Net Sales Decreased 7% to $112 Million; Net
Income Decreased 50% to $5 Million; Adjusted EBITDA Decreased 8% to
$23 Million
Net Sales, Net Income, and Adjusted EBITDA
Increased from Fourth Quarter Levels
Company Continues to Anticipate Gradual Market
Recovery in 2024; Affirms Full Year Net Sales and Adjusted EBITDA
Outlook
CPI Card Group Inc. (Nasdaq: PMTS) (“CPI” or the “Company”), a
payments technology company and leading provider of credit, debit,
and prepaid card and digital solutions, including
Software-as-a-Service-based instant issuance, today reported
financial results for the first quarter ended March 31, 2024 and
updated its financial outlook for 2024.
As anticipated, first quarter Debit and Credit segment sales
were impacted by cautious customer spending as customers continued
their focus on managing inventory levels, while Prepaid segment
sales posted strong growth. Compared to the prior year first
quarter, net sales decreased 7% to $111.9 million; net income
decreased 50% to $5.5 million, primarily due to CEO
transition-related expenses; and Adjusted EBITDA decreased 8% to
$23.0 million.
Net sales, net income, and Adjusted EBITDA each increased from
fourth quarter 2023 levels. As previously noted, the Company
anticipates sales declines in the first half of 2024 to be offset
by growth in the second half of the year from share gains and
improved market demand.
“We are pleased with the overall improvement in results compared
to recent trends,” said John Lowe, President and Chief Executive
Officer. “We were able to deliver strong growth in our Prepaid and
personalization services businesses in the quarter, which partially
offset the anticipated declines in card volumes.”
Lowe added, “Card issuance remains healthy and we continue to
expect a market recovery in the second half of the year.
Strategically, our teams remain focused on gaining market share by
providing innovative solutions and leading customer service and
quality, as well as expanding into adjacent markets, including
digital solutions, for our base of thousands of customers.”
In the first quarter, the Company signed a multi-year contract
with one of its larger customers, gaining share which will generate
incremental sales over the next several years. The Company adjusted
its Free Cash Flow outlook for 2024 to reflect up-front incentives
related to this contract.
CPI is a top payment solutions provider in the U.S. serving
thousands of banks, credit unions and fintechs, as well as major
bank platforms and prepaid program managers. The Company is a
leader in the U.S. markets for eco-focused payment cards,
personalization and Software-as-a-Service-based instant issuance
solutions for small and medium U.S. financial institutions and
retail prepaid debit card solutions.
The Company believes long-term growth trends for the U.S. card
market remain strong, led by consumer card growth, widespread
adoption of eco-focused cards and the ongoing conversion to
contactless cards. Based on figures released by the networks, Visa
and Mastercard® U.S. debit and credit cards in circulation
increased at a compound annual growth rate of 9% for the three-year
period ending December 31, 2023.
2024 Business Highlights
- CPI continues to be a leading provider of eco-focused payment
card solutions in the U.S. market, with more than 100 million
eco-focused cards sold since launch in late 2019.
- CPI continues to be a leading provider of
Software-as-a-Service-based instant issuance solutions in the U.S.,
with more than 15,000 Card@Once® installations across more than
2,000 financial institutions.
- The Company executed share repurchases against the $20 million
authorization announced in November. Through March 2024, the
Company had repurchased in the open market or had committed to
repurchase through its stock purchase agreement with its majority
stockholder approximately $6 million of shares since initiation of
the authorization.
- The Company ended the first quarter with a Net Leverage Ratio
of 3.1x.
First Quarter 2024 Financial Highlights
Net sales decreased 7% year-over-year to $111.9 million in the
first quarter of 2024
- Debit and Credit segment net sales decreased 14% to $88.0
million, primarily due to declines in card volumes, partially
offset by increases in Card@Once® instant issuance solutions and
other card personalization services.
- Prepaid Debit segment net sales increased 26% to $24.2 million,
reflecting strong customer demand and timing among quarters.
First quarter gross profit decreased 4% to $41.5 million and
gross profit margin was 37.1%, which compared to 35.7% in the prior
year first quarter.
First quarter income from operations decreased 31% to $14.1
million; net income decreased 50% to $5.5 million, or $0.46 diluted
earnings per share; and Adjusted EBITDA decreased 8% to $23.0
million. Income from operations and net income declines include the
impact of approximately $2 million of pre-tax operating expenses
related to an executive retention package announced in 2023 and
other CEO transition-related expenses, including stock
compensation, which are not included in Adjusted EBITDA. The net
income decrease was also impacted by a higher effective tax rate
compared to prior year.
Balance Sheet, Liquidity and Cash Flow
The Company generated cash from operating activities of $8.9
million in the first quarter of 2024, which compared to $8.0
million in the 2023 first quarter, and Free Cash Flow of $7.4
million, which compared to $3.9 million in the prior year. The
increase in cash generation compared to the prior year was driven
by working capital improvements and lower capital expenditures,
partially offset by lower net income.
As of March 31, 2024, cash and cash equivalents was $17.1
million. There were $268 million of 8.625% Senior Secured Notes due
2026 and no borrowings from the ABL revolving credit facility
outstanding at quarter-end.
The Company spent $1.25 million to repurchase 68,258 shares of
common stock in the open market during the first quarter. In April,
the Company spent an additional $4.4 million to purchase 244,314
shares from its majority shareholder pursuant to the Stock Purchase
Agreement announced in December, which committed the Company to
purchase shares from its majority shareholder at a 3 to 1 ratio to
the number of shares repurchased in the open market over the
December through March period.
The Company’s capital structure and allocation priorities are to
maintain ample liquidity; invest in the business, including
strategic acquisitions; deleverage the balance sheet; and return
funds to stockholders.
“We were pleased to deliver gross margin improvement and solid
cash flow generation in the first quarter,” said Jeff Hochstadt,
Chief Financial Officer of CPI. “We also made significant progress
executing our share repurchase program, consistent with our capital
allocation priorities.”
Outlook for 2024
The Company affirmed its net sales and Adjusted EBITDA financial
outlook for 2024, which was previously provided in March. The
Company continues to expect slight increases in both net sales and
Adjusted EBITDA for the full year, with declines in the first half
of the year offset by growth in the second half.
The Company has adjusted its Free Cash Flow outlook to be
approximately half of the 2023 level, which compares to the
previous outlook of $5 million to $10 million below prior year. The
change compared to the prior outlook primarily reflects the
near-term impact of the newly signed contract with one of the
Company’s larger customers, which should benefit cash flow through
2029, but negatively impact Free Cash Flow in 2024 due to up-front
incentives. Compared to prior year, the Free Cash Flow outlook also
reflects increased capital spending investment, including
investment in a new state-of-the-art secure card production
facility in Indiana. The Company generated $27.6 million of Free
Cash Flow in 2023.
The Company continues to expect its year-end 2024 Net Leverage
Ratio to be between 3.0x and 3.5x.
Conference Call and Webcast
CPI Card Group Inc. will hold a conference call on May 7, 2024
at 9:00 a.m. Eastern Time (ET) to review its first 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 Q1 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 May 21,
2024 at: U.S. dial-in number (toll free): 800-770-2030
International: 609-800-9909 Conference ID: 8062733
A webcast replay of the conference call will also be available
on CPI Card Group Inc.’s Investor Relations 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 executive
retention and severance; costs related to production facility
modernization efforts; loss on debt extinguishment; foreign
currency gain or loss; and other items that are unusual in nature,
infrequently occurring or not considered part of our core
operations, as set forth in the reconciliation in Exhibit E.
Adjusted EBITDA is intended to show our unleveraged, pre-tax
operating results and therefore reflects our financial performance
based on operational factors, excluding non-operational, unusual or
non-recurring losses or gains. Adjusted EBITDA has important
limitations as an analytical tool, and you should not consider it
in isolation, or as a substitute for, analysis of our results as
reported under GAAP. For example, Adjusted EBITDA does not reflect:
(a) our capital expenditures, future requirements for capital
expenditures or contractual commitments; (b) changes in, or cash
requirements for, our working capital needs; (c) the significant
interest expenses or the cash requirements necessary to service
interest or principal payments on our debt; (d) tax payments that
represent a reduction in cash available to us; (e) any cash
requirements for the assets being depreciated and amortized that
may have to be replaced in the future; (f) the impact of earnings
or charges resulting from matters that we and the lenders under our
credit agreement may not consider indicative of our ongoing
operations; or (g) the impact of any discontinued operations. In
particular, our definition of Adjusted EBITDA allows us to add back
certain non-operating, unusual or non-recurring charges that are
deducted in calculating net income, even though these are expenses
that may recur, vary greatly and are difficult to predict and can
represent the effect of long-term strategies as opposed to
short-term results. In addition, certain of these expenses
represent the reduction of cash that could be used for other
purposes. Adjusted EBITDA margin percentage as shown in Exhibit E
is computed as Adjusted EBITDA divided by total net sales.
We define LTM Adjusted EBITDA as Adjusted EBITDA (defined
previously) for the last twelve months. LTM Adjusted EBITDA is used
in the computation of Net Leverage Ratio, and is reconciled in
Exhibit E.
Free Cash Flow
We define Free Cash Flow as cash flow provided by (used in)
operating activities less capital expenditures. We use this metric
in analyzing our ability to service and repay our debt. However,
this measure does not represent funds available for investment or
other discretionary uses since it does not deduct cash used to
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 2024
We have provided Adjusted EBITDA expectations for 2024 on a
non-GAAP basis because certain reconciling items are dependent on
future events that either cannot be controlled or cannot be
reliably predicted because they are not part of the Company’s
routine activities, any of which could be significant.
Net Leverage Ratio
Management and various investors use the ratio of debt principal
outstanding, plus finance lease obligations, less cash, divided by
LTM Adjusted EBITDA, or “Net Leverage Ratio,” as a measure of our
financial strength when making key investment decisions and
evaluating us against peers.
About CPI Card Group Inc.
CPI Card Group is a payments technology company providing a
comprehensive range of credit, debit, and prepaid card and digital
solutions, including Software-as-a-Service (SaaS) instant issuance.
With a focus on building personal relationships and earning trust,
we help our customers navigate the constantly evolving world of
payments, while delivering innovative solutions that spark
connections and support their brands. We serve clients across
industry, size, and scale through our team of experienced,
dedicated employees and our network of high-security production and
card services facilities—located in the United States. CPI was
named one of the 2024 Best Companies to Work For by U.S. News and
World Report and is committed to exceeding our customers’
expectations, transforming our industry, and enhancing the way
people pay every day. Learn more at www.CPIcardgroup.com.
Forward-Looking Statements
Certain statements and information in this release (as well as
information included in other written or oral statements we make
from time to time) may contain or constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). The words “believe,” “estimate,”
“project,” “expect,” “anticipate,” “plan,” “intend,” “foresee,”
“should,” “would,” “could,” “continue,” “committed,” “attempt,”
“aim,” “target,” “objective,” “guides,” “seek,” “focus,” “provides
guidance,” “provides outlook” or other similar expressions are
intended to identify forward-looking statements, which are not
historical in nature. These forward-looking statements, including
statements about our strategic initiatives and market
opportunities, are based on our current expectations and beliefs
concerning future developments and their potential effect on us and
other information currently available. Such forward-looking
statements, because they relate to future events, are by their very
nature subject to many important risks and uncertainties that could
cause actual results or other events to differ materially from
those contemplated.
These risks and uncertainties include, but are not limited to: a
deterioration in general economic conditions, including
inflationary conditions and resulting in reduced consumer
confidence and business spending, and a decline in consumer credit
worthiness impacting demand for our products; the unpredictability
of our operating results, including an inability to anticipate
changes in customer inventory management practices and its impact
on our business; a disruption or other failure in our supply chain,
including as a result of foreign conflicts and with respect to
single source suppliers, or the failure or inability of suppliers
to comply with our code of conduct or contractual requirements, or
political unrest in countries in which our suppliers operate, or
inflationary pressures, resulting in increased costs and inability
to pass those costs on to our customers and extended production
lead times and difficulty meeting customers’ delivery expectations;
our failure to retain our existing customers or identify and
attract new customers; our inability to recruit, retain and develop
qualified personnel, including key personnel, and implement
effective succession processes; adverse conditions in the banking
system and financial markets, including the failure of banks and
financial institutions; system security risks, data protection
breaches and cyber-attacks; interruptions in our operations,
including our information technology systems, or in the operations
of the third parties that operate computing infrastructure on which
we rely; our inability to develop, introduce and commercialize new
products and services; the usage, or lack thereof, of artificial
intelligence technologies; our substantial indebtedness, including
inability to make debt service payments or refinance such
indebtedness; the restrictive terms of our indebtedness and
covenants of future agreements governing indebtedness and the
resulting restraints on our ability to pursue our business
strategies; our status as an accelerated filer and complying with
the Sarbanes-Oxley Act of 2002 and the costs associated with such
compliance and implementation of procedures thereunder; our failure
to maintain effective internal control over financial reporting;
disruptions in production at one or more of our facilities;
problems in production quality, materials and process and costs
relating to product defects and any related product liability
and/or warranty claims; environmental, social and governance
(“ESG”) preferences and demands of various stakeholders and our
ability to conform to such preferences and demands and to comply
with any related regulatory requirements; the effects of climate
change, negative perceptions of our products due to the impact of
our products and production processes on the environment and other
ESG-related risks; damage to our reputation or brand image;
disruptions in production due to weather conditions, climate
change, political instability or social unrest; our inability to
adequately protect our trade secrets and intellectual property
rights from misappropriation, infringement claims brought against
us and risks related to open source software; defects in our
software and computing systems; our limited ability to raise
capital; costs and impacts to our financial results relating to the
obligatory collection of sales tax and claims for uncollected sales
tax in states that impose sales tax collection requirements on
out-of-state businesses or unclaimed property, as well as potential
new U.S. tax legislation increasing the corporate income tax rate
and challenges to our income tax positions; our inability to
successfully execute on our divestitures or acquisitions; our
inability to realize the full value of our long-lived assets; our
inability to renew licenses with key technology licensors; the
highly competitive, saturated and consolidated nature of our
marketplace; costs and potential liabilities associated with
compliance or failure to comply with regulations, customer
contractual requirements and evolving industry standards regarding
consumer privacy and data use and security; new and developing
technologies that make our existing technology solutions and
products obsolete or less relevant or our failure to introduce new
products and services in a timely manner; our failure to operate
our business in accordance with the Payment Card Industry Security
Standards Council security standards or other industry standards;
the effects of restrictions, delays or interruptions in our ability
to source raw materials and components used in our products from
foreign countries; the effects on the global economy of ongoing
foreign conflicts; our failure to comply with environmental, health
and safety laws and regulations that apply to our products and the
raw materials we use in our production processes; risks associated
with the majority stockholders’ ownership of our stock; potential
conflicts of interest that may arise due to our board of directors
being comprised in part of directors who are principals of our
majority stockholders; the influence of securities analysts over
the trading market for and price of our common stock; failure to
meet the continued listing standards of the Nasdaq Global Market;
the impact of stockholder activism or securities litigation on the
trading price and volatility of our common stock; our inability to
fully execute on our share repurchase program strategy; certain
provisions of our organizational documents and other contractual
provisions that may delay or prevent a change in control and make
it difficult for stockholders other than our majority stockholders
to change the composition of our board of directors; our ability to
comply with a wide variety of complex laws and regulations and the
exposure to liability for any failure to comply; the effect of
legal and regulatory proceedings; and other risks that are
described in Part I, Item 1A – Risk Factors in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission (the
“SEC”) on March 7, 2024 in Part II, Item 1A – Risk Factors of our
Quarterly Report on Form 10-Q and our other reports filed from time
to time with the SEC.
We caution and advise readers not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
These statements are based on assumptions that may not be realized
and involve risks and uncertainties that could cause actual results
or other events to differ materially from the expectations and
beliefs contained herein. We undertake no obligation to publicly
update or revise any forward-looking statements after the date they
are made, whether as a result of new information, future events or
otherwise.
For more information:
CPI encourages investors to use its investor relations website
as a way of easily finding information about the Company. CPI
promptly makes available on this website the reports that the
Company files or furnishes with the SEC, corporate governance
information and press releases.
CPI Card Group Inc. Earnings Release
Supplemental Financial Information
Exhibit A
Condensed Consolidated Statements of
Operations and Comprehensive Income - Unaudited for the three
months ended March 31, 2024 and 2023
Exhibit B
Condensed Consolidated Balance Sheets –
Unaudited as of March 31, 2024 and December 31, 2023
Exhibit C
Condensed Consolidated Statements of Cash
Flows – Unaudited for the three months ended March 31, 2024 and
2023
Exhibit D
Segment Summary Information – Unaudited
for the three months ended March 31, 2024 and 2023
Exhibit E
Supplemental GAAP to Non-GAAP
Reconciliations – Unaudited for the three months ended March 31,
2024 and 2023
EXHIBIT A
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations and Comprehensive Income
(in thousands, except share
and per share amounts)
(Unaudited)
Three Months Ended March
31,
2024
2023
Net sales:
Products
$
58,158
$
75,790
Services
53,778
45,062
Total net sales
111,936
120,852
Cost of sales:
Products (exclusive of depreciation and
amortization shown below)
37,802
45,980
Services (exclusive of depreciation and
amortization shown below)
29,929
29,404
Depreciation and amortization
2,687
2,374
Total cost of sales
70,418
77,758
Gross profit
41,518
43,094
Operating expenses:
Selling, general and administrative
(exclusive of depreciation and amortization shown below)
26,043
21,066
Depreciation and amortization
1,330
1,430
Total operating expenses
27,373
22,496
Income from operations
14,145
20,598
Other expense, net:
Interest, net
(6,425
)
(6,781
)
Other expense, net
(65
)
(114
)
Total other expense, net
(6,490
)
(6,895
)
Income before income taxes
7,655
13,703
Income tax expense
(2,200
)
(2,830
)
Net income
$
5,455
$
10,873
Basic and diluted earnings per share:
Basic earnings per share
$
0.48
$
0.95
Diluted earnings per share
$
0.46
$
0.91
Basic weighted-average shares
outstanding
11,266,699
11,394,919
Diluted weighted-average shares
outstanding
11,769,364
11,901,581
Comprehensive income:
Net income
$
5,455
$
10,873
Total comprehensive income
$
5,455
$
10,873
EXHIBIT B
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(in thousands, except share
and per share amounts)
(Unaudited)
March 31,
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
17,144
$
12,413
Accounts receivable, net
68,539
73,724
Inventories, net
83,381
70,594
Prepaid expenses and other current
assets
11,862
8,647
Total current assets
180,926
165,378
Plant, equipment, leasehold improvements
and operating lease right-of-use assets, net
61,033
63,053
Intangible assets, net
13,154
14,122
Goodwill
47,150
47,150
Other assets
17,517
3,980
Total assets
$
319,780
$
293,683
Liabilities and stockholders’
deficit
Current liabilities:
Accounts payable
$
23,643
$
12,802
Accrued expenses
49,203
35,803
Deferred revenue and customer deposits
1,172
840
Total current liabilities
74,018
49,445
Long-term debt
265,326
264,997
Deferred income taxes
6,742
7,139
Other long-term liabilities
22,145
24,038
Total liabilities
368,231
345,619
Commitments and contingencies
Series A Preferred Stock; $0.001 par
value—100,000 shares authorized; 0 shares issued and outstanding at
March 31, 2024 and December 31, 2023
—
—
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000
shares authorized; 11,391,476 and 11,446,155 shares issued and
outstanding at March 31, 2024 and December 31, 2023,
respectively
11
11
Capital deficiency
(104,193
)
(102,223
)
Accumulated earnings
55,731
50,276
Total stockholders’ deficit
(48,451
)
(51,936
)
Total liabilities and stockholders’
deficit
$
319,780
$
293,683
EXHIBIT C
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended March
31,
2024
2023
Operating activities
Net income
$
5,455
$
10,873
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense
3,049
2,837
Amortization expense
968
967
Stock-based compensation expense
3,060
541
Amortization of debt issuance costs and
debt discount
459
473
Loss on debt extinguishment
—
119
Deferred income taxes
(397
)
(271
)
Other, net
223
12
Changes in operating assets and
liabilities:
Accounts receivable, net
5,171
4,335
Inventories
(12,984
)
(1,464
)
Prepaid expenses and other assets
(17,610
)
310
Income taxes, net
728
550
Accounts payable
10,681
1,533
Accrued expenses and other liabilities
9,730
(11,358
)
Deferred revenue and customer deposits
332
(1,456
)
Cash provided by operating activities
8,865
8,001
Investing activities
Capital expenditures for plant, equipment
and leasehold improvements, net
(1,506
)
(4,145
)
Other
—
50
Cash used in investing activities
(1,506
)
(4,095
)
Financing activities
Principal payments on Senior Notes
—
(7,903
)
Proceeds from ABL Revolver
—
8,000
Other
(109
)
(69
)
Payments on finance lease obligations
(1,269
)
(820
)
Common stock repurchased
(1,250
)
—
Cash used in financing activities
(2,628
)
(792
)
Effect of exchange rates on cash
—
6
Net increase in cash and cash
equivalents
4,731
3,120
Cash and cash equivalents, beginning of
period
12,413
11,037
Cash and cash equivalents, end of
period
$
17,144
$
14,157
Supplemental disclosures of cash flow
information
Cash paid (refunded) during the period
for:
Interest
$
11,903
$
12,608
Income taxes paid
$
16
$
28
Income taxes refunded
$
(163
)
$
—
Right-of-use assets obtained in exchange
for lease obligations:
Operating leases
$
—
$
168
Financing leases
$
—
$
2,169
Accounts payable and accrued expenses for
capital expenditures for plant, equipment and leasehold
improvements
$
263
$
422
Unsettled share repurchases included in
accrued expenses
$
4,404
$
—
EXHIBIT D
CPI Card Group Inc. and
Subsidiaries
Segment Summary
Information
For the Three Months Ended
March 31, 2024 and 2023
(dollars in thousands)
(Unaudited)
Net Sales
Three Months Ended March
31,
2024
2023
$ Change
% Change
Net sales by segment:
Debit and Credit
$
87,973
$
101,985
$
(14,012
)
(13.7
)
%
Prepaid Debit
24,198
19,130
5,068
26.5
%
Eliminations
(235
)
(263
)
28
*
%
Total
$
111,936
$
120,852
$
(8,916
)
(7.4
)
%
* Calculation not meaningful
Gross Profit
Three Months Ended March
31,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
31,495
35.8
%
$
38,184
37.4
%
$
(6,689
)
(17.5
)
%
Prepaid Debit
10,023
41.4
%
4,910
25.7
%
5,113
104.1
%
Total
$
41,518
37.1
%
$
43,094
35.7
%
$
(1,576
)
(3.7
)
%
Income from Operations
Three Months Ended March
31,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
Debit and Credit
$
22,754
25.9
%
$
30,026
29.4
%
$
(7,272
)
(24.2
)
%
Prepaid Debit
8,745
36.1
%
3,677
19.2
%
5,068
137.8
%
Other
(17,354
)
*
%
(13,105
)
*
%
(4,249
)
32.4
%
Total
$
14,145
12.6
%
$
20,598
17.0
%
$
(6,453
)
(31.3
)
%
EBITDA
Three Months Ended March
31,
2024
% of Net Sales
2023
% of Net Sales
$ Change
% Change
EBITDA by segment:
Debit and Credit
$
24,842
28.2
%
$
32,192
31.6
%
$
(7,350
)
(22.8
)
%
Prepaid Debit
9,615
39.7
%
4,301
22.5
%
5,314
123.6
%
Other
(16,360
)
*%
(12,205
)
*%
(4,155
)
34.0
%
Total
$
18,097
16.2
%
$
24,288
20.1
%
$
(6,191
)
(25.5
)
%
Reconciliation of Income (Loss)
from
Operations by Segment to EBITDA by
Segment
Three Months Ended March 31,
2024
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
22,754
$
8,745
$
(17,354
)
$
14,145
Depreciation and amortization
2,150
871
996
4,017
Other income (expenses)
(62
)
(1
)
(2
)
(65
)
EBITDA
$
24,842
$
9,615
$
(16,360
)
$
18,097
Three Months Ended March 31,
2023
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
30,026
$
3,677
$
(13,105
)
$
20,598
Depreciation and amortization
2,161
624
1,019
3,804
Other income (expenses)
5
—
(119
)
(114
)
EBITDA
$
32,192
$
4,301
$
(12,205
)
$
24,288
EXHIBIT E
CPI Card Group Inc. and
Subsidiaries
Supplemental GAAP to Non-GAAP
Reconciliation
(dollars in thousands)
(Unaudited)
Three Months Ended March
31,
2024
2023
EBITDA and Adjusted EBITDA:
Net income
$
5,455
$
10,873
Interest, net
6,425
6,781
Income tax expense
2,200
2,830
Depreciation and amortization
4,017
3,804
EBITDA
$
18,097
$
24,288
Adjustments to EBITDA:
Stock-based compensation expense
$
3,060
$
541
Sales tax expense (1)
—
113
Restructuring and other charges (2)
1,819
—
Loss on debt extinguishment (3)
—
119
Foreign currency gain
—
(5
)
Subtotal of adjustments to EBITDA
$
4,879
$
768
Adjusted EBITDA
$
22,976
$
25,056
Net income margin (% of Net sales)
4.9
%
9.0
%
Net income growth (% Change 2024 vs.
2023)
(49.8
)%
Adjusted EBITDA margin (% of Net
sales)
20.5
%
20.7
%
Adjusted EBITDA growth (% Change 2024 vs.
2023)
(8.3
)%
Three Months Ended March
31,
2024
2023
Free Cash Flow:
Cash provided by operating activities
$
8,865
$
8,001
Capital expenditures for plant, equipment
and leasehold improvements, net
(1,506
)
(4,145
)
Free Cash Flow
$
7,359
$
3,856
(1)
Represents estimated sales tax expense
(benefit) relating to a contingent liability due to historical
activity in certain states where it is probable that the Company
will be subject to sales tax plus interest and penalties.
(2)
Represents executive retention and
severance costs, as well as costs related to production facility
modernization efforts.
(3)
The Company redeemed a portion of the
8.625% Senior Secured Notes in 2023 and expensed the associated
portion of the unamortized deferred financing costs.
Last Twelve Months
Ended
March 31,
December 31,
2024
2023
Reconciliation of net income to LTM
EBITDA and Adjusted EBITDA:
Net income
$
18,567
$
23,985
Interest, net
26,557
26,913
Income tax expense
9,847
10,477
Depreciation and amortization
16,144
15,931
EBITDA
$
71,115
$
77,306
Adjustments to EBITDA:
Stock-based compensation expense
$
10,026
$
7,507
Sales tax benefit(1)
(183
)
(70
)
Restructuring and other charges (2)
6,350
4,531
Loss on debt extinguishment (3)
124
243
Foreign currency gain
(21
)
(26
)
Subtotal of adjustments to EBITDA
$
16,296
$
12,185
LTM Adjusted EBITDA
$
87,411
$
89,491
As of
March 31,
December 31,
2024
2023
Calculation of Net Leverage
Ratio:
Senior Notes
$
267,897
$
267,897
Finance lease obligations
16,839
18,106
Total debt
284,736
286,003
Less: Cash and cash equivalents
(17,144
)
(12,413
)
Total net debt (a)
$
267,592
$
273,590
LTM Adjusted EBITDA (b)
$
87,411
$
89,491
Net Leverage Ratio (a)/(b)
3.1
3.1
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240507734928/en/
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