CompoSecure, Inc. (CMPO)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024: Net sales rose 1% to $100.9M; gross margin 52.1%; adjusted net income increased 8% to $24.7M; adjusted EBITDA fell 10% to $33.6M; GAAP net loss was $(48.4)M, driven by non-cash mark-to-market of warrants/earnouts/derivatives, with GAAP EPS of $(0.53) .
• First positive net contribution from Arculus in Q4; 2025 outlook calls for mid-single digit growth in both net sales and adjusted EBITDA, with momentum building through the year and including payment of the new Resolute Holdings management fee on a pro forma basis .
• Balance sheet: year-end cash $77.5M; total debt $197.5M; net debt reduced ~60% YoY to $120M via strong FCF and conversion of $130M exchangeable notes into equity .
• Potential stock catalysts: COS-driven efficiency improvements, positive Arculus inflection, and a formalized M&A framework via Resolute; management emphasized accelerating organic growth and accretive M&A in 2025 .

What Went Well and What Went Wrong

• What Went Well

  • Adjusted net income up 8% YoY in Q4 to $24.7M; management cited interest savings from the conversion of exchangeable notes as a driver .
  • Arculus turned positive in Q4; management reiterated expectation for net positive contribution for full-year 2025 and highlighted strong exit run-rate across Authenticate and cold storage .
  • Strategic progress: COS roll-out and M&A readiness with Resolute spin-off completed in Feb-25; CEO: “Foundational year… high-single digit Net Sales growth, robust Free Cash Flow… reduced net debt by 60% to $120 million” .

• What Went Wrong

  • Adjusted EBITDA declined 10% YoY to $33.6M, primarily due to increased investments to build out M&A capabilities and reinvigorate organic growth .
  • Gross margin compressed ~86 bps YoY in Q4, with management citing lower production efficiencies from new card constructions and inflationary pressure on wages/materials .
  • GAAP net loss of $(48.4)M in Q4 driven by non-cash mark-to-market adjustments (warrants, earnout, derivative liabilities) tied to stock price improvement .

Financial Results

Liquidity KPIs (FY 2024):

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Executive Chairman Dave Cote: “We’ve begun implementing the CompoSecure Operating System…reinforcing a culture of excellence…The upside for us is significant.”
• CEO Jon Wilk: “2024 was a foundational year… high-single digit Net Sales growth, robust Free Cash Flow… reduced net debt by 60% to $120 million… first quarter of positive net contribution from Arculus in Q4.”
• CFO Tim Fitzsimmons: “Adjusted net income was up 8% in Q4… driven by interest rate savings from conversion into equity of $130 million of exchangeable notes… Free cash flow up 62% to $84.9 million.”
• 2025 strategic priorities: accelerate organic growth, drive efficiency via COS, continue Arculus traction, deliver accretive M&A; 2025 guide mid-single digit growth in net sales and adjusted EBITDA, with sales momentum building through the year (pro forma including Resolute management fee) .

Q&A Highlights

• Growth cadence: Management expects revenue growth to accelerate through 2025 based on backlog/pipeline visibility but declined to provide quarterly guidance; COS benefits to build over 2025 and beyond .
• Arculus trajectory: Strong Q4 exit run-rate; net positive expected for FY25; strength skewed to Authenticate with cold storage also contributing .
• International vs domestic pipeline: International can be lumpy quarter-to-quarter; full-year mix ~18–20%; balanced growth outlook for 2025 .
• Resolute/Pro forma guidance: 2025 guidance includes Resolute management fee; framework focused on accretive M&A with incentives aligned to CMPO share performance .
• Tariffs/materials: Limited China exposure; monitoring EU/Asia materials; lower sensitivity than typical industrials .

Estimates Context

• We attempted to retrieve Wall Street consensus for revenue, EPS, and EBITDA via S&P Global; estimates were unavailable at the time of query due to a system limit, so comparisons to consensus cannot be provided in this recap. As a result, any estimate-based comparisons are omitted, and we explicitly note the unavailability of S&P Global consensus for Q4 2024 at this time.

Key Takeaways for Investors

• Q4 was operationally steady (net sales +1% YoY; gross margin 52.1%) but investment-heavy (adjusted EBITDA −10% YoY), with non-cash mark-to-market driving GAAP loss; this sets a base for 2025 COS-driven efficiency gains and organic growth acceleration .
• Positive Arculus inflection in Q4 and authentication-led momentum are material to the medium-term thesis; management continues to target net positive Arculus for FY25 .
• Balance sheet strengthened materially: net debt down ~60% to $120M; exchangeable notes conversion and robust FCF ($84.9M FY24) provide flexibility for growth investment and M&A .
• 2025 guide calls for mid-single digit growth in net sales and adjusted EBITDA, with momentum building; watch execution of COS as a lever for margin restoration and capacity/yield improvements .
• International mix remains a growth lever but can be lumpy; full-year commentary points to ~18–20% contribution, with domestic steady; monitor program launches timing and product mix impacts on margins .
• M&A optionality via Resolute’s platform is live; management reiterated “accretive” as a strict criterion and alignment of incentives to CMPO stock performance .
• Near-term trading lens: lack of consensus context limits beat/miss framing, but the first Arculus-positive quarter, deleveraging, and 2025 growth outlook are supportive; risk remains around gross margin execution and ongoing investment drag on near-term adjusted EBITDA .

Appendices and Additional Notes

• Q4 2024 press release and investor presentation included detailed GAAP/Non-GAAP reconciliations (Adjusted EBITDA, Adjusted EPS) and liquidity data .
• Prior quarter materials (Q3 press release/8-K; Q2 call) underpin trend analysis of sales/margins and guidance adjustments .