GPGI Inc reported pro forma adjusted EBITDA of $113.9 million for the second quarter, a 13% decline from the prior year. The drop was primarily driven by market headwinds at Husky, which saw a 9% fall in net sales.

Despite the consolidated decline, the company maintained its full-year guidance for revenue and free cash flow. Pro forma adjusted net sales stood at $473.2 million, down approximately 4% year-over-year. The results reflect a divergence between the two core businesses, with Compose Secure delivering record performance while Husky navigated volatile resin prices and shipping disruptions.

Segment performance diverges

The company's two main operating segments displayed contrasting trajectories during the quarter. Compose Secure achieved record adjusted net sales of $133.6 million, an increase of approximately 12% compared to the prior year. This growth was supported by robust demand for premium metal cards and broadening customer adoption. Adjusted EBITDA for this segment rose 14% to $55.2 million, with margins expanding 70 bps to 41.3%.

In contrast, Husky faced significant macroeconomic pressures. Adjusted net sales fell approximately 9% to $339.6 million. Pro forma adjusted EBITDA for Husky declined 23% to $64.9 million, with margins contracting 330 bps to 19.1%. Management attributed the weakness to deferrals in capital investment projects caused by elevated oil and resin prices, geopolitical tensions, and tariff uncertainty.

Guidance reaffirmed despite margin adjustment

GPGI reiterated its full-year revenue and free cash flow guidance but adjusted its pro forma adjusted EBITDA margin outlook. The company now expects margins between 27% and 29%, reflecting tariff pass-through revenues and mix impacts at Husky. Full-year pro forma net sales are projected between $1.95 billion and $2.1 billion, while adjusted EBITDA is guided to $550 million to $610 million.

Management emphasized that the current guidance does not assume material improvement in macro conditions from current levels. Instead, it relies on historical seasonality at Husky, improved labor absorption, and cost actions. Free cash flow generation remains a priority, with full-year expectations set between $275 million and $325 million.

What the numbers show

A key analytical observation from the earnings call is the stark operational leverage disparity between the two segments. While consolidated EBITDA fell 13%, free cash flow generation was described as "significantly higher" than the prior year, reaching approximately $63 million. This suggests that working capital management or timing differences in cash conversion may have offset the immediate profit decline. Furthermore, the 590 bps sequential margin expansion at Husky, driven by better fixed cost absorption as sales improved sequentially, indicates that the business retains significant operating leverage potential if volume recovers, even amid current top-line pressure.

Kaplan Fox & Kilsheimer LLP announced on September 14, 2026, that it has filed a securities class action lawsuit against GPGI, Inc. (NYSE: GPGI). The firm reminded investors who purchased stock between November 3, 2025, and May 6, 2026, to contact the firm by September 14, 2026, to seek appointment as lead plaintiff.

Robbins Geller Rudman & Dowd LLP announced on September 9, 2026, that it has filed a similar securities class action lawsuit against GPGI. The Rosen Law Firm issued a reminder on September 8, urging contact by September 14. Kaplan Fox also issued a reminder on September 8, setting the same deadline. Schall Brown & Schwartz LLP issued a reminder on September 8 with a deadline of September 15, 2026. Robbins LLP reminded investors on September 4, and The DJS Law Group followed on September 7. The Kaplan Fox lawsuit charges GPGI, certain executive officers and directors, and Resolute Holdings Management, Inc., with violations of the Securities Exchange Act of 1934.

Lawsuit allegations and timeline

On November 3, 2025, the company, then named CompoSecure, Inc., announced it had entered into an agreement to acquire Husky Technologies Limited. The deal was completed on January 12, 2026. Plaintiffs allege that defendants made materially false and misleading statements regarding GPGI's business, operations, and prospects during the class period. Specific allegations include:

• Defendants materially overstated the value of Husky Technologies Limited.
• Husky was not on track to achieve the revenue and Adjusted EBITDA targets provided in the Proxy Statement, which lacked a reasonable basis in objective fact.
• A primary motivation for the $5 billion Husky Acquisition was to generate millions of dollars in fees for Resolute Holdings Management, Inc., and individual defendants, rather than creating long-term value for CompoSecure shareholders.
• Positive statements about the company's prospects were materially misleading or lacked a reasonable basis at all relevant times.
• Defendants misrepresented the purported benefits of the acquisition to secure shareholder approval, PIPE funding, and additional management fees, advancing a scheme to transform CompoSecure into a wealth transfer vehicle for Cote, the Cote Family, and Knott.

Financial deterioration validates claims

GPGI's financial performance deteriorated significantly during the class period. On March 12, 2026, GPGI reported fourth quarter 2025 (4Q25) and fiscal year 2025 (FY25) results, citing compressed margins for Husky due to product mix shifts and increased personnel investments. Shares fell approximately 16.4% from $19.74 on March 11, 2026, to $16.51 on March 13, 2026.

On May 7, 2026, GPGI reported first quarter 2026 (1Q26) results, revealing Husky's Adjusted Net Sales were $290.80 million, down 5.2% year-over-year, and Adjusted EBITDA was $38 million, down 40.2% year-over-year. GPGI cut 2026 guidance, lowering Pro Forma Adjusted Net Sales from an initial range of $2.183 billion to $2.228 billion to $1.95 billion to $2.10 billion, and Pro Forma Adjusted EBITDA from $620 million to $650 million to $550 million to $610 million. Shares declined approximately 25.9% from $17.46 on May 6, 2026, to $12.94 on May 7, 2026.

Following a February 26, 2026, short seller report by Jehoshaphat Research claiming Husky's free cash flow was overstated by 90%, GPGI's stock price declined from $23.12 per share to $12.94 per share on May 7, 2026, representing a total decline of approximately 44%.

Pro Forma Adjusted EBITDA margins compressed by 318 basis points from 29.3% to 26.1% in 4Q25.

Lead plaintiff process and legal representation

Multiple firms are actively recruiting investors. Key deadlines and contacts are outlined below:

Other firms actively involved include Holzer & Holzer LLC. Robbins Geller Rudman & Dowd LLP ranked #1 on the most recent ISS Securities Class Action Services Top 50 Report, recovering more than $916 million for investors in 2025, marking their fourth #1 ranking in the past five years. In those five years, Robbins Geller recovered $8.4 billion for investors, $3.4 billion more than any other law firm. With 200 lawyers in 10 offices, the firm's attorneys have obtained many of the largest securities class action recoveries in history, including the largest ever, $7.2 billion, in In re Enron Corp. Sec. Litig.

Kaplan Fox & Kilsheimer LLP, founded in 1956, has recovered more than $10 billion for clients nationwide and is widely regarded as one of the nation's premier plaintiffs' securities litigation firms, with offices in New York, Oakland, Los Angeles, Chicago, and New Jersey. The firm has secured some of the largest recoveries in the history of securities litigation, including a $2.425 billion recovery on behalf of Bank of America shareholders in In re Bank of America, $800 million recovered for the Arkansas Teacher Retirement System and other pension funds in ATRS v. Allianz Global Investors, and a $475 million settlement in In re Merrill Lynch. Kaplan Fox is recognized by Chambers and Partners, Benchmark Litigation, Super Lawyers, and Lawdragon.

Kessler Topaz Meltzer & Check, LLP states it has recovered over $25 billion for clients and is recognized in Chambers & Partners USA 2026 as a Band 1 Top Firm in Securities and Class Actions, holding Legal 500's Tier 1 Rankings for Securities and M&A Litigation, with offices in Pennsylvania and California. Wolf Haldenstein Adler Freeman & Herz LLP, founded in 1888, brings over 125 years of legal expertise in securities litigation. Bragar Eagel & Squire, P.C. is a nationally recognized law firm with offices in New York, South Carolina, and California. Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in corporate, securities, and antitrust class litigation, founded by the late Abraham L. Pomerantz.

The Rosen Law Firm, ranked No. 1 by ISS Securities Class Action Services for number of securities class action settlements in 2017, has recovered billions of dollars for investors, including over $438 million in 2019 alone. The firm achieved the largest ever securities class action settlement against a Chinese Company. Founding partner Laurence Rosen was named by law360 as a Titan of Plaintiffs’ Bar in 2020. Many of the firm’s attorneys have been recognized by Lawdragon and Super Lawyers. Abraham, Fruchter & Twersky, LLP is based in New York and maintains a California office. Kirby McInerney LLP is a New York-based plaintiffs' law firm concentrating in securities, antitrust, whistleblower, and consumer litigation. Schall Brown & Schwartz LLP represents investors around the world, specializing in securities class action lawsuits and shareholder rights litigation, with founding partners Brian Schall, Andrew Brown, and David Schwartz responsible for recovering over a billion dollars for violations of securities laws. Robbins LLP has helped restore more than $1 billion in value to shareholders. Johnson Fistel, PLLP, recognized as one of the Top 10 Plaintiff Law Firms by ISS Securities Class Action Services, recovered approximately $90,725,000 for investors in 2024. Since 1993, Bernstein Liebhard LLP has recovered over $3.5 billion for its clients. The Portnoy Law Firm's founding partner has recovered over $5.5 billion for aggrieved investors.

DJS Law Group's primary focus is to enhance investor return through balanced counseling and aggressive advocacy. As one of the founding partners of Schall Brown & Schwartz LLP, David Schwartz specializes in securities class actions, corporate governance litigation, and domestic/international M&A appraisals. The firm's clients include some of the largest and most sophisticated hedge funds and alternative asset managers in the world.

What the numbers show

The divergence between GPGI's projected accretive value for Husky and the actual financial deterioration highlights the core allegation of the lawsuit. The 40.2% year-over-year drop in Adjusted EBITDA in 1Q26 and the subsequent guidance cuts suggest the acquisition failed to deliver expected operational synergies. The compression in EBITDA margins alongside declining sales indicates structural issues within Husky's business model that were allegedly concealed during the acquisition announcement. The admission by defendants of underlying demand problems and customers rejecting orders on preferred timetables suggests the margin compression may be driven by fundamental demand weakness rather than temporary mix shifts. The aggregate 44% stock decline from February 26 to May 7, 2026, underscores the severity of investor reaction to these revelations.