CompoSecure, Inc.

Welcome to the CompoSecure Inc first quarter 2022 earning conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your questions, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mark Griffin with ICR. Please go ahead.

Good evening and thank you for joining us today to review Composecure's first quarter 2022 financial results. With me on the call tonight is John Wilk, Composecure's Chief Executive Officer and Tim Fitzsibbon, Chief Financial Officer. They will begin with prepared remarks, and then we'll 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 view 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 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 the discussion on 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 financial condition and results of operations. These non-GAAP financial measures should not be considered as an alternative to net income or any other performance measure derived in accordance with U.S. GAAP and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation of GAAP to non-GAAP measures is available in our press release and earnings presentation available on the investor relations section of our website. Thank you. And with that, let me turn the call over to John to discuss our first quarter earnings. John?

Thanks, Mark. Good evening, everyone, and thank you for joining us tonight as we discuss our first quarter 2022 earnings release. We appreciate your interest, so thank you for participating. First, let me summarize our operating results for the quarter, and then I'll highlight the strides we are making with our strategic growth initiatives before turning it over to Tim Fitzsimmons, our Chief Financial Officer. Throughout the quarter, our team continued to exceed expectations And we have established outstanding momentum in early 2022. We delivered record net sales of 84 million, up 32% year over year, above our pre-COVID revenue levels, and up 12% versus fourth quarter 2021. This was driven by strong sales execution and growth across existing and new clients accentuated by our international performance. Our adjusted EBITDA was also a record at $33 million for the quarter, up 14% year over year, which highlights the impressive margin profile of the premium card business and our relentless commitment to continuous improvement, which had a positive impact on efficiency, positioned us well to support greater output, and helped provide incremental lift to margins for the quarter. International sales for the first quarter of 2022 were 22 million, 178% higher than prior year and 96% growth quarter over quarter driven by strong sales execution, distributor growth and demand for premium payment cards. Revenue for Arculus continues to ramp up. We expanded our direct to consumer distribution channels, adding Amazon, and delivered a co-branding partnership with BTC Inc. in the quarter. And during our last call, we highlighted that we were in advanced discussions with several B2B partners. I'm excited to share that our payment card plus Arculus digital authentication and or crypto cold storage has been selected by several cryptocurrency platforms and fintech partners, Voyager Digital, Load, and MassPay. I'll touch on these in greater detail in a few moments. We expect to launch these programs in the second half of 2022 and additional partnerships continue to progress. I want to add that it takes a team working together toward a common goal to accomplish these results that we've seen in the first quarter. On behalf of the leadership team here at Composecure, I'd like to thank the 700 plus members of our team for their contributions and delivering a strong start to 2022. We are reaffirming our fiscal year 2022 revenue guidance in the range of 336 million to 376 million of net sales. We are also reaffirming our adjusted EBITDA guidance of 100 million to 110 million. And based on this quarter's adjusted EBITDA performance, we are well on track to achieve these results. On slide three, I want to provide a bit more context for our performance. The backbone of our business continues to be strong sales execution, deep customer relationships, and our ability to deliver high quality premium products. We continue to demonstrate momentum with new and existing clients from traditional banks to cryptocurrency platforms to FinTech partners. Taking a deeper look at our payment card business, we had some great success, including an expansion of our relationship with Bank of America to support the new metal premium rewards elite card. We also established an important new relationship with Wells Fargo to deliver the built FinTech metal card. This means today we support seven of the top 10 US issuers with significant opportunity for growth remaining. Capital One launched Venture X at the end of the year, and the program adds another premium segment card to the number of portfolios that we support with them, in addition to Venture, Saver, and Spark. The success of the program and continued commitment to invest in the product was highlighted in the Capital One earnings call. JP Morgan expanded our long tenure partnership by announcing the Inc. Business Premier Metal Credit Card, adding to their portfolio of Chase Inc. business credit cards to meet the unique needs of larger business owners. Moving on to our FinTech wins and expansion for the payment card business, we saw a continued expansion of the Crypto.com relationship, with the launch of new countries, including Australia, Mexico, Spain, and the United Kingdom. Gemini is officially launching their crypto rewards metal debit card program with MasterCard. One United bank, the largest black owned bank in America, introduced the Greenwood card commemorating the Greenwood district of Tulsa, Oklahoma. The Greenwood digital banking platform is targeting the black and Latino communities and has a wait list of over 500,000 customers. They are also planning to launch with a Compose Secure metal debit card. One card from FPL, a FinTech in India, has experienced strong growth by highlighting the metal form factor as part of the differentiated value proposition. Our partnership with cryptocurrency platforms and fintechs to support cold storage and payment cards with multi-factor digital authentication continues to expand as well. Bitcoin 2022, a Miami conference, purchased 25,000 co-branded Bitcoin and Arculus key cards to distribute to their attendees, which I'll discuss a bit more later. voyager digital a publicly traded cryptocurrency platform selected us to deliver a product that combines our premium payment card with digital authentication technology the same for load a digital gold and silver cryptocurrency platform essentially load and voyager have selected arculus to make their debit card also a physical security token providing additive functionality for users such as tap to authenticate to a mobile device for high-value transactions. MassPay, a leading payments platform that enables customers to deliver mass payouts globally in fiat or cryptocurrency, has selected Arculus for an integrated payment card with cold storage and digital authentication capabilities. On slide four, we highlight some industry trends, something we did last quarter as well. We are bolstered by positive market momentum. Card issuers continue to see improving customer acquisition trends for premium card products, such as increased new accounts for premium value fee-paying products and a strong pace for proprietary card acquisitions. In their recent earnings call, American Express highlighted all-time acquisition highs for their U.S. consumer platinum and gold cards, U.S. business platinum cards, and the Delta airline cards. American Express also shared that millennials and Gen Z represented a growing percentage of their new accounts acquired. This younger consumer profile is mirrored in other industry research as well. On slide five, you can see some of the highlighted statistics from a recent independent Edgar Dunn survey across 18 countries. It found that metal cards were preferred by millennials across all regions by 77%. Overall, we continue to have strong confidence in the growth of the metal card market. On slide six, We've made good progress on our product roadmap so far, and in the coming year, we plan to continue to expand our product portfolio to better support our customers. Whether it's adding digital authentication security to an existing hot wallet or white labeling our crypto cold storage and digital authentication offering, we're in a strong position to continue to meet the current and growing needs for cryptocurrency platforms, fintech partners, and financial institutions. As mentioned, we're excited that our payment card plus Arculus digital authentication and or crypto cold storage has been selected by several cryptocurrency platforms and FinTech partners, and we expect additional announcements in the coming quarter. We are also highly encouraged by the consumer response coming out of our participation at Bitcoin 2022 in Miami in April of this year. where more than 25,000 crypto enthusiasts had the chance to experience the benefits of our Arculus cold storage wallet. Based on feedback from conference attendees, we believe we were one of the standouts of the conference with a potent marketing presence, including delivering 25,000 Bitcoin conference co-branded Arculus key cards, a main stage speaking engagement by Adam Lowe, our chief product and innovation officer, and nearly 20 media interviews with both social media influencers and leading business publications. During the four day event, attendees would regularly stop me to share how excited they were by the ease of use and better security provided by the Arculus wallet and key card. Moving on to our Arculus product development first half priorities on page seven. Since the beginning, we have been guided by user feedback We've established consumer feedback forums and our teams engage regularly with the Arculus user community. And we're happy to announce that we plan to have viewing, sending and receiving of NFTs and we'll implement Wallet Connect to allow connectivity to the broader DeFi community, both launching in mid June, as well as adding support for more coins. Let me expand further on page eight we show a drill down on arculus securing nfts as as you know nfts have become an important part of the digital asset market consumers have been asking for arculus nft functionality and in mid-june we'll launch the capability to securely store view send and receive ethereum nfts in the arculus wallet allowing users to securely hold NFT private keys and enabling self-custody. You can see visually what the NFT screens look like in the Arculus wallet. Moving from left to right, you can see the choice for coins or NFTs in the far left. If you click on NFTs, you can see the Ethereum NFT gallery, and clicking on that will bring up a display of all of the NFTs that you hold in your Arculus wallet. And you can drill into the detail, gaining more information on each one. NFTs are now secured by our multi-factor authentication that includes a biometric scan, a six digit pin, and the touch of the Arculus key card. We plan to launch with Ethereum NFTs but we expect to add others in the future, such as Solana, Flow, Binance, and Smart Chain, to name a few. Let me also share what Wallet Connect is expected to look like. If you move to slide nine, you can see where you can access Wallet Connect in the app. Once you click on that, you'll be able to connect to any DeFi exchange or platform you choose, such as OpenSea, Rarible, Uniswap, etc., The benefit is that you're accessing from a secure environment with multi-factor authentication, requiring transactions to be signed with the Arculus key card. Moving to slide 10, you can see how this opens the larger DeFi ecosystem to Arculus users, but with the user-friendly familiar process, tap to authenticate what you do every day when you buy something at a store. Our three-factor authentication is transparent, simple, and secure for the user. We've accomplished a lot in the past quarter for Arculus, and I thought it would be interesting to provide you with a view of our progress on slide 11. We've seen strong media and social media impact, as well as brand coverage at key events and expanded our distribution channels. We expect to continue to ramp our Arculus investment in line with our overall strategy. With that, let me hand it over to Tim to walk through the financials in more detail.