CompoSecure Earnings Call: Record Quarter Amid Husky Drag

Composecure Inc. ((GPGI)) has held its Q1 earnings call. Read on for the main highlights of the call.

CompoSecure’s latest earnings call painted a mixed picture, balancing a record quarter at its core card business against mounting macro and operational headwinds at Husky. Management highlighted robust revenue and margin gains, stable cash generation, and a healthier balance sheet, yet acknowledged that resin price spikes, customer caution, and geopolitical uncertainty have clouded near-term visibility and forced wider guidance ranges.

CompoSecure Delivers Record Quarter

CompoSecure posted pro forma net sales of $130.4 million, up 25.6% year over year, with pro forma adjusted EBITDA jumping 36.8% to $47.6 million and margins expanding about 300 basis points to 36.5%. New wins with American Express, Robinhood, Revolut and several crypto-focused platforms showcased strong demand, while management credited its Resolute Operating System for driving better yields and factory efficiency.

Overall Net Sales Growth Despite Mixed Segments

At the consolidated level, GPGI reported pro forma adjusted net sales of $421.2 million, roughly 3% higher than a year ago. The outperformance at CompoSecure more than offset a weaker showing at Husky, underscoring how the portfolio’s strengths are cushioning the impact of cyclical and macro-driven softness in other parts of the business.

Pipeline and Aftermarket Support Resilience

Management emphasized that the company-wide pipeline remains healthy, growing about 4% year over year in the first quarter and roughly 7% through April. Husky’s large installed base of around 13,500 systems, and a revenue mix that is about 65% recurring from parts, tooling and services, provides a resilient aftermarket foundation even as new orders soften.

Cash Flow Generation and Balance Sheet Moves

GPGI generated approximately $29 million of adjusted free cash flow in the quarter, in line with the prior year and reinforcing the cash-generative nature of the business. The company also completed a refinancing that extends debt maturities and reduces interest costs, and management signaled confidence that leverage can be brought down to roughly three times by year-end.

Maintaining Multi-Quarter Guidance with Revised Ranges

The company reaffirmed its broad multi-year framework but updated ranges to reflect greater uncertainty, with second-quarter net sales projected between $425 million and $475 million and pro forma adjusted EBITDA of $105 million to $120 million. For fiscal 2026, management expects pro forma net sales of $1.95 billion to $2.10 billion, pro forma adjusted EBITDA of $550 million to $610 million, and adjusted free cash flow of $275 million to $325 million.

ROS Rollout and Continued R&D Investment

The Resolute Operating System, already boosting CompoSecure’s performance, is being deployed aggressively at Husky to replicate efficiency gains and improve profitability. Even with near-term headwinds, the company is leaning into R&D and commercial investments, arguing that sustained innovation and capability-building are key to capturing long-term growth across its end markets.

Husky’s Revenue and Profitability Pressure

Husky’s quarter stood in stark contrast to CompoSecure’s, with pro forma adjusted net sales falling about 5% to $290.8 million and pro forma adjusted EBITDA dropping roughly 40% to $38.2 million. The segment’s EBITDA margin slid to about 13.2%, a compression of nearly 770 basis points year over year, as late-quarter customer delays pushed more than $20 million of revenue into future periods.

Order and Backlog Weakness at Husky

Customer ordering momentum deteriorated sharply toward the end of the quarter, with orders down about 16% year over year by late March and backlog weakening accordingly. Management noted that customers are taking a wait-and-see approach, slowing near-term conversion and raising questions about the timing of a recovery in Husky’s order book.

Resin Price Spike and Geopolitical Disruptions

Virgin PET prices surged roughly 46% in March and April amid conflict-driven disruptions in the Middle East, creating supply issues, shipment delays and higher costs. Management estimated that logistics and shipment challenges alone reduced revenue by around $5 million and said the price shock depressed capital spending and ordering behavior among customers.

Impact of One-Time GAAP Transaction Charges

The quarter’s reported GAAP earnings were heavily distorted by more than $200 million of transaction-related expenses, which management stressed were one-time in nature. These costs are excluded from pro forma adjusted results, but they significantly skew year-over-year GAAP comparisons, a nuance investors will need to keep in mind when evaluating performance.

Tariff and Policy Uncertainty Weigh on Demand

New tariff measures implemented in early April added another layer of complexity for customers, particularly around timing and planning of large orders. While the U.S. accounts for less than 27% of sales, the policy noise contributed to heightened caution and further delays, reinforcing a cautious tone around near-term demand trends.

Wider Guidance Range Signals Higher Risk

Management widened its guidance ranges to acknowledge the added uncertainty from geopolitical tensions and evolving trade policy, which could extend customer delays. The lower end of the forecast now assumes these headwinds persist, raising execution risk and making the pace of order recovery and revenue conversion a key focus point for investors.

Forward-Looking Outlook and Guidance

Looking ahead to the second quarter and full fiscal 2026, GPGI expects net sales growth to continue, underpinned by CompoSecure’s momentum and deferred Husky revenue, but framed within wide bands to reflect volatile conditions. Pro forma EBITDA margins are guided in the mid-to-high 20s, adjusted free cash flow is projected at $275 million to $325 million for the year, and management aims to end 2026 with leverage near three times, signaling a focus on financial discipline amid uncertainty.

CompoSecure’s call left investors with a nuanced story: operational excellence and record profitability in its core card business, offset by meaningful cyclicality and macro risk at Husky. While management remains confident in the long-term opportunity and is investing accordingly, the near-term path is likely to be bumpy, making order trends, ROS execution and cash discipline the key metrics to watch in coming quarters.