CMPO - Earnings call transcript Q2 2022

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Operator

Good day and thank you for standing by. Welcome to the CompoSecure Second Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. today's being that advised be conference recorded. is Please hand over Piniella, to would of now first conference to like Composecure. Anthony I your the speaker Communication for Corporate Head today go Please Anthony. ahead,

Anthony Piniella

up with for we Fitzsimmons, joining evening, quarter call financial They Chief the Chief is Financial With results. Executive thank will tonight begin Good on call Wilk, us Officer. XXXX the and prepared me Jon Q&A. review then CompoSecure's to Officer; open remarks, second and you CompoSecure's for and will Tim

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

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

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

U.S. filed site risks by Investor including material EBITDA the The For the these useful a reports certain of an financial factors considered should the business website company's of management not to operations. measures on affect from trends to website in non-GAAP results as non-GAAP the different information EPS. today's our and SEC's that SEC, that financial you. could website. measure SEC, company alternative be investors income actual quarter on call said, on measures other derived certain non-GAAP on Relations other discussion includes of available and which A the section press And adjusted or non-GAAP our titled defined financial the available and any to the accordance These GAAP measures our Relations as financial results, information of let may Investor at companies. our available measures regarding with non-GAAP second presentation financial with and call performance XX-K at Thank discussion and non-GAAP and annual other believes discuss Form other provide to GAAP sec.gov. note reconciliation with Please to and impacting turn important and measures and the in earnings our me our are by the similarly to over refer that earnings. used release net be please of composecure.com Jon condition in report on is

Jon Wilk

And evening, thank Thanks, everyone. us you tonight. for Anthony. Good joining

had have profitability. their outstanding by accelerate nearly helped I'm start that and to for And us our appreciate interest thank like I'd to employees XXX announce new sales pleased our we release. As for quarter we first earnings momentum, In and XXXX our We your the second you we quarter, contributions achieved record early quarter. we thanking growth. participating. established that discuss another and

$XX and execution net strong by existing accounts. growth the across quarter, sequentially and XX% million, sales achieved we up XX% driven of For and year-over-year, sales is second new higher which

card in performance premium products. card for new continues travel for our In robust entertainment customer by including and addition, in issuer acquisitions demand solicitations, to a demand growth and bolstered consistent growth card be trends, spending, metal

profile demonstrating card and $XX was quarter, premium improvement. EBITDA our of process impressive excellence and focus XX% business metal adjusted our up margin second constant the the Our on for million year-over-year, operational

assets. actually the take around a the I'd current or climate digital exchanges, withdrawals. win from to market moment details, an their the customer asset news limiting to Storage keys Before private market believe increased freezing, challenges, this the This I will offering what long-term. share we made digital turbulence to This control our And we Arculus wallet benefit for. need address Cold is to in some was consumers like including drives for

by are growing need cold storage. encouraged the authentication, recent to security, partnerships for and address We

For market assets. example, has designed metal their Latin to to InBestGo, Arculus label fintech authentication. combine timing is our a payment uncertainty selected American and technology to giving option CompoSecure for the digital believe ramp plans users keys to this that and the their white digital card time, up. At Wallet, Arculus the for securely anticipated dynamic the custody based a has launch premium we InBestGo card same Storage Cold created Separately,

our impacted. have partners some of and been targets As

We business continue the on to focused remain be thoughtful running and about margins. how we're

simultaneously long-term capture value to While managing our shareholders. for investments

our that meet for market. XXXX. is the that confident anticipated the need current excited to guidance to positioned raising and platform Arculus announce are are We am I well our we to full-year

from now half positioned first have and range million to to the of up million in million EBITDA million we And of $XXX of confidence $XXX to results Our million. $XXX in expect be the expect pipeline sales net to And well. we in up $XXX us to backlog, guidance with $XXX our adjusted to from previous range be million our $XXX sales million. $XXX $XXX extremely million,

highlight a portfolio. in using business card last Turning wins the to from Slide payment and framework both to X, momentum similar metal Arculus and we're quarter

we fintech demonstrate metal feedback program card all quarter, through the clients side, highlight being marketing campaign the a honored limited strong by of existing both has examples the to And with the not were retired with early new supported We is from be American from left a XXX to momentum Express. Delta I'm and the partners. and Delta continue taken customer positive. a go but we'll extremely new This banks aircraft. in Boeing Express On part XXX American reserve been traditional going few. from Delta edition, to to

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card focused entrepreneurs and relationship limits by traditional the metal XX orders. established offers cards, were creators weightless card new community supporting fintech bank, new another and spending side, and a line -- relationship deliver a supporting and a more a fire we to On established we And issued finally, currently to that bank up elements Xx debit air. accepting product they're is with their a Oxygen, on than water,

plan Moving mentioned Arculus and our offer other's users million they InBestGo Wallet, marketing Arculus earlier, products the of separately highlight as is Arculus premium Change invents. digital Storage plus allows label with partnerships, users offer providing on I app described integration well automatically Arculus a Cold own platform, people the And will partner half convert payment with earlier. to product. services, some They that that we pay of self-custody, their their looking users developing Hedge for are bank. option crypto. a Hedge wallet. their on each white to to and in authentication. Storage card Defy Arculus And I Cold progress their a to seeing the are co-marketing to our trend mobile we digital into Cold the as become Storage an for we empowers for plan

an leading on a with This MasterCard issuing mentioned is payment customers from that enabling and we to with received enables last note with a is last to cold for market. very in to this Fiat step authentication. platform we Visa They in. approval our As quarter, selected are excited authentication Arculus the card storage MassPay, have big We're digital mass cards globally capabilities payments or capability side payment roadmap. Arculus payouts for working deliver bring we cryptocurrency. and And in integrated that built

BXB report That's three for our for as a product of an out one leading I'm Vegas, that's our and that wanted NFT Consensus, attendees, of storage a the storage in scheduled Las less also we marketing leading activity. digital need included NFT and marketing leaders a standout the been who our with a a cold offerings. presence digital cold our a were in exposed in Money the presence recent proud accomplishment event innovative view a ABI XX,XXX to We than quite highlight Arculus for a I We'll media over participate most at wallets are marketplace and wallet assets. by in was are to digital our discuss platform Finally, SuperRare, to strong asset have cold for ranked October had both some to in assets. of storage we year. at top June, XXXX BXC conference with influencers In Research.

some on to seeing detail mentioned what provide the Page we're like issuer I industry on Turning of the to some some X, trends trends, I'd in card marketplace.

demand such customers well several in the goods of consumer continues drive and and side they're above as X, to levels. we're entertainment, heard travel showing remains of refer publicly announcements, recent hand largest volume purchase left well customers premium how which spend. as In as pent-up growth top where spending on Slide our the On pandemic seeing areas services, data, available to our based earnings we've

big of period. Moving new from that been right On boost headline Wall pre-pandemic days are how and report half aggressively positive a was showed Slide this acquisitions, chart chart, fears. strong you same to see above acquisition trend. numbers. the you We card updated, to credit you two X, recession can This of last can solicitations spending highlighted side first 'XX continues customer has drive quarter Express to which card signups for Journal see in the the XXXX with card see a ago, spend the you the levels Street publicly in defying American can article banks with to banks

card during gold earnings U.S. levels, their customer million. at X, fact, observers and and Research that published cards acquisitions levels. a strong quality the that Express exceptionally record XX ABI of of that total and payment were of of payment as delta metal worldwide credit XXXX can both you industry platinum, around On call, recent American the Page retention at well. see highlighted metal remain matter believe growth that a estimated shipments As consumer report in

want position growth announced highlights premium you factors, clients security confirming I to And million I which may payment segments. there time XX shipped variety will of highlighted including and believe listeners more Arculus the we into leadership double and share than we on more be talk XX metal ABI deeper our the today. take and strong it XXXX market know and about the diversity is to cards expects than opportunities Each new a that to XXXX expansion As across in by produced by with vertical several towards opportunity know, demand verticals. I card a that platform we Arculus, in platform. premium of the marketplace. we increased authentication some call strength million have the cards the other dive

and One have But continue we there is always that to we want frame them to Crypto. of opportunities you. said are for numerous

Let Slide you what's to me orient X. on

allows user crypto gaming talk accounts, and this and or than to FinTech On sports these financial across about solutions banking market. protect secure verification security. of this and consumer the that we're their the the the including -- variety And for better for is institutions, bigger a or white the to as or entertainment direct customers and we identity telecom, we process, authentication, storage talking the BXB partners, have within security, that login gambling, are are about And response side, authentication, aware it's opportunities three and deliver gaming label Arculus we of. we our we believe the authentication gambling, opportunities to password left support cetera, verticals, problem for et healthcare. would of the investment factor all enhanced whether use helps cold When our for

digital On Arculus ago I our metal ability with cards, on few going cover I'm Cold digital overall with. plus bring each got we'll portfolio cold this intend add storage, to of that to cards have familiar cold side, And with together cold and cards early storage year, pages we have our direct-to-consumer then And you we've next the cards payment excited authentication. authentication. with for authentication, storage plus are in payments we were core offerings payment these the Storage that the are right And a finally, on the to cold as assets. which digital been has asset about or product market, challenges the and to across more exchanges for to driving X. control approval Page me withdrawals. spoke need the This leads their consumers We've received freezing to next moment increased limiting the top later digital year, authentication. keys for I storage advances. current private mentioned payment the our we

adding to to and You actual XX, you today. exchanges fully over this WalletConnect on see and consumers we're currency Slide as This digital their the storage as months, for at platforms the the we meet slide to become Slide support everything headlines of functionality well can view of consumers And few NFT's part to and is issue and may the help Arculus. a awareness which on are as of the their available their offer targets On to timeline end offerings for assets. digital that launched the platforms. to Arculus for see features has includes this Integration ability well we asset positioned Not has protect only proud these as cold elevated assets, June. move But and our X to to protect widespread support. continue top last expanded

integrations, driving made distribution and finally half, challenges summarize SDK current meaningful digital critical. significantly ability the think for joint but their expand our labeled joint storage a to to our continuing solution. a simplifying consumers of with introducing already, BXB wallet of expanding control number we functionality, for to the updates for are through cards their secession integrated including mentioned, For the assets. payment enhance our private cold take coming, direct-to-consumer planning for direct-to-consumer, need channels, I that I've wallet offering to the second of I currencies are I one, increased support, in Page Number points XX, our crypto want market number On option we which that that some keys white digital we've to an believe got

We going Second, continue we're market of shareholders. need even thoughtful can we're address cycle cold managing we to authentication encouraged facing targets This created business can storage bit about later, been uncertainty and and our market by turmoil. impacted. long-term Arculus and recent do while on a timing and have is we margin growing capture the has value security, partners And partnerships, some and not we remain while crypto our focused the discussion away. where ramp-ups the you for by our to for anticipated how margin, for be see running as our simultaneously critical see investments

to to that are the highlights. platform turn the of needs market. our current anticipated some meet give is We to well over going it positioned confident Arculus Tim to I'm and financial

Timothy Fitzsimmons

for open Thanks, financial more before quarter Jon, to the of and I'll back good then turn call it a Jon XXXX evening, we our questions. second provide performance, everyone. detailed overview and

XX% Second the year. same up $XX $XX prior from the to quarter quarter XXXX million, of net million sales in grew

to As strategy, internationally. perform sales Jon deep execution and sales strong well domestically continue mentioned, through relationships, extremely client we and our both about

gross Moving the Gross margin. XXXX in second on margins quarter quarter XX% of XX% second were to of the XXXX. versus in

second We a quarter increases $XX continue We the reported the production of $XX for and offsetting successful of favorable mark-to-market the chain cost value million, associated and of have through efficiencies the costs, impact with net for this to income supply earnout. raw warrants and been increased XXXX includes scale. adjustments fair watch material million

$XX revenue second XXXX quarter to XXXX. quarter, the in in X our out quarter up in million million of and $XX the second to income $XX the of $XX up XX% of adjust XX% approximately Arculus impact investment EBITDA net of Adjusted million, income quarter. last a record net is second operating to was in of million a resulted Similar quarter in minus compared the of second you the be which million net XXXX. $XX operating our If million would the

the to half first results. Turning

the more adjustments XXXX, first versus margins the the a of the strong basis in of production in and from net half the of associated our half Gross were mix. half mark-to-market XXXX first the income of for first XXX Net includes XXXX. a for million of of $XXX at half in of half the XX% to warrants XX% fair This Looking driven efficiencies XXXX, year, the $XXX up million XX% was in change XXXX by performance first product the of grew of value earnout. the than points first impact favorable sales and half $XX for million with $XX million. first

about If $XX half would of $XX compared in at XXXX. have you to out adjust XX% or income it been net up the the income, million, operating million net first of $XX operating an million

produced the the the of XX% an excludes XX of million first warrant of $XX a includes was impact for $XX earnout And EBITDA fair and million, far from XXXX, So million course value of related adjusted to half we've XXXX. first net increase but the revaluation, which investments. from minus the of adjustments increase Arculus half the of

For the of first half XXXX.

also $XX cash of for the up spending. up $XX million the $XX.X And had of versus $X.X cash when first flow out you half million million, from operating back free We operations XXXX. flows capital million

the You appendix can of flow see this cash the in statement presentation.

of expansion cards in team for sales was have Looking XX% distributed international sales XXXX due the second the for increasing markets. demand that strength international again, higher our quarter see sales, international, and $XX split we XX% premium domestic between at million, than of second domestic compared favorable the million, the to to continue $XX our of and execution year and growth the industry XXXX the to can strong you to to net International of continued due payment quarter trends. prior the sales

As Dunn cards we quarter, metal our the growing mentioned survey last in highlighted the the Edgar, payment market. international demand,

advantage I this the opportunities. note want to debt. touch briefly that appendix. sheet balance the positioned well We Please are in growing is to of take on

EBITDA. resulted up $XXX.X million unsecured June $XXX.X we secured million loan, of which made of In an our leverage million the made debt and debt cash of have apologize, debt had thereby a for a cash debt This convertible operating The excess secured $XX.XX our net of in of agreement. net on plans. quarter, we a for secured of of month million. revolver, us working $XX.X debt leverage sheet. accordance And payment facility, our XX, balance flow reducing million, $XXX is $XX total total of calculation is $XXX As drawn cash provide XXXX of the XX with based million, of fund term We $XX.X term debt in a plus flow loan. million our trailing I this will the million with along growth bank capital and of in to $XX.X on $X.XX the

Let's Slide about I turn earnings XX. talk per to share. our wanted to

public our that, this conversion such this our per a As relates run allocate reflects with $X.XX on $X.XX on is of share, as through better net to said first basis. the half basic This diluted to doing EPS a we've an let impact the our the method We alternative reflect instruments for of per under earnings structure. The per Basic it of among diluted and XXXX evolving in method of that the us and are mark-to-market calculating instruments the method Up-C and per for for EPS. adopted share changes allows operating earnings impact GAAP you EPS in have economic share and release, our calculations. gap company shareholders. may better share. believe the economic the value subsidiaries GAAP me is read on company Having actual income is adjustments reason we an fair

due believe You allocated and the in the shares take allocation the through fair and net in the slide MD&A and takes the have complexities XXXX diluted Note our our this a year-to-date and results. Up-C structure that a operating In included income. our of the per background, to basic and compensation that calculations. adjustments, companies $X.XX $X.XX in quarter the On of basic for non-cash been these operating back XX, are can added value between calculations. the the provides non-GAAP that in was appendix read used net non-GAAP fair to share, the the the of that net with the share. the to company's per per impact economics With picture Up-C the providing structure. find pre-allocation value the and the the reconciliation adjustments adjustments of first clearer on slide that footnotes effect EBITDA the the Note of We is fair of share and among non-GAAP the that consistent calculations. through income diluted GAAP the that earnings a you'll impact you of also stock-based be and that we're the the income EPS value we've come adjusted out half

and hand address summary before to over Jon final Now, questions. let it updated take me we guidance for and the our back

Jon Wilk

Tim. Thanks,

mentioned, I As first results well. positioned have us half our

expect from from million confidence million. guidance. be We also million strength previous backlog $XXX of and $XXX We to our in our $XXX $XXX sales range million the now our to up net million up and pipeline sales expect to have be we $XXX of to have EBITDA $XXX adjusted of guidance. of previous range And to now guidance in in our updated million the the

customers. card goals execution, by I the strong see we momentum. the market shareholders. to we short year. sales as pace of deep another we as be guided relationships, offerings to and our second have new strategic strong had long-term We the quarter, from and metal dynamics, Turning term quarter, by payment And I'm pleased Slide with strategic both priorities. value increased for XX. outstanding our creation send for of do market going half can to existing are and making we continue demand our every record We we reshare a pursue I want also progress Driven against continue priorities set our very regardless to into --

well value. on a because are to crypto we And created improving of with even We have growth, focused that thank consumer to appreciate market turbulence growing response the want to authentication the we encouraged And digital that, today. powerful both long-term margins to join current remain taking I'll meet time solutions. by I attention. our questions. much to We the for capture positioned business while cold need and our for believe is it. platform storage maintaining And security, We you Arculus all to very your and the With partially us open it up

Operator

this At conduct you. Thank time, question-and-answer will Instructions]. [Operator we the session.

first Steve Riley ahead, Moss from Go Securities. from B. Steve. Our question comes

Stephen Moss

the starting second just drivers Maybe look It seems high to apply the talk here. of quarter level, maybe about and we kind guide guide revenue and forward? afternoon. just relative as puts end, at about Good flattish the a takes the here to with revenue the

Jon Wilk

Steve. question, the for thanks Sure,

way half half, guidance or in first the at sort we when revenue first we think looking to given meet And XXX beat about exceed way and the it think that to total we've says of and will So second that we second in we half, guidance, at always exceed. you be at half XXX, roughly XXX, Steve, a it. set is to able the essentially guidance, the hope we're

Stephen Moss

it's assuming in helpful. a the Okay. [indiscernible] will impacted adjusted by the in increase first terms in the just an second of I'm fair then assume That's, that assumption? like to And be half, seems fair EBITDA half that is that's the guidance,

Jon Wilk

same for we're back approach A weighted. at Steve, was, bit, last I to the call, time, half we've but taken spending a spending, mentioned, measured very the us on as our

the same in back and our the are strong we long-term to yes, well there levers margin to try to driving control spending time, At we in of build growth dials quite balance and So value. the able results more in is half. business as

Stephen Moss

lower here just gross driving of maybe Okay, here bit number terms we in efficiency, sustainable of use going or is little forward? maybe a just a should and margin this

Jon Wilk

I ranges. Steve, that suggest guidance, gross go look the would the you margin back and we've given EBITDA think long-term of kind certainly business margin for and core on we at that

Stephen Moss

just kind thinking crypto, Okay. And curious out quarter? prior? about to break relative you're could revenue one the you're seeing the me this revenue of just just the market was Arculus more for question of what kind contribution kind in with contribution on of from for back the if uncertainty And is how you

Jon Wilk

Yes, Steve.

the we're tried the As not greater part revenue on we're we and becomes not breaking give own our said units of a It on later this We've partnerships. as a at reporting into out guidance making terms it break last its call, point. progress Arculus at but business. segment, date, out would separately of to you in

platform. still we as in slowed have some down impacted, some of in progress about We QX have think of have time, same overall, At made. certainly demand liked result Arculus seen versus we partners that very confident we an that would uptick we QX, the a remain the from some the trends saw to that we and described

Stephen Moss

quarter. much you for Thank very great. Nice right, All color. all the

Jon Wilk

Thanks, Steve.

Operator

John. second, One & John question our Go Needham Company. Todaro from ahead, next from comes

John Todaro

guys. question, the metal thinking the just or guess growth Arculus that going mean, that we're it's I as that fair or there really we Thank contributing side? card core I but from assume at I guide card my breakout Arculus, is should growth not know is it side, a of little the right metal something to revenue in you. taking further, to bit -- the that coming for all looking from Thanks growth be

Jon Wilk

we're the the gave John, Yes, breaking Steve, I Arculus response out to business. similar not

over result there a about seen executing in I'd relationships for progress the At demand, in QX, some the that Arculus. point time, partnerships, some think the you both of as that I slowed uptick back and QX to sort are turmoil. some my have opportunity where on we some we've seen and comments down confidence impact same from of against the of those of that's the we've pleased

So it deeply going than break to I'm more that. out not

John Todaro

to partnerships And these of of in with growth shift is slowdown, the the in slowdown which that, crypto the you strategy more everyday their guys of strategy on institutional kind noted, shifting the or is understood. of issues a I focus? some the the that take focus partnerships segment direct-to-consumer, institutional can guess, assets still and strategy with that on operators, the as kind guys then focus the there's the on a just hardware focus between some a to Okay, to just there of centralized direct-to-consumer after user you break trying strategy? going average bit retail versus direct-to-consumer custody wallet. little that and Are up withdraw you

Jon Wilk

question, great John. a it's Yes,

we believe over BXB that be bigger I will that channel the still opportunities us. think long-term for the

seen is made point point are the side our increase that need we strategy the it think we the changed, BXB, I for I will have BXB us. over in and long-term and both their think as heavier keys. we BXC leverage say, consumers the still But BXC hasn't demand on private some control to fair, that would channels, Your recognizing

John Todaro

helpful. high then a some here, be customers And larger a legacy in there expansion, seeing concerns that. of relationships, where level question FinTech for the the international that worse that focus in recessionary just it just last some core would recessionary any environment that thanks the gets is are bit Okay, weakness on little environment. would color be on If or the of

Jon Wilk

impact that have as been example it have well, best at when the the recession, defined significant may John, did not did on a pandemic So the look for market. is, a it credit can hit, card it have we that

data spending if down. you we've can And at some trends down, that acquisitions that impact look shared you see marketing us. were those trend, and So of the was

that circumstances a during managed grow through us, believe, pretty of time. still was So, the we in pandemic, we single-digits which set for to tough

as three to come But lost the increase pick were slow were net we down able natural those we new it kind acquisition that to one. account, were well. is is And have to stolen we cards. of times before together. to continue concerns business, And logos a also have up growth have during that reissue, bit, recessionary of extremely still new also we new challenging it drivers some a more in time we net-net, potentially the of the through but drivers could grow the if of able deeply, because number So

we possible that's downturn about how kind So impacts. of think

John Todaro

are Congrats great. quarter Okay, Appreciate questions guys. all for the it. that's Those me. the helpful. on Thanks,

Jon Wilk

Appreciate John. it. question, Thanks for the

Operator

program give couple in now conference. [Operator This thank Okay, for conclude you participation our just for more will questions. you does we and seconds a today's disconnect. Instructions] may your Okay, everyone

CompoSecure (CMPO) 7 Aug 222022 Q2 Earnings call transcript