Resolute Holdings Management Inc(RHLD) - 2025 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements Presents Resolute Holdings' unaudited consolidated financial statements, including balance sheets, operations, comprehensive income, equity, cash flows, and detailed notes Consolidated Balance Sheets (Unaudited) The consolidated balance sheets show an increase in total assets and a shift from a total stockholders' deficit to equity as of March 31, 2025, compared to December 31, 2024 | Metric | March 31, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Total Assets | 214,288 | 201,792 | | Total Liabilities | 238,294 | 238,422 | | Total Equity (Deficit) | (24,006) | (36,630) | | Cash and cash equivalents | 71,017 | 71,589 | | Accounts receivable | 54,188 | 47,449 | | Inventories, net | 47,501 | 44,833 | | Current portion of long-term debt | 12,500 | 11,250 | Consolidated Statements of Operations (Unaudited) The consolidated statements of operations show a slight decrease in net sales and gross profit, and a notable decrease in income from operations for Q1 2025 compared to Q1 2024 | Metric | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :---------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net sales | 103,889 | 104,010 | | Gross profit | 54,547 | 55,213 | | Income from operations | 25,621 | 32,443 | | Net income (loss) attributable to common stockholders | (3,366) | — | | Net income (loss) per share attributable to common stockholders - basic & diluted | (0.39) | — | Consolidated Statements of Comprehensive Income (Loss) (Unaudited) The consolidated statements of comprehensive income (loss) reflect net income (loss) including non-controlling interests and other comprehensive income (loss) components | Metric | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :---------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net income (loss) including non-controlling interests | 22,615 | 26,386 | | Unrealized gain (loss) on derivative - interest rate swap | (753) | 487 | | Comprehensive income (loss) attributable to common stockholders | (3,366) | — | Consolidated Statements of Stockholders Equity (Deficit) (Unaudited) This statement outlines changes in stockholders' equity (deficit) for Q1 2025 and 2024, showing increased additional paid-in capital and reduced accumulated deficit | Metric | March 31, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :----------------------------------- | :------------------------------ | :------------------------------- | | Additional paid-in capital | 14,569 | 1,544 | | Accumulated deficit | (5,700) | (2,334) | | Total stockholders' equity (deficit) | 8,869 | (790) | | Non-controlling interest | (32,875) | (35,840) | - Equity-based compensation for the three months ended March 31, 2025, was $1,156 thousand[18] Consolidated Statements of Cash Flows (Unaudited) The consolidated statements of cash flows indicate a decrease in net cash provided by operating activities and a decrease in net cash used in financing activities for Q1 2025 compared to the prior year | Metric | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash provided by operating activities | 18,368 | 35,668 | | Net cash used in investing activities | (1,156) | (1,613) | | Net cash used in financing activities | (17,784) | (21,978) | | Cash and cash equivalents, end of period | 71,017 | 50,268 | - Payments for taxes related to net share settlement of CompoSecure equity awards significantly increased to $15,284 thousand in Q1 2025 from $3,426 thousand in Q1 2024[20] Notes to Consolidated Financial Statements (Unaudited) These notes provide detailed explanations and disclosures supporting the consolidated financial statements, covering organization, accounting policies, equity-based compensation, debt, and segment information 1. Description of Organization and Business Operations Resolute Holdings Management, Inc. was formed in September 2024 to provide operating management services to CompoSecure Holdings, which it consolidates as a Variable Interest Entity (VIE) - Resolute Holdings Management, Inc. was formed on September 27, 2024, to provide operating management services and generate recurring management fees[21] - CompoSecure Holdings manufactures and designs complex metal, composite, and proprietary financial transaction cards for global financial institutions[22] - On February 28, 2025, CompoSecure distributed all shares of Resolute Holdings common stock in a pro rata Spin-Off, and Resolute Holdings began trading on Nasdaq under 'RHLD'[24] - Resolute Holdings consolidates CompoSecure Holdings as a Variable Interest Entity (VIE) because it is deemed the primary beneficiary under the CompoSecure Management Agreement, despite not owning equity interests[25] - CompoSecure Holdings pays Resolute Holdings a quarterly management fee equal to 2.5% of its last 12 months' Adjusted EBITDA, with an initial term of 10 years and automatic renewals[26][29] 2. Summary of Significant Accounting Policies This note details the accounting principles, including U.S. GAAP and SEC regulations, used in preparing the consolidated financial statements, explaining consolidation, revenue recognition, and segment reporting - The consolidated financial statements are presented in conformity with U.S. GAAP and SEC rules, with CompoSecure Holdings consolidated as a VIE from February 28, 2025[30][31] - Revenue is recognized when performance obligations are satisfied, typically upon transfer of control of goods to customers, with $540 thousand recognized from bill and hold arrangements in Q1 2025[37][43] - The Company operates two reportable segments: Resolute Holdings and CompoSecure Holdings, based on distinct operations and the CompoSecure Management Agreement[44][45] - Capitalized software development costs were $580 thousand in Q1 2025, with a carrying value of $1,520 thousand as of March 31, 2025[46] - The Company adopted ASU 2023-07 (Segment Disclosures) and is assessing ASU 2024-03 (Expense Disaggregation) and ASU 2023-09 (Income Tax Disclosures)[50][51][52] 3. Equity-Based Compensation This note details the equity-based compensation expense, which increased to $6,046 thousand in Q1 2025, primarily driven by restricted stock units and performance stock units | Metric | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Total equity-based compensation expense | 6,046 | 4,167 | | Resolute Equity Plan | 8 | — | | CompoSecure Equity Plan | 6,038 | 4,167 | - Unrecognized compensation cost for restricted stock units under the CompoSecure Equity Plan totaled $45,428 thousand, expected to be recognized over approximately 3.6 years[56] - Unrecognized compensation cost for stock options under the CompoSecure Equity Plan totaled $10,516 thousand, expected to be recognized over approximately 3.5 years[57] 4. Income Taxes The Company recorded an income tax provision of $568 thousand for Q1 2025, with an effective tax rate of 2.5%, primarily due to non-controlling interest and disallowed compensation expenses | Metric | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :--------------------- | :----------------------------------------------- | :----------------------------------------------- | | Income tax (expense) | (568) | — | | Effective tax rate | 2.5% | 0% | - The effective tax rate differs from the U.S. statutory rate primarily due to the non-controlling interest adjustment (pass-through income to CompoSecure) and disallowed compensation expense[61] 5. Earnings (Loss) Per Share The Company reported a basic and diluted net loss per share attributable to common stockholders of $(0.39) for Q1 2025, with potentially dilutive securities excluded due to their anti-dilutive effect | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) attributable to common stockholders ($ in thousands) | (3,366) | — | | Weighted average common shares outstanding | 8,525,998 | 8,525,998 | | Net income (loss) per share attributable to common stockholders - basic & diluted | (0.39) | — | - 16,512 Resolute Equity Plan awards were excluded from the diluted EPS calculation in Q1 2025 due to their anti-dilutive effect[64] 6. Inventories CompoSecure Holdings' net inventories increased to $47,501 thousand as of March 31, 2025, from $44,833 thousand at December 31, 2024, driven by increases across all inventory classes | Inventory Class | March 31, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :------------------ | :------------------------------ | :------------------------------- | | Raw materials | 46,588 | 46,109 | | Work in process | 2,562 | 1,024 | | Finished goods | 1,243 | 505 | | Inventory reserve | (2,892) | (2,805) | | Total Inventories, net | 47,501 | 44,833 | 7. Property and Equipment Net property and equipment decreased to $21,917 thousand as of March 31, 2025, from $23,448 thousand at December 31, 2024, with Q1 2025 depreciation and amortization expense of $2,107 thousand | Asset Class | March 31, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :---------------------- | :------------------------------ | :------------------------------- | | Machinery and equipment | 39,212 | 38,012 | | Leasehold improvements | 12,320 | 11,711 | | Construction in progress | 1,181 | 2,664 | | Total, net | 21,917 | 23,448 | - Depreciation and amortization expense for property and equipment was $2,107 thousand for the three months ended March 31, 2025, compared to $2,221 thousand for the same period in 2024[66] 8. Debt This note details Resolute Holdings' undrawn $5 million revolving credit facility and CompoSecure Holdings' $330 million credit facility, including a $195 million outstanding term loan, and interest rate swap agreements - Resolute Holdings entered into a $5,000 thousand senior secured revolving credit facility, maturing May 31, 2026, with no outstanding balance as of March 31, 2025[67][68] - CompoSecure Holdings refinanced its credit facility in August 2024, resulting in a $330,000 thousand facility comprising a $200,000 thousand Term Loan and a $130,000 thousand Revolver, maturing August 7, 2029[71] | Debt Component | March 31, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :------------------------------------------- | :------------------------------ | :------------------------------- | | CompoSecure Holdings Term Loan Balance | 195,000 | 197,500 | | Current portion of term loan (scheduled payments) | (12,500) | (11,250) | | Net deferred financing costs | (1,787) | (1,861) | | Total Long Term debt | 180,713 | 184,389 | - CompoSecure Holdings had $130,000 thousand of availability under its revolving credit facility as of March 31, 2025, with no outstanding balance[77] - Interest expense related to the CompoSecure Holdings credit facilities was $2,737 thousand in Q1 2025, down from $4,459 thousand in Q1 2024[75] - A December 2023 interest rate swap, with a notional amount of $125,000 thousand and a fixed rate of 1.90%, is set to expire in December 2025, with a fair value of $1,996 thousand (asset) at March 31, 2025[78][79] - All $130,000 thousand Exchangeable Notes were exchanged for CompoSecure Class A Common Stock and extinguished prior to November 29, 2024, resulting in $0 interest expense from these notes in Q1 2025 compared to $2,396 thousand in Q1 2024[82][84] 9. Equity Structure This note outlines the authorized and outstanding shares of common stock, the impact of the Spin-Off, and the accounting treatment for non-controlling interest related to CompoSecure Holdings - As of March 31, 2025, Resolute Holdings had 1,000,000,000 shares of common stock authorized and 8,525,998 shares issued and outstanding[85] - The Spin-Off of Resolute Holdings from CompoSecure was completed on February 28, 2025, distributing 8,525,998 common shares[86] - Non-controlling interest represents equity interests in CompoSecure Holdings held by CompoSecure, reflected due to Resolute Holdings' consolidation of CompoSecure Holdings as a VIE[87] 10. Leases The Company leases office and manufacturing space, recognizing lease expense on a straight-line basis, with a weighted-average remaining lease term of 5.5 years and lease liabilities of $10,872 thousand - The weighted-average remaining lease term for the Company's leases is 5.5 years as of March 31, 2025, with a weighted-average discount rate of 6.33%[91] | Lease Cost Component | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :------------------- | :----------------------------------------------- | :----------------------------------------------- | | Operating lease cost | 656 | 587 | | Variable lease cost | 295 | 240 | | Total lease cost | 951 | 827 | | Future Minimum Commitments | Amount ($ in thousands) | | :------------------------- | :---------------------- | | Total lease payments | 13,311 | | Less: Imputed interest | (2,439) | | Present value of lease liabilities | 10,872 | - Right-of-use assets obtained in exchange for lease obligations (non-cash activity) amounted to $4,884 thousand for the three months ended March 31, 2025[94] 11. Retirement Plans Both Resolute Holdings and CompoSecure Holdings offer 401(k) profit sharing plans with matching contributions, leading to an increased retirement plan expense of $856 thousand in Q1 2025 | Metric | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :--------------------- | :----------------------------------------------- | :----------------------------------------------- | | Retirement plan expense | 856 | 591 | - CompoSecure Holdings increased its 401(k) matching contributions starting January 2025[95] 12. Fair Value Measurements The Company measures financial assets and liabilities at fair value on a recurring basis, primarily the derivative asset for the interest rate swap, which is classified as Level 2 | Asset/Liability | March 31, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :-------------------------- | :------------------------------ | :------------------------------- | | Derivative asset - interest rate swap | 1,996 | 2,749 | - The derivative asset for the interest rate swap is classified as a Level 2 fair value measurement[97] 13. Segments The Company operates two reportable segments: Resolute Holdings and CompoSecure Holdings, with separate and consolidated financial statements presented, highlighting the elimination of intercompany management fees - The Company operates two reportable segments: Resolute Holdings and CompoSecure Holdings, with intercompany management fees eliminated in consolidation[99][100] | Metric ($ in thousands) | Resolute Holdings (Q1 2025) | CompoSecure Holdings (Q1 2025) | Consolidated (Q1 2025) | | :---------------------- | :-------------------------- | :----------------------------- | :--------------------- | | Net sales | 1,129 | 103,889 | 103,889 | | Gross profit | 1,129 | 54,547 | 54,547 | | Income from operations | (2,797) | 26,608 | 25,621 | | Net income (loss) | (3,366) | 24,171 | 22,615 | | Metric ($ in thousands) | Resolute Holdings (Mar 31, 2025) | CompoSecure Holdings (Mar 31, 2025) | Consolidated (Mar 31, 2025) | | :---------------------- | :------------------------------- | :---------------------------------- | :-------------------------- | | Total assets | 11,742 | 203,675 | 214,288 | | Total liabilities | 2,873 | 236,484 | 238,294 | 14. Variable Interest Entities This note reaffirms CompoSecure Holdings as a VIE, with Resolute Holdings as the primary beneficiary, necessitating consolidation, and clarifies that creditors of each entity have no recourse to the other - CompoSecure Holdings is deemed a Variable Interest Entity (VIE), and Resolute Holdings is the primary beneficiary, leading to its consolidation[107] - Creditors of Resolute Holdings have no recourse to CompoSecure Holdings' assets or liabilities, and vice versa[107] - Resolute Holdings has no obligation to provide financial support to CompoSecure Holdings[107] 15. Geographic Information and Concentrations The Company's operations are primarily in the United States, with domestic sales declining and international sales growing, alongside significant customer and vendor concentrations | Net Sales by Region ($ in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Domestic | 89,533 | 92,790 | | International | 14,356 | 11,220 | | Total | 103,889 | 104,010 | - Resolute Holdings' sole customer and source of revenue is CompoSecure Holdings, generating $1,129 thousand in management fees from February 28 to March 31, 2025[108] - Three customers accounted for 62.0% of total revenue in Q1 2025, and three customers accounted for approximately 62% of accounts receivable as of March 31, 2025[109] - The Company primarily relied on three vendors that individually accounted for more than 10% of purchases of supplies for Q1 2025[110] 16. Commitments and Contingencies The Company has non-cancelable operating lease commitments totaling $13,311 thousand in minimum undiscounted future lease payments and may be involved in various disputes and claims - The Company is party to non-cancelable operating leases with $13,311 thousand of minimum undiscounted future lease payments and a present value of $10,872 thousand[112] - The Company accrues for legal matters if a liability is probable and reasonably estimable, expensing litigation costs as incurred[113] 17. Related Party Transactions This note details various agreements and transactions with related parties, primarily CompoSecure and entities under common control by Tungsten 2024 LLC, following the Spin-Off - Resolute Holdings and CompoSecure are under common control by Tungsten 2024 LLC and its affiliates[114] - Key agreements include the CompoSecure Management Agreement, Separation and Distribution Agreement, Letter Agreement, Registration Rights Agreement, and U.S. State and Local Tax Sharing Agreement[114][115][116][118][121] - Roger Fradin, through Fradin Consulting LLC, provides advisory services to CompoSecure's board for an annual cash retainer of $50 thousand and options worth $150 thousand[122] - SRM Equity Partners, LLC provides executive administration services and office space for approximately $362 thousand annually, with $87 thousand recognized in Q1 2025[123] 18. Subsequent Events No subsequent events requiring disclosure were reported by the Company - No subsequent events were reported[125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Resolute Holdings' business model, recent developments, and an analysis of the Company's financial condition and results of operations for Q1 2025 Overview Resolute Holdings Management, Inc. aims to provide operating management services to CompoSecure Holdings and other companies, generating recurring management fees, and consolidates CompoSecure Holdings as a VIE - Resolute Holdings' business model is to provide operating management services to generate recurring management fees from CompoSecure Holdings and future managed companies[127] - Resolute Holdings consolidates CompoSecure Holdings as a VIE, being the primary beneficiary, without owning any equity interests[128] - CompoSecure Holdings creates innovative, customized financial payment card products for leading international and domestic banks[129] Recent Developments The Spin-Off of Resolute Holdings from CompoSecure was completed on February 28, 2025, with Resolute Holdings commencing trading on Nasdaq and entering a management agreement with CompoSecure Holdings - The Spin-Off of Resolute Holdings from CompoSecure was completed on February 28, 2025, and Resolute Holdings began trading on The Nasdaq Stock Market LLC under 'RHLD'[130] - Resolute Holdings entered into the CompoSecure Management Agreement, making it responsible for managing CompoSecure Holdings and requiring consolidation for financial reporting[131] - CompoSecure Holdings will pay Resolute Holdings a quarterly management fee equal to 2.5% of its last 12 months' Adjusted EBITDA, with an initial term of 10 years and automatic renewals[132][133][134] Economic Conditions - Globally and in the Digital Asset Marketplace The Company's business and financial performance are subject to global economic trends and developments impacting CompoSecure Holdings, including market cycles that create uncertainty in its Arculus offering - The Company's business, financial condition, and results of operations are impacted by trends and developments affecting CompoSecure Holdings[135] - Market cycles have created uncertainty in the timing of CompoSecure Holdings' planned ramp-up of its Arculus offering[135] Key Components of Results of Operations This section defines the primary components of the Company's financial statements, including Net Sales, Cost of Sales, Gross Profit, Operating Expenses, Income from Operations, and Other Income (Expense) - Net sales primarily reflect revenue from CompoSecure Holdings' product sales, such as metal cards and Prelams, with Resolute Holdings' management fee revenue eliminated in consolidation[136] - Cost of sales includes direct and indirect manufacturing costs for CompoSecure Holdings' products, influenced by volume, operational efficiencies, and procurement costs[137] - Operating expenses are mainly Selling, General, and Administrative (SG&A) expenses for both Resolute Holdings and CompoSecure Holdings, covering personnel, professional services, and other administrative functions[139] Results of Operations This section provides a comparative analysis of the Company's financial performance for Q1 2025 versus Q1 2024, detailing changes in net sales, gross profit, operating expenses, income from operations, other income/expense, and income tax expense | Metric ($ in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | $ Change | % Change | | :---------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Net sales | 103,889 | 104,010 | (121) | (0)% | | Gross profit | 54,547 | 55,213 | (666) | (1)% | | Operating expenses | 28,926 | 22,770 | 6,156 | 27% | | Income from operations | 25,621 | 32,443 | (6,822) | (21)% | | Other (expense) income, net | (2,438) | (6,057) | 3,619 | (60)% | | Income tax (expense) | (568) | — | (568) | n/a % | | Net (loss) income | 22,615 | 26,386 | (3,771) | (14)% | | Net income (loss) attributable to common stockholders | (3,366) | — | (3,366) | n/a % | | Margin Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------- | :-------------------------------- | :-------------------------------- | | Gross Margin | 53% | 53% | | Operating margin | 26% | 31% | Net Sales Total net sales for Q1 2025 remained relatively flat, with a slight decrease driven by a 4% decline in domestic sales, largely offset by a 28% increase in international sales | Net Sales by Region ($ in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | $ Change | % Change | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Domestic | 89,533 | 92,790 | (3,257) | (4)% | | International | 14,356 | 11,220 | 3,136 | 28% | | Total | 103,889 | 104,010 | (121) | (0)% | - Domestic net sales decreased primarily due to lower customer acquisition by CompoSecure Holdings' clients, while international sales grew due to increased sales across a larger base of smaller customers[146][147] Gross Profit and Gross Margin Gross profit slightly decreased by 1% to $54.5 million in Q1 2025, but the gross profit margin remained constant at 53% compared to Q1 2024 | Metric | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :------------ | :----------------------------------------------- | :----------------------------------------------- | | Gross profit | 54,547 | 55,213 | | Gross Margin | 53% | 53% | Operating Expenses Operating expenses increased by $6.2 million, or 27%, in Q1 2025, primarily due to incremental salaries and equity-based compensation from hiring employees at Resolute Holdings | Metric | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :--------------- | :----------------------------------------------- | :----------------------------------------------- | | Operating expenses | 28,926 | 22,770 | - The increase was primarily driven by incremental salaries and equity-based compensation expenses from new hires at Resolute Holdings[149] Income from Operations and Operating Margin Income from operations decreased by $6.8 million, or 21%, to $25.6 million in Q1 2025, with the operating margin declining by 5% to 26%, primarily due to increased operating expenses | Metric | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :------------------- | :----------------------------------------------- | :----------------------------------------------- | | Income from operations | 25,621 | 32,443 | | Operating margin | 26% | 31% | - The decrease in both income from operations and operating margin was primarily attributable to the increase in operating expenses[150] Other Income (Expense) Other expense decreased significantly by $3.6 million, or 60%, to $2.4 million in Q1 2025, primarily due to lower interest expense resulting from the exchange and extinguishment of Exchangeable Notes | Metric | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :-------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Other (expense) income, net | (2,438) | (6,057) | - The decrease in other expense was primarily due to lower interest expense as a result of the Exchangeable Notes being exchanged and extinguished[151] Income Tax Expense The Company recorded an income tax expense of $0.6 million in Q1 2025, compared to no expense in Q1 2024, due to Resolute Holdings being taxed as a corporation post-Spin-Off | Metric | Three months ended March 31, 2025 ($ in thousands) | Three months ended March 31, 2024 ($ in thousands) | | :----------------- | :----------------------------------------------- | :----------------------------------------------- | | Income tax (expense) | (568) | — | - The income tax expense in Q1 2025 is due to Resolute Holdings being taxed as a corporation, unlike CompoSecure Holdings which was a pass-through entity in the prior period[152] Segments The segmented results for Q1 2025 show Resolute Holdings generating management fees and a net loss, while CompoSecure Holdings generated product sales and net income, with intercompany fees eliminated in consolidation | Metric ($ in thousands) | Resolute Holdings (Q1 2025) | CompoSecure Holdings (Q1 2025) | Intercompany/Eliminations (Q1 2025) | Consolidated (Q1 2025) | | :---------------------- | :-------------------------- | :----------------------------- | :---------------------------------- | :--------------------- | | Management fees | 1,129 | — | (1,129) | — | | Product sales | — | 103,889 | — | 103,889 | | Net sales | 1,129 | 103,889 | (1,129) | 103,889 | | Income from operations | (2,797) | 26,608 | 1,810 | 25,621 | | Net income (loss) | (3,366) | 24,171 | 1,810 | 22,615 | Use of Non-GAAP Financial Measures The Company uses Fee-Related Earnings (FRE) and FRE per share as non-GAAP financial measures to evaluate Resolute Holdings' performance, providing a reconciliation to U.S. GAAP net income attributable to common stockholders - Fee-Related Earnings (FRE) and Fee-Related Earnings per share are non-GAAP measures used to evaluate Resolute Holdings' financial performance[154] - FRE is calculated by adjusting net income (loss) attributable to common stockholders for equity-based compensation, pro forma management fees, one-time Spin-Off costs, and net tax impact[154] | Metric | Three months ended March 31, 2025 ($ in thousands except per share figures) | | :---------------------------------------------- | :------------------------------------------------------------------------ | | Net income (loss) attributable to common stockholders | (3,366) | | Fee-Related Earnings | (606) | | Fee-Related Earnings per share | (0.07) | Critical Accounting Policies and Estimates This section refers to the Company's Annual Report on Form 10-K for the year ended December 31, 2024, and Note 2 of the current report for detailed information on critical accounting policies and estimates - Critical accounting policies and estimates are detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, and Note 2 of the current report[157] New Accounting Pronouncements This section refers to Note 2 of the Notes to Financial Statements for information concerning recent accounting pronouncements - Information regarding new accounting pronouncements is provided in Note 2 of the Notes to Financial Statements[159] Liquidity and Capital Resources The Company's liquidity sources include cash balances, operating cash flows, and revolving credit facilities for both Resolute Holdings and CompoSecure Holdings, with sufficient liquidity for the next 12 months - Primary liquidity sources are existing cash, cash flows from operations, and revolving credit facilities for both Resolute Holdings and CompoSecure Holdings[160] | Metric ($ in millions) | March 31, 2025 | December 31, 2024 | | :--------------------- | :------------- | :---------------- | | Cash and cash equivalents | 71.0 | 71.6 | | Total debt principal outstanding | 195.0 | 197.5 | - Resolute Holdings and CompoSecure Holdings are distinct legal entities requiring separate liquidity management, with debt at each entity being non-recourse to the other[162] - Resolute Holdings has a $5.0 million revolving credit facility (undrawn) and CompoSecure Holdings has a $130.0 million revolving credit facility (undrawn), both deemed sufficient for their respective liquidity needs for the next 12 months[162][164][166] Net Cash Provided by Operations Net cash provided by operating activities decreased by $17.3 million to $18.4 million in Q1 2025, primarily due to higher operating expenses, an increase in receivables, and a decrease in accrued expenses | Metric | Three months ended March 31, 2025 ($ in millions) | Three months ended March 31, 2024 ($ in millions) | | :-------------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Net cash provided by operating activities | 18.4 | 35.7 | - The decrease was primarily attributable to higher operating expenses, an increase in receivables, and a decrease in accrued expenses[169] Net Cash Used in Investing Activities Net cash used in investing activities decreased to $1.2 million in Q1 2025, primarily related to capital expenditures and capitalized software costs | Metric | Three months ended March 31, 2025 ($ in millions) | Three months ended March 31, 2024 ($ in millions) | | :------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | | Net cash used in investing activities | 1.2 | 1.6 | - Investing activities in Q1 2025 included $0.6 million in capital expenditures and $0.6 million in capitalized software costs[170] Net Cash Used in Financing Activities Net cash used in financing activities decreased to $17.8 million in Q1 2025, primarily due to significant payments for taxes related to net share settlement of CompoSecure equity awards and scheduled term loan principal payments | Metric | Three months ended March 31, 2025 ($ in millions) | Three months ended March 31, 2024 ($ in millions) | | :------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | | Net cash used in financing activities | 17.8 | 22.0 | - Key uses of cash in financing activities for Q1 2025 included $15.3 million for taxes related to net share settlement of CompoSecure equity awards and $2.5 million for term loan principal payments[171] Contractual Obligations A summary of the Company's minimum contractual obligations is included in its Annual Report on Form 10-K, with purchase commitments of approximately $8.8 million for the remainder of 2025 and $2.0 million for 2026 - The Company has purchase commitments of approximately $8.8 million for the remainder of 2025 and $2.0 million for 2026[173] Financing This section refers to Note 8 of the Consolidated Financial Statements for a comprehensive description of the Company's debt obligations, including the Resolute Credit Facility and the 2024 CompoSecure Holdings Credit Facility - A complete description of the Company's debt obligations is provided in Note 8 of the Consolidated Financial Statements[174] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's exposure to market risks, primarily interest rate risk on its variable rate debt, and the use of an interest rate swap agreement to hedge this risk Interest Rate Risk The Company is exposed to interest rate risk on its $195.0 million variable rate debt, with a $4.0 million annual impact for every 100 basis point change, partially hedged by an interest rate swap - The Company has $195.0 million in variable rate debt outstanding under the 2024 CompoSecure Holdings Credit Facility as of March 31, 2025[175] - A 100 basis point increase or decrease in the applicable interest rate would cause an approximate $4.0 million increase or decrease in annual interest expense[176] - CompoSecure Holdings has an interest rate swap agreement (December 2023 Swap) with a notional amount of $125,000 thousand and a fixed rate of 1.90%, expiring in December 2025, designated as an effective cash flow hedge[177][178] - The fair value of the interest rate swap was $2.0 million (asset) at March 31, 2025[178] Item 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures and any changes in internal control over financial reporting, noting effective controls and new corporate function implementation post-Spin-Off Evaluation of Disclosure Controls and Procedures Management concluded that the Company's disclosure controls and procedures were functioning effectively as of March 31, 2025, providing reasonable assurance for timely and accurate reporting - The Company's disclosure controls and procedures were evaluated and concluded to be functioning effectively as of March 31, 2025[180] - The controls are designed to provide reasonable assurance that information required for SEC reports is recorded, processed, summarized, and reported timely[179] Changes in Internal Control Over Financial Reporting During Q1 2025, the Company began implementing new corporate and governance functions to meet regulatory requirements as a standalone public company following the Spin-Off, with no other material changes - The Company commenced implementing new corporate and governance functions (external reporting, treasury, stock administration) during Q1 2025 to meet standalone public company regulatory requirements post-Spin-Off[182] - No other changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during Q1 2025[182] Part II. Other Information Item 1. Legal Proceedings As of May 12, 2025, the Company was not a party to any material pending legal proceedings, beyond ordinary routine claims incidental to CompoSecure Holdings' business - As of May 12, 2025, the Company was not a party to any material pending legal proceedings[184] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes in risk factors have occurred since the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[185] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the three months ended March 31, 2025, and no stock repurchases were made despite a Board-authorized program - There were no unregistered sales of equity securities in the three months ended March 31, 2025[186] - The Board authorized a stock repurchase program on February 8, 2025, but no repurchases were made during the three months ended March 31, 2025[187] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[188] Item 4. Mine Safety Disclosures This item is not applicable to the Company's operations - Mine Safety Disclosures are not applicable to the registrant[189] Item 5. Other Information This section includes disclosures on Rule 10b5-1 Trading Plans, noting no new adoptions or terminations by directors or officers during the quarter Rule 10b5-1 Trading Plans No directors or officers informed the Company of the adoption or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended March 31, 2025 - None of the Company's directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025[190] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including various agreements (e.g., Separation and Distribution, Management, Registration Rights, Tax Sharing), corporate documents, incentive plans, and certifications - Key exhibits include the Separation and Distribution Agreement, Management Agreement, Registration Rights Agreement, and U.S. State and Local Tax Sharing Agreement[192] - Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed[195] Signatures The report is duly signed on behalf of Resolute Holdings Management, Inc. by its Chief Executive Officer, Thomas Knott, and Chief Financial Officer, Kurt Schoen, on May 12, 2025 - The report was signed by Thomas Knott, Chief Executive Officer, and Kurt Schoen, Chief Financial Officer, on May 12, 2025[198]