Net Sales Increased 3% to $119 Million; Net
Income Decreased 8% to $6 Million; Adjusted EBITDA Decreased 6% to
$22 Million
Debit and Credit and Prepaid Debit Segments
Each Deliver Growth; Card Sales Trends Continue to Improve
Company Increases Full Year Net Sales Outlook
to Mid-single Digit Growth
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 second quarter ended June 30, 2024 and
updated its financial outlook for 2024.
In the second quarter net sales increased 3% to $118.8 million,
with growth in both the Debit and Credit and Prepaid segments; net
income decreased 8% to $6.0 million; and Adjusted EBITDA decreased
6% to $21.9 million.
Sales growth in the quarter was driven by continued strong
performance from Prepaid, instant issuance solutions and other card
personalization services, while debit and credit card sales trends
improved from recent quarters. Secure card sales decreased slightly
year-on-year in the quarter and increased sequentially compared to
the first quarter.
For the first six months of the year total net sales declined
2%. As previously noted, the Company anticipated sales declines in
the first half of 2024 to be offset by growth in the second half
from share gains and improved market demand as channel inventory
levels subside.
“We continue to execute our strategy and are pleased to deliver
solid improvement in card sales and ongoing growth in our other
business lines in the quarter,” said John Lowe, President and Chief
Executive Officer. “We expected the first half of the year to be
challenging, and our performance and momentum put us in a strong
position to grow in the second half and achieve our increased full
year expectations.”
The Company updated its financial outlook for 2024, increasing
its outlook for net sales from slight growth to a mid-single digit
increase, while retaining its Adjusted EBITDA outlook of a slight
increase from prior year.
In July, the Company completed a refinancing of its debt,
including the issuance of $285 million of Senior Secured Notes due
2029 and entry into a new $75 million asset based revolving credit
facility.
CPI is a top payment solutions provider in the U.S. serving
thousands of banks, credit unions and fintechs, as well as major
bank platforms and prepaid program managers. 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.
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 March 31, 2024.
2024 Business Highlights
- CPI continues to be 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.
- CPI continues to be a leading provider of
Software-as-a-Service-based instant issuance solutions in the U.S.,
with more than 16,000 Card@Once® installations across more than
2,000 financial institutions.
- The Company executed share repurchases against the $20 million
authorization announced in the fourth quarter of 2023. Through June
2024, the Company had repurchased in the open market or had
committed to repurchase through its stock purchase agreement with
its majority stockholder approximately $9 million of shares since
initiation of the program.
- The Company ended the second quarter with a Net Leverage Ratio
of 3.3x.
- Early in the third quarter, the Company refinanced its existing
debt, issuing $285 million of 10% Senior Secured Notes due 2029 and
entering into a new $75 million ABL revolving credit facility,
while redeeming the $268 million outstanding of 8 5/8% notes due
2026.
Second Quarter 2024 Financial Highlights
Net sales increased 3% year-over-year to $118.8 million in the
second quarter of 2024.
- Debit and Credit segment net sales increased 3% to $95.6
million, primarily due to increases in Card@Once® instant issuance
solutions and other card personalization services. Card sales
decreased slightly, as an increase in eco-focused contactless card
sales was offset by declines in sales of contact chip cards.
- Prepaid Debit segment net sales increased 9% to $23.8 million,
reflecting strong sales to existing customers.
Second quarter gross profit increased 4% to $42.4 million and
gross profit margin was 35.7%, which compared to 35.5% in the prior
year second quarter.
Second quarter income from operations decreased 15% to $14.9
million due to higher SG&A expenses; net income decreased 8% to
$6.0 million, or $0.51 diluted earnings per share; and Adjusted
EBITDA decreased 6% to $21.9 million. The SG&A increase
primarily reflects higher compensation expense, including increased
stock compensation. Net income declined less than income from
operations primarily due to a lower tax rate compared to the prior
year period.
Year-to-date 2024 Financial Highlights
Net sales decreased 2% year-over-year to $230.8 million in the
first half of 2024.
- Debit and Credit segment net sales decreased 6% to $183.6
million, primarily due to lower sales of contactless and contact
chip cards, partially offset by increases in sales of Card@Once®
instant issuance solutions and other card personalization services
and eco-focused contactless cards.
- Prepaid Debit segment net sales increased 17% to $48.0 million,
reflecting strong sales to existing customers.
Year-to-date gross profit was flat at $83.9 million and gross
profit margin increased from 35.6% in the prior year to 36.4%.
Year-to-date income from operations decreased 24% to $29.1
million due to higher SG&A expenses; net income decreased 34%
to $11.5 million, or $0.97 diluted earnings per share; and Adjusted
EBITDA decreased 7% to $44.9 million. Income from operations and
net income in the current year include the impact of approximately
$2 million of first quarter pre-tax operating expenses related to
an executive retention package announced in 2023, as well as other
CEO transition-related expenses, including stock compensation and
executive severance, which are not included in Adjusted EBITDA.
Balance Sheet, Liquidity and Cash Flow
The Company generated cash from operating activities of $4.1
million in the first half of 2024, which compared to $10.3 million
in the 2023 first half, and Free Cash Flow of $1.4 million, which
compared to $3.7 million in the prior year. The decrease in cash
generation compared to the prior year was driven by lower net
income and increased working capital usage, partially offset by
lower capital expenditures.
As of June 30, 2024, cash and cash equivalents was $7.5 million.
There were $268 million of 8.625% Senior Secured Notes due 2026 and
$4 million of borrowings from the ABL revolving credit facility
outstanding at quarter-end.
In the second quarter, the Company spent $0.75 million to
repurchase 40,178 shares of common stock in the open market. In
July, the Company spent $2.2 million to purchase an additional
120,534 shares from its majority shareholder pursuant to the Stock
Purchase Agreement announced in March, which committed the Company
to purchase shares from its majority shareholder at a 3 to 1 ratio
to the number of shares repurchased in the open market over the
April through June period. In the second quarter the Company also
settled a $4.4 million purchase of 244,314 shares from its majority
shareholder, pursuant to the Stock Purchase Agreement announced in
December.
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 pleased to deliver stronger sales trends and improved
gross margins in the second quarter and to complete the refinancing
of our debt in July,” said Jeff Hochstadt, Chief Financial Officer
of CPI. “The refinancing of our senior notes provides stability to
our capital structure and supports our efforts to drive long-term
growth.”
Outlook for 2024
The Company updated its net sales outlook for 2024 to a
mid-single digit increase, compared to the previous outlook of a
slight increase. The increase in the sales outlook was driven by
strong Prepaid growth and improved trends in debit and credit card
sales.
The Company maintained its Adjusted EBITDA outlook of a slight
increase for the full year as profit growth in the second half is
expected to be lower than sales growth due to certain anticipated
impacts to SG&A, including investments to grow the business and
increased performance-related compensation relative to 2023.
The Free Cash Flow outlook was maintained at approximately half
of the 2023 level. The Company generated $27.6 million of Free Cash
Flow in 2023 and expects lower levels in 2024 due to increased
capital spending investment, including investment in a new
state-of-the-art secure card production facility in Indiana, and
the impact of a contract with one of the Company’s larger
customers, which should benefit cash flow through 2029, but
negatively impact Free Cash Flow in 2024 due to up-front
incentives.
The Company continues to expect 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 August 5,
2024 at 4:30 p.m. Eastern Time (ET) to review its second quarter
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 Q2 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 August
19, 2024 at: U.S. dial-in number (toll free): 800-770-2030
International: 609-800-9909 Conference ID: 8062733
A webcast replay of the conference call will also be available
on CPI Card Group Inc.’s Investor Relations website:
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 executive
retention and severance; costs related to production facility
modernization efforts; 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 make
principal payments on outstanding debt and financing lease
liabilities. 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 technology 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 “Exchange Act”). The words “believe,” “estimate,”
“project,” “expect,” “anticipate,” “affirm,” “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, 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 in Part II, Item 1A – Risk Factors of our
Quarterly Report on Form 10-Q 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 and
six months ended June 30, 2024 and 2023
Exhibit B
Condensed Consolidated Balance Sheets –
Unaudited as of June 30, 2024 and December 31, 2023
Exhibit C
Condensed Consolidated Statements of Cash
Flows – Unaudited for the six months ended June 30, 2024 and
2023
Exhibit D
Segment Summary Information – Unaudited
for the three and six months ended June 30, 2024 and 2023
Exhibit E
Supplemental GAAP to Non-GAAP
Reconciliations – Unaudited for the three and six months ended June
30, 2024 and 2023
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 June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Net sales:
Products
$
63,844
$
63,946
$
122,002
$
139,736
Services
54,974
51,014
108,752
96,076
Total net sales
118,818
114,960
230,754
235,812
Cost of sales:
Products (exclusive of depreciation and
amortization shown below)
41,893
41,308
79,695
87,288
Services (exclusive of depreciation and
amortization shown below)
31,743
30,214
61,672
59,618
Depreciation and amortization
2,794
2,613
5,481
4,987
Total cost of sales
76,430
74,135
146,848
151,893
Gross profit
42,388
40,825
83,906
83,919
Operating expenses:
Selling, general and administrative
(exclusive of depreciation and amortization shown below)
26,225
21,885
52,268
42,951
Depreciation and amortization
1,254
1,448
2,584
2,878
Total operating expenses
27,479
23,333
54,852
45,829
Income from operations
14,909
17,492
29,054
38,090
Other expense, net:
Interest, net
(6,530
)
(6,740
)
(12,955
)
(13,521
)
Other expense, net
(78
)
(78
)
(143
)
(192
)
Total other expense, net
(6,608
)
(6,818
)
(13,098
)
(13,713
)
Income before income taxes
8,301
10,674
15,956
24,377
Income tax expense
(2,300
)
(4,151
)
(4,500
)
(6,981
)
Net income
$
6,001
$
6,523
$
11,456
$
17,396
Basic and diluted earnings per share:
Basic earnings per share
$
0.54
$
0.57
$
1.03
$
1.52
Diluted earnings per share
$
0.51
$
0.55
$
0.97
$
1.46
Basic weighted-average shares
outstanding
11,049,968
11,427,404
11,158,334
11,411,162
Diluted weighted-average shares
outstanding
11,776,894
11,876,568
11,817,584
11,888,219
Comprehensive income:
Net income
$
6,001
$
6,523
$
11,456
$
17,396
Total comprehensive income
$
6,001
$
6,523
$
11,456
$
17,396
EXHIBIT B
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(in thousands, except share
and per share amounts)
(Unaudited)
June 30,
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
7,479
$
12,413
Accounts receivable, net
76,425
73,724
Inventories, net
85,907
70,594
Prepaid expenses and other current
assets
9,934
8,647
Total current assets
179,745
165,378
Plant, equipment, leasehold improvements
and operating lease right-of-use assets, net
60,773
63,053
Intangible assets, net
12,245
14,122
Goodwill
47,150
47,150
Other assets
21,533
3,980
Total assets
$
321,446
$
293,683
Liabilities and stockholders’
deficit
Current liabilities:
Accounts payable
$
20,279
$
12,802
Accrued expenses
47,350
35,803
Deferred revenue and customer deposits
1,320
840
Total current liabilities
68,949
49,445
Long-term debt
269,654
264,997
Deferred income taxes
4,958
7,139
Other long-term liabilities
22,442
24,038
Total liabilities
366,003
345,619
Commitments and contingencies
Series A Preferred Stock; $0.001 par
value—100,000 shares authorized; 0 shares issued and outstanding at
June 30, 2024 and December 31, 2023
—
—
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000
shares authorized; 11,186,596 and 11,446,155 shares issued and
outstanding at June 30, 2024 and December 31, 2023,
respectively
11
11
Capital deficiency
(106,300
)
(102,223
)
Accumulated earnings
61,732
50,276
Total stockholders’ deficit
(44,557
)
(51,936
)
Total liabilities and stockholders’
deficit
$
321,446
$
293,683
EXHIBIT C
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Six Months Ended June
30,
2024
2023
Operating activities
Net income
$
11,456
$
17,396
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense
6,188
5,931
Amortization expense
1,877
1,934
Stock-based compensation expense
5,154
1,831
Amortization of debt issuance costs and
debt discount
917
936
Loss on debt extinguishment
—
218
Deferred income taxes
(2,181
)
426
Other, net
302
253
Changes in operating assets and
liabilities:
Accounts receivable, net
(2,720
)
5,287
Inventories
(15,584
)
(7,351
)
Prepaid expenses and other assets
(20,316
)
(1,381
)
Income taxes, net
1,598
(772
)
Accounts payable
7,079
(1,758
)
Accrued expenses and other liabilities
9,858
(9,784
)
Deferred revenue and customer deposits
480
(2,844
)
Cash provided by operating activities
4,108
10,322
Investing activities
Capital expenditures for plant, equipment
and leasehold improvements, net
(2,744
)
(6,594
)
Other
—
128
Cash used in investing activities
(2,744
)
(6,466
)
Financing activities
Principal payments on 2026 Senior
Notes
—
(14,877
)
Proceeds from 2026 ABL Revolver
4,000
13,000
Payments on finance lease obligations
(2,413
)
(1,739
)
Common stock repurchased
(6,481
)
—
Other
(1,404
)
(120
)
Cash used in financing activities
(6,298
)
(3,736
)
Effect of exchange rates on cash
—
11
Net (decrease) increase in cash and cash
equivalents
(4,934
)
131
Cash and cash equivalents, beginning of
period
12,413
11,037
Cash and cash equivalents, end of
period
$
7,479
$
11,168
Supplemental disclosures of cash flow
information
Cash paid (refunded) during the period
for:
Interest
$
12,332
$
13,135
Income taxes paid
$
6,481
$
7,408
Income taxes refunded
$
(272
)
$
(26
)
Right-of-use assets obtained in exchange
for lease obligations:
Operating leases
$
1,292
$
168
Financing leases
$
983
$
2,169
Accounts payable and accrued expenses for
capital expenditures for plant, equipment and leasehold
improvements
$
500
$
368
Unsettled share repurchases included in
accrued expenses
$
2,197
$
—
EXHIBIT D
CPI Card Group Inc. and
Subsidiaries
Segment Summary
Information
For the Three and Six Months
Ended June 30, 2024 and 2023
(dollars in thousands)
(Unaudited)
Net Sales
Three Months Ended June
30,
2024
2023
$ Change
% Change
Net sales by segment:
Debit and Credit
$
95,620
$
93,194
$
2,426
2.6
%
Prepaid Debit
23,815
21,821
1,994
9.1
%
Eliminations
(617
)
(55
)
(562
)
*
%
Total
$
118,818
$
114,960
$
3,858
3.4
%
* Calculation not meaningful
Six Months Ended June
30,
2024
2023
$ Change
% Change
Net sales by segment:
Debit and Credit
$
183,593
$
195,179
$
(11,586
)
(5.9
)%
Prepaid Debit
48,013
40,951
7,062
17.2
%
Eliminations
(852
)
(318
)
(534
)
*
%
Total
$
230,754
$
235,812
$
(5,058
)
(2.1
)%
Gross Profit
Three Months Ended June
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
34,164
35.7
%
$
33,038
35.5
%
$
1,126
3.4
%
Prepaid Debit
8,224
34.5
%
7,787
35.7
%
437
5.6
%
Total
$
42,388
35.7
%
$
40,825
35.5
%
$
1,563
3.8
%
Six Months Ended June
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
65,659
35.8
%
$
71,222
36.5
%
$
(5,563
)
(7.8
)%
Prepaid Debit
18,247
38.0
%
12,697
31.0
%
5,550
43.7
%
Total
$
83,906
36.4
%
$
83,919
35.6
%
$
(13
)
(0.0
)%
Income from Operations
Three Months Ended June
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
Debit and Credit
$
25,389
26.6
%
$
25,081
26.9
%
$
308
1.2
%
Prepaid Debit
6,909
29.0
%
7,628
35.0
%
(719
)
(9.4
)%
Other
(17,389
)
*
%
(15,217
)
*
%
(2,172
)
14.3
%
Total
$
14,909
12.5
%
$
17,492
15.2
%
$
(2,583
)
(14.8
)%
Six Months Ended June
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
Debit and Credit
$
48,143
26.2
%
$
55,107
28.2
%
$
(6,964
)
(12.6
)%
Prepaid Debit
15,654
32.6
%
11,305
27.6
%
4,349
38.5
%
Other
(34,743
)
*
%
(28,322
)
*
%
(6,421
)
22.7
%
Total
$
29,054
12.6
%
$
38,090
16.2
%
$
(9,036
)
(23.7
)%
EBITDA
Three Months Ended June
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
EBITDA by segment:
Debit and Credit
$
27,625
28.9
%
$
27,455
29.5
%
$
170
0.6
%
Prepaid Debit
7,803
32.8
%
8,333
38.2
%
(530
)
(6.4
)%
Other
(16,549
)
*
%
(14,313
)
*
%
(2,236
)
15.6
%
Total
$
18,879
15.9
%
$
21,475
18.7
%
$
(2,596
)
(12.1
)%
Six Months Ended June
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
EBITDA by segment:
Debit and Credit
$
52,467
28.6
%
$
59,647
30.6
%
$
(7,180
)
(12.0
)%
Prepaid Debit
17,418
36.3
%
12,634
30.9
%
4,784
37.9
%
Other
(32,909
)
*
%
(26,518
)
*
%
(6,391
)
24.1
%
Total
$
36,976
16.0
%
$
45,763
19.4
%
$
(8,787
)
(19.2
)%
Reconciliation of Income (Loss)
from
Operations by Segment to EBITDA by
Segment
Three Months Ended June 30,
2024
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
25,389
$
6,909
$
(17,389
)
$
14,909
Depreciation and amortization
2,237
895
916
4,048
Other income (expenses)
(1
)
(1
)
(76
)
(78
)
EBITDA
$
27,625
$
7,803
$
(16,549
)
$
18,879
Three Months Ended June 30,
2023
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
25,081
$
7,628
$
(15,217
)
$
17,492
Depreciation and amortization
2,353
704
1,004
4,061
Other income (expenses)
21
1
(100
)
(78
)
EBITDA
$
27,455
$
8,333
$
(14,313
)
$
21,475
Six Months Ended June 30,
2024
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
48,143
$
15,654
$
(34,743
)
$
29,054
Depreciation and amortization
4,387
1,766
1,912
8,065
Other income (expenses)
(63
)
(2
)
(78
)
(143
)
EBITDA
$
52,467
$
17,418
$
(32,909
)
$
36,976
Six Months Ended June 30,
2023
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
55,107
$
11,305
$
(28,322
)
$
38,090
Depreciation and amortization
4,514
1,328
2,023
7,865
Other income (expenses)
26
1
(219
)
(192
)
EBITDA
$
59,647
$
12,634
$
(26,518
)
$
45,763
EXHIBIT E
CPI Card Group Inc. and
Subsidiaries
Supplemental GAAP to Non-GAAP
Reconciliation
(dollars in thousands)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
EBITDA and Adjusted EBITDA:
Net income
$
6,001
$
6,523
$
11,456
$
17,396
Interest, net
6,530
6,740
12,955
13,521
Income tax expense
2,300
4,151
4,500
6,981
Depreciation and amortization
4,048
4,061
8,065
7,865
EBITDA
$
18,879
$
21,475
$
36,976
$
45,763
Adjustments to EBITDA:
Stock-based compensation expense
$
2,094
$
1,290
$
5,154
$
1,831
Sales tax (benefit) expense (1)
—
(78
)
—
35
Restructuring and other charges (2)
939
557
2,758
557
Loss on debt extinguishment (3)
—
99
—
218
Foreign currency gain
—
(21
)
—
(26
)
Subtotal of adjustments to EBITDA
$
3,033
$
1,847
$
7,912
$
2,615
Adjusted EBITDA
$
21,912
$
23,322
$
44,888
$
48,378
Net income margin (% of Net sales)
5.1
%
5.7
%
5.0
%
7.4
%
Net income growth (% Change 2024 vs.
2023)
(8.0
)%
(34.1
)%
Adjusted EBITDA margin (% of Net
sales)
18.4
%
20.3
%
19.5
%
20.5
%
Adjusted EBITDA growth (% Change 2024 vs.
2023)
(6.0
)%
(7.2
)%
Three Months Ended June
30,
Six Months Ended June
30,
2024
2023
2024
2023
Free Cash Flow:
Cash (used in) provided by operating
activities
$
(4,757
)
$
2,321
$
4,108
$
10,322
Capital expenditures for plant, equipment
and leasehold improvements, net
(1,238
)
(2,449
)
(2,744
)
(6,594
)
Free Cash Flow
$
(5,995
)
$
(128
)
$
1,364
$
3,728
____________________
(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)
Represents executive retention and
severance costs, as well as costs related to production facility
modernization efforts.
(3)
The Company redeemed a portion of the
8.625% Senior Secured Notes due 2026 in 2023 and expensed the
associated portion of the unamortized deferred financing costs.
Last Twelve Months
Ended
June 30,
December 31,
2024
2023
Reconciliation of net income to LTM
EBITDA and Adjusted EBITDA:
Net income
$
18,045
$
23,985
Interest, net
26,347
26,913
Income tax expense
7,996
10,477
Depreciation and amortization
16,131
15,931
EBITDA
$
68,519
$
77,306
Adjustments to EBITDA:
Stock-based compensation expense
$
10,830
$
7,507
Sales tax benefit (1)
(105
)
(70
)
Restructuring and other charges (2)
6,732
4,531
Loss on debt extinguishment (3)
25
243
Foreign currency gain
—
(26
)
Subtotal of adjustments to EBITDA
$
17,482
$
12,185
LTM Adjusted EBITDA
$
86,001
$
89,491
As of
June 30,
December 31,
2024
2023
Calculation of Net Leverage
Ratio:
2026 Senior Notes
$
267,897
$
267,897
2026 ABL revolver
4,000
—
Finance lease obligations
16,663
18,106
Total debt
288,560
286,003
Less: Cash and cash equivalents
(7,479
)
(12,413
)
Total net debt (a)
$
281,081
$
273,590
LTM Adjusted EBITDA (b)
$
86,001
$
89,491
Net Leverage Ratio (a)/(b)
3.3
3.1
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240805035357/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
