CompoSecure, Inc. (CMPO) Bundle
Understanding CompoSecure, Inc. (CMPO) Revenue Streams
Understanding CompoSecure, Inc.’s Revenue Streams
CompoSecure, Inc. generates revenue from various sources, primarily focusing on premium payment card solutions. The following sections detail the company's revenue streams, growth trends, and key contributions from different segments.
Breakdown of Primary Revenue Sources
The company’s revenue is primarily sourced from two key regions:
- Domestic Revenue: For the nine months ended September 30, 2024, domestic net sales amounted to $258.0 million, an increase of 9% from $235.9 million in 2023.
- International Revenue: International net sales reached $61.7 million, reflecting a 13% increase from $54.8 million in 2023.
The total net sales for the nine months ended September 30, 2024, were $319.7 million, compared to $290.7 million in the same period of 2023, marking a 10% increase.
| Period | Domestic Net Sales | International Net Sales | Total Net Sales | Growth Rate |
|---|---|---|---|---|
| 9 Months Ended September 30, 2024 | $258,007,000 | $61,705,000 | $319,712,000 | 10% |
| 9 Months Ended September 30, 2023 | $235,933,000 | $54,796,000 | $290,729,000 | - |
Year-over-Year Revenue Growth Rate
The year-over-year growth rate in revenue illustrates the company's performance:
- For the quarter ended September 30, 2024, net sales increased to $107.1 million, up 11% from $96.9 million in the same quarter of 2023.
- The nine-month growth rate of 10% in total net sales reflects a consistent increase in both domestic and international markets.
Contribution of Different Business Segments to Overall Revenue
The business segments contribute as follows:
- Domestic sales contribute approximately 80.7% of total net sales.
- International sales account for about 19.3% of total net sales.
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams include:
- The increase in domestic sales is attributed to higher customer acquisition and demand for premium payment cards.
- International sales experienced a dramatic rise of 115% in the quarter ended September 30, 2024, from $12.6 million to $27.1 million compared to the same quarter in 2023.
Overall, the company’s strategic focus on expanding its international market presence and enhancing customer acquisition strategies has positively impacted revenue growth.
A Deep Dive into CompoSecure, Inc. (CMPO) Profitability
A Deep Dive into CompoSecure, Inc.'s Profitability
Gross Profit and Gross Margin
The company reported a gross profit of $166.7 million for the nine months ended September 30, 2024, which reflects a 7% increase compared to $156.2 million in the same period of 2023. The gross profit margin decreased to 52% from 54% year-over-year, primarily due to product mix and inflationary pressures on wages and materials.
| Period | Gross Profit ($ in millions) | Gross Margin (%) |
|---|---|---|
| Q3 2023 | $48.9 | 50% |
| Q3 2024 | $55.4 | 52% |
| 9M 2023 | $156.2 | 54% |
| 9M 2024 | $166.7 | 52% |
Operating Profit and Operating Margin
For the nine months ended September 30, 2024, the income from operations was $92.0 million, a 4% increase from $88.6 million in 2023. The operating margin decreased to 29% from 30% due to increased operating expenses which rose to $74.7 million, a 10% increase from $67.6 million.
| Period | Operating Income ($ in millions) | Operating Margin (%) |
|---|---|---|
| Q3 2023 | $28.8 | 30% |
| Q3 2024 | $29.1 | 27% |
| 9M 2023 | $88.6 | 30% |
| 9M 2024 | $92.0 | 29% |
Net Profit and Net Profit Margin
The company reported a net loss of $34.8 million for the nine months ended September 30, 2024, compared to a net income of $81.5 million for the same period in 2023. This significant change reflects a net profit margin decline to (10.9)% from 28.0%.
| Period | Net Income ($ in millions) | Net Profit Margin (%) |
|---|---|---|
| Q3 2023 | $38.0 | 39.1% |
| Q3 2024 | $(85.5) | (79.9%) |
| 9M 2023 | $81.5 | 28.0% |
| 9M 2024 | $(34.8) | (10.9%) |
Trends in Profitability Over Time
The profitability metrics indicate a decline in both gross and net profit margins over the past year. The gross margin fell from 54% to 52%, while the operating margin dropped from 30% to 29%. The net profit margin experienced a substantial decline, reflecting the challenges faced by the company in managing costs and expenses amidst rising operational challenges.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average for gross margin in the payment card sector is approximately 55%, while the average operating margin is 25%. The company's gross margin of 52% is below the industry average, while its operating margin of 29% is above the industry average.
Analysis of Operational Efficiency
The operational efficiency is measured through the analysis of cost management and gross margin trends. The increase in operating expenses, particularly in salaries and stock-based compensation, has significantly impacted profitability. The company’s gross margin trend indicates that product mix and operational efficiencies remain critical areas for improvement.
Debt vs. Equity: How CompoSecure, Inc. (CMPO) Finances Its Growth
Debt vs. Equity: How CompoSecure, Inc. Finances Its Growth
As of September 30, 2024, the company reported a total debt principal outstanding of $330.0 million, a decrease from $340.3 million as of December 31, 2023. The breakdown of the debt includes:
| Debt Type | Amount (in thousands) |
|---|---|
| Term Loan | $199,980 |
| Exchangeable Notes | $130,000 |
| Total Debt | $329,980 |
The company maintained cash and cash equivalents of $52.7 million as of September 30, 2024. The debt-to-equity ratio stands at 1.30, reflecting a strategy that leans more towards debt financing compared to industry averages, which typically range from 0.5 to 1.0.
Recent activities include a refinancing effort on August 7, 2024, where the company entered into a Fourth Amended and Restated Credit Agreement with J.P. Morgan Chase, increasing the overall credit facility to $330 million. This includes a term loan of $200 million and a revolving credit facility of $130 million.
Credit ratings have not been explicitly stated, however, the company has indicated compliance with various financial covenants, including a minimum interest coverage ratio and a maximum total debt to EBITDA ratio, as of September 30, 2024.
The company balances debt and equity financing by utilizing a revolving credit facility to manage liquidity needs while also considering equity offerings when necessary. This approach allows the company to maintain operational flexibility while pursuing growth opportunities.
In addition, the company has recognized interest expenses related to its debt obligations, amounting to $15.87 million for the nine months ended September 30, 2024. This is a decrease from $17.07 million for the same period in 2023.
The following table summarizes key financial metrics related to the company's debt and equity structure:
| Metric | Value |
|---|---|
| Total Debt | $330.0 million |
| Cash and Cash Equivalents | $52.7 million |
| Debt-to-Equity Ratio | 1.30 |
| Interest Expense (9 Months 2024) | $15.87 million |
| Interest Expense (9 Months 2023) | $17.07 million |
Overall, the company is strategically leveraging its debt to finance growth while ensuring it remains within manageable limits relative to its equity base.
Assessing CompoSecure, Inc. (CMPO) Liquidity
Assessing CompoSecure, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 2.45, calculated from total current assets of $130.4 million and total current liabilities of $53.2 million.
Quick Ratio: The quick ratio stood at 1.80, with quick assets (cash and cash equivalents plus receivables) of $68.2 million compared to current liabilities of $53.2 million.
Analysis of Working Capital Trends
Working capital increased to $77.2 million as of September 30, 2024, reflecting an improvement from $66.5 million in the previous year. This indicates a positive trend in the company's ability to cover short-term liabilities with short-term assets.
Cash Flow Statements Overview
The following table summarizes cash flow statements for the nine months ended September 30, 2024 and 2023:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $94,136 | $77,879 |
| Net Cash Used in Investing Activities | ($5,511) | ($6,669) |
| Net Cash Used in Financing Activities | ($77,200) | ($61,000) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had cash and cash equivalents of $52.7 million and total debt principal outstanding of $330.0 million. The company believes that cash flows from operations, along with a revolving credit facility of $130.0 million, are sufficient to meet its liquidity needs for at least the next 12 months.
However, the total debt remains a concern, as it increased from $340.3 million as of December 31, 2023. The company is also exposed to interest rate risks related to variable rate debt, which was assessed to potentially impact interest expenses by approximately $4.0 million annually for a 100 basis points change in interest rates .
Is CompoSecure, Inc. (CMPO) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company involves several key metrics that provide insights into whether the stock is overvalued or undervalued. Below are the details regarding the Price-to-Earnings (P/E) ratio, Price-to-Book (P/B) ratio, and Enterprise Value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the company reported a net loss attributable to Class A common stockholders of $42,060. The weighted average shares outstanding for diluted earnings per share were 38,212,440. This results in a diluted loss per share of $(1.10).
Since the company is currently reporting a loss, the P/E ratio cannot be calculated meaningfully. Typically, a P/E ratio is calculated as:
P/E Ratio = Market Price per Share / Earnings per Share
Price-to-Book (P/B) Ratio
As of September 30, 2024, the total assets of the company were $1,150 million, and total liabilities were $1,000 million. This gives a book value of:
Book Value = Total Assets - Total Liabilities = $1,150 million - $1,000 million = $150 million
The total shares outstanding as of the same date were 93,860,000. Thus, the book value per share is:
Book Value per Share = Book Value / Total Shares Outstanding = $150 million / 93,860,000 ≈ $1.60
The current market price per share is $14.02, resulting in a P/B ratio of:
P/B Ratio = Market Price per Share / Book Value per Share = $14.02 / $1.60 ≈ 8.76
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value as of September 30, 2024, can be calculated as follows:
Enterprise Value = Market Capitalization + Total Debt - Cash and Cash Equivalents
Market Capitalization: 93,860,000 shares x $14.02 per share = $1,315,000,000
Total Debt: $330 million
Cash and Cash Equivalents: $52.7 million
Thus, the enterprise value is:
Enterprise Value = $1,315 million + $330 million - $52.7 million = $1,592.3 million
For the last twelve months, EBITDA is reported at $92 million. Therefore, the EV/EBITDA ratio is:
EV/EBITDA Ratio = Enterprise Value / EBITDA = $1,592.3 million / $92 million ≈ 17.3
Stock Price Trends
Over the past 12 months, the stock price has shown significant volatility, with a high of $18.00 and a low of $8.00. Currently, the stock price stands at $14.02.
Dividend Yield and Payout Ratios
As of September 30, 2024, the company declared a special cash dividend of $0.25 per share. Given the current stock price of $14.02, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = $0.25 / $14.02 ≈ 1.79%
The payout ratio cannot be calculated as the company is currently reporting a net loss.
Analyst Consensus on Stock Valuation
Analyst consensus for the stock as of October 2024 is as follows:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | 8.76 |
| EV/EBITDA Ratio | 17.3 |
| Current Stock Price | $14.02 |
| 12-Month High | $18.00 |
| 12-Month Low | $8.00 |
| Dividend Yield | 1.79% |
| Analyst Consensus | 5 Buy, 3 Hold, 1 Sell |
Key Risks Facing CompoSecure, Inc. (CMPO)
Key Risks Facing CompoSecure, Inc.
The financial health of CompoSecure, Inc. is influenced by various internal and external risk factors that investors should consider. These risks can impact the company's operations and overall performance.
Industry Competition
CompoSecure operates in a competitive landscape with numerous players in the financial transaction card market, which may pressure pricing and margins. The company faces competition from both established financial institutions and new entrants offering innovative payment solutions.
Regulatory Changes
Changes in regulations affecting payment card technology, data security, and financial services could impose additional compliance costs or operational limitations. The ongoing evolution of regulations in the financial sector may also affect the company's ability to innovate and adapt to new market demands.
Market Conditions
The company’s performance is sensitive to macroeconomic conditions, including inflation, interest rates, and economic downturns. For instance, as of September 30, 2024, the company reported a $34.8 million net loss, highlighting the impact of adverse market conditions on financial results.
Operational Risks
Operational risks related to manufacturing processes, supply chain disruptions, and labor costs are significant. For example, the gross profit margin decreased from 54% in 2023 to 52% in 2024 due to production inefficiencies and inflationary pressures.
Financial Risks
As of September 30, 2024, the company had total debt principal outstanding of $330.0 million, which raises concerns regarding liquidity and debt servicing. The substantial debt burden limits financial flexibility and increases vulnerability to interest rate fluctuations, given the variable rates associated with the company’s credit facilities.
Additionally, the company reported interest expenses of $15.9 million for the nine months ended September 30, 2024, which further strains cash flow.
Strategic Risks
Strategic risks include the potential failure to execute business plans effectively or to adapt to changing consumer preferences. The company’s reliance on key customers, which accounted for 66.1% of total revenue for the nine months ended September 30, 2024, poses a risk if these customers reduce their orders.
Mitigation Strategies
To address these risks, the company has implemented strategies such as diversifying its customer base and enhancing operational efficiencies. It also maintains a revolving credit facility of $130 million to support liquidity needs. Furthermore, the company is focused on innovation to stay competitive and meet evolving market demands.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Pressure on pricing and margins from established and new entrants. | Potential decrease in market share. |
| Regulatory Changes | Compliance costs and operational limitations due to evolving regulations. | Increased operational costs. |
| Market Conditions | Economic downturns impacting consumer spending. | Adverse effects on sales and profitability. |
| Operational Risks | Manufacturing inefficiencies and supply chain disruptions. | Lower gross margins. |
| Financial Risks | High debt levels affecting liquidity and cash flow. | Increased vulnerability to interest rate changes. |
| Strategic Risks | Failure to execute business plans or adapt to market changes. | Loss of key customers and revenue. |
As these risk factors continue to evolve, it is crucial for investors to remain vigilant and informed about the company's strategic responses and market dynamics.
Future Growth Prospects for CompoSecure, Inc. (CMPO)
Future Growth Prospects for CompoSecure, Inc.
Analysis of Key Growth Drivers
CompoSecure, Inc. is positioned for significant growth driven by several key factors:
- Product Innovations: The company has been focusing on enhancing its premium payment card offerings. For the nine months ended September 30, 2024, the premium payment card business experienced a domestic growth of 9% compared to the previous year.
- Market Expansions: International sales have shown robust growth, increasing by 13% to $61.7 million for the nine months ended September 30, 2024, compared to $54.8 million in 2023.
- Acquisitions: The company continues to explore strategic acquisitions that can enhance its product offerings and market reach.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, CompoSecure reported total net sales of $319.7 million, a growth of 10% from $290.7 million in 2023. This growth trend is expected to continue, with analysts projecting an annual revenue growth rate of approximately 10-15% over the next three years.
The expected earnings per share (EPS) for the fiscal year 2024 is estimated to be around ($0.58) compared to $0.86 in 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
CompoSecure has initiated various strategic partnerships aimed at expanding its market presence:
- Collaborations with Financial Institutions: The company works closely with major banks and payment card issuers, strengthening its position in the payment processing industry.
- Technology Partnerships: Engaging with technology firms to enhance product offerings in digital payments and security features.
Competitive Advantages That Position the Company for Growth
CompoSecure benefits from several competitive advantages:
- Strong Brand Reputation: Established relationships with leading financial institutions provide a solid foundation for new opportunities.
- Innovative Product Line: Continuous investment in R&D has led to unique product offerings that cater to evolving consumer needs.
- Operational Efficiency: The company maintains a gross margin of 52% for the nine months ended September 30, 2024, although it has decreased from 54% in 2023.
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change (%) |
|---|---|---|---|
| Net Sales | $319.7 million | $290.7 million | 10% |
| Domestic Sales | $258.0 million | $235.9 million | 9% |
| International Sales | $61.7 million | $54.8 million | 13% |
| Gross Margin | 52% | 54% | -2% |
| Operating Margin | 29% | 30% | -1% |
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Updated on 16 Nov 2024
Resources:
- CompoSecure, Inc. (CMPO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of CompoSecure, Inc. (CMPO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View CompoSecure, Inc. (CMPO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.