Net Sales Increased 20% to $99.6 Million
Net Income Increased 14% to $6.6 Million;
Adjusted EBITDA Increased 23% to $21.5 Million
Strong Growth Across Portfolio
CPI Card Group Inc. (Nasdaq: PMTS) (“CPI” or the “Company”), a
payment technology company and leading provider of credit, debit,
and prepaid solutions, today reported financial results for the
third quarter and nine months ended September 30, 2021.
“We continued to deliver strong performance in the third
quarter, as we maintain our focus on providing high quality
products and services that meet the needs of our diverse and
growing customer base,” said Scott Scheirman, President and Chief
Executive Officer of CPI. “Our business has proved resilient
throughout the pandemic, and this quarter’s results reflect the
dedicated execution of our strategies by our entire organization as
we navigate ongoing supply-chain and labor shortage
challenges.”
Scheirman continued, “We remain committed to our vision of being
the partner of choice in payment solutions by providing
market-leading quality products and customer service, while
operating a market-competitive business model.”
2021 Business Highlights
- Our comprehensive end-to-end solutions contributed to earning
new FinTech and traditional financial services customers.
- Our innovative tamper-evident packaging solutions contributed
to strong growth in our Prepaid Debit segment and further enhanced
our leadership in the U.S. open loop retail prepaid market.
- We generated incremental net sales from customer demand for
higher-priced contactless cards, as the U.S. payment card market
continues its ongoing transition to contactless solutions.
- We continued to lead the eco-focused payment card market in the
U.S., as evidenced by selling over 40 million eco-focused cards
since launch in 2019.
- Our innovative personalization services contributed to net
sales growth, including from our Card@Once® Software-as-a-Service
instant issuance solutions and CPI On-Demand®.
- We refinanced our debt in the first quarter of 2021, extending
maturities and enhancing liquidity. We have reduced outstanding
debt by more than $30 million since December 31, 2020 and our net
leverage ratio was less than 4x at September 30, 2021.
Third Quarter 2021 Financial Highlights
Net sales increased 20% year-over-year to $99.6 million in the
third quarter of 2021.
- Debit and Credit segment net sales increased 21% to $76.1
million. Net sales growth was primarily driven by the ongoing
transition to higher-priced contactless cards and related card
personalization and new customer growth, and included strong
contributions from Card@Once® and CPI On-Demand®.
- Prepaid Debit segment net sales increased 14% to $23.5 million,
primarily due to higher volumes from existing customers, including
the acquisition of new portfolios and the replenishment of
inventory by those customers.
Net sales in the prior year were impacted by lower customer
demand than expected in both segments, which we believe was
primarily attributable to the COVID-19 pandemic.
Gross profit increased 23% to $37.7 million and gross profit
margin was 37.8%, which compared to 37.0% in the prior year. The
increase in gross profit margin was primarily due to operating
leverage from higher net sales, partially offset by increased labor
costs as a percentage of sales.
Income from operations increased 24% year-over-year to $16.7
million, compared to $13.5 million in the prior year.
Third quarter 2021 net income was $6.6 million, or $0.56
earnings per diluted share, an increase of 14% year-over-year from
net income of $5.8 million, or $0.52 earnings per diluted share, in
the third quarter of 2020.
Adjusted EBITDA increased 23% year-over-year to $21.5 million as
a result of net sales growth and operating leverage, partially
offset by increased labor costs and other compensation-related
expenses.
Year-to-date 2021 Financial
Highlights
Net sales increased 24% year-over-year to $281.9 million in the
first nine months of 2021.
- Debit and Credit segment net sales increased 21% to $218.8
million. Net sales growth was primarily driven by new customer
growth and the ongoing transition to contactless cards and related
card personalization, and included strong contributions from
Card@Once® and CPI On-Demand®.
- Prepaid Debit segment net sales increased 30% to $63.3 million
primarily due to higher volumes from existing customers, including
the acquisition of new portfolios and the replenishment of
inventory by those customers.
Net sales in the prior year were impacted by lower customer
demand than expected in both segments, which we believe was
primarily attributable to the COVID-19 pandemic.
Gross profit for the first nine months increased 39%
year-over-year to $110.5 million and gross profit margin increased
to 39.2% from 34.8% in the prior year.
Income from operations increased 94% year-over-year to $50.3
million, compared to $26.0 million in the prior year.
For the year-to-date period, net income was $15.3 million, or
$1.30 earnings per diluted share, in 2021 compared to net income of
$8.8 million, or $0.79 earnings per diluted share, in 2020, an
increase of 73% 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 for the first nine months increased 57%
year-over-year to $62.9 million.
Balance Sheet, Liquidity, and
Cash Flow
As of September 30, 2021, cash and cash equivalents was $20.9
million. Cash provided by operating activities in the first nine
months of 2021 was $14.5 million, which is net of $21.8 million in
inventory investments to support the business and includes $9.8
million in cash tax refunds related to the CARES Act. Capital
expenditures were $4.8 million in the first nine months of 2021,
yielding Free Cash Flow of $9.7 million, a $2.8 million increase
compared to the first nine months of 2020.
Total long-term debt principal outstanding as of September 30,
2021 was comprised of the Company’s $310 million Senior Notes due
2026. The Company had no borrowings outstanding under its $50
million ABL Revolver as of September 30, 2021, consistent with the
Company’s capital structure strategy to maintain ample liquidity,
invest in the business and deleverage the balance sheet.
“Our customer-focused sales efforts and operating leverage have
contributed to strong profit and cash flow growth in the first nine
months of the year,” said Amintore Schenkel, Chief Financial
Officer. “As we look to the remainder of the year, we are facing
increasing impacts from labor shortages, supply-chain constraints,
and additional costs. We are continuing to implement initiatives
and investments to respond to the changing environment.”
Full-Year 2021
CPI has delivered substantial growth in the first three quarters
of 2021 with year-to-date increases in net sales of 24%, net income
of 73%, and adjusted EBITDA of 57%. Customer demand for CPI’s
products and services remains strong. The financial results for the
fourth quarter are expected to be influenced by several factors
that may cause trends to vary from the first nine months:
- Net sales growth in the first nine months benefitted from
significant new customer onboarding and prepaid debit card retail
inventory replenishment
- The Company expects increased labor, materials, and certain
other costs to begin to be more impactful in the fourth
quarter
The Company is responding to the strong customer demand by
hiring additional labor and investing in state-of-the-art equipment
to increase future capacity and add new capabilities. The Company
is also implementing selective price increases, while continuing to
carefully manage our supply chain and inventory.
Benefits of price increases and equipment investments are
expected to have limited impact in the 2021 fourth quarter. The
Company expects fourth quarter sales growth and profit margins will
not be as strong as the first nine months, but still expects to
deliver strong growth in net sales, profit margins, and overall
profitability for the full year ending December 31, 2021.
Conference Call and Webcast
CPI Card Group Inc. will hold a conference call on November 5,
2021 at 9:00 a.m. Eastern Time (ET) to review its third quarter and
first nine-months 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
International Dial-In Number: (929) 526-1599 Conference ID: 009984
Webcast Link: 3Q21 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 November 19, 2021 at: Toll-Free Dial-In Number, U.S.
Participants: (866) 813-9403 International Dial-In Number: (929)
458-6194 Conference ID: 487043
A webcast replay of the conference call will also be available
on CPI Card Group Inc.’s Investor Relations web site:
https://investor.cpicardgroup.com.
Non-GAAP Financial
Measures
In addition to financial results reported in accordance with
U.S. generally accepted accounting principles (“GAAP”), we have
provided the following non-GAAP financial measures in this release,
all reported on a continuing operations basis: EBITDA, Adjusted
EBITDA, Adjusted EBITDA margin, Free Cash Flow, LTM Adjusted EBITDA
and Net Leverage Ratio. These non-GAAP financial measures are
utilized by management in comparing our operating performance on a
consistent basis between fiscal periods. We believe that these
financial measures are appropriate to enhance an overall
understanding of our underlying operating performance trends
compared to historical and prospective periods and our peers.
Management also believes that these measures are useful to
investors in their analysis of our results of operations and
provide improved comparability between fiscal periods. Non-GAAP
financial measures should not be considered in isolation from, or
as a substitute for, financial information calculated in accordance
with GAAP. Our non-GAAP measures may be different from similarly
titled measures of other companies. Investors are encouraged to
review the reconciliation of these historical non-GAAP measures to
their most directly comparable GAAP financial measures included in
Exhibit E to this press release.
Adjusted EBITDA
Adjusted EBITDA is presented on a continuing operations basis
and is defined as EBITDA (which represents earnings before
interest, taxes, depreciation and amortization) adjusted for
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 and responses thereto on our
business, including our supply chain, customer demand, workforce,
operations and ability to comply with certain covenants related to
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
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; our
failure to maintain effective internal control over financial
reporting or remediate material weaknesses; 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; 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 Nasdaq Global Market; 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 in our Quarterly Report on Form 10-Q for the quarter
ended September 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 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, 2021 and 2020
Exhibit B
Condensed Consolidated Balance
Sheets – Unaudited as of September 30, 2021 and December 31,
2020
Exhibit C
Condensed Consolidated Statements
of Cash Flows - Unaudited for the nine months ended September 30,
2021 and 2020
Exhibit D
Segment Summary Information –
Unaudited for the three and nine months ended September 30, 2021
and 2020
Exhibit E
Supplemental GAAP to Non-GAAP
Reconciliations - Unaudited for the three and nine months ended
September 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 September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Net sales:
Products
$
52,276
$
43,462
$
146,445
$
125,040
Services
47,326
39,240
135,468
103,009
Total net sales
99,602
82,702
281,913
228,049
Cost of sales:
Products (exclusive of depreciation and
amortization shown below)
31,493
27,490
86,708
79,780
Services (exclusive of depreciation and
amortization shown below)
28,368
22,133
77,975
60,986
Depreciation and amortization
2,056
2,472
6,736
7,938
Total cost of sales
61,917
52,095
171,419
148,704
Gross profit
37,685
30,607
110,494
79,345
Operating expenses:
Selling, general and administrative
(exclusive of depreciation and amortization shown below)
19,469
15,617
55,363
48,893
Depreciation and amortization
1,514
1,508
4,873
4,498
Total operating expenses
20,983
17,125
60,236
53,391
Income from operations
16,702
13,482
50,258
25,954
Other expense, net:
Interest, net
(7,183
)
(6,298
)
(23,196
)
(19,158
)
Other income (expense), net
(6
)
27
23
(8
)
Loss on debt extinguishment
—
—
(5,048
)
(92
)
Total other expense, net
(7,189
)
(6,271
)
(28,221
)
(19,258
)
Income from continuing operations before
income taxes
9,513
7,211
22,037
6,696
Income tax (expense) benefit
(2,887
)
(1,402
)
(6,769
)
2,178
Net income from continuing operations
6,626
5,809
15,268
8,874
Net loss from discontinued operations, net
of tax
—
—
—
(30
)
Net income
$
6,626
$
5,809
$
15,268
$
8,844
Basic and diluted earnings per share:
Basic earnings per share from continuing
operations:
$
0.59
$
0.52
$
1.36
$
0.79
Diluted earnings per share from continuing
operations:
$
0.56
$
0.52
$
1.30
$
0.79
Basic earnings per share:
$
0.59
$
0.52
$
1.36
$
0.79
Diluted earnings per share:
$
0.56
$
0.52
$
1.30
$
0.79
Basic weighted-average shares
outstanding:
11,238,678
11,230,028
11,234,054
11,228,116
Diluted weighted-average shares
outstanding:
11,799,321
11,231,821
11,755,381
11,235,098
Comprehensive income:
Net income
$
6,626
$
5,809
$
15,268
$
8,844
Total comprehensive income
$
6,626
$
5,809
$
15,268
$
8,844
EXHIBIT B
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(Amounts in Thousands, Except
Share and Per Share Amounts)
(Unaudited)
September 30,
December 31,
2021
2020
Assets
Current assets:
Cash and cash equivalents
$
20,853
$
57,603
Accounts receivable, net of allowances of
$226 and $289, respectively
65,450
54,592
Inventories
46,442
24,796
Prepaid expenses and other current
assets
5,097
5,032
Income taxes receivable
116
10,511
Total current assets
137,958
152,534
Plant, equipment and leasehold
improvements and operating lease right-of-use assets, net
38,347
39,403
Intangible assets, net
22,821
26,207
Goodwill
47,150
47,150
Other assets
5,999
857
Total assets
$
252,275
$
266,151
Liabilities and stockholders’
deficit
Current liabilities:
Accounts payable
$
18,795
$
18,883
Accrued expenses
32,097
28,149
Current portion of long-term debt
—
8,027
Deferred revenue and customer deposits
1,029
1,868
Total current liabilities
51,921
56,927
Long-term debt
303,251
328,681
Deferred income taxes
6,657
7,409
Other long-term liabilities
12,979
11,171
Total liabilities
374,808
404,188
Commitments and contingencies
Series A Preferred Stock; $0.001 par
value—100,000 shares authorized; 0 shares issued and outstanding at
September 30, 2021 and December 31, 2020
—
—
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000
shares authorized; 11,238,994 and 11,230,482 shares issued and
outstanding at September 30, 2021 and December 31, 2020
11
11
Capital deficiency
(111,622
)
(111,858
)
Accumulated loss
(10,922
)
(26,190
)
Total stockholders’ deficit
(122,533
)
(138,037
)
Total liabilities and stockholders’
deficit
$
252,275
$
266,151
EXHIBIT C
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(Amounts in Thousands)
(Unaudited)
Nine Months Ended September
30,
2021
2020
Operating activities
Net income
$
15,268
$
8,844
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss from discontinued operations
—
30
Depreciation and amortization expense
11,609
12,436
Stock-based compensation expense
214
84
Amortization of debt issuance costs and
debt discount
1,880
2,503
Loss on debt extinguishment
5,048
92
Deferred income taxes
(752
)
290
Other, net
210
1,253
Changes in operating assets and
liabilities:
Accounts receivable
(10,846
)
(16,165
)
Inventories
(21,831
)
(1,109
)
Prepaid expenses and other assets
(3,340
)
49
Income taxes receivable, net
10,603
(3,630
)
Accounts payable
83
921
Accrued expenses
6,419
4,112
Deferred revenue and customer deposits
(843
)
417
Other liabilities
793
81
Cash provided by operating activities -
continuing operations
14,515
10,208
Cash used in operating activities -
discontinued operations
—
(30
)
Investing activities
Capital expenditures for plant, equipment
and leasehold improvements
(4,827
)
(3,320
)
Other
156
—
Cash used in investing activities
(4,671
)
(3,320
)
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
34
-
Taxes withheld and paid on stock
compensation
(12
)
-
Debt issuance costs
(9,452
)
(2,507
)
Payments on debt extinguishment
(2,685
)
-
Payments on finance lease obligations
(1,725
)
(1,782
)
Cash (used in) provided by financing
activities
(46,590
)
24,811
Effect of exchange rates on cash
(4
)
(2
)
Net (decrease) increase in cash and cash
equivalents
(36,750
)
31,667
Cash and cash equivalents, beginning of
period
57,603
18,682
Cash and cash equivalents, end of
period
$
20,853
$
50,349
Supplemental disclosures of cash flow
information
Cash paid (refunded) during the period
for:
Interest, net
$
22,107
$
17,454
Income taxes paid
$
4,708
$
1,205
Income taxes (refunded)
$
(9,846
)
$
(259
)
Right-to-use assets obtained in exchange
for lease obligations:
Operating leases
$
3,666
$
141
Financing leases
$
484
$
1,618
Accounts payable, and accrued expenses for
capital expenditures for plant, equipment and leasehold
improvements
$
1,005
$
127
EXHIBIT D
CPI Card Group Inc. and Subsidiaries Segment
Summary Information For the Three and Nine Months Ended September
30, 2021 and September 30, 2020 (Dollars in Thousands)
(Unaudited)
Net Sales
Three Months Ended September
30,
2021
2020
$ Change
% Change
Net sales by segment:
Debit and Credit
$
76,121
$
62,710
$
13,411
21.4
%
Prepaid Debit
23,498
20,604
2,894
14.0
%
Eliminations
(17
)
(612
)
595
*
%
Total
$
99,602
$
82,702
$
16,900
20.4
%
________________ * Calculation not meaningful
Nine Months Ended September
30,
2021
2020
$ Change
% Change
Net sales by segment:
Debit and Credit
$
218,798
$
180,855
$
37,943
21.0
%
Prepaid Debit
63,339
48,680
14,659
30.1
%
Eliminations
(224
)
(1,486
)
1,262
*
%
Total
$
281,913
$
228,049
$
53,864
23.6
%
Gross Profit
Three Months Ended September
30,
2021
% of Net Sales
2020
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
28,176
37.0
%
$
21,720
34.6
%
$
6,456
29.7
%
Prepaid Debit
9,509
40.5
%
8,887
43.1
%
622
7.0
%
Total
$
37,685
37.8
%
$
30,607
37.0
%
$
7,078
23.1
%
Nine Months Ended September
30,
2021
% of Net Sales
2020
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
83,988
38.4
%
$
60,681
33.6
%
$
23,307
38.4
%
Prepaid Debit
26,506
41.8
%
18,664
38.3
%
7,842
42.0
%
Total
$
110,494
39.2
%
$
79,345
34.8
%
$
31,149
39.3
%
Income from Operations
Three Months Ended September
30,
2021
% of Net Sales
2020
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
Debit and Credit
$
20,499
26.9
%
$
14,734
23.5
%
$
5,765
39.1
%
Prepaid Debit
8,492
36.1
%
7,829
38.0
%
663
8.5
%
Other
(12,289
)
*
%
(9,081
)
*
%
(3,208
)
35.3
%
Total
$
16,702
16.8
%
$
13,482
16.3
%
$
3,220
23.9
%
Nine Months Ended September
30,
2021
% of Net Sales
2020
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
Debit and Credit
$
60,911
27.8
%
$
37,914
21.0
%
$
22,997
60.7
%
Prepaid Debit
23,060
36.4
%
15,379
31.6
%
7,681
49.9
%
Other
(33,713
)
*
%
(27,339
)
*
%
(6,374
)
23.3
%
Total
$
50,258
17.8
%
$
25,954
11.4
%
$
24,304
93.6
%
EBITDA
Three Months Ended September
30,
2021
% of Net Sales
2020
% of Net Sales
$ Change
% Change
EBITDA by segment:
Debit and Credit
$
22,356
29.4
%
$
16,993
27.1
%
$
5,363
31.6
%
Prepaid Debit
9,040
38.5
%
8,332
40.4
%
708
8.5
%
Other
(11,130
)
*
%
(7,836
)
*
%
(3,294
)
42.0
%
Total
$
20,266
20.3
%
$
17,489
21.1
%
$
2,777
15.9
%
Nine Months Ended September
30,
2021
% of Net Sales
2020
% of Net Sales
$ Change
% Change
EBITDA by segment:
Debit and Credit
$
67,078
30.7
%
$
45,073
24.9
%
$
22,005
48.8
%
Prepaid Debit
24,719
39.0
%
16,974
34.9
%
7,745
45.6
%
Other
(34,955
)
*
%
(23,757
)
*
%
(11,198
)
47.1
%
Total
$
56,842
20.2
%
$
38,290
16.8
%
$
18,552
48.5
%
Reconciliation of Income (loss) from
Operations by Segment to EBITDA by Segment
Three Months Ended September
30, 2021
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
20,499
$
8,492
$
(12,289
)
$
16,702
Depreciation and amortization
1,858
550
1,162
3,570
Other income (expenses)
(1
)
(2
)
(3
)
(6
)
EBITDA
$
22,356
$
9,040
$
(11,130
)
$
20,266
Three Months Ended September
30, 2020
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
14,734
$
7,829
$
(9,081
)
$
13,482
Depreciation and amortization
2,261
502
1,217
3,980
Other (expenses)
(2
)
1
28
27
EBITDA
$
16,993
$
8,332
$
(7,836
)
$
17,489
Nine Months Ended September
30, 2021
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
60,911
$
23,060
$
(33,713
)
$
50,258
Depreciation and amortization
6,155
1,647
3,807
11,609
Other income (expenses)
12
12
(5,049
)
(5,025
)
EBITDA
$
67,078
$
24,719
$
(34,955
)
$
56,842
Nine Months Ended September
30, 2020
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
37,914
$
15,379
$
(27,339
)
$
25,954
Depreciation and amortization
7,207
1,599
3,630
12,436
Other (expenses)
(48
)
(4
)
(48
)
(100
)
EBITDA
$
45,073
$
16,974
$
(23,757
)
$
38,290
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,
2021
2020
2021
2020
EBITDA and Adjusted EBITDA:
Net income
$
6,626
$
5,809
$
15,268
$
8,844
Net loss from discontinued operations
—
—
—
30
Interest expense, net
7,183
6,298
23,196
19,158
Income tax expense (benefit)
2,887
1,402
6,769
(2,178
)
Depreciation and amortization
3,570
3,980
11,609
12,436
EBITDA
$
20,266
$
17,489
$
56,842
$
38,290
Adjustments to EBITDA:
Stock-based compensation expense
116
25
214
84
Sales tax (benefit) expense (1)
—
—
(465
)
293
Severance and other charges (2)
1,089
—
1,250
1,229
Loss on debt extinguishment (3)
—
—
5,048
92
Foreign currency (gain) loss
5
(23
)
(24
)
10
Subtotal of adjustments to EBITDA
1,210
2
6,023
1,708
Adjusted EBITDA
$
21,476
$
17,491
$
62,865
$
39,998
Net income margin (% of Net Sales)
6.7
%
7.0
%
5.4
%
3.9
%
Net income growth (% Change 2021 vs.
2020)
14.1
%
72.6
%
Adjusted EBITDA margin (% of Net
Sales)
21.6
%
21.1
%
22.3
%
17.5
%
Adjusted EBITDA growth (% Change 2021 vs.
2020)
22.8
%
57.2
%
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Free Cash Flow:
Cash provided by operating activities
$
(8,231
)
$
(1,838
)
$
14,515
$
10,208
Capital expenditures for plant, equipment
and leasehold improvements
(1,124
)
(1,676
)
(4,827
)
(3,320
)
Free Cash Flow
$
(9,355
)
$
(3,514
)
$
9,688
$
6,888
________________
(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 September 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)
The 2021 amount primarily relates
to executive severance charges, and the prior year amounts relate
to 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
September 30,
December 31,
2021
2020
Reconciliation of net income to LTM
EBITDA and Adjusted EBITDA
Net income
$
22,553
$
16,129
Net loss from discontinued operations
31
61
Interest expense, net
29,435
25,397
Income tax expense (benefit)
5,642
(3,305
)
Depreciation and amortization
16,000
16,827
EBITDA
$
73,661
$
55,109
Adjustments to EBITDA:
Stock-based compensation expense
266
136
Sales tax expense (1)
168
926
Severance and other charges (2)
1,290
1,269
Loss on debt extinguishment (3)
5,048
92
Foreign currency (gain) loss
(27
)
7
Subtotal of adjustments to EBITDA
$
6,745
$
2,430
LTM Adjusted EBITDA
$
80,406
$
57,539
________________
(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 September 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)
The 2021 amount primarily relates
to executive severance charges, and the prior year amounts relate
to 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.
As of
September 30,
December 31,
2021
2020
Calculation of Net Leverage
Ratio:
Debt principal outstanding
$
310,000
$
342,500
Finance lease obligations
3,951
5,192
Total Debt
313,951
347,692
Less: Cash and cash equivalents
(20,853
)
(57,603
)
Total Net Debt (a)
$
293,098
$
290,089
LTM Adjusted EBITDA (b)
$
80,406
$
57,539
Net Leverage Ratio (a)/(b)
3.6
5.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211105005285/en/
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