CompoSecure’s Earnings Call: Mixed Sentiment and Future Growth

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

The recent earnings call for CompoSecure Inc. painted a picture of mixed sentiment. While there were significant achievements such as a record performance from Arculus and robust international sales growth, these positives were tempered by flat overall net sales, a slight decrease in pro forma adjusted EBITDA, and a decline in domestic sales. The call highlighted both the strengths and challenges faced by the company in the current financial landscape.

Record Arculus Performance

Arculus emerged as a standout performer in the quarter, contributing positively to the company’s results. The division achieved record results, bolstered by new vertical industry wins including partnerships with MetaMask and MoneyGram. This performance underscores Arculus’s growing influence and potential within the company’s portfolio.

Strong International Sales Growth

International sales were a bright spot for CompoSecure, with net sales increasing by an impressive 28% compared to the previous year. This growth highlights the company’s successful expansion efforts and its ability to capture market share in international territories.

Positive Adjusted Net Income Growth

The company reported a 21% increase in adjusted net income, reaching $28.4 million. This growth in net income reflects CompoSecure’s ability to manage its operations effectively and generate profitability despite challenges in other areas.

Strong Program Activity

CompoSecure secured several high-profile customer wins during the quarter, including partnerships with Citibank, Robinhood, Karta, Koho, WealthSimple, and Scotia Bank. These wins demonstrate the company’s strong program activity and its appeal to major financial institutions.

Low Debt Leverage

The company’s bank senior secured debt leverage ratio improved to 1.05 times as of March 31, 2025, down from 1.34 times the previous year. This reduction in leverage indicates a strengthening of CompoSecure’s financial position and its commitment to maintaining a healthy balance sheet.

Flat Net Sales

Despite the positive developments, CompoSecure’s consolidated net sales remained flat at $103.9 million compared to the prior year. This stagnation in sales growth highlights a challenge the company faces in boosting its top-line revenue.

Slight Decrease in Pro Forma Adjusted EBITDA

The pro forma adjusted EBITDA saw a slight decrease of 2% to $33.7 million, primarily due to higher general and administrative expenses. This decline points to increased operational costs that the company needs to manage carefully.

Domestic Sales Decline

Domestic net sales experienced a decline, dropping by $3.3 million or 4% from the prior year. This decrease in domestic sales suggests challenges in the home market that CompoSecure needs to address to sustain growth.

Slight Decrease in Gross Margin

The consolidated gross margin for the quarter was 52.5% of net sales, slightly down from 53.1% in the same quarter of the previous year. This marginal decrease in gross margin reflects the company’s ongoing efforts to balance costs and revenues.

Forward-Looking Guidance

Looking ahead, CompoSecure reaffirmed its full-year guidance, expecting mid-single-digit growth in consolidated net sales and pro forma adjusted EBITDA. The company remains focused on operational excellence, leveraging its Operating System to drive improvements. CompoSecure anticipates continued momentum in both its payment cards and Arculus business throughout 2025, supported by a strong balance sheet with cash and cash equivalents at $71.7 million and total debt at $195 million.

In conclusion, CompoSecure’s earnings call revealed a mixed financial performance, with notable achievements in international sales and Arculus’s record performance. However, challenges such as flat net sales and a decline in domestic sales temper the overall sentiment. The company’s forward-looking guidance remains optimistic, with expectations of growth and operational improvements in the coming year.