poSecure(CMPO) - 2025 Q2 - Quarterly Results

Executive Summary CompoSecure achieved record Q2 2025 results, surpassing expectations with strong growth and improved profitability driven by its operating system Second Quarter 2025 Highlights CompoSecure achieved record Q2 2025 financial results, surpassing expectations with strong top-line growth and enhanced profitability from the CompoSecure Operating System - Operating results exceeded expectations across all key metrics[3] - Strong top-line growth driven by domestic programs from traditional banks and fintechs[3] - Record profitability demonstrates early results from CompoSecure Operating System[3] - Raising previously issued full-year 2025 guidance[3] Management Commentary & Strategic Focus CEO Jon Wilk highlighted accelerating sales, improved profitability, robust domestic demand, and growth across traditional banks and fintechs, with the Arculus platform achieving a net positive quarter and new customer launches - Strong second quarter driven by accelerating sales and improved profitability, fueled by robust domestic demand and growth across both traditional banks and fintechs[2] - Generated another net positive quarter for Arculus[2] - Saw exciting customer launches including Chase Sapphire Reserve, XP Legacy, Crypto.com, MGM Rewards, and Gemini[2] - The Arculus team announced the new Coinbase One Card, the first crypto card on the American Express network[2] - Anticipate sustained market demand as the company focuses on accelerating growth, delivering innovation, and executing against strategic priorities[2] - Focus on establishing operational excellence through the CompoSecure Operating System (COS) and building a high-performance culture is starting to deliver improved profitability[2] 2025 Financial Outlook CompoSecure raised its full-year 2025 guidance, projecting Non-GAAP Net Sales of approximately $455 million and Pro Forma Adjusted EBITDA of approximately $158 million, reflecting strong commercial and operational momentum Updated Full-Year 2025 Financial Outlook | Metric | New Guidance | Prior Guidance | | :----------------------- | :------------- | :------------- | | Non-GAAP Net Sales | ~$455 million | Mid-single digit growth | | Pro Forma Adjusted EBITDA | ~$158 million | Mid-single digit growth | Financial Performance Details CompoSecure's Q2 2025 financial results, covering accounting changes, Non-GAAP operating results, financial condition, and GAAP performance Accounting Changes and Presentation Effective February 28, 2025, CompoSecure adopted equity method accounting for CompoSecure Holdings L.L.C. due to a spin-off, presenting Non-GAAP consolidated results for historical comparability - CompoSecure is required to account for CompoSecure Holdings L.L.C. under the equity method, effective February 28, 2025, due to the spin-off of Resolute Holdings Management, Inc[4] - GAAP results for Q2 2025 reflect the conversion to equity method accounting[5] - The Company is presenting full Q2 results on a consolidated Non-GAAP basis for clarity and comparability with historical presentation[5] Q2 2025 Operating Results (Non-GAAP) CompoSecure reported a 10% increase in Non-GAAP Net Sales to $119.6 million, with Gross Profit rising to $68.8 million and gross margin expanding to 57.5% due to improved efficiencies and favorable product mix Q2 2025 Non-GAAP Operating Results (vs. Q2 2024) | Metric | Q2 2025 (Non-GAAP) | Q2 2024 (Non-GAAP) | Change (YoY) | | :-------------------------- | :----------------- | :----------------- | :----------- | | Net Sales ($ in millions) | $119.6 | $108.6 | +10% | | Gross Profit ($ in millions) | $68.8 | $56.1 | +22.6% | | Gross Margin (%) | 57.5% | 51.6% | +5.9 pp | | Pro-Forma Adjusted EBITDA ($ in millions) | $46.3 | $36.7 | +26.2% | | Adjusted EPS - Diluted | $0.25 | $0.23 | +8.7% | - Non-GAAP Net Sales increased 10% to $119.6 million, driven by strong domestic demand and growth across both traditional financial institutions and fintech partners[7] - Gross margin expansion reflects improved manufacturing efficiencies driven by the CompoSecure Operating System, along with favorable product mix[7] Financial Condition (Non-GAAP) As of June 30, 2025, CompoSecure's Non-GAAP financial condition showed $96.5 million in cash, $192.5 million in Total Debt, and a Net Debt leverage ratio of 0.66x, significantly improved from the prior year Non-GAAP Financial Condition (as of June 30) | Metric | June 30, 2025 (Non-GAAP) | June 30, 2024 (Non-GAAP) | Change | | :-------------------------- | :----------------------- | :----------------------- | :------- | | Cash and cash equivalents ($ in millions) | $96.5 | $35.4 | +$61.1M | | Total Debt ($ in millions) | $192.5 | $330.9 | -$138.4M | | Net Debt ($ in millions) | $96.0 | $295.5 | -$199.5M | | Net Debt leverage ratio | 0.66x | 2.15x | -1.49x | GAAP Financial Performance CompoSecure reported a GAAP Net Loss of ($26.1) million in Q2 2025, primarily due to non-cash revaluation of warrant and earnout liabilities, resulting in a diluted EPS of $(0.26) Q2 2025 GAAP Financial Performance (vs. Q2 2024) | Metric | Q2 2025 (GAAP) | Q2 2024 (GAAP) | | :------------------------------------------ | :------------- | :------------- | | Net (Loss) Income ($ in millions) | $(26.1) | $33.6 | | Earnings Per Share - Diluted | $(0.26) | $0.32 | - The net loss was driven by non-cash items relating to the revaluation of warrant and earnout liabilities[11] Company Overview & Innovation Overview of CompoSecure's metal payment card and security solutions, highlighting product innovations and strategic partnerships About CompoSecure Founded in 2000, CompoSecure is a technology partner specializing in metal payment cards, security, and authentication solutions, aiming to deliver elegant, simple, and secure experiences - Founded in 2000, CompoSecure is a technology partner to market leaders, fintechs, and consumers[15] - Specializes in metal payment cards, security, and authentication solutions[1] - Combines elegance, simplicity, and security to deliver exceptional experiences and peace of mind in the physical and digital world[15] Product and Partnership Highlights CompoSecure's Arculus platform integrates security into payment card technology, highlighted by the Coinbase One Card launch with American Express, bridging Web3 and traditional finance, and four ICMA Élan Awards - Arculus security and authentication capabilities deliver unique, premium branded experiences[15] - Arculus partnered with Coinbase, Cardless, and American Express to launch Coinbase One Card—the first crypto card on the American Express network—aimed at bridging the gap between Web3 and traditional finance[16] - Received four prestigious ICMA (International Card Manufacturers Association) Élan Awards[16] Non-GAAP Financial Measures Explains the rationale for Non-GAAP measures, providing comparability, representing standalone business performance, and offering operational insights Rationale for Non-GAAP Presentation Non-GAAP measures are presented to provide greater comparability to historical financial data and better represent standalone business performance following the spin-off and shift to equity method accounting - Non-GAAP measures are presented due to the spin-off of Resolute Holdings Management, Inc. and the resulting shift to equity method accounting under GAAP beginning February 28, 2025[18] - The presentation aims to provide investors with financial information that allows for greater comparability with historical financial presentation and better represents the underlying performance of the standalone business[18] - Non-GAAP measures provide valuable insight into operational efficiency, ongoing profitability, and a clearer view by excluding non-recurring and non-operational items[19] - These Non-GAAP measures are used internally to establish forecasts, budgets, operational goals, and evaluate historical performance[19] Financial Statements & Reconciliations Presents detailed GAAP and Non-GAAP financial statements, including balance sheets, operations, cash flows, and EPS reconciliations for Q2 2025 Balance Sheets The balance sheets provide CompoSecure's financial position as of June 30, 2025, under GAAP and Non-GAAP frameworks, detailing cash, assets, liabilities, and shareholders' deficit Selected Balance Sheet Data (in thousands) | Metric | June 30, 2025 (GAAP) | June 30, 2025 (Non-GAAP) | Dec 31, 2024 (GAAP) | | :---------------------------------- | :------------------- | :--------------------- | :------------------ | | Cash and cash equivalents | $4,808 | $96,474 | $77,461 | | Total current assets | $5,905 | $214,205 | $173,902 | | Total assets | $317,296 | $515,989 | $473,918 | | Total current liabilities | $51,820 | $116,402 | $76,322 | | Long-term debt, net | — | $177,071 | $184,389 | | Total liabilities | $423,672 | $672,508 | $617,364 | | Shareholders' deficit | $(106,376) | $(156,519) | $(143,446) | Statements of Operations The statements of operations present GAAP and Non-GAAP results for Q2 2025, showing Non-GAAP Net Sales of $119.6 million and a GAAP net loss of $(26.1) million due to non-cash revaluation items Selected Statements of Operations Data (Three Months Ended June 30, in thousands) | Metric | Q2 2025 (GAAP) | Q2 2025 (Non-GAAP) | Q2 2024 (GAAP) | | :------------------------------------------ | :------------- | :----------------- | :------------- | | Net sales | $— | $119,592 | $108,567 | | Cost of sales | $— | $50,792 | $52,495 | | Gross profit | $— | $68,800 | $56,072 | | Selling, general and administrative expenses | $2,656 | $30,438 | $24,279 | | Revaluation of warrant liability | $(53,436) | $(53,436) | $5,604 | | Revaluation of earnout consideration liability | $(10,721) | $(10,721) | $1,928 | | Net (loss) income | $(26,125) | $(26,125) | $33,597 | | Pro Forma Adjusted EBITDA | | $46,322 | $36,705 | Statements of Cash Flows The statements of cash flows detail cash movements for the six months ended June 30, 2025, showing Non-GAAP net cash provided by operating activities of $51.8 million and ending cash of $96.5 million Selected Statements of Cash Flows Data (Six Months Ended June 30, in thousands) | Metric | 2025 (GAAP) | 2025 (Non-GAAP) | 2024 (GAAP) | | :------------------------------------------ | :------------ | :-------------- | :------------ | | Net (loss) income | $(4,633) | $(4,633) | $50,670 | | Net cash provided by operating activities | $3,048 | $51,830 | $66,000 | | Net cash used in investing activities | $(60,690) | $(2,798) | $(3,527) | | Net cash used in financing activities | $(15,011) | $(30,019) | $(68,298) | | Net (decrease) increase in cash and cash equivalents | $(72,653) | $19,013 | $(5,825) | | Cash and cash equivalents, end of period | $4,808 | $96,474 | $35,391 | Earnings Per Share Reconciliation This section reconciles GAAP net income to Adjusted Net Income and Adjusted EPS for Q2 2025, reporting a Non-GAAP Adjusted Net Income of $28.4 million and an Adjusted Diluted EPS of $0.25 Adjusted Net Income and EPS (Three Months Ended June 30, in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :------------------------------------------ | :------ | :------ | | Net (loss) income (GAAP) | $(26,125) | $33,597 | | Adjusted net income | $28,391 | $22,448 | | Adjusted net income per share - basic | $0.28 | $0.28 | | Adjusted net income per share - diluted | $0.25 | $0.23 | | Total Shares outstanding used in computing adjusted earnings per share Diluted | 114,894 | 104,735 | - Adjustments include mark-to-market adjustments, stock-based compensation, Proforma Management fees, Spin-off costs, and secondary offering transaction costs[28] Additional Information Provides Q2 2025 earnings call details, forward-looking statements with risks, and corporate and investor relations contact information Earnings Conference Call Details CompoSecure's Q2 2025 results will be discussed during a conference call on Thursday, August 7, 2025, at 5:00 p.m. Eastern Time, with a webcast available on the Investor Relations website - Date: Thursday, August 7, 2025[14] - Time: 5:00 p.m. Eastern time[14] - 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[13](index=13&type=chunk) Forward-Looking Statements This section contains forward-looking statements based on management's beliefs, subject to inherent risks and uncertainties, and the company disclaims any obligation to update them except as required by law - Statements are based on the beliefs and assumptions of management and are inherently subject to risks, uncertainties, and assumptions[17] - Factors that could affect future results include the ability to grow and manage growth profitably, maintain customer relationships, competition, global economic factors, legal proceedings, future exchange and interest rates, and changes in accounting[17] - CompoSecure undertakes no obligation 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[17] Corporate and Investor Relations Contacts Contact information for CompoSecure's Head of Communications, Anthony Piniella, and Investor Relations contact, Sean Mansouri of Elevate IR, is provided for inquiries - Corporate Contact: Anthony Piniella, Head of Communications, CompoSecure, (917) 208-7724, apiniella@composecure.com[20] - Investor Relations Contact: Sean Mansouri, CFA, Elevate IR, (720) 330-2829, CMPO@elevate-ir.com[20]