poSecure(US:CMPO)2022-11-03 16:00Financial Performance - Net sales for the quarter ended September 30, 2022, increased by $37.1 million, or 56%, to $103.3 million compared to $66.2 million for the same quarter in 2021 [168]. - Domestic net sales rose by $32.1 million, or 62%, to $83.8 million, while international net sales increased by $5.0 million, or 35%, to $19.5 million [170]. - Gross profit for the quarter ended September 30, 2022, increased by $25.6 million, or 71%, to $61.8 million, with a gross margin improvement from 55% to 60% [173]. - Net income for the quarter was $21.9 million, an increase from $18.7 million in the same quarter of 2021, primarily due to higher sales volume and a favorable change in the fair value of earnout consideration liabilities [177]. - Net sales for the nine months ended September 30, 2022, increased by $92.0 million, or 48%, to $284.7 million compared to $192.6 million for the same period in 2021 [182]. - Gross profit for the nine months ended September 30, 2022, increased by $63.8 million, or 60%, to $169.4 million, with a gross margin improvement from 55% to 59% [185]. - Net income for the nine months ended September 30, 2022, was $109.5 million, a 73% increase from $63.4 million in the same period in 2021 [189]. - Adjusted EBITDA for the nine months ended September 30, 2022, was $105.6 million, compared to $81.2 million for the same period in 2021 [192]. Operating Expenses - Operating expenses for the quarter increased by $21.6 million, driven by salaries and employee-related benefits, which accounted for $16.2 million of the increase [174]. - Operating expenses increased by $46 million, primarily due to higher salaries, marketing expenses, and stock-based compensation [186]. - The Company expects operating expenses to rise as a result of compliance with SEC regulations and other public company obligations [162]. Income and Margins - Income from operations for the quarter was $25.6 million, compared to $21.6 million for the same quarter in 2021, with operating margins decreasing to 25% from 33% [175]. - Income from operations was $90.0 million, with an operating margin of 32%, down from 37% in the previous year [187]. Interest Expense and Debt - Interest expense for the quarter increased by $2.9 million, or 102%, to $5.8 million, primarily due to the issuance of Exchangeable Notes in December 2021 [176]. - Interest expense increased by $7.5 million, or 85%, to $16.4 million, primarily due to the issuance of Exchangeable Notes [188]. - The effective interest rate on the Company's 2021 Credit Facility was 5.15% as of September 30, 2022 [208]. - The Company has $243.1 million in variable rate debt under the 2021 Credit Facility and $130.0 million in long-term debt from Exchangeable Notes as of September 30, 2022 [216]. - An increase or decrease of 100 basis points in the applicable interest rate would cause an increase or decrease in interest expense of approximately $4.0 million on an annual basis [217]. - The Company entered into interest rate swap agreements to hedge forecasted interest rate payments on its variable rate debt, with a notional amount of $125,000 at fixed rates of 1.06% and 1.90% [218]. Cash Flow and Liquidity - Cash provided by operating activities for the nine months ended September 30, 2022 was $90.9 million, an increase of $42.8 million compared to $48.0 million for the same period in 2021, primarily due to an increase in net income of $46.1 million [210]. - Cash used in investing activities for the nine months ended September 30, 2022 was $7.2 million, up from $3.9 million for the same period in 2021, primarily related to capital expenditures [211]. - Cash used in financing activities for the nine months ended September 30, 2022 was $90.1 million, compared to $45.3 million for the same period in 2021, mainly due to payment of issuance costs related to the Business Combination of $23.8 million [212]. - The Company anticipates that cash flows from operations and available cash will be sufficient to meet liquidity needs for at least the next 12 months, but additional liquidity may be required for significant acquisitions [205]. Business Development - The Company launched its Arculus platform in Q3 2021, which includes the Arculus Key card and Arculus Wallet mobile application, targeting the digital asset market [152]. - The Company is taking a measured approach to investments in the Arculus business due to uncertainties in the digital asset market and the impact of recent events on partners [157]. - The company experienced a significant increase in international sales driven by demand in the FinTech market and sales through international distributor channels [182]. Cash and Debt Position - As of September 30, 2022, the Company had cash and cash equivalents of $15.4 million and total debt principal outstanding of $373.1 million, compared to cash and cash equivalents of $21.9 million and total debt of $395.0 million as of December 31, 2021 [204]. - The 2021 Credit Facility includes a term loan of $250.0 million and a $60.0 million revolving loan facility, with $50.0 million available for borrowing as of September 30, 2022 [206].