,347 23,514 Year ended December 31, 2021 Year ended December 31, 2021 Income Statement Items: As reported Adjustment Under re-allocation method Net income per share attributable to Class A common stockholders - basic (1) $ 0.91 $ (0.70) $ 0.21 Net income per share attributable to Class A common stockholders - diluted (1) $ 0.14 $ (0.02) $ 0.12 Net income attributable to CompoSecure, Inc. (2) 13,512 (10,358) 3,154 Net income attributable to redeemable non-controlling interests 69,902 10,358 80,260 ( 1) The amounts for the year ended December 31, 2021 represent basic and diluted net income per share of Class A common stock for the prorated period from December 27, 2021 through December 31, 2021, the period following the Business Combination described in Note 1. (2) Net income attributable to CompoSecure, Inc. for the year ended December 31, 2021 was equal to net income for the period subsequent to the Business Combination for the prorated period from December 27, 2021 through December 31, 2021. Net income attributable to non-controlling for the year ended December 31, 2021 is equal to net income for the period from January 1, 2021 through December 31, 2021. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Operating Leases The Company leases certain office space and manufacturing space under arrangements currently classified as leases under ASC 842. See Note 6 for future minimum commitments under all non-cancelable operating leases. Litigation The Company may be, from time to time, party to various disputes and claims arising from normal business activities. The Company accrues for amounts related to legal matters if it is probable that a liability has been incurred and the amount is reasonably estimable. While the outcome of existing disputes and claims is uncertain, the Company does not expect that the resolution of existing disputes and claims would have a material adverse effect on its consolidated financial position or liquidity or the Company’s consolidated results of operations and cash flows. Litigation costs are expensed as incurred. In February 2021, the Company had received from a third party a notice of dispute with respect to whether commissions were due and owing on product sales to certain of the Company’s customers which could have required |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONSIn November 2015, the Company entered into a sales representation agreement with a third party, partially owned by an individual who is a Class B shareholder of Holdings and who was then a member of Holdings' Board of Managers. In 2016, the Company commenced litigation against such third party seeking a judicial determination that the sales representation agreement was void and unenforceable, among other claims. In February 2018, the trial court ruled against Holdings in the litigation, concluding that the sales representation agreement was valid and enforceable. Holdings appealed the ruling, however, the ruling was upheld. As a result of the ruling, Holdings was instructed to pay the commissions in accordance with the terms of the sales representation agreement, interest related to the commissions, and legal fees on behalf of the third party. Expenses relating to this agreement for the three months ended September 30, 2022 and 2021 amounted to $13,356 and $1,982, respectively, and amounted to $19,435 and $7,906, for the nine months ended September 30, 2022 and 2021, respectively. The expenses were recorded as a component of selling, general and administrative expenses. In October 2019, Holdings terminated the sales representation agreement. Customers in place prior to the termination of the agreement are subject to the arrangement and are eligible for future commissions, which are payable and are being accrued and paid in accordance with the terms of the sales representation agreement. Amounts accrued as a component of accrued expenses as of September 30, 2022 and December 31, 2021 related to this agreement were $14,924 and $3,402, respectively. In February 2021, the Company had received from such third party a notice of dispute with respect to whether commissions are due and owing on product sales to certain of the Company’s customers. In October 2022, the Company resolved this dispute through binding arbitration. See Note 14. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Accounting | The accompanying consolidated financial statements are presented in conformity U.S. GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”). |
Consolidation | The accompanying consolidated financial statements include the results of operations of the Company and its majority owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. |
Reclassifications | Certain reclassifications have been made to conform to the current year presentation. |
Use of Estimates | The preparation of the consolidated financial statements requires management to make a number of estimates and assumptions relating to the reported amount of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. The Company bases its estimates on historical experience, current business factors and various other assumptions believed to be reasonable under the circumstances, all of which are necessary in order to form a basis for determining the carrying values of assets and liabilities. Actual results may differ from those estimates and assumptions. The Company evaluates the adequacy of its reserves and the estimates used in calculations on an on-going basis. Significant areas requiring management to make estimates include the valuation of equity instruments, measurement of changes in the fair value of earnout consideration liability, estimates of derivative liability associated with the Exchangeable Notes, which are marked to market each quarter based on a Lattice model approach, derivative asset for the interest rate swap, changes in the fair value of warrant liabilities, valuation allowances on deferred tax assets which are based on an assessment of recoverability of the deferred tax assets against future taxable income and estimates of the inputs used to calculate the tax receivable agreement liability. |
Revenue Recognition | The Company recognizes revenue in accordance with ASC 606 when the performance obligations under the terms of the Company’s contracts with its customers have been satisfied. This occurs at the point in time when control of the specific goods or services as specified by each purchase order are transferred to customers. Specific goods refers to the products offered by the Company, including metal cards, high security documents, and pre-laminated materials. Transfer of control passes to customers upon shipment or upon receipt, depending on the agreement with the specific customers. ASC 606 requires entities to record a contract asset when a performance obligation has been satisfied or partially satisfied, but the amount of consideration has not yet been received because the receipt of the consideration is conditioned on something other than the passage of time. ASC 606 also requires an entity to present a revenue contract as a contract liability in instances when a customer pays consideration, or an entity has a right to an amount of consideration that is unconditional (e.g. receivable), before the entity transfers a good or service to the customer. The Company did not have any contract assets or liabilities as of September 30, 2022 or December 31, 2021. The Company invoices its customers at the time at which control is transferred, with payment terms ranging between 15 and 60 days depending on each individual contract. As the payment is due within 90 days of the invoice, a significant financing component is not included within the contracts. The majority of the Company’s contracts with its customers have the same performance obligation of manufacturing and transferring the specified number of cards to the customer. Each individual card included within an order constitutes a separate performance obligation, which is satisfied upon the transfer of goods to the customer. The contract term as defined by ASC 606 is the length of time it takes to deliver the goods or services promised under the purchase order or statement of work. As such, the Company's contracts are generally short term in nature. Revenue is measured in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenue is recognized net of variable consideration such as discounts, rebates, and returns. The Company’s products do not include an unmitigated right of return unless the product is non-conforming or defective. If the goods are non-conforming or defective, the defective goods are replaced or reworked or, in certain instances, a credit is issued for the portion of the order that was non-conforming or defective. A provision for sales returns and allowances is recorded based on experience with goods being returned. Most returned goods are re-worked and subsequently re-shipped to the customer and recognized as revenue. Historically, returns have not been material to the Company. Additionally, the Company has a rebate program with certain customers allowing for a rebate based on achieving a certain level of shipped sales during the calendar year. This rebate is estimated and updated throughout the year and recorded against revenues and the related accounts receivable. |
Segment Information | The Company is managed and operated as one business as the entire business is managed by a single management team that reports to the Chief Executive Officer and President. The Company's chief operating decision-maker is its Chief Executive Officer and President, who makes resource allocation decisions and assesses performance based on financial information presented on an aggregate basis. The Company does not operate separate lines of business with respect to any of its products and does not prepare discrete financial information to allocate resources to separate products or by location. Accordingly, the Company views its business as one reportable operating segment. |
Net Income Per Share | The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income per common share is computed by dividing net income attributable to controlling interest by the weighted average number of common shares outstanding for the period. The weighted-average number of common shares outstanding during the period includes Class A common stock but is exclusive of Class B common stock as these shares have no economic or participating rights. Effective April 1, 2022, the Company changed its methodology to apply the accounting policy to calculate the basic and diluted earnings per share as well as it determined that it would push down the changes in fair value of the mark-to-market liabilities related to the Company's warrants and earnout consideration liability to its operating subsidiary, Holdings, resulting in a change to the net income attributable to the controlling interest and non-controlling interest. Diluted net income per share is computed by dividing the net income allocated to potential dilutive instruments attributable to controlling interest by the basic weighted-average number of common shares outstanding during the period, adjusted for the potentially dilutive shares of common stock equivalents resulting from the assumed exercise of the warrants, payment of the earnouts, exercise of the equity awards, exchange of the Class B units and Exchangeable Notes ("securities") only if the effect is not anti-dilutive. |
Recent Accounting Pronouncements - Adopted and Not Yet Adopted | Recent Accounting Pronouncements – Adopted In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequently amended by ASU 2019-04 and ASU 2019-05 which introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. This new standard amends the current guidance on the impairment of financial instruments. The ASU adds to U.S. GAAP an impairment model known as current expected credit loss (CECL) model that is based on expected losses rather than incurred losses. Under the new guidance, an entity will recognize as an allowance its estimate of expected credit losses. Expected credit losses are determined on the basis of how long a receivable has been outstanding (e.g., under 30 days, 31–60 days) as each customer has its own specific term. This method is used to estimate the allowance for bad debts on trade receivables. A trade receivable is considered past due when its past due one day over its specific payment term. The Company determines the write-offs of the allowance on a customer by customer approach. The Company has not experienced any significant write-offs in the past. The ASU is effective for the Company for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years with early adoption permitted. The Company adopted this guidance effective January 1, 2022. The adoption of this guidance did not have a material impact on the consolidated financial statements. Recent Accounting Pronouncements – Not Yet Adopted In March 2022, the FASB issued ASU 2022-02, which eliminates the accounting guidance on troubled debt restructurings (TDRs) for creditors in ASC 310-402 and amends the guidance on “vintage disclosures” to require disclosure of current-period gross write-offs by year of origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced disclosures for creditors with respect to loan refinancing and restructurings for borrowers experiencing financial difficulty. The amendments in ASU 2020-04 are effective for years beginning after December 15, 2022 for entities that have adopted CECL. The Company is evaluating the impact of this ASU on the Company's financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform ("ASU 2020-04"). ASU 2020-04 provides optional guidance for a limited period of time to ease potential accounting impact associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate ("LIBOR"). The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued. The amendments in ASU 2020-04 can be adopted as of March 12, 2020 and are effective through December 31, 2022. However, it cannot be applied to contract modifications that occur after December 31, 2022. LIBOR was expected to be phased out at the end 2021. We do not currently have any contracts that have been changed to a new reference rate, but we will continue to evaluate our contracts and the effects of this standard on our consolidated financial statements prior to adoption. |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Inventory Disclosure [Abstract] | |
Major classes of inventories | The major classes of inventories were as follows: September 30, 2022 December 31, 2021 Raw materials $ 39,994 $ 27,474 Work in process 2,217 582 Finished goods 448 363 Inventory reserve (3,531) (2,613) $ 39,128 $ 25,806 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | Property and equipment consisted of the following: Useful Life September 30, 2022 December 31, 2021 Machinery and equipment 5 - 10 years $ 63,458 $ 59,437 Furniture and fixtures 3 - 5 years 987 955 Computer equipment 3 - 5 years 927 925 Leasehold improvements Shorter of lease term or estimated useful life 11,788 11,358 Vehicles 5 years 264 264 Software 1 - 3 years 2,889 2,889 Construction in progress 3,721 985 Total 84,034 76,813 Less: Accumulated depreciation and amortization (61,212) (54,636) Property and equipment, net $ 22,822 $ 22,177 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Balances payable under all borrowing facilities | The balances payable under all borrowing facilities are as follows: September 30, December 31, Total debt $ 363,122 $ 380,000 Less: current portion of term loan (scheduled payments) (9,685) (12,500) Less: deferred financing costs, net (5,673) (7,471) Total long-term debt $ 347,764 $ 360,029 Derivative liability - redemption with make-whole provision $ 367 $ 552 |
Maturity of borrowings | The maturity of all the borrowings facilities is as follows: Remainder of 2022 $ — 2023 14,372 2024 18,750 2025 200,000 2026 130,000 Total debt $ 363,122 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Leases [Abstract] | |
ROU assets and lease liabilities | ROU assets and lease liabilities related to the operating leases are as follows: Balance Sheet Classification September 30, 2022 December 31, 2021 Right-of-use assets Right of use assets $ 9,268 $ 5,246 Current lease liabilities Current portion of lease liabilities 1,815 1,119 Non-current lease liabilities Non-current portion of lease liabilities 8,133 4,709 |
Components of lease costs, and supplemental cash flow information and non-cash activity | The components of lease costs were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Operating lease cost $ 544 $ 341 $ 1,309 $ 979 Variable lease cost 176 123 473 322 Total lease cost $ 720 $ 464 $ 1,782 $ 1,301 Supplemental cash flow information and non-cash activity related to our operating leases are as follows: Nine Months Ended September 30, 2022 2021 Operating cash flow information: Cash paid for amounts included in the measurement of lease liabilities $ 1,204 $ 954 Non-cash activity: Right-of-use assets obtained in exchange for lease obligations $ 5,104 $ — |
Future minimum commitments under operating leases | Future minimum commitments under all non-cancelable operating leases are as follows: 2022 (excluding the nine months ended September 30, 2022) $ 538 2023 2,149 2024 2,146 2025 2,176 2026 1,882 Later years 2,117 Total lease payments 11,008 Less: Imputed interest (1,060) Present value of lease liabilities $ 9,948 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Share-based compensation expense | The following table summarizes share-based compensation expense included in general and administrative expenses within the consolidated statements of operations: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Stock option expense $ 273 $ 311 $ 956 $ 960 Restricted stock unit expense 3,442 — 6,741 — Incentive units — 29 39 164 Total stock-based compensation expense $ 3,715 $ 340 $ 7,736 $ 1,124 |
Options activity | Stock Option Activity Number of Shares Weighted Average Exercise Price Per Shares Weighted Average Aggregate Outstanding at January 1, 2022 5,409,771 $ 1.27 4.1 $ 37,542 Granted — — Exercised (237,148) $ 0.01 2.6 $ 1,186 Forfeited — — Outstanding at September 30, 2022 5,172,623 $ 1.33 3.4 $ 19,423 Vested and expected to vest at September 30, 2022 5,172,623 $ 1.33 3.4 $ 19,423 Exercisable at September 30, 2022 4,973,073 $ 1.15 3.3 $ 19,384 |
Restricted stock, performance stock unit and earnouts activity | Restricted Stock and Performance Stock Unit Activity Number of Shares Outstanding at January 1, 2022 — Granted 6,069,578 Vested (48,057) Forfeited (47,650) Nonvested at September 30, 2022 5,973,871 Earnouts Number of Shares Outstanding at January 1, 2022 657,160 Granted — Vested — Forfeited — Nonvested at September 30, 2022 657,160 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Disclosures [Abstract] | |
Financial assets measured at fair value on a recurring basis | The Company’s financial assets and liabilities measured at fair value on a recurring basis, consisted of the following types of instruments as of the following dates: Level 1 Level 2 Level 3 Total September 30, 2022 Assets Carried at Fair Value: Derivative asset - interest rate swap $ — $ — $ 9,392 $ 9,392 Liabilities Carried at Fair Value: Public warrants 9,262 — — 9,262 Private warrants — — 9,646 9,646 Earnout consideration — — 16,751 16,751 Derivative liability - redemption with make-whole provision — — 367 367 December 31, 2021 Liabilities Carried at Fair Value: Public warrants $ 17,714 $ — $ — 17,714 Private warrants — — 17,557 17,557 Earnout consideration — — 38,427 38,427 Derivative liability - redemption with make-whole provision — — 552 552 |
Financial liabilities measured at fair value on a recurring basis | The Company’s financial assets and liabilities measured at fair value on a recurring basis, consisted of the following types of instruments as of the following dates: Level 1 Level 2 Level 3 Total September 30, 2022 Assets Carried at Fair Value: Derivative asset - interest rate swap $ — $ — $ 9,392 $ 9,392 Liabilities Carried at Fair Value: Public warrants 9,262 — — 9,262 Private warrants — — 9,646 9,646 Earnout consideration — — 16,751 16,751 Derivative liability - redemption with make-whole provision — — 367 367 December 31, 2021 Liabilities Carried at Fair Value: Public warrants $ 17,714 $ — $ — 17,714 Private warrants — — 17,557 17,557 Earnout consideration — — 38,427 38,427 Derivative liability - redemption with make-whole provision — — 552 552 |
Reconciliation of warrant liabilities measured at fair value | The following table provides a reconciliation of the ending balances for the warrant liabilities remeasured at fair value: Warrant Liabilities Estimated fair value at December 31, 2021 $ 35,271 Change in estimated fair value (16,363) Estimated fair value at September 30, 2022 $ 18,908 |
Assumptions used to determine fair value | The following assumptions were used to determine the fair value of the private warrants as of September 30, 2022: September 30, 2022 Exercise Price $ 11.50 Risk-free interest rate 4.13 % Expected volatility 46 % Expected dividends 0 % Expected term (years) 4.24 Common Stock market value $ 5.01 The following assumptions were used to determine the fair value of the Earnout considerations as of September 30, 2022: September 30, 2022 Valuation date share price $ 5.01 Risk-free interest rate 4.23% Expected volatility 75% - 77.5% Expected dividends 0 % Expected term (years) 2.2 - 3.2 years |
Earnout consideration | The following table provides a reconciliation of the ending balances for the earnout consideration liabilities remeasured at fair value: Earnout Consideration Liability Estimated fair value at December 31, 2021 $ 38,427 Change in estimated fair value (21,676) Estimated fair value at September 30, 2022 $ 16,751 |
GEOGRAPHIC INFORMATION AND CO_2
GEOGRAPHIC INFORMATION AND CONCENTRATIONS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Risks and Uncertainties [Abstract] | |
Geographical revenue information | Geographical sales information based on the location of the customer was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net sales by region: Domestic 83,842 51,728 216,335 154,454 International 19,463 14,455 68,352 38,194 Total $ 103,305 $ 66,183 $ 284,687 $ 192,648 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Computation of basic and diluted earnings per share | The following table sets forth the computation of net income used to compute basic and diluted net earnings per share of Class A common stock for the three months and nine months ended September 30, 2022. No earnings per share are presented for the periods ended September 30, 2021 as only the Class B common shares would have been outstanding in historical periods pursuant to the reverse recapitalization and the Class B common shares do not participate in the Company's income or loss and are therefore not participating securities. Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 Basic and diluted: Net income $ 21,894 $ 109,459 Less: Net income attributable to non-controlling interest (19,077) (93,973) Net income attributable to Class A Common Stockholders $ 2,817 $ 15,486 Plus: adjustment due to net effect of stock options and exchangeable notes to net income 733 15,446 Net income attributable to Class A Common Stockholders after adjustment $ 3,550 $ 30,932 Weighted average common shares outstanding used in computing net income per share - 15,433,438 15,141,169 Plus: net effect of dilutive stock options and exchangeable notes 4,228,622 17,673,514 Weighted average common shares outstanding used in computing net income per share—diluted 19,662,060 32,814,683 Net income per share—basic $ 0.18 $ 1.02 Net income per share—diluted $ 0.18 $ 0.94 |
Antidilutive shares excluded from calculation | The following amounts were not included in the calculation of net earnings per diluted share because their effects were anti-dilutive: Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022 Potentially dilutive securities: Warrants 22,415,400 22,415,400 Class B common shares 60,586,800 60,586,800 Exchangeable notes 12,999,978 — Earnout consideration shares 7,500,000 7,500,000 Stock options and restricted common shares 3,753,590 3,453,590 |
Impact of change in accounting policy | Below is a summary of the impact of the change in accounting policy for the periods indicated: Three-month period ended September 30, 2022 Three-month period ended September 30, 2022 Income Statement Items: Under No-allocation method Adjustment As reported Net income per share attributable to Class A common stockholders - basic $ 0.23 $ (0.05) $ 0.18 Net income per share attributable to Class A common stockholders - diluted $ 0.12 $ 0.06 $ 0.18 Net income attributable to CompoSecure, Inc. 3,577 (760) 2,817 Net income attributable to redeemable non-controlling interests $ 18,314 $ 763 $ 19,077 Nine-month period ended September 30, 2022 Nine-month period ended September 30, 2022 Income Statement Items: Under No-allocation method Adjustment As reported Net income per share attributable to Class A common stockholders - basic $ 3.17 $ (2.15) $ 1.02 Net income per share attributable to Class A common stockholders - diluted $ 1.21 $ (0.27) $ 0.94 Net income attributable to CompoSecure, Inc. 48,072 (32,586) 15,486 Net income attributable to redeemable non-controlling interests $ 63,785 $ 30,188 $ 93,973 Six-month period ended June 30, 2022 Six-month period ended June 30, 2022 Income Statement Items: Under No-allocation method Adjustment As reported Provision for income taxes $ 948 $ 2,397 $ 3,345 Net income 89,963 (2,397) 87,566 Net income attributable to CompoSecure, Inc. 44,050 (32,112) 11,938 Net income attributable to redeemable non-controlling interests 45,913 29,715 75,628 Net income per share attributable to Class A common stockholders - basic $ 2.94 $ (2.14) $ 0.80 Net income per share attributable to Class A common stockholders - diluted $ 0.97 $ (0.22) $ 0.75 Three-month period ended June 30, 2022 Three-month period ended June 30, 2022 Income Statement Items: Under No-allocation method Adjustment As reported Income tax expense $ 405 $ 2,397 $ 2,802 Net income 63,055 (2,397) 60,658 Net income attributable to CompoSecure, Inc. 38,437 (29,963) 8,474 Net income attributable to redeemable non-controlling interests 24,619 27,565 52,184 Net income per share attributable to Class A common stockholders - basic $ 2.55 $ (1.99) $ 0.56 Net income per share attributable to Class A common stockholders - diluted $ 0.68 $ (0.16) $ 0.52 June 30, June 30, Balance Sheet Items: Under No-allocation method Adjustment As reported Deferred tax asset $ 25,098 $ (321) $ 24,777 Retained earnings (962,502) (2,397) (964,899) Deferred tax asset was adjusted cumulatively in the period ended June 30, 2022 due to the change in accounting policy. The Company determined that the effect on deferred tax assets and provision for income taxes for the periods ended March 31, 2022 and December 31, 2021 were immaterial and therefore were not adjusted retrospectively. Three-month period ended March 31, 2022 Three-month period ended March 31, 2022 Income Statement Items: As reported Adjustment Under re-allocation method Net income per share attributable to Class A common stockholders - basic $ 0.32 $ (0.09) $ 0.23 Net income per share attributable to Class A common stockholders - diluted $ 0.16 $ 0.07 $ 0.23 Net income attributable to CompoSecure, Inc. 4,741 (1,347) 3,394 Net income attributable to redeemable non-controlling interests 22,167 1,347 23,514 Year ended December 31, 2021 Year ended December 31, 2021 Income Statement Items: As reported Adjustment Under re-allocation method Net income per share attributable to Class A common stockholders - basic (1) $ 0.91 $ (0.70) $ 0.21 Net income per share attributable to Class A common stockholders - diluted (1) $ 0.14 $ (0.02) $ 0.12 Net income attributable to CompoSecure, Inc. (2) 13,512 (10,358) 3,154 Net income attributable to redeemable non-controlling interests 69,902 10,358 80,260 ( 1) The amounts for the year ended December 31, 2021 represent basic and diluted net income per share of Class A common stock for the prorated period from December 27, 2021 through December 31, 2021, the period following the Business Combination described in Note 1. (2) Net income attributable to CompoSecure, Inc. for the year ended December 31, 2021 was equal to net income for the period subsequent to the Business Combination for the prorated period from December 27, 2021 through December 31, 2021. Net income attributable to non-controlling for the year ended December 31, 2021 is equal to net income for the period from January 1, 2021 through December 31, 2021. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Basis of Presentation (Details) | Dec. 27, 2021 $ / shares |
Accounting Policies [Abstract] | |
Common stock, par value (usd per share) | $ 0.0001 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Accounting Policies [Abstract] | ||
Contract assets | $ 0 | $ 0 |
Contract liabilities | $ 0 | $ 0 |
Revenue, payment terms, minimum | 15 days | |
Revenue, payment terms, maximum | 60 days | |
Revenue, payment due | 90 days |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segments (Details) | 9 Months Ended |
Sep. 30, 2022 segment | |
Accounting Policies [Abstract] | |
Number of operating segments | 1 |
Number of reportable segments | 1 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 39,994 | $ 27,474 |
Work in process | 2,217 | 582 |
Finished goods | 448 | 363 |
Inventory reserve | (3,531) | (2,613) |
Inventories | $ 39,128 | $ 25,806 |
PROPERTY AND EQUIPMENT - Compon
PROPERTY AND EQUIPMENT - Components (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 84,034 | $ 76,813 |
Less: Accumulated depreciation and amortization | (61,212) | (54,636) |
Property and equipment, net | 22,822 | 22,177 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 63,458 | 59,437 |
Machinery and equipment | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Useful life | 5 years | |
Machinery and equipment | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Useful life | 10 years | |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 987 | 955 |
Furniture and fixtures | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Useful life | 3 years | |
Furniture and fixtures | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Useful life | 5 years | |
Computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 927 | 925 |
Computer equipment | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Useful life | 3 years | |
Computer equipment | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Useful life | 5 years | |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 11,788 | 11,358 |
Vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Useful life | 5 years | |
Property and equipment, gross | $ 264 | 264 |
Software | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 2,889 | 2,889 |
Software | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Useful life | 1 year | |
Software | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Useful life | 3 years | |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 3,721 | $ 985 |
PROPERTY AND EQUIPMENT - Narrat
PROPERTY AND EQUIPMENT - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation and amortization | $ 2,010 | $ 2,640 | $ 6,577 | $ 7,813 |
DEBT - Narrative (Details)
DEBT - Narrative (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||||||
Apr. 19, 2021 USD ($) day $ / shares | Jan. 01, 2021 | Jan. 31, 2022 USD ($) | Sep. 30, 2022 USD ($) $ / shares | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) $ / shares | Sep. 30, 2021 USD ($) | Dec. 31, 2021 USD ($) $ / shares | Dec. 27, 2021 $ / shares | Nov. 30, 2020 USD ($) | Nov. 05, 2020 USD ($) | Jul. 31, 2019 USD ($) | Jul. 26, 2016 USD ($) | |
Debt Instrument [Line Items] | |||||||||||||
Common stock, par value (usd per share) | $ / shares | $ 0.0001 | ||||||||||||
Derivative liability - redemption with make-whole provision | $ 367 | $ 367 | $ 552 | ||||||||||
Gain (loss) on derivative | 246 | $ 0 | 185 | $ 0 | |||||||||
Payment of term loan | 16,878 | 18,000 | |||||||||||
Amount outstanding | 347,764 | 347,764 | 360,029 | ||||||||||
Derivative gain at settlement | $ 400 | ||||||||||||
Derivative notional amount | 125,000 | 125,000 | |||||||||||
Derivative asset | $ 9,392 | 9,392 | $ 0 | ||||||||||
2016 Credit Facility | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Debt issuance costs | 1,800 | $ 3,200 | |||||||||||
Maximum borrowing capacity | $ 310,000 | 300,000 | $ 120,000 | ||||||||||
Payment of term loan | $ 13,753 | ||||||||||||
2016 Credit Facility | Prime rate | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Basis spread on variable interest rate | 2% | ||||||||||||
2016 Credit Facility | LIBOR | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Basis spread on variable interest rate | 3% | ||||||||||||
Class A Common Stock | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Common stock, par value (usd per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||||
Exchangeable notes | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Face amount | $ 130,000 | ||||||||||||
Conversion price (usd per share) | $ / shares | $ 11.50 | ||||||||||||
Interest rate | 7% | ||||||||||||
Term | 5 years | ||||||||||||
Redemption, period from Closing Date | 3 years | ||||||||||||
Redemption, stock price percentage threshold | 130% | ||||||||||||
Redemption, threshold trading days | day | 20 | ||||||||||||
Redemption, threshold consecutive trading days | 30 days | ||||||||||||
Redemption, notice period | 30 days | ||||||||||||
Redemption price percentage | 100% | ||||||||||||
Redemption, VWAP, threshold trading days | 5 days | ||||||||||||
Maximum conversion rate | 0.0999999 | ||||||||||||
Anti-dilution, period after common stock issuance | 45 days | ||||||||||||
Anti-dilution, threshold consecutive trading days | 10 days | ||||||||||||
Fundamental change, repurchase price percentage | 100% | ||||||||||||
Registration default, interest rate for first 90 days | 0.25% | ||||||||||||
Registration default, interest rate after 90 days | 0.50% | ||||||||||||
Event of default, threshold percentage of note holders that may declare notes payable immediately | 25% | ||||||||||||
Event of default, percentage of notes payable immediately | 100% | ||||||||||||
Event of default, interest rate for first 90 days | 0.25% | ||||||||||||
Event of default, interest rate for days 91-180 | 0.50% | ||||||||||||
Interest expense | $ 2,407 | $ 7,127 | |||||||||||
Effective interest rate | 7.40% | 7.40% | |||||||||||
Debt issuance costs | $ 2,600 | ||||||||||||
Line of credit and term loan | 2016 Credit Facility | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Interest expense | $ 3,439 | $ 2,902 | $ 9,609 | $ 8,830 | |||||||||
Effective interest rate | 5.15% | 4.36% | 5.15% | 4.36% | |||||||||
Line of Credit | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Basis spread on variable interest rate | 3% | ||||||||||||
Line of Credit | 2016 Credit Facility | Revolver | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Maximum borrowing capacity | $ 60,000 | ||||||||||||
Annual commitment fee percentage | 0.40% | ||||||||||||
Amount outstanding | $ 10,000 | $ 10,000 | $ 15,000 | ||||||||||
Availability for borrowing | $ 50,000 | $ 50,000 | |||||||||||
Term loan | 2016 Credit Facility | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Face amount | $ 250,000 | $ 240,000 | $ 140,000 |
DEBT - Balances Payable (Detail
DEBT - Balances Payable (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Debt Disclosure [Abstract] | ||
Total debt | $ 363,122 | $ 380,000 |
Less: current portion of term loan (scheduled payments) | (9,685) | (12,500) |
Less: deferred financing costs, net | (5,673) | (7,471) |
Total long-term debt | 347,764 | 360,029 |
Derivative liability - redemption with make-whole provision | $ 367 | $ 552 |
DEBT - Maturity (Details)
DEBT - Maturity (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Debt Disclosure [Abstract] | ||
Remainder of 2022 | $ 0 | |
2023 | 14,372 | |
2024 | 18,750 | |
2025 | 200,000 | |
2026 | 130,000 | |
Total debt | $ 363,122 | $ 380,000 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) $ in Thousands | 9 Months Ended | ||||||||
Jul. 01, 2022 USD ($) renewal_option | May 01, 2022 USD ($) renewal_option | Jan. 01, 2021 USD ($) | Aug. 01, 2014 renewal_option | Sep. 30, 2022 USD ($) | Dec. 31, 2021 USD ($) | Dec. 31, 2020 | Jun. 16, 2016 | Apr. 01, 2012 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||||
Right-of-use assets | $ 9,268 | $ 5,246 | |||||||
Lease liabilities | $ 9,948 | ||||||||
Renewal term | 5 years | 5 years | 3 years | ||||||
Lease term | 3 years | 7 years | |||||||
Base rent | $ 147 | $ 686 | |||||||
Lease escalation factor | 3% | 3.80% | |||||||
Number of renewal options | renewal_option | 1 | 2 | |||||||
Weighted-average remaining lease term | 5 years 2 months 12 days | ||||||||
Weighted-average discount rate | 3.83% | ||||||||
Office space and manufacturing space location 1 | |||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||||
Renewal term | 5 years | ||||||||
Lease term | 10 years | ||||||||
Base rent | $ 338 | ||||||||
Lease escalation factor | 3% | ||||||||
Office space and manufacturing space location 2 | |||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||||
Renewal term | 2 years | 3 years | |||||||
Lease term | 4 years | ||||||||
Base rent | $ 106 | ||||||||
Lease escalation factor | 3% | ||||||||
Number of renewal options | renewal_option | 2 | ||||||||
Office space and manufacturing space location 3 | |||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||||
Lease term | 10 years | ||||||||
Base rent | $ 850 | ||||||||
Lease escalation factor | 3% | ||||||||
Minimum | |||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||||
Remaining lease terms | 1 year | ||||||||
Renewal term | 1 year | ||||||||
Maximum | |||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||||
Remaining lease terms | 7 years | ||||||||
Renewal term | 5 years | ||||||||
Line of Credit | |||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||||
Basis spread on variable interest rate | 3% | ||||||||
Interest rate | 3.40% | ||||||||
Accounting Standards Update 2016-02 | |||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||||
Right-of-use assets | $ 6,298 | ||||||||
Lease liabilities | $ 6,875 |
LEASES - ROU Assets and Liabili
LEASES - ROU Assets and Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Leases [Abstract] | ||
Right-of-use assets | $ 9,268 | $ 5,246 |
Current lease liabilities | 1,815 | 1,119 |
Non-current lease liabilities | $ 8,133 | $ 4,709 |
LEASES - Components of Lease Co
LEASES - Components of Lease Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Leases [Abstract] | ||||
Operating lease cost | $ 544 | $ 341 | $ 1,309 | $ 979 |
Variable lease cost | 176 | 123 | 473 | 322 |
Total lease cost | $ 720 | $ 464 | $ 1,782 | $ 1,301 |
LEASES - Future Minimum Commitm
LEASES - Future Minimum Commitments (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Leases [Abstract] | |
2022 (excluding the nine months ended September 30, 2022) | $ 538 |
2023 | 2,149 |
2024 | 2,146 |
2025 | 2,176 |
2026 | 1,882 |
Later years | 2,117 |
Total lease payments | 11,008 |
Less: Imputed interest | (1,060) |
Present value of lease liabilities | $ 9,948 |
LEASES - Supplemental Cash Flow
LEASES - Supplemental Cash Flow Information and Non-Cash Activity (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Operating cash flow information: | ||
Cash paid for amounts included in the measurement of lease liabilities | $ 1,204 | $ 954 |
Non-cash activity: | ||
Right-of-use assets obtained in exchange for lease obligations | $ 5,104 | $ 0 |
EQUITY STRUCTURE (Details)
EQUITY STRUCTURE (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | ||
Sep. 30, 2022 | Dec. 31, 2021 | Dec. 27, 2021 | |
Class of Stock [Line Items] | |||
Preferred stock, authorized (shares) | 10,000,000 | 10,000,000 | |
Preferred stock, issued (shares) | 0 | 0 | |
Preferred stock, outstanding (shares) | 0 | 0 | |
Share price (usd per share) | $ 5.01 | ||
Private warrants | |||
Class of Stock [Line Items] | |||
Warrants outstanding (shares) | 10,837,400 | ||
Warrants, exercise price (usd per share) | $ 11.50 | ||
Warrants, commencement, period from Business Combination | 30 days | ||
Public warrants | |||
Class of Stock [Line Items] | |||
Warrants outstanding (shares) | 11,578,000 | ||
Warrants, exercise price (usd per share) | $ 11.50 | ||
Warrants, commencement, period from Business Combination | 30 days | ||
Class A Common Stock | |||
Class of Stock [Line Items] | |||
Common stock, authorized (shares) | 250,000,000 | 250,000,000 | |
Common stock, issued (shares) | 15,757,535 | 14,929,982 | |
Common stock, outstanding (shares) | 15,757,535 | 14,929,982 | |
Share price (usd per share) | $ 9.95 | ||
Class B Common Stock | |||
Class of Stock [Line Items] | |||
Common stock, authorized (shares) | 75,000,000 | 75,000,000 | |
Common stock, issued (shares) | 60,586,800 | 61,136,800 | |
Common stock, outstanding (shares) | 60,586,800 | 61,136,800 | |
Common stock redemption value | $ 602,840 |
STOCK-BASED COMPENSATION - Shar
STOCK-BASED COMPENSATION - Share-Based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 3,715 | $ 340 | $ 7,736 | $ 1,124 |
Options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 273 | 311 | 956 | 960 |
Restricted stock units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 3,442 | 0 | 6,741 | 0 |
Incentive units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 0 | $ 29 | $ 39 | $ 164 |
STOCK-BASED COMPENSATION - Opti
STOCK-BASED COMPENSATION - Options Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Number of Shares | ||
Outstanding (in shares) | 5,409,771 | |
Granted (in shares) | 0 | |
Exercised (in shares) | (237,148) | |
Forfeited (in shares) | 0 | |
Outstanding (in shares) | 5,172,623 | 5,409,771 |
Vested and expected to vest (in shares) | 5,172,623 | |
Exercisable (in shares) | 4,973,073 | |
Weighted Average Exercise Price Per Shares | ||
Outstanding (in usd per share) | $ 1,270 | |
Granted (in usd per share) | 0 | |
Exercised (in usd per share) | 10 | |
Forfeited (in usd per share) | 0 | |
Outstanding (in usd per share) | 1,330 | $ 1,270 |
Vested and expected to vest (in usd per share) | 1,330 | |
Exercisable (in usd per share) | $ 1,150 | |
Weighted Average Remaining Contractual Term | ||
Outstanding, weighted average remaining contractual term | 3 years 4 months 24 days | 4 years 1 month 6 days |
Exercised, weighted average remaining contractual term | 2 years 7 months 6 days | |
Vested and expected to vest, weighted average remaining contractual term | 3 years 4 months 24 days | |
Exercisable, weighted average remaining contractual term | 3 years 3 months 18 days | |
Aggregate Intrinsic Value | ||
Outstanding, aggregate intrinsic value | $ 19,423 | $ 37,542 |
Exercised, aggregate intrinsic value | 1,186 | |
Vested and expected to vest, aggregate intrinsic value | 19,423 | |
Exercisable, aggregate intrinsic value | $ 19,384 |
STOCK-BASED COMPENSATION - Rest
STOCK-BASED COMPENSATION - Restricted Stock and Performance Stock Unit, and Earnouts Activity (Details) | 9 Months Ended |
Sep. 30, 2022 shares | |
Restricted stock and performance stock units | |
Number of Shares | |
Nonvested (in shares) | 0 |
Granted (in shares) | 6,069,578 |
Vested (in shares) | (48,057) |
Forfeited (in shares) | (47,650) |
Nonvested (in shares) | 5,973,871 |
Earnout consideration shares | |
Number of Shares | |
Nonvested (in shares) | 657,160 |
Granted (in shares) | 0 |
Vested (in shares) | 0 |
Forfeited (in shares) | 0 |
Nonvested (in shares) | 657,160 |
STOCK-BASED COMPENSATION - Narr
STOCK-BASED COMPENSATION - Narrative (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2022 USD ($) shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized compensation cost | $ | $ 35,256 |
Unrecognized compensation expense, period of recognition | 2 years 9 months 18 days |
Class B Common Stock | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Awards outstanding (shares) | shares | 1,236,027 |
RETIREMENT PLAN - Defined Contr
RETIREMENT PLAN - Defined Contribution Plan (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Defined Contribution Plan Disclosure [Line Items] | ||||
Required period of service to participate in plan | 90 days | |||
Retirement plan expense | $ 319 | $ 252 | $ 1,156 | $ 786 |
Matching scenario one | ||||
Defined Contribution Plan Disclosure [Line Items] | ||||
Employer match | 100% | |||
Employee contributions | 1% | |||
Matching scenario two | ||||
Defined Contribution Plan Disclosure [Line Items] | ||||
Employer match | 50% | |||
Employee contributions | 5% |
RETIREMENT PLAN - Deferred Comp
RETIREMENT PLAN - Deferred Compensation Plan (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2014 | Dec. 31, 2021 | |
Retirement Benefits [Abstract] | |||
Percent of EBITDA contributed | 0.25% | ||
Contributions | $ 0 | $ 150 | |
Liability | $ 242 | $ 242 | |
Vesting period | 7 years | ||
Vesting percentage, year one | 0% | ||
Vesting percentage, year two | 5% | ||
Vesting percentage, year three | 15% | ||
Vesting percentage, year four | 20% | ||
Vesting percentage, year five | 30% | ||
Vesting percentage, year six | 50% | ||
Vesting percentage, year seven | 100% |
FAIR VALUE MEASUREMENTS - Finan
FAIR VALUE MEASUREMENTS - Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 | Nov. 05, 2020 |
Assets Carried at Fair Value: | |||
Derivative asset | $ 9,392 | $ 0 | |
Liabilities Carried at Fair Value: | |||
Warrant liability | 18,908 | $ 35,271 | |
Earnout consideration | 16,751 | 38,427 | |
Derivative liability - redemption with make-whole provision | 367 | 552 | |
Public warrants | |||
Liabilities Carried at Fair Value: | |||
Warrant liability | 9,262 | 17,714 | |
Private warrants | |||
Liabilities Carried at Fair Value: | |||
Warrant liability | 9,646 | 17,557 | |
Level 1 | |||
Assets Carried at Fair Value: | |||
Derivative asset | 0 | ||
Liabilities Carried at Fair Value: | |||
Earnout consideration | 0 | 0 | |
Derivative liability - redemption with make-whole provision | 0 | 0 | |
Level 1 | Public warrants | |||
Liabilities Carried at Fair Value: | |||
Warrant liability | 9,262 | 17,714 | |
Level 1 | Private warrants | |||
Liabilities Carried at Fair Value: | |||
Warrant liability | 0 | 0 | |
Level 2 | |||
Assets Carried at Fair Value: | |||
Derivative asset | 0 | ||
Liabilities Carried at Fair Value: | |||
Earnout consideration | 0 | 0 | |
Derivative liability - redemption with make-whole provision | 0 | 0 | |
Level 2 | Public warrants | |||
Liabilities Carried at Fair Value: | |||
Warrant liability | 0 | 0 | |
Level 2 | Private warrants | |||
Liabilities Carried at Fair Value: | |||
Warrant liability | 0 | 0 | |
Level 3 | |||
Assets Carried at Fair Value: | |||
Derivative asset | 9,392 | ||
Liabilities Carried at Fair Value: | |||
Earnout consideration | 16,751 | 38,427 | |
Derivative liability - redemption with make-whole provision | 367 | 552 | |
Level 3 | Public warrants | |||
Liabilities Carried at Fair Value: | |||
Warrant liability | 0 | 0 | |
Level 3 | Private warrants | |||
Liabilities Carried at Fair Value: | |||
Warrant liability | $ 9,646 | $ 17,557 |
FAIR VALUE MEASUREMENTS - Narra
FAIR VALUE MEASUREMENTS - Narrative (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Nov. 05, 2020 |
Fair Value Disclosures [Abstract] | ||
Derivative notional amount | $ 125,000 | |
Derivative asset | $ 9,392 | $ 0 |
Earnout shares (in shares) | 7,500,000 |
FAIR VALUE MEASUREMENTS - Recon
FAIR VALUE MEASUREMENTS - Reconciliation of Warrant Liability (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Class of Warrant or Right [Roll Forward] | ||||
Estimated fair value at December 31, 2021 | $ 35,271 | |||
Change in estimated fair value | $ 1,678 | $ 0 | (16,363) | $ 0 |
Estimated fair value at September 30, 2022 | $ 18,908 | $ 18,908 |
FAIR VALUE MEASUREMENTS - Fair
FAIR VALUE MEASUREMENTS - Fair Value Assumptions (Details) | Sep. 30, 2022 $ / shares year |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Share price (usd per share) | $ 5.01 |
Exercise Price | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Warrants, measurement input | 11.50 |
Risk-free interest rate | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Warrants, measurement input | 0.0413 |
Risk-free interest rate | Minimum | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Earnouts, measurement input | 0.0423 |
Expected volatility | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Warrants, measurement input | 0.46 |
Expected volatility | Minimum | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Earnouts, measurement input | 0.75 |
Expected volatility | Maximum | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Earnouts, measurement input | 0.775 |
Expected dividends | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Warrants, measurement input | 0 |
Earnouts, measurement input | 0 |
Expected term | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Warrants, measurement input | year | 4.24 |
Expected term | Minimum | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Earnouts, measurement input | 3.2 |
Expected term | Maximum | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Earnouts, measurement input | 2.2 |
FAIR VALUE MEASUREMENTS - Earno
FAIR VALUE MEASUREMENTS - Earnout Consideration (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Derivative Instrument, Contingent Consideration, Liability [Roll Forward] | ||||
Estimated fair value at December 31, 2021 | $ 38,427 | |||
Change in estimated fair value | $ (2,636) | $ 0 | (21,676) | $ 0 |
Estimated fair value at September 30, 2022 | $ 16,751 | $ 16,751 |
GEOGRAPHIC INFORMATION AND CO_3
GEOGRAPHIC INFORMATION AND CONCENTRATIONS - Geographical Revenue Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Disaggregation of Revenue [Line Items] | ||||
Total | $ 103,305 | $ 66,183 | $ 284,687 | $ 192,648 |
Domestic | ||||
Disaggregation of Revenue [Line Items] | ||||
Total | 83,842 | 51,728 | 216,335 | 154,454 |
International | ||||
Disaggregation of Revenue [Line Items] | ||||
Total | $ 19,463 | $ 14,455 | $ 68,352 | $ 38,194 |
GEOGRAPHIC INFORMATION AND CO_4
GEOGRAPHIC INFORMATION AND CONCENTRATIONS - Additional Information (Details) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2022 | Dec. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenue | Customer concentration risk | Three customers | ||||||
Concentration Risk [Line Items] | ||||||
Concentration risk, percentage | 76.40% | 75.60% | 76.80% | |||
Revenue | Customer concentration risk | Two customers | ||||||
Concentration Risk [Line Items] | ||||||
Concentration risk, percentage | 70.40% | |||||
Accounts receivable | Customer concentration risk | Two customers | ||||||
Concentration Risk [Line Items] | ||||||
Concentration risk, percentage | 66% | |||||
Accounts receivable | Customer concentration risk | Four customers | ||||||
Concentration Risk [Line Items] | ||||||
Concentration risk, percentage | 88% | |||||
Purchases | Supplier concentration risk | One vendor | ||||||
Concentration Risk [Line Items] | ||||||
Concentration risk, percentage | 15% | |||||
Purchases | Supplier concentration risk | Three vendors | ||||||
Concentration Risk [Line Items] | ||||||
Concentration risk, percentage | 32% |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Jun. 30, 2022 | Sep. 30, 2021 | Jun. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | ||||||
Income tax expense | $ 393 | $ 2,802 | $ 0 | $ 3,345 | $ 3,738 | $ 0 |
Effective income tax rate | 1.76% | 3.30% |
EARNINGS PER SHARE - Basic and
EARNINGS PER SHARE - Basic and Diluted Calculation (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||||
Sep. 30, 2022 | Jun. 30, 2022 | Sep. 30, 2021 | Jun. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | |||
Basic and diluted: | ||||||||
Net income | $ 21,894 | $ 60,658 | $ 18,694 | $ 87,566 | $ 109,459 | $ 63,396 | ||
Less: Net income attributable to non-controlling interest | (19,077) | (93,973) | ||||||
Net income attributable to Class A Common Stockholders | 2,817 | 15,486 | ||||||
Plus: adjustment due to net effect of stock options and exchangeable notes to net income | 733 | 15,446 | ||||||
Net income attributable to Class A Common Stockholders after adjustment | $ 3,550 | $ 30,932 | ||||||
Weighted average common shares outstanding used in computing net income per share - basic (shares) | 15,433,438 | 15,141,169 | ||||||
Plus: net effect of dilutive stock options and exchangeable notes (in shares) | 4,228,622 | 17,673,514 | ||||||
Weighted average shares used in computing net income per share - diluted (shares) | 19,662,060 | 32,814,683 | ||||||
Net income per share - basic (in usd per share) | $ 0.18 | $ 0.56 | $ 0.80 | $ 1.02 | ||||
Net income per share - diluted (in usd per share) | $ 0.18 | [1] | $ 0.52 | $ 0.75 | $ 0.94 | [1] | ||
[1]Net income attributable to CompoSecure, Inc.is adjusted for net effects of stock options for the three months ended September 30, 2022, and for net effects of stock options and Exchangeable Notes for the nine months ended September 30, 2022 to calculate diluted net income attributable to CompoSecure, Inc. See note 13. |
EARNINGS PER SHARE - Antidiluti
EARNINGS PER SHARE - Antidilutive Shares (Details) - shares | 3 Months Ended | 9 Months Ended |
Sep. 30, 2022 | Sep. 30, 2022 | |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive shares (shares) | 22,415,400,000 | 22,415,400,000 |
Class B common shares | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive shares (shares) | 60,586,800,000 | 60,586,800,000 |
Exchangeable notes | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive shares (shares) | 12,999,978,000 | 0 |
Earnout consideration shares | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive shares (shares) | 7,500,000,000 | 7,500,000,000 |
Stock options and restricted common shares | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive shares (shares) | 3,753,590,000 | 3,453,590,000 |
EARNINGS PER SHARE - Impact of
EARNINGS PER SHARE - Impact of Change in Accounting Policy (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Jun. 30, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||||
Provision for income taxes | $ 393 | $ 2,802 | $ 0 | $ 3,345 | $ 3,738 | $ 0 | ||||||
Net income | 21,894 | 60,658 | 18,694 | 87,566 | 109,459 | 63,396 | ||||||
Net income attributable to CompoSecure, Inc. | $ 2,817 | $ 8,474 | 18,694 | $ 21,480 | $ 23,222 | $ 11,938 | $ 15,486 | 63,396 | ||||
Net income per share attributable to Class A common stockholders - basic (usd per share) | $ 0.18 | $ 0.56 | $ 0.80 | $ 1.02 | ||||||||
Net income per share attributable to Class A common stockholders - diluted (usd per share) | $ 0.18 | [1] | $ 0.52 | $ 0.75 | $ 0.94 | [1] | ||||||
Net income attributable to redeemable non-controlling interests | $ 19,077 | $ 52,184 | $ 0 | $ 75,628 | $ 93,973 | $ 0 | ||||||
Deferred tax asset | 25,103 | 24,777 | 24,777 | 25,103 | $ 25,650 | |||||||
Retained earnings | (957,733) | (964,899) | (964,899) | (957,733) | (1,028,229) | |||||||
As reported | ||||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||||
Net income attributable to CompoSecure, Inc. | $ 4,741 | $ 13,512 | ||||||||||
Net income per share attributable to Class A common stockholders - basic (usd per share) | $ 0.32 | $ 0.91 | ||||||||||
Net income per share attributable to Class A common stockholders - diluted (usd per share) | $ 0.16 | $ 0.14 | ||||||||||
Net income attributable to redeemable non-controlling interests | $ 22,167 | $ 69,902 | ||||||||||
Pro Forma | ||||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||||
Net income attributable to CompoSecure, Inc. | $ 3,394 | $ 3,154 | ||||||||||
Net income per share attributable to Class A common stockholders - basic (usd per share) | $ 0.23 | $ 0.21 | ||||||||||
Net income per share attributable to Class A common stockholders - diluted (usd per share) | $ 0.23 | $ 0.12 | ||||||||||
Net income attributable to redeemable non-controlling interests | $ 23,514 | $ 80,260 | ||||||||||
Pro Forma | Adjustment | ||||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||||
Net income attributable to CompoSecure, Inc. | $ (1,347) | $ (10,358) | ||||||||||
Net income per share attributable to Class A common stockholders - basic (usd per share) | $ (0.09) | $ (0.70) | ||||||||||
Net income per share attributable to Class A common stockholders - diluted (usd per share) | $ 0.07 | $ (0.02) | ||||||||||
Net income attributable to redeemable non-controlling interests | $ 1,347 | $ 10,358 | ||||||||||
Under No-allocation method | ||||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||||
Provision for income taxes | 405 | 948 | ||||||||||
Net income | 63,055 | 89,963 | ||||||||||
Net income attributable to CompoSecure, Inc. | $ 3,577 | $ 38,437 | $ 44,050 | $ 48,072 | ||||||||
Net income per share attributable to Class A common stockholders - basic (usd per share) | $ 0.23 | $ 2.55 | $ 2.94 | $ 3.17 | ||||||||
Net income per share attributable to Class A common stockholders - diluted (usd per share) | $ 0.12 | $ 0.68 | $ 0.97 | $ 1.21 | ||||||||
Net income attributable to redeemable non-controlling interests | $ 18,314 | $ 24,619 | $ 45,913 | $ 63,785 | ||||||||
Deferred tax asset | 25,098 | 25,098 | ||||||||||
Retained earnings | (962,502) | (962,502) | ||||||||||
Adjustment | ||||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||||||||
Provision for income taxes | 2,397 | 2,397 | ||||||||||
Net income | (2,397) | (2,397) | ||||||||||
Net income attributable to CompoSecure, Inc. | $ (760) | $ (29,963) | $ (32,112) | $ (32,586) | ||||||||
Net income per share attributable to Class A common stockholders - basic (usd per share) | $ (0.05) | $ (1.99) | $ (2.14) | $ (2.15) | ||||||||
Net income per share attributable to Class A common stockholders - diluted (usd per share) | $ 0.06 | $ (0.16) | $ (0.22) | $ (0.27) | ||||||||
Net income attributable to redeemable non-controlling interests | $ 763 | $ 27,565 | $ 29,715 | $ 30,188 | ||||||||
Deferred tax asset | (321) | (321) | ||||||||||
Retained earnings | $ (2,397) | $ (2,397) | ||||||||||
[1]Net income attributable to CompoSecure, Inc.is adjusted for net effects of stock options for the three months ended September 30, 2022, and for net effects of stock options and Exchangeable Notes for the nine months ended September 30, 2022 to calculate diluted net income attributable to CompoSecure, Inc. See note 13. |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 | Feb. 28, 2021 |
Loss Contingencies [Line Items] | |||
Amounts accrued, related parties | $ 14,924 | $ 3,402 | |
Affiliated Entity | |||
Loss Contingencies [Line Items] | |||
Amounts accrued, related parties | $ 10,248 | ||
Minimum | |||
Loss Contingencies [Line Items] | |||
Possible payments required | $ 4,000 | ||
Maximum | |||
Loss Contingencies [Line Items] | |||
Possible payments required | $ 14,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Related Party Transactions [Abstract] | |||||
Expenses, related parties | $ 13,356 | $ 1,982 | $ 19,435 | $ 7,906 | |
Amounts accrued, related parties | $ 14,924 | $ 14,924 | $ 3,402 |