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CompoSecure, Inc. Announces Record Second Quarter 2022 Financial Results and Raises 2022 Guidance

  • Second quarter Net Sales of $97.2 million, up 54.9% year-over-year
  • Second quarter Net Income of $60.7 million, up 182.4% year-over-year
  • Second quarter Adjusted EBITDA of $39.7 million, up 45.2% year-over-year
  • Arculus named most Innovative Cold Storage Wallet by ABI Research
  • Raises 2022 full year fiscal guidance

CompoSecure, Inc. (Nasdaq: CMPO), a leader in payment, security, and authentication solutions, today announced financial results for the second quarter ended June 30, 2022.

Jon Wilk, CompoSecure’s President and CEO commented, “We had an outstanding quarter, and I am proud that we have achieved record results through strong sales execution, deep customer relationships, and international expansion. Looking ahead, we expect continued growth in our metal payment card business driven by both new customers and expansion of business from our existing base. In addition, we believe that we will benefit from ongoing card issuer trends such as the robust demand for travel and entertainment spending, and the high demand for premium metal card products.”

He continued, “Current challenges in the digital asset market, including crypto exchanges freezing or limiting withdrawals, are driving an increased need for consumers to control their private keys, and we are encouraged by recent partnerships for security, authentication, and cold storage leveraging our Arculus platform. At the same time, this market cycle has created uncertainty in timing for our anticipated Arculus ramp up since some of our partners and targets have been impacted. As we have stated, we continue to be thoughtful about how we are running the business and remain focused on margins while simultaneously managing our investments to capture long-term value for our shareholders. We are confident that our Arculus platform is well positioned to meet the current and anticipated needs of the market.”

Mr. Wilk added, “We have delivered exceptional results through the first half of the year while navigating a dynamic environment. Given our performance and continued confidence in the strength of our sales pipeline, we are raising our 2022 full fiscal year guidance.”

Second Quarter 2022 Financial Highlights

  • Net Sales: Net Sales for the second quarter of 2022 were $97.2 million, up 54.9% compared to $62.7 million in the second quarter of 2021, and grew 15.0% sequentially from the first quarter of 2022
  • Net Income: Net Income for the second quarter of 2022 was $60.7 million compared to a net income of $21.5 million in the second quarter of 2021.
  • Adjusted EBITDA: Adjusted EBITDA for the second quarter of 2022 was $39.7 million, compared to $27.3 million for the second quarter of 2021, up 45.2% year over year.
  • Gross Profit/Margin: Gross Profit for the second quarter of 2022 was $58.9 million, compared to $35.1 million for the second quarter of 2021. Gross margin for the second quarter of 2022 was 60.6%, compared to 56.0% for the second quarter of 2021.
  • Earnings Per Share: Net Income Per Share attributable to Class A common stockholders for the second quarter of 2022 was $.56 per share (basic) and $.52 per share (diluted).
  • Change in EPS Accounting Policy: Adopted alternative method under U.S. GAAP for calculating basic and diluted EPS by allocating changes in fair value adjustments of mark-to-market instruments among the public company and operating subsidiaries to better reflect the actual economic impact of conversion of such instruments on net income on a per share basis.

Second Quarter 2022 Highlights

  • Record Net Sales driven by strong sales execution, new customers and expansion of business from existing base.
  • Strong international growth with second quarter international Net Sales of $27.1 million, 71.0% higher than second quarter of 2021 due to expansion of international sales team, distributor growth, and demand for premium payment cards in international markets.
  • Arculus ranked as the most innovative Cold Storage Wallet by ABI Research and included as one of the top three leaders for storing cryptocurrency and other digital assets.
  • InBestGo, a Latin American based fintech, has selected CompoSecure to launch a metal credit card that combines premium payment card technology and best-in-class digital authentication; Separately, InBestGo to white label the Arculus cold storage wallet, giving their users the option to securely custody their own keys for their digital assets.

Financial Outlook

  • Full Year 2022 Guidance: The Company is raising its full fiscal year 2022 guidance. For the full year 2022 the Company now expects Net Sales to be in the range of $355mm to $380mm (up from $336mm to $376mm) and full year 2022 Adjusted EBITDA guidance to be in the range of $110mm to $120mm (up from $100mm to $110mm).

Conference Call and Webcast

CompoSecure will host a webcast and simultaneous conference call today at 5:00 p.m. Eastern Time to review the Company’s financial results for the second quarter ended June 30, 2022. To access the webcast, please register at CompoSecure Q1 Earnings Webcast. You may also register to access via a conference call. A live webcast of the conference call will be accessible from the Investors section of our website at https://ir.composecure.com/news-events/events.

About CompoSecure

Founded in 2000, CompoSecure (Nasdaq: CMPO) is a technology partner to market leaders, fintechs and consumers enabling trust for millions of people around the globe. The company combines elegance, simplicity and security to deliver exceptional experiences and peace of mind in the physical and digital world. CompoSecure’s innovative payment card technology and metal cards with Arculus security and authentication capabilities deliver unique, premium branded experiences, enable people to access and use their financial and digital assets, and ensure trust at the point of a transaction. For more information, please visit www.composecure.com and www.GetArculus.com.

Forward-Looking Statements

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management. Although the Company believes that its plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, the Company cannot assure you that it will achieve or realize these plans, intentions, or expectations. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning the Company’s possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. In some instances, these statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” or the negatives of these terms or variations of them or similar terminology. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the date hereof. You should understand that the following important factors, among others, could affect the Company’s future results and could cause those results or other outcomes to differ materially from those expressed or implied in the Company’s forward-looking statements: the outcome of any legal proceedings that may be instituted against the Company or others; the impacts of the ongoing COVID-19 pandemic; the ability of the Company to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees; the possibility that the Company may be adversely impacted by other economic conditions (including the rapidly evolving conflict between Russian and the Ukraine), business, and/or competitive factors; future exchange and interest rates; and other risks and uncertainties included under “Risk Factors” in other Company filings that have been made or will be made with the Securities and Exchange Commission. The Company undertakes no obligations 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.

Use of Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and that may be different from non-GAAP financial measures used by other companies. The Company believes EBITDA and Adjusted EBITDA are useful to investors in evaluating the Company’s financial performance. The Company uses these measures internally to establish forecasts, budgets and operational goals to manage and monitor its business, as well as evaluate its underlying historical performance and to measure incentive compensation, as we believe that these non-GAAP financial measures depict the true performance of the business by encompassing only relevant and controllable events, enabling the Company to evaluate and plan more effectively for the future. In addition, the Company’s debt agreements contain covenants that use a variation of these measures for purposes of determining debt covenant compliance. The Company believes that investors should have access to the same set of tools that its management uses in analyzing operating results. EBITDA and Adjusted EBITDA should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing the Company’s financial performance. Accordingly, these key business metrics have limitations as an analytical tool. They should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of the Company’s liquidity and may be different from similarly titled non-GAAP measures used by other companies. Please refer to the tables below for the reconciliation of net income to EBITDA and Adjusted EBITDA for the quarters and years ended June 30, 2022 and June 30, 2021.

CompoSecure, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 

Three Months Ended June 30,

 

Six Months Ended June 30,

2022

 

2021

 

2022

 

2021

Net sales

$

97,199

 

$

62,743

 

$

181,382

 

$

126,465

 

 
Operating expenses:
Cost of sales

 

38,347

 

 

27,633

 

 

73,771

 

 

57,039

 

Selling, General and administrative

 

24,431

 

 

10,739

 

 

43,209

 

 

18,796

 

Total operating expenses

 

62,778

 

 

38,372

 

 

116,980

 

 

75,835

 

 
Income from operations

 

34,421

 

 

24,371

 

 

64,402

 

 

50,630

 

 
Total other income (expense), net

 

29,039

 

 

(2,891

)

 

26,509

 

 

(5,928

)

Income before income taxes

 

63,460

 

 

21,480

 

 

90,911

 

 

44,702

 

Income tax provision

 

(2,802

)

 

-

 

 

(3,345

)

 

-

 

Net income

 

60,658

 

 

21,480

 

 

87,566

 

 

44,702

 

 
Net income attributable to non-controlling interests

 

52,184

 

 

-

 

 

75,628

 

 

-

 

Net income attributable to CompoSecure, Inc

$

8,474

 

$

21,480

 

$

11,938

 

$

44,702

 

 
Net income per share attributable to Class A common stockholders -basic

$

0.56

 

 

n/a

 

$

0.80

 

 

n/a

 

Net income per share attributable to Class A common stockholders - diluted

$

0.52

 

 

n/a

 

$

0.75

 

 

n/a

 

 
Weighted average shared used to compute net income per share attributable to Class A common stockholders - basic

 

15,052

 

 

n/a

 

 

14,993

 

 

n/a

 

Weighted average shared used to compute net income per share attributable to Class A common stockholders - diluted

 

32,363

 

 

n/a

 

 

32,341

 

 

n/a

 

CompoSecure, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Six Months Ended June 30,

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

$

87,566

 

$

44,702

 

Adjustments to reconcile net income to net cash provided by operating activities
Depreciation

 

4,567

 

 

5,173

 

Equity-based compensation expense

 

4,020

 

 

784

 

Amortization of deferred finance costs

 

1,252

 

 

774

 

Change in fair value of earnout consideration liability

 

(19,041

)

 

-

 

Revaluation of warrant liability

 

(18,041

)

 

-

 

Change in fair value of derivative liability

 

61

 

 

-

 

Deferred tax expense

 

3,094

 

 

-

 

Changes in assets and liabilities
Accounts receivable

 

(17,282

)

 

(20,542

)

Inventories

 

(2,938

)

 

(192

)

Prepaid expenses and other assets

 

(1,144

)

 

(515

)

Accounts payable

 

(201

)

 

(1,600

)

Deposits and other assets

 

-

 

 

(3,681

)

Accrued expenses

 

10,262

 

 

2,125

 

Other liabilities

 

(782

)

 

180

 

Net cash provided by operating activities

 

51,393

 

 

27,206

 

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment

 

(3,504

)

 

(1,251

)

Net cash used in investing activities

 

(3,504

)

 

(1,251

)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit

 

10,000

 

 

-

 

Payment of line of credit

 

-

 

 

(5,000

)

Payment of term loan

 

(16,878

)

 

(12,000

)

Distributions

 

(25,731

)

 

(14,602

)

Payment of issuance cost related to business combination

 

(23,833

)

 

-

 

Net cash used in financing activities

 

(56,442

)

 

(31,602

)

Net decrease in cash and cash equivalents

 

(8,553

)

 

(5,647

)

Cash and cash equivalents, beginning of period

 

21,944

 

 

13,422

 

Cash and cash equivalents, end of period

$

13,391

 

$

7,775

 

 
Supplementary disclosure of cash flow information
Cash paid for interest expense

$

9,638

 

$

5,136

 

Supplemental disclosure of non-cash financing activity:
Derivative asset - interest rate swap

$

5,590

 

$

-

 

CompoSecure, Inc.
Condensed Consolidated Balance Sheet Data
(in thousands)
 
June 30, 2022 December 31, 2021
(unaudited)
ASSETS
Cash and cash equivalents

$

13,391

 

$

21,944

 

Accounts Receivable, net

 

45,208

 

 

27,925

 

Inventories

 

28,743

 

 

25,806

 

Prepaid expenses and other current assets

 

3,740

 

 

2,596

 

Property and equipment, net

 

21,114

 

 

22,177

 

Right of use asset, net

 

9,286

 

 

5,246

 

Deferred tax asset

 

24,777

 

 

25,650

 

Derivative asset - interest rate swap

 

5,590

 

 

-

 

Deposits and other assets

 

10

 

 

10

 

TOTAL ASSETS

$

151,859

 

$

131,354

 

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt

$

4,997

 

 

12,500

 

Current portion of lease liabilities

 

1,664

 

 

1,119

 

Accounts payable

 

6,857

 

 

7,058

 

Accrued expenses

 

23,482

 

 

13,220

 

Deferred issuance costs

 

-

 

 

23,107

 

Bonus payable

 

2,676

 

 

3,512

 

Long-term debt, net of deferred finance costs

 

224,787

 

 

233,132

 

Convertible notes, net of debt discount

 

127,119

 

 

126,897

 

Derivative liability - convertible notes

 

613

 

 

552

 

Warrant liability

 

17,230

 

 

35,271

 

Line of credit

 

25,000

 

 

15,000

 

Earnout liability

 

19,386

 

 

38,427

 

Lease liabilities

 

8,257

 

 

4,709

 

Tax receivable agreement liability

 

24,897

 

 

24,500

 

Total stockholders' (deficit)

 

(335,106

)

 

(407,650

)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

151,859

 

$

131,354

 

CompoSecure, Inc.
Non-GAAP Adjusted EBITDA Reconciliation
(in thousands)
(unaudited)
 
 

Three Months Ended June 30,

 

Six Months Ended June 30,

2022

 

2021

 

2022

 

2021

Net income

$

60,658

 

$

21,481

$

87,566

 

$

44,703

Add:
Depreciation

 

2,217

 

 

2,587

 

4,567

 

 

5,173

Interest expense, net

 

5,547

 

 

2,891

 

10,513

 

 

5,928

Taxes

 

2,802

 

 

-

 

3,345

 

 

-

EBITDA

$

71,224

 

$

26,959

$

105,991

 

$

55,804

Equity compensation expense

 

3,014

 

 

343

 

4,020

 

 

784

Mark to market adjustments (1)

 

(34,586

)

 

-

 

(37,021

)

 

-

Adjusted EBITDA

$

39,652

 

$

27,302

$

72,990

 

$

56,588

 
(1) Includes the changes in fair value of warrant liability, derivative liabilities and earnout consideration liability for the quarter and year ended June 30, 2022.

 

CompoSecure, Inc. announces record second quarter 2022 financial results and raises 2022 guidance.

Contacts

Anthony Piniella

Head of Communications, CompoSecure

Phone: 908.898.8887

Email: ir@composecure.com

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