Net Sales Increased 18% to $125 Million and
Full Year Sales Outlook Increased
Growth Across Portfolio, Led by Strong Sales of
Debit and Credit Cards
Net Income Decreased 66% to $1 Million,
Impacted by Debt Refinancing Costs; Adjusted EBITDA Increased 18%
to $25 Million
Full Year Adjusted EBITDA and Free Cash Flow
Outlooks Increased
CPI Card Group Inc. (Nasdaq: PMTS) (“CPI” or the “Company”), a
payments technology company providing a comprehensive range of
payment card and digital solutions, including
Software-as-a-Service-based instant issuance, today reported
financial results for the third quarter ended September 30, 2024
and updated its financial outlook for 2024.
Third quarter net sales increased 18% to $124.8 million compared
to the prior year period, with strong growth in both the Debit and
Credit and Prepaid segments. Net income decreased 66% to $1.3
million, reflecting the impact of $8.8 million of pre-tax debt
refinancing costs, and Adjusted EBITDA increased 18% to $25.1
million, driven by net sales growth.
Sales performance in the quarter was driven by strong growth in
debit and credit card sales, as well as continued growth from
Prepaid, instant issuance solutions and other card personalization
services. Product sales increased 25% in the third quarter, led by
sales of contactless cards, while services sales increased 10%. For
the first nine months of the year total net sales increased 4%.
“We are very pleased to deliver strong growth in the quarter,
including 19% growth in our Debit and Credit segment, even as
channel inventories continue to be worked down,” said John Lowe,
President and Chief Executive Officer. “We are maintaining momentum
with our solutions across the CPI portfolio and believe we are
winning business in the market.”
Lowe added, “We are advancing CPI’s growth strategies and
continue to offer our customers additional products and services as
we gain more traction with our digital solutions and in adjacent
markets.”
The Company updated its financial outlook for 2024, increasing
its full-year expectations for net sales to mid-to-high
single-digit growth and for Adjusted EBITDA to low single-digit
growth. The previous outlook was a mid-single digit net sales
increase and a slight increase in Adjusted EBITDA. The Company also
increased its Free Cash Flow outlook for the year.
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 9% for the three-year
period ending June 30, 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 debit and credit cards sold since launch.
- 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 continued to advance its market expansion
strategies, adding new digital solutions offerings for its
customers including push provisioning capabilities for mobile
wallets.
- The Company executed $9 million of share repurchases through
the third quarter of 2024.
- CPI completed a debt refinancing in the third quarter, issuing
$285 million aggregate principal amount of 10.000% Senior Secured
Notes due 2029 and entering into a new $75 million ABL revolving
credit facility, while redeeming the $268 million aggregate
principal amount of 8.625% Senior Secured Notes due 2026.
- The Company completed a secondary offering of 1.38 million
shares of common stock sold by its majority stockholder group,
reducing the stockholder group’s ownership position from 56% of
shares outstanding to 43%.
Third Quarter 2024 Financial Highlights
Net sales increased 18% year-over-year to $124.8 million in the
third quarter of 2024.
- Debit and Credit segment net sales increased 19% to $99.8
million, driven by strong contactless card sales led by eco-focused
cards, as well as continued growth in Card@Once® instant issuance
solutions and other card personalization services.
- Prepaid Debit segment net sales increased 13% to $25.2 million,
reflecting strong sales to existing customers.
Third quarter gross profit increased 24% to $44.7 million and
gross profit margin of 35.8% increased from 34.1% in the prior year
third quarter, driven by operating leverage from sales growth.
Third quarter income from operations increased 37% to $17.8
million, driven by strong sales growth and gross margin
improvement. Net income decreased 66% to $1.3 million, or $0.11
diluted earnings per share, due to pre-tax debt refinancing costs
of $8.8 million, or approximately $0.55 per share after-tax,
including interest expense related to a call premium on the $268
million of 8.625% Senior Notes due 2026 redeemed in the third
quarter, partially offset by a tax benefit recorded in the quarter.
Adjusted EBITDA increased 18% to $25.1 million.
Year-to-date 2024 Financial Highlights
Net sales increased 4% year-over-year to $355.5 million in the
first nine months of 2024.
- Debit and Credit segment net sales increased 2% to $283.3
million, driven by increased sales of contactless cards, led by
eco-focused cards, and growth in Card@Once® instant issuance
solutions and other card personalization services, partially offset
by lower sales of other cards.
- Prepaid Debit segment net sales increased 16% to $73.2 million,
reflecting strong sales to existing customers.
Year-to-date gross profit increased 7% to $128.6 million and
gross profit margin increased from 35.1% in the prior year to
36.2%.
Year-to-date income from operations decreased 8% to $46.9
million due to increased compensation expenses, including CEO
transition-related expenses and increased performance-based
employee incentive compensation expense. Net income decreased 40%
to $12.7 million, or $1.08 diluted earnings per share, primarily
due to debt refinancing costs. Adjusted EBITDA increased 1% to
$70.0 million.
Balance Sheet, Liquidity and Cash Flow
The Company generated cash from operating activities of $16.7
million in the first nine months of 2024, which compared to $22.3
million in the 2023 period, and Free Cash Flow of $12.5 million,
which compared to $16.2 million in the prior year. The decrease in
cash generation compared to the prior year was primarily driven by
increased working capital usage, including increased inventory
purchases of contactless chips, partially offset by lower capital
expenditures.
As of September 30, 2024, cash and cash equivalents was $14.7
million. There were $285 million of 10% Senior Secured Notes due
2029 and no borrowings from the ABL revolving credit facility
outstanding at quarter-end.
In the third quarter, the Company completed a refinancing of its
debt, issuing $285 million of new 10% Senior Secured Notes due 2029
and entering into a new $75 million ABL revolving credit facility.
The Company used the proceeds from the notes offering to redeem the
remaining $267.9 million principal balance of its 8.625% Senior
Secured Notes due 2026 and to pay related fees and expenses.
Refinancing costs recorded in the third quarter totaled $8.8
million, including $5.8 million of interest expense related to the
2.156% early redemption premium on the Company’s retired 8.625%
Senior Notes due 2026 and a $3 million loss on debt extinguishment
related to unamortized deferred financing costs in connection with
the redemption of the notes and the termination of the prior ABL
revolving credit facility.
Also in the third quarter, the Company spent $2.2 million to
purchase 120,534 shares of its common stock from its majority
stockholder group pursuant to a Stock Repurchase Agreement
announced in March, which committed the Company to purchase shares
from its majority stockholder group at a 3 to 1 ratio to the number
of shares repurchased in the open market in the second quarter.
The Company continues to focus its capital structure and
allocation priorities on investing in the business, including
strategic acquisitions; deleveraging the balance sheet; and
returning funds to stockholders.
On September 30th, the Company announced a secondary public
offering of shares of its common stock to be sold by its majority
stockholder group. The 1.38 million share offering closed on
October 2, 2024. The Company did not offer any shares of common
stock in the offering and did not receive any proceeds from the
sale of common stock by the selling stockholders.
“We delivered strong third quarter sales and profit growth,
while continuing to invest in our expansion strategies,” said Jeff
Hochstadt, Chief Financial Officer of CPI. “We also effectively
extended maturities on our debt and completed a secondary offering
of common stock, which should benefit trading liquidity over
time.”
Outlook for 2024
The Company updated its outlook for 2024 to mid-to-high
single-digit net sales growth and low single-digit Adjusted EBITDA
growth. The prior outlook was a mid-single digit net sales increase
and a slight increase in Adjusted EBITDA. The increase in the net
sales outlook was driven by strength across CPI’s portfolio.
The Free Cash Flow outlook was updated to be slightly below the
2023 level, compared to the previous outlook of approximately half
of the 2023 level, primarily due to working capital improvements,
lower expected capital spending, and a lower tax rate relative to
the previous outlook.
The Company now expects its year-end 2024 Net Leverage Ratio to
be similar to the 2023 year-end level, compared to a previous
outlook of between 3.0x and 3.5x.
Conference Call and Webcast
CPI Card Group Inc. will hold a conference call on November 5,
2024 at 4:30 p.m. Eastern Time (ET) to review its third 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 Card Group Q3
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 November
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 payment card and digital solutions,
including Software-as-a-Service-based 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,
all located in the United States. CPI 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 our significant stockholder group’s 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 significant stockholder group; 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
significant stockholder group 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 for the year ended
December 31, 2023 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
nine months ended September 30, 2024 and 2023
Exhibit B
Condensed Consolidated Balance Sheets –
Unaudited as of September 30, 2024 and December 31, 2023
Exhibit C
Condensed Consolidated Statements of Cash
Flows – Unaudited for the nine months ended September 30, 2024 and
2023
Exhibit D
Segment Summary Information – Unaudited
for the three and nine months ended September 30, 2024 and 2023
Exhibit E
Supplemental GAAP to Non-GAAP
Reconciliations – Unaudited for the three and nine months ended
September 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 September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net sales:
Products
$
69,648
$
55,689
$
191,650
$
195,425
Services
55,103
50,174
163,855
146,250
Total net sales
124,751
105,863
355,505
341,675
Cost of sales:
Products (exclusive of depreciation and
amortization shown below)
44,199
37,540
123,894
124,828
Services (exclusive of depreciation and
amortization shown below)
32,927
29,574
94,599
89,192
Depreciation and amortization
2,927
2,597
8,408
7,584
Total cost of sales
80,053
69,711
226,901
221,604
Gross profit
44,698
36,152
128,604
120,071
Operating expenses:
Selling, general and administrative
(exclusive of depreciation and amortization shown below)
25,674
21,783
77,942
64,734
Depreciation and amortization
1,226
1,408
3,810
4,286
Total operating expenses
26,900
23,191
81,752
69,020
Income from operations
17,798
12,961
46,852
51,051
Other expense, net:
Interest, net
(13,458
)
(6,714
)
(26,413
)
(20,235
)
Loss on debt extinguishment
(2,987
)
(25
)
(2,987
)
(243
)
Other expense, net
(534
)
(28
)
(677
)
(2
)
Total other expense, net
(16,979
)
(6,767
)
(30,077
)
(20,480
)
Income before income taxes
819
6,194
16,775
30,571
Income tax benefit (expense)
474
(2,337
)
(4,026
)
(9,318
)
Net income
$
1,293
$
3,857
$
12,749
$
21,253
Basic and diluted earnings per share:
Basic earnings per share
$
0.12
$
0.34
$
1.14
$
1.86
Diluted earnings per share
$
0.11
$
0.33
$
1.08
$
1.79
Basic weighted-average shares
outstanding
11,107,126
11,432,794
11,141,264
11,418,372
Diluted weighted-average shares
outstanding
11,872,783
11,827,816
11,856,404
11,861,868
Comprehensive income:
Net income
$
1,293
$
3,857
$
12,749
$
21,253
Total comprehensive income
$
1,293
$
3,857
$
12,749
$
21,253
EXHIBIT B
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(in thousands, except share
and per share amounts)
(Unaudited)
September 30,
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
14,650
$
12,413
Accounts receivable, net
79,583
73,724
Inventories, net
92,286
70,594
Prepaid expenses and other current
assets
12,295
8,647
Total current assets
198,814
165,378
Plant, equipment, leasehold improvements
and operating lease right-of-use assets, net
64,073
63,053
Intangible assets, net
11,352
14,122
Goodwill
47,150
47,150
Other assets
20,960
3,980
Total assets
$
342,349
$
293,683
Liabilities and stockholders’
deficit
Current liabilities:
Accounts payable
$
21,538
$
12,802
Accrued expenses
52,107
35,803
Deferred revenue and customer deposits
1,466
840
Total current liabilities
75,111
49,445
Long-term debt
280,152
264,997
Deferred income taxes
5,057
7,139
Other long-term liabilities
24,820
24,038
Total liabilities
385,140
345,619
Commitments and contingencies
Series A Preferred Stock; $0.001 par
value—100,000 shares authorized; 0 shares issued and outstanding at
September 30, 2024 and December 31, 2023
—
—
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000
shares authorized; 11,159,418 and 11,446,155 shares issued and
outstanding at September 30, 2024 and December 31, 2023,
respectively
11
11
Capital deficiency
(105,827
)
(102,223
)
Accumulated earnings
63,025
50,276
Total stockholders’ deficit
(42,791
)
(51,936
)
Total liabilities and stockholders’
deficit
$
342,349
$
293,683
EXHIBIT C
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended September
30,
2024
2023
Operating activities
Net income
$
12,749
$
21,253
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense
9,448
8,970
Amortization expense
2,770
2,900
Stock-based compensation expense
6,936
4,431
Amortization of debt issuance costs
1,206
1,397
Loss on early extinguishment of debt
8,763
243
Deferred income taxes and other, net
(1,781
)
956
Changes in operating assets and
liabilities:
Accounts receivable, net
(5,878
)
12,988
Inventories
(21,964
)
(5,806
)
Prepaid expenses and other assets
(19,343
)
422
Income taxes, net
(602
)
(1,616
)
Accounts payable
8,326
(7,805
)
Accrued expenses and other liabilities
15,396
(13,283
)
Deferred revenue and customer deposits
626
(2,784
)
Cash provided by operating activities
16,652
22,266
Investing activities
Capital expenditures for plant, equipment
and leasehold improvements, net
(4,199
)
(6,076
)
Other
1
183
Cash used in investing activities
(4,198
)
(5,893
)
Financing activities
Principal payments on 2026 Senior
Notes
(267,897
)
(16,954
)
Proceeds from 2029 Senior Notes
285,000
—
Net proceeds from ABL Revolver
—
3,000
Payments on finance lease obligations
(3,688
)
(2,655
)
Common stock repurchased
(8,678
)
—
Debt issuance costs
(6,583
)
—
Payment for debt early redemption
premium
(5,776
)
—
Taxes withheld and paid on stock-based
compensation awards
(2,595
)
(327
)
Cash used in financing activities
(10,217
)
(16,936
)
Effect of exchange rates on cash
—
(1
)
Net increase (decrease) in cash and cash
equivalents
2,237
(564
)
Cash and cash equivalents, beginning of
period
12,413
11,037
Cash and cash equivalents, end of
period
$
14,650
$
10,473
Supplemental disclosures of cash flow
information
Cash paid (refunded) during the period
for:
Interest
$
25,128
$
25,307
Income taxes paid
$
8,247
$
9,994
Income taxes refunded
$
(409
)
$
(25
)
Right-of-use assets obtained in exchange
for lease obligations:
Operating leases
$
1,292
$
2,641
Financing leases
$
5,690
$
6,989
Accounts payable and accrued expenses for
capital expenditures for plant, equipment and leasehold
improvements
$
1,527
$
977
Unsettled share repurchases included in
accrued expenses
$
—
$
—
EXHIBIT D
CPI Card Group Inc. and
Subsidiaries
Segment Summary
Information
For the Three and Nine Months
Ended September 30, 2024 and 2023
(dollars in thousands)
(Unaudited)
Net Sales
Three Months Ended September
30,
2024
2023
$ Change
% Change
Net sales by segment:
Debit and Credit
$
99,755
$
83,780
$
15,975
19.1
%
Prepaid Debit
25,173
22,335
2,838
12.7
%
Eliminations
(177
)
(252
)
75
*
%
Total
$
124,751
$
105,863
$
18,888
17.8
%
* Calculation not meaningful
Nine Months Ended September
30,
2024
2023
$ Change
% Change
Net sales by segment:
Debit and Credit
$
283,348
$
278,959
$
4,389
1.6
%
Prepaid Debit
73,186
63,286
9,900
15.6
%
Eliminations
(1,029
)
(570
)
(459
)
*
%
Total
$
355,505
$
341,675
$
13,830
4.0
%
Gross Profit
Three Months Ended September
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
36,131
36.2
%
$
28,381
33.9
%
$
7,750
27.3
%
Prepaid Debit
8,567
34.0
%
7,771
34.8
%
796
10.2
%
Total
$
44,698
35.8
%
$
36,152
34.1
%
$
8,546
23.6
%
Nine Months Ended September
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
101,790
35.9
%
$
99,603
35.7
%
$
2,187
2.2
%
Prepaid Debit
26,814
36.6
%
20,468
32.3
%
6,346
31.0
%
Total
$
128,604
36.2
%
$
120,071
35.1
%
$
8,533
7.1
%
Income from Operations
Three Months Ended September
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
Debit and Credit
$
27,035
27.1
%
$
20,791
24.8
%
$
6,244
30.0
%
Prepaid Debit
7,111
28.2
%
6,631
29.7
%
480
7.2
%
Other
(16,348
)
*
%
(14,461
)
*
%
(1,887
)
13.0
%
Total
$
17,798
14.3
%
$
12,961
12.2
%
$
4,837
37.3
%
Nine Months Ended September
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
Debit and Credit
$
75,178
26.5
%
$
75,898
27.2
%
$
(720
)
(0.9
)%
Prepaid Debit
22,765
31.1
%
17,936
28.3
%
4,829
26.9
%
Other
(51,091
)
*
%
(42,783
)
*
%
(8,308
)
19.4
%
Total
$
46,852
13.2
%
$
51,051
14.9
%
$
(4,199
)
(8.2
)%
EBITDA
Three Months Ended September
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
EBITDA by segment:
Debit and Credit
$
29,264
29.3
%
$
23,086
27.6
%
$
6,178
26.8
%
Prepaid Debit
8,171
32.5
%
7,304
32.7
%
867
11.9
%
Other
(19,005
)
*
%
(13,477
)
*
%
(5,528
)
41.0
%
Total
$
18,430
14.8
%
$
16,913
16.0
%
$
1,517
9.0
%
Nine Months Ended September
30,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
EBITDA by segment:
Debit and Credit
$
81,731
28.8
%
$
82,733
29.7
%
$
(1,002
)
(1.2
)%
Prepaid Debit
25,589
35.0
%
19,938
31.5
%
5,651
28.3
%
Other
(51,914
)
*
%
(39,995
)
*
%
(11,919
)
29.8
%
Total
$
55,406
15.6
%
$
62,676
18.3
%
$
(7,270
)
(11.6
)%
Reconciliation of Income (Loss)
from
Operations by Segment to EBITDA by
Segment
Three Months Ended September
30, 2024
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
27,035
$
7,111
$
(16,348
)
$
17,798
Depreciation and amortization
2,198
1,061
894
4,153
Other income (expenses)
31
(1
)
(3,551
)
(3,521
)
EBITDA
$
29,264
$
8,171
$
(19,005
)
$
18,430
Three Months Ended September
30, 2023
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
20,791
$
6,631
$
(14,461
)
$
12,961
Depreciation and amortization
2,322
675
1,008
4,005
Other income (expenses)
(27
)
(2
)
(24
)
(53
)
EBITDA
$
23,086
$
7,304
$
(13,477
)
$
16,913
Nine Months Ended September
30, 2024
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
75,178
$
22,765
$
(51,091
)
$
46,852
Depreciation and amortization
6,585
2,827
2,806
12,218
Other income (expenses)
(32
)
(3
)
(3,629
)
(3,664
)
EBITDA
$
81,731
$
25,589
$
(51,914
)
$
55,406
Nine Months Ended September
30, 2023
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
75,898
$
17,936
$
(42,783
)
$
51,051
Depreciation and amortization
6,836
2,003
3,031
11,870
Other income (expenses)
(1
)
(1
)
(243
)
(245
)
EBITDA
$
82,733
$
19,938
$
(39,995
)
$
62,676
EXHIBIT E
CPI Card Group Inc. and
Subsidiaries
Supplemental GAAP to Non-GAAP
Reconciliation
(dollars in thousands)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
EBITDA and Adjusted EBITDA:
Net income
$
1,293
$
3,857
$
12,749
$
21,253
Interest, net (1)
13,458
6,714
26,413
20,235
Income tax (benefit) expense
(474
)
2,337
4,026
9,318
Depreciation and amortization
4,153
4,005
12,218
11,870
EBITDA
$
18,430
$
16,913
$
55,406
$
62,676
Adjustments to EBITDA:
Stock-based compensation expense
$
1,782
$
2,600
$
6,936
$
4,431
Sales tax expense (2)
—
—
—
35
Restructuring and other charges (3)
1,881
1,672
4,639
2,229
Loss on debt extinguishment (4)
2,987
25
2,987
243
Foreign currency loss
—
28
—
2
Subtotal of adjustments to EBITDA
$
6,650
$
4,325
$
14,562
$
6,940
Adjusted EBITDA
$
25,080
$
21,238
$
69,968
$
69,616
Net income margin (% of Net sales)
1.0
%
3.6
%
3.6
%
6.2
%
Net income growth (% Change 2024 vs.
2023)
(66.5
)%
(40.0
)%
Adjusted EBITDA margin (% of Net
sales)
20.1
%
20.1
%
19.7
%
20.4
%
Adjusted EBITDA growth (% Change 2024 vs.
2023)
18.1
%
0.5
%
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Free Cash Flow:
Cash provided by operating activities
$
12,544
$
11,944
$
16,652
$
22,266
Capital expenditures for plant, equipment
and leasehold improvements, net
(1,455
)
518
(4,199
)
(6,076
)
Free Cash Flow
$
11,089
$
12,462
$
12,453
$
16,190
____________________
(1)
The 2024 balance includes payment
of an early redemption premium of $5.8 million related to the
redemption of the 8.625% Senior Secured Notes due 2026.
(2)
Represents estimated sales tax
expense (benefit) 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.
(3)
Represents executive retention
and severance costs, as well as costs related to production
facility modernization efforts. The 2024 balance includes expenses
to be paid by the Company on behalf of the majority stockholder
group that entered into an underwriting agreement for the sale of
an aggregate of 1,380,000 shares of CPI common stock to the
public.
(4)
In July 2024, the Company
redeemed the entire principal balance of $267.9 million of the
8.625% Senior Secured Notes due 2026 and also repaid in full and
terminated a prior Credit Agreement with Wells Fargo Bank, N.A.
entered into in March 2021, and expensed the remaining unamortized
deferred financing costs. Additionally, 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
September 30,
December 31,
2024
2023
Reconciliation of net income to LTM
EBITDA and Adjusted EBITDA:
Net income
$
15,481
$
23,985
Interest, net (1)
33,091
26,913
Income tax expense
5,185
10,477
Depreciation and amortization
16,279
15,931
EBITDA
$
70,036
$
77,306
Adjustments to EBITDA:
Stock-based compensation expense
$
10,012
$
7,507
Sales tax benefit (2)
(105
)
(70
)
Restructuring and other charges (3)
6,941
4,531
Loss on debt extinguishment (4)
2,987
243
Foreign currency gain
(28
)
(26
)
Subtotal of adjustments to EBITDA
$
19,807
$
12,185
LTM Adjusted EBITDA
$
89,843
$
89,491
As of
September 30,
December 31,
2024
2023
Calculation of Net Leverage
Ratio:
2029 Senior Notes
$
285,000
$
—
2026 Senior Notes
—
267,897
Finance lease obligations
20,096
18,106
Total debt
305,096
286,003
Less: Cash and cash equivalents
(14,650
)
(12,413
)
Total net debt (a)
$
290,446
$
273,590
LTM Adjusted EBITDA (b)
$
89,843
$
89,491
Net Leverage Ratio (a)/(b)
3.2
3.1
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241105033398/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
