Fourth Quarter Sales Affected by Cautious
Customer Spending as Expected; Fourth Quarter Net Sales Decreased
19%; Net Income Decreased 78%; Adjusted EBITDA Decreased 27%
Full Year Net Sales Decreased 7% to $445
Million; Net Income Decreased 34% to $24 Million; Adjusted EBITDA
Decreased 8% to $89 Million
Company Anticipates Gradual Market Recovery in
2024; Financial Outlook Projects Company to Return to Sales Growth
for Full Year
CPI Card Group Inc. (Nasdaq: PMTS) (“CPI” or the “Company”), a
payments technology company and leading provider of credit, debit,
and prepaid card and digital solutions, including
Software-as-a-Service-based instant issuance, today reported
financial results for the fourth quarter and full year ended
December 31, 2023 and provided its initial financial outlook for
2024.
As anticipated, fourth quarter sales were similar to third
quarter levels as customers generally remained cautious with
spending and continued their focus on managing inventory levels.
Net sales decreased 19% to $102.9 million in the quarter; net
income decreased 78% to $2.7 million, reflecting the impact of the
sales decline and an executive retention accrual; and Adjusted
EBITDA decreased 27% to $19.9 million. Sales declines also reflect
challenging comparisons with the record level in the prior year
quarter, when the Company posted net sales growth of 36%.
For the full year, net sales decreased 7% to $444.5 million, net
income decreased 34% to $24.0 million, and Adjusted EBITDA
decreased 8% to $89.5 million. Cash from operating activities
increased 9% to $34.0 million and Free Cash Flow of $27.6 million
more than doubled from 2022. The year-end Net Leverage Ratio of
3.1x was relatively consistent with the prior year level.
The Company anticipates cautious customer spending will continue
into 2024, with the market gradually recovering over the course of
the year. The Company’s initial financial outlook for 2024 projects
slight increases in both net sales and Adjusted EBITDA.
“Fourth quarter business trends were largely in-line with
expectations, as customers continued to prioritize managing
inventory levels,” said John Lowe, President and Chief Executive
Officer. “We believe card issuance trends to consumers remain
healthy and we will continue to focus on gaining market share
through innovative solutions and leading customer service and
quality.”
Lowe added, “Longer-term, we aim to supplement growth in our
current portfolio by expanding into adjacent markets and offering
additional products and services, including digital solutions, for
our base of thousands of financial institution customers. In 2024,
we are investing in these opportunities, as well as in our
companywide go-to-market resources.”
Lowe was named President and CEO in January, succeeding Scott
Scheirman, who previously announced his intent to retire in early
2024.
“I want to thank Scott for his leadership of the company over
the last six years as we delivered a remarkable turnaround and are
now positioned as a leader in the U.S. payments space, with a
strong foundation for the future,” said Lowe.
The Company believes long-term growth trends for the U.S. card
market remain strong, led by consumer card growth, widespread
adoption of eco-focused cards and the ongoing conversion to
contactless cards. Based on figures released by the networks, Visa
and Mastercard® U.S. debit and credit cards in circulation
increased at a compound annual growth rate of 10% for the
three-year period ending September 30, 2023.
CPI is a top payment solutions provider in the U.S. serving
thousands of banks, credit unions and fintechs. The Company is a
leader in the U.S. markets for eco-focused payment cards,
personalization and Software-as-a-Service-based instant issuance
solutions for small and medium U.S. financial institutions and
retail prepaid debit card solutions, and maintains longstanding
customer relationships.
2023 Business Highlights
- A leading provider of eco-focused payment card solutions in the
U.S. market, with more than 100 million eco-focused cards sold
since launch in late 2019.
- A leading provider of Software-as-a-Service-based instant
issuance solutions in the U.S., with more than 15,000 Card@Once®
installations across more than 2,000 financial institutions.
- Strong cash flow generation, with cash provided by operating
activities increasing 9% and Free Cash Flow more than doubling from
the 2022 levels.
- The Company reduced the outstanding balance on its 8.625%
Senior Secured Notes by $17.1 million during the year through open
market repurchases and ended the year with a Net Leverage Ratio of
3.1x.
- The Company announced a $20 million share repurchase
authorization and initiated execution in December. Through February
2024, the Company had repurchased in the open market or had
committed to repurchase through its stock purchase agreement with
its majority stockholder more than $4 million in shares under the
authorization.
Fourth Quarter 2023 Financial Highlights
Net sales decreased 19% year-over-year to $102.9 million in the
fourth quarter of 2023.
- Debit and Credit segment net sales decreased 22% to $82.1
million, primarily due to declines in card volumes.
- Prepaid Debit segment net sales decreased 5% to $21.0
million.
Fourth quarter gross profit decreased 25% to $35.4 million and
gross profit margin was 34.4%, which compared to 37.6% in the prior
year fourth quarter.
Fourth quarter income from operations decreased 53% to $10.5
million; net income decreased 78% to $2.7 million, or $0.23 diluted
earnings per share; and Adjusted EBITDA decreased 27% to $19.9
million. Income from operations, net income and Adjusted EBITDA
declines were driven by the sales decrease. The net income decrease
was also impacted by a higher effective tax rate compared to prior
year, partially offset by lower interest expense. Income from
operations and net income were negatively impacted by approximately
$3 million of pre-tax operating expenses related to an executive
retention package, including stock compensation, which are not
included in Adjusted EBITDA.
Full Year 2023 Financial Highlights
Net sales decreased 7% year-over-year to $444.5 million in
2023.
- Debit and Credit segment net sales decreased 8% to $361.1
million, primarily due to volume declines in eco-focused
contactless cards compared to significant orders in 2022 and lower
contact card sales, partially offset by increased sales of other
contactless cards and services related to Card@Once® instant
issuance solutions.
- Prepaid Debit segment net sales decreased 2% to $84.2
million.
Full year gross profit decreased 12% to $155.5 million and gross
profit margin was 35.0%, which compared to 36.9% in the prior
year.
Full year income from operations decreased 22% to $61.6 million;
net income decreased 34% to $24.0 million, or $2.01 diluted
earnings per share; and Adjusted EBITDA decreased 8% to $89.5
million. Income from operations, net income and Adjusted EBITDA
declines were driven by lower net sales, partially offset by lower
operating expenses, while the net income decline also reflects a
higher effective tax rate, partially offset by lower interest
expense. Income from operations and net income were negatively
impacted by approximately $7 million of pre-tax operating expenses
related to an executive retention package, including stock
compensation, which are not included in Adjusted EBITDA.
Balance Sheet, Liquidity and Cash Flow
The Company generated cash from operating activities of $34.0
million in 2023, which compared to $31.3 million in 2022, and Free
Cash Flow of $27.6 million, which compared to $13.5 million in the
prior year. The increase in cash generation compared to the prior
year was driven by working capital improvements and lower capital
expenditures, partially offset by lower net income.
As of December 31, 2023, cash and cash equivalents was $12.4
million. There were $268 million of 8.625% Senior Secured Notes due
2026 and no borrowings from the ABL revolving credit facility
outstanding at year-end.
The Company retired $17.1 million of Senior Notes during 2023
and spent $0.25 million to repurchase 13,180 shares of common stock
in the open market during the fourth quarter.
The Company’s capital structure and allocation priorities are to
maintain ample liquidity; invest in the business, including
strategic acquisitions; deleverage the balance sheet; and return
funds to stockholders.
“We were able to significantly improve free cash flow generation
in 2023 despite the challenging sales environment,” said Jeff
Hochstadt, Chief Financial Officer of CPI. “We enhanced our balance
sheet by reducing net debt last year, and plan to allocate capital
to repurchase stock and invest in the business for long-term growth
in 2024.”
Outlook for 2024
The Company expects cautious customer spending to continue into
2024 before the market recovers over the course of the year, with
first quarter sales anticipated to be similar to the 2023 fourth
quarter level. The Company projects slight increases in both net
sales and Adjusted EBITDA for the full year, with declines in the
first half of the year offset by growth in the second half.
Free Cash Flow for 2024 is expected to be $5 million to $10
million lower than the 2023 level due to increased capital spending
investment. The increased capital spending includes investment in a
new state-of-the-art secure card production facility in Indiana,
which will eventually replace the Company’s current Indiana
facility and provide more capabilities, capacity and
efficiencies.
The Company expects its year-end 2024 Net Leverage Ratio to be
between 3.0x and 3.5x.
Conference Call and Webcast
CPI Card Group Inc. will hold a conference call on March 7, 2024
at 9:00 a.m. Eastern Time (ET) to review its fourth quarter and
full year 2023 results. To participate in the Company's conference
call via telephone or online:
U.S. dial-in number (toll-free): 888-330-3573 International:
646-960-0677 Conference ID: 8062733 Webcast Link: CPI Q4 Webcast or
at https://investor.cpicardgroup.com
Participants are advised to login for the webcast 10 minutes
prior to the scheduled start time.
A replay of the conference call will be available until March
21, 2024 at: U.S. dial-in number (toll free): 800-770-2030
International: 647-362-9199 Conference ID: 8062733
A webcast replay of the conference call will also be available
on CPI Card Group Inc.’s Investor Relations web site:
https://investor.cpicardgroup.com
Non-GAAP Financial Measures
In addition to financial results reported in accordance with
U.S. generally accepted accounting principles (“GAAP”), we have
provided the following non-GAAP financial measures in this release,
all reported on a continuing operations basis: EBITDA, Adjusted
EBITDA, Adjusted EBITDA margin, Free Cash Flow, LTM Adjusted EBITDA
and Net Leverage Ratio. These non-GAAP financial measures are
utilized by management in comparing our operating performance on a
consistent basis between fiscal periods. We believe that these
financial measures are appropriate to enhance an overall
understanding of our underlying operating performance trends
compared to historical and prospective periods and our peers.
Management also believes that these measures are useful to
investors in their analysis of our results of operations and
provide improved comparability between fiscal periods. Non-GAAP
financial measures should not be considered in isolation from, or
as a substitute for, financial information calculated in accordance
with GAAP. Our non-GAAP measures may be different from similarly
titled measures of other companies. Investors are encouraged to
review the reconciliation of these historical non-GAAP measures to
their most directly comparable GAAP financial measures included in
Exhibit E to this press release.
Adjusted EBITDA
Adjusted EBITDA is presented on a continuing operations basis
and is defined as EBITDA (which represents earnings before
interest, taxes, depreciation and amortization) adjusted for
litigation; stock-based compensation expense; estimated sales tax
expense; restructuring and other charges, including severance and
executive retention; loss on debt extinguishment; foreign currency
gain or loss; and other items that are unusual in nature,
infrequently occurring or not considered part of our core
operations, as set forth in the reconciliation in Exhibit E.
Adjusted EBITDA is intended to show our unleveraged, pre-tax
operating results and therefore reflects our financial performance
based on operational factors, excluding non-operational, unusual or
non-recurring losses or gains. Adjusted EBITDA has important
limitations as an analytical tool, and you should not consider it
in isolation, or as a substitute for, analysis of our results as
reported under GAAP. For example, Adjusted EBITDA does not reflect:
(a) our capital expenditures, future requirements for capital
expenditures or contractual commitments; (b) changes in, or cash
requirements for, our working capital needs; (c) the significant
interest expenses or the cash requirements necessary to service
interest or principal payments on our debt; (d) tax payments that
represent a reduction in cash available to us; (e) any cash
requirements for the assets being depreciated and amortized that
may have to be replaced in the future; (f) the impact of earnings
or charges resulting from matters that we and the lenders under our
credit agreement may not consider indicative of our ongoing
operations; or (g) the impact of any discontinued operations. In
particular, our definition of Adjusted EBITDA allows us to add back
certain non-operating, unusual or non-recurring charges that are
deducted in calculating net income, even though these are expenses
that may recur, vary greatly and are difficult to predict and can
represent the effect of long-term strategies as opposed to
short-term results. In addition, certain of these expenses
represent the reduction of cash that could be used for other
purposes. Adjusted EBITDA margin percentage as shown in Exhibit E
is computed as Adjusted EBITDA divided by total net sales.
We define LTM Adjusted EBITDA as Adjusted EBITDA (defined
previously) for the last twelve months. LTM Adjusted EBITDA is used
in the computation of Net Leverage Ratio, and is reconciled in
Exhibit E.
Free Cash Flow
We define Free Cash Flow as cash flow provided by (used in)
operating activities less capital expenditures. We use this metric
in analyzing our ability to service and repay our debt. However,
this measure does not represent funds available for investment or
other discretionary uses since it does not deduct cash used to
service our debt. Free Cash Flow should not be considered in
isolation, or as a substitute for, cash (used in) provided by
operating activities or any other measures of liquidity derived in
accordance with GAAP.
Financial Expectations for 2024
We have provided Adjusted EBITDA expectations for 2024 on a
non-GAAP basis because certain reconciling items are dependent on
future events that either cannot be controlled or cannot be
reliably predicted because they are not part of the Company’s
routine activities, any of which could be significant.
Net Leverage Ratio
Management and various investors use the ratio of debt principal
outstanding, plus finance lease obligations, less cash, divided by
LTM Adjusted EBITDA, or “Net Leverage Ratio”, as a measure of our
financial strength when making key investment decisions and
evaluating us against peers.
About CPI Card Group Inc.
CPI Card Group is a payments technologies company providing a
comprehensive range of credit, debit, and prepaid card and digital
solutions, including Software-as-a-Service (SaaS) instant issuance.
With a focus on building personal relationships and earning trust,
we help our customers navigate the constantly evolving world of
payments, while delivering innovative solutions that spark
connections and support their brands. We serve clients across
industry, size, and scale through our team of experienced,
dedicated employees and our network of high-security production and
card services facilities—located in the United States. CPI was
named one of the 2024 Best Companies to Work For by U.S. News and
World Report and is committed to exceeding our customers’
expectations, transforming our industry, and enhancing the way
people pay every day. Learn more at www.CPIcardgroup.com.
Forward-Looking Statements
Certain statements and information in this release (as well as
information included in other written or oral statements we make
from time to time) may contain or constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The words “believe,” “estimate,” “project,” “expect,”
“anticipate,” “plan,” “intend,” “foresee,” “should,” “would,”
“could,” “continue,” “committed,” “attempt,” “aim,” “target,”
“objective,” “guides,” “seek,” “focus,” “provides guidance,”
“provides outlook” or other similar expressions are intended to
identify forward-looking statements, which are not historical in
nature. These forward-looking statements, including statements
about our strategic initiatives and, market opportunities and
goals, plans and projections regarding our financial position,
including our guidance for the full-year 2024 results, are based on
our current expectations and beliefs concerning future developments
and their potential effect on us and other information currently
available. Such forward-looking statements, because they relate to
future events, are by their very nature subject to many important
risks and uncertainties that could cause actual results or other
events to differ materially from those contemplated.
These risks and uncertainties include, but are not limited to: a
deterioration in general economic conditions, including
inflationary conditions and resulting in reduced consumer
confidence and business spending, and a decline in consumer credit
worthiness impacting demand for our products; the unpredictability
of our operating results, including an inability to anticipate
changes in customer inventory management practices and its impact
on our business; a disruption or other failure in our supply chain,
including as a result of foreign conflicts and with respect to
single source suppliers, or the failure or inability of suppliers
to comply with our code of conduct or contractual requirements, or
political unrest in countries in which our suppliers operate, or
inflationary pressures, resulting in increased costs and inability
to pass those costs on to our customers and extended production
lead times and difficulty meeting customers’ delivery expectations;
our failure to retain our existing customers or identify and
attract new customers; our inability to recruit, retain and develop
qualified personnel, including key personnel, and implement
effective succession processes; adverse conditions in the banking
system and financial markets, including the failure of banks and
financial institutions; system security risks, data protection
breaches and cyber-attacks; interruptions in our operations,
including our information technology systems, or in the operations
of the third parties that operate computing infrastructure on which
we rely; our inability to develop, introduce and commercialize new
products and services; the usage, or lack thereof, of artificial
intelligence technologies; our substantial indebtedness, including
inability to make debt service payments or refinance such
indebtedness; the restrictive terms of our indebtedness and
covenants of future agreements governing indebtedness and the
resulting restraints on our ability to pursue our business
strategies; our status as an accelerated filer and complying with
the Sarbanes-Oxley Act of 2002 and the costs associated with such
compliance and implementation of procedures thereunder; our failure
to maintain effective internal control over financial reporting;
disruptions in production at one or more of our facilities;
problems in production quality, materials and process and costs
relating to product defects and any related product liability
and/or warranty claims; environmental, social and governance
(“ESG”) preferences and demands of various stakeholders and our
ability to conform to such preferences and demands and to comply
with any related regulatory requirements; the effects of climate
change, negative perceptions of our products due to the impact of
our products and production processes on the environment and other
ESG-related risks; damage to our reputation or brand image;
disruptions in production due to weather conditions, climate
change, political instability or social unrest; our inability to
adequately protect our trade secrets and intellectual property
rights from misappropriation, infringement claims brought against
us and risks related to open source software; defects in our
software and computing systems; our limited ability to raise
capital; costs and impacts to our financial results relating to the
obligatory collection of sales tax and claims for uncollected sales
tax in states that impose sales tax collection requirements on
out-of-state businesses or unclaimed property, as well as potential
new U.S. tax legislation increasing the corporate income tax rate
and challenges to our income tax positions; our inability to
successfully execute on our divestitures or acquisitions; our
inability to realize the full value of our long-lived assets; our
inability to renew licenses with key technology licensors; the
highly competitive, saturated and consolidated nature of our
marketplace; costs and potential liabilities associated with
compliance or failure to comply with regulations, customer
contractual requirements and evolving industry standards regarding
consumer privacy and data use and security; new and developing
technologies that make our existing technology solutions and
products obsolete or less relevant or our failure to introduce new
products and services in a timely manner; our failure to operate
our business in accordance with the Payment Card Industry Security
Standards Council security standards or other industry standards;
the effects of restrictions, delays or interruptions in our ability
to source raw materials and components used in our products from
foreign countries; the effects on the global economy of ongoing
foreign conflicts; our failure to comply with environmental, health
and safety laws and regulations that apply to our products and the
raw materials we use in our production processes; risks associated
with the majority stockholders’ ownership of our stock; potential
conflicts of interest that may arise due to our board of directors
being comprised in part of directors who are principals of our
majority stockholders; the influence of securities analysts over
the trading market for and price of our common stock; failure to
meet the continued listing standards of the Nasdaq Global Market;
the impact of stockholder activism or securities litigation on the
trading price and volatility of our common stock; our inability to
fully execute on our share repurchase program strategy; certain
provisions of our organizational documents and other contractual
provisions that may delay or prevent a change in control and make
it difficult for stockholders other than our majority stockholders
to change the composition of our board of directors; our ability to
comply with a wide variety of complex laws and regulations and the
exposure to liability for any failure to comply; the effect of
legal and regulatory proceedings; and other risks that are
described in Part I, Item 1A, Risk Factors in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission (the
“SEC”) on March 7, 2024 and our other reports filed from time to
time with the SEC.
We caution and advise readers not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
These statements are based on assumptions that may not be realized
and involve risks and uncertainties that could cause actual results
or other events to differ materially from the expectations and
beliefs contained herein. We undertake no obligation to publicly
update or revise any forward-looking statements after the date they
are made, whether as a result of new information, future events or
otherwise.
For more information:
CPI encourages investors to use its investor relations website
as a way of easily finding information about the Company. CPI
promptly makes available on this website the reports that the
Company files or furnishes with the SEC, corporate governance
information and press releases.
CPI Card Group Inc. Earnings Release
Supplemental Financial Information
Exhibit A
Condensed Consolidated Statements of
Operations and Comprehensive Income - Unaudited for the three
months and full years ended December 31, 2023 and 2022
Exhibit B
Condensed Consolidated Balance Sheets –
Unaudited as of December 31, 2023 and 2022
Exhibit C
Condensed Consolidated Statements of Cash
Flows – Unaudited for the full years ended December 31, 2023 and
2022
Exhibit D
Segment Summary Information – Unaudited
for the three months and full years ended December 31, 2023 and
2022
Exhibit E
Supplemental GAAP to Non-GAAP
Reconciliations – Unaudited for the three months and full years
ended December 31, 2023 and 2022
EXHIBIT A
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations and Comprehensive Income
(in thousands, except share
and per share amounts)
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Net sales:
Products
$
53,929
$
72,323
$
249,354
$
281,190
Services
48,943
54,113
195,193
194,555
Total net sales
102,872
126,436
444,547
475,745
Cost of sales:
Products (exclusive of depreciation and
amortization shown below)
36,546
42,166
161,374
171,017
Services (exclusive of depreciation and
amortization shown below)
28,205
34,305
117,397
119,930
Depreciation and amortization
2,703
2,467
10,287
9,031
Total cost of sales
67,454
78,938
289,058
299,978
Gross profit
35,418
47,498
155,489
175,767
Operating expenses:
Selling, general and administrative
(exclusive of depreciation and amortization shown below)
23,521
23,447
88,255
90,782
Depreciation and amortization
1,358
1,401
5,644
5,855
Total operating expenses
24,879
24,848
93,899
96,637
Income from operations
10,539
22,650
61,590
79,130
Other expense, net:
Interest, net
(6,678
)
(7,282
)
(26,913
)
(29,616
)
Other income (expense), net
30
107
(215
)
(367
)
Total other expense, net
(6,648
)
(7,175
)
(27,128
)
(29,983
)
Income before income taxes
3,891
15,475
34,462
49,147
Income tax expense
(1,159
)
(2,998
)
(10,477
)
(12,607
)
Net income
$
2,732
$
12,477
$
23,985
$
36,540
Basic and diluted earnings per share:
Basic earnings per share
$
0.24
$
1.10
$
2.10
$
3.24
Diluted earnings per share
$
0.23
$
1.06
$
2.01
$
3.11
Basic weighted-average shares
outstanding
11,449,379
11,385,843
11,426,124
11,291,202
Diluted weighted-average shares
outstanding
11,782,476
11,805,520
11,917,556
11,749,105
Comprehensive income:
Net income
$
2,732
$
12,477
$
23,985
$
36,540
Total comprehensive income
$
2,732
$
12,477
$
23,985
$
36,540
EXHIBIT B
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(in thousands, except share
and per share amounts)
(Unaudited)
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
12,413
$
11,037
Accounts receivable, net
73,724
80,583
Inventories, net
70,594
68,399
Prepaid expenses and other current
assets
8,647
7,551
Total current assets
165,378
167,570
Plant, equipment, leasehold improvements
and operating lease right-of-use assets, net
63,053
57,178
Intangible assets, net
14,122
17,988
Goodwill
47,150
47,150
Other assets
3,980
6,780
Total assets
$
293,683
$
296,666
Liabilities and stockholders’
deficit
Current liabilities:
Accounts payable
$
12,802
$
24,371
Accrued expenses
35,803
40,070
Deferred revenue and customer deposits
840
3,571
Total current liabilities
49,445
68,012
Long-term debt
264,997
285,522
Deferred income taxes
7,139
6,808
Other long-term liabilities
24,038
18,401
Total liabilities
345,619
378,743
Commitments and contingencies
Series A Preferred Stock; $0.001 par
value—100,000 shares authorized; 0 shares issued and outstanding at
December 31, 2023 and 2022
—
—
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000
shares authorized; 11,446,155 and 11,390,355 shares issued and
outstanding at December 31, 2023 and 2022, respectively
11
11
Capital deficiency
(102,223
)
(108,379
)
Accumulated earnings
50,276
26,291
Total stockholders’ deficit
(51,936
)
(82,077
)
Total liabilities and stockholders’
deficit
$
293,683
$
296,666
EXHIBIT C
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Year Ended
December 31,
2023
2022
Operating activities
Net income
$
23,985
$
36,540
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense
12,065
11,020
Amortization expense
3,866
3,866
Stock-based compensation expense
7,507
3,479
Amortization of debt issuance costs and
debt discount
1,855
1,931
Loss on debt extinguishment
243
474
Deferred income taxes
331
1,555
Other, net
(655
)
1,094
Changes in operating assets and
liabilities:
Accounts receivable, net
6,795
(19,745
)
Inventories
(1,638
)
(10,702
)
Prepaid expenses and other assets
2,346
(2,700
)
Income taxes, net
(1,162
)
362
Accounts payable
(11,260
)
(453
)
Accrued expenses and other liabilities
(7,506
)
2,226
Deferred revenue and customer deposits
(2,731
)
2,389
Cash provided by operating activities
34,041
31,336
Investing activities
Capital expenditures for plant, equipment
and leasehold improvements, net
(6,405
)
(17,867
)
Other
183
95
Cash used in investing activities
(6,222
)
(17,772
)
Financing activities
Principal payments on Senior Notes
(16,954
)
(24,938
)
Principal payments on ABL Revolver
(18,000
)
(30,000
)
Proceeds from ABL Revolver
13,000
35,000
Payments on debt extinguishment and
other
(368
)
(1,939
)
Proceeds from finance lease financing
—
2,074
Payments on finance lease obligations
(3,871
)
(3,360
)
Common stock repurchased
(250
)
—
Cash used in financing activities
(26,443
)
(23,163
)
Effect of exchange rates on cash
—
(47
)
Net increase (decrease) in cash and cash
equivalents
1,376
(9,646
)
Cash and cash equivalents, beginning of
period
11,037
20,683
Cash and cash equivalents, end of
period
$
12,413
$
11,037
Supplemental disclosures of cash flow
information
Cash paid (refunded) during the period
for:
Interest
$
25,738
$
27,714
Income taxes paid
$
10,462
$
12,584
Income taxes refunded
$
(86
)
$
(451
)
Right-of-use assets obtained in exchange
for lease obligations:
Operating leases
$
3,091
$
816
Financing leases
$
11,285
$
9,124
Accounts payable and accrued expenses for
capital expenditures for plant, equipment and leasehold
improvements
$
102
$
462
EXHIBIT D
CPI Card Group Inc. and
Subsidiaries
Segment Summary
Information
For the Three Months and Year
Ended December 31, 2023 and 2022
(dollars in thousands)
(Unaudited)
Net Sales
Three Months Ended December
31,
2023
2022
$ Change
% Change
Net sales by segment:
Debit and Credit
$
82,098
$
104,851
$
(22,753
)
(21.7
)%
Prepaid Debit
20,951
22,126
(1,175
)
(5.3
)%
Eliminations
(177
)
(541
)
364
*%
%
Total
$
102,872
$
126,436
$
(23,564
)
(18.6
)%
*Calculation not meaningful
Year Ended December
31,
2023
2022
$ Change
% Change
Net sales by segment:
Debit and Credit
$
361,057
$
390,559
$
(29,502
)
(7.6
)%
Prepaid Debit
84,237
86,136
(1,899
)
(2.2
)%
Eliminations
(747
)
(950
)
203
*
%
Total
$
444,547
$
475,745
$
(31,198
)
(6.6
)%
Gross Profit
Three Months Ended December
31,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
27,173
33.1
%
$
39,825
38.0
%
$
(12,652
)
(31.8
)%
Prepaid Debit
8,245
39.4
%
7,673
34.7
%
572
7.5
%
Total
$
35,418
34.4
%
$
47,498
37.6
%
$
(12,080
)
(25.4
)%
Year Ended December
31,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
126,776
35.1
%
$
144,214
36.9
%
$
(17,438
)
(12.1
)%
Prepaid Debit
28,713
34.1
%
31,553
36.6
%
(2,840
)
(9.0
)%
Total
$
155,489
35.0
%
$
175,767
36.9
%
$
(20,278
)
(11.5
)%
Income from Operations
Three Months Ended December
31,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
Debit and Credit
$
19,008
23.2
%
$
31,198
29.8
%
$
(12,190
)
(39.1
)%
Prepaid Debit
6,991
33.4
%
5,184
23.4
%
1,807
34.9
%
Other
(15,460
)
*
%
(13,732
)
*
%
(1,728
)
(12.6
)%
Total
$
10,539
10.2
%
$
22,650
17.9
%
$
(12,111
)
(53.5
)%
Year Ended December
31,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
Debit and Credit
$
94,906
26.3
%
$
110,045
28.2
%
$
(15,139
)
(13.8
)%
Prepaid Debit
24,927
29.6
%
25,577
29.7
%
(650
)
(2.5
)%
Other
(58,243
)
*
%
(56,492
)
*
%
(1,751
)
(3.1
)%
Total
$
61,590
13.9
%
$
79,130
16.6
%
$
(17,540
)
(22.2
)%
EBITDA
Three Months Ended December
31,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
EBITDA by segment:
Debit and Credit
$
21,227
25.9
%
$
33,436
31.9
%
$
(12,209
)
(36.5
)%
Prepaid Debit
7,848
37.5
%
5,743
26.0
%
2,105
36.7
%
Other
(14,445
)
*
%
(12,554
)
*
%
(1,891
)
(15.1
)%
Total
$
14,630
14.2
%
$
26,625
21.1
%
$
(11,995
)
(45.1
)%
Year Ended December
31,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
EBITDA by segment:
Debit and Credit
$
103,960
28.8
%
$
118,478
30.3
%
$
(14,518
)
(12.3
)%
Prepaid Debit
27,786
33.0
%
27,844
32.3
%
(58
)
(0.2
)%
Other
(54,440
)
*
%
(52,673
)
*
%
(1,767
)
(3.4
)%
Total
$
77,306
17.4
%
$
93,649
19.7
%
$
(16,343
)
(17.5
)%
Reconciliation of Income (Loss)
from
Operations by Segment to EBITDA by
Segment
Three Months Ended December
31, 2023
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
19,008
$
6,991
$
(15,460
)
$
10,539
Depreciation and amortization
2,189
857
1,015
4,061
Other income (expenses)
30
—
—
30
EBITDA
$
21,227
$
7,848
$
(14,445
)
$
14,630
Three Months Ended December
31, 2022
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
31,198
$
5,184
$
(13,732
)
$
22,650
Depreciation and amortization
2,238
599
1,031
3,868
Other income (expenses)
—
(40
)
147
107
EBITDA
$
33,436
$
5,743
$
(12,554
)
$
26,625
Year Ended December 31,
2023
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
94,906
$
24,927
$
(58,243
)
$
61,590
Depreciation and amortization
9,025
2,860
4,046
15,931
Other income (expenses)
29
(1
)
(243
)
(215
)
EBITDA
$
103,960
$
27,786
$
(54,440
)
$
77,306
Year Ended December 31,
2022
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
110,045
$
25,577
$
(56,492
)
$
79,130
Depreciation and amortization
8,440
2,310
4,136
14,886
Other income (expenses)
(7
)
(43
)
(317
)
(367
)
EBITDA
$
118,478
$
27,844
$
(52,673
)
$
93,649
EXHIBIT E
CPI Card Group Inc. and
Subsidiaries
Supplemental GAAP to Non-GAAP
Reconciliation
(dollars in thousands)
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
EBITDA and Adjusted EBITDA:
Net income
$
2,732
$
12,477
$
23,985
$
36,540
Interest, net
6,678
7,282
26,913
29,616
Income tax expense
1,159
2,998
10,477
12,607
Depreciation and amortization
4,061
3,868
15,931
14,886
EBITDA
$
14,630
$
26,625
$
77,306
$
93,649
Adjustments to EBITDA:
Stock-based compensation expense
3,076
551
7,507
3,479
Sales tax (benefit) expense (1)
(105
)
(56
)
(70
)
18
Restructuring and other charges (2)
2,302
—
4,531
—
Loss on debt extinguishment (3)
—
79
243
474
Foreign currency (gain) loss
(28
)
4
(26
)
83
Subtotal of adjustments to EBITDA
5,245
578
12,185
4,054
Adjusted EBITDA
$
19,875
$
27,203
$
89,491
$
97,703
Net income margin (% of Net sales)
2.7
%
9.9
%
5.4
%
7.7
%
Net income growth (% Change 2023 vs.
2022)
(78.1
)%
(34.4
)%
Adjusted EBITDA margin (% of Net
sales)
19.3
%
21.5
%
20.1
%
20.5
%
Adjusted EBITDA growth (% Change 2023 vs.
2022)
(26.9
)%
(8.4
)%
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Free Cash Flow:
Cash provided by operating activities
$
11,775
$
19,623
$
34,041
$
31,336
Capital expenditures for plant, equipment
and leasehold improvements, net
(329
)
(3,427
)
(6,405
)
(17,867
)
Free cash flow
$
11,446
$
16,196
$
27,636
$
13,469
________________________________
(1)
Represents estimated sales tax (benefit)
expense relating to a contingent liability due to historical
activity in certain states where it is probable that the Company
will be subject to sales tax plus interest and penalties.
(2)
The 2023 amount represents accrued
executive retention to be paid in 2024 and costs related to
production facility modernization efforts.
(3)
The Company redeemed a portion of the
8.625% Senior Secured Notes in 2023 and 2022 and expensed the
associated portion of the unamortized deferred financing costs.
As of
December 31,
2023
2022
Calculation of Net Leverage
Ratio:
Senior Notes
$
267,897
$
285,000
ABL revolver
—
5,000
Finance lease obligations
18,106
10,697
Total debt
286,003
300,697
Less: Cash and cash equivalents
(12,413
)
(11,037
)
Total net debt (a)
$
273,590
$
289,660
LTM Adjusted EBITDA (b)
$
89,491
$
97,703
Net Leverage Ratio (a)/(b)
3.1
3.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240307370173/en/
CPI Card Group Inc. Investor Relations: (877) 369-9016
InvestorRelations@cpicardgroup.com
CPI Card Group Inc. Media Relations:
Media@cpicardgroup.com
Grafico Azioni CPI Card (NASDAQ:PMTS)
Storico
Da Dic 2024 a Gen 2025
Grafico Azioni CPI Card (NASDAQ:PMTS)
Storico
Da Gen 2024 a Gen 2025
