• CompoSecure Reports First Quarter 2023 Financial Results

    المصدر: Nasdaq GlobeNewswire / 03 مايو 2023 15:00:00   America/Chicago

    SOMERSET, N.J., May 03, 2023 (GLOBE NEWSWIRE) -- CompoSecure, Inc. (Nasdaq: CMPO), a leader in metal payment cards, security, and authentication solutions, today announced its financial and operating results for the first quarter ended March 31, 2023.

    “2023 is off to a solid start driven by strong sales execution, deep customer engagement, and continued demand for our premium metal cards,” said Jon Wilk, President and CEO of CompoSecure. “In addition, we remain encouraged by recent positive card-issuer sentiment that underscores consumer and business resilience even in the face of slower macroeconomic growth.”

    “This quarter, we were extremely pleased to extend a key contract with one of our largest customers. Looking ahead, we are reiterating our net sales and adjusted EBITDA guidance for 2023 based on our expectation of continued sales execution. As always, we remain focused on a prudent approach to capital allocation while simultaneously delivering innovative offerings to the market that can deliver long term shareholder value.”

    Q1 2023 Financial Highlights (vs. Q1 2022)

    • Net Sales: Net Sales increased 13% to $95.3 million compared to $84.2 million, with the increase primarily driven by strong sales execution and continued growth in the Company’s premium payment card business.
    • Gross Profit: Gross Profit increased 9% to $53.4 million or 56.0% of Net Sales, compared to $48.8 million or 57.9%.
    • Net Income/EPS: Net Income was $10.7 million compared to $26.9 million. Net income for Q1 2023 was primarily impacted by non-cash expenses of $13.4 million related to the fair value of the Company’s warrants, earnout consideration and derivative liabilities, which was driven by improvement in the Company’s stock price; and $4 million in stock-based compensation. Net Income per share attributable to class A common stockholders was $0.13 (Basic) and $0.11 (Diluted), compared to $0.23 (Basic) and $0.23 (Diluted) in the year-ago period.
    • Adjusted Net Income/Adjusted EPS: Adjusted Net Income (a non-GAAP measure) was $20.6 million compared to $20.4 million in the year-ago period. Adjusted EPS (a non-GAAP measure), which includes both class A and class B shares, was $0.27 (Basic) and $0.23 (Diluted) compared to $0.27 (Basic) and $0.23 (Diluted) in the year-ago period (see reconciliation of non-GAAP measures shown in table below).
    • Adjusted EBITDA: Adjusted EBITDA (a non-GAAP measure) increased 6% to $35.5 million compared to $33.3 million, with the increase primarily driven by Net Sales growth.

    Recent Operational Highlights

    • Extended a contract with one of its largest customers, American Express, through July 2026.
    • Demonstrated continued metal payment card success with card launches including Rocket Mortgage, Xapo Bank, Papara prepaid card, H-E-B grocery, and UMB private bank.
    • Advancements on Arculus implementations including progress on a pilot for payment plus authentication with a major crypto exchange, working with NBC Banq to deliver an all-in-one payment with digital asset cold storage, Chainge Finance launching a self-custody hardware cold storage wallet powered by Arculus, and inbestgo going live with Arculus cold storage wallet for their customers in Latin America.
    • Enhanced Arculus B2B and B2C functionality to cryptographically include support for more than 10K coins, implemented enhanced security for card to mobile device communication, and launched B2C cold storage wallet sales in Canada with additional international locations anticipated in the second quarter.

    2023 Financial Outlook
    The Company is reaffirming its guidance for full year 2023 results, with net sales expected to be in the range of $400-$425 million and adjusted EBITDA expected to be in the range of $145-$155 million.

    Conference Call
    The Company will host a conference call and live audio webcast today at 5:00 p.m. Eastern time to discuss its financial and operational results, followed by a question-and-answer period.

    Date: Wednesday, May 3, 2023
    Time: 5:00 p.m. Eastern time
    Dial-in registration link: here
    Live webcast registration link: here

    If you have any difficulty registering or connecting with the conference call, please contact Elevate IR at (720) 330-2829.

    A live webcast and replay of the conference call will be available on the investor relations section of the Company’s website at https://ir.composecure.com/news-events/events.

    About CompoSecure
    Founded in 2000, CompoSecure (Nasdaq: CMPO) is a technology partner to market leaders, fintechs and consumers enabling trust for millions of people around the globe. The company combines elegance, simplicity and security to deliver exceptional experiences and peace of mind in the physical and digital world. CompoSecure’s innovative payment card technology and metal cards with Arculus security and authentication capabilities deliver unique, premium branded experiences, enable people to access and use their financial and digital assets, and ensure trust at the point of a transaction. For more information, please visit www.composecure.com and www.GetArculus.com.

    Forward-Looking Statements
    This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management. Although the Company believes that its plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, the Company cannot assure you that it will achieve or realize these plans, intentions, or expectations. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning the Company’s possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. In some instances, these statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” or the negatives of these terms or variations of them or similar terminology. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the date hereof. You should understand that the following important factors, among others, could affect the Company’s future results and could cause those results or other outcomes to differ materially from those expressed or implied in the Company’s forward-looking statements: the ability of the Company to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees; the possibility that the Company may be adversely impacted by other economic, business, and/or competitive factors; the outcome of any legal proceedings that may be instituted against the Company or others; future exchange and interest rates; and other risks and uncertainties, including those under “Risk Factors” in filings that have been made or will be made with the Securities and Exchange Commission. The Company undertakes no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

    Use of Non-GAAP Financial Measures
    This press release includes certain non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and that may be different from non-GAAP financial measures used by other companies. The Company believes EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are useful to investors in evaluating the Company’s financial performance. The Company uses these measures internally to establish forecasts, budgets and operational goals to manage and monitor its business, as well as evaluate its underlying historical performance and to measure incentive compensation, as we believe that these non-GAAP financial measures depict the true performance of the business by encompassing only relevant and controllable events, enabling the Company to evaluate and plan more effectively for the future. Due to the forward-looking nature of the financial guidance included above, specific quantification of the charges excluded from the non-GAAP financial measures included in such financial guidance, including with respect to depreciation, amortization, interest, and taxes, that would be required to reconcile the non GAAP financial measures included in such financial guidance to GAAP measures are not available, so it is not feasible to provide accurate forecasted non-GAAP reconciliations without unreasonable effort. Consequently, no disclosure of estimated comparable GAAP measures is included, and no reconciliation of the forward looking non-GAAP financial measures is included. In addition, the Company’s debt agreements contain covenants that use a variation of these measures for purposes of determining debt covenant compliance. The Company believes that investors should have access to the same set of tools that its management uses in analyzing operating results. EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are significant components in understanding and assessing the Company’s financial performance. Accordingly, these key business metrics have limitations as an analytical tool. They should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of the Company’s liquidity and may be different from similarly titled non-GAAP measures used by other companies. Please refer to the tables below for the reconciliation of GAAP measures to these non-GAAP measures for the quarter ended March 31, 2023.

    Corporate Contact
    Anthony Piniella
    Head of Communications, CompoSecure
    (908) 898-8887
    apiniella@composecure.com

    Investor Relations Contact
    Sean Mansouri, CFA
    Elevate IR
    (720) 330-2829
    ir@composecure.com

    CompoSecure, Inc.
    Condensed Consolidated Balance Sheet Data
     (in thousands)
        
     March 31, 2023 December 31, 2022
     (unaudited)  
    ASSETS   
    Cash and cash equivalents$22,566  $13,642 
    Accounts Receivable, net 39,187   37,272 
    Inventories 51,275   42,374 
    Prepaid expenses and other current assets 4,197   3,824 
    Property and equipment, net 24,282   22,655 
    Right of use asset, net 8,960   8,932 
    Deferred tax asset 28,328   25,569 
    Derivative asset - interest rate swap 6,957   8,651 
    Deposits and other assets 24   24 
    TOTAL ASSETS$185,776  $162,943 
        
    LIABILITIES AND STOCKHOLDERS' EQUITY   
    Current portion of long-term debt$18,750   14,372 
    Current portion of lease liabilities 1,884   1,846 
    Current portion of tax receivable agreement liability 2,367   2,367 
    Accounts payable 15,494   7,127 
    Accrued expenses 12,223   10,154 
    Commission payable 4,951   3,317 
    Bonus payable 3,429   8,177 
    Long-term debt, net of deferred finance costs 212,009   216,276 
    Convertible notes, net of debt discount 127,466   127,348 
    Derivative liability - convertible notes 993   285 
    Warrant liability 27,100   16,341 
    Earnout liability 17,063   15,090 
    Lease liabilities 7,757   7,766 
    Tax receivable agreement liability 25,445   24,475 
    Total stockholders' (deficit) (291,155)  (291,998)
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$185,776  $162,943 
        


    CompoSecure, Inc. 
    Consolidated Statements of Operations 
    (in thousands, except per share amounts) 
    (unaudited) 
         
     Three Months Ended March 31, 
      2023   2022  
    Net sales$95,316  $84,183  
         
    Operating expenses:    
    Cost of sales 41,962   35,424  
    Selling, General and administrative 23,944   18,777  
    Total operating expenses 65,906   54,201  
         
    Income from operations 29,410   29,982  
         
    Total other income (expense), net (19,936)  (2,531) 
    Income before income taxes 9,474   27,451  
    Income tax benefit (provision) 1,263   (543) 
    Net income 10,737   26,908  
         
    Net income attributable to non-controlling interests 8,408   23,514  
    Net income attributable to CompoSecure, Inc$2,329  $3,394  
         
    Net income per share attributable to Class A common stockholders -basic$0.13  $0.23  
    Net income per share attributable to Class A common stockholders - diluted$0.11  $0.23  
         
    Weighted average shared used to compute net income per share attributable to Class A common stockholders - basic (in thousands) 17,632   14,934  
    Weighted average shared used to compute net income per share attributable to Class A common stockholders - diluted (in thousands) 94,736   14,934  
             


    CompoSecure, Inc. 
    Consolidated Statements of Cash Flows 
    (in thousands) 
    (unaudited) 
         
     Three Months Ended March 31,  
      2023   2022  
    CASH FLOWS FROM OPERATING ACTIVITES:    
    Net income$10,737  $26,908  
    Adjustments to reconcile net income to net cash provided by operating activities   
    Depreciation 2,040   2,349  
    Stock-based compensation expense 4,022   1,006  
    Amortization of deferred finance costs 559   620  
    Change in fair value of earnout consideration liability 1,973   (4,107) 
    Revaluation of warrant liability 10,759   1,424  
    Change in fair value of derivative liability 708   248  
    Deferred tax (benefit) expense (2,034)  543  
    Changes in assets and liabilities    
    Accounts receivable (1,915)  (10,659) 
    Inventories (8,901)  (1,392) 
    Prepaid expenses and other assets (373)  (4,423) 
    Accounts payable 8,367   (2,248) 
    Accrued expenses 2,069   3,422  
    Other liabilities (3,114)  (1,782) 
     Net cash provided by operating activities 24,897   11,909  
    CASH FLOWS FROM INVESTING ACTIVITIES:    
    Acquisition of property and equipment (3,666)  (1,417) 
     Net cash used in investing activities (3,666)  (1,417) 
    CASH FLOWS FROM FINANCING ACTIVITIES:    
    Proceeds from employee stock purchase plan and exercise of equity awards 146   -  
    Payments for taxes related to net share settlement of equity awards (2,409)  -  
    Proceeds from line of credit -   10,000  
    Payment of term loan (330)  (3,125) 
    Distributions (9,714)  -  
    Payment of issuance cost related to business combination -   (23,833) 
     Net cash used in financing activities (12,307)  (16,958) 
    Net increase (decrease) in cash and cash equivalents 8,924   (6,466) 
    Cash and cash equivalents, beginning of period 13,642   21,944  
    Cash and cash equivalents, end of period$22,566  $15,478  
         
    Supplementary disclosure of cash flow information    
     Cash paid for interest expense$4,567  $4,734  
    Supplemental disclosure of non-cash financing activity:    
    Derivative asset - interest rate swap$6,957  $4,036  
         



    CompoSecure, Inc.
    Non-GAAP Adjusted EBITDA Reconciliation
    (in thousands)
    (unaudited)
          
          
      Three Months Ended March 31, 
       2023   2022  
    Net income $10,737  $26,908  
    Add (less):     
    Depreciation  2,040   2,349  
    Interest expense, net  6,496   4,966  
    Income tax (benefit) expense  (1,263)  543  
    EBITDA $18,010  $34,766  
    Stock-based compensation  4,022   1,006  
    Mark to market adjustments (1)  13,440   (2,435) 
    Adjusted EBITDA $35,472  $33,337  
          
          
    (1) Includes the changes in fair value of warrant liability, derivative liabilities and earnout consideration liability for the quarter ended March 31, 2023 and March 31, 2022.
          



    CompoSecure, Inc.
    Non-GAAP Adjusted EPS Reconciliation
    (in thousands)
    (unaudited)
             
             
      Three Months Ended March 31, Three Months Ended March 31,
       2023   2022 
      (in thousands) except per share amounts
      Basic Diluted Basic Diluted
    Net income $10,737  $10,737  $26,908  $26,908 
    (Less) add: (benefit) provision for income taxes  (1,263)  (1,263)  543   543 
    Income before Income taxes  9,474   9,474   27,451   27,451 
    Income tax expense (1)  (5,581)  (5,581)  (5,420)  (5,420)
    Adjusted net income before adjustments  3,893   3,893   22,031   22,031 
    Add (less): mark-to-market adjustments (2)  12,732   12,732   (2,682)  (2,682)
    Add: stock-based compensation  4,022   4,022   1,006   1,006 
    Adjusted net income $20,647  $20,647  $20,355  $20,355 
    Common shares outstanding used in         
    computing earnings per share, basic:        
    Class A and Class B common shares (3)  77,591   77,591   76,071   76,071 
    Common shares outstanding used in         
    computing earnings per share, diluted:        
    Warrants (Public and Private) (4)  -   8,094   -   8,094 
    Equity awards  -   4,145   -   4,331 
    Total Shares outstanding used in computing adjusted earnings per share  77,591   89,830   76,071   88,496 
             
    Adjusted earnings per share (5) $0.27  $0.23  $0.27  $0.23 
             
             
    1) Calculated using the Company's blended tax rate.      
    2) Includes the changes in fair value of warrant liability and earnout consideration liability.   
    3) Assumes both Class A shares and Class B shares participate in earnings and are outstanding at the end of the period.
    4) Assumes treasury stock method, valuation at assumed fair market value of $18.00.    
    5) The Company did not include the effect of Exchangeable Notes to its total shares outstanding used in diluted adjusted net income per share.
             

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