CompoSecure Inc (CMPO) 2023 Q2 法說會逐字稿

Thank you for standing by and welcome to CompoSecure second quarter 2023 earnings call. (Operator Instructions)

感謝您的支持並歡迎參加 CompoSecure 2023 年第二季度財報電話會議。 （操作員說明）

I would now like to hand the call over to Sean Mansouri, Investor Relations. Please go ahead.

我現在想將電話轉交給投資者關係部門的肖恩·曼蘇里 (Sean Mansouri)。請繼續。

Good afternoon, and thank you for joining us to review CompoSecure's second quarter 2023 financial results. With me on the call is Jon Wilk, CompoSecure's CEO; and Tim Fitzsimmons, CFO. They will begin with prepared remarks and then we will open the call for Q&A.

下午好，感謝您與我們一起回顧 CompoSecure 的 2023 年第二季度財務業績。與我一起參加電話會議的是 CompoSecure 首席執行官 Jon Wilk；和首席財務官蒂姆·菲茨西蒙斯。他們將從準備好的發言開始，然後我們將開始問答環節。

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.

在電話會議期間，我們將做出與我們的業務相關的可能被視為前瞻性的聲明，包括有關我們執行增長戰略的計劃以及我們維持現有和獲取新客戶的能力的聲明，以及有關我們計劃的其他聲明，和前景。

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. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations.

前瞻性陳述通常可以用“我們期望”、“我們預期”或“即將到來”等詞語來識別。這些陳述僅反映我們今天的觀點，不應被視為我們在任何後續日期的觀點。我們不承擔更新或修改這些前瞻性陳述的義務。前瞻性陳述不是對未來業績的承諾或保證，並受到各種風險和不確定性的影響，可能導致實際結果與我們的預期存在重大差異。

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 at composecure.com and on the SEC's website at sec.gov.

有關可能影響我們實際業績的重大風險和其他重要因素的討論，請參閱我們的 10-K 表年度報告以及向 SEC 提交的其他報告中的信息，這些信息可在我們網站的投資者關係部分找到參見composecure.com 和SEC 網站sec.gov。

Please note that the discussion on today's call includes certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income, and adjusted EPS. 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 maybe 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 Investor Relations section of our website.

請注意，今天電話會議的討論包括某些非公認會計準則財務指標，包括調整後的 EBITDA、調整後的淨利潤和調整後的每股收益。該公司相信，這些非公認會計準則財務指標為管理層和投資者提供了有關影響公司財務狀況和經營業績的某些財務和業務趨勢的有用信息。這些非公認會計原則財務指標不應被視為淨利潤或根據美國公認會計原則得出的任何其他績效指標的替代品，並且可能與其他公司使用的類似標題的非公認會計原則指標有所不同。我們網站投資者關係部分的新聞稿和收益介紹中提供了 GAAP 與非 GAAP 衡量標準的對賬。

Thank you. And with that, let me turn the call over to Jon to discuss our second quarter results.

謝謝。接下來，讓我將電話轉給喬恩，討論我們第二季度的業績。

Thank you, Sean. Good afternoon, everyone, and thank you for joining us for our second quarter conference call.

謝謝你，肖恩。大家下午好，感謝您參加我們的第二季度電話會議。

As you hopefully read from our 8-K filed this afternoon, I'm excited to announce a five-year contract extension with one of our largest customers through December 2028 as their exclusive provider of metal cards. This comes on the heels of the extension with American Express we announced last quarter, which means we have now secured long-term renewals with our two largest customers.

正如您希望從我們今天下午提交的8-K 中看到的那樣，我很高興地宣布與我們最大的客戶之一簽訂為期五年的合同，延長至2028 年12 月，作為他們的金屬卡獨家供應商。緊接著我們上季度宣布與美國運通續約，這意味著我們現在已經與兩個最大的客戶獲得了長期續約。

Throughout our 20-year history, our company has been driven by delivering unmatched value and business impact for our clients, as well as innovation, all while establishing long-term partnerships across the market. And I'm proud that we continued to demonstrate that unique value proposition.

在我們 20 年的歷史中，我們公司一直致力於為客戶提供無與倫比的價值和業務影響以及創新，同時在整個市場建立長期合作夥伴關係。我很自豪我們繼續展示這種獨特的價值主張。

Now to summarize the quarter on page 3, our second quarter results once again reflected the performance and consistency of our business as net sales for the quarter increased 1% to $98.5 million, driven by strong domestic growth of 11%, which was offset by lower international sales, which Tim will cover in a bit more detail. On a year-to-date basis, net sales were up 7% to $194 million.

現在，在第3 頁上總結本季度，我們第二季度的業績再次反映了我們業務的表現和一致性，在11% 的強勁國內增長的推動下，該季度的淨銷售額增長了1%，達到9850 萬美元，但這一增長被較低的增長率所抵消。國際銷售，蒂姆將更詳細地介紹這一點。年初至今，淨銷售額增長 7%，達到 1.94 億美元。

Looking at card issuer trends, our customers continued to report strong growth and have a positive outlook while maintaining their investment in customer acquisition and rewards despite the macroeconomic uncertainty. During the quarter, we continued to position our payment card and Arculus product offerings for growth, including expanding our sales team, continuing trade show and partnership opportunities, and executing our B2B marketing strategy.

從發卡機構的趨勢來看，儘管宏觀經濟存在不確定性，我們的客戶仍然保持強勁增長，並保持積極的前景，同時保持在客戶獲取和獎勵方面的投資。本季度，我們繼續定位我們的支付卡和 Arculus 產品以實現增長，包括擴大我們的銷售團隊、繼續舉辦貿易展覽和合作機會，以及執行我們的 B2B 營銷策略。

And finally, we are reaffirming our guidance for 2023, which calls for net sales to range between $400 million and $425 million with adjusted EBITDA ranging between $145 million and $155 million.

最後，我們重申 2023 年的指導，即淨銷售額在 4 億美元到 4.25 億美元之間，調整後的 EBITDA 在 1.45 億美元到 1.55 億美元之間。

I'd like to take a minute and cover some of the other highlights for the quarter, turning to slide 4. In addition to the contract extension, which I previously talked about, we've launched several new metal card programs with top issuers this quarter. To highlight a few, with Citizens Bank, we're helping to deliver an innovative metal card design that integrates a touch card feature from Mastercard to help partially sighted or blind people easily distinguish their payment cards from one another.

I'd like to take a minute and cover some of the other highlights for the quarter, turning to slide 4. In addition to the contract extension, which I previously talked about, we've launched several new metal card programs with top issuers this四分之一.需要強調的是，我們正在與公民銀行合作提供一種創新的金屬卡設計，該設計集成了萬事達卡的觸摸卡功能，以幫助弱視或盲人輕鬆區分他們的支付卡。

We also launched with Barclays in the UK, which is one of the biggest four banks in that market, and overall one of the largest markets in Europe. In addition, we launched with Mars, a fintech based in Turkey, which is now offering a premium metal Mastercard. From a marketing perspective, we had a strong presence at events and trade shows and we'll continue to ramp that activity as we go through the year, both domestically and internationally. These efforts have helped to increase our pipeline for both payment card and Arculus opportunities. I'm also excited to see industry recognition for our company, our product offerings, and our leadership team that we highlighted on page four as well.

我們還在英國與巴克萊銀行合作，巴克萊銀行是該市場最大的四大銀行之一，也是歐洲最大的市場之一。此外，我們還與總部位於土耳其的金融科技公司 Mars 合作推出了優質金屬萬事達卡。從營銷的角度來看，我們在活動和貿易展覽中表現強勁，並且我們將在這一年中繼續加大國內和國際活動的力度。這些努力有助於增加我們的支付卡和 Arculus 機會渠道。我也很高興看到我們的公司、我們的產品以及我們在第四頁上強調的領導團隊得到行業認可。

Moving on to slide 5, which provides insight from issuers and payment networks. As you can see from these callouts, Amex continues to expect double-digit revenue growth and even greater EPS growth. Capital One emphasized continued marketing spend on their domestic card business and Visa believes that growth in payment volumes around the world will remain stable. These comments show confidence in the market for payment cards, and we believe we're well positioned to benefit as a market leader in metal cards.

轉到幻燈片 5，它提供了來自發行機構和支付網絡的見解。正如您從這些標註中看到的那樣，美國運通繼續預計兩位數的收入增長，甚至更大的每股收益增長。第一資本強調其國內卡業務的持續營銷支出，而 Visa 相信全球支付量的增長將保持穩定。這些評論顯示了對支付卡市場的信心，我們相信我們處於有利位置，可以作為金屬卡市場的領導者受益。

Turning to the growing opportunity for secure authentication on slide 6, our lives have become highly digital, and reliance on passwords is becoming more worrisome. I've spoken to this on previous calls and this issue -- this is an issue that consumers are beginning to recognize as well. On the left-hand side, you'll see that many consumers are looking to transition from passwords, with 68% willing to use non-password log-in methods; and on the right side, a recent study shows that consumers want better methods that provide more visible security.

轉向幻燈片 6 中日益增長的安全身份驗證機會，我們的生活已經變得高度數字化，對密碼的依賴變得更加令人擔憂。我在之前的電話會議和這個問題上已經談過這一點——這也是消費者開始認識到的一個問題。在左側，您會看到許多消費者正在尋求從密碼登錄方式過渡，其中 68% 的人願意使用非密碼登錄方式；另一方面，最近的一項研究表明，消費者想要更好的方法來提供更明顯的安全性。

That really connects well to our Arculus offerings on slide 7, and what we can provide for our B2B customers by combining Arculus authentication and/or cold storage with a payment card. I'm pleased with our progress against the Arculus roadmap. We continued to add to our sales team and bolster our Arculus B2B marketing efforts, and we've added new B2B customers this quarter including Plug Wallet, an online crypto wallet; and Radix DeFi, a decentralized network.

這確實與幻燈片 7 上我們的 Arculus 產品以及我們通過將 Arculus 身份驗證和/或冷存儲與支付卡相結合可以為 B2B 客戶提供的服務緊密相連。我對我們按照 Arculus 路線圖取得的進展感到滿意。我們繼續擴大銷售團隊並加強 Arculus B2B 營銷工作，本季度我們增加了新的 B2B 客戶，包括在線加密錢包 Plug Wallet；以及 Radix DeFi，一個去中心化網絡。

I'll now hand it over to Tim to review our financials before returning for closing remarks.

現在，我將把它交給蒂姆，讓他審查我們的財務狀況，然後再回來作結束語。

Thanks, Jon, and good evening, everyone. I'll provide a more detailed overview of our Q2 2023 financial performance and then turn it back to Jon before we open up the call for questions.

謝謝喬恩，大家晚上好。我將更詳細地概述我們 2023 年第二季度的財務業績，然後在我們開始提問之前將其返回給喬恩。

Unless stated otherwise, all comparisons and various commentaries is on a year-over-year basis. As Jon mentioned, net sales increased 1% to $98.5 million compared to $97.2 million. The increase was primarily driven by continued domestic growth in the company's metal card payment business, which was up 11%, partially offset by lower international sales, which is a more variable market due to customer mix and a smaller sales base.

除非另有說明，所有比較和各種評論都是逐年進行的。正如 Jon 提到的，淨銷售額從 9720 萬美元增長了 1%，達到 9850 萬美元。這一增長主要是由於該公司金屬卡支付業務的國內持續增長推動的，該業務增長了11%，但部分被國際銷售額的下降所抵消，由於客戶結構和銷售基礎較小，國際銷售額的下降導致市場變化更大。

International sales remained in line with the company's targeted revenue mix of approximately 20%. Gross margin for the quarter was 55% compared to 61% in the prior year. The decrease was primarily due to higher material and labor costs resulting from inflationary pressures and less favorable product mix compared to 2023. It's important to note that gross margin continues to be in line with our previously stated mid-50% margin target.

國際銷售額仍符合公司約 20% 的目標收入組合。本季度毛利率為 55%，而去年同期為 61%。下降的主要原因是通脹壓力導致材料和勞動力成本上升，以及與 2023 年相比不太有利的產品組合。值得注意的是，毛利率仍然符合我們之前製定的 50% 中期利潤率目標。

Net income from the quarter was $32.7 million compared to $60.7 million in the prior year. $25.4 million of the difference was driven by non-cash items. Q2 of 2023 had $9.2 million added to net income for non-cash items, while Q2 of 2022 added $34.6 million. These non-cash adjustments are result of changes in the valuations of the warrants, the earn-out consideration, and derivative liabilities, which is primarily driven by the company's stock price improvement year-over-year. Adjusted EBITDA in Q2 was $36.9 million compared to $39.7 million in the prior year, with an adjusted EBITDA margin of 37% compared to 41% in the second quarter of 2022. The decrease in adjusted EBITDA margin was driven by product mix and the impact of the inflationary pressures that I've already spoken to, as well as continued investment in our sales and support teams. Adjusted EBITDA includes the net impact of $4.2 million of our continued investment in Arculus. As we have stated in the past, this is right in line with managing our investments to be at or below our overall net investment in 2022 and our ongoing efforts to deliver long-term value for our shareholders.

本季度淨利潤為 3,270 萬美元，上年同期淨利潤為 6,070 萬美元。其中 2540 萬美元的差異是由非現金項目造成的。 2023 年第二季度非現金項目淨收入增加了 920 萬美元，而 2022 年第二季度則增加了 3460 萬美元。這些非現金調整是認股權證、盈利對價和衍生負債估值變化的結果，這主要是由公司股價同比上漲推動的。第二季度調整後 EBITDA 為 3,690 萬美元，上年同期為 3,970 萬美元，調整後 EBITDA 利潤率為 37%，而 2022 年第二季度為 41%。調整後 EBITDA 利潤率下降是由產品組合和我已經談到過的通貨膨脹壓力，以及對我們的銷售和支持團隊的持續投資。調整後的 EBITDA 包括我們對 Arculus 持續投資的 420 萬美元的淨影響。正如我們過去所說，這符合將我們的投資管理在 2022 年等於或低於我們的整體淨投資以及我們為股東創造長期價值的持續努力。

On slide 10, year-to-date 2023 results. On this slide, you can see our year-to-date performance. Net sales were up 7% to $194 million, driven by our strong sales execution and continued demand for metal payment cards. Our year-to-date gross margin of 55% is in line with our mid-50% target, despite the higher labor and material costs that I've just mentioned. Net income for the first half was $43.4 million compared to $87.6 million in the prior year. $41.3 million of the difference was driven by non-cash items.

第 10 張幻燈片顯示了 2023 年迄今的結果。在這張幻燈片上，您可以看到我們今年迄今的表現。得益於我們強勁的銷售執行力和對金屬支付卡的持續需求，淨銷售額增長了 7%，達到 1.94 億美元。儘管我剛才提到的勞動力和材料成本較高，但我們今年迄今 55% 的毛利率符合我們 50% 的中期目標。上半年淨利潤為 4,340 萬美元，上年同期為 8,760 萬美元。其中 4130 萬美元的差異是由非現金項目造成的。

Full-year 2023 had $4.3 million added to net income for non-cash items, while the full year of 2022 had $37 million. Adjusted EBITDA for the first half was $72 million compared to $73 million in the prior year.

2023 年全年非現金項目淨收入增加 430 萬美元，而 2022 年全年增加 3700 萬美元。上半年調整後 EBITDA 為 7200 萬美元，上年同期為 7300 萬美元。

EBITDA margin for the first half was 37% compared to 40% in the prior year. This was impacted by the gross margin decrease and continued investment in sales and support teams. This includes our year-to-date net investment in Arculus up $8.7 million.

上半年 EBITDA 利潤率為 37%，而去年同期為 40%。這是受到毛利率下降以及對銷售和支持團隊的持續投資的影響。這包括我們今年迄今對 Arculus 的淨投資增加了 870 萬美元。

On slide 11, looking closer at the split between domestic and international, you can see that our domestic sales continued to improve, increasing 11% to the second quarter of $78 million. Again, due to the strength of our sales execution and favorable industry trends. International net sales for the second quarter of 2023 were $21 million remaining in line with our long-term target of roughly 20% of total net sales.

在幻燈片 11 上，仔細觀察國內和國際之間的差異，您可以看到我們的國內銷售額持續改善，增長 11%，達到第二季度的 7800 萬美元。再次，由於我們強大的銷售執行力和有利的行業趨勢。 2023 年第二季度的國際淨銷售額為 2100 萬美元，符合我們約佔總淨銷售額 20% 的長期目標。

Moving on to the balance sheet, which you'll find in the appendix. We had cash and cash equivalents of $23 million and total debt of $358 million, which includes $228 million of term loan and $130 million of exchangeable notes. This results in a total net debt of $335 million.

接下來是資產負債表，您可以在附錄中找到它。我們擁有 2,300 萬美元的現金和現金等價物，總債務為 3.58 億美元，其中包括 2.28 億美元的定期貸款和 1.3 億美元的可交換票據。這導致淨債務總額為 3.35 億美元。

As always, we want to provide both our overall debt leverage and our bank agreement, secured debt leverage ratio, as our bank agreement is calculated with slight differences. At June 30, our overall leverage ratio was 2.5 times based on a net debt of $335 million and trailing 12-month adjusted EBITDA of $136 million. This compares to three times at June 30, 2022, with the improvement driven by paying down debt and increased trailing 12-month adjusted EBITDA. At June 30, 2023, we had a bank agreement, secured debt leverage ratio of 1.6 times based on a total secured debt of $228 million, and trailing 12-month bank adjusted EBITDA of $143 million.

一如既往，我們希望提供整體債務槓桿率和銀行協議、擔保債務槓桿率，因為我們的銀行協議的計算方式略有差異。截至 6 月 30 日，基於 3.35 億美元的淨債務和 1.36 億美元的過去 12 個月調整後 EBITDA，我們的整體槓桿率為 2.5 倍。相比之下，截至 2022 年 6 月 30 日，這一數字是三倍，改善的原因是償還債務和過去 12 個月調整後 EBITDA 的增加。截至 2023 年 6 月 30 日，我們簽訂了銀行協議，擔保債務槓桿率為 1.6 倍，擔保債務總額為 2.28 億美元，過去 12 個月銀行調整後 EBITDA 為 1.43 億美元。

This compares to 2.2 times at June 30, 2022. We've generated year-to-date operating cash flow of $53 million. I want to turn now to earnings per share. As a reminder, our method under GAAP for calculating basic and diluted EPS allows us to allocate changes in adjustments of mark-to-market instruments among the public company and operating subsidiaries to better reflect the actual economic impact of the conversion of such instruments on our net income and our per share basis.

相比之下，截至 2022 年 6 月 30 日，這一數字為 2.2 倍。年初至今，我們已產生 5300 萬美元的運營現金流。我現在想談談每股收益。需要提醒的是，我們根據GAAP 計算基本每股收益和稀釋每股收益的方法使我們能夠在上市公司和運營子公司之間分配按市價工具調整的變化，以更好地反映此類工具轉換對我們的實際經濟影響。淨利潤和每股基礎。

GAAP EPS for the three months ended June 30, 2023, was $0.31 per basic share and $0.29 per diluted share. This compares to $0.56 and $0.52 per basic and diluted share respectively in the year-ago period. The decrease was primarily driven by changes to the fair value of the warrants, earn-out consideration, and derivative liabilities, primarily driven by our stock price improvement.

截至 2023 年 6 月 30 日止三個月的 GAAP 每股基本每股收益為 0.31 美元，每股稀釋每股收益為 0.29 美元。相比之下，去年同期基本股和稀釋股分別為 0.56 美元和 0.52 美元。下降的主要原因是認股權證、盈利對價和衍生負債的公允價值變化，而衍生負債主要是由我們的股價上漲推動的。

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-C structure and the shares that are included in the basic and diluted calculations.

您可以通讀幻燈片上的腳註，了解由於 Up-C 結構以及基本和稀釋計算中包含的股份而導致的淨利潤分配的複雜性。

Now let's look at the six-month EPS. Turning to slide 13, you could see how we are tracking with GAAP EPS for the year, which now puts us at $0.45 per basic share and $0.41 per diluted share. This compares to $0.80 and $0.75 per basic and diluted share respectively in the year-ago period. Again this was impacted by the same factors I outlined on the previous slides as non-cash adjustments can have either a positive or a negative impact on net income.

現在讓我們看看六個月的每股收益。翻到幻燈片 13，您可以看到我們如何跟踪今年的 GAAP 每股收益，現在我們的每股基本股為 0.45 美元，每股稀釋股為 0.41 美元。相比之下，去年同期每股基本股和稀釋股分別為 0.80 美元和 0.75 美元。這再次受到我在之前幻燈片中概述的相同因素的影響，因為非現金調整可能對淨利潤產生積極或消極影響。

On slide 14, we are also providing non-GAAP adjusted net income and adjusted EPS, which excludes the impact of non-cash fair value adjustments on the warrants earn-out and stock-based comp. We believe that this provides a clearer picture of the economics of the company's operating results.

在幻燈片 14 上，我們還提供了非 GAAP 調整後淨利潤和調整後每股收益，其中不包括非現金公允價值調整對認股權證盈利和股票比較的影響。我們相信，這可以更清晰地了解公司經營業績的經濟性。

With that background, our non-GAAP EPS for the second quarter 2023 was $0.29 per basic share, and $0.25 per diluted share. This compares to $0.33 per basic share, and $0.29 per diluted share in the year-ago period. The decrease in adjusted EPS was driven primarily by the previously outlined product mix, inflationary pressures, and continued investment in our sales and support teams. In the appendix, you'll find a reconciliation between the GAAP and non-GAAP net income used in these calculations.

在此背景下，我們 2023 年第二季度的非 GAAP 每股基本每股收益為 0.29 美元，稀釋每股收益為 0.25 美元。相比之下，去年同期基本股每股 0.33 美元，稀釋後每股 0.29 美元。調整後每股收益的下降主要是由於之前概述的產品組合、通脹壓力以及對我們銷售和支持團隊的持續投資。在附錄中，您將找到這些計算中使用的 GAAP 和非 GAAP 淨利潤之間的調節表。

Turning to slide 15, adjusted EPS for this (technical difficulty) 2023, put us at $0.50 per basic share and $0.48 per diluted share. This compares to $0.60 and $0.52 per basic and diluted share respectively in the year-ago period, again impacted by the same factors I have outlined on the previous slides.

轉向幻燈片 15，調整後的 2023 年每股收益（技術難度）為每股基本股 0.50 美元，每股稀釋股 0.48 美元。相比之下，去年同期基本股和稀釋股分別為 0.60 美元和 0.52 美元，同樣受到我在之前幻燈片中概述的相同因素的影響。

I'll now turn it back to Jon to discuss our guidance and give closing remarks.

現在我將把它轉回喬恩來討論我們的指導並發表結束語。

Thanks, Tim. Now turning to slide 16. As I mentioned earlier, we remain on track for 2023, and we are reaffirming our previously issued guidance. We anticipate net sales to range from between $400 million to $425 million with gross margin in the mid-50s range and expected adjusted EBITDA to finish between $145 million and $155 million.

謝謝，蒂姆。現在轉向幻燈片 16。正如我之前提到的，我們仍將朝著 2023 年的目標前進，並且我們正在重申之前發布的指導意見。我們預計淨銷售額將在 4 億美元至 4.25 億美元之間，毛利率將在 50 多美元左右，調整後的 EBITDA 預計將在 1.45 億美元至 1.55 億美元之間。

To close, on slide 17, I want to highlight a few things that we've covered today. One, we've reaffirmed our guidance and have now re-signed long-term contracts with our two largest customers. Our customers continued to maintain a positive outlook for the premium payment (technical Difficulty) opportunity around Arculus authentication and cold storage. We are bolstering our position to take advantage of growth opportunities by adding salespeople and focusing on our B2B marketing efforts.

最後，在幻燈片 17 中，我想強調一下我們今天討論的一些內容。第一，我們重申了我們的指導方針，現在已經與我們最大的兩個客戶重新簽署了長期合同。我們的客戶繼續對圍繞 Arculus 身份驗證和冷存儲的溢價支付（技術難度）機會保持積極的前景。我們正在通過增加銷售人員並專注於 B2B 營銷工作來鞏固我們的地位，以利用增長機會。

We remain thoughtful about our investments to better capture long-term value for our shareholders and that continues to pay off simultaneously supporting margin and driving growth opportunities.

我們對投資保持深思熟慮，以更好地為股東獲取長期價值，並在支持利潤和推動增長機會的同時繼續獲得回報。

With that, I'd like (technical difficulty)

有了這個，我想要（技術難度）

Thank you. (Operator Instructions)

謝謝。 （操作員說明）

Reggie Smith, JPMorgan.

雷吉·史密斯，摩根大通。

Hi, good evening. Thanks for taking the question. My first -- you cited macro uncertainty in the press release. And I was curious if you felt or saw any macro weakness and how that manifests in the business?

嗨，晚上好。感謝您提出問題。我的第一個問題是，您在新聞稿中提到了宏觀不確定性。我很好奇您是否感覺到或看到任何宏觀弱點以及這在業務中如何體現？

Thanks for the question, Reggie. We're seeing at this point, data that still remains, I'd say, positive. There is just a watch item out there for us and for our issuer partners that we continue to monitor closely. But so far those signs have been solid.

謝謝你的提問，雷吉。我想說，我們目前看到的數據仍然是積極的。對於我們和我們的發行合作夥伴來說，只有一個值得關注的項目，我們將繼續密切監控。但到目前為止，這些跡像都是可靠的。

Understood. And if I could just follow up with one more. Obviously, you reiterated your guidance, which is great. And not to nit-pick here, but just curious, when you think about what's implied for the back half and the range of outcomes for the back half. By maintaining guidance in the same range, I guess it's somewhat implied that there is a wider band because of outcomes for the last two quarters.

明白了。如果我能再跟進一個就好了。顯然，您重申了您的指導，這很好。並不是在這裡吹毛求疵，只是好奇，當你思考後半部分的含義以及後半部分的結果範圍時。通過將指導維持在相同的範圍內，我想這在某種程度上暗示了由於過去兩個季度的結果而存在更寬的範圍。

Not sure if that was -- if that is even accurate or the message you're trying to convey. But curious how you think about that. So essentially, you've got a $25 million range over the last two quarters of the year, where before, you had the similar range over three quarters of performance, if you follow my question.

不確定這是否是——是否準確或你試圖傳達的信息。但很好奇你對此有何看法。因此，本質上來說，今年最後兩個季度的業績範圍為 2500 萬美元，而在此之前，如果您遵循我的問題，則在三個季度的業績範圍內也有類似的範圍。

Yeah, I think you may be reading too much into it from that perspective. We typically have not updated guidance quarter-to-quarter. We feel good about the ranges that we've given. What it does imply, Reggie, is that the back half would be stronger from a revenue standpoint to come into that range. And if you look at where we are year-to-date on EBITDA, we're right about halfway to the bottom end of that range as well. So those are the implications. I wouldn't read more into it than that, other than we feel very comfortable with the ranges we've given.

是的，我認為你可能從這個角度讀得太多了。我們通常不會按季度更新指導。我們對我們給出的範圍感到滿意。雷吉，這確實意味著，從收入的角度來看，進入這個範圍的後半部分會更強。如果你看看我們今年迄今為止的 EBITDA 情況，我們也大約處於該範圍底部的一半。這些就是影響。除了我們對我們給出的範圍感到非常滿意之外，我不會對此進行更多的解讀。

That's fine. I appreciate it. If I can get one more in quickly. And so obviously, 2022 was an amazing year for you guys. It's a very difficult comp. If you had the control for that, how are you thinking about the growth of the business long-term?

沒關係。我很感激。如果我能盡快再多弄一個就好了。顯然，2022 年對你們來說是令人驚奇的一年。這是一個非常困難的比賽。如果您對此有控制權，您如何考慮業務的長期增長？

So, we haven't given updated long-term guidance, Reggie, we will issue updated guidance as we move through the back half of this year. What we said in the past is, we do believe this business, on average, can grow in the mid-teens. But more specifically, the implications around gross margins being able to continue to operate in mid-50s, EBITDA in the core business, north of 40, with investments perhaps mid-30s, so that's how we think about it.

所以，我們還沒有給出更新的長期指導，雷吉，我們將在今年下半年發布更新的指導。我們過去說過的是，我們確實相信這項業務平均可以在十幾歲左右增長。但更具體地說，毛利率能夠在 50 多歲中期繼續運營，核心業務的 EBITDA 能夠在 40 多歲以上，投資可能在 30 多歲左右，這就是我們的想法。

Perfect. Thank you.

完美的。謝謝。

Thank you.

謝謝。

John Todaro, Needham and Company.

約翰·托達羅，李約瑟公司。

Great. Thanks for taking my questions. Congrats on the contract renewal. First one here. I have two -- but if we could just go back to the sales outlook for a moment without trying to dig too deep into it. As you mentioned, it does imply kind of an uptick. Are there any second-half drivers that we should be thinking about and aware of?

偉大的。感謝您回答我的問題。恭喜續約。第一個在這裡。我有兩個——但如果我們能暫時回到銷售前景而不是試圖深入研究它就好了。正如您所提到的，這確實意味著某種程度的上升。有哪些下半年的驅動因素是我們應該思考和意識到的？

The drivers for us are fairly consistent, John. I try to hit them almost on each call, which is continued growth from our top clients, domestic expansion outside of those top clients, international growth, and fintechs really across domestic and international. And we're seeing the opportunities coming in across all four of those areas and feel good about that.

約翰，我們的司機相當一致。我幾乎在每次電話會議上都試圖擊中他們，這是我們的頂級客戶的持續增長、這些頂級客戶之外的國內擴張、國際增長以及真正跨越國內和國際的金融科技。我們看到所有這四個領域都出現了機會，對此感覺很好。

Got it. Great. Thank you. And then just the second question. Inflationary pressures were recorded as some of the gross margin declines. Would imagine from here, maybe a little additional inflationary pressures. But would love to hear if there is any color there and if we should expect that new number for gross margin moving forward, at least for the rest of 2023?

知道了。偉大的。謝謝。然後是第二個問題。通脹壓力導致部分毛利率下降。從這裡可以想像，也許會有一點額外的通脹壓力。但很想知道其中是否有任何顏色，以及我們是否應該預期毛利率的新數字會繼續前進，至少在 2023 年剩餘時間內？

So we -- I've said, I'll continue to say, and Tim we reiterated a number of times. We think gross margins should be in the mid-50s. Sometimes it could be a few points higher, sometimes it could be a few points lower. We think that mid-50s is the right range for people to be thinking about. And this quarter, we're right on that number. So the time Tim spent was around explaining the difference between second quarter of last year, and those were the examples he gave. But net-net, we've been saying for a long time, we think mid-50s is the right target and we came in exactly on that, and we feel good about that continuing.

所以我們——我已經說過，我會繼續說，蒂姆，我們重申了很多次。我們認為毛利率應該在 50 多歲左右。有時可能會高幾個點，有時可能會低幾個點。我們認為 50 多歲是人們應該考慮的合適範圍。本季度，我們的數字是正確的。所以蒂姆花的時間是在解釋去年第二季度的差異，這些就是他舉的例子。但是，我們長期以來一直在說，我們認為 50 年代中期是正確的目標，我們正是在這個目標上實現的，我們對這種持續下去感到高興。

Great. Thank you guys. Appreciate it.

偉大的。感謝你們。欣賞它。

Thank you, John.

謝謝你，約翰。

Hal Goetsch, B Riley.

哈爾·戈奇，B·萊利。

Hey, guys, thanks for taking my question. My question is, it's been a little bit of scare in the banking sector in the back half of Q1 and Q2. And I'm wondering if was there any impact of any inventory drawdown in the channel or what do you think inventories are, in the right shape, both at your company and with your big partners? Thanks.

嘿，伙計們，謝謝你提出我的問題。我的問題是，第一季度後半段和第二季度銀行業有點恐慌。我想知道渠道中的庫存減少是否會產生任何影響，或者您認為貴公司和大合作夥伴的庫存狀況如何？謝謝。

Thanks, Hal. So we've certainly been watching and monitoring the activity among things like regional banks. We have not seen an impact on our business from them. We have seen, I'd say, continued strong levels of conversation across that next level of bank in the US and feel good about that. Citizens is a great example of a new launch, which we're very proud of.

謝謝，哈爾。因此，我們當然一直在關注和監控地區銀行等機構的活動。我們沒有看到他們對我們的業務產生影響。我想說，我們已經看到美國下一級銀行之間持續進行了強有力的對話，對此感覺良好。 《公民》是新產品發布的一個很好的例子，我們對此感到非常自豪。

With reference to inventory levels, we don't have perfect visibility into what clients could be carrying around that. I'd say generally speaking, we've carried more inventory post-COVID, we've wanted higher inventory levels of key raw material items going in. Generally issuers, I think, are keeping appropriate amounts of safety stock of cards on hand and I really haven't seen a change there.

就庫存水平而言，我們無法完全了解客戶可能攜帶的物品。我想說，一般來說，我們在新冠疫情之後持有了更多的庫存，我們希望關鍵原材料的庫存水平更高。我認為，一般來說，發行人都會保留適量的卡安全庫存，並且我真的沒有看到那裡有什麼變化。

Okay, thank you.

好的謝謝。

Thank you, Hal.

謝謝你，哈爾。

(Operator Instructions) Chase White, Compass Point Research and Trading.

（操作員指令）Chase White，Compass Point 研究和交易。

Thanks, guys. So on your contract extension, you've got top two clients now extended. Is it safe to assume that the contract extension that you just announced is on similar terms when it comes to escalators and other KPIs? And does that give you any better visibility? Obviously you touched on this earlier, but any better visibility into early 2024 in terms of the business? And then I have a follow-up after that.

多謝你們。因此，在您的合同延期中，您現在已經延長了兩名頂級客戶的合同。是否可以安全地假設您剛剛宣布的合同延期在自動扶梯和其他 KPI 方面的條款類似？這會給你帶來更好的可見性嗎？顯然您之前已經談到過這一點，但是在業務方面對 2024 年初有更好的了解嗎？之後我會進行跟進。

Thanks for the question, Chase. I'm not going to comment on terms and conditions of the renewal except to say that we have planned for all of the contract renewals we had coming up as part of our normal business cycle. We remain comfortable with our overall guidance in the context of all of our renewals. And we'll give updated guidance as we move towards the end of the year here, but just having our top clients under contract and winning those opportunities, we think is a very important statement around our business, yes.

謝謝你的提問，蔡斯。我不會對續約的條款和條件發表評論，只是說我們已經計劃好了作為正常業務週期一部分的所有合同續約。我們對所有續約的總體指導仍然感到滿意。當我們接近今年年底時，我們將提供更新的指導，但只是讓我們的頂級客戶簽訂合同並贏得這些機會，我們認為這是圍繞我們業務的一個非常重要的聲明，是的。

Got it. Thanks. And follow-up, any updates on your exchange partner for Arculus or when we could hear more about that?

知道了。謝謝。後續，您的 Arculus 交換合作夥伴有什麼最新消息嗎？或者我們什麼時候可以聽到更多相關信息？

So we're continuing to advance partnerships. Some previously announced, some announced today. And I continued to feel terrific about the product we've built, the platform, the Arculus roadmap, we maintain and continued to maintain a positive outlook there. Things always seem to take a little bit longer than you anticipate as you're trying to get some of these programs up and running. And we continued to work through with the exchange partner that we highlighted earlier this year around piloting the Arculus authentication technology. So look forward to more updates as we move through the year as well.

因此，我們將繼續推進合作夥伴關係。有些是之前宣布的，有些是今天宣布的。我仍然對我們構建的產品、平台、Arculus 路線圖感到非常棒，我們保持並將繼續保持積極的前景。當您嘗試啟動並運行其中一些程序時，事情似乎總是比您預期的要長一些。我們繼續與今年早些時候強調的交換合作夥伴合作，圍繞 Arculus 身份驗證技術進行試點。因此，隨著這一年的到來，我們也期待更多的更新。

Got it. Thanks, guys.

知道了。多謝你們。

Thank you.

謝謝。

(Operator Instructions) Mark Palmer, Berenberg Capital Markets.

（操作員說明）Mark Palmer，Berenberg Capital Markets。

Yes, good evening, and thanks for taking my question. The company is throwing off a very healthy amount of cash flow on a pretty consistent basis. What are your priorities right now with regard to the use of that cash? And you see that your overall leverage ratio is at 2.5 times. What do you think as being an optimal level of leverage that you want to maintain as you continue to operate the business? Thank you.

是的，晚上好，感謝您提出我的問題。該公司在相當穩定的基礎上釋放了大量的現金流。對於這些現金的使用，您現在的首要任務是什麼？你看到你的整體槓桿率為2.5倍。您認為在繼續經營業務時您希望保持的最佳槓桿水平是多少？謝謝。

Thanks, Mark, and thanks for the question. Yes, we continue to throw off significant amount of cash. As we've highlighted before, our two stated priorities are organic growth and continuing to pay down debt. And as Tim highlighted and you highlighted in your question, we continue to lower those leverage ratios. So feel good about that. When you look Tim's reference points were for June of last year same time, if you go back further to when we went public, it's even further deleveraging from that point. And we got there through a combination of paying down debt and growing EBITDA, and would look to continue to do both of those things.

謝謝馬克，也謝謝你的提問。是的，我們繼續扔掉大量現金。正如我們之前強調的，我們聲明的兩個優先事項是有機增長和繼續償還債務。正如蒂姆和您在問題中強調的那樣，我們繼續降低這些槓桿比率。所以對此感覺良好。當你看蒂姆的參考點是去年六月的同一時間時，如果你進一步追溯到我們上市時，從那時起，它甚至進一步去槓桿化。我們通過償還債務和不斷增長的 EBITDA 來實現這一目標，並將繼續做這兩件事。

So beyond that, it's Board level conversations around capital allocation that we will continue to have and monitor on an ongoing basis.

除此之外，我們將繼續進行並持續監控董事會層面有關資本配置的對話。

Thank you.

謝謝。

Thank you. As there appear to be no further questions in queue, this does conclude today's conference call. Thank you for participating. You may now disconnect.

謝謝。由於似乎沒有其他問題了，今天的電話會議到此結束。感謝您的參與。您現在可以斷開連接。