CompoSecure, Inc.

Good day, and thank you for standing by. Welcome to the Composecure Q2 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Sean Mansuri, Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us to review CompostSecure's second quarter 2024 financial results. With me on the call is John Wilk, CompostSecure's Chief Executive Officer, and Tim Fitzsimmons, Chief Financial Officer. They will begin with prepared remarks and then we will open 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 and our ability to maintain existing and acquire new customers, as well as 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 actual results to differ materially from our expectations. For a 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 and on the SEC's website at sec.gov. Please note that the discussion on today's call may include certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, adjusted EPS, and free cash flow. 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 measures 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 all that, let me turn the call over to John to discuss our second quarter results.

Thank you, Sean. Good afternoon, everyone, and thank you for joining us for our second quarter conference call. We've got a lot of exciting news to share with you today, but I want to start and begin by discussing the strategic transaction that we announced in a separate press release issued after market closed today and covered on slides three and four in our earnings presentation. Dave Cody, former CEO of Honeywell and current executive chairman of Vertiv, will become executive chairman of Composecure following the acquisition of a majority interest in the company by the David Cody family. In the transaction, all outstanding Class B shares will be converted to Class A shares, and the David Cody family, through resolute partners, will purchase $49.3 million out of the 51.9 million shares at $7.55 per share, resulting in an investment of $372 million upon closing of the transaction. This deal unlocks shareholder value by removing our dual-class shares, eliminating tax distributions to our Class B holders, simplifying our reporting, and removing market overhang and uncertainty related to the future sale of Class B shares. Importantly, we anticipate a positive impact of more than $20 million in incremental free cash flow on an annual basis, providing Compose Secure with additional cash to invest in the business to drive growth and reward shareholders. I've included a slide where you can see more about Dave Cody and his background. As you can see on the right side of this slide, Dave has an incredible track record of delivering returns for shareholders in his capacity as CEO of Honeywell for 15 years and as his current executive chairman at Vertiv. His experience steering global organizations will be invaluable to Composecure as we enter a new phase of growth and continue to focus on creating value for our shareholders, customers, and employees. Separately, we are also pleased to announce that we have amended and extended our credit facility with favorable terms, which was due to expire at the end of 2025. Tim will walk you through the details a little bit later in the call on that. Now let me summarize our quarterly performance. We're pleased to report that net sales increased by 10% to a record 108.6 million and reflected the highest revenue in the history of our company. In addition, our adjusted EBITDA increased by 8% to 40 million. These results were driven by continued growth in our domestic business and strong international demand. We expanded our partnership with Fiserv to include the marketing and reselling of Arculus Authenticate. This enhances our ability to bring FIDO2 secure authentication to Fiserv's extensive customer base of financial institutions and fintechs. Overall, given our strong progress this year, we have narrowed our fiscal year 2024 full-year guidance to the higher end of our previous range. We now anticipate net sales between 418 and 428 million versus previous guidance of 408 to 428 and adjusted EBITDA between 150 and 157 million versus 147 and 157 million, our prior guidance. Turning to slide six, I wanted to cover some of the new exciting programs our customers launched. We continue to support our customers' ability to offer highly attractive premium card programs, such as the limited edition American Express white gold card and the first Wells Fargo and Expedia co-branded metal card. In addition, you could see that Turkish Airlines and Atlas Affintech also recently announced or launched new metal card programs. Moving on to slide seven for some insight on the card market. Card issuers maintain steady purchase volumes and drove strong customer acquisitions in the second quarter. This continues the trends we've seen throughout the year and has reaffirmed our belief in a strong and growing market for premium and metal payment cards. In addition, on slide eight, you can see several of our customer and partner quotes from the second quarter. These callouts underscore our commitment to marketing and innovations that will attract and retain premium card customers. Turning to Arculus on slide nine, we have maintained good momentum and remain on track for our total net investment in 2024 to be lower than 2023, with the expectation of turning positive for fiscal 2025. For the quarter, Arculus net investment was 2.3 million compared to 4.2 million last year in the same quarter. And year to date, the net investment in Arculus was 4 million as of June 2024 versus 8.7 last year. As I mentioned earlier, we recently signed a marketing agreement with Fiserv to expand our relationship and allow Fiserv to begin marketing and reselling Arculus Authenticate. This builds on our already successful collaboration and solidifies our joint commitment to add functionality to payment cards that improves the customer experience. In addition, we recently previewed an exciting Arculus capability that leverages our secure hardware wallet to enable payment at point of sale terminals using digital assets. This capability is still in the early phases, but has promising applicability for Web 3 payments. With that, I'll now hand it over to Tim to review our financials in more detail.