CompoSecure Inc (CMPO) 2023 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to CompoSecure's third quarter 2023 earnings call. I would now like to hand the call over to CompoSecure's external Investor Relations Adviser, Sean Mansouri, with Elevate IR. Please go ahead.

女士們先生們，謝謝你們的支持。歡迎參加 CompoSecure 的 2023 年第三季財報電話會議。我現在想將電話轉給 CompoSecure 的外部投資者關係顧問 Sean Mansouri，負責 Elevate IR。請繼續。

Good afternoon. And thank you for joining us. With me on the call is Jon 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.

午安.感謝您加入我們。與我一起參加電話會議的是 CompoSecure 執行長 Jon Wilk 和財務長 Tim Fitzsimmons。他們將從準備好的演講開始，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. 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.

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，包括有關我們執行成長策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。前瞻性陳述通常可以用「我們期望」、「我們預期」或「即將到來」等字眼來識別。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。

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. 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.

我們不承擔更新或修改這些前瞻性陳述的義務。前瞻性陳述並非對未來績效的承諾或保證，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有重大差異。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.

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盈餘。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資訊。

These non-GAAP financial measures should not be considered as an alternative to net income or any other performance measures delivered in accordance with US 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 Investor Relations section of our website. Thank you. And with that, let me turn the call over to Jon to discuss our third quarter results.

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提供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 衡量標準的對帳。謝謝。接下來，讓我將電話轉給喬恩，討論我們第三季的業績。

Thank you, Sean. Good afternoon, everyone. And thank you for joining us for our third quarter conference call. During the quarter, our domestic business, once again achieved record results, exceeding our all-time net sales from the third quarter of last year, demonstrating the resiliency and demand for our premium metal payment cards.

謝謝你，肖恩。大家下午好。感謝您參加我們的第三季電話會議。本季度，我們的國內業務再次取得創紀錄的業績，超過了去年第三季度以來的歷史淨銷售額，顯示了我們的優質金屬支付卡的彈性和需求。

However, global economic uncertainty weighed on results across our smaller international business, which we will review later in the call. Despite this, we are on track to achieve the most successful year in our company's history in terms of net sales, adjusted EBITDA, and operating cash flow.

然而，全球經濟的不確定性影響了我們規模較小的國際業務的業績，我們將在稍後的電話會議中進行審查。儘管如此，我們仍有望實現公司歷史上淨銷售額、調整後 EBITDA 和營運現金流最成功的一年。

Now to summarize the quarter on slide 3, net sales in the quarter were $97 million compared to $103 million in the year prior. As I mentioned a moment ago, the decrease was primarily attributable to lower international sales, which offset the record results we delivered domestically.

現在總結投影片 3 的季度，該季度的淨銷售額為 9,700 萬美元，而去年同期為 1.03 億美元。正如我剛才提到的，下降的主要原因是國際銷售額下降，這抵消了我們在國內取得的創紀錄業績。

Year to date, our net sales are up 2% to $291 million compared to the prior year. Adjusted EBITDA increased 9% to $35 million compared to $33 million in our prior year, in part due to our operating expense control.

今年迄今為止，我們的淨銷售額比前一年增長了 2%，達到 2.91 億美元。調整後 EBITDA 成長 9%，達到 3,500 萬美元，而前一年為 3,300 萬美元，部分原因是我們的營運費用控制。

Looking at card issuer trends, customer feedback and broader industry sentiment indicate that the demand for premium metal cards remains strong. And they continue to communicate a positive outlook despite the economic uncertainty.

從發卡機構的趨勢來看，客戶回饋和更廣泛的行業情緒表明，對優質金屬卡的需求仍然強勁。儘管經濟存在不確定性，他們仍繼續傳達積極的前景。

That said, select customers are more tightly managing their inventory levels, which has impacted order volumes in both Q3 and Q4. Given these factors, we are adjusting our full year sales guidance for 2023 to a range of $386 million to $392 million and expect adjusted EBITDA to range between $141 million and $146 million dollars, which captures the low end of our original guidance for adjusted EBITDA issued earlier this year.

也就是說，部分客戶更嚴格地管理庫存水平，這影響了第三季和第四季的訂單量。考慮到這些因素，我們將 2023 年全年銷售指引調整為 3.86 億至 3.92 億美元，預計調整後 EBITDA 為 1.41 億至 1.46 億美元，這符合我們發布的調整後 EBITDA 原始指引的下限今年早些時候。

Regarding Arculus, we projected the net investment to improve from last year, which was $21 million, due to the combination of revenue growth and optimizing operating costs. We're pacing ahead of that goal and now anticipate the net investment for 2023 to be approximately $15 million.

關於 Arculus，由於收入成長和營運成本優化，我們預計淨投資將比去年有所改善，為 2,100 萬美元。我們正在努力實現這一目標，目前預計 2023 年的淨投資約為 1,500 萬美元。

Turning to slide 4, on that note, I wanted to take a moment and highlight a few key developments in the business. For the quarter, several of our customers launched new premium metal card programs, including Amex Hilton Aspire, Amex SAS Elite, and Axis Magnus Bank in India to name a few.

轉向投影片 4，我想花點時間強調該業務的一些關鍵發展。本季度，我們的一些客戶推出了新的優質金屬卡計劃，包括印度的 Amex Hilton Aspire、Amex SAS Elite 和 Axis Magnus Bank 等。

We also continued our B2B marketing initiatives and product enhancements for both Arculus Cold Storage and Arculus Authenticate with a focus on lead generation through industry conferences and digital marketing. Our efforts have recently begun to show promising developments. Well, our sales team worked through a growing pipeline of prospective partnerships.

我們也持續針對 Arculus Cold Storage 和 Arculus Authenticate 實施 B2B 行銷計畫和產品增強，重點是透過產業會議和數位行銷開發潛在客戶。我們的努力最近開始顯示出有希望的進展。嗯，我們的銷售團隊透過不斷增長的潛在合作夥伴關係進行了工作。

Turning to slide 5 for some further details on Arculus enhancements, there are two things I want to highlight. Arculus Authenticate hardware passkeys received official designation as a Microsoft FIDO2 security key vendor, and is now compatible with the Microsoft ecosystem, offering users a reliable and user-friendly passwordless authentication solution. Arculus Cold Storage now supports 95% of crypto by market cap, and has added several key enhancements, including support for custom tokens across three additional chains: Etherium, Polygon, and Binance Smart Chain.

請參閱幻燈片 5，以了解有關 Arculus 增強功能的更多詳細信息，我想強調兩件事。 Arculus Authenticate 硬體金鑰可獲得 Microsoft FIDO2 安全金鑰供應商的正式指定，現在與 Microsoft 生態系統相容，為使用者提供可靠且使用者友善的無密碼身分驗證解決方案。 Arculus Cold Storage 現在支援按市值計算的 95% 的加密貨幣，並添加了多項關鍵增強功能，包括支援跨三個附加鏈的自訂代幣：Etherium、Polygon 和 Binance Smart Chain。

We expanded Arculus integration with MetaMask, improving security by enabling the Arculus card as a signing device for safe offline private key storage. And Cross-chain DeFi capabilities were enhanced via WalletConnect across major chains as well.

我們擴展了 Arculus 與 MetaMask 的集成，透過將 Arculus 卡用作安全離線私鑰儲存的簽章裝置來提高安全性。跨鏈 DeFi 能力也透過 WalletConnect 跨主要鏈增強。

On slide 6, I referred to card issuer trends earlier. I'd like to provide some more insight. You can see that our largest customers continued to experience purchase volume growth. While the trend has moderated over the past several quarters, it still remains very healthy and well above pre-pandemic levels.

在投影片 6 中，我之前提到了發卡機構的趨勢。我想提供一些更多的見解。您可以看到我們最大的客戶的購買量持續成長。儘管這一趨勢在過去幾個季度有所放緩，但仍然非常健康，遠高於疫情前的水平。

On the right-hand side of this slide, you can see that American Express once again reported strong card acquisition numbers this quarter with $2.9 million new proprietary cards during the quarter. In addition, they've indicated they'll continue to spend on marketing given the quality of new card acquisitions and great demand for their products. Keep in mind, this is all publicly available information. We're providing the chart to give some additional insight and understanding based on what our customers are saying publicly.

在這張投影片的右側，您可以看到美國運通本季再次報告了強勁的卡片收購數量，該季度新增專有卡價值 290 萬美元。此外，他們還表示，鑑於新卡收購的品質和對其產品的巨大需求，他們將繼續在行銷上投入資金。請記住，這都是公開資訊。我們提供圖表是為了根據客戶的公開言論提供一些額外的見解和理解。

On slide 7, looking at the overall payment market, we highlighted several customer and partner quotes, and the themes that we're seeing. First, we're hearing positive sentiment related to market growth, including consumer demand for products and continued marketing investments to drive customer acquisition.

在投影片 7 上，縱觀整個支付市場，我們重點介紹了一些客戶和合作夥伴的報價以及我們所看到的主題。首先，我們聽到了與市場成長相關的正面情緒，包括消費者對產品的需求以及推動客戶獲取的持續行銷投資。

Second, a cautious optimism remains despite global economic uncertainty, in part due to a relatively strong US labor market and inflation levels moderating slightly domestically. These factors point towards continued growth for the premium payment card market. I'll now hand it over to Tim to review our financials before returning for closing remarks.

其次，儘管全球經濟存在不確定性，但謹慎樂觀情緒依然存在，部分原因是美國勞動市場相對強勁，國內通膨水準略有放緩。這些因素顯示高級支付卡市場將持續成長。現在，我將把它交給提姆，讓他審查我們的財務狀況，然後再回來作結束語。

Thanks, Jon. And good afternoon, everyone. I'll provide a more detailed overview of our Q3 2023 financial performance, and then turn it back to Jon before we open the call for questions. Unless stated otherwise, all comparisons and variance commentary are on a year-over-year basis.

謝謝，喬恩。大家下午好。我將更詳細地概述我們 2023 年第三季的財務業績，然後在我們開始提問之前將其退還給喬恩。除非另有說明，所有比較和差異評論均以同比為基礎。

Net sales were $96.9 million compared to $103.3 million. Domestic sales increased modestly compared to the record year ago period, which was offset by lower international sales, which is a more variable market due to global economic uncertainty, customer mix, and a smaller sales base.

淨銷售額為 9,690 萬美元，去年同期為 1.033 億美元。與去年同期相比，國內銷售額略有成長，但被國際銷售額下降所抵消，由於全球經濟不確定性、客戶結構和銷售基礎較小，國際銷售額變化更大。

Gross margin for the quarter was 51% compared to 60% in the prior year. The decrease was primarily due to lower production efficiencies from new card constructions, as well as an impact from inflationary pressures on wages and materials.

本季毛利率為 51%，去年同期為 60%。下降的主要原因是新卡建設導致生產效率降低，以及工資和材料通膨壓力的影響。

Net income for the quarter increased 74% to $38 million compared to $21.9 million in the prior year. The increase was driven by prudent operating expense controls as reflected by a reduction in our selling, general, and administrative expenses, as well as changes to the fair value of the warrants, earnout consideration, and derivative liabilities.

該季度淨利潤較上年同期的 2,190 萬美元成長 74%，達到 3,800 萬美元。這一增長是由審慎的營運費用控制所推動的，這體現在我們的銷售、一般和管理費用的減少，以及認股權證、盈利對價和衍生負債的公允價值的變化。

Adjusted EBITDA in Q3 increased 9% to $35.5 million compared to $32.7 million in the prior year. And our adjusted EBITDA margin increased approximately 500 basis points to 37% compared to 32% in the third quarter of 2022. The increase in adjusted EBITDA was driven by the aforementioned operating expense controls.

第三季調整後 EBITDA 成長 9%，達到 3,550 萬美元，而去年同期為 3,270 萬美元。我們的調整後 EBITDA 利潤率成長了約 500 個基點，達到 37%，而 2022 年第三季為 32%。調整後 EBITDA 的成長是由上述營運費用控制所推動的。

On slide 10, you can see our year-to-date performance. Net sales are up 2% to $290.7 million, driven by our strong sales execution and the resilience of our domestic market, partially offset by lower international sales.

在幻燈片 10 上，您可以看到我們今年迄今的表現。由於我們強勁的銷售執行力和國內市場的彈性，淨銷售額增長了 2%，達到 2.907 億美元，但部分被國際銷售額下降所抵消。

Our year-to-date gross margin was 54% compared to 60% in the prior year due to the lower production efficiency and inflationary pressure from labor and materials. Net income for the first nine months was $81.5 million compared to $109.5 million in the prior year. The low net income was driven primarily by the noncash changes to the fair value of the warrant earnout and derivative liabilities.

由於生產效率較低以及勞動力和材料的通膨壓力，我們年初至今的毛利率為 54%，而去年為 60%。前 9 個月的淨利潤為 8,150 萬美元，而去年同期為 1.095 億美元。淨利較低的主因是認股權證收益和衍生負債的公允價值發生非現金變動。

Adjusted EBITDA for the first nine months increased 2% to $107.9 million compared to $105.6 million in the prior year. Adjusted EBITDA margin for the first nine months of 2023 was 37%, which was flat compared to the prior year.

前 9 個月調整後 EBITDA 成長 2%，達到 1.079 億美元，去年同期為 1.056 億美元。 2023 年前 9 個月調整後 EBITDA 利潤率為 37%，與前一年持平。

On slide 11, we'll take a closer look at the split between domestic and international sales. You could see that our domestic sales are holding strong despite comping record results from last year and increased modestly to $84.4 million in the third quarter of 2023 compared to the third quarter of 2022. International net sales for the quarter of 2023 were $12.6 million, with the decrease primarily due to the global economic uncertainty.

在投影片 11 中，我們將仔細研究國內和國際銷售額之間的差異。您可以看到，儘管與去年相比創紀錄的業績，我們的國內銷售額仍保持強勁，並且與2022 年第三季度相比，2023 年第三季度小幅增長至8,440 萬美元。2023 年第三季度的國際淨銷售額為1,260 萬美元，其中下降主要是由於全球經濟的不確定性。

Moving on to the balance sheet, we had cash and cash equivalents of $23.8 million and total debt of $345 million, which includes $215 million of term loan and $130 million of exchangeable notes. This result in a total net debt of $321.2 million.

轉向資產負債表，我們的現金和現金等價物為 2,380 萬美元，總債務為 3.45 億美元，其中包括 2.15 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 3.212 億美元。

As always, we want to provide both our overall debt leverage and our bank agreement secured debt leverage as our bank agreement is calculated with slight differences. At September 30, our overall leverage ratio was 2.31 times based on a net debt of $321.2 million and a trailing 12-month adjusted EBITDA of $138.9 million. This compares to 2.83 times at September 30, '22, with the improvement driven by paying down debt and increased TTM adjusted EBITDA.

一如既往，我們希望提供整體債務槓桿和銀行協議擔保債務槓桿，因為我們的銀行協議的計算略有差異。截至 9 月 30 日，基於 3.212 億美元的淨債務和 1.389 億美元的過去 12 個月調整後 EBITDA，我們的整體槓桿率為 2.31 倍。相較之下，截至 2022 年 9 月 30 日的數字為 2.83 倍，改善的原因是償還債務和增加 TTM 調整後的 EBITDA。

At September 30, 2023, we had a bank agreement secured debt leverage ratio of 1.48 times based on a total secured debt of $215 million and trailing 12-month bank-adjusted EBITDA of $145.5 million. This compares to 1.9 times at September 30, 2022.

截至 2023 年 9 月 30 日，我們的銀行協議擔保債務槓桿率為 1.48 倍，擔保債務總額為 2.15 億美元，過去 12 個月銀行調整後 EBITDA 為 1.455 億美元。相比之下，2022 年 9 月 30 日這一數字為 1.9 倍。

I want to turn now to the earnings per share. As a reminder, our method under GAAP for calculating basic and diluted EPS allows us to allocate changes and adjustments of mark to market instruments among the public company and the operating subsidiaries to better reflect the actual economic impact on the conversion of such instruments on our net income and on a per-share basis.

我現在想談談每股盈餘。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營運子公司之間分配按市值計價工具的變化和調整，以更好地反映這些工具轉換對我們淨值的實際經濟影響收入並以每股為基礎。

GAAP EPS for the three months ended September 30, 2023 was $0.39 per basic share and $0.34 per diluted share. This compares to $0.18 per basic and diluted share in the year-ago period.

截至 2023 年 9 月 30 日止三個月的 GAAP 每股基本每股收益為 0.39 美元，每股稀釋每股收益為 0.34 美元。相比之下，去年同期基本股和稀釋股每股 0.18 美元。

The increase was primarily driven by changes to the fair value of the warrants, earnout consideration, and derivative liabilities, primarily driven by the change in our stock price. You can read through the footnotes on the slide that take you through the complexities of the allocation of the net income due to the UP-C structure and the shares that are included in the basic and diluted calculations.

這一增長主要是由認股權證、收益對價和衍生負債的公允價值變化所推動的，而衍生負債主要是由我們股價的變化所推動的。您可以通讀投影片上的腳註，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。

Turning to slide 14, you can see how we are tracking with GAAP EPS for the year to date, which now puts us at $0.86 per basic share and $0.75 per diluted share. This compares to $1.02 and $0.94 per basic and diluted share, respectively, in the year ago period. Again, this was impacted by the same factors I outlined on the previous slide as noncash adjustments can have either a positive or negative impact on net income.

翻到投影片 14，您可以看到我們如何追蹤今年迄今的 GAAP 每股收益，現在我們的每股基本股為 0.86 美元，每股稀釋股為 0.75 美元。相比之下，去年同期基本股和稀釋股分別為 1.02 美元和 0.94 美元。同樣，這受到我在上一張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 15, we're also providing a non-GAAP adjusted net income and adjusted EPS, which excludes the impact of the noncash fair value adjustments for the warrants, earnout revaluations, and stock comp. We believe this provides a clearer picture of the economics of the company's operating results.

在投影片 15 上，我們也提供了非 GAAP 調整後淨利和調整後每股盈餘，其中不包括認股權證、收益重估和股票比較的非現金公允價值調整的影響。我們相信這可以更清楚地了解公司經營績效的經濟狀況。

With that background, our non-GAAP EPS for the third quarter 2023 was $0.27 per basic share and $0.24 per diluted share. This compares to $0.26 per basic share and $0.22 per diluted share in the year ago period. In the appendix, you will find a reconciliation between the GAAP and the non-GAAP net income used in these calculations.

在此背景下，我們 2023 年第三季的非 GAAP 每股基本每股盈餘為 0.27 美元，稀釋每股盈餘為 0.24 美元。相比之下，去年同期基本股每股 0.26 美元，稀釋每股 0.22 美元。在附錄中，您將找到這些計算中使用的 GAAP 和非 GAAP 淨利潤之間的調整表。

Turning to slide 16, adjusted EPS for the nine months ended September 30, 2023, puts us at $0.83 per basic share and $0.72 per diluted share. This compares to $0.86 and $0.74 per basic and diluted share respectively in the year ago period. I'll now turn it back to Jon to discuss our guidance and give closing remarks.

轉向幻燈片 16，截至 2023 年 9 月 30 日的九個月調整後每股收益為每股基本股 0.83 美元，每股稀釋股為 0.72 美元。相比之下，去年同期基本股和稀釋股分別為 0.86 美元和 0.74 美元。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 17, as I previously stated, we are revising our 2023 net sales guidance, now expected to range between $386 million and $392 million. And we expect adjusted EBITDA to range between $141 million at $146 million, which still captures the low end of our previously issued adjusted EBITDA guidance.

謝謝，蒂姆。現在轉向投影片 17，正如我之前所說，我們正在修訂 2023 年淨銷售額指導，目前預計範圍在 3.86 億美元至 3.92 億美元之間。我們預計調整後 EBITDA 範圍在 1.41 億美元至 1.46 億美元之間，這仍然符合我們先前發布的調整後 EBITDA 指引的下限。

In closing, I want to reiterate a few key takeaways from our call today. We're on track to achieve the most successful year in our company's history in terms of net sales, adjusted EBITDA, and operating cash flow, even following a record year that saw 41% revenue growth and 33% adjusted EBITDA growth.

最後，我想重申我們今天電話會議的一些關鍵要點。我們預計將實現公司歷史上淨銷售額、調整後 EBITDA 和營運現金流方面最成功的一年，即使在收入增長 41% 和調整後 EBITDA 增長 33% 創紀錄的一年之後也是如此。

During the third quarter, our domestic business once again achieved record results, demonstrating the resiliency and demand for metal payment cards. And although select customers have begun to manage tighter inventory levels and macro uncertainty has weighed on the international results, customer sentiment regarding consumer demand remains positive.

第三季度，我們的國內業務再次取得創紀錄的業績，展現了金屬支付卡的韌性和需求。儘管部分客戶已開始管理更緊張的庫存水平，並且宏觀不確定性對國際業績造成壓力，但客戶對消費者需求的情緒仍然樂觀。

We continue to expand our marketing and sales capability of both our payment card and Arculus offerings, while investing to deliver unique innovations to the market. We remain focused on optimizing our balance sheet as reflected by another reduction in debt this quarter. And I remind you of our long-term contract renewals that we put in place with our two largest customers that we discussed in the last quarter.

我們持續擴大支付卡和 Arculus 產品的行銷和銷售能力，同時投資為市場提供獨特的創新。我們仍然專注於優化我們的資產負債表，本季債務的再次減少就反映了這一點。我提醒您，我們與上個季度討論過的兩個最大客戶簽訂了長期合約。

With all of that, we believe we are well positioned to execute on our growth and profitability objectives as we move forward. With that, I'd like to open up the call to Q&A.

綜上所述，我們相信，隨著我們的前進，我們有能力實現我們的成長和獲利目標。至此，我想打開問答環節。

(Operator Instructions) John Todaro, Needham.

（操作員說明）John Todaro，Needham。

Great, thanks for taking my question. Congrats, guys, on a record year.

太好了，感謝您提出我的問題。恭喜你們，今年創紀錄了。

So, Jon, obviously, you've been in business for quite some time. Just wondering on the macro uncertainty and weakness, if we can get a bit more color on how far ahead card issuers typically manage their inventory, any kind of sight line or thoughts on 2024 trends, and then I have one more question on the authentication side.

所以，喬恩，顯然，你已經從業很長一段時間了。只是想知道宏觀的不確定性和弱點，如果我們能更多地了解發卡機構通常管理庫存的程度，對 2024 年趨勢的任何視線或想法，然後我還有一個關於認證方面的問題。

Sure. So typically, customers can keep anywhere from, let's say, three to six months of inventory, John. And at certain times, they'll tweak that up slightly. At certain times, they'll tweak it down slightly.

當然。因此，通常情況下，客戶可以在任何地方保留三到六個月的庫存，約翰。在某些時候，他們會稍微調整一下。在某些時候，他們會稍微調整它。

And that has the potential to impact any given quarter. We think that is called the transitional type-impact. As that happens over time, they'll adjust levels up or down.

這有可能影響任何特定季度。我們認為這就是所謂的過渡型影響。隨著時間的推移，他們會向上或向下調整水平。

On the international front, we've talked about two things. One, just generally that part of our business is made up by a number of customers, smaller customers, but more of them. And generally that has more variability.

在國際方面，我們討論了兩件事。第一，一般來說，我們的部分業務是由許多客戶組成的，客戶規模較小，但數量較多。一般來說，這具有更多的可變性。

With some of the economic uncertainty on a global basis, right now, we just see a modest slowdown in that business. But it will still, we think, perform well for the year coming in, right around 20% of total revenue for the year, which is our long-term guide. And that's where we ultimately think it comes in. But it will be slightly down from last year.

由於全球經濟存在一些不確定性，目前我們只看到該業務略有放緩。但我們認為，它在即將到來的一年中仍將表現良好，約佔當年總收入的 20% 左右，這是我們的長期指導。這就是我們最終認為它發揮作用的地方。但它會比去年略有下降。

Got it. And then just one more on digital authentication, so in the past, the last earnings call, you specifically called out some of the non-crypto opportunities on that side as being quite a large opportunity set. So just curious how that shaped up quarter over quarter, any update on how you're framing the Cold Storage versus the digital authentication non-crypto?

知道了。然後還有一個關於數位身分驗證的問題，所以在過去的最後一次財報電話會議上，您特別指出了這方面的一些非加密機會，因為這是一個相當大的機會集。所以只是好奇這在每個季度中是如何形成的，關於如何構建冷存儲與非加密數字身份驗證的任何更新？

Continue to remain very excited about the opportunities in the authentication space, having meaningful conversations across large institutions and fintechs, domestically and internationally. Right now, the movement or implementation of these, as I've mentioned in prior quarters, takes longer. It requires technology change within the institutions and is taking some time.

繼續對身分驗證領域的機會感到非常興奮，與國內外大型機構和金融科技公司進行有意義的對話。正如我在前幾個季度提到的，目前這些的行動或實施需要更長的時間。它需要機構內部進行技術變革，並且需要一些時間。

But I'd say those conversations continue to go very well. And in our view, we're starting to see that in the overall net investment numbers for Arculus, which are heading in the direction that we want.

但我想說，這些對話仍然進展順利。在我們看來，我們開始在 Arculus 的整體淨投資數據中看到這一點，它正朝著我們想要的方向發展。

Great, thanks, guys.

太好了，謝謝你們。

Thank you, John.

謝謝你，約翰。

Reggie Smith, JPMorgan.

雷吉史密斯，摩根大通。

Hey, everyone. This is Charlie on for Reggie. Thanks for taking the question.

嘿大家。這是查理替補雷吉。感謝您提出問題。

Curious if we can dig in a little bit more on the international slowdown, was there any specific geographies that pulled back? And are there any large money center banks out there that could be an opportunity moving forward or is that not so much an option out there? Thanks.

好奇我們能否進一步深入了解國際經濟放緩的情況，是否有任何特定地區出現了放緩？是否有任何大型貨幣中心銀行可能是一個前進的機會，或者這不是一個選擇嗎？謝謝。

Yeah, so Charlie, thanks for the question. I'd say we saw some of those impacts really across Europe and a little bit in Asia. To answer the second part of the question, yes, we think we opened up new business with a couple of money center banks in Europe last quarter and expect those kinds of opportunities to bear fruit in our international business over time. So it is just a more variable base for us given it's more spread out, more customers dealing with different economic conditions within different countries and regions.

是的，查理，謝謝你的提問。我想說，我們確實在整個歐洲看到了其中一些影響，在亞洲也有一些影響。要回答問題的第二部分，是的，我們認為上個季度我們與歐洲的幾家貨幣中心銀行開闢了新業務，並預計隨著時間的推移，這些機會將在我們的國際業務中取得成果。因此，對我們來說，這只是一個更可變的基礎，因為它更加分散，更多的客戶應對不同國家和地區的不同經濟狀況。

Got it. That's helpful. And if I could sneak in one more, do you see any risk to that sentiment spreading to the US? And looking back, were there any cracks or maybe subtle signs that could have predicted this slowdown? I mean, you mentioned the variability but any color there would be helpful. Thanks.

知道了。這很有幫助。如果我能再偷偷溜進去一次，你認為這種情緒蔓延到美國有任何風險嗎？回顧過去，是否有任何裂縫或微妙的跡象可以預測這種放緩？我的意思是，您提到了可變性，但任何顏色都會有幫助。謝謝。

Yeah, Charlie, we're not seeing it domestically as evidenced by what we announced today, which was -- third quarter of last year was our strongest domestic quarter ever. We beat that this year, in our view, a really strong domestic quarter.

是的，查理，我們在國內並沒有看到這一點，正如我們今天宣布的那樣，去年第三季是我們有史以來最強勁的國內季度。我們認為，今年我們的國內季度表現非常強勁。

We, as I mentioned, renewed contracts with our two largest customers. That was one of the big outstanding questions for us as we moved into this year. And as I mentioned earlier, we couldn't be more pleased with that.

正如我所提到的，我們與兩個最大的客戶續簽了合約。當我們進入今年時，這是我們面臨的重大懸而未決的問題之一。正如我之前提到的，我們對此感到非常滿意。

As we look at whether or not we could have predicted it, I think you're seeing it across a variety of industries. We're still seeing consumer spending. We're still seeing resiliency there. You're just seeing a little bit of cautiousness in this point about inventory management. I think you're seeing across a variety of industries, not necessarily specific to card manufacturing, which is not a major pullback, but just improving cost controls in an uncertain world.

當我們考慮是否可以預測到這一點時，我認為您在各個行業中都看到了這種情況。我們仍然看到消費者支出。我們仍然看到那裡的彈性。您只是在庫存管理方面看到了一點謹慎。我認為你看到了各個行業的情況，不一定是特定於卡片製造，這並不是一個重大的回調，而只是在不確定的世界中改善成本控制。

So no, we don't see that impact domestically. And you know, hindsight is 20/20. But we think we're seeing this impact not just specific to card manufacturing.

所以不，我們在國內沒有看到這種影響。你知道，事後諸葛亮是 20/20。但我們認為我們看到的這種影響不僅僅是針對卡片製造。

That's great. Thanks for taking the questions.

那太棒了。感謝您提出問題。

Appreciate it.

欣賞它。

Hal Goetsch, B. Riley.

哈爾·戈奇，B.萊利。

Hey, Jon. Can you just give us your thoughts on maybe what do you think inventories in the channel are now after some of this cautiousness?

嘿，喬恩。您能告訴我們您的想法嗎？在這種謹慎態度之後，您認為通路中的庫存現在是多少？

The quarter for you guys was good, domestically. At the channel, inventories were high. That's probably why it was not meeting your expectation, just inventory drawdown. But what do you think inventories are in right now? Thank you.

對你們來說，這個季度在國內表現不錯。在通路上，庫存很高。這可能就是為什麼它沒有達到你的預期，只是庫存減少。但您認為目前庫存狀況如何？謝謝。

Thanks, Hal. We don't have visibility into inventory levels across all of our customers' data that they generally hold tight. Across a few, we do have some visibility. But it, I think, ranges in the areas that I talked about, could be three to six, three to seven months of inventory that they can dial up or down, depending on how they're feeling going into end of year.

謝謝，哈爾。我們無法了解他們通常持有的所有客戶資料的庫存水準。在一些方面，我們確實有一定的知名度。但我認為，我談到的領域的範圍可能是三到六個月、三到七個月的庫存，他們可以調高或調低庫存，這取決於他們進入年底的感受。

Okay. Thank you very much.

好的。非常感謝。

Thank you, Hal.

謝謝你，哈爾。

Chase White, Compass Point Research & Training, LLC.

Chase White，Compass Point 研究與訓練有限責任公司。

Thanks for taking the question, guys. So on the updated guidance, what factors would drive you to the top end of the range in revenues and EBITDA versus the bottom end?

謝謝你們提出問題，夥伴們。那麼，根據更新後的指導，哪些因素會促使您的收入和 EBITDA 達到區間的上限，而不是下限？

For us, it's largely locked from orders and production. There's a few things that we need to close out that would take you to the higher end of the range. And then just from a production standpoint, you have being able to run without challenges.

對我們來說，它很大程度上被鎖定了訂單和生產。我們需要完成一些事情，才能將您帶到範圍的高端。然後，僅從生產的角度來看，您就可以毫無挑戰地運行。

And one of the things that we talked about here briefly and I just want to mention is, as we innovate, so as we deliver new products to the market that we're excited about, we will see some up and down in our margin. Times when we launch new products, we'll see small bumps down in that. Other times, you'll see small bumps up. But we will continue to deliver innovative new products.

我們在這裡簡要討論的一件事我只想提一下，當我們創新時，當我們向市場提供令我們興奮的新產品時，我們的利潤率會出現一些上下波動。當我們推出新產品時，我們會看到一些小問題。其他時候，您會看到小凸起。但我們將繼續提供創新的新產品。

That is the lifeblood of this company. It helps drive our future growth. And so making sure those products are ramping up, they're running through efficiently in the factory. So closing out a few orders here and then making sure that we run efficiently between now and the end of the year would deliver us closer to the high end of the ranges.

這是這家公司的命脈。它有助於推動我們未來的成長。因此，要確保這些產品不斷增加，並在工廠中有效運作。因此，在這裡完成一些訂單，然後確保我們從現在到年底之間的高效運行將使我們更接近範圍的高端。

Got it. That's helpful. And can you just remind us, what needs to happen from before you're able to return capital shareholders, whether it be buybacks or dividends or both?

知道了。這很有幫助。您能否提醒我們，在您能夠回報資本股東之前需要發生什麼，無論是回購還是股息或兩者兼而有之？

Chase, appreciate the question. On capital allocation, we've said specifically our two priorities are organic growth and paying down debt. And beyond that, we have conversations at the Board, as you can imagine, regarding capital allocation and what we might do and when. And as the Board were to make decisions that would alter those priorities, we'll certainly let you and the market know. But at this point, those are still our priorities.

蔡斯，感謝這個問題。在資本配置方面，我們明確表示我們的兩個優先事項是有機成長和償還債務。除此之外，正如你想像的那樣，我們在董事會就資本分配以及我們可能做什麼以及何時做什麼進行了對話。由於董事會將做出會改變這些優先事項的決定，我們當然會讓您和市場知道。但目前，這些仍然是我們的優先事項。

Got it. Thank you.

知道了。謝謝。

Thank you.

謝謝。

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

謝謝。由於似乎沒有進一步的問題，今天的電話會議就到此結束。感謝大家的參與。您現在可以斷開連線。