
Part I. Financial Information This section details the company's financial statements and performance, highlighting the significant structural changes from the Resolute Holdings spin-off Financial Statements The financial statements reflect a major structural change due to the deconsolidation of its primary operating subsidiary - Effective February 28, 2025, due to the spin-off of Resolute Holdings and a new Management Agreement, CompoSecure, Inc. no longer consolidates its operating subsidiary, Holdings. Instead, it accounts for its investment in Holdings using the equity method92944 Consolidated Statements of Operations Highlights (Q1 2025 vs Q1 2024) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $59,824 | $104,010 | -42.5% | | Gross Profit | $28,749 | $55,213 | -48.0% | | Income from Operations | $6,044 | $31,136 | -80.6% | | Earnings in Equity Method Investment | $14,844 | $0 | N/A | | Net Income Attributable to CompoSecure, Inc. | $21,492 | $4,025 | +434% | | Diluted EPS | $0.07 | $0.17 | -58.8% | Consolidated Balance Sheet Highlights (As of March 31, 2025 vs Dec 31, 2024) | Metric | March 31, 2025 (in thousands) | Dec 31, 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $9,506 | $77,461 | -87.7% | | Total Assets | $292,323 | $473,918 | -38.3% | | Long-term debt, net | $0 | $184,389 | -100% | | Total Liabilities | $379,630 | $617,364 | -38.5% | | Equity method investment | $14,844 | $0 | N/A | Business Operations and Corporate Structure Changes The company manufactures metal cards and underwent a major restructuring via the spin-off of Resolute Holdings - The company is a manufacturer of metal financial transaction cards and offers the Arculus platform for secure authentication and digital asset storage23 - On February 28, 2025, the company completed the spin-off of Resolute Holdings. Consequently, Holdings is now managed by Resolute Holdings, and CompoSecure accounts for its investment in Holdings via the equity method2729 - The spin-off was structured as a pro rata distribution of Resolute Holdings stock to CompoSecure stockholders, with one share of Resolute for every twelve shares of CompoSecure held27 Equity Method Investment in Holdings The company now accounts for its investment in Holdings using the equity method following its deconsolidation - The carrying value of the equity method investment in Holdings was $14.844 million as of March 31, 2025, resulting entirely from earnings recognized post-deconsolidation5354 Holdings' Financial Summary (Post-Deconsolidation) | Metric | For period Feb 28 - Mar 31, 2025 (in thousands) | | :--- | :--- | | Net Sales | $44,065 | | Gross Profit | $25,799 | | Income from Operations | $15,722 | | Net Income | $14,844 | Debt All long-term debt was removed from the consolidated balance sheet due to the deconsolidation of Holdings - As of March 31, 2025, all debt has been removed from the Company's consolidated balance sheet due to the deconsolidation of Holdings. The debt is now carried by Holdings72 - All $130 million of Exchangeable Notes were surrendered and exchanged for Class A Common Stock in 2024 and are no longer outstanding59 - Holdings has a $330 million credit facility ($200M term loan, $130M revolver) maturing in August 2029. As of March 31, 2025, Holdings was in compliance with all financial covenants6370 Geographic Information and Concentrations Operations are primarily domestic, with significant customer and supplier concentration risks Net Sales by Geography (Q1 2025 vs Q1 2024) | Region | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Domestic | $54,480 | $92,790 | | International | $5,344 | $11,220 | | Total | $59,824 | $104,010 | - Customer concentration remains high. In Q1 2025, four customers accounted for 70.0% of total revenue. In Q1 2024, two customers accounted for 73.2% of total revenue99 Related Party Transactions New agreements with the spun-off Resolute Holdings establish management fees and define the new relationship - Holdings entered into a 10-year Management Agreement with Resolute Holdings, which will manage its day-to-day business and strategy121122 - Holdings will pay Resolute Holdings a quarterly management fee of 2.5% of its last 12 months' Adjusted EBITDA. The fee for the partial Q1 2025 period was $1.129 million121122 - CompoSecure, Resolute Holdings, and Holdings are under common control by Tungsten following the spin-off120 Management's Discussion and Analysis (MD&A) Management discusses the significant operational and financial impacts of the Resolute Holdings spin-off Results of Operations Quarterly results show decreased sales and profit due to deconsolidation, offset by non-cash income gains - The decrease in net sales, gross profit, and income from operations was primarily driven by the deconsolidation of Holdings on February 28, 2025, as Q1 2025 results only include two months of consolidated operations152156158 - Other income increased by $42.5 million year-over-year, primarily due to non-cash income of $29.2 million from changes in the fair value of earnout and warrant liabilities159 - The company recognized $14.8 million in earnings from its equity method investment in Holdings for the period from February 28, 2025, to March 31, 2025160 Use of Non-GAAP Financial Measures The company utilizes non-GAAP measures, including new ones post-spin-off, to provide comparable performance views - The company presents non-GAAP measures, including new ones post-spin-off, to provide a comparable view of underlying business performance across reporting periods163 Reconciliation of Net Income to Adjusted EBITDA | Metric (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $21,492 | $17,073 | | EBITDA | $53,190 | $24,204 | | Stock-based compensation expense | $5,720 | $4,397 | | Mark to market adjustments, net | ($29,151) | $9,153 | | Spin-Off costs | $5,019 | $0 | | Adjusted EBITDA | $34,778 | $37,754 | Non-GAAP Adjusted Net Income and EPS | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted net income (in thousands) | $28,412 | $23,317 | | Adjusted net income per share - diluted | $0.25 | $0.24 | Liquidity and Capital Resources Liquidity was significantly impacted by the deconsolidation, with cash decreasing but future cash flow deemed sufficient - Cash and cash equivalents decreased to $9.5 million as of March 31, 2025, from $77.5 million at December 31, 2024, primarily due to the deconsolidation of Holdings179 - Net cash provided by operating activities decreased to $3.0 million in Q1 2025 from $33.8 million in Q1 2024181 - Net cash used in investing activities was $60.7 million, primarily due to $60.3 million in cash deconsolidated as part of the Spin-Off and Management Agreement22182 Market Risk Disclosures Market risk is primarily driven by interest rate fluctuations on debt held by its unconsolidated subsidiary - The company is exposed to interest rate risk through its subsidiary Holdings, which had $195 million in variable-rate debt as of March 31, 2025186 - A 100 basis point change in interest rates would result in an approximate $4.0 million annual change in interest expense for Holdings187 - Holdings uses an interest rate swap with a notional value of $125 million to hedge a portion of its variable-rate debt exposure, which expires in December 2025188 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the quarter's end - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level191 - No material changes to the internal control over financial reporting occurred during the quarter ended March 31, 2025193 Part II. Other Information This section covers legal proceedings, key risk factors, and details on equity securities transactions Legal Proceedings The company is not involved in any material legal proceedings outside of ordinary business claims - The Company is not a party to any material pending legal proceedings, other than ordinary routine claims196 Risk Factors Key risks stem from the new corporate structure, customer dependency, and digital asset market uncertainties - Management Risk: The company relies on Resolute Holdings for management services, giving Resolute substantial influence over business, operations, and strategy, which exposes the company to performance risks and potential conflicts of interest197263 - Control Risk: The company is a 'controlled company' due to Tungsten's majority ownership, which may result in conflicts of interest and limits governance protections available to other shareholders197295 - Business & Customer Risk: The business is highly dependent on its two largest customers, JPMorgan Chase and American Express, which represented approximately 63% of net sales for the year ended December 31, 2024203 - Digital Asset Risk: The Arculus digital asset solutions face risks from a rapidly evolving and uncertain regulatory environment, potential security breaches, and the challenge of achieving widespread market acceptance197224 Unregistered Sales and Use of Proceeds No unregistered equity sales occurred, and no shares were repurchased under the authorized program this quarter - The company has a share repurchase program authorized for up to $100 million of its Class A Common Stock or warrants324 - There was no repurchase activity during the quarter ended March 31, 2025, leaving the full $100 million available for future repurchases324