Third Quarter Net Sales Decreased 15% to $106
Million; Net Income Decreased 68% to $4 Million; Adjusted EBITDA
Decreased 25% to $21 Million
First Nine Months Net Sales Decreased 2%; Net
Income Decreased 12%; Adjusted EBITDA Decreased 1%
Company Updates 2023 Outlook; Announces $20
Million Share Repurchase Authorization
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 ended September 30, 2023 and updated its financial
outlook for 2023.
As anticipated, third quarter sales and earnings declined
compared to prior year levels, with net sales decreasing 15% to
$105.9 million, net income decreasing 68% to $3.9 million and
Adjusted EBITDA decreasing 25% to $21.2 million. Sales declines
reflect cautious spending and inventory rationalization by certain
customers and were also impacted by comparisons with the 2022 third
quarter, when the Company posted net sales growth of 25%.
“We believe the card production market has been affected by
cautious customer spending due to a variety of factors, including a
focus on managing inventory levels following robust purchases in a
challenging supply-chain environment last year,” said Scott
Scheirman, President and Chief Executive Officer. “Although the
production side of the market has been relatively softer, card
issuance to end users has continued to grow and we believe the
long-term growth trends for the industry remain intact.”
The Company expects fourth quarter sales and Adjusted EBITDA to
be similar to the third quarter levels as customer demand remains
lower than anticipated and new sales initiatives are not expected
to significantly impact the current year. As a result, the
Company’s updated full year outlook for 2023 projects mid-single
digit declines for both net sales and Adjusted EBITDA, with Free
Cash Flow projected to be approximately double the 2022 level.
The Company believes long-term growth trends for the U.S. card
market remain strong, led by consumer card growth, widespread
adoption of eco-focused cards and the ongoing conversion to
contactless cards. Based on figures released by the networks, Visa
and Mastercard® U.S. debit and credit cards in circulation
increased at a compound annual growth rate of 10% for the
three-year period ending June 30, 2023.
The Company also announced that its Board of Directors approved
a $20 million share repurchase authorization, expiring December 31,
2024.
Scheirman added, “We believe repurchasing our shares is a great
investment for our shareholders, as the Company is well-positioned
for the future with innovative, high-quality products and services
and strong customer focus.”
CPI is a top payment solutions provider in the U.S. serving
thousands of banks, credit unions and fintechs. The Company is a
leader in the U.S. markets for eco-focused payment cards,
personalization and Software-as-a-Service-based instant issuance
solutions for small and medium U.S. financial institutions and
retail prepaid debit card solutions, and maintains longstanding
customer relationships.
2023 Business Highlights
- A leading provider of eco-focused payment card solutions in the
U.S. market, with more than 100 million eco-focused cards sold
since launch in late 2019.
- A leading provider of Software-as-a-Service-based instant
issuance solutions in the U.S., with more than 15,000 Card@Once®
installations across more than 2,000 financial institutions.
- Financial position improvement, with the outstanding balance on
the Company’s 8.625% Senior Secured Notes reduced by $17 million in
the first nine months of the year through open market repurchases
and a Net Leverage Ratio of 2.9x at September 30, 2023.
Third Quarter 2023 Financial Highlights
Net sales decreased 15% year-over-year to $105.9 million in the
third quarter of 2023.
- Debit and Credit segment net sales decreased 16% to $83.8
million, primarily due to volume declines in eco-focused and other
contactless cards and contact cards. Services sales increased due
to growth in Card@Once® instant issuance solutions processing
fees.
- Prepaid Debit segment net sales decreased 12% to $22.3 million,
primarily due to timing of sales between quarters.
Third quarter gross profit decreased 25% to $36.2 million and
gross profit margin was 34.1%, which compared to 38.9% in the prior
year third quarter.
Third quarter income from operations decreased 45% to $13
million; net income decreased 68% to $3.9 million, or $0.33 diluted
earnings per share; and Adjusted EBITDA decreased 25% to $21.2
million. Income from operations, net income and Adjusted EBITDA
declines were driven by the sales decrease, partially offset by
lower operating expenses. The net income decrease was also impacted
by a higher effective tax rate compared to prior year, partially
offset by lower interest expense. Income from operations and net
income were negatively impacted by approximately $3 million of
pre-tax operating expenses related to executive retention, which
are not included in Adjusted EBITDA.
Year-to-date 2023 Financial Highlights
Net sales decreased 2% year-over-year to $341.7 million in the
first nine months of 2023.
- Debit and Credit segment net sales decreased 2% to $279
million, primarily due to volume declines in eco-focused
contactless cards compared to strong orders in 2022 and lower
contact card sales, partially offset by increases in sales of other
contactless cards and services related to card personalization and
Card@Once® instant issuance solutions.
- Prepaid Debit segment net sales decreased 1% to $63.3
million.
Year-to-date gross profit decreased 6% to $120.1 million and
gross profit margin was 35.1%, which compared to 36.7% in the prior
year.
Year-to-date income from operations decreased 10% to $51.1
million; net income decreased 12% to $21.3 million, or $1.79
diluted earnings per share; and Adjusted EBITDA decreased 1% to
$69.6 million. Income from operations, net income and Adjusted
EBITDA declines were driven by lower net sales, partially offset by
lower operating expenses, while the net income decline also
reflects a higher effective tax rate, partially offset by lower
interest expense. Income from operations and net income were
negatively impacted by approximately $4 million of pre-tax
operating expenses related to executive retention, which are not
included in Adjusted EBITDA.
Balance Sheet, Liquidity and Cash Flow
The Company generated cash flow from operating activities of
$22.3 million in the first nine months of the year, which compared
to $11.7 million in the prior year period, and Free Cash Flow of
$16.2 million, which compared to a usage of $2.7 million in the
first nine months of 2022. The increase in cash generation compared
to the prior year was driven by working capital improvement.
As of September 30, 2023, cash and cash equivalents was $10.5
million. There were $268 million of 8.625% Senior Secured Notes due
2026 and $8 million of borrowings from the ABL revolving credit
facility outstanding at quarter-end. The Company retired $17
million of notes during the first nine months of 2023, utilizing
cash balances and revolving credit facility proceeds.
The Company’s capital structure and allocation priorities are to
maintain ample liquidity; invest in the business, including
strategic acquisitions; deleverage the balance sheet; and return
funds to stockholders.
“We are managing operating expenses tightly as we deal with the
softer customer demand in 2023,” said Jeff Hochstadt, Chief
Financial Officer of CPI. “We are also keenly focused on optimizing
working capital to generate strong free cash flow improvement in
2023.”
Outlook
The Company projects the following full-year outlook for
2023:
- Net sales to decline mid-single digits (previous outlook: flat
to low single-digit growth)
- Adjusted EBITDA to decline mid-single digits (previous outlook:
mid-to-high single-digit growth)
- Free Cash Flow to be approximately double the 2022 level
(previous outlook: more than double the 2022 level)
- Net Leverage Ratio of approximately 3x (previous outlook: 2.5x
to 3x)
Conference Call and Webcast
CPI Card Group Inc. will hold a conference call on November 7,
2023 at 9:00 a.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 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
21, 2023 at: U.S. dial-in number (toll free): 800-770-2030
International: 647-362-9199 Conference ID: 8062733
A webcast replay of the conference call will also be available
on CPI Card Group Inc.’s Investor Relations web site:
https://investor.cpicardgroup.com
Non-GAAP Financial Measures
In addition to financial results reported in accordance with
U.S. generally accepted accounting principles (“GAAP”), we have
provided the following non-GAAP financial measures in this release,
all reported on a continuing operations basis: EBITDA, Adjusted
EBITDA, Adjusted EBITDA margin, Free Cash Flow, LTM Adjusted EBITDA
and Net Leverage Ratio. These non-GAAP financial measures are
utilized by management in comparing our operating performance on a
consistent basis between fiscal periods. We believe that these
financial measures are appropriate to enhance an overall
understanding of our underlying operating performance trends
compared to historical and prospective periods and our peers.
Management also believes that these measures are useful to
investors in their analysis of our results of operations and
provide improved comparability between fiscal periods. Non-GAAP
financial measures should not be considered in isolation from, or
as a substitute for, financial information calculated in accordance
with GAAP. Our non-GAAP measures may be different from similarly
titled measures of other companies. Investors are encouraged to
review the reconciliation of these historical non-GAAP measures to
their most directly comparable GAAP financial measures included in
Exhibit E to this press release.
Adjusted EBITDA
Adjusted EBITDA is presented on a continuing operations basis
and is defined as EBITDA (which represents earnings before
interest, taxes, depreciation and amortization) adjusted for
litigation; stock-based compensation expense; estimated sales tax
expense; restructuring and other charges, including severance and
executive retention; loss on debt extinguishment; foreign currency
gain or loss; and other items that are unusual in nature,
infrequently occurring or not considered part of our core
operations, as set forth in the reconciliation in Exhibit E.
Adjusted EBITDA is intended to show our unleveraged, pre-tax
operating results and therefore reflects our financial performance
based on operational factors, excluding non-operational, unusual or
non-recurring losses or gains. Adjusted EBITDA has important
limitations as an analytical tool, and you should not consider it
in isolation, or as a substitute for, analysis of our results as
reported under GAAP. For example, Adjusted EBITDA does not reflect:
(a) our capital expenditures, future requirements for capital
expenditures or contractual commitments; (b) changes in, or cash
requirements for, our working capital needs; (c) the significant
interest expenses or the cash requirements necessary to service
interest or principal payments on our debt; (d) tax payments that
represent a reduction in cash available to us; (e) any cash
requirements for the assets being depreciated and amortized that
may have to be replaced in the future; (f) the impact of earnings
or charges resulting from matters that we and the lenders under our
credit agreement may not consider indicative of our ongoing
operations; or (g) the impact of any discontinued operations. In
particular, our definition of Adjusted EBITDA allows us to add back
certain non-operating, unusual or non-recurring charges that are
deducted in calculating net income, even though these are expenses
that may recur, vary greatly and are difficult to predict and can
represent the effect of long-term strategies as opposed to
short-term results. In addition, certain of these expenses
represent the reduction of cash that could be used for other
purposes. Adjusted EBITDA margin percentage as shown in Exhibit E
is computed as Adjusted EBITDA divided by total net sales.
We define LTM Adjusted EBITDA as Adjusted EBITDA (defined
previously) for the last twelve months. LTM Adjusted EBITDA is used
in the computation of Net Leverage Ratio, and is reconciled in
Exhibit E.
Free Cash Flow
We define Free Cash Flow as cash flow provided by (used in)
operating activities less capital expenditures. We use this metric
in analyzing our ability to service and repay our debt. However,
this measure does not represent funds available for investment or
other discretionary uses since it does not deduct cash used to
service our debt. Free Cash Flow should not be considered in
isolation, or as a substitute for, cash (used in) provided by
operating activities or any other measures of liquidity derived in
accordance with GAAP.
Financial Expectations for 2023
We have provided Adjusted EBITDA expectations for 2023 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 payment technology company providing a
comprehensive range of credit, debit, and prepaid card solutions,
complementary digital solutions, and Software-as-a-Service (SaaS)
instant issuance. With a focus on building personal relationships
and earning trust, we help our customers navigate the constantly
evolving world of payments, while delivering innovative solutions
that spark connections and support their brands. We serve clients
across industry, size, and scale through our team of experienced,
dedicated employees and our network of high-security production and
card services facilities located in the United States. CPI is
committed to exceeding our customers’ expectations, transforming
our industry, and enhancing the way people pay every day. Learn
more at www.CPIcardgroup.com.
Forward-Looking Statements
Certain statements and information in this release (as well as
information included in other written or oral statements we make
from time to time) may contain or constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The words “believe,” “estimate,” “project,” “expect,”
“anticipate,” “plan,” “intend,” “foresee,” “should,” “would,”
“could,” “continue,” “committed,” “attempt,” “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; adverse conditions in the banking system and
financial markets, including the failure of banks and financial
institutions; a disruption or other failure in our supply chain,
including as a result of the Russia-Ukraine or other 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, 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 status as 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; our inability
to recruit, retain and develop qualified personnel, including key
personnel; the potential effects of COVID-19 and responses thereto
on our business, including our supply chain, customer demand,
workforce, operations; 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; 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; disruptions in
production at one or more of our facilities; defects in our
software; environmental, social and governance 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;
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; our limited ability
to raise capital; problems in production quality, materials and
process; 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; costs
relating to product defects and any related product liability
and/or warranty claims; our inability to renew licenses with key
technology licensors; the highly competitive, saturated and
consolidated nature of our marketplace; 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 the ongoing
military action by Russia in Ukraine and other foreign conflicts;
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; quarterly variation in our operating
results; our failure to operate our business in accordance with the
Payment Card Industry Security Standards Council security standards
or other industry standards; our failure to comply with
environmental, health and safety laws and regulations that apply to
our products and the raw materials we use in our production
processes; risks associated with the majority stockholders’
ownership of our stock; potential conflicts of interest that may
arise due to our board of directors being comprised in part of
directors who are principals of our majority stockholders; the
influence of securities analysts over the trading market for and
price of our common stock; failure to meet the continued listing
standards of the Nasdaq Global Market; the impact of stockholder
activism or securities litigation on the trading price and
volatility of our common stock; certain provisions of our
organizational documents and other contractual provisions that may
delay or prevent a change in control and make it difficult for
stockholders other than our majority stockholders to change the
composition of our board of directors; our ability to comply with a
wide variety of complex laws and regulations and the exposure to
liability for any failure to comply; the effect of legal and
regulatory proceedings; and other risks that are described in Part
I, Item 1A – Risk Factors in our Annual Report on Form 10-K for the
year ended December 31, 2022 filed with the SEC on March 8, 2023,
in Part II, Item 1A – Risk Factors of this 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, 2023 and 2022
Exhibit B
Condensed Consolidated Balance Sheets –
Unaudited as of September 30, 2023 and December 31, 2022
Exhibit C
Condensed Consolidated Statements of Cash
Flows - Unaudited for the nine months ended September 30, 2023 and
2022
Exhibit D
Segment Summary Information – Unaudited
for the three and nine months ended September 30, 2023 and 2022
Exhibit E
Supplemental GAAP to Non-GAAP
Reconciliations - Unaudited for the three and nine months ended
September 30, 2023 and 2022
EXHIBIT A
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations and Comprehensive Income
(in thousands, except share
and per share amounts)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net sales:
Products
$
55,689
$
71,606
$
195,425
$
208,867
Services
50,174
52,971
146,250
140,442
Total net sales
105,863
124,577
341,675
349,309
Cost of sales:
Products (exclusive of depreciation and
amortization shown below)
37,540
42,702
124,828
128,851
Services (exclusive of depreciation and
amortization shown below)
29,574
31,190
89,192
85,625
Depreciation and amortization
2,597
2,245
7,584
6,564
Total cost of sales
69,711
76,137
221,604
221,040
Gross profit
36,152
48,440
120,071
128,269
Operating expenses:
Selling, general and administrative
(exclusive of depreciation and amortization shown below)
21,783
23,403
64,734
67,335
Depreciation and amortization
1,408
1,592
4,286
4,454
Total operating expenses
23,191
24,995
69,020
71,789
Income from operations
12,961
23,445
51,051
56,480
Other expense, net:
Interest, net
(6,714
)
(7,323
)
(20,235
)
(22,334
)
Other expense, net
(53
)
(63
)
(245
)
(474
)
Total other expense, net
(6,767
)
(7,386
)
(20,480
)
(22,808
)
Income before income taxes
6,194
16,059
30,571
33,672
Income tax expense
(2,337
)
(4,149
)
(9,318
)
(9,609
)
Net income
$
3,857
$
11,910
$
21,253
$
24,063
Basic and diluted earnings per share:
Basic earnings per share
$
0.34
$
1.06
$
1.86
$
2.14
Diluted earnings per share
$
0.33
$
1.01
$
1.79
$
2.05
Basic weighted-average shares
outstanding
11,432,794
11,265,767
11,418,372
11,259,655
Diluted weighted-average shares
outstanding
11,827,816
11,788,921
11,861,868
11,730,668
Comprehensive income:
Net income
$
3,857
$
11,910
$
21,253
$
24,063
Total comprehensive income
$
3,857
$
11,910
$
21,253
$
24,063
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,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
10,473
$
11,037
Accounts receivable, net
67,546
80,583
Inventories, net
74,080
68,399
Prepaid expenses and other current
assets
8,747
7,551
Total current assets
160,846
167,570
Plant, equipment, leasehold improvements
and operating lease right-of-use assets, net
62,643
57,178
Intangible assets, net
15,088
17,988
Goodwill
47,150
47,150
Other assets
6,388
6,780
Total assets
$
292,115
$
296,666
Liabilities and stockholders’
deficit
Current liabilities:
Accounts payable
$
16,876
$
24,371
Accrued expenses
27,967
40,070
Deferred revenue and customer deposits
787
3,571
Total current liabilities
45,630
68,012
Long-term debt
272,669
285,522
Deferred income taxes
7,920
6,808
Other long-term liabilities
22,616
18,401
Total liabilities
348,835
378,743
Commitments and contingencies
Series A Preferred Stock; $0.001 par
value—100,000 shares authorized; 0 shares issued and outstanding at
September 30, 2023 and December 31, 2022
—
—
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000
shares authorized; 11,453,549 and 11,390,355 shares issued and
outstanding at September 30, 2023 and December 31, 2022,
respectively
11
11
Capital deficiency
(104,275
)
(108,379
)
Accumulated earnings
47,544
26,291
Total stockholders’ deficit
(56,720
)
(82,077
)
Total liabilities and stockholders’
deficit
$
292,115
$
296,666
EXHIBIT C
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended September
30,
2023
2022
Operating activities
Net income
$
21,253
$
24,063
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense
8,970
8,118
Amortization expense
2,900
2,900
Stock-based compensation expense
4,431
2,928
Amortization of debt issuance costs and
debt discount
1,397
1,449
Loss on debt extinguishment
243
395
Deferred income taxes
1,112
1,192
Other, net
(156
)
437
Changes in operating assets and
liabilities:
Accounts receivable
12,988
(14,862
)
Inventories
(5,806
)
(13,916
)
Prepaid expenses and other assets
422
1,501
Income taxes, net
(1,616
)
(1,577
)
Accounts payable
(7,805
)
(440
)
Accrued expenses and other liabilities
(13,283
)
(3,208
)
Deferred revenue and customer deposits
(2,784
)
2,733
Cash provided by operating activities
22,266
11,713
Investing activities
Capital expenditures for plant, equipment
and leasehold improvements, net
(6,076
)
(14,440
)
Other
183
95
Cash used in investing activities
(5,893
)
(14,345
)
Financing activities
Principal payments on Senior Notes
(16,954
)
(20,000
)
Principal payments on ABL Revolver
(10,000
)
(10,000
)
Proceeds from ABL Revolver
13,000
35,000
Payments on debt extinguishment and
other
(327
)
(1,093
)
Proceeds from finance lease financing
—
2,074
Payments on finance lease obligations
(2,655
)
(2,457
)
Cash (used in) provided by financing
activities
(16,936
)
3,524
Effect of exchange rates on cash
(1
)
(68
)
Net (decrease) increase in cash and cash
equivalents
(564
)
824
Cash and cash equivalents, beginning of
period
11,037
20,683
Cash and cash equivalents, end of
period
$
10,473
$
21,507
Supplemental disclosures of cash flow
information
Cash paid (refunded) during the period
for:
Interest
$
25,307
$
27,026
Income taxes paid
$
9,994
$
10,859
Income taxes refunded
$
(25
)
$
(449
)
Right-of-use assets obtained in exchange
for lease obligations:
Operating leases
$
2,641
$
816
Financing leases
$
6,989
$
7,783
Accounts payable and accrued expenses for
capital expenditures for plant, equipment and leasehold
improvements
$
977
$
1,781
EXHIBIT D
CPI Card Group Inc. and
Subsidiaries
Segment Summary
Information
For the Three Months Ended
September 30, 2023 and 2022
(dollars in thousands)
(Unaudited)
Net Sales
Three Months Ended September
30,
2023
2022
$ Change
% Change
Net sales by segment:
Debit and Credit
$
83,780
$
99,512
$
(15,732
)
(15.8
)%
Prepaid Debit
22,335
25,335
(3,000
)
(11.8
)%
Eliminations
(252
)
(270
)
18
*
%
Total
$
105,863
$
124,577
$
(18,714
)
(15.0
)%
* Calculation not meaningful
Nine Months Ended September
30,
2023
2022
$ Change
% Change
Net sales by segment:
Debit and Credit
$
278,959
$
285,708
$
(6,749
)
(2.4
)%
Prepaid Debit
63,286
64,010
(724
)
(1.1
)%
Eliminations
(570
)
(409
)
(161
)
*
%
Total
$
341,675
$
349,309
$
(7,634
)
(2.2
)%
Gross Profit
Three Months Ended September
30,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
28,381
33.9
%
$
38,071
38.3
%
$
(9,690
)
(25.5
)%
Prepaid Debit
7,771
34.8
%
10,369
40.9
%
(2,598
)
(25.1
)%
Total
$
36,152
34.1
%
$
48,440
38.9
%
$
(12,288
)
(25.4
)%
Nine Months Ended September
30,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
99,603
35.7
%
$
104,389
36.5
%
$
(4,786
)
(4.6
)%
Prepaid Debit
20,468
32.3
%
23,880
37.3
%
(3,412
)
(14.3
)%
Total
$
120,071
35.1
%
$
128,269
36.7
%
$
(8,198
)
(6.4
)%
Income from Operations
Three Months Ended September
30,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
Debit and Credit
$
20,791
24.8
%
$
29,418
29.6
%
$
(8,627
)
(29.3
)%
Prepaid Debit
6,631
29.7
%
9,109
36.0
%
(2,478
)
(27.2
)%
Other
(14,461
)
*
%
(15,082
)
*
%
621
(4.1
)%
Total
$
12,961
12.2
%
$
23,445
18.8
%
$
(10,484
)
(44.7
)%
Nine Months Ended September
30,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
Debit and Credit
$
75,898
27.2
%
$
78,847
27.6
%
$
(2,949
)
(3.7
)%
Prepaid Debit
17,936
28.3
%
20,393
31.9
%
(2,457
)
(12.0
)%
Other
(42,783
)
*
%
(42,760
)
*
%
(23
)
0.1
%
Total
$
51,051
14.9
%
$
56,480
16.2
%
$
(5,429
)
(9.6
)%
EBITDA
Three Months Ended September
30,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
EBITDA by segment:
Debit and Credit
$
23,086
27.6
%
$
31,675
31.8
%
$
(8,589
)
(27.1
)%
Prepaid Debit
7,304
32.7
%
9,638
38.0
%
(2,334
)
(24.2
)%
Other
(13,477
)
*
%
(14,094
)
*
%
617
(4.4
)%
Total
$
16,913
16.0
%
$
27,219
21.8
%
$
(10,306
)
(37.9
)%
Nine Months Ended September
30,
2023
% of Net Sales
2022
% of Net Sales
$ Change
% Change
EBITDA by segment:
Debit and Credit
$
82,733
29.7
%
$
85,042
29.8
%
$
(2,309
)
(2.7
)%
Prepaid Debit
19,938
31.5
%
22,101
34.5
%
(2,163
)
(9.8
)%
Other
(39,995
)
*
%
(40,119
)
*
%
124
(0.3
)%
Total
$
62,676
18.3
%
$
67,024
19.2
%
$
(4,348
)
(6.5
)%
Reconciliation of Income (loss)
from
Operations by Segment to EBITDA by
Segment
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 expenses
(27
)
(2
)
(24
)
(53
)
EBITDA
$
23,086
$
7,304
$
(13,477
)
$
16,913
Three Months Ended September
30, 2022
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
29,418
$
9,109
$
(15,082
)
$
23,445
Depreciation and amortization
2,271
529
1,037
3,837
Other expenses
(14
)
—
(49
)
(63
)
EBITDA
$
31,675
$
9,638
$
(14,094
)
$
27,219
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 expenses
(1
)
(1
)
(243
)
(245
)
EBITDA
$
82,733
$
19,938
$
(39,995
)
$
62,676
Nine Months Ended September
30, 2022
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
78,847
$
20,393
$
(42,760
)
$
56,480
Depreciation and amortization
6,202
1,711
3,105
11,018
Other expenses
(7
)
(3
)
(464
)
(474
)
EBITDA
$
85,042
$
22,101
$
(40,119
)
$
67,024
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,
2023
2022
2023
2022
EBITDA and Adjusted EBITDA:
Net income
$
3,857
$
11,910
$
21,253
$
24,063
Interest, net
6,714
7,323
20,235
22,334
Income tax expense
2,337
4,149
9,318
9,609
Depreciation and amortization
4,005
3,837
11,870
11,018
EBITDA
$
16,913
$
27,219
$
62,676
$
67,024
Adjustments to EBITDA:
Stock-based compensation expense
$
2,600
$
966
$
4,431
$
2,928
Sales tax expense (1)
—
22
35
74
Restructuring and other charges (2)
1,672
—
2,229
—
Loss on debt extinguishment (3)
25
—
243
395
Foreign currency loss
28
64
2
79
Subtotal of adjustments to EBITDA
$
4,325
$
1,052
$
6,940
$
3,476
Adjusted EBITDA
$
21,238
$
28,271
$
69,616
$
70,500
Net income margin (% of Net sales)
3.6
%
9.6
%
6.2
%
6.9
%
Net income growth (% Change 2023 vs.
2022)
(67.6
)%
(11.7
)%
Adjusted EBITDA margin (% of Net
sales)
20.1
%
22.7
%
20.4
%
20.2
%
Adjusted EBITDA growth (% Change 2023 vs.
2022)
(24.9
)%
(1.3
)%
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Free Cash Flow:
Cash provided by operating activities
$
11,944
$
19,861
$
22,266
$
11,713
Capital expenditures for plant, equipment
and leasehold improvements
518
(6,261
)
(6,076
)
(14,440
)
Free Cash Flow
$
12,462
$
13,600
$
16,190
$
(2,727
)
_____________
(1)
Represents estimated sales tax (benefit)
expense relating to a contingent liability due to historical
activity in certain states where it is probable that the Company
will be subject to sales tax plus interest and penalties.
(2)
The 2023 amount represents accrued
executive retention to be paid in 2024.
(3)
The Company redeemed a portion of the
8.625% Senior Secured Notes through the third quarters of 2023 and
2022 and expensed the associated portion of the unamortized
deferred financing costs.
Last Twelve Months
Ended
September 30,
December 31,
2023
2022
Reconciliation of net income to LTM
EBITDA and Adjusted EBITDA:
Net income
$
33,730
$
36,540
Interest, net
27,517
29,616
Income tax expense
12,316
12,607
Depreciation and amortization
15,738
14,886
EBITDA
$
89,301
$
93,649
Adjustments to EBITDA:
Stock-based compensation expense
$
4,982
$
3,479
Sales tax (benefit) expense(1)
(21
)
18
Restructuring and other charges (2)
2,229
—
Loss on debt extinguishment (3)
322
474
Foreign currency loss
6
83
Subtotal of adjustments to EBITDA
$
7,518
$
4,054
LTM Adjusted EBITDA
$
96,819
$
97,703
As of
September 30,
December 31,
2023
2022
Calculation of Net Leverage
Ratio:
Senior Notes
$
267,897
$
285,000
ABL revolver
8,000
5,000
Finance lease obligations
15,027
10,697
Total debt
290,924
300,697
Less: Cash and cash equivalents
(10,473
)
(11,037
)
Total net debt (a)
$
280,451
$
289,660
LTM Adjusted EBITDA (b)
$
96,819
$
97,703
Net Leverage Ratio (a)/(b)
2.9
3.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231107645127/en/
CPI Card Group Inc. Investor Relations: (877) 369-9016
InvestorRelations@cpicardgroup.com
CPI Card Group Inc. Media Relations:
Media@cpicardgroup.com
CPI Card (NASDAQ:PMTS)
Historical Stock Chart
From Apr 2024 to May 2024
CPI Card (NASDAQ:PMTS)
Historical Stock Chart
From May 2023 to May 2024