GPGI

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2026, for GPGI, Inc. (formerly CompoSecure, Inc.). GPGI operates as a permanent capital platform managing two primary businesses: CompoSecure (premium metal payment cards and authentication) and Husky (injection molding equipment), acquired via the "Husky Transaction" completed on January 12, 2026. Following a spin-off of Resolute Holdings Management, Inc. in February 2025, GPGI no longer consolidates its operating subsidiaries. Instead, it accounts for its 100% interest in GPGI Holdings (which owns CompoSecure and Husky) using the equity method of accounting. Consequently, GPGI's consolidated financial statements reflect primarily corporate-level expenses and its share of earnings from GPGI Holdings, rather than direct operating revenues.

Key Financial Metrics

Note: Consolidated Net Sales are $0.0 because operating revenues are recorded at the GPGI Holdings level and flow through to GPGI only as "Earnings in equity method investment."

Material Changes vs. Prior Period

• Accounting Structure: The most significant change is the continued application of equity method accounting post-spin-off. Unlike the prior year (2025), where GPGI consolidated operations for the first two months before the spin-off, the current period reflects zero consolidated revenue and gross profit.
• Net Income Volatility: Net income for the three months ended June 30, 2026, was $50.3 million, a reversal from a loss of $26.1 million in the same period in 2025. This improvement was driven by a $96.2 million gain on debt extinguishment recognized by GPGI Holdings related to the Husky Transaction refinancing.
• YTD Loss: For the six months ended June 30, 2026, the Company reported a net loss of $184.7 million compared to a loss of $4.6 million in the prior year. This deterioration is primarily due to a $87.0 million loss recorded in the equity method investment, driven by transaction costs and integration expenses associated with the Husky acquisition.
• Operating Expenses: Consolidated SG&A expenses increased to $9.4 million (Q2) and $65.0 million (YTD) compared to $2.6 million and $25.3 million in the prior year periods, respectively. This increase is attributed to higher stock-based compensation for independent contractors and significant transaction costs related to the Husky deal.

Guidance, Outlook, and Risks

Management Commentary: Management views the platform as structurally advantaged for acquiring high-quality businesses. The Husky Transaction has diversified the portfolio, though it has introduced significant transaction costs and debt. The Company anticipates funding future operations through cash on hand, distributions from GPGI Holdings, and available debt capacity under a new $400 million revolving credit facility.

Risks and Contingencies:

• Legal Proceedings: A putative securities class action lawsuit was filed on July 14, 2026, alleging false statements regarding the valuation and benefits of the Husky acquisition. The Company believes it has meritorious defenses but cannot predict the outcome.
• Tax Receivable Agreement (TRA): The Company has a significant liability ($284.9 million total obligation) to pay 90% of tax benefits realized from the TRA to former shareholders. A loss of $28.1 million was recorded in the first six months of 2026 due to the remeasurement of this liability.
• Geopolitical and Economic Risks: Ongoing conflicts in the Middle East and global trade tensions pose risks to supply chains, raw material costs, and customer demand.
• Integration Risks: The success of the Husky Transaction depends on the ability to integrate operations and realize anticipated synergies, which may take longer than expected.

Investor Verification Checklist

• Equity Method Accounting Impact: Verify understanding that consolidated revenue is $0; actual operating performance is found in the "Earnings in equity method investment" line and Note 3 (Segment Reporting).
• Debt Structure: Confirm the details of the $2.1 billion debt refinancing at GPGI Holdings, including the $900 million senior secured notes and $1.2 billion term loan, and the associated interest rate exposure.
• TRA Liability: Review the $284.9 million Tax Receivable Agreement obligation and the $28.1 million loss recognized in the current period due to remeasurement.
• Legal Exposure: Monitor the status of the July 2026 securities class action lawsuit regarding the Husky Transaction valuation.
• Non-GAAP Reconciliations: Scrutinize the reconciliation of Net Income to Adjusted EBITDA, specifically the add-backs for transaction costs ($94.2 million YTD) and fair value inventory step-ups ($23.6 million).