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CompoSecure, Inc. (CMPO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was in line with internal expectations; consolidated non-GAAP net sales were $103.9M (flat YoY), gross margin was 52.5%, and pro forma adjusted EBITDA was $33.7M; adjusted diluted EPS was $0.25 and GAAP diluted EPS was $0.07 .
  • Management reiterated FY 2025 guidance for mid-single-digit growth in both consolidated net sales and pro forma adjusted EBITDA, citing strengthening demand into Q2 and sustained momentum through year-end .
  • Arculus delivered a record quarter with another net positive contribution, supported by wins at MetaMask and MoneyGram and expanding verticals (authentication bundling with metal cards) .
  • GAAP presentation changed following the spin-off of Resolute Holdings; results for the operating subsidiary are now reported via the equity method, with non-GAAP consolidations provided to reflect underlying business economics and comparability .

What Went Well and What Went Wrong

What Went Well

  • Record Arculus quarter with positive net contribution; management emphasized Arculus as a “powerful differentiator” with customers bundling Authenticate with payment capabilities .
  • International momentum offset domestic softness; Q1 international net sales increased $3.1M (+28%) YoY while domestic fell $3.3M (-4%), with overall consolidated net sales essentially flat .
  • Operational initiatives under the CompoSecure Operating System (COS) are yielding early benefits in factory output and yield, expected to deliver positive net impact in 2025 .
  • Quote: “We delivered record results for Arculus… seeing metal card customers… bundling Arculus Authenticate with payment capabilities” — Jon Wilk .
  • Quote: “We are far and away the leader in metal cards, but still have less than 1% penetration… upside… significant” — Dave Cote .
  • Quote: “We are beginning to see the benefits from implementing COS… believed to deliver positive net impact in 2025” — Jon Wilk .

What Went Wrong

  • Gross margin dipped slightly to 52.5% from 53.1% YoY, primarily due to product mix; pro forma adjusted EBITDA decreased modestly to $33.7M vs $34.5M YoY on higher G&A tied to growth investments .
  • Domestic net sales contracted 4% YoY; management flagged rising labor costs and macro/tariff uncertainty as watch items, maintaining guidance conservatively .
  • GAAP comparability is less intuitive due to equity-method accounting post-spin; GAAP diluted EPS was $0.07 driven by non-cash gains (warrant/earnout revaluations), reinforcing reliance on non-GAAP for operating performance .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Consolidated Net Sales ($USD Millions)$107.1 $100.9 $103.9
Gross Margin (%)52% 52.1% 52.5%
Pro Forma Adjusted EBITDA ($USD Millions)$40.0 $33.6 $33.7
Adjusted EPS – Diluted ($USD)$0.27 $0.20 $0.25
GAAP EPS – Diluted ($USD)N/A($0.53) $0.07

Segment/Geography (YoY Q1 2025)

SegmentQ3 2024Q4 2024Q1 2025
Domestic Net Sales YoY ($ change, %)N/AFlat YoY; International $15.4M absolute -$3.3M, -4%
International Net Sales YoY ($ change, %)+$6.0M, +13% $15.4M absolute; +7% YoY +$3.1M, +28%

Key Balance Sheet & Cash KPIs

MetricQ3 2024Q4 2024Q1 2025
Cash & Cash Equivalents ($USD Millions)$52.7 $77.5 $71.7 (Non-GAAP)
Total Debt ($USD Millions)$330.0 $197.5 $195.0 (Non-GAAP)
Net Debt ($USD Millions)N/AN/A$180.7 (Non-GAAP)
Bank Senior Secured Debt Leverage Ratio (x)1.06x 1.25x 1.05x
Operating Cash Flow ($USD Millions)YTD: $94.0 FY: $129.6 $18.2 (quarter)

Non-GAAP vs GAAP (Q1 2025 reference points)

  • Consolidated non-GAAP net sales $103.9M vs GAAP net sales presentation impacted by equity-method conversion on Feb 28; GAAP diluted EPS $0.07 primarily driven by non-cash warrant/earnout revaluation gains .
  • Pro forma adjusted EBITDA includes ~$3.2M management fee expense in both Q1 2025 and Q1 2024 for comparability; actual paid to Resolute in Q1 2025 was $1.1M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Net Sales GrowthFY 2025Mid-single-digit growth (provided in March) Mid-single-digit growth reiterated Maintained
Pro Forma Adjusted EBITDA GrowthFY 2025Mid-single-digit growth (includes Resolute management fee pro forma) Mid-single-digit growth reiterated (includes Resolute fee) Maintained

Notes:

  • Management emphasized momentum building in Q2 and carrying through H2; guidance conservatism reflects macro/tariff watch items and ongoing investments .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
COS operational excellenceEmphasis on building high-performance culture and COS rollout; investments to drive efficiency and future growth Early factory/production benefits; positive net impact expected in 2025 Improving execution momentum
Metal card demand/market breadthSustained demand; premium product preference; international strength; pipeline balanced domestic/international Demand strengthening in Q2; broadening to younger demographics; several high-profile launches (Citi, Robinhood, Scotiabank, etc.) Strengthening and widening
Arculus (Authenticate, cold storage, payments)On track to turn positive in 2025; strong exit-rate momentum; authentication gaining traction Record quarter; net positive contribution; MetaMask/Baanx launch and MoneyGram Access integration; stablecoin payments utility Accelerating adoption and vertical expansion
Macro: tariffs, labor costs, supply chainMonitoring tariffs; labor cost inflation; digital wallets as competitive headwind Guidance issued with tariff uncertainty; proactive supply chain routines; not seeing consumer weakness in order activity Watch items with mitigations
Regional mixInternational lumpiness; Q3 strong; Q4 international $15.4M Q1 international +28% YoY; domestic -4% YoY International rebound
M&A strategy via ResoluteBuilding M&A capability; spin-off rationale; accretive, value-driven criteria Robust pipeline; disciplined approach; focus on CMPO shareholder value Active and disciplined

Management Commentary

  • Accounting change context: “We are now required to report CompoSecure's results using the equity method of accounting following the spin-off of Resolute Holdings… GAAP earnings can be misleading… look at historical reporting and deduct the management fee” — Dave Cote .
  • Demand and guidance: “We started the year in line… momentum building in the second quarter… reaffirming our full year 2025 guidance” — Jon Wilk .
  • Arculus differentiation: “We delivered record results for Arculus… metal card customers… bundling Arculus Authenticate with payment capabilities” — Jon Wilk .
  • Operations: “Benefits from implementing COS, particularly at the factory and production level, will deliver positive net impact in 2025” — Jon Wilk .
  • Financial profile: “Pro forma adjusted EBITDA… decreased by 2% to $33.7M… decline driven by higher G&A… EBITDA margin 32.4% vs 33.2% prior year” — Tim Fitzsimmons .
  • Balance sheet: “Non-GAAP cash $71.7M and total debt $195.0M… senior secured debt leverage ratio 1.05x” — Tim Fitzsimmons .

Q&A Highlights

  • Guidance conservatism and cadence: Management maintained mid-single-digit FY growth, citing strengthening orders/backlog; revenue and EBITDA expected to tick up through Q2–Q4; conservatism due to macro/tariff uncertainty .
  • Arculus unit economics and pricing: Bundling Authenticate with payment capabilities aims to improve contribution margin and build software revenue over time; best quarter for Arculus with net positive contribution, though not broken out quantitatively due to reporting requirements .
  • COS manufacturing impacts: Early improvements in output and yield; positive net impact visible in 2025, framed as Toyota production system-adapted methodology emphasizing process, people, and cultural change .
  • M&A pipeline and capital allocation: Robust pipeline across adjacencies; disciplined, accretive approach; buyback authorization increased to $100M remains an option alongside debt paydown and inorganic opportunities .
  • Stablecoin payments and authentication: Arculus enabling self-custody payments via traditional rails; passkey/FIDO momentum aiding adoption; ongoing opportunities across banks, fintechs, and gaming .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2025 EPS and revenue was unavailable; comparisons to estimates cannot be determined. Values retrieved from S&P Global.*
  • Company stated operating results were in line with expectations, and guidance was reiterated, suggesting no material deviation versus internal planning .

Key Takeaways for Investors

  • Execution steady with in-line results; modest gross margin compression and slightly lower pro forma EBITDA reflect intentional growth investments (sales/engineering, COS) while international strength offsets domestic softness .
  • Arculus is transitioning from investment to growth driver; record quarter and positive net contribution supported by authentication bundling and new payment capabilities (MetaMask, MoneyGram) — a narrative and multiple-expansion catalyst if sustained .
  • Guidance maintained amid visible Q2 momentum; near-term trading setup favors names with reaffirmed outlooks and improving demand; watch for H2 conversion of backlog into revenue and margin impact from COS .
  • Accounting shift masks operating progress in GAAP; rely on non-GAAP consolidated views for comparability; reconcile management fee pro forma adjustments when trending EBITDA and EPS .
  • Balance sheet improved vs prior year with lower debt and leverage (1.05x); liquidity and cash generation support optionality for buybacks, debt reduction, and M&A; management reiterates disciplined inorganic strategy .
  • Macro/tariffs remain watch items but supply chain routines and diversified material sourcing mitigate risks; management not seeing consumer weakness in orders/design sessions at present .
  • Upcoming catalysts: MetaMask metal card global launch (Q2), expansion of stablecoin POS capabilities, further Arculus vertical wins, and visible COS-driven efficiency gains through 2025 .

Appendix: Additional Relevant Q1 2025 Press Releases

  • MetaMask metal payment card launch with Baanx/Mastercard; spend directly from self-custody wallets via smart contracts on Linea, global launch Q2 2025 .
  • Arculus integration with MoneyGram Access and SDF grant for stablecoin payments over traditional rails; cash-to-USDC on Stellar and self-custody spend at POS .
  • Global survey shows strong consumer preference and willingness to pay for metal cards; heightened appeal among UHNW and younger demographics; recycled metal sustainability attributes .

Notes on Prior Two Quarters (Trend Context)

  • Q4 2024: Net sales $100.9M, gross margin 52.1%, adjusted EBITDA $33.6M, adjusted diluted EPS $0.20; Arculus achieved first positive net contribution; FY 2025 guide for mid-single-digit growth initially set .
  • Q3 2024: Net sales $107.1M; adjusted EBITDA $40.0M; adjusted diluted EPS $0.27; strong international performance; investments flagged for future growth; macro/tariffs monitored .