CMPO - Earnings call 3 2023 | CompoSecure, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to CompoSecure's Third Quarter 2023 Earnings Call. I would now like to hand the call over to compete of our external Investor Relations Adviser, Sean Mansouri with Elevate IR. Please go ahead.

Sean Mansouri

Good afternoon and thank you for joining us. With me on the call is Jon Wilk, CompoSecure's Chief Executive Officer; and Tim Fitzsimons, Chief Financial Officer. may prepared Q&A.During then make and statements to the to new business well with the will statements as execute begin including customers maintain our for forward-looking, our existing strategy regarding prospects. call call, that ability on will our remarks, our other and we and plans open related statements growth They concerning considered our plans to be as we acquire will and

or identified be anticipate of often be may words variety statements future such to to our guarantees are subject no obligation we statements Forward-looking actual risks cause our of views and expectations. as any not expect, of statements.Forward-looking we with update to We undertake and or reflect revise promises these as performance a or uncertainties materially from as date. considered results our should forward-looking the These that and differ upcoming. could subsequent of views only today not statements are

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

Jonathan Wilk

joining thank everyone, for Thank you, for our you Good Sean. afternoon, us call. and quarter conference third

results, our metal again premium our last domestic all-time record quarter, demand and from third cards. the payment net once the business exceeding achieved year, our sales the for of During demonstrating resiliency quarter

history the million are in smaller sales the to million economic successful Despite cash $XXX uncertainty weighed quarter most terms in of $XX track we business, to across on Net we compared in were summarize year the which results net sales, flow.Now on X. the quarter year adjusted EBITDA in and prior. Slide operating international global on this, the in call. later review However, company's achieve to our will our

their order more and trends. a control.Looking and has to cards they broader remains customers indicate our due QX compared issuer levels, Customer which year. inventory expense As select volumes outlook to despite X% That moment said, were part to strong, record which premium communicate at a million international million I X% lower million to year, we to $XXX results decrease $XX attributable the both compared tightly QX. domestically. to sales industry the card operating EBITDA our the sentiment impacted for continue demand that prior up our sales, offset mentioned the ago, net and in Year-to-date, positive are $XX economic metal primarily to managing increased prior in was delivered feedback in the Adjusted uncertainty.

million Given business. $XXX which On I year.Regarding EBITDA XXXX that from be and the for highlight last to year, the ahead $XXX adjusted a million to operating original guidance XXXX take and growth the want to to investment Slide the these issued a for range in a now combination end low key EBITDA pacing which was sales Arculus, earlier expect adjusting adjusted of captures of to anticipate approximately revenue million.Turning are we're $XX to net improve to the net our that $XXX due and and guidance optimizing $XXX note, for we investment costs, year X. million million, million of factors, full of moment to few developments we and $XX our goal projected range between this

launched For the a with Elite several India including metal Aspire, SAS Amex premium Magnus our Bank new Axis Hilton customers Amex in name and few. programs, of card quarter, to with

generation and through digital We both and focus industry enhancements conferences Authenticate initiatives Storage also continued marketing. Arculus product for marketing our a with BXB Arculus and lead on Cold

more and as custom Ethereum, Arculus three integration details by Polygon support users for Arculus designation to market now passwordless Arculus show authentication as Cold and Arculus a Storage developments improving reliable our highlight. team XX% Smart of prospective received worked pipeline key security tokens MetaMask, expanded Microsoft We to vendor Chain. a with There enabling DeFi official storage. key including additional has supports a X major passkeys referred FIDOX further is to cap enhancements, chains, by key private compatible as I'd I with hardware via begun Slide across Microsoft ecosystem, recently X, solution. have several across Binance card promising enhancements. and Arculus some and for crypto offline two Slide efforts a the capabilities earlier. added are Our want while card on I were issuer like the Authenticate security to insight. now trends safe offering to provide some through for of growing sales partnerships.Turning things And well.On user-friendly chains enhanced WalletConnect cross-chain device signing

continue see purchase growth. largest can that customers You our volume to experience

quarters, has moderated several very past trend it pre-pandemic and While healthy still remains the over above well levels. the

the numbers X.X slide, this during acquisition American reported that quarter. On with strong million you the cards card of side new can the proprietary quarter Express right-hand again see once

In to in quality indicated are market, some this and we're for partner addition, new acquisitions have Keep insight information. of great on they'll given themes their card the products. the payment continue seeing. and and additional highlighted marketing, all give demand the publicly to at customer understanding the customers what our chart spend quotes is and based that X, mind, overall publicly.On several providing they looking Slide we on We're saying available

demand marketing investment acquisition. to and market continued growth, drive consumer for products First, we're customer hearing positive sentiment related to including

a before domestically. to review to remains strong continued inflation uncertainty U.S. factors a Second, Tim labor in the moderating slightly despite cautious for economic growth optimism premium and financials it towards card point to closing levels These global payment remarks. over our returning market.I'll part hand market due for now relatively

Timothy Fitzsimmons

XXXX. by increased operating compared which lower of fair economic million million increase in were the earnout the increased compared our driven XX% in Domestic was as quarter The you basis. Thanks, EBITDA year. to prior XX, turn controls.On to value questions. approximately comparisons and margin base.Gross increased financial global record $XX.X a to administrative derivative see $XX.X aforementioned back compared Net XX% production adjusted expense a sales XX% operating Jon, selling, and points and afternoon, everyone. XX% increased million of EBITDA to $XXX.X before margin materials. Slide controls new million international changes and general $XX.X it X% QX compared as uncertainty, sales smaller for to customer market and variance compared open sales adjusted can then and year. overview I'll to in in quarter the we the to ago expenses all consideration mix our sales, for constructions well increase the to Jon to XXX to good by in QX in which quarter is million the provide as XX% impact The basis warrants, reduction from income driven the the was $XX pressures stated third decrease year, as compared Unless Adjusted up our on domestic to of XXXX of to prudent was card was to detailed and the for performance. primarily the liabilities. $XXX.X a the more sales more expense to by market, commentary driven performance X% million, due were of from by year-to-date due by execution modestly well international variable a was prior reflected $XX.X our call period, a partially year million. lower in Net on as efficiencies the EBITDA resilience prior and Net year-over-year inflationary The sales. an by offset offset wages lower otherwise, our sales strong

to was in income the million $XX.X XX%, gross nine by compared warrant value fair XXXX prior lower the compared Slide year. months year.On compared prior changes The prior $XXX.X margin increased flat year-to-date XX% a earnout the nine to months XX, which and between the the margin the take XX% and due year. the of and income $XXX.X first year and the to compared X% materials. EBITDA nine split liabilities. first in Adjusted net labor pressure million first production sales. domestic million at primarily the Adjusted closer was inflationary to Our Net from noncash million in international efficiency derivative for was to the lower the was the of $XXX.X to to for prior EBITDA we'll was for look months driven

from million term $XX.X quarter million domestic quarter $XXX.X million notes. sheet. see had of with the due on comping could equivalents XXXX $XXX compared $XX.X XXXX. million, uncertainty.Moving despite year in results to International of of $XX.X sales a million, which strong holding loan exchangeable million. the and net $XXX for net and debt cash debt decrease This million are the to our third total increased last cash and primarily to the third economic of were XXXX global and You modestly quarter sales the includes total that of the of $XXX of balance in We of resulted record to

to XX, is XX-month X.XXx our to September compares September bank leverage EBITDA million. debt increased to of we our debt EBITDA X.Xx $XXX leverage of at by adjusted secured debt million X.XXx had and EBITDA. compares adjusted provide a and net driven to as with $XXX.X X.XXx both to September based always, turn adjusted trailing bank slight ratio the a down debt want XXXX.I agreement ratio overall total trailing As our million agreement per with leverage based and XX, and earnings agreement secured overall we $XXX.X was bank XXXX, At secured now at of $XXX.X our TTM want September of paying leverage debt on XX, a the a improvement XXXX, differences.At This bank million. on calculated of debt XX, This XX-month share.

of driven GAAP the such three basis. and fair share net on primarily and consideration by As through $X.XX structure XXXX, mark-to-market basic instruments the a per of derivative for our you primarily the conversion impact to EPS can instruments under share footnotes was better changes the our the diluted in that included income allocate the September price.You to to the among the allows operating EPS and $X.XX the complexities the earnout calculations.Turning share. driven us allocation diluted per of to on due GAAP a in the the of ago adjustments to per warrants, the changes basic months slide the This XX. and was XX, the compares take of actual and income period. shares in diluted reminder, basic to subsidiaries basic method stock are $X.XX our and and Slide ended that reflect company by economic (inaudible) increase net for and calculating share value through diluted liabilities per on public change year the read The the on

between provides income for per the and XXXX, and for adjustments income EPS With to per find previous share background, impact or economics on for the the respectively, the income.On period. can puts calculations.Turning September per factors per diluted either non-GAAP $X.XX in and EPS, EPS revaluations per This puts and in how XX, In EPS in diluted to period. $X.XX third us adjusted which us $X.XX share, diluted share basic see per share can positive GAAP and Adjusted which our company's negative a this ago for the of a in noncash appendix, slide per basic outlined and at net the adjustments ended of at $X.XX earnout a of impact and the share basic to the picture $X.XX net tracking $X.XX and used to was also this Slide share. and year share. Slide we on operating diluted clearer per share GAAP the XX, XX. have respectively, the by net This a basic the $X.XX non-GAAP we're comp. noncash believe warrants ago compared providing $X.XX a period. $X.XX adjusted the nine stock the reconciliation that I as basic and fair Again, quarter months same the the are compares year-to-date, the per ago $X.XX year now share. non-GAAP $X.XX basic We was This and XXXX results. impacted compares diluted value with will $X.XX diluted You share, excludes you per these year

Jonathan Wilk

turn now and guidance closing to to it I'll back remarks. give discuss our Jon

Jonathan Wilk

Thanks, Tim.

Now Slide turning XX. to

As adjusted sales closing, and still low range issued net to guidance to $XXX adjusted XXXX I million, and are terms successful we adjusted a our and the want million range net and end today. growth. in revising $XXX which operating expect of million, it saw $XXX sales, few a our expect to previously record track million guidance.In between our we previously revenue EBITDA $XXX in adjusted from XX% even I the EBITDA achieve to We're cash XX% following between captures stated, now takeaways to on EBITDA flow, reiterate of history growth year that call our and key company's most year EBITDA

while begun demand results. to weighed record the capabilities remains resiliency metal We third the sales sentiment Customer our offerings our During marketing payment demonstrating manage and and of consumer to unique the demand and expand macro deliver although investing once levels regarding profitability another international And customers focused card market. with again in contract have reduction to optimizing this tighter our on the balance well and on sheet we for our select cards. positive.We both to innovations we to of quarter, our of our remain positioned that the Arculus continue has forward.With inventory on to in discussed domestic and results, business our payment that, as place by our achieved customers that, last debt I'd quarter. With as all objectives two believe to move long-term put in you remind we renewals reflected Q&A. open execute largest that we I and growth are like up call quarter, the we uncertainty

Operator

from (Operator coming Instructions). you. first Needham. Thank John Todaro question And with our

John Todaro

you've Great. business quite been Congrats record Jon, for a obviously, some on in year. time. the

on wondering uncertainty Just the and macro weakness.

XXXX or side. ahead I authentication get how issuers have on could a thoughts one more of far Any line you kind on site card of question on manage If the bit And trends? kind typically their inventory. color then more

Jonathan Wilk

Sure.

a we year, in the long-term to is and things. on is One, certain can last modest customers customers, quarter. about smaller for economic three front, John, down And that right comes or total that still, And in will well typically, which times, ultimately of and just for it, just With slowdown of that that made inventory, anywhere perform around it let's happens customers, they'll to coming some our We any from, they'll be by international adjust where it tweak we've slightly. impact months over up think but the guide, in, part tweak six XX% transitional uncertainty times, now, generally, two more keep a it basis we potential impact business. slightly call of revenue will from global think a that they'll up the variability. it them. of down.On see right we But type that levels talked the as that time, our So think, year, of given certain has but generally, more slightly business is, number has of at down year. at the say, that's up

John Todaro

on then more it. just Got digital And one authentication.

earnings opportunity I on non-crypto it last a So, you was think specifically side quite in some opportunities that the set. the as being called of call, past, out large

how shaped kind update curious just So authentication the versus of that the kind quarter-over-quarter. up framing of Any how you're Cold on Storage digital non-crypto.

Jonathan Wilk

it's and taking for of continue well. the It conversations to those the to mentioned to in across very right our and that in authentication these, conversations meaningful numbers go within heading sort about and net space, prior sort internationally requires as in But large Continue that are the longer. of domestically excited see now. implementation the technology investment opportunities movement institutions institutions in in starting quarters, The say we I've which takes I'd And Arculus, remain we're or fintech's time. of change overall some very view, direction want. having

Operator

our for next of with the question question. our Reggie moment One Smith And coming from next JPMorgan. line

Unknown Analyst

This is moving so a is any are in that bit forward? much specific there And opportunity money more on Charlie back? an can that center could Was an slowdown. Or Reggie. Curious there be not large that international banks geographies for out dig if option there pulled on out we there? little any

Jonathan Wilk

Yes.

with kinds and of over think in bear to those in international a our of we the quarter question. the we and Europe in I'd bit question, second some we yes, of those the little for To answer impacts new couple of banks fruit time. Asia. thanks Charlie, So, business opportunities business a across say center saw up money expect opened Europe really part last

variable spread conditions more different us So, different out, it's within regions. dealing just customers with is economic more countries it and for base given a more

Unknown Analyst

any cracks more. see variability, if to you back, that sneak the mean in the slowdown? And there I that could sentiment would but any maybe one helpful. have U.S.? helpful. could predicted the That's or be it. subtle there And looking signs Do spreading to any risk I color were mentioned you Got

Jonathan Wilk

we one announced what We, not We in strongest mentioned, quarter year as really it contracts we're renewed our by largest of customers. quarter. a was strong seeing with, couldn't third two pleased not of We're the we today, of that as domestically more across view, there. this that.As beat quarter still earlier, it, could at for domestic domestic variety Charlie, I kind ever. of I was Yes, outstanding be year look seeing our as was spending. think That our a evidenced And consumer with we whether we last with seeing which still us big mentioned questions you're as year. into predicted moved resiliency have we this or industries. seeing -- we're Not I

You're bit this in cautiousness about management. inventory a just little seeing point of

is I just not think specific manufacturing, card a major variety improving you're seeing industries, a necessarily which in cost of an uncertain world. pullback, not controls across to but

hindsight So to this not impact no, we we're impact see don't that specific XXXX. domestically card just seeing But is we manufacturing. and think

Operator

next B. with from Goetsch Riley. Hal And the our line of coming question

Harold Goetsch

not your It's The now? us expectations can probably it your were domestically. think as good this channel on give are inventories is was what for some cautiousness? in right mean of Jon, thoughts guys after high. you down, are the do just quarter think the -- you you but maybe I now channel what meeting you it inventories Or inventory draw why inventories was

Jonathan Wilk

ranges all few. I or levels It's to into inventory visibility Thanks, be inventory customers. visibility. sort that three of of have a of end how dial -- down, don't into it's tight But months, data across Hal. about do they're some can I going think hold to our in they of We that generally talked We that across feeling they depending year. on could seven the areas three up six, have

Operator

question and Our coming next line next White question. the of Chase Compass LLC. And Point Research our from with Trading

Chase White

revenues end guidance, of the the EBITDA you updated would the on versus drive range and factors end? in So, to the top bottom what

Jonathan Wilk

bumps standpoint, the and take of orders There close that talked when so we run just higher and in to up we're For deliver see products, about about, few locked deliver small growth. -- a that mention down And in things out from the able we we see lifeblood some as would a will we that. our as to want then products challenges. one the helps of new will you company. Other to to being production. range. we innovative continue new we times is us, And from sort to products our that excited it's this is drive things times, need that just bumps up. It are future small largely you'll I production that of as market we see margin But and down we'll end to the here without briefly, launch innovate, of the new

so, efficiently -- And running sure up. the ramping are is that They're in products those through making factory.

few So, making then year the to orders would closing here sure a the between deliver now and of high ranges. out that of end efficiently end the the and run us we closer

Chase White

helpful. And before you're needs to That's just happen it both? dividends return you what remind capital whether to be shareholders, able or or buybacks Got to it. us can

Jonathan Wilk

our were that, point, and what the could specifically Board, the would know. imagine, organic regarding decisions question. allocation, you Chase, I when with and priorities. debt. alter conversations appreciate as On And market those are certainly beyond and said our paying might make in you those have the as to capital growth and two we priorities that are we've do priorities, we'll still the at down let allocation we Board this But capital

Operator

Thank there this in conference for be as call. questions no all queue, today's conclude And does appear participating. you. Thank you further to

may You disconnect. now

CompoSecure (CMPO) 9 Nov 232023 Q3 Earnings call transcript