Resolute Holdings Management Inc.
08/07/2025 | Press release | Distributed by Public on 08/07/2025 14:34
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with the Company's audited consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere particularly in the sections titled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" included in this Quarterly Report on Form 10-Q.
Overview
Resolute Holdings Management, Inc. ("Resolute Holdings") intends to provide operating management services to generate recurring, long-duration management fees from CompoSecure Holdings L.L.C. ("CompoSecure Holdings") and other companies it may manage in the future. Resolute Holdings will apply a differentiated approach of value creation through the systematic deployment of the Resolute Operating System to drive performance at businesses it manages with the intention of creating value at both the underlying managed businesses, including CompoSecure Holdings, and at Resolute Holdings. Resolute Holdings will also apply its M&A and capital markets expertise to drive inorganic growth of its managed businesses.
In accordance with ASC 810 and due to the terms of the CompoSecure Management Agreement, as defined below, Resolute Holdings (together with CompoSecure Holdings, the "Company") is required to consolidate CompoSecure Holdings because it is a variable interest entity ("VIE") in which Resolute Holdings is deemed to be the primary beneficiary. Resolute Holdings does not own any equity interests or common stock in CompoSecure Holdings or CompoSecure.
CompoSecure Holdings, a wholly owned subsidiary of CompoSecure, Inc. ("CompoSecure"), creates innovative, highly differentiated and customized financial payment card products for banks and other payment card issuers to support and increase their customer acquisition, customer retention and organic customer spend. CompoSecure Holdings' customers consist primarily of leading international and domestic banks and other payment card issuers primarily within the United States ("U.S."), with additional direct and indirect customers in Europe, Asia, Latin America, Canada, and the Middle East. CompoSecure Holdings is a platform for next generation payment technology, security, and authentication solutions. CompoSecure Holdings maintains trusted, highly-embedded and long-term customer relationships with an expanding set of global issuers. CompoSecure Holdings has established a niche position in the financial payment card market through over 20 years of innovation and experience and is focused primarily on this attractive subsector of the financial technology market. CompoSecure Holdings serves a diverse set of direct customers and indirect customers, including some of the largest issuers of credit cards in the U.S.
Recent Developments
On February 28, 2025, CompoSecure distributed all shares of common stock of its wholly owned subsidiary, Resolute Holdings, on a pro rata basis to the holders of CompoSecure's Class A Common Stock as of the February 20, 2025 record date ("Spin-Off"). Each stockholder of record who held shares of CompoSecure Class A Common Stock as of the close of business on February 20, 2025, received one share of Resolute Holdings common stock for every twelve shares of CompoSecure common stock then held. On February 28, 2025, Resolute Holdings started trading regular-way on The Nasdaq Stock Market LLC under the ticker symbol "RHLD".
In connection with the completion of the Spin-Off, Resolute Holdings entered into a management agreement with CompoSecure Holdings (the "CompoSecure Management Agreement"), pursuant to which Resolute Holdings is responsible for managing the day-to-day business and operations and overseeing the strategy of CompoSecure Holdings and its controlled affiliates. Due to the execution of and the terms of the CompoSecure Management Agreement, Resolute Holdings is required to consolidate CompoSecure Holdings for financial reporting purposes.
Pursuant to the CompoSecure Management Agreement, CompoSecure Holdings pays Resolute Holdings a quarterly management fee (the "CompoSecure Management Fee"), payable in arrears, in a cash amount equal to 2.5% of CompoSecure Holdings' last 12 months' Adjusted EBITDA, as defined in the Management Agreement, measured for the period ending on the fiscal quarter then ended ("Management Agreement Adjusted EBITDA"). Management Agreement Adjusted EBITDA reflects a)
CompoSecure Holdings' earnings before interest, taxes, depreciation, depletion and amortization, extraordinary losses and expenses, one-time and non-recurring expenses, and the CompoSecure Management Fee, less b) CompoSecure's selling, general and administrative expenses, adjusted for the same items above ("Parent Allocated Expense", as defined in the CompoSecure Management Agreement). CompoSecure Holdings is also required to reimburse Resolute Holdings and its affiliates for Resolute Holdings' documented costs and expenses incurred on behalf of CompoSecure Holdings other than those expenses related to Resolute Holdings' or its affiliates' personnel who provide services to CompoSecure Holdings under the CompoSecure Management Agreement. Resolute Holdings will determine, in its sole and absolute discretion, whether a cost or expense will be borne by Resolute Holdings or by CompoSecure Holdings.
The CompoSecure Management Agreement has an initial term of 10 years and shall automatically renew for successive ten-year terms unless terminated in accordance with its terms. Resolute Holdings and CompoSecure Holdings may each terminate the CompoSecure Management Agreement upon the occurrence of certain other limited events, and in connection with certain of these limited events, Resolute Holdings has the right to require CompoSecure Holdings to pay a termination fee, which may be paid in cash, shares of common stock of CompoSecure or a combination of cash and stock. The CompoSecure Management Agreement also provides for certain indemnification rights in Resolute Holdings' favor, as well as certain additional covenants, representations and warranties.
Economic Conditions - Globally and in the Digital Asset Marketplace
As a result of the consolidation of CompoSecure Holdings, the Company's business, financial condition and results of operations are subject to impacts from trends and developments impacting the business of CompoSecure Holdings, including but not limited to, market cycles that have created uncertainty in the timing of CompoSecure Holdings' planned ramp-up of its Arculus offering.
Key Components of Results of Operations
Net Sales
Net sales reflect the Company's revenue generated from the sale of CompoSecure Holdings' products as management fee revenue at Resolute Holdings is eliminated in consolidation. Product sales at CompoSecure Holdings primarily include the design and manufacturing of metal cards, including contact and dual interface cards. CompoSecure Holdings also generates revenue from the sale of Prelams (which refers to pre-laminated, sub-assemblies consisting of a composite of material layers which are partially laminated to be used as a component in the multiple layers of a final payment card or other card construction). Net sales include the effect of discounts and allowances which consist primarily of volume-based rebates.
Cost of Sales
The Company's cost of sales comprises CompoSecure Holdings' direct and indirect costs related to manufacturing products and providing related services. Product costs include the cost of raw materials and supplies, including various metals, EMV® chips, holograms, adhesives, magnetic stripes, and NFC assemblies; the cost of labor; equipment and facilities; operational overhead; depreciation and amortization; leases and rental charges; shipping and handling; and freight and insurance costs. Cost of sales can be impacted by many factors, including volume, operational efficiencies, procurement costs, and promotional activity.
Gross Profit and Gross Margin
The Company's gross profit comprises CompoSecure Holdings' net sales less cost of sales, and its gross margin represents gross profit as a percentage of its net sales.
Operating Expenses
The Company's operating expenses are primarily comprised of selling, general, and administrative expenses at Resolute Holdings and CompoSecure Holdings, which generally consist of personnel-related expenses for its corporate, executive, finance, information technology, and other administrative functions, and expenses for outside professional services, including legal, audit and accounting services, as well as expenses for facilities, depreciation, amortization, travel, sales and marketing.
Income from Operations and Operating Margin
Income from operations consists of the Company's gross profit less its operating expenses. Operating margin is income from the Company's operations as a percentage of its net sales.
Other Income (Expense)
Other income (expense) primarily consist of interest expense net of any interest income and deferred financing costs.
Net (Loss) Income
Net (loss) income consists of the Company's income from operations, less other expenses and income tax provision or benefit.
Results of Operations
Three months ended June 30, 2025 vs. three months ended June 30, 2024
The following table presents the Company's results of operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
||||||||||
|
|
2025 |
2024 |
$ Change |
% Change |
||||||||
|
|
|
(in thousands) |
||||||||||
|
Net sales |
|
$ |
119,592 |
|
$ |
108,567 |
|
$ |
11,025 |
10 |
% |
|
|
Cost of sales |
|
50,792 |
|
52,495 |
|
(1,703) |
(3) |
% |
||||
|
Gross profit |
|
68,800 |
|
56,072 |
|
12,728 |
23 |
% |
||||
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
28,167 |
|
22,681 |
|
5,486 |
24 |
% |
||||
|
Income from operations |
|
40,633 |
|
33,391 |
|
7,242 |
22 |
% |
||||
|
Other (expense) income, net |
|
(2,037) |
|
(5,489) |
|
3,452 |
(63) |
% |
||||
|
(Loss) income before income taxes |
|
38,596 |
|
27,902 |
|
10,694 |
38 |
% |
||||
|
Income tax (expense) |
|
(299) |
|
- |
|
(299) |
n/a |
% |
||||
|
Net (loss) income |
|
38,297 |
|
27,902 |
|
10,395 |
37 |
% |
||||
|
Net income (loss) attributable to non-controlling interests |
|
38,908 |
|
27,902 |
|
11,006 |
39 |
% |
||||
|
Net income (loss) attributable to common stockholders |
|
$ |
(611) |
|
$ |
- |
|
$ |
(611) |
n/a |
% |
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|||
|
|
2025 |
2024 |
|
||
|
Gross Margin |
58 |
% |
52 |
% |
|
|
Operating margin |
34 |
% |
31 |
% |
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
||||||||||
|
|
2025 |
2024 |
$ Change |
% Change |
||||||||
|
|
|
(in thousands) |
||||||||||
|
Net sales by region |
|
|
|
|
||||||||
|
Domestic |
|
$ |
104,303 |
|
$ |
85,184 |
|
$ |
19,119 |
22 |
% |
|
|
International |
|
15,289 |
|
23,383 |
|
(8,094) |
(35) |
% |
||||
|
Total |
|
$ |
119,592 |
|
$ |
108,567 |
|
$ |
11,025 |
10 |
% |
|
The Company's net sales for the quarter ended June 30, 2025 increased $11.0 million to $119.6 million compared to $108.6 million for the quarter ended June 30, 2024. The increase was driven by an increase in domestic sales in CompoSecure Holdings' premium payment card business, which was up 22%, offset by international sales which were down 35%.
Domestic: The Company's domestic net sales for the quarter ended June 30, 2025 increased $19.1 million, or 22%, to $104.3 million compared to $85.2 million for the quarter ended June 30, 2024. The increase was due to higher volumes from new and existing customers.
International: The Company's international net sales for the quarter ended June 30, 2025 decreased $8.1 million, or 35%, to $15.3 million compared to $23.4 million for the quarter ended June 30, 2024. CompoSecure Holdings' international customer base is comprised of a larger population of smaller customers compared to the domestic customer base. The timing of certain customer orders negatively impacted sales compared to the quarter ended June 30, 2024.
Gross Profit and Gross Margin
The Company's gross profit for the quarter ended June 30, 2025 increased $12.7 million, or 23%, to $68.8 million compared to $56.1 million for the quarter ended June 30, 2024, and the gross profit margin increased to 58%, compared to 52% in the prior year. The increase was driven by higher volumes, mix, and improved operational execution.
Operating Expenses
The Company's operating expenses increased $5.5 million, or 24%, to $28.2 million for the quarter ended June 30, 2025 compared to $22.7 million for the quarter ended June 30, 2024. The increase was primarily due to incremental salaries and equity based compensation expense from hiring employees at Resolute Holdings.
Income from Operations and Operating Margin
Income from operations for the quarter ended June 30, 2025 increased $7.2 million, or 22%, to $40.6 million compared to $33.4 million for the quarter ended June 30, 2024. The increase was primarily attributable to an increase in revenue, partially offset by higher operating expenses. Operating margin for the quarter ended June 30, 2025 increased by 3%, to 34%, compared to 31% for the quarter ended June 30, 2024. The increase in operating margin was primarily attributable to the increase in gross margin, partially offset by higher operating expenses.
Other Income (Expense)
Other expense for the quarter ended June 30, 2025 decreased $3.4 million, to $2.0 million, compared to $5.5 million for the quarter ended June 30, 2024. The decrease in other expense was primarily due to lower interest expense as a result of the Exchangeable Notes being exchanged and extinguished during the fourth quarter of 2024.
Income Tax Expense
The Company's income tax expense for the quarter ended June 30, 2025 was $0.3 million compared to $0.0 million for the quarter ended June 30, 2024 due to Resolute Holdings being taxed as a corporation compared to CompoSecure Holdings as a pass-through entity in the prior period.
Results of Operations
Six months ended June 30, 2025 vs. six months ended June 30, 2024
The following table presents the Company's results of operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
||||||||||
|
|
2025 |
2024 |
$Change |
% Change |
||||||||
|
|
|
(in thousands) |
||||||||||
|
Net sales |
|
$ |
223,481 |
|
$ |
212,577 |
|
$ |
10,904 |
5 |
% |
|
|
Cost of sales |
|
100,134 |
|
101,292 |
|
(1,158) |
(1) |
% |
||||
|
Gross profit |
|
123,347 |
|
111,285 |
|
12,062 |
11 |
% |
||||
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
57,093 |
|
45,451 |
|
11,642 |
26 |
% |
||||
|
Income from operations |
|
66,254 |
|
65,834 |
|
420 |
1 |
% |
||||
|
Other (expense) income, net |
|
(4,475) |
|
(11,546) |
|
7,071 |
(61) |
% |
||||
|
(Loss) income before income taxes |
|
61,779 |
|
54,288 |
|
7,491 |
14 |
% |
||||
|
Income tax (expense) |
|
(867) |
|
- |
|
(867) |
n/a |
% |
||||
|
Net (loss) income |
|
60,912 |
|
54,288 |
|
6,624 |
12 |
% |
||||
|
Net income (loss) attributable to non-controlling interests |
|
64,889 |
|
54,288 |
|
10,601 |
20 |
% |
||||
|
Net income (loss) attributable to common stockholders |
|
$ |
(3,977) |
|
$ |
- |
|
$ |
(3,977) |
n/a |
% |
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
|||
|
|
2025 |
2024 |
|||
|
Gross Margin |
55 |
% |
52 |
% |
|
|
Operating margin |
30 |
% |
31 |
% |
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
||||||||||
|
|
2025 |
2024 |
$ Change |
% Change |
||||||||
|
|
|
(in thousands) |
||||||||||
|
Net sales by region |
|
|
|
|
||||||||
|
Domestic |
|
$ |
193,836 |
|
$ |
177,974 |
|
$ |
15,862 |
9 |
% |
|
|
International |
|
29,645 |
|
34,603 |
|
(4,958) |
(14) |
% |
||||
|
Total |
|
$ |
223,481 |
|
$ |
212,577 |
|
$ |
10,904 |
5 |
% |
|
The Company's net sales for the six months ended June 30, 2025 increased $10.9 million to $223.5 million compared to $212.6 million for the six months ended June 30, 2024. The increase was driven by a 9% increase in domestic sales in CompoSecure Holdings' premium payment card business, offset by international sales which were down 14%.
Domestic: The Company's domestic net sales for the six months ended June 30, 2025 increased $15.9 million, or 9%, to $193.8 million compared to $178.0 million for the six months ended June 30, 2024. The increase was due to higher volumes from new and existing customers.
International: The Company's international net sales for the six months ended June 30, 2025 decreased $5.0 million, or 14%, to $29.6 million compared to $34.6 million for the six months ended June 30, 2024. CompoSecure Holdings' international customer
base is comprised of a larger population of smaller customers compared to the domestic customer base. The timing of certain customer orders negatively impacted sales compared to the six months ended June 30, 2024.
Gross Profit and Gross Margin
The Company's gross profit for the six months ended June 30, 2025 increased $12.1 million, or 11%, to $123.3 million compared to $111.3 million for the six months ended June 30, 2024, while the gross profit margin increased by 3% to 55%. The increase was driven by higher volumes, mix, and improved operational execution.
Operating Expenses
The Company's operating expenses increased $11.6 million, or 26%, to $57.1 million for the six months ended June 30, 2025 compared to $45.5 million for the six months ended June 30, 2024. The increase was primarily due to incremental salaries and equity based compensation expense from hiring employees at Resolute Holdings.
Income from Operations and Operating Margin
Income from operations for the six months ended June 30, 2025 increased $0.4 million, or 1%, to $66.3 million. The slight increase was due to an increase in revenue and improvement in gross margin, offset by an increase in operating expenses. Operating margin for the six months ended June 30, 2025 decreased by 1%, to 30%, compared to 31% for the six months ended June 30, 2024. The slight decrease in operating margin was primarily attributable to the increase in operating expenses described above.
Other Income (Expense)
Other expense for the six months ended June 30, 2025 decreased $7.1 million, to $4.5 million, compared to $11.6 million for the six months ended June 30, 2024. The decrease in other expense was primarily due to lower interest expense as a result of the Exchangeable Notes being exchanged and extinguished during the fourth quarter of 2024.
Income Tax Expense
The Company's income tax expense for the six months ended June 30, 2025 was $0.9 million compared to $0.0 million for the six months ended June 30, 2024 due to Resolute Holdings being taxed as a corporation compared to CompoSecure Holdings as a pass-through entity in the prior period.
Segments
The following table presents the Company's results of operations by reportable segment for the three and six months ended June 30, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|||||||||||||||||||||
|
|
|
June 30, 2025 |
|
June 30, 2025 |
||||||||||||||||||||
|
|
|
($ in thousands) |
|
($ in thousands) |
||||||||||||||||||||
|
|
Resolute |
CompoSecure |
Intercompany/ |
|
|
|
Resolute |
CompoSecure |
Intercompany/ |
|
|
|||||||||||||
|
|
|
Holdings |
|
Holdings |
|
Eliminations |
|
Consolidated |
Holdings |
|
Holdings |
|
Eliminations |
|
Consolidated |
|||||||||
|
Management fees |
|
$ |
3,419 |
|
$ |
- |
|
$ |
(3,419) |
|
$ |
- |
|
$ |
4,548 |
|
$ |
- |
|
$ |
(4,548) |
|
$ |
- |
|
Product sales |
|
|
- |
|
|
119,592 |
|
|
- |
|
|
119,592 |
|
|
- |
|
|
223,481 |
|
|
- |
|
|
223,481 |
|
Net sales |
|
|
3,419 |
|
|
119,592 |
|
|
(3,419) |
|
|
119,592 |
|
|
4,548 |
|
|
223,481 |
|
|
(4,548) |
|
|
223,481 |
|
Cost of sales |
|
|
- |
|
|
50,792 |
|
|
- |
|
|
50,792 |
|
|
- |
|
|
100,134 |
|
|
- |
|
|
100,134 |
|
Gross profit |
|
|
3,419 |
|
|
68,800 |
|
|
(3,419) |
|
|
68,800 |
|
|
4,548 |
|
|
123,347 |
|
|
(4,548) |
|
|
123,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
1,809 |
|
|
11,452 |
|
|
- |
|
|
13,261 |
|
|
3,625 |
|
|
22,676 |
|
|
(948) |
|
|
25,353 |
|
Equity-based compensation |
|
|
1,353 |
|
|
5,049 |
|
|
- |
|
|
6,402 |
|
|
2,509 |
|
|
10,662 |
|
|
(723) |
|
|
12,448 |
|
Professional fees |
|
|
262 |
|
|
2,369 |
|
|
- |
|
|
2,631 |
|
|
718 |
|
|
6,904 |
|
|
(139) |
|
|
7,483 |
|
Marketing |
|
|
- |
|
|
1,172 |
|
|
- |
|
|
1,172 |
|
|
- |
|
|
2,043 |
|
|
- |
|
|
2,043 |
|
Subscriptions |
|
|
72 |
|
|
- |
|
|
- |
|
|
72 |
|
|
397 |
|
|
- |
|
|
- |
|
|
397 |
|
Other operating expenses |
|
|
308 |
|
|
4,321 |
|
|
- |
|
|
4,629 |
|
|
481 |
|
|
8,888 |
|
|
- |
|
|
9,369 |
|
Management fees |
|
|
- |
|
|
3,419 |
|
|
(3,419) |
|
|
- |
|
|
- |
|
|
4,548 |
|
|
(4,548) |
|
|
- |
|
Total selling, general and administrative expenses |
|
|
3,804 |
|
|
27,782 |
|
|
(3,419) |
|
|
28,167 |
|
|
7,730 |
|
|
55,721 |
|
|
(6,358) |
|
|
57,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
(385) |
|
|
41,018 |
|
|
- |
|
|
40,633 |
|
|
(3,182) |
|
|
67,626 |
|
|
1,810 |
|
|
66,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
76 |
|
|
1,428 |
|
|
- |
|
|
1,504 |
|
|
76 |
|
|
2,505 |
|
|
- |
|
|
2,581 |
|
Interest (expense) |
|
|
(3) |
|
|
(3,373) |
|
|
- |
|
|
(3,376) |
|
|
(4) |
|
|
(6,756) |
|
|
- |
|
|
(6,760) |
|
Other |
|
|
- |
|
|
(165) |
|
|
- |
|
|
(165) |
|
|
- |
|
|
(296) |
|
|
- |
|
|
(296) |
|
Total other income (expense) |
|
|
73 |
|
|
(2,110) |
|
|
- |
|
|
(2,037) |
|
|
72 |
|
|
(4,547) |
|
|
- |
|
|
(4,475) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(312) |
|
|
38,908 |
|
|
- |
|
|
38,596 |
|
|
(3,110) |
|
|
63,079 |
|
|
1,810 |
|
|
61,779 |
|
Income tax (expense) |
|
|
(299) |
|
|
- |
|
|
- |
|
|
(299) |
|
|
(867) |
|
|
- |
|
|
- |
|
|
(867) |
|
Net income (loss) |
|
$ |
(611) |
|
$ |
38,908 |
|
$ |
- |
|
$ |
38,297 |
|
$ |
(3,977) |
|
$ |
63,079 |
|
$ |
1,810 |
|
$ |
60,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
$ |
- |
|
|
2,341 |
|
|
- |
|
|
2,341 |
|
$ |
- |
|
|
4,614 |
|
|
- |
|
|
4,614 |
|
Capital expenditures |
|
$ |
- |
|
|
1,642 |
|
|
- |
|
|
1,642 |
|
$ |
- |
|
|
2,798 |
|
|
- |
|
|
2,798 |
Use of Non-GAAP Financial Measures
This Quarterly Report on Form 10-Q includes certain non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and that may be different from non-GAAP financial measures used by other companies. The Company believes Fee-Related Earnings and Fee-Related Earnings per share are useful to investors in evaluating the Company's financial performance. Fee-Related Earnings is calculated based on net income (loss) attributable to common stockholders of Resolute Holdings, and adding back a) equity-based compensation under the CompoSecure Equity Plan, b) Management Fees for the period during which expenses were incurred from Jan 1, 2025 until February 27, 2025 but prior to execution of the Management Agreement, c) one-time Spin-Off related costs, less the net tax impact of such adjustments at Resolute Holdings' expected tax rate of 31%. The Company believes that these non-GAAP financials represent the best presentation regarding the performance of the Company that is attributable to Resolute Holdings common stockholders. Fee-Related Earnings and Fee-Related Earnings per share should not be considered as measures of financial performance under U.S. GAAP, and the items excluded from Fee-Related Earnings and Fee-Related Earnings per share are significant components in understanding and assessing the Company's financial performance. Accordingly, these key business metrics have limitations as an analytical tool. They should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP or as an alternative to cash flows from operating activities as a measure of the Company's liquidity, and may be different from similarly titled non-GAAP measures used by other companies.
The following unaudited table presents the reconciliation of U.S. GAAP net income attributable to common stockholders to non-GAAP Fee-Related Earnings and Fee-Related Earnings per share for the three months ended June 30, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|||||||||||||||||||||
|
|
|
June 30, 2025 |
|
June 30, 2025 |
||||||||||||||||||||
|
|
|
($ in thousands except per share figures) |
|
($ in thousands except per share figures) |
||||||||||||||||||||
|
|
Resolute |
CompoSecure |
Intercompany/ |
|
|
Resolute |
CompoSecure |
Intercompany/ |
|
|
||||||||||||||
|
|
|
Holdings |
|
Holdings |
|
Eliminations |
|
Consolidated |
|
Holdings |
|
Holdings |
|
Eliminations |
|
Consolidated |
||||||||
|
Net income (loss) attributable to common stockholders |
|
$ |
(611) |
|
$ |
- |
|
$ |
- |
|
$ |
(611) |
|
$ |
(3,977) |
|
$ |
- |
|
$ |
- |
|
$ |
(3,977) |
|
Net income (loss) per share attributable to common stockholders - diluted |
|
$ |
(0.07) |
|
$ |
0.00 |
|
$ |
0.00 |
|
$ |
(0.07) |
|
$ |
(0.47) |
|
$ |
0.00 |
|
$ |
0.00 |
|
$ |
(0.47) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile Fee-Related Earnings to net income (loss) attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Equity-based compensation expensed at Resolute Holdings under CompoSecure Equity Plan (1) |
|
|
1,310 |
|
|
|
|
|
|
|
|
1,310 |
|
|
2,458 |
|
|
|
|
|
|
|
|
2,458 |
|
Add: Pro forma management fees from Jan 1, 2025 to Feb 27, 2025 (2) |
|
|
- |
|
|
|
|
|
|
|
|
- |
|
|
2,046 |
|
|
|
|
|
|
|
|
2,046 |
|
Add: Spin-Off costs (3) |
|
|
- |
|
|
|
|
|
|
|
|
- |
|
|
290 |
|
|
|
|
|
|
|
|
290 |
|
Net tax impact of adjustments (4) |
|
|
- |
|
|
|
|
|
|
|
|
- |
|
|
(724) |
|
|
|
|
|
|
|
|
(724) |
|
Fee-Related Earnings |
|
|
699 |
|
|
|
|
|
|
|
|
699 |
|
|
93 |
|
|
|
|
|
|
|
|
93 |
|
Fee-Related Earnings per share |
|
$ |
0.08 |
|
|
|
|
|
|
|
$ |
0.08 |
|
$ |
0.01 |
|
|
|
|
|
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares used to compute: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to common stockholders (in thousands) |
|
|
8,526 |
|
|
|
|
|
|
|
|
8,526 |
|
|
8,526 |
|
|
|
|
|
|
|
|
8,526 |
|
Fee-Related Earnings per share (in thousands) |
|
|
8,527 |
|
|
|
|
|
|
|
|
8,527 |
|
|
8,526 |
|
|
|
|
|
|
|
|
8,526 |
| (1) | Equity-based compensation required to be reported by the Company related to awards issued under the CompoSecure Equity Plan. Equity granted under the CompoSecure Equity Plan relates to CompoSecure Class A common stock and has no impact on Resolute Holdings' common stock outstanding. |
| (2) | Incremental management fees as if the CompoSecure Management Agreement was executed on January 1, 2025. |
| (3) | One-time costs associated with the Spin-Off from CompoSecure. |
| (4) | Tax-effect of adjustments at a 31% effective tax rate. Only applied to those adjustments that would impact Resolute Holdings' taxes. Equity-based compensation expense under the CompoSecure Equity Plan is expensed for tax purposes at CompoSecure and not Resolute Holdings. |
Critical Accounting Policies and Estimates
Critical accounting policies are detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 and reference is made to Note 2 of Notes to Financial Statements - unaudited in Item 1, "Financial Statements". Critical accounting policies adopted since the Company's Annual Report on Form 10-K for the year ended December 31, 2024 include the following:
Reclassifications: Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
Variable Interest Entities: The Company evaluates its contractual, ownership, and other interests in entities to determine if it has any variable interest in a VIE. These evaluations are complex and involve judgment. If the Company determines that an entity in which it holds a contractual or ownership interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Management
performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company's involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively.
New Accounting Pronouncements
Reference is made to Note 2 of Notes to Financial Statements - unaudited in Item 1, "Financial Statements," for information concerning recent accounting pronouncements since the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.
Liquidity and Capital Resources
Resolute Holdings' primary sources of liquidity are the CompoSecure Management Agreement, its existing cash and cash equivalents balances, and borrowings on the Resolute revolving credit facility. CompoSecure Holdings' primary sources of liquidity are its existing cash and cash equivalents, cash flows from operations, and borrowings on the CompoSecure Holdings term loan and revolving credit facility as detailed in Note 8 of Notes to Financial Statements - unaudited in Item 1, "Financial Statements". The Company's primary cash requirements at Resolute Holdings and CompoSecure Holdings include operating expenses, debt service payments (principal and interest), and capital expenditures (including property and equipment and software).
As of June 30, 2025, the Company had cash and cash equivalents of $99.9 million, consisting of $8.2 million at Resolute Holdings and $91.7 million at CompoSecure Holdings. The Company had debt principal outstanding of $192.5.million at CompoSecure Holdings. As of December 31, 2024, the Company had cash and cash equivalents of $71.6 million and total debt principal outstanding of $197.5 million, all at CompoSecure Holdings.
Resolute Holdings and CompoSecure Holdings are distinct legal entities and operating businesses that must separately maintain sufficient liquidity independent of each other. Debt at each entity is non-recourse to the other. Resolute Holdings is dependent on payment of the CompoSecure Management Fee from CompoSecure Holdings to maintain sufficient liquidity. The Company believes that the cash flows from operations and available cash and cash equivalents, as well as the availability of a $5.0 million revolving credit facility at Resolute Holdings, are sufficient to meet the liquidity needs of Resolute Holdings for at least the next 12 months from the date of filing of this Form 10-Q. The Company believes that the cash flows from operations and available cash and cash equivalents, as well as the availability of a $130.0 million revolving credit facility at CompoSecure Holdings, are sufficient to meet the liquidity needs of CompoSecure Holdings, including the repayment of its outstanding debt, for at least the next 12 months from the date of filing of this Form 10-Q.
The Company anticipates that to the extent Resolute Holdings requires additional liquidity, it shall do so through borrowings on its revolving credit facility, the incurrence of other indebtedness, or a combination thereof and offering of its shares in capital markets. The Company anticipates that to the extent CompoSecure Holdings requires additional liquidity, it shall do so through borrowings on its revolving credit facility, the incurrence of other indebtedness, or a combination thereof and offering of CompoSecure shares in capital markets. The Company cannot be assured that each of Resolute Holdings and CompoSecure Holdings will be able to obtain this additional liquidity on reasonable terms, or at all. Additionally, the liquidity of Resolute Holdings and CompoSecure Holdings and their ability to meet their respective obligations and fund their capital requirements are also dependent on their respective future financial performance, which is subject to general economic, financial and other factors that are beyond its control. Accordingly, the Company cannot be assured that its business will generate sufficient cash flows from operations or that future borrowings will be available from additional indebtedness or otherwise to meet its liquidity needs. Although the Company has no specific current plans to do so, if the Company decides to pursue one or more significant acquisitions, the Company may incur additional debt to finance such acquisitions.
On February 28, 2025, Resolute Holdings entered into a credit agreement with JPMorgan Chase Bank, N.A ("JPMC")., as lender (the "Resolute Credit Agreement"). The Resolute Credit Agreement provides for a $5.0 million loan through a senior secured revolving credit facility available to be used by Resolute Holdings. The revolving credit facility matures on May 31, 2026. Borrowings of the revolving loans shall bear interest at a fluctuating rate per annum equal to, at the option of Resolute Holdings, (i) a rate equal to the higher of (a) the rate of interest last quoted by the Wall Street Journal as the prime rate in the U.S. or (b) 2.5% or (ii) a Term SOFR based benchmark rate for the applicable interest period (provided that in no event shall such Term SOFR rate be less than 0.00% per annum) plus an applicable margin of 2.25%. The terms of the revolving credit facility impose financial covenants, measured at the Resolute Holdings legal entity level, including a minimum liquidity ratio, a minimum revenue requirement and, beginning with the
fiscal quarter ending March 31, 2026, a minimum leverage ratio which shall not be greater than 1.50 to 1.00 on the last day of any fiscal quarter. The revolving credit facility is subject to an unused commitment fee of 0.25%. No amounts were drawn on the Resolute Holdings revolving credit facility as of June 30, 2025. As of June 30, 2025, Resolute Holdings met the covenants of the Resolute Credit Agreement.
On August 7, 2024, CompoSecure Holdings, together with its operating subsidiaries, entered into a Fourth Amended and Restated Credit Agreement with JPMC (the "CompoSecure Holdings Credit Facility"). The CompoSecure Holdings Credit Facility had an initial maximum borrowing capacity of $330,000, comprised of a term loan of $200,000 (the "CompoSecure Holdings Term Loan") and a revolving credit facility of $130,000 (the "CompoSecure Holdings Revolver"). The CompoSecure Holdings Credit Facility has a maturity date of August 7, 2029. At June 30, 2025, there was $192.5 million of total debt outstanding under the CompoSecure Holdings Credit Facility. No amounts were drawn on the CompoSecure Holdings Revolver as of June 30, 2025. Additional amounts may be available for borrowing during the term of the revolving loan, up to the full $130 million, as long as CompoSecure Holdings maintains a net leverage ratio as stipulated in the credit facility agreement. As of June 30, 2025, CompoSecure Holdings' net leverage ratio met the requirement for the available borrowing as defined in the terms of the credit facility agreement. The CompoSecure Holdings Credit Facility will mature on August 7, 2029. CompoSecure has pledged its ownership interests in CompoSecure Holdings (representing 100% ownership) as collateral pursuant to a pledge and security agreement with the lenders under the CompoSecure Holdings Credit Facility.
The CompoSecure Holdings Credit Facility requires CompoSecure Holdings to make quarterly principal payments until maturity, at which point a balloon principal payment is due for the outstanding principal. The CompoSecure Holdings Credit Facility also requires CompoSecure Holdings to make monthly interest payments as well as pay a quarterly unused commitment fee of 0.35% for any unused portion of the CompoSecure Holdings Revolver. The CompoSecure Holdings Credit Facility provides for CompoSecure Holdings to prepay the term loans without penalty or premium. The CompoSecure Holdings Credit Facility is secured by substantially all assets of CompoSecure Holdings.
Interest on the CompoSecure Holdings Revolver and CompoSecure Holdings Term Loan are based on the outstanding principal amount during the interest period multiplied by the quoted SOFR rate plus the which can range from 1.75% to 2.75% based on CompoSecure Holdings' leverage ratio. The CompoSecure Holdings Credit Facility also requires the Company to make monthly interest payments as well as pay a quarterly unused commitment fee of 0.35% for any unused portion of the CompoSecure Holdings Revolver. The CompoSecure Holdings Credit Facility contains customary covenants, including among other things, certain restrictions or limitations on indebtedness, issuance of liens, investments, asset sales, certain mergers or consolidations, sales, transfers, leases or dispositions of substantially all of CompoSecure Holdings assets, and affiliate transactions. CompoSecure Holdings may also be required to make repayments in advance of the maturity date based on a calculation of excess cash flows, as defined in the agreement, with any required payments to be made after the issuance of CompoSecure Holdings annual financial statements. CompoSecure Holdings was in compliance with all covenants of the CompoSecure Holdings Credit Facility as of June 30, 2025. See Note 8 in Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Net Cash Provided by Operations
Cash provided by the Company's operating activities for the six months ended June 30, 2025 was $67.3 million compared to cash provided by operating activities of $71.8 million during the six months ended June 30, 2024. The decrease in cash provided by operating activities of $4.5 million was primarily attributable to an increase in receivables, partially offset by an increase in accounts payable and accrued expenses.
Net Cash Used in Investing Activities
Cash used in the Company's investing activities for the six months ended June 30, 2025 was $2.8 million primarily relating to capital expenditures of $2.0 million and capitalized software expenditures of $0.8 million, compared to cash used in investing activities for the six months ended June 30, 2024 of $3.5 million.
Net Cash Used in Financing Activities
Cash used in the Company's financing activities for the six months ended June 30, 2025 was $36.2 million compared to cash used in the Company's financing activities for the six months ended June 30, 2024 of $79.4 million. Cash used in financing activities
for the six months ended June 30, 2025 primarily related to a distribution to CompoSecure of $15.9 million, payments for taxes related to net share settlement of CompoSecure equity awards of $15.3 million and repayment of scheduled principal payments of the term loan of $5.0 million. Cash used in financing activities for the six months ended June 30, 2024 primarily related to distributions to then-members of CompoSecure Holdings including CompoSecure, repayment of scheduled term loan principal payments, and payments for taxes related to net share settlement of CompoSecure equity awards.
Contractual Obligations
A summary of our minimum contractual obligations related to our material outstanding contractual commitments is included in our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC. Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business. As of June 30, 2025, the Company has purchase commitments with a supplier of approximately $8.8 million for the remainder of 2025 and $2.0 million for 2026.
Financing
Resolute Holdings is a party to the Resolute Credit Facility and CompoSecure Holdings is a party to the CompoSecure Holdings Credit Facility with various banks. For a more complete description of the Company's debt obligations, see Note 8 of Notes to Consolidated Financial Statements in the Consolidated Financial Statements of the Company in this Quarterly Report on Form 10-Q.
Resolute Holdings Management Inc. published this content on August 07, 2025, and is solely responsible for the information contained herein. Distributed via SEC EDGAR on August 07, 2025 at 20:35 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]