GPGI, Inc. (GPGI Q4 FY2023 earnings call

• Fourth quarter 2023 delivered strong results with net sales up and adjusted EBITDA at a record for the quarter.
• 2023 saw record revenue and adjusted EBITDA, with adjusted EBITDA in line with original guidance. Extended long-term contracts with top clients and produced over 31 million metal cards.
• Introduced innovations like the Echo Mirror card, which was popular with Trade Republic. Customers are leveraging CompoSecure's products in marketing, e.g., Trade Republic, Change Finance, Venous.io, Radix.
• Arculus platform updates: B2B cold storage for digital assets and authenticate offerings for secure login, etc. Partnered with Forbes to understand fraud and authentication perceptions.
• Proactively increased inventory levels in late 2023 to support 2024 client needs.

In the fourth quarter, net sales increased to $100 million. Domestic net sales were strong at $86 million, up 9% year-over-year and surpassing Q3's record. International net sales were $14 million, up sequentially but down year-over-year. For the full year, net sales reached a record $390.6 million, driven by strong U.S. demand despite international impact from global conditions. Q4 adjusted EBITDA grew over 20% to $37.2 million, and full year adjusted EBITDA was $145 million, up 6% from the prior year. Domestic contributed a significant portion of the revenue, while international accounted for about 20% of annual net sales mix in 2023.

• 2024 net sales guidance: $408 million to $428 million.
• 2024 adjusted EBITDA guidance: $147 million to $157 million.
• Arculus net investment expected to improve again in 2024 and turn positive in 2025.
• Board approved a securities repurchase program for up to $40 million over three years.

• Macroeconomic environment could impact international business.
• Non-cash changes in fair value of warrants, earn-out consideration, and derivative liabilities can affect net income.
• Forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations.

Q: John Todaro asked about Arculus growth and metrics.

A: Jon Wilk said they're seeing momentum in Arculus executions like Change Finance, Radix, etc., and net investment in Q4 is headed in the right direction, expected to improve and turn positive in 2025.

Q: Hal Goetsch asked about inventories and new programs.

A: Jon Wilk said inventory issues in channel have largely subsided, and new products like Echo Mirror, LED card are part of new program wins.

Q: Mark Palmer asked about guidance swing factors and repurchase program allocation.

A: Jon Wilk said guidance range is based on executing against visible opportunities, and the Board authorized the repurchase program for capital allocation to drive shareholder value.

Q: Joe Flynn asked about Capital One deal and capital allocation.

A: Jon Wilk said the Capital One deal is neutral to positive, and the company believes its stock is undervalued with tools to drive shareholder value.

Q: Reggie Smith asked about revenue cadence and long-term growth.

A: Jon Wilk said no seasonality in revenue, and the business is a double-digit grower, driven by domestic expansion, international growth, and fintech partnerships.