CompoSecure, Inc.

Good day and thank you for standing by. Welcome to the Compose Secure fourth quarter and full year 2021 earnings call. At this time, all participant lines are in listen only mode. After the presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star then one on your telephone keypad. Please be advised today's conference may be recorded. If you require operator assistance during the call, please press star then zero. I'd now like to hand the conference over to your host today, Mark Griffin, Investor Relations. Please go ahead.

Good afternoon. Thank you for joining us today to review Compass Secures' fourth quarter and full year 2021 financial results. With me on the call this afternoon is John Wilk, Compass Secures' Chief Executive Officer, and Tim Fitzsimmons, Chief Financial Officer. They will begin with prepared remarks, and they will open up the call for Q&A. During the call, we will make statements related to our business that may be considered forward-looking, including statements concerning our plans to execute on our growth strategy, our ability to maintain existing and acquire new customers, and other statements regarding our plans and prospects. Forward-looking statements may often be identified with words such as we expect, we anticipate, or upcoming. These statements reflect our views only as of today and should not be considered our views as of any subsequent date. We undertake no obligation to update or revise these forward-looking statements. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For discussion of material risks and other important factors that could affect our actual results, please refer to the information in our annual report on Form 10-K and other reports filed with the SEC, which are available on the investor relations section of our website at compostsecure.com. and on the SEC's website at sec.gov. Please note that during today's discussion, today's call includes certain non-GAAP financial measures as defined by the SEC, including adjusted EBITDA. The company believes these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends impacting the company's conditions and operations. These non-GAAP financial measures should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP and may be different from similarly tighter non-GAAP financial measures used by other companies. The reconciliation of GAAP to non-GAAP measures is available on our press release and earnings presentation available on the investor relations section of our website. With that, let me turn the call over to John for our first earnings call as a public company. John, go ahead, please.

Thanks, Mark, and good evening, everyone. Thank you for joining us tonight as we discuss our fourth quarter and full year earnings release. We appreciate your interest and thank you for participating. 2021 was an exciting year for Composecure, in which we became a newly listed public company, achieved record net sales, and launched a best-in-class three-factor authentication product for securing digital assets called Arculus. It's important to me to take a moment to recognize our more than 700 employees who made this possible. I'm extremely proud of what we have achieved as a team this year, and I thank them for their dedication and support. As mentioned, Composecure completed its business combination with Roman DBDR Tech Acquisition Corp in December of 2021 and is a newly listed public company on NASDAQ. I also want to thank the team at Roman for their partnership during the merger process and look forward to their continued support. We are excited about being public and about how that will support the ongoing growth and success for CompoSecure customers, employees, and shareholders. Now, let me summarize our operating results for the fourth quarter and full year. as well as discuss our strategic growth initiatives before turning it over to Tim Fitzsimmons, our CFO. The headline message is that we delivered results for the year and the quarter in line with our guidance for revenue and EBITDA and have very strong momentum as we begin 2022. In the fourth quarter, we demonstrated strong net sales of 75 million, achieving 40% year-over-year growth, and our adjusted EBITDA for the fourth quarter was $21 million, which includes the impact of our Arculus investment, for which Tim will provide some additional context. This is consistent with our messaging that we would start to see increased sales growth in the back half of 21, and we delivered on that. For the year, we finished 2021 with record net sales of 268 million. Guidance, if you remember, was 267 to 269 million. And our adjusted EBITDA for the year was just over 102 million, with guidance being between 97 and 102. So we were at the top end of the range for EBITDA. I'm pleased with these results and even more excited about our opportunities heading into 2022. Let me share further context and color around the drivers of these results. I'll start by saying our premium card business is being led by strong sales execution, as well as our deep customer relationships. We are also leveraging the trends of increased solicitation by card issuers, and growing demand for premium cards as the economy emerges from the challenges of the pandemic. We expect these positive trends to continue well into 2022. In addition, we are being very thoughtful about how we are running the business and remain focused on margins while simultaneously accelerating our critical investments to capture long-term opportunity and value. This is clearly reflected in our adjusted EBITDA numbers, which you can see were impacted in the second half by our more than $20 million that we invested in Arculus and still met the high end of the guidance range for the year. The combination of strong sales performance and continued industry trends gives us the confidence going into 2022. And with that, we are reaffirming our 2022 guidance in the range of $336 million to $376 million for net sales and $100 million to $110 million of adjusted EBITDA. As this is our first earnings call, I thought it'd be helpful to provide a brief overview of Compose Secure for those less familiar with our story. Compose Secure is a leading provider of financial payment cards and cryptocurrency storage and security solutions. Our products serve two main markets, the premium payment card market and the growing market for securing digital assets. The company's been around for more than 20 years. We're not a startup. As you can see from slide three, we produced 22 million metal cards last year with strong margins. We serve a hundred plus card programs across the globe, including seven of the top 10 US issuers. And we have very long tenure with our largest clients. On page four, the company was built and continues to be driven by our ability to innovate. We've led the creation and growth of the metal card form factor, through our expertise in material science and technology. And we've been at the forefront of embedding emerging payment technology, for example, the evolution of tap to transact. And we're now accelerating that innovation in digital assets and authentication technology. As you can see on the lower right, this is supported by a very strong patent portfolio that helps create competitive moats around our business. Now that I've given you a quick overview of the business, I want to contextualize the market opportunity and trends that we are seeing. So on the next page, when you look at the total addressable market on the left side of page five, you'll see the TAM for the metal card payment business. As I mentioned, we issued 22 million metal cards last year. We believe there were approximately 4 billion payment cards issued worldwide on an annual basis. So we estimate that we currently have only a half a percent of penetration of the total addressable market for our existing premium card business. So plenty of runway for growth. In the middle, we highlight the total addressable market in crypto cold storage, as well as security and authentication on the right. where we're seeing exponential growth in the number of users. You can also see on the right side the growing need for better security around digital assets as the number of threats and hacks increases and the broader security and authentication market continues to grow. The bottom line for us is that we think the total addressable market for the payment card business is tremendous. And we believe the total addressable market for crypto and authentication could be even bigger. I'll provide further details on how our Arculus platforms meet these market needs in a moment. But first, let me cover some of the trends that we're seeing in the payment card marketplace in the next slide. So on page six, as we finish 2021 and we move into 2022, We expect continued robust growth in the premium payment card business, driven by strong sales execution and supported by three elements that you can see laid out on page six. Increased card solicitations, increased applications by consumers, and increased acquisitions that we're seeing in the market. You can see those elements highlighted in all three charts. that were produced from publicly available data. Strong customer demand is returning to and even exceeding pre-pandemic levels. And we are well positioned to capture the opportunity as our metal cards are an attractive value proposition for card issuers. And we have longstanding blue chip clientele and we're establishing relationships with some of the leading FinTech clients in the world. On slide five, we highlighted the market opportunity for our payment card business and the digital authentication platform. But as you look at page seven, we've got the roadmap for where we're going and where we're bringing together payment cards and digital authentication. You see on the left side of this slide, today in market, we've got our payment card business and the Arculus cold storage product. But in the middle, we bring together payments plus digital authentication. The example here is most people log in to their banking and investment accounts using a username and password. We've seen hundreds of millions of usernames and passwords compromised over the last few years. And we intend to address that challenge by bringing together a traditional debit or credit card with the Arculus authentication capabilities. turning your credit or debit card into a security token we also have the ability to add those same authentication capabilities to our crypto cold storage product and this would enable a customer to have increased security on their existing hot wallet in addition to offering enhanced security and control of their private keys for cold storage and finally we intend to bring together payment plus authentication plus cold storage into one product. This functionality, we believe, will be available in 2022, and we intend to pilot payment card plus digital authentication in Q2 and Q3 with clients that we are currently in active and advanced conversations with. To give further specifics on our Arculus platform roadmap, I also want to share some new features and functionality that are key priorities in the first half of the year. If you look at slide eight, we've always been a customer-centric company, and our priorities are informed by what we're hearing and seeing in the community and across the market. And as such, we are focused on Number one, incorporating the ability to include NFTs and view NFTs in your Arculus wallet. We've seen the rise and explosion of the NFT market across a whole variety of industries. We are continuing to increase the number of currencies. We added 10 new currencies in January and today support approximately 75% of the crypto market cap with our current portfolio growth. of supported currencies, and we'll continue to expand that list. And lastly, we've heard a strong desire from the crypto community to integrate and enable the Arculus wallet to operate with the broader DeFi ecosystem. And we will be including the capability through Wallet Connect to enable the Arculus customers to do that. I know that you're interested in hearing our progress on sales and marketing for Arculus, so I'd like to take a moment and update you on our current momentum. I'm excited to announce that we launched our first Arculus third-party sales distribution channel through Amazon.com at the end of February. This is the first of several third-party distribution channels that we will begin to ramp up. And this is in addition to the ability to sell direct to consumers through GetArculus.com, our consumer direct sales website. Second, we've completed our first 25,000 card co-branded Arculus product for shipment later this month for the Bitcoin 2022 conference in Miami in April. This is one of the leading crypto conferences in the world. where we'll get exposure to some of the most influential names of the industry and put our product directly in the hands of the crypto leaders who are at the forefront. As part of this partnership, we'll be making 2,500 customized, specially designed VIP cards that will operate as whale passes for the conference as well. And third, We are in advanced conversations with a number of B2B partners that include card design and technical integration work, including crypto cold storage and payments plus authentication. We will provide further updates as deals get finalized, and we expect to announce a broader update with our Q1 results. We discussed in our press release that we also recently enhanced our organizational strength with key leadership appointments. Joining our senior leadership team, we have our new chief revenue officer, Amanda Gorbeau. Amanda has more than 25 years of experience in payments and security, leading global sales, products, and service teams for the financial sector. Under her leadership, we're already beginning to scale up our sales and marketing efforts. We've also included in our press release hires in product marketing and software development. I've been impressed with the level of talent that we've attracted to the business in a generally competitive labor market for blockchain and crypto. With that, let me hand it over to Tim to walk through the financials in more detail.