Q4 2021 CompoSecure Inc Earnings Call
Today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
Today's conference is scheduled to begin shortly. Please continue to stand by. Thank you for your patience.
[music].
Speaker Change: Well, I guess you said thank you.
Speaker Change: ??? ??? ???
Speaker Change: ¶¶
Speaker Change: You
Good day, and thank you for standing by welcome to accomplish secure at fourth quarter and full year 2021 earnings call.
Speaker Change: Good day and thank you for standing by. Welcome to the CompoSecure fourth quarter and full year 2021 earnings call. At this time, all participant lines are in listen only mode. After the presentation.
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.
Speaker Change: To ask a question during this session, you'll need to press star, then 1 on your telephone keypad. Please be advised, today's conference...
Please be advised today's conference maybe recorded.
If you require operator assistance during the call. Please press Star then zero.
Speaker Change: If you require operator assistance during the call, please press star then zero.
Speaker Change: I'd now like to hand the conference over to your host today, Mark Griffin, Investor Relations.
I'd now like to hand, the conference over to your host today, Marc Griffin Investor Relations. Please go ahead.
Good afternoon. Thank you for joining us today to really accomplish curious fourth quarter and full year 2021 financial results.
Mark Griffin: Good afternoon. Thank you for joining us today to review Compass Secure's fourth quarter and full year 2021 financial plan.
With me on the call. This afternoon is John will accomplish secures Chief Executive Officer.
Mark Griffin: With me on the call this afternoon is John Wilk, Comcast Securities Chief Executive Officer, and Tim Fitzsimmons, Chief Financial Officer.
And Tim said Simmons, Chief Financial Officer, who will begin with prepared remarks, and then we'll open up the call for Q&A.
Mark Griffin: They will begin with prepared remarks and they will open up the call for Q&A.
Mark Griffin: 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 processes.
During the call we will make statements related to our business that may be considered forward looking 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.
Mark Griffin: 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.
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 any subsequent date.
Mark Griffin: 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 result to differ materially from our expectations.
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 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 accomplish secure dot com and on the SEC's website at SEC Gov.
Mark Griffin: 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.
Mark Griffin: discussion. The today's call includes certain non-GAAP financial measures as defined by the SEC, including adjusted EBIT.
Discussion.
Today's call includes certain non-GAAP financial measures as defined by the SEC, including adjusted EBITDA.
Mark Griffin: The company believes these non-financial, non- GAAP financial measures provide useful information to management and investors regarding certain financial and business trends impacting the company's.
The company believes these non financial non-GAAP financial measures cause I useful information to management and investors regarding certain financial and business trends.
The company's conditions and operations.
Mark Griffin: 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.
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 may be different from similarly, titled non-GAAP financial measures.
Thanks.
A reconciliation of GAAP to non-GAAP measures is available on our press release press release and earnings presentation available on the Investor Relations section of our website.
Mark Griffin: The Reconciliation of Gap to Non- GAAP measures is available on our press release and earnings presentation available on the investor relations section of our website.
Mark Griffin: With that, let me turn the call over to John for our first earnings call as a public company. John , go ahead.
That let me turn the call over to John for his 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.
John Wilk: Thanks, Mark, and good evening, everyone. Thank you for joining us tonight as we discuss our fourth quarter and full year earnings release.
Speaker Change: We appreciate your interest and thank you for participating.
We appreciate your interest and thank you for participating.
Speaker Change: 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 Arcula.
2021 was an exciting year for accomplish secure which we became a newly listed public company achieve.
Achieved record net sales and launched a best in class three factor authentication product for securing digital assets called arc.
It's important to me to take a moment to recognize our more than 700 employees, who made this possible.
Speaker Change: 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.
Speaker Change: 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 accomplish secure completed its business combination with Roman D V D. R Tech acquisition Corp.
Speaker Change: 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.
In December of 2021, and as a newly listed public company on NASDAQ.
Speaker Change: 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 to have you here.
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 accomplish secure customers employees and shareholders.
Speaker Change: 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.
Speaker Change: 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 .
Speaker Change: 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 in the quarter in line with our guidance for revenue and EBITDA and have very strong momentum as we begin 2022.
Tim Fitzsimmons: 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 achieve.
Tim Fitzsimmons: In the fourth quarter, we demonstrated strong net sales of $75 million.
Tim Fitzsimmons: achieving 40% year-over-year growth.
Achieving 40% year over year growth.
Tim Fitzsimmons: And our adjusted EBITDA for the fourth quarter was $21 million, which includes the impact of our Arculous investment, for which Tim will provide some additional context.
And our adjusted EBITDA for the fourth quarter was $21 million, which includes the impact of our Arcalis investment for which Tim will provide some additional context.
Speaker Change: This is consistent with our messaging that we would start to see increased sales growth in the back half of 21.
This is consistent with our messaging that we would start to see increased sales growth in the back half of 'twenty one.
And we delivered on that.
Speaker Change: For the year, we finished 2021 with record net sales of $268 million.
For the year, we finished 2021 with record net sales of $268 million.
Speaker Change: Guidance, if you remember, was $267 to $269 million.
Guidance, if you remember was $267 million to $269 million.
And our adjusted EBITDA for the year was just over $102 million.
Speaker Change: And our adjusted EBITDA for the year was just over $102 million.
Speaker Change: with guidance being between 97 and 102. So we were at the top end of the range for EBITDA.
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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: I'll start by saying our premium card business is being led by strong sales execution, as well as our deep customer engagement.
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.
Speaker Change: 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.
Speaker Change: We expect these positive trends to continue well into 2022.
We expect these positive trends to continue well into 2022.
In addition, we are being very thoughtful about how we're running the business and remain focused on margins, while simultaneously accelerating our critical investments to capture long term opportunity and value.
Speaker Change: 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.
Speaker Change: 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 Arculous and still met the high end of the guidance range for the year. The common
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 art jealous 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 confidence going into 2022.
Speaker Change: continued industry trends gives us the confidence going into 2022.
Speaker Change: 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.
And with that we are reaffirming our 2022 guidance in the range of 336 million to $376 million for net sales and a 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 accomplish secure for those less familiar with our story.
Speaker Change: As this is our first earnings call, I thought it'd be helpful to provide a brief overview of Compost Secure for those less familiar with our story.
Speaker Change: Compost Secure is a leading provider of financial payment cards and cryptocurrency storage and security solutions.
Accomplished secure is a leading provider of financial payment cards, and crypto currency storage and security solutions.
Speaker Change: Our products serve two main markets, the premium payment card market and the growing market for securing digital assets.
Our products serve two main markets the premium payment card market.
And the growing market for securing digital assets.
The company has been around for more than 20 years, we're not a startup.
Speaker Change: The company's been around for more than 20 years. We're not a startup.
Speaker Change: As you can see from slide three, we produced 22 million metal cards last year with strong margins.
As you can see from slide three we produced 22 million metal cards last year with strong margins.
Speaker Change: We serve 100 plus card programs across the globe, including seven of the top 10 U.S. issuers.
We serve 100 plus card programs across the globe, including seven of the top 10 U S issuers.
Speaker Change: and we have very long tenure with our largest clients.
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.
Speaker Change: 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.
Speaker Change: We've led the creation and growth of the metal card form factor through our expertise in material science and technology.
Our expertise in materials science and technology and.
Speaker Change: And we've been at the forefront of embedding emerging payment technology. For example, the evolution of tap to transact.
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 and digital assets and authentication technology.
Speaker Change: 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.
Speaker Change: 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.
It 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're seeing.
Speaker Change: 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.
Speaker Change: So, on the next page, when you look at the total addressable market on the left side of page 5, you'll see the TAM for the metal.
You'll see the Tam for the metal.
Card payment business.
Speaker Change: As I mentioned, we issued 22 million metal cards last year.
As I mentioned, we issued 22 million metal cards last year.
Speaker Change: We believe there were approximately 4 billion payment cards issued worldwide on an annual basis.
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.
Speaker Change: 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.
The total addressable market for our existing premium card business, so plenty of runway for growth.
Speaker Change: 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.
In the middle we highlight the total addressable market and crypto cold storage as well as security and authentication on the right.
We're seeing exponential growth in the number of users.
Speaker Change: 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.
You can also see on the right side, the growing need for better security around digital assets, there's a number of threats and hacks increases and.
Speaker Change: and the broader security and authentication market continues to grow.
In the broader security and authentication market continues to grow.
The bottom line for US is that we think the total addressable market.
Speaker Change: 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.
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 arquebus 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.
Speaker Change: I'll provide further details on how our Arculous platform meets these market needs in a moment. But first, let me cover some of the trends that we're seeing in the payment card marketplace on the next slide.
So on <unk>.
Speaker Change: Page six, as we finish 2021 and we move into 2022.
Page six as we finished 2021 and we move into 2022.
We expect continued robust growth in the premium payment card business.
Speaker Change: We expect continued robust growth in the premium payment card business driven by strong.
Driven by strong sales execution and.
Speaker Change: and supported by three elements that you can see laid out on page six. Increased card solicitations, increased
And supported by three elements that you can see laid out on page six.
Increased card Solicitations, Inc.
Increased applications by consumers.
Speaker Change: and increased acquisitions that we're seeing in the market.
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.
Speaker Change: 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.
Speaker Change: Strong customer demand is returning to and even exceeding pre-pandemic levels.
Speaker Change: And we are well positioned to capture the opportunity as our metal cards are an attractive value proposition for card issuers.
And we are well positioned to capture the opportunity as our metal cards are an attractive value proposition for card issuers.
Speaker Change: And we have longstanding blue chip clientele, and we're establishing relationships with some of the leading FinTech clients in the world.
We have long standing 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.
Speaker Change: On slide five, we highlighted the market opportunity for our payment card business and the digital authentication platform. On slide six, we highlighted the market opportunity for our payment card business and the digital authentication platform.
But if 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.
Speaker Change: 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 Oculus cold storage product.
Speaker Change: You see on the left side of this slide, today in market, we've got our payment card business and the Arculous cold storage product.
But in the middle we bring together payments plus digital authentication.
Speaker Change: 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.
Speaker Change: The example here is most people login to their banking and investment accounts using a username
Using a user name and password.
Speaker Change: We've seen hundreds of millions of usernames and passwords compromised over the last few years.
Seen hundreds of millions of user names 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 <unk> authentication capabilities.
Speaker Change: And we intend to address that challenge by bringing together a traditional debit or credit card with the Arculus authentication capability.
Speaker Change: turning your credit or debit card into a security token.
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.
Speaker Change: We also have the ability to add those same authentication capabilities to our crypto cold storage product.
Speaker Change: 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 this would enable a customer to have increased security on their existing hot wallet in.
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.
Speaker Change: And finally, we intend to bring together payment plus authentication plus cold storage into one product.
Dysfunctionality, we believe will be available in 2022, and we intend to pilot payment card plus digital auto authentication in Q2 and Q3 with clients that we are currently in active and advance conversations with.
Speaker Change: 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 <unk> platform roadmap.
Speaker Change: to give further specifics on our Arculus platform roadmap.
Speaker Change: I also want to share some new features and functionality that are key priorities in the first half of the year.
I also want to share some new features and functionality that our 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.
Speaker Change: 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 in Ftes and view and Ftes in your Oculus wallet.
Speaker Change: And as such, we are focused on, number one, incorporating the ability to include NFTs and view NFTs in your Arculous wallet.
Speaker Change: We've seen the rise and explosion of the NFT market across a whole variety of industries.
We've seen the rise an explosion of the NFC market across a whole variety of industries.
Speaker Change: We are continuing to increase the number of currencies.
We are continuing to increase the number of currencies.
Speaker Change: We added 10 new currencies in January and today support approximately 75% of the crypto market cap with our current portfolio of supported currencies and we'll continue to expand that list.
Added 10, new currencies in January and today support approximately 75% of the <unk>.
Crypto market cap with our current portfolio of supported currencies and we will continue to expand that list.
And lastly, we've heard a strong desire from the crypto community.
Speaker Change: 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.
Integrate and enable the oculus wallet to operate with the broader defy ecosystem.
Speaker Change: And we will be including the capability through WalletConnect to enable the Arculus customers to do that.
And we will be including the capability.
Through wallet connect to enable the oculus customers to do that.
I know that you're interested in hearing our progress on sales and marketing for Oculus, So I'd like to take a moment.
Speaker Change: 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.
Date, you on our current momentum.
Speaker Change: I'm excited to announce that we launched our first Arculus third-party sales distribution channel through Amazon.com at the end of February .
I'm excited to announce that we launched our first <unk> third party sales distribution channel through Amazon Dot com at the end of February .
This is the first of several third party distribution channels that we will begin to ramp up.
Speaker Change: 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 get Arcola Dot com, our consumer direct sales website.
Speaker Change: 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 25000 card co branded Oculus product for shipment later this month for the Bitcoin 2022 conference in Miami in April .
Speaker Change: 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 .
Speaker Change: 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.
This is one of the leading crypto conferences in the world.
We'll get exposure to some of the most influential names in the industry.
Speaker Change: put our product directly in the hands of the crypto leaders.
Our product directly in the hands of the crypto leaders who are at the forefront.
Speaker Change: As part of this partnership, we'll be making 2,500 customized specially designed VIP cards
As part of this partnership will be making 2500 customized special, especially designed VIP cards.
Speaker Change: that will operate as whale passes for the conference as well.
It will operate as whale passes for the conference as well.
Speaker Change: And third, we are in advanced conversations with a number of B2B partners.
And third we are in advanced conversations with a number of <unk> partners that include card design and technical integration work.
Speaker Change: that include card design and technical integration work.
Speaker Change: including crypto cold storage and payments plus authentication.
Including crypto cold storage and payments plus authentication.
We will provide further updates as deals get finalized.
Speaker Change: We will provide further updates as deals get finalized.
And we expect to announce a broader update with our Q1 results.
Speaker Change: 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 strengths with key leadership appointments.
Speaker Change: 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 GOR Boe.
Speaker Change: Joining our senior leadership team, we have our new chief revenue officer, Amanda Gourbeau. Amanda is more than 25 years.
Amanda has more than 25 years of experience.
Amanda Gourbeau: payments and security, leading global sales, products, and service teams.
Payments and security, leading global sales products and service teams.
Amanda Gourbeau: for the financial sector. Under her leadership, we're already beginning to scale up our sales and marketing effort.
The financial sector.
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.
Amanda Gourbeau: We've also included in our press release hires in product marketing and software development.
Amanda Gourbeau: 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.
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.
Amanda Gourbeau: With that, let me hand it over to Tim to walk through the financials in more detail.
With that let me hand, it over to Tim to walk through the financials in more detail.
Thanks, John and good evening, everyone I'll provide an overview of our fourth quarter and full year 2021 financial performance and then briefly turn it back to John before we ended up we take questions from the audience before I jump in.
Tim Fitzsimmons: Thanks, John , and good evening everyone. I'll provide an overview of our fourth quarter and full year 2021 financial performance and then briefly turn it back to John before we end up, we take questions from the audience.
Tim Fitzsimmons: I want to reiterate John's opening comments that we hit the guidance that we had shared with you prior to closing the SPAC merge.
Want to reiterate John's opening comments that we hit the guidance that we had shared with you prior to closing the <unk> merger. So we had come right in on the guidance that we had indicated at that point in time.
Tim Fitzsimmons: So we had come right in on the guidance that we had indicated at that point in time.
Tim Fitzsimmons: The fourth quarter net sales grew 40% to $75 million up from $54 million in the same quarter of the prior year.
Fourth quarter net sales grew 40% to $75 million up from $54 million in the same quarter of the prior year.
Speaker Change: John and I have spoken about the impact of COVID quarters in our prior communications. Our experience has proven out that Q4 of 2020 was the low point of the impact of COVID.
John and I have spoken about the impact of Covid quarters in the prior in our prior communications. Our experience has proven out that Q4 of 2020 was the low point of the impact of Covid.
If you look at our quarterly trend, we were up 14% Q4 over Q3, showing the growth trend that we were expecting.
Speaker Change: If you look at our quarterly trend, we were up 14% Q4 over Q3, showing the growth trend that we were expecting.
Accordingly growth in Q4 was driven by executing against all facets of our sales strategy that is continued growth from existing and new domestic customers international expansion.
Speaker Change: Importantly, growth in Q4 was driven by executing against all facets of our sales strategy.
Speaker Change: That is continued growth from existing and new domestic customers, international expansion, and growth of our fintech customers.
And growth about Fintech customers.
Publicly available data as you saw on slide six shows that large issuers are experiencing increased demand.
Speaker Change: Publicly available data, as you saw on slide six, shows that large issuers are experiencing increased demand. We are seeing this trend as well, as we saw our backlog of booked orders grow in Q4.
We are seeing this trend as well as we saw our backlog of booked orders grow in Q4.
Growing on moving onto gross margin our gross margins were 52% in Q4 of 2021 versus 48% in Q4 of 2020.
Speaker Change: Moving on to gross margin, our gross margins were 52% in Q4 of 2021 versus 48% in Q4 of 2020.
Speaker Change: This was driven by production efficiencies, product mix, and supply chain savings.
This was driven by production efficiencies product mix and supply chain savings.
We had adjusted EBITDA of $21 million in the fourth quarter of 2021, which was up slightly compared to the prior year and resulted in an adjusted EBITDA margin of 28% compared to 37%.
Speaker Change: We had adjusted EBITDA of $21 million in the fourth quarter of 2021, which was up slightly compared to the prior year and resulted in an adjusted EBITDA margin of 28% compared to 37%.
Speaker Change: This margin was impacted by our $13 million investment in the launch of Oculus in Q4 of 2021. So now let's.
This margin was impacted by a $13 million investment in the launch of Oculus in Q4 of 2021.
So now, let's turn to the full year results for.
For the full year of 2021 net sales grew 3% to $268 million up from 261 in 2020.
Speaker Change: For the full year of 2021, net sales grew 3% to $268 million, up from 261.
Speaker Change: Our margin stories is also one of growth. Our gross margins were 54% in 2021 versus 51% in 2020. This increase was driven by the same factors that was driving Q4, production efficiencies, our product mix, and supply chain cost savings that we managed to negotiate.
Our margin stories is also one of growth our gross margins were 54% in 2021 versus 51% in 2020. This increase was driven by the same factors that was driving Q4 production efficiencies product mix and supply chain.
Cost savings that we managed to negotiate.
<unk>.
We produced adjusted EBITDA for the year of 100, 2100 $102 million in 2021, which was a decrease of $14 million.
Speaker Change: We produced a just EBITDA for the year of $102 million in 2021, which was a decrease of $14 million from 2020. But this decrease includes the impact of the $21 million investment in the Oculus business that we made. And that decrease was partially offset by margin improvements within the payment card business.
From 2020, but this decrease includes the impact of the $21 million investment in the Oculus business that we made and that decrease was partially offset by margin improvements within the payment card business.
Looking at our international versus domestic sales, our international sales increased by $2 million or 4% year over year. The net sales trend that you see in this chart shows that the quarter growth trajectory with what we were expecting for 2021 with the emergence of.
Speaker Change: Looking at our international versus domestic sales, how international sales increased by $2 million or 4% year over year. The net sales trend that you see in this chart shows that the quarter growth trajectory was what we were expecting for 2021 with the emergence of the impact of COVID on the first half of the year.
The impact of Covid on the first half of the year.
I'm going to turn to the balance sheet and cash flow now which are located in the appendix of this presentation and if you look at the cash flow, which shows a free cash flow from operations of $73 million for 2021.
Speaker Change: I'm going to turn to the balance sheet and cash flow now, which are located in the appendix of this presentation. And if you look at the cash flow, it shows a free cash flow from operations of $73 million for 2021.
Speaker Change: We derive that by taking the operating cash flow of $78 million less the capital spending of $5 million.
We derive that by taking the operating cash flow of $78 million less capital spending of $5 million.
Speaker Change: This free cash flow includes our $21 million investment in Oculus.
This free cash flow includes our $21 million investment in Oculus.
As of 30 December 31, we had secured debt of $265 million that was made up of a $250 million term loan and a $15 million.
Speaker Change: As of December 31st, we had a secured debt of $265 million.
Speaker Change: That was made up of a $250 million term loan and a $15 million revolver.
Albert.
Speaker Change: We also had unsecured convertible debt of $130 million, which arose out of the SPAC merger.
We also had unsecured convertible debt of $130 million, which arose out of the <unk> merger.
We had cash on the balance sheet of $22 million.
Speaker Change: We had cash on the balance sheet of $22 million.
And this results in a secured net debt ratio of two four times and a total net debt ratio of three six times on the $102 million of adjusted EBITDA.
Speaker Change: And this results in a secured net debt ratio of 2.4 times and a total net debt ratio of 3.6 times on the $102 million of adjusted EBIT.
This senior credit facility provides a revolving loan of up to $60 million with $15 million drawn at year end.
Speaker Change: This senior credit facility provides a revolving loan of up to $60 million with $15 million drawn at the IRS.
The company forecast of results and the debt facility are anticipated to provide adequate working cash flow to fuel our growth in the coming years.
Speaker Change: The company forecasted results and the debt facility are anticipated to provide adequate working cash flow to fuel our growth in the coming year.
Speaker Change: With that, let me turn it back to John so he can finalize and comment.
With that let me turn it back to John So he can finalize some comments.
Okay.
Thanks, Tim before we move to Q&A I want to close by summarizing a bit of what we talked about today.
John Wilk: Thanks, Tim. Before we move to Q&A, I want to close by summarizing a bit of what we talked about today.
So on page 13, I think.
John Wilk: So, on page 13, I think we highlight again that we are affirming our guidance for.
We highlight again that we are.
Firming our guidance for.
John Wilk: 2022, with revenue in the range of $336 to $376 million, and EBITDA between $100 to $110 million.
2022 with revenue in the range of $336 million to $376 million in EBITDA between $100 million to $110 million.
John Wilk: We're very pleased with our fourth quarter and full year results. We're in a strong position to capitalize on the trends and momentum in our premium card business.
We are very pleased with our fourth quarter and full year results were in a strong position to capitalize on the trends and momentum in our premium card business.
John Wilk: strong sales execution, increased solicitation, increased customer applications, and increased number of new customers.
Including strong sales execution increased solicitation increased customer applications.
And increased number of new customers acquired.
John Wilk: As we accelerate our Arculus business, we believe the merger of the physical card and security and authentication technology is inevitable as the demand rapidly increases for storage solutions.
As we accelerate our <unk> business, we believe the merger of the physical card.
Security and authentication technologies is inevitable as the demand rapidly increases for storage solutions.
John Wilk: and for access to crypto for real world transactions as that continues to grow.
And for access to crypto for real World transactions as that continues to grow.
John Wilk: Arculus is well positioned to enable this transformation by partnering with our existing relationships as well as working with new partners in gaming, crypto exchanges, and other digital markets.
<unk> is well positioned to enable this transformation by partnering with our existing relationships as well as working with new partners and gaming crypto exchanges and other digital markets.
John Wilk: With that, I want to thank you all for taking the time to join us today. We very much appreciate your attention and look forward to updating you throughout the year as we progress. With that.
With that I want to thank you all for taking the time to join US today, we very much appreciate your attention.
We look forward to updating you throughout the year as we progress.
With that we'll open the call to questions.
If you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
John Wilk: If you'd like to ask a question at this time, please press the star, then the number one key on your TouchTone telephone. To withdraw your question, press the pound key. Again, that is star, then the number one key on your TouchTone telephone.
To withdraw your question press the pound key.
That is star then one if you'd like to ask a question.
Our first question comes from Steve Moss with B Riley Securities.
Speaker Change: Our first question comes from Steve Moss with B Riley Securities.
Hi, good afternoon.
Good afternoon, John maybe just.
Maybe just starting with the.
Steve Moss: Maybe just starting with what you mentioned in terms of you have partners that you're engaged in technical integration here, kind of wondering, are those the same partners you're referring to that you're gonna have client pilots on page seven, or could you size up how many partners are advanced at this point, a number of partners that are advanced at this point, and maybe the size of those potential white-label clients?
The what you mentioned in terms of your partners that you're engaging technical integration here.
Kind of wondering are those the same partners you're referring to on that you can have client pilots on page seven or.
Could you size up how many partners are.
At this point.
A number of partners that are advanced at this point and maybe the.
The size of those potential white label clients.
Sure.
Speaker Change: Steve, thank you for the question. We are not sizing individual opportunities for you guys at this point. I'm just trying to give you context for, you know, it's not that we're having conversations across a variety of industries. We're having advanced conversations at this point. When we get into car design,
Yes, Steve. Thank you for the question we are.
Not sizing individual opportunities for you guys at this point I'm, just trying to give you context for.
It's not that we're having conversations across a variety of industries, we're having advanced conversations at this point when we get into card design.
Back and forth, that's when the conversations reach more advanced stages.
Speaker Change: back and forth. That's when the conversations reach more advanced stages. And people look at different ways, Steve, if they want to use our wallet or an SDK to integrate with us, those are examples of the kinds of technical integration choices that I'm highlighting.
And people look at different ways, Steve if they want to use our wallet or an SDK to integrate with US those are examples of the kinds of.
Technical integration choices.
That I'm highlighting so.
Speaker Change: I'm messaging out to you and to the market that we are in advanced stages with a number of those B2B conversations. We think that's important.
Messaging out to you and to the market.
That we are in advanced stages with a number of those conversations.
We think that build.
Speaker Change: help demonstrate to you and to the market sort of the progress that we're making.
Demonstrate to you and to the market sort of the progress that we're making in that space.
Speaker Change: Okay, and then just to tie in terms of the potential announcements, you seem to indicate that announcements of white label partnerships will come with the first quarter earnings. Did I hear that correctly?
Okay, and then just to tie in terms of the announced potential announcements you seem to indicate the announcements of white label partnership will come with.
First quarter earnings did I hear that correctly.
Speaker Change: Yes, we'll announce things as we're able to, meaning there are times where partners will want to get out and announce something and, you know, in those cases we'll announce it if it is at Q4, or excuse me, Q1 earnings or before. You know, we want to help.
Yes.
We'll announce things as we're able to meaning there are times, where our partners will want to get out and announce something in.
Those cases, we'll announce it if it is at Q4 or excuse me in Q1.
Earnings or before.
We want to help you.
Speaker Change: you and others in the market understand our progress and momentum around Arculus.
You and others in the market understand our progress and momentum around Oculus.
Okay great.
Speaker Change: Great. That's helpful. I appreciate that. And then, you know, one question on the metal card business here, you know, as we look at the metal card outlook, revenue outlook, you know, do we think about it as steady growth throughout the year or could it be weighted to one half of the year versus the other? Just kind of any color there could be helpful.
That's helpful. I appreciate that and then.
One question on the metal card business here.
As we look at the metal card outlook right.
Revenue outlook do we think about it as steady growth throughout the year or could it be weighted to one half of the year versus the other just kind of any any color there could be helpful.
Thanks, Steve.
So.
Theres not typically seasonality in our business.
Speaker Change: There's not typically seasonality in our business, so if you want to think about it in terms of, you know, the run rate that we exited the year and, you know, some sequential growth off of that as you look to sort of model out the full numbers for the year.
So if you want to think about it in terms of.
The run rate that we exited the year.
Sequential growth off of that.
As you look to sort of model out the full numbers for the year.
Speaker Change: Okay, great. Thank you very much. Appreciate all the color.
Okay, great. Thank you very much I appreciate all the color.
Thanks, Steve.
As a reminder, if you'd like to ask a question at this time that is star then one.
Speaker Change: As a reminder, if you'd like to ask a question at this time, that is star, then 1.
Yeah.
I'm showing no further questions in queue at this time and that will conclude today's question and answer session.
Speaker Change: I'm showing no further questions in queue at this time. That will conclude today's question and answer session.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.
This concludes today's conference call. Thank you for participating.
You may now disconnect.
Okay.
[music].
Speaker Change: ??? ??? ???
Hum.
[music].
Speaker Change: you