LITTLETON, Colo.--(BUSINESS WIRE)--CPI Card Group Inc. Announces Investments by its Chairman and Tricor Pacific Capital. ...

Core Insights - CPI Card Group Inc. announced a new integration with Nymbus to enhance instant card issuance capabilities [1] - The integration allows CPI's Card@Once® instant issuance solution to work seamlessly with the Nymbus Core Platform [1] Company Overview - CPI Card Group is a payments technology company that offers a wide range of payment cards and digital solutions [1] - Nymbus is recognized as a leading provider of cloud-based core banking solutions [1]

Financial Data and Key Metrics Changes - Overall sales increased by 11% for the quarter, driven by the addition of AeroWide, compared to a strong prior year [6][14] - Adjusted EBITDA decreased by 7% in the quarter, primarily due to unfavorable sales mix and tariff expenses [6][16] - Gross profit margin decreased from 35.8% in the prior year to 29.7% due to unfavorable sales mix and increased production costs [15] Business Line Data and Key Metrics Changes - Debit and credit segment sales increased by 16%, with AeroWide contributing $15 million [14] - Prepaid sales declined by 7%, largely due to timing and comparisons to large sales in the prior year [14] - Personalization services were flat in the quarter, showing improvement from the first half of the year [14] Market Data and Key Metrics Changes - Contactless card sales were flat compared to a very strong prior year, although contactless volumes increased [14] - The prepaid segment saw a decrease in sales, but the complexity of prepaid offerings is expected to drive long-term growth [32][33] Company Strategy and Development Direction - The company is focused on customer-centric strategies, quality, efficiency, innovation, and diversification [9] - Strategic initiatives include expanding addressable markets and enhancing growth through digital solutions [10] - The company has entered a strategic relationship with Carta to enhance prepaid card technology, which is expected to reduce fraud [12][44] Management's Comments on Operating Environment and Future Outlook - Management expects strong year-on-year growth in the fourth quarter for both net sales and adjusted EBITDA, significantly higher than the third quarter [8][23] - The company has updated its four-year outlook to low double-digit to low teens net sales growth and flat to low single-digit adjusted EBITDA growth for 2024 [7][21] - Management remains confident in core business growth despite facing margin pressures [23] Other Important Information - The company finalized a strategic relationship with Carta, including a $10 million equity investment [19] - The new Indiana production facility is fully operational, which is expected to aid efficiencies in 2025 [6][18] Q&A Session Summary Question: Impact of tariffs on EBITDA - Management noted $1.6 million in tariff expenses for Q3, with an expectation of $4 million to $5 million for the year [28] Question: Overview of prepaid segment performance - The prepaid business has evolved beyond gift cards, with new programs in healthcare and payroll cards, but has experienced lumpiness in orders [32][33] Question: Timing of prepaid shipments and market growth - Management indicated that prepaid ordering can be lumpy, but they expect growth in card volumes and new programs [40][42] Question: Details on Carta's technology and its benefits - The technology allows for chip-enabled cards with constantly changing PAN numbers, significantly reducing fraud risk [44] Question: Positioning regarding potential semiconductor tariffs - Management expressed confidence that their suppliers may be exempt from semiconductor tariffs due to U.S. manufacturing facilities [50]

Financial Data and Key Metrics Changes - Third quarter net sales increased by 11%, primarily driven by the addition of ROI and growth in the instant issuance business, partially offset by a decline in prepaid sales [15][19] - Adjusted EBITDA decreased by 7% to $23.4 million, with margins declining from 20.1% to 17% due to unfavorable sales mix and tariffs [18][19] - Gross profit margin decreased from 35.8% in the prior year to 29.7%, driven by lower average selling prices and increased production costs, including $1.6 million in tariff expenses [17][18] Business Line Data and Key Metrics Changes - Debit and Credit segment sales increased by 16%, with ROI contributing $15 million, while contactless card sales were flat compared to a strong prior level [15][16] - Prepaid sales declined by 7%, largely due to timing and comparisons to large sales in the prior year [17][19] - The instant issuance business is expected to have a record year with growth in new verticals and additional financial institution penetration [9][10] Market Data and Key Metrics Changes - Cards in circulation in the U.S. increased at a 7% CAGR over the three years ended June 30, indicating healthy card issuance [24] - The company continues to gain market share in the Debit and Credit segment as contactless card volumes increased [6][15] Company Strategy and Development Direction - The company is focused on customer-centric strategies, quality, efficiency, innovation, and diversification to become a trusted partner for payment technology solutions [9] - Strategic initiatives include expanding addressable markets, enhancing growth, and entering closed loop prepaid solutions [11][14] - A strategic relationship with Carta, an Australian prepaid program manager, was established to enhance digital card validation solutions [12][13] Management's Comments on Operating Environment and Future Outlook - Management expects strong year-on-year growth in the fourth quarter for both net sales and adjusted EBITDA, significantly higher than the third quarter [7][8] - The full-year outlook was updated to low double-digit to low teens net sales growth and flat to low single-digit adjusted EBITDA growth due to ongoing margin impacts [7][25] - Management remains confident in core business growth and the positive impact of strategic initiatives [27] Other Important Information - The company has invested $10 million to acquire a 20% stake in Carta, with $2.5 million paid upfront and the remainder expected to be settled through commercial arrangements [21][22] - The company has been proactive in managing inventory levels in anticipation of potential semiconductor tariffs [62] Q&A Session Summary Question: Impact of tariffs on EBITDA - Management noted $1.6 million in tariff expenses for Q3, with an updated expectation of $4 million to $5 million for the year [32][33] Question: Changes in prepaid segment sales - Management explained that the prepaid business has evolved beyond gift cards, with increased complexity in packaging and new initiatives in closed loop prepaid [37][41] Question: Timing of prepaid shipments - Management clarified that delays in prepaid orders are related to timing rather than cancellations, with expectations for some orders to shift into early 2026 [50][51] Question: Details on Carta's technology - Management highlighted that Carta's technology enables chip functionality in prepaid cards, significantly reducing fraud risk and enhancing market value [53][55] Question: Semiconductor tariffs and inventory positioning - Management expressed confidence that their suppliers may be exempt from potential semiconductor tariffs and mentioned a proactive approach to maintaining higher inventory levels [60][62] Question: Growth of the instant issuance business - Management confirmed that the instant issuance business is growing faster than the overall company, with plans to expand into new markets [66][67]

Core Insights - CPI Card Group Inc. reported quarterly earnings of $0.47 per share, missing the Zacks Consensus Estimate of $0.63 per share, and down from $0.66 per share a year ago, representing an earnings surprise of -25.40% [1] - The company posted revenues of $137.97 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 1.77%, compared to year-ago revenues of $124.75 million [2] - CPI Card Group shares have declined approximately 41.4% year-to-date, contrasting with the S&P 500's gain of 16.5% [3] Earnings Outlook - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is $0.70 on revenues of $143.7 million, and for the current fiscal year, it is $2.04 on revenues of $535.5 million [7] Industry Context - The Financial - Miscellaneous Services industry, to which CPI Card Group belongs, is currently ranked in the top 32% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors or through tools like the Zacks Rank [5][6]

Third Quarter 2025 Investor Presentation November 4, 2025 Cautionary Statements Forward Looking Statements Certain statements and information in this presentation (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 ...

Financial Performance - Total net sales for Q3 2025 reached $137.966 million, a 10.0% increase from $124.751 million in Q3 2024[8] - Product sales increased by 21.2% to $84.453 million in Q3 2025, compared to $69.648 million in Q3 2024[8] - Net income for Q3 2025 was $2.308 million, compared to $1.293 million in Q3 2024, representing an increase of 78.3%[8] - Basic earnings per share for Q3 2025 were $0.20, up from $0.12 in Q3 2024, indicating a growth of 66.7%[8] - Gross profit for the nine months ended September 30, 2025, was $121.809 million, down from $128.604 million in the same period of 2024, reflecting a decrease of 5.3%[8] - Net income for the nine months ended September 30, 2025, was $7,600,000, a decrease of 40.0% compared to $12,749,000 in 2024[11] - Total net sales for the three months ended September 30, 2025, were $137.966 million, with a gross profit of $40.993 million, resulting in a gross profit margin of 29.7%[69] - For the nine months ended September 30, 2025, total net sales reached $390.480 million, with a gross profit of $121.809 million, achieving a gross profit margin of 31.2%[69] - The EBITDA for the three months ended September 30, 2025, was $18.604 million, with an EBITDA margin of 13.5%[69] - The EBITDA for the nine months ended September 30, 2025, was $51.898 million, with an EBITDA margin of 13.3%[69] Assets and Liabilities - Total assets increased to $407.060 million as of September 30, 2025, compared to $349.657 million at the end of 2024, marking a growth of 16.4%[7] - Total liabilities increased to $432.719 million as of September 30, 2025, compared to $385.278 million at the end of 2024, reflecting a rise of 12.3%[7] - Long-term debt rose to $308.433 million as of September 30, 2025, up from $280.405 million at the end of 2024, an increase of 10.0%[7] - Current liabilities increased to $82.454 million as of September 30, 2025, from $75.587 million as of December 31, 2024[74] - The company reported a capital deficit of $103.067 million as of September 30, 2025, an improvement from $105.429 million at the end of 2024[9] Cash Flow and Capital Expenditures - Cash and cash equivalents decreased to $15.955 million as of September 30, 2025, down from $33.544 million at the end of 2024, a decline of 52.4%[7] - Cash provided by operating activities increased to $19,911,000 from $16,652,000, reflecting a growth of 13.5%[11] - Total capital expenditures for the nine months ended September 30, 2025, were $13.777 million, compared to $4.199 million for the same period in 2024[75] Acquisitions and Investments - The company acquired Arroweye for $45.8 million, funded through cash and available capacity under the ABL Revolver, with $1.5 million held in escrow[27] - Arroweye's acquisition incurred $4.1 million in integration costs during the nine months ended September 30, 2025[27] - The preliminary estimated fair value of identifiable intangible assets acquired from Arroweye was $12,400,000[29] - The goodwill recognized for Arroweye was $3,498,000, primarily attributable to the assembled workforce[28] - On October 7, 2025, the company acquired a 20% equity interest in Gift Card Co Pty Ltd for a total consideration of $10.0 million[76] Tax and Operating Losses - The effective tax rate for the three months ended September 30, 2025, was 38.3%, compared to (57.9)% for the same period in 2024, indicating a significant change in tax obligations[46] - For the nine months ended September 30, 2025, the effective tax rate was 34.0%, up from 24.0% in 2024, primarily due to limitations on deductibility of executive compensation and increased state tax expenses[47] - The company utilized $2.9 million of net operating loss carryforwards during the nine months ended September 30, 2025, with remaining unutilized deferred tax assets of $6.0 million expected to be used in future periods[49] Stock and Shareholder Information - The company approved a share repurchase plan for up to $20.0 million, with $11.2 million remaining unused as of December 31, 2024[50] - The Company granted 60,000 performance stock units (PSU) in January 2024, with a grant date fair value of $0.9 million[58] - As of September 30, 2025, there were 534,679 outstanding restricted stock units at a weighted average grant date fair value of $21.49[60] - The Company has a total of 3,200,000 shares reserved for issuance under the Omnibus Plan, with 727,878 shares available for grant as of September 30, 2025[57] Segment Performance - The Debit and Credit segment generated net sales of $115.272 million for the three months ended September 30, 2025, while the Prepaid Debit segment contributed $23.335 million[69] - The Company reported a loss from operations of $14.142 million in the Other segment for the three months ended September 30, 2025[69] - The Company’s reportable segments include Debit and Credit, Prepaid Debit, and Other, with a focus on secure card production and integrated prepaid card services[65][66]

Financial Performance - Net sales increased 11% to $138 million in Q3 2025, driven by Arroweye and instant issuance solutions [2]. - Net income rose 78% to $2.3 million, while Adjusted EBITDA decreased 7% to $23.4 million due to lower gross margins and tariff expenses [3]. - Year-to-date net sales increased 10% to $390.5 million, or 13% excluding the impact of an accounting change [11]. - Total net sales for Q3 2025 reached $137.966 million, a 10.0% increase from $124.751 million in Q3 2024 [39]. - Product sales increased by 21.2% to $84.453 million in Q3 2025, compared to $69.648 million in Q3 2024 [39]. - Service sales decreased by 2.1% to $53.513 million in Q3 2025, down from $55.103 million in Q3 2024 [39]. - Total net sales for the nine months ended September 30, 2025, were $390.480 million, up 9.8% from $355.505 million in the same period of 2024 [39]. - Consolidated net sales for the three months ended September 30, 2025, reached $137,966 million, reflecting a 10.6% increase compared to the same period in 2024 [59]. - For the nine months ended September 30, 2025, consolidated net sales amounted to $390,480 million, with a growth rate of 9.8% compared to the same period in 2024 [59]. Profitability and Margins - Gross profit decreased 8% to $41 million, with a gross profit margin of 29.7%, down from 35.8% in the prior year [8]. - Gross profit for Q3 2025 was $40.993 million, a decrease of 8.0% from $44.698 million in Q3 2024 [39]. - Net income for Q3 2025 was $2.308 million, compared to $1.293 million in Q3 2024, representing an increase of 78.3% [39]. - Basic earnings per share for Q3 2025 was $0.20, up from $0.12 in Q3 2024, reflecting a 66.7% increase [39]. - The net income margin for the three months ended September 30, 2025, was 1.7% of net sales, compared to 1.0% in 2024 [50]. Expenses and Costs - Operating expenses for Q3 2025 totaled $27.975 million, a slight increase from $26.900 million in Q3 2024 [39]. - The company incurred acquisition and integration costs of $4,110 related to the Arroweye acquisition in May 2025 [51]. - Stock-based compensation expense for the three months ended September 30, 2025, was $1,499, compared to $1,782 in 2024, reflecting a decrease of 15.8% [50]. - Depreciation and amortization for the nine months ended September 30, 2025, totaled $15,877, an increase from $12,218 in 2024 [50]. Debt and Leverage - The company reported a Net Leverage Ratio of 3.6x as of September 30, 2025, following the retirement of $20 million in Senior Notes [15]. - The net leverage ratio as of September 30, 2025, was 3.6, up from 3.0 as of December 31, 2024, indicating increased leverage [54]. - Long-term debt increased to $308,433 thousand as of September 30, 2025, up from $280,405 thousand at December 31, 2024, indicating a rise of 10.0% [41]. Strategic Initiatives and Outlook - The company updated its 2025 outlook, projecting net sales growth of low double-digit to low teens, and Adjusted EBITDA growth of flat to low single-digit [4]. - The company is focused on improving margins and achieving synergies from the Arroweye acquisition while investing in strategic growth initiatives [16]. - The company is focused on strategic initiatives and market opportunities, with a financial outlook for 2025 that includes investments in new technologies and solutions [31]. - The company continues to focus on expanding its market presence and enhancing product offerings to drive future growth [59]. Acquisitions - CPI acquired Arroweye Solutions for $45.8 million and a 20% equity interest in Karta for $10 million, enhancing its market position [9].

Core Insights - CPI Card Group has formed a strategic partnership with Karta to enhance digital security for prepaid cards, aiming to prevent gift card fraud by integrating Karta's SafeToBuy technology with CPI's prepaid solutions [1][3][4] Company Overview - CPI Card Group is a payments technology company that offers a wide range of payment cards and digital solutions, focusing on building relationships and trust with clients [5][6] - Karta, an Australian FinTech founded in 2021, is backed by the Commonwealth Bank of Australia and CPI Card Group, aiming to redefine payment cards to be smarter and safer [7][8] Technology and Innovation - The SafeToBuy technology eliminates printed card numbers from gift card packaging, embedding data and security in an EMV chip to reduce the risk of fraud [2][8] - The partnership allows CPI to produce and personalize contactless gift cards with EMV chips that include Karta's SafeToBuy applet, enhancing the security of transactions [3][4] Market Position and Future Plans - CPI is positioned as Karta's exclusive supplier in the U.S., with plans to adapt Karta's prepaid program management platform for a U.S. launch targeted for early 2026 [4] - The collaboration aims to create a new standard of security and trust in the payment card industry, enabling retailers and financial institutions to reduce fraud and connect physical cards with digital use [4][8]

Group 1 - CPI Card Group Inc. hosted the grand opening of its new production facility in Fort Wayne on October 23 [1] - The new Lima Road facility is more than twice the size of CPI's former High Street location [1]