• Net Sales: Increased by 10% to $108.6 million, a record level for the company.
• Gross Margin: 52%, down from 55% in the prior year.
• Net Income: Increased by 3% to $33.6 million.
• Adjusted EBITDA: Increased by 8% to $40 million, with a margin of 36.8%.
• Domestic Net Sales: $85.2 million, up 9% year-over-year.
• International Net Sales: Increased 14% to $23.4 million.
• Cash and Cash Equivalents: $35.4 million as of June 30, 2024.
• Total Debt: $330.9 million, including $200.9 million of term loan and $130 million of exchangeable notes.
• Operating Cash Flow: $66 million, a 24.6% increase from the previous period.
• GAAP EPS: $0.44 per basic share and $0.32 per diluted share.
• Non-GAAP Adjusted Net Income: Increased by 10% to $25.2 million.
• Non-GAAP Adjusted EPS: $0.31 per basic share and $0.27 per diluted share.
• Fiscal Year 2024 Guidance: Net sales between $418 million and $428 million; Adjusted EBITDA between $150 million and $157 million.

• Warning! GuruFocus has detected 9 Warning Signs with CMPO.

Release Date: August 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CompoSecure Inc (NASDAQ:CMPO) reported a record net sales increase of 10% to $108.6 million, marking the highest revenue in the company's history.
• The company announced a strategic transaction with the Dave Cote family, which is expected to unlock shareholder value and provide more than $20 million in incremental free cash flow annually.
• CompoSecure Inc (NASDAQ:CMPO) expanded its partnership with Fiserv to include the marketing and reselling of Arculus Authenticate, enhancing its market reach.
• The company has amended and extended its credit facility with favorable terms, providing more flexibility and capacity for growth.
• CompoSecure Inc (NASDAQ:CMPO) has narrowed its fiscal year 2024 guidance to the higher end, anticipating net sales between $418 million and $428 million and adjusted EBITDA between $150 million and $157 million.

Negative Points

• Gross margin for the quarter declined to 52% from 55% in the prior year, primarily due to product mix and inflationary pressures on wages.
• The company's cash balance decreased compared to the end of 2023, driven by a special cash dividend and tax distributions.
• Despite strong international demand, the international business is expected to come in slightly under typical levels for the full year.
• The company has not set a long-term guide for free cash flow conversion, leaving some uncertainty about future financial targets.
• There is no specific volume guidance provided for the partnership with Robinhood, leaving potential growth from this collaboration uncertain.

Q & A Highlights

Q: What's the sales sensitivity around the Robinhood card, and is it a possible source of upside within the guidance? A: Jonathan Wilk, CEO: We are very excited about the partnership with Robinhood, which includes both our core metal veneer gold card and limited edition solid gold cards. The excitement from their customers is high, and we believe it can be a growth opportunity. However, we won't comment on specific volumes but are optimistic about the program's potential.

Q: What is driving the underlying shift in the full-year guidance, and has there been any change in demand expectations? A: Jonathan Wilk, CEO: We had a strong quarter both domestically and internationally. International business rebounded after a slower first quarter, driven by new program launches. We expect international business to stabilize, contributing to strong domestic growth and a positive full-year outlook.

Q: Do you have a longer-term free cash flow conversion target, and how are you prioritizing capital return? A: Jonathan Wilk, CEO: Last year, our free cash flow conversion was about 13%. The elimination of the dual share class structure will unlock additional free cash flow, enhancing our ability to invest back into the business. We haven't set a long-term target but expect a significant improvement in this metric.

Q: Can you provide more details on the Fiserv Arculus partnership and its impact on distribution? A: Jonathan Wilk, CEO: The partnership with Fiserv validates our thesis that cards can serve as authentication tokens. Fiserv's extensive client roster offers a tremendous distribution opportunity, and we are excited to build on this partnership.

Q: How are you thinking about M&A, particularly in terms of consolidation versus product extension? A: Jonathan Wilk, CEO: We have an M&A framework considering both vertical and horizontal opportunities. While we haven't found a deal we love yet, we look forward to exploring options with Dave Cote and Tom Knott's expertise. It's early days, and we'll share more details in the future.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.