Earnings call transcript: CompoSecure Q3 2025 exceeds forecasts, stock surges

CompoSecure Inc. reported its third-quarter 2025 earnings, surpassing expectations with an earnings per share (EPS) of $0.29, beating the forecast of $0.2505 by 15.77%. Revenue also exceeded projections, reaching $120.9 million against the expected $117.23 million. The company’s stock reacted positively, surging 14.15% in premarket trading. InvestingPro data shows analysts have been optimistic, with 4 analysts recently revising their earnings estimates upward for the upcoming period.

Key Takeaways

• CompoSecure’s Q3 2025 EPS and revenue both surpassed market forecasts.
• Domestic sales increased significantly, while international sales declined.
• Stock price surged in the premarket following the earnings announcement.
• The company raised its full-year 2025 financial guidance.
• A planned acquisition with Husky Technologies is expected to enhance growth.

Company Performance

CompoSecure demonstrated a robust performance in Q3 2025, with net sales increasing by 13% year-over-year to $120.9 million. The company reported a 30% rise in pro forma adjusted EBITDA, reaching $47.7 million. While domestic net sales grew by 31% to $105.1 million, international sales fell by 42% to $15.8 million, reflecting sector-specific challenges abroad.

Financial Highlights

• Revenue: $120.9 million, up 13% year-over-year.
• Earnings per share: $0.29, up from the forecasted $0.2505.
• Gross margin: Improved to 59% from 51.7% in the prior year.
• EBITDA margin: Reached 39.5%, an increase of 529 basis points.

Earnings vs. Forecast

CompoSecure delivered an EPS of $0.29, exceeding the forecast of $0.2505 by 15.77%. Revenue also surpassed expectations, coming in at $120.9 million compared to the anticipated $117.23 million. This performance marks a significant improvement over previous quarters, underlining the company’s strategic growth initiatives.

Market Reaction

Following the earnings release, CompoSecure’s stock rose sharply by 14.15% in premarket trading, reaching $22.67. This increase reflects investor confidence in the company’s ability to outperform expectations. The stock’s current price is significantly higher than its 52-week high of $21.16, indicating strong market sentiment.

Outlook & Guidance

CompoSecure raised its full-year 2025 guidance, projecting non-GAAP net sales of $463 million, up from $455 million, and pro forma adjusted EBITDA of $165-$170 million, increased from $158 million. The company also introduced its 2026 financial guidance, with expected non-GAAP net sales of $510 million and pro forma adjusted EBITDA of $190 million.

Executive Commentary

CEO Jon Wilk expressed optimism, stating, "The progress we have made over the past year is increasingly positive in our financial performance, in the way we operate, and in the culture that is taking shape across the organization." Executive Chairman David M. Cote highlighted the strategic acquisition, saying, "We view the combination of CompoSecure and Husky as the foundation for a best-in-class, diversified compounder."

Risks and Challenges

• Declining international sales could impact future growth.
• Supply chain disruptions may affect production and delivery timelines.
• Market saturation in the metal card sector could limit expansion.
• Economic downturns may reduce consumer spending on premium products.
• Regulatory changes in key markets could pose compliance challenges.

Q&A

During the earnings call, analysts inquired about the share count, which was confirmed at 291 million pro forma shares. Management emphasized potential improvements in the operating system and expressed confidence in long-term value creation, despite no specific synergies being claimed between CompoSecure and Husky Technologies.

Full transcript - CompoSecure Inc (CMPO) Q3 2025:

Liz, Conference Operator: Thank you for standing by. My name is Liz, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the CompoSecure Third Quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Steven J. Feder, CompoSecure’s General Counsel. Please go ahead.

Steven J. Feder, General Counsel, CompoSecure: Good morning and welcome to CompoSecure’s conference call, where we will review CompoSecure’s third quarter 2025 financial results and discuss the planned business combination with Husky Technologies. With me on the call is David M. Cote, Executive Chairman of CompoSecure; Tom Knott, Chief Investment Officer of CompoSecure; Jon Wilk, Chief Executive Officer; Timothy W. Fitzsimmons, our retiring Chief Financial Officer; and Mary Holt, incoming Chief Financial Officer. We will begin with prepared remarks and then 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 about our growth strategy, customer demand, our ability to maintain existing and acquire new customers, implementation of the CompoSecure Operating System, and our guidance for 2025 and 2026, as well as other statements regarding plans and prospects.

For a discussion of material risks and other important factors that could affect our actual results, please refer to the information in our annual report on Form 10-K and other reports filed with the SEC, which are available on the Investor Relations section of our website and on the SEC’s website at sec.gov. Please note that effective as of February 28, 2025, the date of the spinoff of Resolute Holdings Management, and as a result of the management agreement between Resolute Holdings Management and the company’s wholly-owned subsidiary, CompoSecure Holdings, the results of operations of CompoSecure Holdings and the operating companies which are its subsidiaries are not consolidated in the financial statements included in this report and instead are accounted for under the equity method of accounting.

In the earnings release we issued earlier today and the discussion on today’s call, we also present non-GAAP financial measures to help investors better understand our operating performance. 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 performance measures derived in accordance with U.S. GAAP and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation of GAAP to non-GAAP measures is available in our press release and earnings presentation available on the IR section of our website. Thank you. With that said, let me turn the call over to Executive Chairman David M. Cote.

David M. Cote, Executive Chairman, CompoSecure: What a wicked great day we have to celebrate today. We have good news busting out all over. Before I get into CompoSecure’s third quarter, I want to begin with a few remarks about my excitement regarding the Husky transaction. When my family invested in CompoSecure over a year ago, a big part of the value creation plan was to implement our operating system to catalyze organic growth, improve margins, and build a rigorous discipline around capital allocation to pursue accretive inorganic growth. While still early, we’re delivering strong organic growth and improved profitability at CompoSecure. The third quarter results are terrific. Over the past year, we have been actively looking for another great business that could benefit from our operating system and shares the same foundational characteristics we look for at Honeywell, Vertiv, and CompoSecure.

I am delighted to report that we have found all that and more in Husky. We view the combination of CompoSecure and Husky as the foundation for a best-in-class, diversified compounder. CompoSecure is the global leader in manufacturing premium metal payment cards and authentication solutions. Husky is the global leader in highly engineered injection molding equipment and aftermarket services. Collectively, they form a platform positioned to become the home for market-leading businesses that operate in attractive industries, generate recurring revenues, deliver high growth and profitability, achieve attractive returns on incremental invested capital, and offer significant opportunities for long-term value creation. Husky checks every box of our investment criteria. It has a great position in a good industry. It differentiates with technology, and it presents substantial upside potential in both organic and inorganic growth, along with clear opportunities for margin expansion.

Coupled with an ability to generate strong free cash flow and a healthy pro forma balance sheet that will deliver quickly, we find this to be an incredibly compelling opportunity for CompoSecure investors as we expand the operating platform. Tom and I will provide further details on the transaction and the business after we cover CompoSecure’s third quarter results. Turning to CompoSecure, a year after our investment, it is gratifying to see the progress we’ve made. We have accelerated organic growth, strengthened our operating discipline, and begun to realize the benefits of cultivating a high-performance culture. Our strategic initiatives, underpinned by the CompoSecure Operating System, or COS, are yielding results, and the business is consistently performing at a much higher level. The nice thing about all this is that it is just the beginning, with tremendous opportunity ahead to further drive investor value creation.

Significant opportunities remain for CompoSecure to unlock faster organic growth while continuing to drive meaningful operational efficiencies across the business. The combination with Husky diversifies CompoSecure’s business and adds multiple levers of future value creation. Our focus will remain on discipline execution, innovation, and maintaining the momentum that’s driving our success. We will continue making strategic investments necessary to fully capitalize on the opportunities to deliver long-term value for all our investors. With that, I’ll turn the call over to Jon.

Jon Wilk, Chief Executive Officer, CompoSecure: Thanks, Dave. Good morning, everyone, and thank you for joining us for our Third Quarter conference call. Before we go through the Q3 results, I want to take a moment to publicly recognize Tim Fitzsimmons and his work as our CFO over the past 13 years. As announced in June, Tim is retiring, and I want to extend my deepest thanks for all his contributions and wish him well in his retirement. He has set a strong financial foundation for the company that we will benefit from for years to come. After an extensive search, I am thrilled to welcome Mary Holt, our incoming CFO, who joins us on the call today.

Mary brings a wealth of experience and knowledge from world-class organizations such as Honeywell and Pfizer, and we are confident her background, financial acumen, proven leadership, and experience with lean management operating systems will be powerful additions to our business and will play a key role in helping us advance our strategic initiatives. Now, moving to slide three. As we mentioned last quarter, our results are being reported using equity method accounting following the completed spinoff of Resolute Holdings Management earlier this year. On this call, we will refer to non-GAAP measures for net sales, gross profit, and related operating measures. With that, let’s review the quarter. Net sales increased 13% year over year to $120.9 million, driven by disciplined execution, operational focus, and continued support from Dave and the board for our strategic initiatives. Pro forma adjusted EBITDA increased 30% to $47.7 million, with an EBITDA margin of 39.5%.

Implementation of the CompoSecure Operating System is clearly having a strong impact as we achieved gross margins of 59% for the quarter compared to 51.7% for the same quarter prior year. We also saw numerous customer program launches during the quarter, which I’ll comment on momentarily. Arculus delivered another strong net positive quarter, supported by expanding commercial activity. We continue to see traction with banks, fintechs, and exchanges who are launching innovative card programs and seeking enhanced security features. With sales momentum building and operating efficiency improving, we are raising our 2025 outlook and introducing strong guidance for 2026. For fiscal year 2025, we are raising our full-year guidance and now expect non-GAAP net sales of approximately $463 million and pro forma adjusted EBITDA of approximately $165-$170 million.

We are also announcing financial guidance for 2026, where we expect non-GAAP net sales of approximately $510 million and non-GAAP pro forma adjusted EBITDA of approximately $190 million. Turning to slide four. We shared a version of this slide last quarter, but it is worth a quick refresher for those new to the company since our reporting structure is rather nuanced. When evaluating CompoSecure’s performance, we suggest focusing on core operating results after deducting the management fee paid to RHLD. In turn, RHLD’s results primarily reflect the same management fee income net of its own operating expenses. Demand for our metal card products remains strong and is supported by ongoing trends we see in the market, as outlined on page seven.

We also continue to make operational progress, highlighted on the right side of the slide, and we are seeing sustained improvements in the business from the CompoSecure Operating System, including tangible benefits materializing on the top and bottom line, as well as strong gross margin improvements. Turning to slide six, we continue to see strong activity from both existing customers and new entrants, with several new and expanded programs launching in the quarter, such as Citi Strata Elite, Chime, a Bank of America/American Airlines co-brand, Alaska Airlines co-brand, Bank of Montreal, and Gemini XRP. These programs reinforce the strength of our partnerships and the value we bring to issuers seeking to enhance their brand loyalty and deliver improved returns through higher customer acquisition, spending, and retention. With that, I’ll pass it to Tim for a few remarks. Thank you, Jon.

I want to say what an honor it’s been to work alongside such a talented team and to help CompoSecure through its evolution into a strong public company it is today. I’m deeply grateful to our employees, our leadership team, our board of directors, and our investors for their trust and collaboration over the years. The company is well positioned, and I have no doubt CompoSecure is poised for continued growth and success under Dave and Jon’s leadership. I also would like to wish Mary Holt the best in her new role. She brings tremendous experience, deep financial expertise, and a proven record of leadership. I’m confident she’ll make an impact and continue to strengthen the finance organization as the company advances into its next phase of growth. Now for some further financial details on the quarter.

As Jon mentioned, following the February 28th spinoff of Resolute Holdings and the execution of the management agreement, Resolute Holdings now consolidates the financial results of CompoSecure operating under GAAP. The non-GAAP financials we are providing remain comparable to historical results, with the only change being the deduction of the management fee paid to Resolute Holdings. For Resolute Holdings, the non-GAAP financials reflect the management fee revenue, less salaries, and operating expenses. Now I’ll walk through our Q3 2025 financial performance. Unless stated otherwise, all comparisons and variance commentary are on a year-over-year basis. In Q3, non-GAAP net sales increased 13% to $120.9 million compared to $107.1 million. Non-GAAP gross margin for the quarter was 59% of net sales compared to 51.7%. Non-GAAP pro forma adjusted EBITDA for the quarter increased 30% to $47.7 million, up from $36.6 million.

At September 30th, on a non-GAAP basis, CompoSecure had $224.6 million of cash and cash equivalents, $40.7 million of investment in U.S. Treasury bills, and $190 million of total debt. This compares to September 30th, 2024, when the company had $52.7 million of cash and cash equivalents and $330 million of total debt. The strong increase in cash for the quarter is primarily driven by proceeds from warrant exercises as well as free cash flow generation from operating activities. On slide 13, you can see that domestic net sales grew 31% to $105.1 million, an increase of $25.1 million. International net sales declined 42% to $15.8 million, down $11.3 million due to timing of certain customer orders. As noted before, our international business can show greater variability quarter to quarter due to its smaller scale.

Turning to slide 14, non-GAAP pro forma adjusted EBITDA was $47.7 million, up 30% year over year, and non-GAAP pro forma adjusted EBITDA margin was 39.5%, up 529 basis points year over year. Now let me turn it back to Jon.

Jon Wilk, Chief Executive Officer, CompoSecure: Thanks, Tim. As mentioned earlier in the call, we raised our full-year guidance. We now expect non-GAAP net sales to be approximately $463 million and pro forma adjusted EBITDA to be approximately $165-$170 million, up from our previous guidance of $455 million and $158 million, respectively. Based on the disciplined execution of our strategic initiatives and the momentum we are seeing in the market, we have issued financial guidance for fiscal year 2026. As mentioned, we expect non-GAAP net sales of approximately $510 million and non-GAAP pro forma adjusted EBITDA of approximately $190 million. As a reminder, our raised guidance for 2025 and our guidance for 2026 includes the payment of Resolute Holdings Management Fee and does not include any impact from Husky. I’d like to close with a few thoughts.

The progress we have made over the past year is increasingly positive in our financial performance, in the way we operate, and in the culture that is taking shape across the organization. The CompoSecure Operating System continues to deliver meaningful impact, helping us improve execution, enhance efficiency, and drive record results. We are operating from a position of strength, supported by expanding customer relationships, continued innovation, and strong market demand. The opportunity ahead is substantial, and we are focused on building upon this momentum to deliver sustained long-term value for our investors. With that, I’d like to turn it back to Dave to discuss the transaction with Husky Technologies.

Jon Wilk, Chief Executive Officer, CompoSecure: Switching to slide three of the business combination presentation. The combination with Husky creates a best-in-class diversified compounder. The combined platform brings together two global market leaders, each operating in fundamentally good industries with best-in-class financial profiles, approximately 70% recurring revenue, and significant long-term growth potential. Importantly, this transaction is highly accretive to CompoSecure’s investors, supports long-term value creation, and preserves balance sheet flexibility for future M&A. Starting with the market, Husky operates in a fundamentally good industry that has been historically underappreciated. The industry has supported solid growth and attractive margins for years, and we believe the fundamentals are firmly in place for that to continue for a long time to come, especially with the growing awareness of PET’s superior carbon footprint, the regulatory push for plastic circularity, and the growing adoption of recycled plastics in packaging.

Growth in PET beverage demand, primarily bottled water, is the underlying secular trend driving the market for Husky’s equipment, and it is hard to imagine a future without a lot more packaged beverage bottles as the world continues to urbanize. Overall, Husky is well positioned to capitalize on favorable long-term demand drivers across its key end markets. Turning to the company, Husky is a globally recognized brand with a long-standing reputation for manufacturing best-in-class systems. Platinum and the management team have established a great foundation, and their efforts have yielded solid organic growth in the last five years, with identified opportunities to accelerate growth in 2026 and beyond. In many ways, Husky today is where both Honeywell and Vertiv were at the onset of my involvement. Husky is well positioned to benefit from the same operating system and process discipline that drove consistent outperformance at Honeywell, Vertiv, and now CompoSecure.

All of us see the logic and opportunity with Husky. Platinum is rolling about a billion dollars of their equity. My family has a billion dollars of equity, and the management team is also heavily invested in the deal. I would also add that we have raised an oversubscribed $2 billion of private placement from some of the leading institutional investors in the world on the same deal terms we covered today. As you can probably tell, I’m pretty psyched about this opportunity, and I hope you are too. With that, let me turn the call over to Tom Knott, our Chief Investment Officer, who can take you through the transaction and business in more detail.

Tom Knott, Chief Investment Officer, CompoSecure: Thank you, Dave. Let me begin by reiterating how excited we are about the opportunity for CompoSecure to combine with Husky. The transaction establishes us as a highly differentiated and diversified compounder, and the opportunities ahead are many. Stepping back, we began this journey in September 2024 with the acquisition of a majority interest in CompoSecure. Since that time, the company’s performance has accelerated materially, and we are beginning to see early gains from the systematic deployment of our operating system throughout the company. We have a proven approach to business operations, and we are confident that Husky exhibits all the same foundational qualities that will enable durable, long-term value creation for our investors as we begin working with Brad and his team.

Turning to slide four, we are acquiring Husky for approximately $5 billion, or 11.2 times 2026 net adjusted EBITDA, applying an enterprise value of $7.4 billion, or 11.6 times 2026 net adjusted EBITDA on a combined basis. The transaction is expected to be accretive to diluted EPS in the first full year post-combination and will be funded through a $2 billion private placement, approximately $1 billion in rolled equity from Platinum, and approximately $2 billion of debt, resulting in three and a half times net LTM leverage. We expect the transaction to close in the first quarter of 2026, subject to customary regulatory approvals and closing conditions. Turning to slide five, Husky checks every box of our investment criteria just as CompoSecure did. It is the number one player in both PET system sales as well as aftermarket.

The company operates in a large, structurally growing industry characterized by acyclical customer demand. It has a long history of engineering-led innovation that drives strong technology differentiation. We are also excited about growth opportunities we see for the business, supported by 65% recurring revenue from aftermarket sales and a highly fragmented competitive landscape. Lastly, we have already started working with the Husky team on implementing our operating system to drive growth, further margin expansion, and continued strong free cash flow. Turning to slide six, the transaction provides significant structural and financial benefits to CompoSecure. It diversifies our revenue base and end market exposure, reduces customer concentration, increases scale, will be highly accretive to earnings, improves capital allocation flexibility, and offers substantial runway for further investor value creation. Turning to slide seven, Husky is the global leader in integrated engineered equipment and aftermarket services.

Its business model operates much like a razor-razor blade model with an installed base of approximately 13,500 systems that result in approximately 65% recurring revenues from aftermarket parts, tooling, and services. Importantly, while Husky’s equipment and services typically represent less than 5% of customers’ annual operating costs, they are critical for the customer’s operations with immense focus on productivity, uptime, and reliability. This focus on high criticality, high-value products aligns closely with how we think about CompoSecure’s market leadership in metal cards. Turning to slides eight and nine, these pages really summarize the pro forma platform. The combined businesses deliver immediate scale and are positioned to deliver mid to high single-digit organic growth, approximately 70% recurring revenue, approximately 12.5% EBITDA growth annually, 100 basis points of margin expansion opportunity per year, and approximately 7.5% free cash flow yield in year one.

Taken together, the company has a best-in-class financial profile, durable growth drivers, all being offered at a significant discount to peers. In summary, we are extremely excited about this transformative transaction and to partner with the Husky team. The transaction brings together two market leaders to create a best-in-class diversified compounder. While I’m excited about the momentum we have already seen at CompoSecure as we deliver above-market, top, and bottom-line growth, I am even more excited about the opportunities I see ahead for the combined platform. With that, I’ll turn it back to Dave for some closing remarks.

Jon Wilk, Chief Executive Officer, CompoSecure: As I said at the beginning, I’m incredibly psyched about this opportunity. Husky has a great position in a good industry, and we see a clear path to deliver solid long-term growth with more than 500 basis points of identified margin upside for the combined company. The long-form investor presentation we shared during the private placement process was also filed today, and it has a lot more detail that should go a long way to helping you see why we’re so excited about this combination and about both businesses. On behalf of CompoSecure, we look forward to providing our investors with great returns for many years to come. We hope you’ll join us. With that, I’ll open up the call for Q&A.

Liz, Conference Operator: At this time, I would like to welcome. At this time, I will invite everyone in order to ask a question, press star one, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Moshe Ari Orenbuch with TD Cowen. Please go ahead.

Moshe Ari Orenbuch, Analyst, TD Cowen: Great. Thanks and congrats on all the stuff that you have accomplished and disclosed today. Wondering, because I was able to kind of scroll quickly through the presentation, only saw it a few moments ago, but I do not think it includes a share count. How do we think about, as we think about shares, the effective number that will be included in that for those purposes?

Tom Knott, Chief Investment Officer, CompoSecure: Yeah, Moshe, this is Tom. The share count you should think about on a pro forma basis will be 291 million shares.

Moshe Ari Orenbuch, Analyst, TD Cowen: Got it. Okay. Good. Maybe with respect to, as you think about the margins, a very strong margin performance on CompoSecure and the improvement that you’ve seen, is there a way to kind of discuss how much of that improvement that you are hoping to see from the implementation of the operating system is kind of in place and how much of that is still coming? Maybe just if you could just kind of discuss with us where you think the CompoSecure piece of the business is in that journey.

Jon Wilk, Chief Executive Officer, CompoSecure: Thanks, Moshe. When we think about where we are, there is still enormous potential ahead in the operating system work to continue to improve our efficiency. At the same time, and as we’ve said on prior calls, we will continue to invest in critical areas of growth, building out the sales team, building out the engineering and R&D capability of the company to help make sure we’ve got the things in place to deliver that sustained organic growth over time. Still tremendous opportunity ahead, some of which will flow through to margin, some of which will be reinvested to plant seeds for the future.

Moshe Ari Orenbuch, Analyst, TD Cowen: Got it. Thanks very much, and I’ll cue back in.

Liz, Conference Operator: Next up, we have Tom from the line of Peter Stefan with Lake Street Capital Markets. Please go ahead.

Peter Stefan, Analyst, Lake Street Capital Markets: Hey, guys. A lot to say. Congratulations for today. Just wanted to start off with a question on the acquisition. Maybe you could kind of help us think through some of those synergies you have within your core kind of metal card business and what you see with Husky’s kind of injection molding equipment.

Jon Wilk, Chief Executive Officer, CompoSecure: Yeah. At the end of the day. We’re not pointing to nor counting on any kind of synergies. Between the two businesses. You can expect there are some, but we didn’t want to count on anything. Where the synergies come from in what can be considered unrelated businesses is the same thing that we used to point to at Honeywell, where we’d get asked. How do aerospace controls, chemicals, and turbochargers go together? Everybody’s expecting some kind of made-up technology insight, which we didn’t do. We just said, at the end of the day. The same thing that mattered there is what matters here. It’s the consistent application of a management operating system that works quite well.

Being able to implement the operating system, it’ll be the Husky operating system, the CompoSecure Operating System, getting functional transformation implemented, making sure you have a very good people process in place, agreement on strategic priorities with the monthly growth days, which sounds like a simple meeting, but is actually a lot more than that. It’s the application and implementation of those management philosophies that make all the difference in the world. Getting that culture to the point where people want to perform at a high level because it’s fun and they enjoy it. Matters greatly. It’s a tough thing to measure, but when you get it, like we did at Honeywell, like we’ve got at Vertiv, like it’s happening at CompoSecure, which is going to happen at Husky, that’s where all the magic happens.

Peter Stefan, Analyst, Lake Street Capital Markets: Got it. Maybe you could kind of help us think through some of the more recurring natures of that business. I know you guys kind of talked about 70% recurring revenue mix, but. In addition to the actual injection molding equipment, what about the business is recurring?

Tom Knott, Chief Investment Officer, CompoSecure: Yeah. Like we said on the call a little earlier, it’s very much sort of the razor-razor blade where you’ve got a large installed base of machines, and we’re selling aftermarket parts and services to those customers to support the installed base. You’ve got a big installed base, and you’re selling parts and services to those customers to support the machines that are already in place.

Peter Stefan, Analyst, Lake Street Capital Markets: Okay. Got it. That’s helpful. Appreciate the color, guys. Congrats again.

Jon Wilk, Chief Executive Officer, CompoSecure: Thanks. Thanks, Jacob.

Liz, Conference Operator: Your next question comes from the line of Paul Gichev with B. Riley Securities. Please go ahead.

Paul Gichev, Analyst, B. Riley Securities: Hey, thank you. And thanks for all the detail on this transaction. I’ve got two questions, and one relates to Compo on margin expansion. And then on the guidance for maybe margin expansion potential of the combined company. We were thinking Compo was going to have about 50% gross margins for the long haul, and in less than a year, they’re in the high 50s. And like you just said, you’ve guided to maybe 100 basis points of margin expansion in the combined business. And I’m just thinking that seems modest at this time. But on the first part, can you just tell us what kind of has happened operationally to get the kind of efficiency you’ve got in the last three quarters? Thank you.

Jon Wilk, Chief Executive Officer, CompoSecure: How? Literally putting into practice exactly what Dave described. Putting in place that operating system, the routines, the tenacity, the culture change that we have put in place, those are the things that are driving the improvements that we talk about. It is, we believe, sustainable, and we believe there is still more opportunity ahead. The comment that was made earlier is that we believe there is that kind of opportunity on an annual basis to continue to improve margins across the combined businesses.

You also heard my answer to Moshe’s question earlier, which was this idea that we still believe there’s meaningful opportunity with Compo, some of which will accrete to margin, some that we will reinvest in planting seeds to help make sure that we’ve got the sustained organic growth, the sustained innovation pipeline, and the breakthrough R&D to help make sure that we can continue to deliver for our customers. It is literally those lessons from Honeywell, the lessons from Vertiv, now Compo, that we believe we can implement at Husky as well.

Paul Gichev, Analyst, B. Riley Securities: Yeah. So if I had one thought to kind of triangulate this. If both companies at the spot where Honeywell was at and Vertiv was at when Mr. Cote got involved, where did margins go with those businesses over a 36-month period?

Jon Wilk, Chief Executive Officer, CompoSecure: I don’t have those off the top of my head, but they’re public record and they’re good.

Paul Gichev, Analyst, B. Riley Securities: Okay. Yeah. Okay. Good. I’ll take that out. Thank you very much.

Jon Wilk, Chief Executive Officer, CompoSecure: Let’s put it this way. I’ve learned that analysts can’t handle anything above a commitment to improve basis points above 500. I used to think at Vertiv that we could get 1,000 basis points. They couldn’t handle it. I said, "Okay, it’s 500." Now that we’re at 1,000, they say, "Oh, well, where can you go next?" We can’t take 1,000 basis points more because they can’t handle it. That’s why we’re telling you 500.

Paul Gichev, Analyst, B. Riley Securities: Okay. All right. Thank you.

Jon Wilk, Chief Executive Officer, CompoSecure: Hello?

Liz, Conference Operator: 80%.

Jon Wilk, Chief Executive Officer, CompoSecure: Thank you.

Liz, Conference Operator: Thank you all for joining. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.