CPI Card Group Inc. Reports Second Quarter and First Half 2021 Results

Q2 Net Sales of $93.2 Million, Up 31% Year-Over-Year

Q2 Net Income of $6.2 Million, Up 387% Year-Over-Year

Q2 Adjusted EBITDA of $19.3 Million, Up 91% Year-Over-Year

New Customer Additions Contribute to Strong Growth

Stock Begins Trading on Nasdaq

CPI Card Group Inc. (Nasdaq: PMTS; TSX: PMTS) (“CPI” or the “Company”) today reported financial results for the second quarter and first half ended June 30, 2021.

“Our strong second quarter and first half results reflect the continued successful execution of our strategy, as demonstrated by on-boarding new customers, including in the growing FinTech space,” said Scott Scheirman, President and Chief Executive Officer of CPI. “Our focus on meeting our customers’ needs with high quality and differentiated products and solutions drove strong performance across our segments.”

Scheirman continued, “Our success reflects the commitment of our organization to be the partner of choice to our customers by providing market-leading quality products and customer service.”

First Half 2021 Business Highlights

CPI’s comprehensive end-to-end solutions contributed to earning new FinTech and traditional financial services customers.

CPI’s market leading quality and tamper-evident prepaid packaging solutions drove higher demand and volumes, including earning the prepaid portfolio of another large U.S. national chain.

We generated incremental net sales from customer demand for higher-priced contactless sales, as the U.S. payment card market continues its ongoing transition to contactless solutions.

We continued to lead the eco-focused payment card market, as evidenced by selling over 33 million eco-focused cards, including Second Wave®, since launch in 2019.

Our innovative personalization services also contributed to net sales growth over the prior year, including from our Card@Once® Software-as-a-Service instant issuance solutions and CPI On-Demand®.

The Company refinanced its debt, extending maturities and enhancing liquidity, and reduced outstanding debt by more than $30 million since December 31, 2020, resulting in net leverage ratio of less than 4x at June 30, 2021.

Second Quarter 2021 Financial Highlights

Net sales increased 31% year-over-year to $93.2 million in the second quarter of 2021.

Debit and Credit segment net sales increased 25% year-over-year to $72.9 million in the second quarter. Net sales growth was driven by new customers, and by the ongoing transition to higher-priced contactless card sales and related card personalization.

Prepaid Debit segment net sales increased 51% year-over-year to $20.4 million in the second quarter, primarily due to higher volumes from existing customers.

Net sales in the prior year second quarter were impacted by lower customer demand than expected in both segments, which CPI believes was primarily attributable to the COVID-19 pandemic.

Gross profit increased 61% year-over-year in the second quarter of 2021 to $37.1 million and gross profit margin increased to 39.8% compared to 32.3% in the prior year, primarily due to operating leverage.

Income from operations increased 218% year-over-year to $15.8 million in the second quarter of 2021, compared to $5.0 million in the prior year.

Second quarter 2021 net income was $6.2 million, or $0.53 earnings per diluted share, an increase of 387% year-over-year from net income of $1.3 million, or $0.11 earnings per diluted share, in the second quarter of 2020.

Adjusted EBITDA increased 91% year-over-year to $19.3 million in the second quarter as a result of net sales growth and operating leverage.

First Half 2021 Financial Highlights

Net sales increased 25% year-over-year to $182.3 million in the first half of 2021.

Debit and Credit segment net sales increased 21% year-over-year to $142.7 million in the first half of 2021. Net sales growth was driven by new customers and the ongoing transition to contactless card sales and related card personalization.

Prepaid Debit segment net sales increased 42% year-over-year to $39.8 million in the first half of 2021 due to higher volumes from our customers including the acquisition of new customer portfolios.

Net sales in the prior year were impacted by lower customer demand than expected in both segments, which CPI believes was primarily attributable to the COVID-19 pandemic.

First half 2021 gross profit increased 49% year-over-year to $72.8 million and gross profit margin increased to 39.9% from 33.5% in the prior year.

First half 2021 income from operations increased 169% year-over-year to $33.6 million, compared to $12.5 million in the prior year.

For the year-to-date period, net income was $8.6 million, or $0.74 earnings per diluted share, in 2021 compared to net income of $3.0 million, or $0.27 earnings per diluted share, in 2020, an increase of 185% year-over-year. Year-to-date net income and diluted earnings per share were adversely impacted by $5.0 million of debt extinguishment costs and $2.6 million of make-whole interest expense incurred during the first quarter of 2021 when the Company refinanced its debt.

Adjusted EBITDA increased 84% year-over-year to $41.4 million in the first half of 2021.

Balance Sheet, Liquidity, and Cash Flow

As of June 30, 2021, cash and cash equivalents was $30.7 million. Cash provided by operating activities in the first half of 2021 was $22.7 million, which is net of $15.6 million in inventory investments to support the business and includes $6.0 million in cash tax refunds primarily from CARES Act filings. Capital expenditures were $3.7 million in the first half of 2021, yielding Free Cash Flow of $19.0 million, an $8.6 million increase compared to the first half of 2020.

During the second quarter of 2021, the Company used $15 million of cash on hand to pay down the ABL Revolver to zero and had no borrowings outstanding thereunder as of June 30, 2021, consistent with the Company’s capital structure strategy to maintain ample liquidity, invest in the business and de-leverage the balance sheet. At quarter end, $50 million was available for borrowing under the ABL Revolver. Total long-term debt principal outstanding as of June 30, 2021 was comprised of the Company’s $310 million Senior Notes.

“Our excellent financial performance in the first half drove strong free cash flow, allowing us to reduce debt while continuing to make investments in the business,” said John Lowe, Chief Financial Officer. “We are proud of our first half growth and our recent listing on the Nasdaq stock exchange, and will continue to pursue our strategic initiatives and execute our business plan.”

Conference Call and Webcast

CPI Card Group Inc. will hold a conference call on August 12, 2021 at 9:00 a.m. Eastern Time (ET) to review its second quarter and first half of 2021 results. To participate in the Company's conference call via telephone or online:

Toll-Free Dial-In Number, U.S. Participants: (844) 200-6205 United States (Local): (646) 904 5544 All Other Locations: + 44 208 0682 558 Conference ID: 716604 Webcast Link: 2Q21 Earnings Webcast

Participants are advised to login for the webcast 10 minutes prior to the scheduled start time.

A replay of the conference call and webcast will be available until August 26, 2021 at: Toll-Free Dial-In Number, U.S. Participants: (844) 200-6205 International Dial-In Number: (646) 904-5544 Conference ID: 941788 Webcast replay: 2Q21 Earnings Webcast Replay

A webcast replay and transcript of the conference call will 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 stock-based compensation expense; estimated sales tax expense (benefit); restructuring and other charges; 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, nor does it reflect the cash impacts of discontinued operations. 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.

Net Leverage Ratio

Management and various investors use the ratio of total debt, 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 payment technology company and leading provider of credit, debit and prepaid solutions delivered physically, digitally and on-demand. CPI helps our customers foster connections and build their brands through innovative and reliable solutions, including financial payment cards, personalization and Software-as-a-Service (SaaS) instant issuance. CPI has more than 20 years of experience in the payments market and is a trusted partner to financial institutions and payments services providers. Serving customers from locations throughout the United States, CPI has a large network of high security facilities, each of which is registered as PCI compliant by one or more of the payment brands: Visa, Mastercard®, American Express® and Discover®. 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,” “guides,” “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: the potential effects of COVID-19 on our business, including our supply-chain, customer demand, workforce, operations and ability to comply with certain covenants in our indebtedness; a disruption or other failure in our supply chain or labor pool resulting in increased costs and inability to pass those costs on to our customers; our inability to recruit, retain and develop qualified personnel, including key personnel; our lack of eligibility to participate in government relief programs related to COVID-19 or inability to realize material benefits from such programs; 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 limited ability to raise capital in the future; the effects of current or additional U.S. government tariffs as well as economic downturns or disruptions, including delays or interruptions in our ability to source raw materials and components used in our products; 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 the data centers or computing infrastructure on which we rely; our transition to being an accelerated filer and complying with Section 404 of the Sarbanes-Oxley Act of 2002 and the costs associated with such compliance and implementation of procedures thereunder; failure to comply with regulations, customer contractual requirements and evolving industry standards regarding consumer privacy and data use and security; disruptions in production at one or more of our facilities; our failure to retain our existing customers or identify and attract new customers; 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; problems in production quality, materials and process; a loss of market share or a decline in profitability resulting from competition; our inability to develop, introduce and commercialize new products; 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; 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, as well as potential new U.S. tax legislation increasing the corporate income tax rate and challenges to our income tax positions; failure to meet the continued listing standards of the Toronto Stock Exchange or the Nasdaq Global Market; a decrease in the value of our common stock combined with our common stock not being traded on a United States national securities exchange, which may prevent investors or potential investors from investing or achieving a meaningful degree of liquidity; quarterly variation in our operating results; our inability to realize the full value of our long-lived assets; our failure to operate our business in accordance with the Payment Card Industry Security Standards Council security standards or other industry standards; a decline in U.S. and global market and economic conditions and resulting decreases in consumer and business spending; costs relating to product defects and any related product liability and/or warranty claims; our dependence on licensing arrangements; risks associated with international operations; non-compliance with, and changes in, laws in the United States and in foreign jurisdictions in which we operate and sell our products and services; the effect of legal and regulatory proceedings; our ability to comply with a wide variety of environmental, health and safety laws and regulations and the exposure to liability for any failure to comply; risks associated with the majority stockholders’ ownership of our stock; the influence of securities analysts over the trading market for and price of our common stock; our inability to sell, exit, reconfigure or consolidate businesses or facilities that no longer meet with our strategy; 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; 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; 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, 2020, in Part II, Item 1A – Risk Factors of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 and our other reports filed from time to time with the Securities and Exchange Commission (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, free of charge, the reports that the Company files or furnishes with the SEC, corporate governance information and press releases. CPI uses its investor relations site (http://investor.cpicardgroup.com) as a means of disclosing material information and for complying with its disclosure obligations under Regulation FD.

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, 2021 and 2020

Exhibit B

Condensed Consolidated Balance Sheets – Unaudited as of June 30, 2021 and December 31, 2020

Exhibit C

Condensed Consolidated Statements of Cash Flows - Unaudited for the six months ended June 30, 2021 and 2020

Exhibit D

Segment Summary Information – Unaudited for the three and six months ended June 30, 2021 and 2020

Exhibit E

Supplemental GAAP to Non-GAAP Reconciliations - Unaudited for the three and six months ended June 30, 2021 and 2020

EXHIBIT A

CPI Card Group Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

(Amounts in Thousands, Except Share and Per Share Amounts)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Net sales:

Products

47,156

39,077

94,169

81,578

Services

46,063

32,301

88,142

63,769

Total net sales

93,219

71,378

182,311

145,347

Cost of sales:

Products (exclusive of depreciation and amortization shown below)

27,928

25,911

55,215

52,290

Services (exclusive of depreciation and amortization shown below)

25,939

19,666

49,607

38,853

Depreciation and amortization

2,264

2,711

4,680

5,466

Total cost of sales

56,131

48,288

109,502

96,609

Gross profit

37,088

23,090

72,809

48,738

Operating expenses:

Selling, general and administrative (exclusive of depreciation and amortization shown below)

19,748

16,613

35,894

33,276

Depreciation and amortization

1,553

1,505

3,359

2,990

Total operating expenses

21,301

18,118

39,253

36,266

Income from operations

15,787

4,972

33,556

12,472

Other expense, net:

Interest, net

(7,037

)

(6,772

)

(16,013

)

(12,860

)

Other income (expense), net

(32

)

(35

)

Loss on debt extinguishment

—

(5,048

)

(92

)

Total other expense, net

(7,033

)

(6,804

)

(21,032

)

(12,987

)

Income (loss) from continuing operations before income taxes

8,754

(1,832

)

12,524

(515

)

Income tax (expense) benefit

(2,522

)

3,115

(3,882

)

3,580

Net income from continuing operations

6,232

1,283

8,642

3,065

Net loss from discontinued operations, net of tax

—

)

—

(30

)

Net income

6,232

1,279

8,642

3,035

Basic and diluted earnings per share:

Basic earnings per share from continuing operations:

0.55

0.11

0.77

0.27

Diluted earnings per share from continuing operations:

0.53

0.11

0.74

0.27

Basic earnings per share:

0.55

0.11

0.77

0.27

Diluted earnings per share:

0.53

0.11

0.74

0.27

Basic weighted-average shares outstanding:

11,233,002

11,229,819

11,231,742

11,227,160

Diluted weighted-average shares outstanding:

11,762,481

11,233,852

11,720,148

11,242,272

Comprehensive income:

Net income

6,232

1,279

8,642

3,035

Total comprehensive income

6,232

1,279

8,642

3,035

EXHIBIT B

CPI Card Group Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Amounts in Thousands, Except Share and Per Share Amounts)

(Unaudited)

June 30,

December 31,

2021

2020

Assets

Current assets:

Cash and cash equivalents

30,667

57,603

Accounts receivable, net of allowances of $237 and $289, respectively

55,979

54,592

Inventories

40,273

24,796

Prepaid expenses and other current assets

6,036

5,032

Income taxes receivable

2,522

10,511

Total current assets

135,477

152,534

Plant, equipment and leasehold improvements and operating lease right-of-use assets, net

39,257

39,403

Intangible assets, net

23,909

26,207

Goodwill

47,150

Other assets

2,575

857

Total assets

248,368

266,151

Liabilities and stockholders’ deficit

Current liabilities:

Accounts payable

20,778

18,883

Accrued expenses

31,809

28,149

Current portion of long-term debt

—

8,027

Deferred revenue and customer deposits

1,157

1,868

Total current liabilities

53,744

56,927

Long-term debt

302,877

328,681

Deferred income taxes

7,447

7,409

Other long-term liabilities

13,563

11,171

Total liabilities

377,631

404,188

Commitments and contingencies

Series A Preferred Stock; $0.001 par value—100,000 shares authorized; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020

—

Stockholders’ deficit:

Common stock; $0.001 par value—100,000,000 shares authorized; 11,237,056 and 11,230,482 shares issued and outstanding at June 30, 2021 and December 31, 2020

Capital deficiency

(111,726

)

(111,858

)

Accumulated loss

(17,548

)

(26,190

)

Total stockholders’ deficit

(129,263

)

(138,037

)

Total liabilities and stockholders’ deficit

248,368

266,151

EXHIBIT C

CPI Card Group Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Amounts in Thousands)

(Unaudited)

Six Months Ended June 30,

2021

2020

Operating activities

Net income

8,642

3,035

Adjustments to reconcile net income to net cash provided by operating activities:

Loss from discontinued operations

—

Depreciation and amortization expense

8,039

8,457

Stock-based compensation expense

Amortization of debt issuance costs and debt discount

1,393

1,565

Loss on debt extinguishment

5,048

Deferred income taxes

255

Other, net

142

1,199

Changes in operating assets and liabilities:

Accounts receivable

(1,384

)

(2,381

)

Inventories

(15,600

)

259

Prepaid expenses and other assets

(752

)

1,136

Income taxes receivable, net

7,989

(3,799

)

Accounts payable

2,548

(1,660

)

Accrued expenses

6,530

3,275

Deferred revenue and customer deposits

(715

)

629

Other liabilities

730

(105

)

Cash provided by operating activities - continuing operations

22,746

12,046

Cash used in operating activities - discontinued operations

—

(30

)

Investing activities

Capital expenditures for plant, equipment and leasehold improvements

(3,703

)

(1,644

)

Other

156

—

Cash used in investing activities

(3,547

)

(1,644

)

Financing activities

Principal payments on First Lien Term loan

(312,500

)

Principal payments on Senior Credit Facility

(30,000

)

Principal payments on ABL Revolver

(15,000

)

Proceeds from Senior Notes

310,000

Proceeds from ABL Revolver, net of discount

14,750

Proceeds from Senior Credit Facility, net of discount

29,100

Proceeds from exercises of stock options

Debt issuance costs

(9,452

)

(2,507

)

Payments on debt extinguishment

(2,685

)

Payments on finance lease obligations

(1,287

)

(1,181

)

Cash (used in) provided by financing activities

(46,140

)

25,412

Effect of exchange rates on cash

(21

)

Net (decrease) increase in cash and cash equivalents

(26,936

)

35,763

Cash and cash equivalents, beginning of period

57,603

18,682

Cash and cash equivalents, end of period

30,667

54,445

Supplemental disclosures of cash flow information

Cash paid (refunded) during the period for:

Interest

8,604

11,519

Income taxes paid

2,284

275

Income taxes (refunded)

(6,003

)

(259

)

Right-to-use assets obtained in exchange for lease obligations:

Operating leases

3,363

141

Financing leases

484

763

Accounts payable, and accrued expenses for capital expenditures for plant, equipment and leasehold improvements

399

528

EXHIBIT D

CPI Card Group Inc. and Subsidiaries

Segment Summary Information

For the Three and Six Months Ended June 30, 2021 and June 30, 2020

(Dollars in Thousands)

(Unaudited)

Net Sales

Three Months Ended June 30,

2021

2020

$ Change

% Change

Net sales by segment:

Debit and Credit

72,860

58,306

14,554

25.0

Prepaid Debit

20,383

13,536

6,847

50.6

Eliminations

(24

)

(464

)

440

Total

93,219

71,378

21,841

30.6

* Calculation not meaningful

Six Months Ended June 30,

2021

2020

$ Change

% Change

Net sales by segment:

Debit and Credit

142,677

118,145

24,532

20.8

Prepaid Debit

39,841

28,076

11,765

41.9

Eliminations

(207

)

(874

)

667

Total

182,311

145,347

36,964

25.4

* Calculation not meaningful

Gross Profit

Three Months Ended June 30,

2021

% of Net Sales

2020

% of Net Sales

$ Change

% Change

Gross profit by segment:

Debit and Credit

28,263

38.8

18,553

31.8

9,710

52.3

Prepaid Debit

8,825

43.3

4,537

33.5

4,288

94.5

Total

37,088

39.8

23,090

32.3

13,998

60.6

Six Months Ended June 30,

2021

% of Net Sales

2020

% of Net Sales

$ Change

% Change

Gross profit by segment:

Debit and Credit

55,812

39.1

38,961

33.0

16,851

43.3

Prepaid Debit

16,997

42.7

9,777

34.8

7,220

73.8

Total

72,809

39.9

48,738

33.5

24,071

49.4

Income from Operations

Three Months Ended June 30,

2021

% of Net Sales

2020

% of Net Sales

$ Change

% Change

Income (loss) from operations by segment:

Debit and Credit

20,258

27.8

10,704

18.4

9,554

89.3

Prepaid Debit

7,550

37.0

3,434

25.4

4,116

119.9

Other

(12,021

)

(9,166

)

(2,855

)

31.1

Total

15,787

16.9

4,972

7.0

10,815

217.5

* Calculation not meaningful

Six Months Ended June 30,

2021

% of Net Sales

2020

% of Net Sales

$ Change

% Change

Income (loss) from operations by segment:

Debit and Credit

40,412

28.3

23,180

19.6

17,232

74.3

Prepaid Debit

14,568

36.6

7,550

26.9

7,018

93.0

Other

(21,424

)

(18,258

)

(3,166

)

17.3

Total

33,556

18.4

12,472

8.6

21,084

169.1

* Calculation not meaningful

EBITDA

Three Months Ended June 30,

2021

% of Net Sales

2020

% of Net Sales

$ Change

% Change

EBITDA by segment:

Debit and Credit

22,322

30.6

13,121

22.5

9,201

70.1

Prepaid Debit

8,106

39.8

3,982

29.4

4,124

103.6

Other

(10,820

)

(7,947

)

(2,873

)

36.2

Total

19,608

21.0

9,156

12.8

10,452

114.2

* Calculation not meaningful

Six Months Ended June 30,

2021

% of Net Sales

2020

% of Net Sales

$ Change

% Change

EBITDA by segment:

Debit and Credit

44,722

31.3

28,080

23.8

16,642

59.3

Prepaid Debit

15,679

39.4

8,642

30.8

7,037

81.4

Other

(23,825

)

(15,921

)

(7,904

)

49.6

Total

36,576

20.1

20,801

14.3

15,775

75.8

* Calculation not meaningful

Reconciliation of Income (loss) from

Operations by Segment to EBITDA by Segment

Three Months Ended June 30, 2021

Debit and Credit

Prepaid Debit

Other

Total

EBITDA by segment:

Income (loss) from operations

20,258

)

7,550

(12,021

)

15,787

)

Depreciation and amortization

2,060

558

1,199

3,817

Other income (expenses)

)

EBITDA

22,322

8,106

(10,820

)

19,608

Three Months Ended June 30, 2020

Debit and Credit

Prepaid Debit

Other

Total

EBITDA by segment:

Income (loss) from operations

10,704

3,434

(9,166

)

4,972

Depreciation and amortization

2,453

549

1,214

4,216

Other (expenses)

(36

)

(32

)

EBITDA

13,121

3,982

(7,947

)

9,156

Six Months Ended June 30, 2021

Debit and Credit

Prepaid Debit

Other

Total

EBITDA by segment:

Income (loss) from operations

40,412

14,568

(21,424

)

33,556

Depreciation and amortization

4,297

1,097

2,645

8,039

Other income (expenses)

(5,046

)

(5,019

)

EBITDA

44,722

15,679

(23,825

)

36,576

Six Months Ended June 30, 2020

Debit and Credit

Prepaid Debit

Other

Total

EBITDA by segment:

Income (loss) from operations

23,180

7,550

(18,258

)

12,472

Depreciation and amortization

4,946

1,097

2,413

8,456

Other (expenses)

(46

)

(76

)

(127

)

EBITDA

28,080

8,642

(15,921

)

20,801

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,

2021

2020

2021

2020

EBITDA and Adjusted EBITDA:

Net income

6,232

1,279

8,642

3,035

Net loss from discontinued operations

—

Interest expense, net

7,037

6,772

16,013

12,860

Income tax expense (benefit)

2,522

(3,115

)

3,882

(3,580

)

Depreciation and amortization

3,817

4,216

8,039

8,456

EBITDA

19,608

9,156

36,576

20,801

Adjustments to EBITDA:

Stock-based compensation expense

Sales tax (benefit) expense (1)

(385

)

172

(465

)

293

Restructuring and other charges (2)

762

161

1,229

Loss on debt extinguishment (3)

—

5,048

Foreign currency (gain) loss

)

(29

)

Subtotal of adjustments to EBITDA

(302

)

977

4,813

1,706

Adjusted EBITDA

19,306

10,133

41,389

22,507

Net income (% Change 2021 vs. 2020)

387.3

184.7

Adjusted EBITDA margin (% of Net Sales)

20.7

14.2

22.7

15.5

Adjusted EBITDA growth (% Change 2021 vs. 2020)

90.5

83.9

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Free Cash Flow:

Cash provided by operating activities

22,602

8,842

22,746

12,046

Capital expenditures for plant, equipment and leasehold improvements

(1,179

)

(706

)

(3,703

)

(1,644

)

Free Cash Flow

21,423

8,136

19,043

10,402

(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. During the year ended December 31, 2020, the Company revised its prior period financial statements to adjust immaterial items, primarily due to estimated sales tax expense relating to 2017 through the second quarter of 2020. Refer to Note 1 of the Form 10-Q for the quarter ended June 30, 2021 and Note 2 of the Form 10-K for the year ended December 31, 2020 for an explanation of the immaterial prior period adjustments.

(2)

Represents restructuring severance charges.

(3)

The Company terminated and repaid its Senior Credit Facility and First Lien Term Loan during the first quarter of 2021 and expensed the unamortized deferred financing costs and debt discount. Additionally, the Company terminated its previous Revolving Credit Facility during the first quarter of 2020 and expensed the remaining unamortized deferred financing costs.

Last Twelve Months Ended

June 30,

December 31,

2021

2020

Reconciliation of net income to LTM EBITDA and Adjusted EBITDA

Net income

21,736

16,129

Net loss from discontinued operations

Interest expense, net

28,550

25,397

Income tax expense (benefit)

4,157

(3,305

)

Depreciation and amortization

16,410

16,827

EBITDA

70,884

55,109

Adjustments to EBITDA:

Stock-based compensation expense

175

136

Sales tax expense (1)

168

926

Restructuring and other charges (2)

201

1,269

Loss on debt extinguishment (3)

5,048

Foreign currency (gain) loss

(55

)

Subtotal of adjustments to EBITDA

5,537

2,430

LTM Adjusted EBITDA

76,421

57,539

(1)

(2)

Represents restructuring severance charges.

(3)

As of

June 30,

December 31,

2021

2020

Calculation of Net Leverage Ratio:

Debt principal outstanding

310,000

342,500

Finance lease obligations

4,380

5,192

Total Debt

314,380

347,692

Less: Cash and cash equivalents

(30,667

)

(57,603

)

Total Net Debt (a)

283,713

290,089

LTM Adjusted EBITDA (b)

76,421

57,539

Net Leverage Ratio (a)/(b)

3.7

5.0

View source version on businesswire.com: https://www.businesswire.com/news/home/20210812005239/en/

CPI Card Group Inc. Investor Relations: (877) 369-9016 InvestorRelations@cpicardgroup.com

CPI Card Group Inc. Media Relations: Media@cpicardgroup.com

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