Business Breakdowns
· Parsa Kiai, Matt Reustle
[00:00:00] S1: Near term, you look at the response to the Chase and American Express refreshes. Near term, I feel pretty good about where the business is going, but long term and medium term you gotta keep an eye on competition. There are really sophisticated and well-capitalized competitors in Idemia and Thales and others, and you're not going to have a monopoly forever, and you have to innovate, you have to continue to grow with your customers. So competition is really always at the forefront of, I guess, any business. And then the mobile wallet issue, it's kind of the elephant in the room. And the next few years it's not an issue, but that is something you definitely have to keep an eye on in the long term. We have full faith in the team at Resolute, but there's a structure in which they get paid on the EBITDA of CompoSecure. You do have to think about the long-term alignment of those, but given Mr. Cote's controlling interest and holdings in both, that's not a near-term concern. But those are the things I would think about long term that we have to keep an eye on. [00:00:00] S0: Those all make sense. This has been absolutely fascinating. I am biased because of my particular interest in this name, but I appreciate you getting into some of the history and details in terms of their positioning in the market and what it looks like from your perspective, having the history. As we close out, we always try to cover lessons that you can pull away at maybe a broader level and apply elsewhere. What would stand out to you from Compo?
· Matt Reustle, Parsa Kiai
[00:00:00] S0: Those all make sense. This has been absolutely fascinating. I am biased because of my particular interest in this name, but I appreciate you getting into some of the history and details in terms of their positioning in the market and what it looks like from your perspective, having the history. As we close out, we always try to cover lessons that you can pull away at maybe a broader level and apply elsewhere. What would stand out to you from Compo? [00:00:00] S1: The whole history and our involvement in the company has been a fascinating learning experience. But the biggest takeaways and what we've learned from it is finding overlooked and not well understood businesses that are actually mission critical to large, entrenched, and growing customers with a cost that is minuscule compared to the ROI that the customer has on their core product. Like selling a $12 premium metal card to Chase and American Express, that is an incredibly powerful tool. And you've had a bunch of businesses on the podcast in the past, whether it's a company like Transdigm that will sell a proprietary $200 widget that goes on a $100 million Boeing, or industrial gas businesses like Air Products that provide a small key input into a multibillion dollar refinery or chemical plant. Finding these businesses in which you are mission critical, you are exceptionally high value, low cost and entrenched—they're fascinating businesses. And then on the CompoSecure 2.0 with David Cote, and it turns into what can he do here? Watching that capital allocation unfold is going to be very interesting.
· Parsa Kiai, Matt Reustle
[00:00:00] S1: The whole history and our involvement in the company has been a fascinating learning experience. But the biggest takeaways and what we've learned from it is finding overlooked and not well understood businesses that are actually mission critical to large, entrenched, and growing customers with a cost that is minuscule compared to the ROI that the customer has on their core product. Like selling a $12 premium metal card to Chase and American Express, that is an incredibly powerful tool. And you've had a bunch of businesses on the podcast in the past, whether it's a company like Transdigm that will sell a proprietary $200 widget that goes on a $100 million Boeing, or industrial gas businesses like Air Products that provide a small key input into a multibillion dollar refinery or chemical plant. Finding these businesses in which you are mission critical, you are exceptionally high value, low cost and entrenched—they're fascinating businesses. And then on the CompoSecure 2.0 with David Cote, and it turns into what can he do here? Watching that capital allocation unfold is going to be very interesting. [00:00:00] S0: Parsa, this has been a true pleasure. You hit on my favorite theme there at the end with those mission critical businesses and representing a small cost to the end customer. That is one that I absolutely love. So thank you very much for joining us and sharing the knowledge here. [00:00:00] S1: Absolutely. Matt, thank you very much for having me.