Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2025 were essentially flat at $103.9 million compared to the prior year [16] - Consolidated gross margin decreased to 52.5% from 53.1% in the same quarter of the prior year [16] - Pro forma adjusted EBITDA decreased by 2% to $33.7 million, driven by higher general and administrative expenses [17] - Adjusted net income increased by 21% to $28.4 million, with adjusted diluted EPS rising to $0.25 from $0.24 [18] Business Line Data and Key Metrics Changes - The Payment Card and Arculus business started the year in line with expectations, with program activity remaining strong [10] - Arculus delivered record results for the quarter, contributing positively with new vertical industry wins [10][14] - Domestic net sales decreased by $3.3 million or 4%, while international net sales increased by $3.1 million or 28% [18] Market Data and Key Metrics Changes - The metal payment card market continues to show strong issuer adoption and end-user preference, with demand strengthening in Q2 [13] - The company is seeing momentum building in both Payment Cards and Arculus, anticipating sustained growth through the remainder of the year [11] Company Strategy and Development Direction - The company is focused on organic growth through the implementation of the CompoSecure Operating System (COS) to enhance operational excellence [11][24] - The strategy includes evaluating M&A opportunities that align with the company's growth profile and create long-term value [25] - The company aims to maintain a disciplined approach to capital allocation, balancing organic growth, M&A, and potential buybacks [84] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the company's positioning and growth trajectory despite macroeconomic headwinds such as rising labor costs and economic uncertainty [25] - The company is reaffirming its full-year 2025 guidance, expecting mid-single-digit growth in both consolidated net sales and pro forma adjusted EBITDA [24] Other Important Information - The company is now required to report results using the equity method of accounting following the spin-off of Resolute Holdings, which affects how financial results are presented [19] - Non-GAAP financial measures are provided to help investors understand the underlying economics of the business [4][19] Q&A Session Summary Question: Is the guidance maintained due to macro environment conservatism? - Management indicated that the guidance reflects expected mid-single-digit growth, with momentum building into Q2 and beyond [30] Question: What areas are the biggest focus for acquisition? - The company is looking at opportunities within its current space and along the value chain, maintaining a broad remit for potential acquisitions [32] Question: How is the remainder of the year expected to unfold in terms of revenue growth? - Management expects growth to tick up in Q2 and continue building through Q3 and Q4, with no signs of macroeconomic impacts affecting client activity [39][42] Question: What traction is being seen with Arculus among legacy issuers? - The company is seeing traction in traditional banks, fintechs, and gaming sectors, with a focus on moving towards passkey technology [75] Question: How is the M&A pipeline looking amid recent tariffs? - The M&A pipeline remains healthy, with the company positioned as an attractive acquirer in the market [77]

Core Insights - CompoSecure, Inc. reported strong execution in its payment card and Arculus business, with expectations for sustained growth throughout 2025 [2][12] - The company achieved record results for Arculus, indicating a positive contribution and differentiation in the digital asset and Web3 payments landscape [2][11] - The financial results reflect a transition to equity method accounting following the spin-off of Resolute Holdings Management, impacting the presentation of operating results [3][4] Financial Results - For Q1 2025, net sales were $59.8 million, a decrease from $104.0 million in Q1 2024, while non-GAAP net sales were $103.9 million [5][13] - Gross profit for Q1 2025 was $28.7 million, with a gross margin of 48.1%, compared to $55.2 million and 53.1% in Q1 2024 [5][13] - Adjusted net income increased by 21% to $28.4 million, while diluted adjusted EPS was $0.25, compared to $0.24 in the prior year [13][29] Financial Condition - As of March 31, 2025, CompoSecure had $9.5 million in cash and cash equivalents, with total debt of $195.0 million, resulting in net debt of $180.7 million [13][19] - The company's liquidity needs are expected to be met through the operations of CompoSecure Holdings [13][19] - The bank agreement's senior secured debt leverage ratio improved to 1.05x from 1.34x year-over-year [13][19] 2025 Financial Outlook - CompoSecure reiterated its full-year 2025 guidance, projecting mid-single digit growth in both consolidated net sales and Pro Forma Adjusted EBITDA [12][18] - The company anticipates continued sales momentum throughout the year, supported by strategic investments and the implementation of the CompoSecure Operating System [2][12]