Q2 2024 CompoSecure Inc Earnings Call

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Operator: Good day, and thank you for standing by.

Operator: 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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 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 Mansouri, Investor Relations. Please go ahead.

Operator: Today, 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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 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 Mansouri, Investor Relations. Please go ahead.

Speaker Change: Good day and thank you for standing by welcome to the Compass secure Q2, 'twenty 'twenty four earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you will need to pause.

Operator: Welcome to the Compo Secure Q2 2024 earnings call. At this time, all participants are in a list of questions.

Operator: 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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again.

Star one one on your telephone.

You will then hear an automated message advising that your hand is raised to withdraw your question. Please press star one again.

Operator: Please be advised that today's conference is being recorded.

Please be advised that today's conference is being recorded.

Sean Mansouri: I would now like to hand the conference over to your first speaker today, Sean Mansouri, Investor Relations. Please go ahead.

I would now like to hand, the conference over to your first speaker today, Shawn Mansouri Investor Relations. Please go ahead.

Sean Mansouri: Thank you. Good afternoon, everyone, and thank you for joining us to review Compo Secure's second quarter 2024 financial results. Whitney on the call is John Wilk, Compo Secure's Chief Executive Officer, and Tim Fitzsimmons, Chief Financial Officer.

Sean Mansouri: Thank you. Good afternoon, everyone, and thank you for joining us to review CompoSecure's second quarter 2024 financial results. With me on the call is John Wilk, CompoSecure'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.

Shawn Mansouri: Thank you good afternoon, everyone and thank you for joining us to review accomplish secures second quarter 2024 financial results.

Speaker Change: With me on the call is John Wilke combo, secures Chief Executive Officer and Tim.

Speaker Change: Chief Financial Officer.

Sean Mansouri: 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.

Sean Mansouri: They will begin with prepared remarks, and then we will open the call for Q&A. 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. 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. Thank you, and with all that, let me turn the call over to John to discuss our second quarter results.

Speaker Change: They will begin with prepared remarks, and then we will open the call for Q&A.

Sean Mansouri: 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.

Speaker Change: 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.

Speaker Change: Forward looking statements may often be identified with words, such as we expect we anticipate or upcoming.

Speaker Change: These statements reflect our views only as of today and should not be considered our views as of any subsequent date.

Speaker Change: We undertake no obligation to update or revise these forward looking statements.

Sean Mansouri: 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.

Speaker Change: 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.

Sean Mansouri: 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.

Speaker Change: For a discussion of material risks and other important factors that could affect our actual results.

Speaker Change: These 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.

Sean Mansouri: 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 US GAAP and may be different from similarly titled non-GAAP measures. Use by other companies. Units.

Sean Mansouri: 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.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: 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.

Sean Mansouri: 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.

Sean Mansouri: A reconciliation of GAAP to non-GAAP measures is available in our press release and earnings presentation, available in 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.

Speaker Change: 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.

John Wilk: 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.

Speaker Change: Thank you and with all that let me turn the call over to John to discuss our second quarter results.

John Wilk: 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 by discussing the strategic transaction that we announced in a separate press release issued after the 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 Dave Cody family.

John Todaro: 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, begin by discussing the strategic transaction that we announced in a separate press release issued after the 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 Dave Cody family, resulting in an investment of $372 million upon closing of the transaction.

John Wilke: Thank you, Sean and good afternoon, everyone and thank you for joining us for our second quarter Conference call.

John Wilk: 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 aftermarket close 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 David Cody family through Resolute Partners will purchase $49.3 million out of the $51.9 million shares at $75.5 per share, resulting in an investment of $372 million upon closing of the transaction.

John Wilke: 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.

John Wilk: In the transaction, all outstanding Class B shares will be converted to Class A shares, and the David Cote 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.

Speaker Change: Dave Cody former CEO of Honeywell and current executive Chairman, a verdict will become executive chairman of combo secure following the acquisition of a majority interest in the company by the David Cody family.

Speaker Change: In the transaction all outstanding class B shares will be converted to class a shares.

Speaker Change: And David Cody family through Resolute partners will purchased $49 3 million out of the 51 9 million shares at $7 55 per share.

John Wilke: Resulting in an investment of 372 million upon closing of the transaction.

John Wilk: This deal unlocked 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 CompoSecure 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 in 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.

John Wilke: This deal unlock shareholder value by removing our dual class shares.

John Wilke: Eliminating tax distributions to our class B holders.

John Wilke: Simplifying our reporting.

John Wilke: And removing market overhang and uncertainty related to the future sale of class B shares.

John Todaro: Importantly, we anticipate a positive impact of more than $20 million in incremental free cash flow on an annual basis, providing CompoSecure with additional cash to invest in the business to drive growth and reward shareholders. 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.

John Wilk: Importantly, we anticipate a positive impact of more than $20 million in incremental free cash flow on an annual basis, providing CompoSecure with additional cash to invest in the business, to drive growth, and to reward shareholders. I've included a slide where you can see more about Dave Cote and his background.

John Wilke: Importantly, we anticipate a positive impact of more than $20 million in incremental free cash flow on an annual basis, providing combo secure with additional cash to invest in the business to drive growth and reward shareholders.

John Wilk: 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.

John Wilke: I've included a slide where you can see more about Dave Cody and his background.

Dave Cody: 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.

Speaker Change: And as his current executive chairman at verdicts.

John Wilk: His experience during 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.

John Todaro: 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. These results were driven by continued growth in our domestic business and strong international demand.

Speaker Change: His experience during global organizations will be invaluable to accomplish secure as we enter a new phase of growth and continue to focus on creating value for our shareholders customers and employees.

John Wilk: 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.

Dave Cody: Separately. We are also pleased to announce that we have amended and extended our credit facility with favorable terms.

Speaker Change: Which was due to expire at the end of 2025.

Dave Cody: Tim will walk you through the details a little bit later in the call on that.

John Wilk: 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.

John Wilk: 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.

Tim: Now, let me summarize our quarterly performance.

Tim: We're pleased to report that net sales increased by 10%.

Dave Cody: To a record $108 6 million and reflected the highest revenue in the history of our company.

Dave Cody: In addition, our adjusted EBITDA increased by 8% to $40 million.

John Wilk: 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 FISER's extensive customer base of financial institutions and fintech. 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 million, and Adjusted EBITDA between $150 and $157 million, versus $147 and $157 million, our prior guidance.

Tim: These results were driven by continued growth in our domestic business and strong international demand.

John Wilk: Fund. We expanded our partnership with Pfizer to include the marketing and reselling of Arculus Authenticate. This enhances our ability to bring phyto to secure authentication to Pfizer's extensive customer base of financial institutions and FinTechs.

Dave Cody: We expanded our partnership with Fiserv to include the marketing and reselling of arc <unk> authenticate.

Dave Cody: This enhances our ability to bring fido to secure our dedication to five serves extensive customer base of financial institutions and Fintech.

John Wilk: Overall, given 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.

Dave Cody: Overall, given our strong progress this year.

Dave Cody: We have narrowed our fiscal full fiscal year 2020 for full year guidance to the higher end of our previous range. We now anticipate net sales between 418 and $428 million.

John Todaro: We now anticipate net sales between $418 million and $428 million, including the limited edition American Express white gold card. In addition, you can see that Turkish Airlines and Atlas of FinTech have also recently announced or launched new metal card programs. In addition, on Friday, you can see several of our customer and partner quotes from the second quarter. And year-to-date, the net investment in Arculus was $4 million. In addition, we recently previewed an exciting Arculus capability that leverages our secure hardware wallet. This capability is still in the early phases, but it has promising applicability for Web3 payment. With that, I'll now hand it over to Tim to review our financials in more detail.

Dave Cody: Versus previous guidance of 408 to $4 28.

Dave Cody: And adjusted EBITDA between 150 and $157 million.

Dave Cody: 147% and 157 million of our prior guidance.

John Wilk: Turning to slide six, I wanted to cover some of the new exciting programs our customers launched. We continue to support our customer's 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.

John Wilk: 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 can see that Turkish Airlines and Atlas of FinTech have also recently announced or launched new metal card programs. Moving on to slide seven, for some insight into the card market.

Speaker Change: Turning to slide six I wanted to cover some of the new exciting programs our customers launched.

Dave Cody: We continue to support our customers' ability to offer highly attractive premium card programs.

Dave Cody: Such as the limited edition American Express White gold card.

Dave Cody: And the first Wells Fargo, and Expedia co branded metal card.

John Wilk: In addition, you can see that Turkish Airlines and Atlas of FinTech 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.

Dave Cody: In addition, you can see that Turkish Airlines and Atlas a fintech also recently announced or launched new metal card programs.

Dave Cody: Moving on to slide seven for some insight on the card market.

John Wilk: Card issuers maintained 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 Friday, you can see several of our customer and partner quotes from the second quarter. These call-outs underscore our commitment to marketing and innovations that will attract and retain premium card customers. Turning to Arculus on slide 9.

Dave Cody: Card issuer issuers maintained steady purchase volumes and drove strong customer acquisitions in the second quarter.

Dave Cody: This continues the trends we've seen throughout the year and has reaffirmed our belief and our strong and growing market for premium and metal payment cards.

John Wilk: In addition, on slide eight, you can see several of our customer and partner quotes from the second quarter. These call outs underscore a commitment to marketing and innovations that will attract and retain premium card customers.

Dave Cody: In addition on slide eight you can see several of our customer and partner quotes from the second quarter.

Dave Cody: These callouts underscore our commitment to marketing and innovations that will attract and retain premium card customers.

John Wilk: 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 24 versus 8.7 last year. As I mentioned earlier, we recently signed a marketing agreement with Pfizer to expand our relationship and allow Pfizer to begin marketing and reselling Arculus Authenticate.

Dave Cody: Turning to <unk> on slide nine.

John Wilk: 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, Arcula's 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 Archulis was $4 million as of June 2024 versus $8.7 last year.

Dave Cody: We have maintained good momentum and remain on track for our total net investment in 2024 to be lower than 2023.

Dave Cody: With the expectation of turning positive for fiscal 2025.

Dave Cody: For the quarter Oculus net investment was $2 3 million compared to $4 2 million last year in the same quarter in.

Dave Cody: And year to date, the net investment in <unk> was $4 million.

Dave Cody: As of June 2024 versus $8 seven last year.

John Wilk: 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 it has promising applicability for Web3 payment. With that, I'll now hand it over to Tim to review our financials in more detail.

Speaker Change: As I mentioned earlier, we recently signed a marketing agreement with five served to expand our relationship and allow Pfizer to begin marketing and reselling <unk> authenticate.

John Wilk: This builds on our already successful collaboration and solidifies our joint commitment to add functionality to payment cards that improves the customer experience.

Speaker Change: This builds on our already successful collaboration and solidifies our joint commitment to add functionality to payment cards that improves the customer experience.

John Wilk: 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 three payments.

Speaker Change: In addition, we recently previewed and exciting <unk> capability that leverages, our secure hardware wallet.

Dave Cody: To enable payment at point of sale terminals using digital assets.

Dave Cody: This capability is still in the early phases, but has promising applicability for web three payments.

Tim Fitzsimmons: With that, I'll now hand it over to Tim to review our financials in more detail. Thank you, John, and good afternoon, everyone. I'll provide a more detailed overview of our Q2 2024 financial performance and then turn it back to John before we open the call for questions. Unless stated otherwise, all comparisons and variance commentary are on a year-over-year basis. In Q2, net sales increased by 10,000 percent to a record level of 108.6 million compared to 98.5 million. As John mentioned, the increase was driven by continued growth in our domestic business and strong international demand. Gross margin for the quarter was 52% compared to 55% in the prior year. This decline was mainly due to product mix related to the timing and demand for some of our new quad constructions, as well as inflationary pressure on wages.

Dave Cody: With that I'll now hand, it over to Tim to review our financials in more detail.

Tim Fitzsimmons: Thank you, John, and good afternoon, everyone. I'll provide a more detailed overview of our Q2 2024 financial performance and then turn it back to John before we open the call for questions. Unless stated otherwise, all comparisons and variance commentary are on a year-over-year basis. For example, in Q2, net sales increased by 10% to a record level of $108.6 million compared to $98.5 million. As John mentioned, the increase was driven by continued growth in our domestic business and strong international demand.

Timothy Fitzsimmons: Thank you, John, and good afternoon, everyone. I'll provide a more detailed overview of our Q2 2024 financial performance and then turn it back to John before we open the call for questions. Unless stated otherwise, all comparisons and variance commentary are on a year-over-year basis. This decline was mainly due to product mix related to the timing and demand for some of our new card constructions, as well as inflationary pressures on wages. Now turning to slide 13 and looking closer at the split between our domestic and international business.

Tim: Thank you John and good afternoon, everyone I'll provide a more detailed overview of our Q2 2024 financial performance and then turn it back to John before we open the call for questions.

Tim: Unless stated otherwise all comparisons in variance commentary are on a year over year basis.

Tim: In Q2, net sales increased by 10% to a record level of $108 6 million compared to $98 5 million.

Speaker Change: As John mentioned, the increase was driven by continued growth in our domestic business and strong international demand.

Tim Fitzsimmons: Gross margin for the quarter was 52% compared to 55% in the prior year. This decline was mainly due to product mix related to the timing and demand for some of our new card constructions, as well as inflationary pressures on wages.

John Wilke: Gross margin for the quarter was 52% compared to 55% in the prior year.

John Wilke: This decline was mainly due to product mix related to the timing and demand for some of our new card constructions as well as inflationary pressures on wages.

Tim Fitzsimmons: That income for the quarter increased by 3% to 33.6 million compared to 32.7 million. Adjusted EBITDA in Q2 increased by 8% to 40 million compared to 36.9 million in the prior year, with an adjusted EBITDA margin of 36.8% compared to 37.4% in the second quarter of 2023. Again, driven by the factors I just mentioned.

Tim Fitzsimmons: That income for the quarter increased by 3% to $33.6 million compared to $32.7 million. Adjusted EBITDA in Q2 increased by 8% to $40 million compared to $36.9 million in the prior year, with an adjusted EBITDA margin of 36.8% compared to 37.4% in the second quarter of 2023, again driven by the factors I just mentioned.

John Wilke: Net income for the quarter increased by 3% to $33 6 million compared to $32 7 million.

John Wilke: Adjusted EBITDA in Q2 increased by 8% to $40 million compared to $36 9 million in the prior year.

John Wilke: With an adjusted EBITDA margin of 36, 8% compared to 37, 4% in the second quarter of 2023.

John Wilke: Again, driven by the factors I just mentioned.

Tim Fitzsimmons: We always like to provide you with the year-to-date results in addition to the quarter. On slide 12, you could see our year-to-date financial results, which reflect our continued growth on the top and bottom lines and puts us on track for the updated guidance that John provided. Now turning to slide 13 and looking closer at the split between our domestic and international business. You can see that our second quarter domestic net sales remained strong at 85.2 million, up 9% year-over-year. Our international business also improved, increasing 14% to 23.4 million compared to the year-go period. This is due to strong international demand that included accelerated demand for our innovative products such as the Echo Mirror Card.

Tim Fitzsimmons: We always like to provide you with the year-to-date results in addition to the quarter. On slide 12, you can see our year-to-date financial results, which reflect our continued growth on the top and bottom lines and puts us on track for the updated guidance that John provided. Now turning to slide 13 and looking closer at the split between our domestic and international business, you can see that our second quarter domestic net sales remain strong at 85.2 million, up 9% year over year. Our international business also improved, increasing 14% to $23.4 million compared to the year-ago period. This is due to strong international demand that included accelerated demand for our innovative products, such as the Echo Miracle.

John Wilke: We always like to provide you with the year to date results. In addition to the quarter on Slide 12, you can see our year to date financial results, which reflect a continued growth on the top and bottom lines and puts us on track for the updated guidance that John provided.

Timothy Fitzsimmons: You can see that our second quarter domestic net sales remain strong at 85.2 million, up 9% year over year; our international business also increased 14% to $23.4 million compared to the year-ago period. Turning to the balance.

John Wilke: Now turning to slide 13, and looking closer at the split between our domestic and international business.

John Wilke: You can see that our second quarter domestic net sales remained strong at $85 2 million up 9% year over year.

John Wilke: Our international business also improved increasing 14% to $23 4 million compared to the year ago period.

John Wilke: This is due to strong international demand that included accelerated demand for our innovative products such as the Echo mirror card.

Tim Fitzsimmons: Turning to the balance sheet. As of June 30, 2024, we had cash and cash equivalence of 35.4 million in total debt of 330.9 million. This includes $200.9 million of term loan and $130 million exchangeable notes. As of December 31, 2023, we had cash and cash equivalence of 41.2 million in total debt of 340.3 million. The decrease in our cash balance compared to year-end 2023 was primarily driven by the special cash-driven and flash distribution of 30 cents per share or approximately 24.5 million paid on June 11, 2024. It also included the tax distributions to members of 26.2 million, payments of debt of 9.4 million, as well as other capex and financing activities totaling 11.8 million.

Tim Fitzsimmons: Turning to the balance, as of June 30, 2024, we had cash and cash equivalents of $35.4 million and total debt of $330.9 million. This includes $200.9 million of term loans and $130 million of exchangeable net worth. As of December 31st, 2023, we had cash-in-cash equivalents of $41.2 million, and total debt of $340.3 million. The decrease in our cash balance compared to year-end 2023 was primarily driven by the special cash dividend slash distribution of $0.30 per share, or approximately $24.5 million, paid on June 11, 2024.

John Wilke: Turning to the balance sheet.

John Wilke: As of June 32024, we had cash and cash equivalents of $35 4 million and total debt of $330 9 million. This includes $200 9 million of term loan and 130 million exchangeable notes.

Timothy Fitzsimmons: As of December 31st, 2023, we had cash-in-cash equivalents of $41.2 million. The decrease in our cash balance compared to year-end 2023 was primarily driven by the special cash dividend slash distribution of $0.30 per share, or approximately $24.5 million, paid on June 11, 2024. Importantly, a majority of our lenders in the previous debt agreement participated in the amendment, reflecting the confidence of our lenders that they have in our business. Turning to our cash flow statement on slide 15.

John Wilke: As of December 31, 2023, we had cash and cash equivalents of $41 2 million and total debt of $343 million.

Timothy Fitzsimmons: The decrease in our cash balance compared to year end 2023 was primarily driven by the special cash dividend slash distribution of <unk> 30 per share or approximately $24 5 million paid on June 11th 2024.

Tim Fitzsimmons: It also included tax distributions to members of $26.2 million, payments of debt of $9.4 million, as well as other CapEx and financing activities totaling $11.8 million. These were partially offset by positive cash flows from operations of $66 million.

Timothy Fitzsimmons: It also included the tax distributions to members of $26 2 million payments of debt of $9 4 million as well as other capex and financing activities totaling $11 8 million.

Operator: Good day and thank you for standing by.

Operator: Welcome to the Compo Secure Q2 2024 Earnings Call. At this time, all participants are in a list of questions.

Tim Fitzsimmons: Johnson. These were partially offset, like positive cash flows from operations of $66 million shows. We provide both our overall debt leverage ratio and our bank agreement secured debt leverage ratio as our bank agreement is calculated with slight differences. On June 30, 2024, our overall leverage ratio was 2.2 times based on a total debt of 330.9 million in trailing 12 month adjusted EBITDA of 150.4 million. This compares to 2.35 times at December 31, 2023, with the improvement driven by paying down debt and increased trailing 12 month adjusted EBITDA. At June 30, 2024, we had a bank agreement secured debt leverage ratio of 1.29 times based on a total secured debt of 200.9 million in trailing 12 month bank adjusted EBITDA of 150.3 million.

Timothy Fitzsimmons: These were partially offset by positive cash flows from operations up 66 million.

Operator: 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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again.

Tim Fitzsimmons: We provide both our overall debt leverage ratio and our bank agreement secured debt leverage ratio. As our bank agreement is calculated with like, on June 30, 2024, our overall leverage ratio was 2.2 times based on a total debt of $330.9 million and trailing 12-month adjusted EBITDA of $150.4 million. This compares to 2.35 times at December 31st, 2023, with the improvement driven by paying down debt and increasing trailing 12-month adjusted EBIT. At June 30, 2024, we had a bank agreement secured debt leverage ratio of 1.29%, based on a total secured debt of $200.9 million and trailing 12-month bank adjusted EBITDA of $153 million. This compares to 1.39 times on December 31st, 2023.

Timothy Fitzsimmons: Jos we provide both our overall debt leverage ratio and our bank agreement secured debt leverage ratio as our bank agreement is calculated with slight differences on June 32024, our overall leverage ratio was two two times based on a toll.

Operator: Please be advised that today's conference is being recorded.

Sean Mansouri: I would now like to hand the conference over to your first speaker today, Sean Mansouri, Investor Relations. Please go ahead. Thank you.

Timothy Fitzsimmons: <unk> debt of $339 million in trailing 12 month adjusted EBITDA of $150 4 million. This compares to 235 times at December 31, 2023, with the improvement driven by paying down debt and increased trailing 12 month adjusted EBITDA.

Sean Mansouri: Good afternoon everyone and thank you for joining us to review Compo Secure's second quarter 2024 financial results. Whitney on the call is John Wilk, Compo Secure'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.

Timothy Fitzsimmons: At June 32024, we had a bank agreement secured debt leverage ratio of 1.91 0.29 times based on a total secured debt of $200 9 million and trailing 12 month bank adjusted EBITDA of $153 million. This compares to $1 three nine times at December.

Sean Mansouri: 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 acquiring 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.

Tim Fitzsimmons: This compares to 1.39 times at December 31, 2023. As John mentioned earlier, we recently amended our credit facility led by JP Morgan Chase with Bank of America and TD Bank, which now includes lower rates and upsized revolving line of credit, a longer term and more flexible covenants. Importantly, a majority of our landers in the previous debt agreement participated in the amendment, reflecting the competence of our landers that have in our business. The amended facility also provides us with the capacity to continue driving growth and innovation, along with the ability to retire out exchangeable notes, maturing, December 20, 206.

Timothy Fitzsimmons: <unk> 31 2023.

Tim Fitzsimmons: As John mentioned earlier, we recently amended our credit facility, led by JPMorgan Chase, with BankAmerica and TD Bank, which now includes lower rates, an upsized revolving line of credit, a longer term, and more flexible covenants. Importantly, a majority of our lenders in the previous debt agreement participated in the amendment, reflecting the confidence of our lenders that they have in our business. The amended facility also provides us with the capacity to continue driving growth and innovation, along with the ability to retire our exchangeable notes maturing in December 2026.

Timothy Fitzsimmons: As John mentioned earlier, we recently amended our credit facility led by Jpmorgan Chase with Bank of America.

Speaker Change: Bank, which now includes lower rates.

Timothy Fitzsimmons: And Upsized revolving line of credit are longer term and more flexible covenants importantly, a majority of our lenders and the previous debt agreement participated in the amendment, reflecting the confidence about lenders.

Speaker Change: That have in our business the.

Timothy Fitzsimmons: The amended facility also provides us with the capacity to continue driving growth and innovation.

Sean Mansouri: 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.

Timothy Fitzsimmons: Along with the ability to retire our exchangeable notes maturing December 2026.

Tim Fitzsimmons: Turning to our cash flow statement on Slide 15. You could see that next cash provided by operating activities increased 24.6% to $66 million compared to $53 million in the comparative period. The increase is primarily driven by an increase in net income of 7.2 million in favorable changes in working capital accounts of 8.1 million.

Tim Fitzsimmons: Turning to our cash flow statement on slide 50, you can see that net cash provided by operating activities increased 24.6% to $66 million, compared to $53 million in the comparative period. The increase is primarily driven by an increase in net income of $7.2 million and favorable changes in working capital accounts of $8.1 million.

Timothy Fitzsimmons: Turning to our cash flow statement on slide 15.

Sean Mansouri: 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 10K 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.

Timothy Fitzsimmons: You can see that net cash provided by operating activities increased 24, 6% to $66 million compared to $53 million in the comparative period the.

Speaker Change: The increase was primarily driven by an increase in net income of $7 2 million and favorable changes in working capital accounts of $8 1 million.

Tim Fitzsimmons: Turning to EPS. FAP EPS for the three months ended June 30, 2024, was 44 cents per basic share and 32 cents per diluted share compared to 31 cents per basic share and 29 cents per diluted share for the three months ended June 30, 2023. On slide 16, you can read through the footnotes on the slide that take you through the complexities of the allocation of net income due to the upsea structure and the shares that are included in the basic diluted calculations. On slide 17, we're also providing non-GAAP adjusted net income and adjusted EPS, which excludes the impact of non-cash fair value adjustments to the warrants, the earn-out evaluation, and stock compensation.

Timothy Fitzsimmons: Turning to EPS.

Sean Mansouri: Please note that the discussion on today's call may include certain non-gap financial measures, including adjusted EBITDA, adjusted net income, adjusted EPS, and free cash flow. The company believes these non-gap 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-gap financial measures should not be considered as an alternative to net income or any other performance measures derived in accordance with US gap and may be different from similarly titled non-gap measures. Use by other companies. Units. A reconciliation of gap to non-gap measures is available in our press release and earnings presentation available on the Investor Relations section of our website.

Timothy Fitzsimmons: DAP ETS for the three months ended June 30, 2024 was $0.44 per basic share and $0.32 per diluted share, compared to $0.31 per basic share and $0.29 per diluted share for the three months ended June 30, 2023. On slide 16, you can read through the footnotes on the slide that take you through the complexities of the allocation of net income due to the FC structure and the shares that are included in the basic diluted calculation.

Tim Fitzsimmons: FAP EPS for the three months ended June 30, 2024 was $0.44 per basic share and $0.32 per diluted share compared to $0.31 per basic share and $0.29 per diluted share for the three months ended June 30, 2023. On slide 16, you can read through the footnotes on the slide that take you through the complexities of the allocation of net income due to the FC structure and the shares that are included in the basic diluted calculation.

Timothy Fitzsimmons: GAAP EPS for the three months ended June 32024 was <unk> 44 per basic share and 32 per diluted share compared to <unk> 31 per basic share and 29 per diluted share for the three months ended June 32023.

Timothy Fitzsimmons: On Slide 16, you can read through the footnotes on the slide that take you through the complexities of the allocation of net income due to the up sea structure and the shares that are included in the basic and diluted calculations.

Timothy Fitzsimmons: On slide 17, we're also providing non-GAAP-adjusted net income and adjusted EPS, which excludes the impact of non-cash fair value adjustments to the warrants, the earn-out revaluation, and stock compensation. We believe that this provides a clearer picture of the economics of the company's operating results.

Tim Fitzsimmons: On slide 17, we're also providing non-GAAP-adjusted net income and adjusted EPS, which excludes the impact of non-cash fair value adjustments to the warrants, the earn-out revaluation, and stock compensation. We believe that this provides a clearer picture of the economics of the company's operating results. Non-GAAP adjusted net income for the three months ended June 30, 2024 increased by 10% to $25.2 million compared to $22.9 million, with adjusted EPS of $0.31 per basic share and $0.27 per diluted share compared to $0.29 per basic share and $0.25 per diluted share during the three months ended June 30, 2023. On slide 18, you will find our year-to-date adjusted EPS, and on slide 19, our year-to-date adjusted operating profit. I'll now turn it back to John to discuss our guidance and give closing remarks.

Timothy Fitzsimmons: On Slide 17, we're also providing non-GAAP adjusted net income and adjusted EPS, which excludes the impact of noncash fair value adjustments to the warrants the earn out revaluation and stock compensation. We believe that this provides a clearer picture of the economics of the Companys operating results non.

Tim Fitzsimmons: We believe that this provides a clearer picture of the economics of the company's operating results. Non-GAAP adjusted net income for the three months ended June 30, 2024, increased by 10 percent to 25.2 million compared to 22.9 million, with adjusted EPS of 31 cents per basic share and 27 cents per diluted share compared to 29 cents per basic share and 25 cents per diluted share during the three months ended June 30, 2023.

Timothy Fitzsimmons: non-GAAP adjusted net income for the three months ended June 32024 increased by 10% to $25 2 million compared to $22 9 million with adjusted EPS of <unk> 31 per basic share and 27 per diluted share compared to 29.

John Wilk: 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.

John Wilk: 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 aftermarket close 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.

Timothy Fitzsimmons: Per basic share and <unk> 25 per diluted share during the three months ended June 32023.

Tim Fitzsimmons: on slide 18 you will find out you to date that BPS and on slide 19 a you to date adjusted BPS.

Timothy Fitzsimmons: On Slide 18, you will find our year to date GAAP EPS and on slide 19, our year to date adjusted EPS.

John Wilk: I'll now turn it back to John to discuss how guidance and give closing remarks. Thanks, Tim. As I mentioned earlier, we've tightened our fiscal 2024 four-year guidance. We now anticipate net sales between 418 and 428 million and adjusted EBITDA between 150 and 157 million.

Timothy Fitzsimmons: I'll now turn it back to John to discuss our guidance and give closing remarks.

John Wilk: Thanks, Tim. As I mentioned earlier, we've tightened our fiscal 2024 full-year guidance. In closing, I'd like to summarize the call today. We generated a record quarter of results on both the top and bottom lines, and the momentum in our business is strong. Our amended credit facility supports our continued growth and enables us to retire our exchangeable notes maturing in December 2026.

Timothy Fitzsimmons: Thanks, Tim as I mentioned earlier, we've tightened our fiscal 2020 for full year guidance. We now anticipate net sales between 418 and $428 million and adjusted EBITDA between 150 and $157 million.

John Wilk: In the transaction, all outstanding class B shares will be converted to class A shares, and David Cody family through resolute partners will purchase $49.3 million out of the $51.9 million shares at $75.5 per share, resulting in an investment of $372 million upon closing of the transaction. This deal unlocked 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.

John Wilk: In closing, I'd like to summarize the call today. We generated a record quarter of results on both the top and bottom line, and the momentum in our business is strong. Our amended credit facility supports our continued growth and enables us to retire our exchangeable notes maturing in December 2026. We expanded our partnership with Pfizer to include the marketing and reselling of arduous authenticate, and we remain on track for our total net investment for arduous to be lower than 2023, with the expectation of turning positive in 2025. And finally, we are very excited about the benefits related to the strategic transaction with the Dave Cody family through Resolute Holdings with our Class B stockholders.

Timothy Fitzsimmons: In closing I'd like to summarize the call today, we generated a record quarter of results on both the top and bottom line and the momentum in our business is strong.

Timothy Fitzsimmons: Our amended credit facility supports our continued growth and enables us to retire our exchangeable notes maturing in December 2026.

John Todaro: We expanded our partnership with Fiserv to include the marketing and reselling of Arculus Authenticate, and we remain on track for our total net investment for Arculus to be lower. And finally, we are very excited about the benefits related to the strategic transaction with the Dave Cody family through Resolute Holdings with our Class B stockholders. Dave's career and track record are unparalleled, and I am excited to leverage his deep expertise in steering global public companies. With that, I'd like to open up the call for Q&A. Thank you.

John Wilk: We expanded our partnership with Fiserv to include the marketing and reselling of Arculous Authenticate, and we remain on track for our total net investment for Arculous to be lower in 2023 with the expectation of turning positive in 2025. And finally, we are very excited about the benefits related to the strategic transaction with the Dave Cody family through Resolute Holdings with our Class B stockholder. This transaction provides compelling benefits for CompoSecure and our shareholders. Dave's career and track record are unparalleled, and I am excited to leverage his deep expertise in leading a global public company. With that, I'd like to open up the call for Q&A. Thank you.

Speaker Change: We expanded our partnership with Pfizer to include the marketing and reselling of <unk> authenticate and we remain on track for our total net investment for <unk> to be lower in.

Speaker Change: In 2023 with the expectation of turning positive in 2025.

John Wilk: Importantly, we anticipate a positive impact of more than $20 million in incremental free cash flow on an annual basis, providing CompoSecure 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 in 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 during 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.

John Todaro: And finally, we are very excited about the benefits related to the strategic transaction with the Dave Coty family through Resolute holdings with our class B stockholders.

John Wilk: This transaction provides compelling benefits for Compost Secure and our shareholders, and Dave's career and track record is unparalleled. I am excited to leverage his deep expertise steering global public companies.

John Todaro: This transaction provides compelling benefits for accomplish secure and our shareholders.

John Todaro: And Dave's career and track record is unparalleled and I am excited to leverage his deep expertise steering global public companies.

Operator: With that, I'd like to open up the call for Q&A. Thank you. At this time, we will conduct the question-and-answer session. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster.

John Todaro: With that I'd like to open up the call for Q&A.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Our first question comes from Brian Vieten on behalf of Needham. Your line is now open.

Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Brian Vieten: Our first question comes from Brian B10 with need hand. Your line is now open. Great. Thanks, guys, and congrats on the great deal here.

Operator: To withdraw your question, please press star 11 again. Our first question comes from Brian Vitan with Needham. Your line is now open.

Brian <unk>: Our first question comes from Brian <unk> with Needham Your line is now open.

John Wilk: 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.

Brian Vieten: Great. Thanks, guys, and congrats on a great deal here. Hey, just a quick one. On the Robinhood side, what's the sales sensitivity around the Robinhood card? It sounds like there have been a lot of signups from the waitlist. What's the embedded assumption, I guess, for this piece within the guidance?

Brian Vitan: Great. Thanks, guys and congrats on a great deal here, Hey, just a quick one.

Brian Vieten: Hey, just a quick one on the Robinhood side. What's the sales sensitivity around that Robinhood card? It sounds like there's been a lot of sign-ups from the wait list. What's the embedded assumption I guess for this piece within the guidance? Is that a possible source of upside? I'm just trying to better understand there, and it's obviously topical with Robinhood also presenting right now. Thanks, guys. Thanks, Brian.

Speaker Change: On the Robin Hood side, what's the sales sensitivity around that Robin Hood card. It sounds like Theres been a lot of sign ups from the wait list.

Brian Vitan: What's the embedded assumption I guess for this piece within the guidance is that.

John Wilk: 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. Fund. We expanded our partnership with Pfizer to include the marketing and reselling of Arculus Authenticate. This enhances our ability to bring phyto to secure authentication to Pfizer's extensive customer base of financial institutions and FinTechs.

Brian Vitan: possible source of upside. Just wanted to better understand that, and it's obviously topical with Robin Hood also presenting right now. Thanks, guys.

Brian Vitan: A possible source of upside just trying to better understand there.

Speaker Change: It's obviously topical.

Brian Vitan: Robin Hood also presenting right now thanks guys.

John Wilk: Thanks, Brian. We are very excited about the partnership with Robinhood. If you remember, there are two parts. We've got our core sort of metal veneer gold card and then the unique, very limited edition solid gold cards that we're doing. And as you mentioned, the excitement around that from their customers is, we think, really high. So we are excited about building and growing that relationship. And yes, we think it can turn into a nice growth opportunity for us. I'm not going to comment on specific volumes with the program, but suffice to say, we are very excited about the program.

John Wilk: We are very excited about the partnership with Robinhood. If you remember, there are two parts of it. We've got our core sort of metal veneer gold card, and then the unique, very limited edition solid gold cards that we're doing. And, as you mentioned, the excitement around that from their customers we think is really high. So we are excited about building and growing that relationship. And yes, we think it can turn into a nice growth opportunity for us. I'm not going to comment on specific volumes with the program. But suffice to say, we are very excited about the program.

Speaker Change: Thanks, Brian we are very excited about the partnership with Robinhood. If you remember there are two parts of it we've got our core sort of metal veneer gold card.

John Todaro: We've got our core sort of metal veneer gold card and then the unique, very limited edition solid gold cards that we're doing. And as you mentioned, the excitement around that from their customers, we think is really high. So we are excited about building and growing that relationship, and yes, we think it can turn into a nice growth opportunity for us. I'm not going to comment on specific volumes with the program, but suffice to say, we are very excited about it.

John Todaro: And then the unique very limited edition solid gold cards that we're doing and as you mentioned the excitement around that from their customers. We think is really high. So we are excited about building and growing that relationship and yes, we think it can turn into.

Operator: Great, thank you. Please stand by for our next question.

Operator: A nice growth opportunity for us I'm not going to comment on specific volumes with the program, but suffice to say we are very excited about the program.

John Wilk: Overall, given 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.

Operator: Great. Thank you.

Speaker Change: Great. Thank you.

Operator: Okay.

Operator: Please stand by for our next question.

Cassie Chan: Great, thank you. Please stand by for our next question. Our next question comes from Cassie Chan with Bank of America. Your line is now open.

Operator: Please standby for our next question.

Cassie Chan: Question. Our next question comes from Cassie Chan with Bank of America. Your line is now open. Hey guys, thanks for kicking my question. Just wanted to ask, I mean, it seems like you guys raised a full year guy by a bit more than the 2QB at least well to our estimates. Just wanted to know what's driving that underlying shift. Is that it changed around expectations for domestic versus international growth, both number of cards issued, or maybe growth from top to client, or the posture of the macro. Just wanted to know, you know, relative to 3 months ago, has there been an underlying shift that you've seen in demand that's driving the full year outlook rate?

Speaker Change: Our next question comes from Cathy Chan with Bank of America. Your line is now open.

Unnamed Questioner: Hey guys, thanks for asking my question. I just wanted to ask, I mean, it seems like you guys raised the full-year guide by a bit more than the 2Q beat, at least relative to our estimates. Just wanted to know what's driving that underlying shift. Is it a change in expectations for domestic versus international growth, the number of cards issued, or maybe, you know, growth from the top two clients, or the posture of the macro? Just wanted to know, relative to three months ago, has there been any underlying shift that you've seen in demand that's driving the full year outlook higher? Thank you.

John Wilk: Hey guys, thanks for taking my question. I just wanted to ask, I mean, it seems like you guys raised the full-year guide by a bit more than the 2Q beat, at least relative to our estimates. Just wanted to know what's driving that underlying shift. Is it a change in expectations for domestic versus international growth, the number of cards issued, or maybe, you know, growth from the top two clients or the posture of the macro? Just wanted to know, relative to three months ago, has there been any underlying shift that you've seen in demand that's driving the full year outlook rate? Thank you.

Speaker Change: Hey, guys. Thanks for taking my question.

Unnamed Questioner: Just wanted to ask I mean, it seems like you guys made the full year guide by a bit more than the <unk> lead quality to our estimates just wanted to know what's driving that underlying shift change around expectations for domestic versus international growth number of cards issued our baby growth from top tier clients are the posture of the backhaul just wanted to know.

John Wilk: Turning to slide six, I wanted to cover some the new exciting programs our customers launched. We continue to support our customer's 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-Granded Metal Card. In addition, you can see that Turkish Airlines and Atlas of FinTech also recently announced or launched new metal card programs. Moving on to slide seven for some insight on the card market.

Unnamed Questioner: Relative to three months ago.

Unnamed Questioner: Has there been any underlying shifts that you've seen in demand thats driving that for your outlook. Thank you.

John Wilk: Thank you. Thanks, Cassie. As we look at full year, yeah, we had a strong quarter, both domestically and internationally. So we talked about expecting to see that bounce back in international after a slower first quarter. And what we saw there, I think, was some excitement about some new programs launching internationally that drove some nice volume in the quarter. We think steadies out as we move through the year. So, as we started the year, if you remember, Q1 international was about 11% of business; this quarter was about 22% of our business. We've said historically that that comes in around 20, with the slow start that we had.

John Wilk: Thanks, Cassie. As we look at the full year, yeah, we had a strong quarter, both domestically and internationally. So we talked about expecting to see that bounce back in international after a slower first quarter. And what we saw there, I think, was some excitement about some new programs launching internationally that drove some nice volume in the quarter, which we think steadies out as we move through the year. So as we started the year, if you remember, Q1 International was about 11 percent of business.

Unnamed Questioner: Thanks, Kathy as we look at full year.

Speaker Change: Yes, we had a strong quarter, both domestically and internationally. So we talked about expecting to see that bounce back in international after a slower first quarter.

Speaker Change: And what we saw there I think was some excitement about some new programs launching internationally.

Speaker Change: That drove some nice volume in the quarter, we think studies out.

John Wilk: 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 call outs underscore a commitment to marketing and innovations that will attract and retain premium card customers.

Speaker Change: As we move through the year. So as we started the year. If you remember Q1 international was about 11% of business.

John Wilk: This quarter was about 22 percent of our business. We've said historically that that comes in around 20. With the slow start that we had, we said we would get back on track. We think that will happen on a full year basis. It still probably comes in slightly under where it would typically be. So, net net, our answer is strong domestic growth, with, you know, returning international business sort of getting us back to a nice pace.

Speaker Change: This quarter was about 22% of our business.

Speaker Change: We've said historically that that comes in around 20 with the slow start that we had we said we will get back on track, we think that does on a full year basis. It still probably comes in.

John Wilk: We said it would get back on track. We think that does on a full year basis. It still probably comes in, you know, on the slightly under where it would be typically.

Speaker Change: On the slightly under where it would be typically so net net our answer is strong domestic growth.

John Wilk: So net net, our answer is strong domestic growth with, you know, returning international business, sort of getting us back to a nice pace there. Got it.

John Wilk: 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 24 versus 8.7 last year.

Unnamed Questioner: Returning.

Speaker Change: International business sort of getting us back to a nice pace there.

Cassie Chan: Got it. And, in fact, I just have to follow up.

Cassie Chan: And if I could just ask a follow-up, I know you guys mentioned removing the dual cash shares and, you know, an income that's a 20 million in annual free cash flow, which was nice to hear. I guess you guys have a longer term free cash flow conversion or target out there. And how are you guys prioritizing capital return. Thank you. So we gave you the free cash flow conversion calculation at the end of the year last year. I think it was about 13% on a full-year basis. This unlocks, you know, quite a nice size chunk of additional free cash flow.

Speaker Change: Got it and if I could just ask a follow up I know you guys mentioned Youre moving adult class shares and an incremental 20 million and annual free cash flow, which was nice to hear I guess, you guys have a longer term free cash flow conversion our target out there.

Speaker Change: How are you guys prioritizing capital return thank you.

Timothy Fitzsimmons: So we gave you the free cashflow conversion calculation at the end of the year last year. I think it was about 13% on a full year basis.

John Wilk: I know you guys mentioned removing the dual class shares and, you know, an incremental 20 million in annual free cash flow, which is nice to hear. I guess you guys have a longer-term free cash flow conversion or target out there. And how are you guys prioritizing capital return? Thank you.

Speaker Change: So we gave you the.

Speaker Change: Free cash flow conversion calculation at the end of the year last year I think it was about 13% on a full year basis.

John Wilk: So we gave you the free cashflow conversion calculation at the end of the year last year. I think it was about 13% on a full year basis.

John Wilk: As I mentioned earlier, we recently signed a marketing agreement with Pfizer to expand our relationship and allow Pfizer 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 three payments.

Timothy Fitzsimmons: This unlocks quite a nice size chunk of additional free cashflow. So obviously, it depends on where the stock price comes out as we compare it to the value of our equity, but we expect to see a really nice pop in that metric for us in terms of the free cashflow that comes from the elimination of the dual share class structure. And importantly, it gives us more to invest back in the business. So I think we're excited about it for the business. We're excited about it for shareholders, but we have not set a long-term guide for where that should go.

John Wilk: This unlocks quite a nice size chunk of additional free cashflow. So obviously, it depends on where the stock price comes out as we compare it to the value of our equity, but we expect to see a really nice pop in that metric for us in terms of the free cashflow that comes from the elimination of the dual share class structure. And importantly, it gives us more to invest back in the business. So I think we're excited about it for the business. We're excited about it for shareholders, but we have not set a long-term guide for where that should go.

Speaker Change: This unlocks.

Timothy Fitzsimmons: Quite a nice size chunk of additional free cash flow so.

John Wilk: So, you know, obviously it depends on where the stock price comes out as we compare it to the value of our equity. But, you know, we expect to see, you know, really nice pop in that metric for us in terms of the free cash flow that comes from the elimination of the dual share class structure. And importantly, gives us more to invest back in the business. So I think we're excited about it for the business. We're excited about it for shareholders.

Timothy Fitzsimmons: Obviously, it depends on where the stock price comes out as we compare it to the.

Timothy Fitzsimmons: The value of our equity, but we expect to see really nice pop in that metric for us.

Timothy Fitzsimmons: In terms of the free cash flow that comes from the elimination of the dual share class structure, and importantly gives us more to invest back in the business. So I think we're excited about it for the business. We're excited about it for shareholders. We have not set a long term guide for where that should come out.

Cassie Chan: We have not set a long-term guide for where that should come out. Okay, thank you. And great set of results.

Tim Fitzsimmons: with that I'll now hand it over to Tim to review our financials in more detail.

John Wilk: Okay, thank you, and a great set of results. Thanks, Cassie.

Speaker Change: Okay. Thank you and great set of results.

Cassie Chan: Thanks, Cassie.

Tim Fitzsimmons: Thank you John and good afternoon everyone. I'll provide a more detailed overview of our Q2 2024 financial performance and then turn it back to John before we open the call for questions unless stated otherwise all comparisons and variance commentary are on a year-over-year basis. In Q2 net sales increased by 10,000 percent to a record level of 108.6 million compared to 98.5 million. As John mentioned, the increase was driven by continued growth in our domestic business and strong international demand gross margin for the quarter was 52% compared to 55% in the prior year this decline was mainly due to product mix related to the timing and demand for some of our new quad constructions as well as inflationary pressure on wages.

Speaker Change: Thanks Kathy.

Jacob Stephan: Our next question comes from Jacob Stefan with Lake Street Capital Markets. Your line is now open. Hey guys, I appreciate you. Hey, I appreciate you guys taking my question, and congrats on the results here. Maybe if I could just touch on the Pfizer parking list partnership, you know, certainly seems like a nice announcement. But maybe if you could kind of give us some color there, what do you think this, you know, distribution kind of reseller partnership does for the card. Number one, I think it helps validate the thesis here around the capability of, you know, a card can do more than it does today by turning a credit or debit card into an authentication token.

Jacob Stephan: Our next question comes from Jacob Stephan with Lake Street Capital Markets. Your line is now open.

Timothy Fitzsimmons: Our next question comes from Jacob Stephan with Lake Street Capital Markets. Your line is now open.

John Wilk: Hey, guys, appreciate you taking my question. Congratulations on the results here. Maybe if I could just touch on the Pfizer Arculis partnership, which certainly seems like a nice announcement. But maybe if you could kind of give us some color there, what do you think this, you know, distribution kind of reseller partnership does for the card?

Unnamed Questioner: Hey, guys, appreciate you taking my question. Congratulations on the results here. Maybe if I could just touch on the Pfizer Arculis partnership, which certainly seems like a nice announcement. But maybe if you could kind of give us some color there, what do you think this, you know, distribution kind of reseller partnership does for the card?

Speaker Change: Hey, guys I appreciate it Hey, I appreciate you guys, taking my question and congrats on the results here.

Unnamed Questioner: Maybe if I could just touch on the Pfizer arguments partnership.

Unnamed Questioner: Certainly it seems like a nice announcement, but maybe if you can kind of give us some color. There what do you think this distribution kind of reseller partnership does for the card.

John Todaro: Number one, I think it helps validate the thesis here around the capability of a card to do more than it does today by turning a credit or debit card into an authentication token. We've been talking about that. And, you know, we're starting to see those conversations with banks and feel the momentum there a bit. So, you know, being able to open up a distribution channel like Pfizer is, we think, a terrific opportunity. They are an amazing company, an amazing partner. And, you know, the roster of clients, the number of clients they have is extraordinary. So we look forward to building this out, but we wanted to share that announcement.

John Wilk: Number one, I think it helps validate the thesis here around the capability of a card to do more than it does today by turning a credit or debit card into an authentication token. We've been talking about that. And, you know, we're starting to see those conversations with banks and feel the momentum there a bit. So, you know, being able to open up a distribution channel like Pfizer is, we think, a terrific opportunity. They are an amazing company, an amazing partner. And, you know, the roster of clients, the number of clients they have is extraordinary. So we look forward to building this out, but we wanted to share that announcement.

Speaker Change: Number one I think it helps validate the thesis.

John Todaro: <unk> here around the capability of.

John Todaro: Our card can do more than it does today by turning a credit or debit card into an authentication token we've been talking about that.

John Wilk: We've been talking about that. And, you know, we're starting to see those conversations with banks and feeling the momentum there a bit. So, you know, being able to open up a distribution channel like Pfizer, we think is a terrific opportunity. They are an amazing company and amazing partner. And, you know, the roster of clients, the number of clients they have is extraordinary.

John Todaro: And we're starting to see those conversations.

Tim Fitzsimmons: That income for the quarter increased by 3% to 33.6 million compared to 32.7 million. Adjusted EBITDA in Q2 increased by 8% to 40 million compared to 36.9 million in the prior year with an adjusted EBITDA margin of 36.8% compared to 37.4% in the second quarter of 2023. Again, driven by the factors I just mentioned.

John Todaro: With banks and feeling the momentum there a bit so being.

John Todaro: Being able to open up a distribution channel like Fiserv, we think is a terrific opportunity. They are an amazing company an amazing partner.

John Todaro: And the roster of clients the number of clients they have.

Jacob Stephan: So, we look forward to building this out, but wanted to share that announcement. Got it. And maybe if you could help us understand, you know, the kind of seasonal, you know, new card of program launches. You know, it seems like four this quarter, you know, obviously we have Robin Hood last quarter. But maybe help us understand you kind of expect more kind of in the second half of the year here, or you know, the first half, typically the seasonally strong point for new privileges.

John Todaro: Is extraordinary so we look forward to building this out.

John Todaro: But wanted to share that announcements.

Jacob Stephan: Got it. And maybe if you could help us understand, you know, the kind of seasonality of new card program launches, you know, it seems like for this quarter, you know, obviously, we have Robin Hood, last quarter, but maybe help us understand, do you kind of expect more in the second half of the year here? Or is, you know, the first half typically the seasonally strong point for a new card launch?

Tim Fitzsimmons: We always like to provide you with the year-to-date results in addition to the quarter. On slide 12 you could see our year-to-date financial results which reflect our continued growth on the top and bottom lines and puts us on track for the updated guidance that John provided. Now turning to slide 13 and looking closer at the split between our domestic and international business. You can see that our second quarter domestic net sales remained strong at 85.2 million up 9% year-over-year. Our international business also improved increasing 14% to 23.4 million compared to the year-go period. This is due to strong international demand that included accelerated demand for our innovative products such as the echo mirror card.

Speaker Change: Got it and maybe if you could help us understand the.

Speaker Change: Kind of seasonal.

John Todaro: New card program launches.

Speaker Change: It seems like for this quarter.

Speaker Change: Robin Hood latch.

Speaker Change: Last quarter, but maybe help us understand.

Speaker Change: Kind of expect more kind of in the second half of the year here are.

Speaker Change: The first half typically the seasonally strong point for new game launches sorry, Jacob so.

John Wilk: Sorry, Jacob. So, please don't take the four as these are the only ones we had in the quarter. We're giving you just a select set of examples of some new programs that we think are exciting. You know, there are, you know, a good number more than that in any given quarter. But you asked about seasonality, and we've said we don't typically see something that, you know, fourth quarter, Q one are always up down. It doesn't follow that type of seasonality. What we do see internationally, and we've talked about this, is, you know, we've got a smaller number of customer or smaller volume.

John Wilk: Sorry, Jacob. So please don't take the four, as these are the only ones we have in the quarter. We're giving you just a select set of examples of some new programs that we think are exciting. You know, there are a good number more than that in any given quarter. But you asked about seasonality, and we've said we don't typically see something that, you know, fourth quarter Q1 is always up or down. It doesn't follow that type of seasonality.

John Todaro: Please don't take the four as these are the only ones. We had in the quarter were giving you just a select set of examples of some new programs that we think are exciting.

Speaker Change: There are good number more than that in any given quarter.

Speaker Change: But you asked about seasonality and we've said, we don't typically see something that.

Speaker Change: Fourth quarter Q1 are always up down.

Tim Fitzsimmons: Turning to the balance sheet. As of June 30, 2024, we had cash and cash equivalence of 35.4 million in total debt of 330.9 million. This includes 200.9 million of term loan and 130 million exchangeable notes. As of December 31, 2023, we had cash and cash equivalence of 41.2 million in total debt of 340.3 million. The decrease in our cash balance compared to year-end 2023 was primarily driven by the special cash-driven and flash distribution of 30 cents per share or approximately 24.5 million paid on June 11, 2024. It also included the tax distributions to members of 26.2 million payments of debt of 9.4 million, as well as other capex and financing activities totaling 11.8 million.

Speaker Change: Does it follow that type of seasonality, what we do see internationally and we've talked about this.

John Wilk: What we do see internationally, and we've talked about this, is that we've got a smaller number of customers, smaller volume, and there's more lumpiness at times where you'll see customers launching programs in a specific quarter, where you may see more volume, where they have a need to deliver cards. We saw a little bit of that in Q2 with some popular programs that we were running in Europe. But NetNet, we don't see it sort of based on time of year. It has has

Speaker Change: We've got a.

Speaker Change: Smaller number of customers smaller volume.

John Wilk: And there's more lumpiness at times where you'll see customers launching programs in a specific quarter where you may see more volume, where they have a need to deliver cards. We saw a little bit of that in Q two with some popular programs that we were running in Europe. But net net, we don't see it sort of based on time of year.

John Todaro: And there is more lumpiness at times, where you'll see customers launching programs in a specific quarter, where you may see more volume, where they have a need to deliver cards, we saw a little bit of that in Q2.

Speaker Change: With some popular programs that we were running in Europe.

John Todaro: But NetNet, we don't see it sort of based on time of year. It has to do more with time of launch for us.

Speaker Change: But net net we don't see it sort of based on time of year. It has to do more with time of launch for our customers.

Jacob Stephan: It has to do more with the time of launch for our customers. Okay, got it.

Speaker Change: Okay got it I appreciate you taking the questions. Good luck guys.

Jacob Stephan: I appreciate you taking the questions. Good luck, guys. Thank you.

John Todaro: Thank you.

Operator: As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

John Todaro: Thank you.

Speaker Change: As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced.

Reggie Smith: Our next question comes from Reggie Smith with JP Morgan. Your line is now open.

Speaker Change: Our next question comes from Reggie Smith with Jpmorgan. Your line is now open.

Tim Fitzsimmons: Johnson. These were partially offset like positive cash flows from operations of $66 million shows. We provide both our overall debt leverage ratio and our bank agreement secured debt leverage ratio as our bank agreement is calculated with slight differences. On June 30, 2024, our overall leverage ratio was 2.2 times based on a total debt of 330.9 million in trailing 12 month adjusted EBITDA of 150.4 million. This compares to 2.35 times at December 31, 2023, with the improvement driven by paying down debt and increased trailing 12 month adjusted EBITDA.

Charlie: Hey everyone, it's Charlie on for Reggie. I realize it's early days on M&A, and I doubt the strategy is fully back yet, but how are you thinking about M&A, I guess, on the consolidation side where you acquire a different card manufacturer versus product extension where you acquire a company offering different products that might also fit your bank partners. So thanks, Charlie. We appreciate the question. We've had an M&A framework in place where we've looked at potential deals that I think cut across the different types of opportunity you describe: vertical, horizontal opportunities. Today, we haven't seen anything that we fell in love with.

John Todaro: Hey, everyone Charlie on for Rajeev.

Speaker Change: I realize it's early days on M&A and I doubt the strategy is fully back yet, but how are you thinking about.

Speaker Change: M&A I guess on the consolidation side, where you acquire a different part of manufacturer versus.

John Todaro: Product extension when you acquire a company offering different products that might also affect your bank partners.

John Todaro: Thanks, Charlie we appreciate the question.

Speaker Change: We've had an M&A framework in place, where we have looked at potential deals that I think cut across the different types of opportunity you described vertical horizontal.

John Todaro: Opportunities.

Tim Fitzsimmons: At June 30, 2024, we had a bank agreement secured debt leverage ratio of 1.29 times based on a total secured debt of 200.9 million in trailing 12 month bank adjusted EBITDA of 150.3 million. This compares to 1.39 times at December 31, 2023.

Speaker Change: To date, we haven't seen anything that we fell in love with.

John Wilk: You know, for us, it's early days with this deal just signed. It's too soon to get into details. I think about what our forward strategy will look like. You know, I really look forward to partnering with Dave Cody and his partner Tom, not with their experience in the space, and look forward to sharing more down the line.

John Todaro: For us it's early days with this deal just signed.

Speaker Change: It's too soon to get into details I think about what our forward strategy will look like.

Speaker Change: Really look forward to partnering with Dave Cody and his partner Tom not.

Tim Fitzsimmons: As John mentioned earlier, we recently amended our credit facility led by JP Morgan Chase with Bank of America and TD bank, which now includes lower rates and upsized revolving line of credit, a longer term and more flexible covenants. Importantly, a majority of our landers in the previous debt agreement participated in the amendment reflecting the competence of our landers that have in our business. The amended facility also provides us with the capacity to continue driving growth and innovation, along with the ability to retire out exchangeable notes, maturing, December 20, 206.

John Todaro: With their experience in this space.

John Todaro: We look forward to sharing more down the line on this.

Charlie: and this. Great. Thank you.

John Todaro: Great. Thank you.

John Wilk: Thanks, Charlie. Thank you.

Speaker Change: Thanks, Charlie.

Operator: I'm showing no further questions at this time. Thank you for your participation in today's conference.

John Todaro: Thank you.

Speaker Change: Showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Operator: This does conclude the program. You may.

John Todaro: Okay.

John Todaro: [music].

John Todaro: Yes.

John Todaro: Okay.

John Todaro: Okay.

John Todaro: [music].

Tim Fitzsimmons: Turning to our cash flow statement on slide 15. You could see that next cash provided by operating activities increased 24.6% to $66 million compared to 53 million in the comparative period. The increase is primarily driven by an increase in net income of 7.2 million in favorable changes in working capital accounts of 8.1 million.

John Todaro: Okay.

John Todaro: Yes.

John Todaro: Yes.

John Todaro: [music].

John Todaro: Okay.

Tim Fitzsimmons: Turning to EPS. FAP EPS for the three months ended June 30, 2024 was 44 cents per basic share and 32 cents per diluted share compared to 31 cents per basic share and 29 cents per diluted share for the three months ended June 30, 2023. On slide 16, you can read through the footnots on the slide that take you through the complexities of the allocation of net income due to the upsea structure and the shares that are included in the basic diluted calculations.

Tim Fitzsimmons: On slide 17, we're also providing non-gap adjusted net income and adjusted EPS which excludes the impact of non-cash fair value adjustments to the warrants, the earn out evaluation and stock compensation. We believe that this provides a clearer picture of the economics of the company's operating results. Non-gap adjusted net income for the three months ended June 30, 2024 increased by 10 percent to 25.2 million compared to 22.9 million with adjusted EPS of 31 cents per basic share and 27 cents per diluted share compared to 29 cents per basic share and 25 cents per diluted share during the three months ended June 30, 2023, on slide 18 you will find out you to date that BPS and on slide 19 a you to date adjusted BPS.

John Wilk: I'll now turn it back to John to discuss how guidance and give closing remarks. Thanks Tim. As I mentioned earlier we've tightened our fiscal 2024 four-year guidance. We now anticipate net sales between 418 and 428 million and adjusted EBITDA between 150 and 157 million.

John Wilk: In closing I'd like to summarize the call today. We generated a record quarter of results on both the top and bottom line and the momentum in our business is strong. Our amended credit facility supports our continued growth and enables us to retire our exchangeable notes maturing in December 2026. We expanded our partnership with Pfizer to include the marketing and reselling of arduous authenticate and we remain on track for our total net investment for arduous to be lower than 2023 with the expectation of turning positive in 2025. And finally we are very excited about the benefits related to the strategic transaction with the Dave Cody family through resolute holdings with our class B stockholders.

John Wilk: This transaction provides compelling benefits for compost secure and our shareholders and Dave's career and track record is unparalleled and I am excited to leverage his deep expertise steering global public companies.

Operator: With that I'd like to open up the call for Q&A. Thank you. At this time we will conduct the question and answer session. As a reminder to ask a question you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1-1 again. Please stand by while we compile the Q&A roster.

Brian Vieten: Our first question comes from Brian B10 with need hand. Your line is now open. Great. Thanks guys and congrats on the great deal here. Hey just a quick one on the Robinhood side. What's the sales sensitivity around that Robinhood card? It sounds like there's been a lot of sign-ups from the wait list. What's the embedded assumption I guess for this piece within the guidance? Is that a possible source of upside? I'm just trying to better understand there and it's obviously topical with Robinhood also presenting right now. Thanks guys. Thanks Brian.

John Wilk: We are very excited about the partnership with Robinhood. If you remember there are two parts of it. We've got our core sort of metal veneer gold card and then the unique very limited addition solid gold cards that we're doing. And as you mentioned the excitement around that from their customers we think is really high. So we are excited about building and growing that relationship. And yes we think it can turn into a nice growth opportunity for us. I'm not going to comment on specific volumes with the program. But suffice to say we are very excited about the program. Great. Thank you. Please stand by for our next question.

John Wilk: Question. Our next question comes from Cassie Chan with Bank of America. Your line is now open. Hey guys, thanks for kicking my question. Just wanted to ask, I mean, it seems like you guys raised a full year guy by a bit more than the 2QB at least well to our estimates. Just wanted to know what's driving that underlying shift is that it changed around expectations for domestic versus international growth, both number of cards issued, or maybe growth from top to client, or the posture of the macro.

John Wilk: Just wanted to know, you know, relative to 3 months ago, has there been an underlying shift that you've seen in demand that's driving the full year outlook rate? Thank you. Thanks, Cassie. As we look at full year, yeah, we had a strong quarter, both domestically and internationally. So we talked about expecting to see that bounce back in international after a slower first quarter. And what we saw there, I think, was some excitement about some new programs launching internationally that drove some nice volume in the quarter.

John Wilk: We think steadies out as we move through the year. So as we started the year, if you remember Q1 international was about 11% of business, this quarter was about 22% of our business. We've said historically that that comes in around 20 with the slow start that we had. We said it would get back on track. We think that does on a full year basis. It still probably comes in, you know, on the slightly under where it would be typically. So net net, our answer is strong domestic growth with, you know, returning international business, sort of getting us back to a nice pace there. Got it.

John Wilk: And if I could just ask a follow up, I know you guys mentioned removing the dual cash shares and, you know, an income that's a 20 million in annual free cash flow, which was nice to hear. I guess you guys have a longer term free cash flow conversion or target out there. And how are you guys prioritizing capital return. Thank you. So we gave you the free cash flow conversion calculation at the end of the year last year.

John Wilk: I think it was about 13% on a full year basis. This unlocks, you know, quite a nice size chunk of additional free cash flow. So, you know, obviously it depends on where the stock price comes out as we compare it to the value of our equity. But, you know, we expect to see, you know, really nice pop in that metric for us in terms of the free cash flow that comes from the elimination of the dual share class structure.

John Wilk: And importantly gives us more to invest back in the business. So I think we're excited about it for the business. We're excited about it for shareholders. We have not set a long term guide for where that should come out. Okay, thank you. And great set of results. Thanks, Cassie.

John Wilk: Our next question comes from Jacob Stefan with Lake Street Capital Markets. Your line is now open. Hey guys, I appreciate you. Hey, I appreciate you guys taking my question and congrats on the results here. Maybe if I could just touch on the Pfizer parking list partnership, you know, certainly seems like a nice announcement. But maybe if you could kind of give us some color there, what do you think this, you know, distribution kind of reseller partnership does for the card.

John Wilk: Number one, I think it helps validate the thesis here around the capability of, you know, a card can do more than it does today by turning a credit or debit card into an authentication token. We've been talking about that. And, you know, we're starting to see those conversations with banks and feeling the momentum there a bit. So, you know, being able to open up a distribution channel like Pfizer, we think is a terrific opportunity. They are an amazing company and amazing partner. And, you know, the roster of clients, the number of clients they have is extraordinary.

John Wilk: So, we look forward to building this out, but wanted to share that announcement. Got it. And maybe if you could help us understand, you know, the kind of seasonal, you know, new card of program launches. You know, it seems like four this quarter, you know, obviously we have Robin Hood last quarter. But maybe help us understand you kind of expect more kind of in the second half of the year here, or you know, the first half, typically the seasonally strong point for new privileges.

John Wilk: Sorry Jacob. So, please don't take the four as these are the only ones we had in the quarter. We're giving you just a select set of examples of some new programs that we think are exciting. You know, there are, you know, a good number more than that in any given quarter. But you asked about seasonality and we've said we don't typically see something that, you know, fourth quarter, Q one are always up down.

John Wilk: It doesn't follow that type of seasonality. What we do see internationally, and we've talked about this is, you know, we've got a smaller number of customer or smaller volume. And there's more lumpiness at times where you'll see customers launching programs in a specific quarter where you may see more volume, where they have a need to deliver cards. We saw a little bit of that in Q two with some popular programs that we were running in Europe.

John Wilk: But net net, we don't see it sort of based on time of year. It has to do more with time of launch for our customers. Okay, got it. I appreciate you taking the questions. Good luck guys. Thank you.

Operator: As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.

Charlie Pearce: Our next question comes from Reggie Smith with JP Morgan. Your line is now open. Hey everyone, it's Charlie on for Reggie.

John Wilk: I realize it's early days on M&A and I doubt the strategy is fully back yet, but how are you thinking about M&A, I guess, on the consolidation side where you acquire a different card manufacturer versus product extension where you acquire a company offering different products that might also fit your bank partners. So thanks, Charlie. We appreciate the question. We've had an M&A framework in place where we've looked at potential deals that I think cut across the different types of opportunity you describe vertical horizontal opportunities.

John Wilk: Today, we haven't seen anything that we fell in love with. You know, for us, it's early days with this deal just signed. It's too soon to get into details. I think about what our forward strategy will look like. You know, really look forward to partnering with Dave Cody and his partner Tom, not with their experience in the space and look forward to sharing more down the line, and this.

Charlie Pearce: Great. Thank you. Thanks, Charlie. Thank you.

Operator: I'm showing no further questions at this time. Thank you for your participation in today's conference.

Operator: This does conclude the program.

Operator: You may