GPGI, Inc.
For the period ended Mar 31, 2025. Filed May 12, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 12, 2025
GPGI$14.21+4.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0001823144-24-000012
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-12.
0001823144-25-000008
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 91 previous paragraphs and 88 current paragraphs.
20 unchanged; 27 reworded; 37 added; 40 removed; 4 previous and 4 current paragraphs rearranged.
Tables are not compared: 8 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (37)
Current report
On September 27, 2024, Resolute Holdings Management, Inc. ("Resolute Holdings") was created as a wholly owned subsidiary of to Holdings. On February 28, 2025, the Company completed the previously-announced spin-off (the "Spin-Off") of Resolute Holdings. In connection with the Spin-Off, Holdings entered into a management agreement (the "Management Agreement") pursuant to which Resolute Holdings provides management and other related services to Holdings in exchange for payment of quarterly management fees based on 2.5% of trailing twelve-month adjusted EBITDA. The Spin-Off of Resolute Holdings from the Company was achieved through the distribution of all outstanding shares of common stock, par value $0.0001 per share, of Resolute Holdings (the "Resolute Holdings Common Stock"), on a pro rata basis, to holders of record of the Company’s Class A Common Stock, par value $0.0001 per share (the “CompoSecure Common Stock”). Each holder of record of CompoSecure Common Stock received one share of Resolute Holdings Common Stock for every twelve shares of CompoSecure Common Stock held on February 20, 2025, the record date for the Spin-Off. In lieu of fractional shares of Resolute Holdings Common Stock, holders of CompoSecure Common Stock received cash.
Current report
The distribution of shares in connection with the Spin-Off constituted an Extraordinary Dividend as defined in the agreement governing the Company's outstanding warrants (the "warrant agreement"). As a result, the warrant price was decreased from $11.50 per share of CompoSecure Common Stock to $7.97 per share of CompoSecure Common Stock, and the redemption trigger price was decreased from $18.00 per share of CompoSecure Common Stock to $14.47 per share of CompoSecure Common Stock, effective as of February 28, 2025.
Current report
By virtue of control of the board of managers of Holdings, the Company historically operated and controlled the business and affairs of Holdings and thus consolidated Holdings. As of February 28, 2025 and subsequent to the Spin-Off and execution of the Management Agreement, control of Holdings transferred to Resolute Holdings and the Company no longer consolidates Holdings. Rather, the Company accounts for the investment in Holdings as an equity method investment.
Current report
In particular, a portion of the raw materials used by us to manufacture our products are obtained, directly or indirectly, from companies located outside of the United States. There is currently significant uncertainty about the future relationship between the U.S. and various other countries with respect to trade policies and tariffs. Recently, tariffs have been imposed on imports from certain countries outside of the United States. For example, the Trump administration has instituted substantial changes to U.S. foreign trade policy with respect to China and other countries, including a significant increase in tariffs on goods imported into the U.S., and has signaled possibly imposing further restrictions on international trade. As a result, further trade restrictions and/or tariffs may be forthcoming. Certain international trade agreements may also be at risk, as the current U.S. administration has voiced some opposition in respect thereof. These factors may stagnate the economy, impact relationships with and access to suppliers, increase the costs of certain raw materials we purchase, and/or materially and adversely affect our business, financial condition and results of operations. These and future tariffs, including any retaliatory tariffs that may be imposed by other countries on U.S. exports, as well as uncertainties surrounding domestic and foreign tariffs and any other global trade developments, bring with them uncertainty. We cannot predict future changes to imports covered by tariffs or which countries will be included or excluded from such tariffs. The reactions of other countries and resulting actions on the United States and similarly situated companies could negatively impact our business, financial condition and results of operations.
Current report
Overview
Current report
The below components of results of operations primarily relate to the operations of Holdings prior to the Spin-Off and when the Company consolidated the operating results of Holdings. Subsequent to the Spin-Off, the Company's operations are limited to non-revenue generating activities such as its stock market listing, compliance with public company reporting obligations, obligations under the tax receivable agreement and the earnout consideration.
Current report
Net Sales
Current report
Gross Profit and Gross Margin
Current report
Operating Expenses
Current report
Income from Operations and Operating Margin
Current report
Earnings in CompoSecure Holdings, L.L.C. Equity Method Investment
Current report
Earnings in CompoSecure Holdings, L.L.C. Equity Method Investment consists of the net income of CompoSecure Holdings, L.L.C. attributable to the Company resulting from the Company's equity method investment in CompoSecure Holdings, L.L.C.
Current report
Net Income
Current report
Three Months Ended March 31, 2025 compared with Three Months Ended March 31, 2024
Current report
Net Sales
Current report
The Company’s net sales for the three months ended March 31, 2025 decreased by $44.2 million, or 42%, to $59.8 million compared to $104.0 million for the three months ended March 31, 2024. The decrease was driven by the deconsolidation of Holdings on February 28, 2025. Holdings generated $44.1 million of net sales from February 28, 2025 to March 31, 2025.
Current report
Domestic: The Company’s domestic net sales for the three months ended March 31, 2025 decreased $38.3 million, or 41%, to $54.5 million compared to $92.8 million for the three months ended March 31, 2024. Holdings generated $35.1 million of domestic net sales from February 28, 2025 to March 31, 2025.
Current report
International: The Company’s international net sales for the three months ended March 31, 2025 decreased $5.9 million , or 52%, to $5.3 million compared to $11.2 million for the three months ended March 31, 2024. The international customer base is comprised of a larger population of smaller customers relative to the domestic customer base. Holdings generated $9.0 million of international net sales from February 28, 2025 to March 31, 2025.
Current report
Gross Profit and Gross Margin
Current report
The Company’s gross profit for the three months ended March 31, 2025 decreased $26.5 million, or 48%, to $28.7 million compared to $55.2 million for the three months ended March 31, 2024, while the gross profit margin decreased from 53% to 48%. The decrease in gross profit was primarily driven by the deconsolidation of Holdings as a result of the Spin-Off on February 28, 2025. Holdings generated $25.8 million of gross profit from February 28, 2025 to March 31, 2025. Gross margin declined as a result of inefficiencies associated with new card constructions.
Current report
Operating Expenses
Current report
The Company’s operating expenses for the three months ended March 31, 2025 decreased $1.4 million, or 6%, to $22.7 million compared to $24.1 million for the three months ended March 31, 2024. The decrease was driven primarily by the deconsolidation of Holdings as a result of the Spin-Off on February 28, 2025. Holdings incurred $10.1 million of operating expenses from February 28, 2025 to March 31, 2025. Additionally, costs associated with employees and professional costs at Resolute Holdings prior to the Spin-Off and costs associated with the Spin-Off offset the decrease in operating expenses related to the deconsolidation and Spin-Off.
Current report
Income from Operations and Operating Margin
Current report
Other Income (Expense), Net
Current report
Other income for the three months ended March 31, 2025 was $27.6 million as compared to other expense of $14.9 million for the three months ended March 31, 2024. The change in other income (expense) was primarily due to changes in the fair value of earnout consideration liability, warrant liability and make-whole liability resulting in non-cash income of $29.2 million for the three months ended March 31, 2025, compared to an expense of $9.2 million for the three months ended March 31, 2024, as well as a decrease in net interest expense of $4.2 million resulting from the conversion of all Exchangeable Notes into shares of Class A Common Stock during the fourth quarter of 2024 and the deconsolidation of Holdings as a result of the Spin-Off on February 28, 2025. As a result of the deconsolidation, all debt and related interest was removed from the Company's financial position and results of operations.
Current report
Earnings in CompoSecure Holdings, L.L.C. Equity Method Investment
Current report
Earnings in CompoSecure Holdings, L.L.C. equity method investment consists of $14.8 million of net income of Holdings attributable to the Company. The equity method investment resulted from the deconsolidation associated with the Spin-Off and related Management Agreement. Refer to Note 5 in the consolidated financial statements for the results of our equity method investment.
Current report
Income Tax Expense (Benefit)
Current report
The Company's income tax expense for the three months ended March 31, 2025 was $27.0 million, compared to an income tax benefit of $0.8 million for the three months ended March 31, 2024. The increase in tax expense was primarily related to the taxable gain on appreciated property resulting from the Spin-Off.
Current report
Due to the Spin-Off of Resolute Holdings and the related Management Agreement, and the resulting shift to equity method accounting under GAAP beginning February 28, 2025, CompoSecure is presenting a broader set of non-GAAP measures, including Net Sales and Gross Profit on a consolidated basis, to provide investors with consistent, comparable financial information that better represents the underlying performance of the business across reporting periods.
Current report
(3)The presented adjustments include amounts related to both the Company and its equity method investment in Holdings.
Current report
The Exchangeable Notes were included through the application of the "if-converted" method. Interest related to the Exchangeable Notes, net of tax was excluded from net income. No Exchangeable Notes were outstanding during the three months ended March 31, 2025.
Current report
Recently Adopted Accounting Policies
Current report
for the year ended December 31, 2024.
Current report
Cash provided by the Company’s operating activities for the three months ended March 31, 2025 was $3.0 million as compared to cash provided by its operating activities of $33.8 million during the three months ended March 31, 2024. The decrease in cash provided by operating activities of $(30.7) million was primarily attributable to a favorable changes in mark to market fair values of $38.3 million and equity in net income of Holdings of $14.8 million. These decreases were partially offset by an increase in net income of $4.4 million and an increase in working capital of $19.6 million.
Current report
Net Cash Used in Financing
Current report
Holdings is party to the 2024 Credit Facility with various banks. For more information on the 2024 Credit Facility, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 6 to the Company's financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 5, 2025.
Removed paragraphs (40)
Previous report
On June 11, 2024, the Company paid a special cash dividend to Class A shareholders of CompoSecure, Inc., and made a corresponding distribution to Class B unitholders of Holdings. As a result of the special cash dividend and distribution, the conversion price of the exchangeable notes was adjusted to $10.98 per share, which resulted in an adjustment to the exchange rate to 91.0972 shares of the Company’s Class A Common Stock per $1,000 principal amount of Notes exchanged. On September 17, 2024, as a result of the Resolute Transaction a majority interest of the Company was acquired through privately negotiated sales. See Note 6 for additional information on the special cash dividend and sale of the majority interest.
Previous report
The sale of the majority interest and subsequent filing of a Schedule 13D report with the SEC by Resolute on September 19, 2024 triggered the occurrence of a “Make-Whole Fundamental Change” (as defined in the Indenture under which the exchangeable notes were issued), pursuant to which the Company, on September 20, 2024, issued a Notice of Make-Whole Fundamental Change to the holders of the exchangeable notes to notify the holders that the exchange rate for the exchangeable notes has been temporarily increased from 91.0972 shares of Class A Common Stock per $1,000 principal amount of notes to 104.5199 shares of Class A Common Stock per $1,000 principal amount of notes. This temporary increase in the exchange rate resulted in an adjustment of the conversion price to $9.57 per share from September 19, 2024 to November 29, 2024. Following that date, the conversion price will revert back to $10.98 per share and the exchange rate will revert back to 91.0972 shares of the Company’s Class A Common Stock per $1,000 principal amount of notes.
Previous report
Effective September 19, 2024, Resolute’s acquisition of a majority of the Company’s common stock caused a "Fundamental Change" (as defined in the Indenture). This Fundamental Change provides holders of the exchangeable notes a choice to: (1) exchange the Notes for shares of Class A Common Stock at a temporarily increased exchange rate of 104.5199 shares per $1,000 principal amount of notes until November 27, 2024 (with the exchange rate then reverting to the existing 91.0972 shares per $1,000 principal amount of Notes); (2) have the Company repurchase for cash of all of such holder’s notes on November 29, 2024 at a repurchase price equal to 100% of the principal amount of the notes to be repurchased plus accrued and unpaid interest; or (3) continue to hold the Notes. A notice was sent to all holders of notes on October 9, 2024 providing details of these choices. Through November 6, 2024, an aggregate of $51.4 million of the Notes have been surrendered and exchanged for an aggregate of 5.4 million newly-issued shares of Class A Common Stock.
Previous report
On August 7, 2024, the Company entered into a Fourth Amended and Restated Credit Agreement with JPMC and and the lenders party thereto to refinance its senior secured indebtedness, which increased the maximum borrowing capacity of the credit facility to $330,000 comprising of a term loan of $200,000 and a revolving credit facility of $130,000. The senior credit facility is set to mature on August 7, 2029.
Previous report
On August 7, 2024, all of the Class B stockholders of the Company and Resolute entered into stock purchase agreements, pursuant to which the selling shareholders would exchange their 51,908,422 Class B units (and corresponding Class B shares) for Class A shares, eliminating the Company's existing dual-share class structure. On September 17, 2024, the Resolute Transaction closed and Resolute became the majority owner of the Company by acquiring 49,290,409 of the Class A Common Stock of the Company for an aggregate purchase price of approximately $372.1 million, or $7.55 per share, representing an approximately 60% voting interest. The Company was not party to stock purchase transactions. Prior to these transactions, Class B holders held Class B units in Holdings. Subsequent to the Resolute Transaction, CompoSecure owned 100% of Holdings. As a result of the Resolute Transaction, the Company no longer has Class B shares outstanding or a non-controlling interest as of September 30, 2024. The Company's tax receivable agreement liability and future payments thereunder increased as the Company realized an increase in tax basis of Holdings’ assets resulting from the exchange of Holdings' equity by unitholders in connection with the Resolute Transaction.
Previous report
During the quarter ended September 30, 2024, the trading price of the Company's Class A Common Stock increased from $6.89 on July 1, 2024 to $14.02 on September 30, 2024. The increase in the stock price was a primary driver to changes in the fair value of earnout consideration liability and warrant liability of $125.0 million, which had a material effect on the Company's operating results included in this report.
Previous report
Net (Loss) Income
Previous report
Three months ended September 30, 2024 vs. three months ended September 30, 2023
Previous report
The Company’s net sales for the quarter ended September 30, 2024 increased $10.2 million, or 11%, to $107.1 million compared to $96.9 million for the quarter ended September 30, 2023. The increase was primarily driven by strong sales in the international market, which was up 115%, offset by lower domestic sales which decreased by 5%.
Previous report
Domestic: The Company’s domestic net sales for the quarter ended September 30, 2024 decreased $4.3 million, or 5%, to $80.0 million compared to $84.3 million for the quarter ended September 30, 2023. The decrease was primarily due to the timing of orders. As noted below, domestic sales have increased 9% year-to-date.
Previous report
International: The Company’s international net sales for the quarter ended September 30, 2024 increased $14.5 million, or 115%, to $27.1 million compared to $12.6 million for the quarter ended September 30, 2023. International sales as a percentage of total sales was higher at 25% and 13% of the Company's total net sales for the quarter ended
Previous report
September 30, 2024 and 2023, respectively. The international market is more variable due to customer mix and a smaller sales base.
Previous report
The Company’s gross profit for the quarter ended September 30, 2024 increased $6.5 million, or 13%, to $55.4 million compared to $48.9 million for the quarter ended September 30, 2023. The gross profit margin percentage increased by 2%, to 52%, compared to 50% for the quarter ended September 30, 2023. The increase was primarily due to favorable product mix and improved product efficiencies.
Previous report
The Company’s operating expenses increased $6.2 million, or 31%, to $26.3 million for the quarter ended September 30, 2024 compared to $20.1 million for the quarter ended September 30, 2023. The increase was primarily due to increase in professional fees of $2.3 million, an increase in salaries of $2.3 million, and an increase in stock based compensation expense of $1.0 million. Professional fees during the quarter increased primarily due to the Resolute Transaction and salaries and stock based compensation expense increased as a result of added headcount.
Previous report
Income from operations for the quarter ended September 30, 2024 increased $0.3 million, or 1%, to $29.1 million compared to $28.8 million for the quarter ended September 30, 2023. The increase was primarily attributable to an increase in net sales. Operating margin for the quarter ended September 30, 2024 decreased by 3%, to 27%, compared to 30% for the quarter ended September 30, 2023. The decrease in operating margin was primarily attributable to the increase in operating expenses described above.
Previous report
Other (Expense) Income, net
Previous report
Other expense for the quarter ended September 30, 2024 increased $124.1 million, to $113.9 million of expense, compared to $10.2 million of income for the quarter ended September 30, 2023. The increase in other expense was primarily due to changes in the fair value of earnout consideration liability and warrant liability of $125.0 million, based on changes in the fair value of such liabilities resulting primarily from the significant improvement in the market price of our Class A Common Stock.
Previous report
Income Tax Expense
Previous report
The Company's income tax expense for the quarter ended September 30, 2024 was $0.6 million compared to $0.9 million for the quarter ended September 30, 2023.
Previous report
Nine months ended September 30, 2024 vs. Nine months ended September 30, 2023
Previous report
The Company’s net sales for the nine months ended September 30, 2024 increased $29.0 million, or 10%, to $319.7 million compared to $290.7 million for the nine months ended September 30, 2023. The increase was primarily driven by domestic growth in the Company’s premium payment card business, which was up 9%. and international sales which were up by 13%
Previous report
Domestic: The Company’s domestic net sales for the nine months ended September 30, 2024 increased $22.1 million, or 9%, to $258.0 million compared to $235.9 million for the nine months ended September 30, 2023. The increase was primarily due to higher customer acquisition by the Company’s clients as they continue to experience higher demand for their products.
Previous report
International: The Company’s international net sales for the nine months ended September 30, 2024 increased $6.9 million, or 13%, to $61.7 million compared to $54.8 million for the nine months ended September 30, 2023. International net sales remained flat at 19% of the Company's total net sales for the nine months ended September 30, 2024 and 2023. As described above, the international market is more variable due to customer mix and a smaller sales base.
Previous report
The Company’s gross profit for the nine months ended September 30, 2024 increased $10.5 million, or 7%, to $166.7 million compared to $156.2 million for the nine months ended September 30, 2023. The gross profit margin percentage decreased by 2%, to 52%, compared to 54% for the nine months ended September 30, 2023. The decrease was primarily due to product mix, specifically lower production efficiencies from new and innovative card constructions as well as the impact of inflationary pressure on wages and materials during the nine months ended September 30, 2024.
Previous report
The Company’s operating expenses for the nine months ended September 30, 2024 increased $7.0 million, or 10%, to $74.7 million compared to $67.6 million for the nine months ended September 30, 2023. The increase was primarily due to an increase in salaries of $4.1 million and increase in stock-based compensation expense of $2.2 million resulting from increases in headcount.
Previous report
Other Expense, net
Previous report
Other expenses for the nine months ended September 30, 2024 increased $120.4 million, or 1878%, to $126.8 million compared to $6.4 million for the nine months ended September 30, 2023. The overall increase in other expenses was primarily due to changes in the fair value of earnout consideration liability and warrant liability of $122.6 million, based on changes in the fair value of such liabilities resulting primarily from the significant improvement in the market price of our Class A Common Stock. and changes in a derivative liability related to a make-whole provision of $0.8 million. The balance is offset by lower interest expense resulting from principal payments made on the outstanding term loan.
Previous report
Income Tax Expense
Previous report
The Company's income tax expense for the nine months ended September 30, 2024 was $0.1 million, compared to $0.7 million for the nine months ended September 30, 2023. The decrease in the income tax expense is attributable to a change in the Company's interim effective tax rate. The Company's interim effective tax rate, inclusive of any discrete items, was (0.15)% and 0.80% for the nine months ended September 30, 2024 and September 30, 2023, respectively.
Previous report
The Company did not include the effect of Exchangeable Notes in its total shares outstanding used in diluted adjusted net income per share.
Previous report
New Accounting Pronouncements
Previous report
On August 7, 2024, the Company entered into a Fourth Amended and Restated Credit Agreement with JPMC (the “2024 Credit Facility” and collectively with the 2021 Credit Facility, the “Credit Facilities”) to refinance the 2021 Credit Facility. In conjunction with the 2024 Credit Facility, the maximum borrowing capacity of the overall credit facility was increased to $330 million comprising of a term loan of $200,000 (the “2024 Term Loan”) and a revolving credit facility of $130 million (the “2024 Revolver”). At September 30, 2024, there was $200 million of total debt outstanding under the Company’s existing credit facilities (the “2024 Credit Facility”). No amounts were drawn on the revolving credit facility as of September 30, 2024. Additional amounts may be available for borrowing during the term of the revolving loan, up to the full $130 million, as long as the Company maintains a net leverage ratio as stipulated in the credit facility agreement. As of September 30, 2024, the Company’s net leverage ratio met the requirement for the available borrowing as defined in the terms of the credit facility agreement. The 2024 Credit Facility will mature on August 7, 2029.
Previous report
Two lenders who participated in the 2021 Credit Facility did not participate in the 2024 Credit Facility and transferred their debt to other lenders. The 2024 Credit Facility is set to mature on August 7, 2029. The 2024 Credit Facility was accounted for as an extinguishment for the two lenders who transferred their debt and as a modification for all other remaining lenders. As a result, the Company wrote-off approximately $0.1 million in unamortized debt issuance costs related to the lenders who did not participate in the 2024 Credit Facility which is included in Loss on Extinguishment of Debt in Other Expense in the accompanying consolidated statements of operations.
Previous report
In conjunction with the 2024 Credit Facility, the Company incurred approximately $0.7 million in lender fees and $0.1 million in other third-party fees related to the 2024 Revolver and approximately $1.1 million in lender fees and $0.2 in other third-party fees related to the 2024 Term Loan. The $1.1 million of lender fees related to the 2024 Term Loan have been capitalized and these fees, along with $0.8 million of unamortized debt issuance costs related to the 2021 Credit Facility, will be amortized into interest expense through the maturity date of the 2024 Term Loan using the effective interest method. Similarly $0.7 million of lender fees and $0.1 million of other third-party fees related to the 2024 Revolver have been capitalized as an other long-term asset and will be amortized into interest expense through the maturity date of the 2024 Revolver using the straight-line method. The $0.2 million other third-party fees related to the 2024 Term Loan were expensed as incurred.
Previous report
The Company’s Credit Facilities, including the 2024 Credit Facility, require the Company to make quarterly principal payments until maturity, at which point a balloon principal payment is due for the outstanding principal. The Credit Facilities also require the Company to make monthly interest payments as well as pay a quarterly unused commitment fee of 0.35% for any unused portion of the revolving credit facilities. The 2024 Credit Facility provide for the Company to prepay the term loans without penalty or premium. The Credit Facilities are secured by substantially all of the assets of the Company.
Previous report
Interest on the revolving credit facilities and the term loans are based on the outstanding principal amount during the interest period multiplied by the quoted SOFR rate plus the which can range from 1.75% to 2.75% based on the Company's leverage ratio. The Credit Facilities also require the Company to make monthly interest payments as well as pay a quarterly unused commitment fee of 0.35% for any unused portion of the revolving credit facilities.
Previous report
The 2024 Credit Facility contains customary covenants, including among other things, certain restrictions or limitations on indebtedness, issuance of liens, investments, asset sales, certain mergers or consolidations, sales, transfers, leases or dispositions of substantially all of the Company’s assets, and affiliate transactions. The Company may also be required to make repayments on the 2021 Credit Facility in advance of the maturity date based on a calculation of excess cash flows, as defined in the agreement, with any required payments to be made after the issuance of the Company’s annual financial statements. The Company was in compliance with all covenants as of September 30, 2024. See Note 5 in Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Previous report
On April 19, 2021, concurrently with the execution of the Merger Agreement, the Company and its subsidiary, Holdings entered into subscription agreements (the “Note Subscription Agreements”) with certain investors ("Notes Investors") pursuant to which such Notes investors, severally and not jointly, purchased on the Closing Date of the Business Combination, senior notes (the “Exchangeable Notes”) issued by Holdings and guaranteed by its operating subsidiaries, CompoSecure, L.L.C. and Arculus Holdings, L.L.C., in an aggregate principal amount of up to $130.0 million that are exchangeable into shares of Class A common stock at a conversion price of $11.50, subject to adjustments. The conversion price is currently $9.57 for the period from September 19, 2024 to November 29, 2024. After that period, the conversion price will return to $10.98 per share, subject to the terms and conditions of the Indenture entered into with the trustee under the Indenture. The Exchangeable Notes bear interest at a rate of 7% per year, payable semiannually in arrears. The Exchangeable Notes will mature on December 27, 2026, and are exchangeable for shares of Class A common stock. The Company will settle any exchange of the Exchangeable Notes in shares of Class A common stock, with cash payable in lieu of any fractional shares. Additional interest may be payable as set forth in the Indenture. See Note 5 in Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q. Through November 6, 2024, an aggregate of $51.4 million of the Notes have been surrendered and exchanged for an aggregate of 5.4 million newly-issued shares of Class A Common Stock.
Previous report
Cash provided by the Company’s operating activities for the nine months ended September 30, 2024 was $94.1 million compared to cash provided by operating activities of $77.9 million during the nine months ended September 30, 2023. The increase in cash provided by operating activities of $16.3 million was primarily attributable to non-cash charges of $109.8 million related to changes in the Company's earnout consideration liability and warrant liability based on changes in the fair value of such liabilities resulting primarily from the significant improvement in the market price of our Class A Common Stock, equity compensation expense of $15.3 million, depreciation and amortization expense of $6.9 million, amortization of deferred financing costs of $1.0 million and changes in working capital of $0.6 million. This was partially offset by net loss of $34.8 million, and deferred tax benefit of $4.8 million
Previous report
The Company is a party to the 2024 Credit Facility with various banks and has issued Exchangeable Notes to certain holders. For a more complete description of the Company's debt obligations, see Note 5 of Notes to Consolidated Financial Statements in the Consolidated Financial Statements of the Company in this Quarterly Report on Form 10-Q.
Reworded paragraphs (27)
Previous wording
The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with the Company's audited consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC. The following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere particularly in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included in this Quarterly Report on Form 10-Q.
Current wording
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company's audited consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere particularly in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included in this Quarterly Report on Form 10-Q.
Previous wording
The Company creates innovative, highly differentiated and customized financial payment card products for banks and other payment card issuers to support and increase their customer acquisition, customer retention and organic customer spend. The Company’s customers consist primarily of leading international and domestic banks and other payment card issuers primarily within the United States (“U.S.”), with additional direct and indirect customers in Europe, Asia, Latin America, Canada, and the Middle East. The Company is a platform for next generation payment technology, security, and authentication solutions. The Company maintains trusted, highly-embedded and long-term customer relationships with an expanding set of global issuers. The Company has established a niche position in the financial payment card market through over 20 years of innovation and experience and is focused primarily on this attractive subsector of the financial technology market. The Company serves a diverse set of direct customers and indirect customers, including some of the largest issuers of credit cards in the U.S.
Current wording
The Company, together with its wholly owned subsidiary, CompoSecure Holdings, L.L.C. ("Holdings") and its operating subsidiaries, creates innovative, highly differentiated and customized financial payment card products for banks and other payment card issuers to support and increase their customer acquisition, customer retention and organic customer spend. The Company’s customers consist primarily of leading international and domestic banks and other payment card issuers primarily within the United States (“U.S.”), with additional direct and indirect customers in Europe, Asia, Latin America, Canada, and the Middle East. The Company is a platform for next generation payment technology, security, and authentication solutions. The Company maintains trusted, highly-embedded and long-term customer relationships with an expanding set of global issuers. The Company has established a niche position in the financial payment card market through over 20 years of innovation and experience and is focused primarily on this attractive subsector of the financial technology market. The Company serves a diverse set of direct customers and indirect customers, including some of the largest issuers of credit cards in the U.S.
Previous wording
U.S. and international markets and, in particular, the rapidly evolving digital assets industry, are experiencing uncertain and volatile economic conditions, including Russian aggression in Ukraine, the ongoing conflict in Israel, Gaza and the surrounding areas, sustained inflation, threats or concerns of recession, and supply chain disruptions. These conditions make it extremely difficult for us and our suppliers to accurately forecast and plan future business activities. Additionally, a significant downturn in the domestic or global economy may cause our existing customers to pause or delay orders and prospective customers to defer new projects. Together, these circumstances create an environment in which it is challenging for us to predict future operating results. If these uncertain business, macroeconomic or political conditions continue or further decline, our business, financial condition and results of operations could be materially adversely affected.
Current wording
U.S. and international markets, and particularly the rapidly evolving digital assets industry, are experiencing uncertain and volatile economic conditions, including the war in Ukraine, the ongoing conflict in Israel, Gaza and the surrounding areas, sustained inflation, international trade restrictions and tariffs, threats or concerns of recession, and supply chain disruptions. These conditions make it extremely difficult for us and our suppliers to accurately forecast and plan future business activities. Additionally, a significant downturn in the domestic or global economy may cause our existing customers to pause or delay orders and prospective customers to defer new projects. Together, these circumstances create an environment in which it is challenging for us to predict future operating results. If these uncertain business, macroeconomic or political conditions continue or further decline, our business, financial condition and results of operations could be materially adversely affected.
Previous wording
The Company’s Arculus platform offers a broad range of secure authentication and digital asset storage solutions and enables our consumer Arculus Cold Storage Wallet for digital assets. We believe consumers can achieve enhanced protection by controlling their private keys with a cold storage wallet, such as the Arculus Cold Storage Wallet. At the same time, this market cycle has created uncertainty in timing for our anticipated Arculus ramp up, as some of our partners and targets have been impacted. Therefore, we are taking a measured approach to better target the timing of our investments to support near-term and long-term opportunities.
Current wording
The Company’s Arculus platform offers a broad range of secure authentication and digital asset storage solutions and enables our consumer Arculus Cold Storage Wallet for digital assets. We believe consumers can achieve enhanced protection by controlling their private keys with a cold storage wallet, such as the Arculus Cold Storage Wallet. At the same time, this market cycle has created uncertainty in timing for our anticipated Arculus ramp up, as some of our partners and targets have been impacted. Therefore, we have been taking a measured approach to better target the timing of our investments to support near-term and long-term opportunities.
Previous wording
The Company’s cost of sales includes the direct and indirect costs related to manufacturing products and providing related services. Product costs include the cost of raw materials and supplies, including various metals, EMV® chips, holograms, adhesives, magnetic stripes, and NFC assemblies; the cost of labor; equipment and facilities; operational overhead; depreciation and amortization; leases and rental charges; shipping and handling; and freight and insurance costs.
Current wording
The Company’s cost of sales includes the direct and indirect costs related to manufacturing products and providing related services. Product costs include the cost of raw materials and supplies, including various metals, EMV® chips, holograms, adhesives, magnetic stripes, and NFC assemblies; the cost of labor; equipment and facilities; operational overhead; depreciation and amortization; leases and rental charges; shipping and handling; and freight and insurance costs. Cost of sales can be impacted by many factors, including volume, operational efficiencies, procurement costs, and promotional activity.
Previous wording
The Company’s operating expenses are primarily comprised of selling, general, and administrative expenses, which generally consist of personnel-related expenses for its corporate, executive, finance, information technology, and other administrative functions, and expenses for outside professional services, including legal, audit and accounting services, as well as expenses for facilities, depreciation, amortization, travel, sales and marketing.
Current wording
The Company’s operating expenses are comprised of selling, general, and administrative expenses, which generally consist of personnel-related expenses for its corporate, executive, finance, information technology, and other administrative functions, expenses for outside professional services, including legal, audit and accounting services, as well as expenses for facilities, depreciation, amortization, travel, sales and marketing.
Previous wording
Net (loss) income consists of the Company’s income from operations, less other expenses and income tax provision or benefit.
Current wording
Net income consists of the Company’s income from operations, less other expenses and income tax provision or benefit.
Previous wording
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges. Please see the factors discussed in this Quarterly Report on Form 10-Q, including those discussed in the sections entitled “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements” and "Recent Developments" for additional information.
Current wording
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges. Please see the factors discussed elsewhere in this Quarterly
Previous wording
During the nine months ended September 30, 2024, the Company had income from operations of $92.0 million compared to income from operations of $88.6 million for the nine months ended September 30, 2023. The operating margin for the nine months ended September 30, 2024 decreased to 29% compared to 30% for the nine months ended September 30, 2023. The decrease in operating margin percentage was primarily due to the noted decrease in gross margin and increases in operating expenses offset by revenue growth..
Current wording
During the three months ended March 31, 2025, the Company had income from operations of $6.0 million compared to income from operations of $31.1 million for the three months ended March 31, 2024. The Company’s operating margin for the three months ended March 31, 2025 decreased to 10% compared to 30% for the three months ended March 31, 2024. The decrease in income from operations and operating margin was driven primarily by the deconsolidation of Holdings as a result of the Spin-Off on February 28, 2025.
Previous wording
This Quarterly Report on Form 10-Q may include 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, Adjusted EBITDA, Adjusted net income, and Adjusted net income per share 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, Adjusted EBITDA, Adjusted net income and Adjusted net income per share should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted net income per share 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.
Current wording
This Form 10-Q 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, Adjusted EBITDA, Adjusted Net Income, and non-GAAP earnings per share are useful to investors in evaluating the Company’s financial performance.
Previous wording
The following unaudited table presents the reconciliation of net income to EBITDA and Adjusted EBITDA for the periods indicated:
Current wording
The following unaudited table presents the reconciliation of net income to EBITDA and Adjusted EBITDA for the three months ended March 31, 2025 and 2024.
Previous wording
(1)Includes amortization of deferred financing cost and loss on extinguishment of debt for the three and nine months ended September 30, 2024 and 2023, respectively.
Current wording
(1)Includes amortization of deferred financing costs for the three months ended March 31, 2025 and 2024.
Previous wording
(2)Includes the changes in fair value of warrant liability, derivative liabilities and earnout consideration liability for the three and nine months ended September 30, 2024 and 2023, respectively.
Current wording
(2)Includes the changes in fair value of warrant liability, derivative liabilities and earnout consideration liability for the three months ended March 31, 2025 and 2024.
Previous wording
The following unaudited table presents the non-GAAP earnings per share and reconciliation of GAAP net income to non-GAAP adjusted net income for the periods indicated:
Current wording
The following unaudited table presents the non-GAAP earnings per share and reconciliation of GAAP net income to non-GAAP adjusted net income for the periods indicated below to reflect current and deferred income tax expenses. The below presentation does not include a full tax provision. The Company applies a blended tax rate to its income before taxes and to all adjustments. Additionally, the below table includes Class B shares to eliminate the impact of the Company's historical Up-C structure.
Previous wording
Includes the changes in fair value of warrant liability and earnout consideration liability.
Current wording
Includes the changes in fair value of warrant liability, make-whole provision of Exchangeable Notes and earnout consideration liability.
Previous wording
Calculated using the Company's blended tax rate.
Current wording
2)Reflects current and deferred income tax expenses. For the three months ended March 31, 2024 it was calculated using the Company's blended tax rate as if the Company did not have any non-controlling interest associated with its historical Up-C structure. For the three months ended March 31, 2025, it was calculated by applying the Company's blended tax rate to the presented adjustments and including the Company's provision less tax associated with a taxable gain from the distribution of appreciated property related to the Spin-Off.
Previous wording
Assumes both Class A shares and Class B shares participate in earnings and are outstanding at the end of the period.
Current wording
Assumes both Class A and Class B shares participate in earnings and are outstanding at the end of the period. There were no Class B shares outstanding as of March 31, 2025.
Previous wording
Assumes treasury stock method, valuation at assumed fair market value of $18.00.
Current wording
Assumes treasury stock method, valuation at assumed fair market value of $14.47 and $18.00 for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
Critical accounting policies are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
Critical accounting policies are detailed in the Company’s Annual Report on Form 10-K for the year ended
Previous wording
Reference is made to Note 2 of Notes to Financial Statements - unaudited in Item 1, “Financial Statements,” for information concerning recent accounting pronouncements since the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
information concerning recent accounting pronouncements since the filing of the Company’s Annual Report on Form 10-K
Previous wording
The Company’s primary sources of liquidity are its existing cash and cash equivalents balances, cash flows from operations and borrowings on its term loan, revolving credit facility and Exchangeable Notes. The Company’s primary cash requirements include operating expenses, debt service payments (principal and interest), including possible repurchase of exchangeable notes (as described above), and capital expenditures (including property and equipment).
Current wording
CompoSecure, Inc's primary sources of liquidity are its existing cash and cash equivalents balances and funding from its wholly owned subsidiary, Holdings. Holdings primary sources of liquidity are its existing cash and cash equivalents balances, cash flows from operations and borrowings on its term loan and revolving credit facility. The Company’s primary cash requirements include limited operating expenses relating primarily to public company expenses such as D&O insurance, professional fees, and stock exchange listing fees.
Previous wording
As of September 30, 2024, the Company had cash and cash equivalents of $52.7 million and debt principal outstanding of $330.0 million. As of December 31, 2023, the Company had cash and cash equivalents of $41.2 million and total debt principal outstanding of $340.3 million.
Current wording
As of March 31, 2025, the Company had cash and cash equivalents of $9.5 million. As of December 31, 2024, the Company had cash and cash equivalents of $77.5 million and total debt principal outstanding of $197.5 million. The decrease in cash and cash equivalents and debt resulted from the adoption of equity method accounting presentation for Holdings on February 28, 2025 as a result of the Spin-Off and Management Agreement.
Previous wording
The Company believes that cash flows from its operations and available cash and cash equivalents, as well as the availability of a revolving credit facility of $130.0 million (as described below), are sufficient to meet its liquidity needs, including the repayment of its outstanding debt, including possible repurchase of exchangeable notes (as described above), for at least the next 12 months from the date of filing of this Form 10-Q. The Company anticipates that to the extent that it requires additional liquidity, it will be funded through borrowings on its revolving credit facility, the incurrence of other indebtedness, or a combination thereof and offering of its shares in capital markets. The Company cannot be assured that it will be able to obtain this additional liquidity on reasonable terms, or at all. Additionally, the Company’s liquidity and its ability to meet its obligations and fund its capital requirements are also dependent on its future financial performance, which is subject to general economic, financial and other factors that are beyond its control. Accordingly, the Company cannot be assured that its business will generate sufficient cash flows from operations or that future borrowings will be available from additional indebtedness or otherwise to meet its liquidity needs. Although the Company has no specific current plans to do so, if the Company decides to pursue one or more significant acquisitions, the Company may incur additional debt to finance such acquisitions.
Current wording
The Company believes that Holdings' cash flows from its operations and available cash and cash equivalents at March 31, 2025 of $9.5 million as well as its available $130.0 million under the 2024 Revolver, are sufficient to meet the liquidity needs of Holdings and the Company, including the repayment by Holdings of its outstanding debt, for at least the next 12 months. The Company anticipates that to the extent that Holdings requires additional liquidity, it will be funded through borrowings on its revolving credit facility, the incurrence of other indebtedness, or a combination thereof and/or offering of its shares in capital markets. The Company cannot be assured that it or Holdings will be able to obtain this additional liquidity on reasonable terms, or at all. Additionally, the liquidity of the Company and Holdings and their ability to meet their obligations and their capital requirements are also dependent on the future financial performance of Holdings, which is subject to general economic, financial and other factors that are beyond its control. Accordingly, the Company cannot be assured that Holdings will generate sufficient cash flows from operations or that future borrowings will be available from additional indebtedness or otherwise to meet the liquidity needs of the Company and Holdings. Although the Company has no specific current plans to do so, if the Company decides to pursue one or more significant acquisitions, the Company and/or Holdings may incur additional debt to finance such acquisitions.
Previous wording
Net Cash Used in Investing Activities
Current wording
Net Cash Used in Investing
Previous wording
Cash used in the Company’s investing activities for the nine months ended September 30, 2024 was $5.5 million primarily relating to capital expenditures of $4.8 million and capitalized software expenditures of $0.7 million, compared to cash used in investing activities for the nine months ended September 30, 2023 of $6.7 million.
Current wording
Cash used in the Company’s investing activities for the three months ended March 31, 2025 was $60.7 million, primarily related to cash and cash equivalents that were deconsolidated as a result of the Spin-Off, compared to cash used in investing activities for the three months ended March 31, 2024 of $1.6 million.
Previous wording
$15.6 million, repayment of scheduled principal payments of the term loan of $10.3 million, dividends to Class A shareholders $8.9 million, payments for taxes related to net share settlement of equity awards of $8.5 million and deferred cost related to debt modification of $1.9 million. This was partially offset by proceeds of $2.9 million pursuant to the exercise of equity awards and issuance of shares for ESPP transactions. Cash used in financing activities for the nine months ended September 30, 2023, primarily related to payment of distributions to non-controlling interests, repayment of scheduled term loan principal payments, payments for taxes related to net share settlement of equity awards, payments of tax receivable agreement liability and proceeds from employee stock purchase plan and exercise of equity awards.
Current wording
Cash used in the Company’s financing activities for the three months ended March 31, 2025 was $10.3 million, compared to cash used in the Company's financing activities for the three months ended March 31, 2024 of $18.2 million. Cash used in financing activities for the three months ended March 31, 2025 primarily related to $15.3 million of payments for taxes related to net share settlement of equity awards, offset by proceeds from the exercise of warrants of $4.9 million. Cash used in financing activities for the three months ended March 31, 2024 primarily related to distributions to non-controlling interest holders of $10.2 million, repayment of scheduled principal payments of the 2024 Term Loan of $4.7 million, and payments for taxes related to net share settlement of equity awards of $3.5 million. This was partially offset by proceeds of $0.1 million pursuant to the exercise of equity awards and issuance of shares for ESPP transactions.
Previous wording
A summary of our minimum contractual obligations related to our material outstanding contractual commitments is included in Notes 7, 8 and 16 of our Annual report on Form 10-K for the year ended December 31, 2023 as filed with the SEC. Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business. As of September 30, 2024, the Company had inventory-related purchase commitments totaling approximately $32.3 million.
Current wording
A summary of the minimum contractual obligations of the Company and Holdings relating to our material outstanding contractual commitments is included in Notes 7, 8 and 16 of our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC. Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Report on Form 10-Q, including those discussed in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for additional information.
Current report — wording carried from elsewhere
The Company uses these non-GAAP measures internally to establish forecasts, budgets and operational goals to manage and monitor its business, as well as evaluate its underlying historical performance and measure incentive compensation. 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. We believe EBITDA and Adjusted EBITDA provide valuable insight into operational efficiency independent of capital structure and tax environment; Adjusted Net Income and Adjusted EPS offer investors a clearer view of ongoing profitability by excluding non-recurring and non-operational items. Additionally, the Company’s debt agreements contain covenants based on variations 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.
Current report — wording carried from elsewhere
EBITDA, Adjusted EBITDA and non-GAAP earnings per share should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from EBITDA, Adjusted EBITDA and non-GAAP earnings per share 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. These non-GAAP measures may be different from similarly titled non-GAAP measures used by other companies.
Current report — wording carried from elsewhere
Reference is made to Note 2 of Notes to Financial Statements - unaudited in Item 1, “Financial Statements,” for
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Cost of sales can be impacted by many factors, including volume, operational efficiencies, procurement costs, and promotional activity.
Previous report — wording carried elsewhere
The following table presents the Company’s results of operations for the periods indicated:
Previous report — wording carried elsewhere
Net Cash Used in Financing Activities
Previous report — wording carried elsewhere
Cash used in the Company’s financing activities for the nine months ended September 30, 2024 was $77.2 million compared to cash used in the Company's financing activities for the nine months ended September 30, 2023 of $61.0 million. Cash used in financing activities for the nine months ended September 30, 2024 primarily related to distributions to non-controlling interest holders of $34.9 million, special distribution to non-controlling interest holders of