| --- | --- | --- | --- | --- | --- | |-------------------------------------------|-------|-------|-------|-------|-------| | | | | | | | | Third Quarter 2024 Investor Presentation | | | | | | | | | | | | | | November 5, 2024 | | | | | | 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 ...

Financial Data and Key Metrics Changes - The company reported nearly 20% growth in both net sales and adjusted EBITDA for Q3 2024, marking the second largest sales quarter in its history [7][10] - Net sales increased by 18% in the quarter, with product sales, primarily debit and credit cards, growing by 25% [8][16] - Gross margins improved by 170 basis points year-over-year, with adjusted EBITDA increasing by 18% [9][20] - Net income decreased by 66% to $2.6 million due to $8.8 million in pretax debt refinancing costs [20][24] Business Line Data and Key Metrics Changes - The Debit and Credit segment saw a 19% increase in sales, driven by eco-focused contactless cards and growth in Card@Once instant issuance solutions [16][25] - The Prepaid segment grew by 13%, reflecting strong demand for higher-priced fraud-focused packaging solutions [16][25] - Income from operations for the Debit and Credit segment increased by 30% to $27 million in Q3, while Prepaid segment income rose by 7% to $7.1 million [25] Market Data and Key Metrics Changes - Cards in circulation in the U.S. increased at a 9% CAGR over the last three years, indicating a healthy card market [13] - Major issuers like JPMorgan Chase and Bank of America reported significant year-over-year increases in cards outstanding, supporting the growth outlook for the industry [13] Company Strategy and Development Direction - The company is focused on customer service, innovation, and high quality to grow its traditional businesses while expanding into adjacent markets, including digital solutions [11][35] - Recent innovations include the ability to produce cards with an advanced contactless chip that integrates the antenna within the chip, reducing carbon footprint and enhancing design flexibility [11] - The company signed an agreement with Rippleshot to offer fraud prevention tools, indicating a strategic move towards enhancing digital solutions [12] Management's Comments on Operating Environment and Future Outlook - Management noted that while channel inventories are still elevated, they are improving, and the company is winning business in the market [8][36] - The full-year outlook for 2024 has been updated to reflect increased net sales and adjusted EBITDA expectations due to strength across the portfolio [10][33] - The company anticipates solid long-term growth in core markets, supported by strong issuance trends and improving channel inventory levels [13][34] Other Important Information - The company completed a refinancing of its debt, issuing $285 million of senior secured notes due in 2029, which is expected to improve trading liquidity over time [29][30] - A secondary offering of shares was completed, resulting in a decrease in majority stockholder ownership from 56% to 43%, which is expected to benefit shareholders by increasing public float [31][32] Q&A Session Summary Question: Is the excess inventory completely behind the company now? - Management indicated that while things are improving, channel inventories are still being worked down, but market momentum remains strong [36] Question: How will the integration of the chip and antenna design impact ASPs or gross margins long term? - Management expressed excitement about the new chip technology but noted it is too early to determine the financial impact [37] Question: Can you discuss the momentum seen in the push provisioning partnership with MEA? - Management reported strong momentum but noted it is still early days, with a pipeline being developed [40] Question: What are the expectations for the growth rates of the debit and credit versus prepaid segments in Q4? - Management expects both segments to continue performing well without significant seasonality affecting their growth [44] Question: Can you provide an update on the new production facility in Indiana? - The facility is expected to be operational by mid-next year, with a significant increase in capacity and efficiency anticipated [46][47] Question: What is the composition of the recent sales growth? - Management indicated that the growth is a mix of existing customers and new programs, with new customer wins contributing to the momentum [49][50]

Core Insights - CPI Card Group Inc. reported quarterly earnings of $0.66 per share, exceeding the Zacks Consensus Estimate of $0.50 per share, and showing a significant increase from $0.33 per share a year ago, representing an earnings surprise of 32% [1] - The company achieved revenues of $124.75 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 6.90% and increasing from $105.86 million year-over-year [2] - CPI Card Group shares have increased approximately 17.5% since the beginning of the year, while the S&P 500 has gained 19.8% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.59 on revenues of $120.35 million, and for the current fiscal year, it is $2.06 on revenues of $467.8 million [7] - The estimate revisions trend for CPI Card Group has been unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expectations of underperformance in the near future [6] Industry Context - The Technology Services industry, to which CPI Card Group belongs, is currently ranked in the top 32% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - TTEC Holdings, another company in the same industry, is expected to report a significant decline in earnings, with a projected EPS of $0.14, reflecting a year-over-year change of -70.8% [9]

Financial Performance - Total net sales for Q3 2024 reached $124.751 million, a 17.8% increase from $105.863 million in Q3 2023[4] - Gross profit for Q3 2024 was $44.698 million, compared to $36.152 million in Q3 2023, reflecting a 23.5% increase[4] - Net income for Q3 2024 decreased to $1.293 million from $3.857 million in Q3 2023, representing a decline of 66.5%[4] - Operating expenses for Q3 2024 were $26.900 million, up from $23.191 million in Q3 2023, an increase of 11.7%[4] - Basic earnings per share for Q3 2024 were $0.12, down from $0.34 in Q3 2023, a decrease of 64.7%[4] - Net income for the nine months ended September 30, 2024, was $12,749,000, compared to $21,253,000 for the same period in 2023, representing a decrease of approximately 40%[6] - Cash provided by operating activities for the nine months ended September 30, 2024, was $16,652,000, down from $22,266,000 in 2023, indicating a decline of about 25%[6] - Total net sales for the three months ended September 30, 2024, reached $355.505 million, a significant increase from $105.863 million in the same period of 2023, representing a growth of approximately 236%[10] - The gross profit for the same period was $128.604 million, with a gross profit margin of approximately 36.2%[44] - EBITDA for the nine months ended September 30, 2024, was reported at $55.406 million, reflecting a significant increase compared to the previous period[44] Assets and Liabilities - Total current assets increased to $198.814 million as of September 30, 2024, up from $165.378 million at December 31, 2023, a growth of 20.2%[3] - Total liabilities rose to $385.140 million as of September 30, 2024, compared to $345.619 million at December 31, 2023, an increase of 11.4%[3] - Long-term debt increased to $280.152 million as of September 30, 2024, up from $264.997 million at December 31, 2023, a rise of 5.7%[3] - Cash and cash equivalents increased to $14.650 million as of September 30, 2024, compared to $12.413 million at December 31, 2023, a growth of 18.0%[3] - The company reported a capital deficiency of $(105.827) million as of September 30, 2024, compared to $(102.223) million at December 31, 2023[3] - The company’s total stockholders' deficit as of September 30, 2024, was $(42,791,000), a slight improvement from $(56,720,000) as of September 30, 2023[5] Segment Performance - The company operates through three reportable segments: Debit and Credit, Prepaid Debit, and Other, focusing on comprehensive financial payment card solutions[7] - For the nine months ended September 30, 2024, total net sales reached $355.505 million, with the Debit and Credit segment contributing $283.348 million and the Prepaid Debit segment contributing $73.186 million[44] - The Debit and Credit segment reported net sales of $99.755 million for the three months ended September 30, 2024[43] - The company’s prepaid debit services generated $73.186 million in net sales for the three months ended September 30, 2024, compared to $22.335 million in the same period of 2023, reflecting a growth of about 228%[10] Debt and Financing - The company completed a private offering of $285 million aggregate principal amount of 10.000% Senior Secured Notes due 2029, with net proceeds used to redeem the entire principal balance of $267.9 million of 8.625% Senior Secured Notes due 2026[26] - The 2029 Senior Notes are secured by substantially all of the assets of the issuer and the guarantors, subject to customary exceptions, and require compliance with certain covenants[26] - The Company entered into a $75.0 million asset-based revolving credit facility (2029 ABL Revolver) with JPMorgan Chase Bank, which matures on July 11, 2029[27] - The interest rate on borrowings under the 2029 ABL Revolver ranges from SOFR plus 1.50% to 1.75%, with a commitment fee of 0.375% to 0.50% on unused portions[29] - The company reported accrued expenses totaling $52.107 million as of September 30, 2024, compared to $35.803 million as of December 31, 2023, indicating an increase of approximately 46%[23] Stock and Compensation - Stock-based compensation expense increased to $6,936,000 for the nine months ended September 30, 2024, from $4,431,000 in 2023, marking an increase of approximately 56%[6] - The company granted 157,966 restricted stock units with a weighted average grant date fair value of $22.17 during the nine months ended September 30, 2024[40] - The Company has an authorized share repurchase plan that allows for up to $20.0 million in common stock repurchases, expiring on December 31, 2024[34] - The Company repurchased 473,284 shares at an average price of $18.16 per share, totaling $8.6 million, with $11.2 million remaining under the share repurchase plan[35] Future Outlook and Strategy - The company is focused on expanding its Financial Payment Card solutions, serving a diverse customer base including fintechs and community banks[49] - Future outlook includes strategic initiatives aimed at enhancing product offerings and market presence, with a commitment to compliance with PCI Security Standards[49] - Management highlights the ongoing development of new products and services to meet evolving customer needs in the payments technology sector[49] - The company anticipates cash flows from operating activities to be negatively impacted in the fourth quarter of 2024 due to customer contract incentives[69] Tax and Legal Matters - The effective tax rates for the three months ended September 30, 2024, and 2023 were (57.9)% and 37.7%, respectively, reflecting changes in stock compensation deductibility[31] - The Company is subject to routine legal proceedings, but believes that the resolution of such matters will not materially affect its financial condition[39]

| --- | --- | |--------------------------------------------------------|--------------------| | | | | | Exhibit 99.1 | | CPI Card Group Inc. Reports Third Quarter 2024 Results | | | | Date: November 5, | 2024 Net Sales Increased 18% to $125 Million and Full Year Sales Outlook Increased Growth Across Portfolio, Led by Strong Sales of Debit and Credit Cards Net Income Decreased 66% to $1 Million, Impacted by Debt Refinancing Costs; Adjusted EBITDA Increased 18% to $25 Million Full Year Adjusted EBITDA and Fre ...

Financial Data and Key Metrics Changes - The company reported a 3% increase in net sales compared to the prior year, while net income decreased by 8% and adjusted EBITDA decreased by 6% [13][14] - Gross margins improved slightly from 35.5% to 35.7%, but adjusted EBITDA margin declined from 20.3% to 18.4% due to increased SG&A expenses [15][16] - Year-to-date free cash flow was slightly less than prior year levels, with a net leverage ratio of 3.3x at the end of the quarter [13][19] Business Line Data and Key Metrics Changes - The debit and credit segment saw a 3% increase in sales, while the prepaid segment experienced a 9% increase [14] - Card@Once instant issuance solutions and other card personalization services delivered good growth, contributing to the overall sales increase [14][39] - Prepaid income from operations increased by 38% year-to-date, driven by sales growth and gross margin improvement [18] Market Data and Key Metrics Changes - Cards in circulation in the U.S. increased at a 10% CAGR over the past three years, indicating healthy issuance trends [12] - The issuance market remained strong, with a healthy growth quarter for cards in circulation based on data from card networks [6][12] Company Strategy and Development Direction - The company aims to grow and gain market share in traditional businesses while expanding into adjacent markets, including digital solutions [10][11] - Focus on customer service, quality, and innovation is emphasized as a strategy to gain share in current markets [10] - The company is advancing efforts in healthcare payment cards and digital push provisioning services for mobile wallets as long-term growth drivers [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in business trends and expects better growth rates in the second half of the year, driven by strong prepaid performance and improved debit and credit sales trends [7][8] - The full-year outlook for 2024 has been updated to mid-single-digit sales growth, while maintaining adjusted EBITDA outlook at slight growth compared to 2023 [8][24] Other Important Information - The company refinanced its debt, issuing $285 million of new senior secured notes and entering into a new $75 million asset-based revolving credit facility [9][21] - Share repurchases totaled nearly $9 million out of a $20 million authorization since the program's inception [9][22] Q&A Session Summary Question: When will the excess inventory issue be fully resolved? - Management noted that while inventory levels are still higher than historical norms, they are moving closer to normalization and expect improvements by the end of Q3 [26][27] Question: When can new markets like healthcare payment cards become meaningful contributors? - Management indicated that these opportunities will take years to develop, with positive momentum already seen in adjacent markets [28][29] Question: What is the current pricing environment? - Management stated that pricing remains competitive and is based on the value proposition of their products [30][31] Question: Can you elaborate on the increase in SG&A expenses? - Management explained that the increase is due to investments in the business and costs related to the CEO transition, with a significant portion tied to performance-based compensation [34][35][36] Question: What is the growth potential for Card@Once? - Management expressed confidence in the growth potential of Card@Once, highlighting its unique position in the market and ongoing customer demand [39][40] Question: What were the one-time expenses related to the CEO transition? - Management disclosed that the total one-time expenses for the CEO transition amounted to approximately $9 million [43][44]

| --- | --- | --- | --- | --- | --- | |--------------------------------------------|-------|-------|-------|-------|-------| | | | | | | | | Second Quarter 2024 Investor Presentation | | | | | | | | | | | | | | August 5, 2024 | | | | | | 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 ...

Financial Performance - Total net sales for Q2 2024 reached $118.818 million, a 3.8% increase from $114.960 million in Q2 2023[5] - Gross profit for Q2 2024 was $42.388 million, compared to $40.825 million in Q2 2023, reflecting a 3.8% increase[5] - Net income for Q2 2024 was $6.001 million, a decrease of 8.0% from $6.523 million in Q2 2023[5] - Basic earnings per share for Q2 2024 were $0.54, down from $0.57 in Q2 2023[5] - The company reported total net sales of $230,754 for the six months ended June 30, 2024, compared to $235,812 for the same period in 2023, reflecting a slight decrease[14] - For the six months ended June 30, 2024, net income was $11.456 million, a decrease of 34% compared to $17.396 million for the same period in 2023[34] - The company’s net income for the six months ended June 30, 2024, was $17.396 million, down from $21.475 million in the same period of 2023, indicating a decline of about 19.5%[42] Assets and Liabilities - Total assets increased to $321.446 million as of June 30, 2024, up from $293.683 million at December 31, 2023, representing a 9.4% growth[4] - Total liabilities rose to $366.003 million as of June 30, 2024, compared to $345.619 million at December 31, 2023, indicating a 5.9% increase[4] - Current liabilities increased to $68.949 million as of June 30, 2024, from $49.445 million at December 31, 2023, a 39.6% rise[4] - Long-term debt as of June 30, 2024, was $269.654 million, up from $264.997 million as of December 31, 2023, with the 2026 Senior Notes bearing an interest rate of 8.625%[24] - Total current assets increased to $179.745 million as of June 30, 2024, compared to $165.378 million at December 31, 2023[4] Cash Flow and Operating Activities - Cash and cash equivalents decreased to $7.479 million as of June 30, 2024, down from $12.413 million at December 31, 2023[4] - Cash provided by operating activities decreased to $4.1 million for the six months ended June 30, 2024, down from $10.3 million for the same period in 2023, primarily due to lower net income and changes in working capital[64] - Total cash provided by operating activities for the six months ended June 30, 2023, was $10,322, compared to $4,108 for the six months ended June 30, 2024[9] Segment Performance - The company’s reportable segments include Debit and Credit, Prepaid Debit, and Other, with a focus on integrated card services and financial payment cards[38][39] - The Debit and Credit segment generated $183,593 in total net sales for the six months ended June 30, 2024, compared to $195,179 for the same period in 2023[14] - The company’s prepaid debit segment generated $48,013,000 in net sales for the six months ended June 30, 2024, compared to $40,951,000 in the same period of 2023, marking an increase of 17%[14] Operating Expenses - Operating expenses for the three months ended June 30, 2024, totaled $27.479 million, compared to $23.333 million in the same period of 2023, marking an increase of about 17.0%[40][42] - The company’s operating expenses for the six months ended June 30, 2024, totaled $54.852 million, compared to $45.829 million in the same period of 2023, reflecting an increase of about 19.7%[41] Share Repurchase and Stock Compensation - The company repurchased 352,750 shares of common stock at an average price of $18.14 per share, totaling $6.4 million during the six months ended June 30, 2024[31] - As of June 30, 2024, the company had an authorized amount of $11.2 million remaining under the share repurchase plan[31] - Stock-based compensation expense increased to $5,154 for the six months ended June 30, 2024, from $1,831 for the same period in 2023[9] Economic and Market Conditions - CPI Card Group Inc. reported reduced demand from customers for certain products and services during 2023 through the first half of 2024, impacting financial and operating results[51] - The company has experienced concerns in the banking and financial services industry, leading to reduced overall spending on card programs[51] - Economic uncertainties, including negative liquidity events in certain banks, have led to caution in the financial services industry, affecting demand in the Debit and Credit segment[51] Tax and Compliance - The effective tax rate for the three months ended June 30, 2024, was 27.7%, a decrease from 38.9% in the same period of 2023, primarily due to changes in executive compensation deductibility[28] - The effective income tax rate for the six months ended June 30, 2024, was 28.2%, slightly lower than 28.6% for the same period in 2023[30] - The company is committed to compliance with PCI Security Standards Council requirements, ensuring the security of its products and services[48]

Financial Performance - Net sales increased 3% year-over-year to $118.8 million in Q2 2024, with Debit and Credit segment net sales up 3% to $95.6 million and Prepaid Debit segment net sales up 9% to $23.8 million[1][7]. - Net income decreased 8% to $6.0 million, and Adjusted EBITDA decreased 6% to $21.9 million in Q2 2024[1][7]. - The company updated its full-year net sales outlook to mid-single digit growth, up from slight growth, driven by strong Prepaid growth and improved trends in debit and credit card sales[3][13]. - Year-to-date net sales decreased 2% to $230.8 million, with Debit and Credit segment net sales down 6% to $183.6 million, while Prepaid Debit segment net sales increased 17% to $48.0 million[9][10]. - Total net sales for Q2 2024 reached $118.8 million, a 3.9% increase from $115.0 million in Q2 2023[28]. - Product sales were $63.8 million, slightly down from $63.9 million in the same quarter last year, while service sales increased to $55.0 million from $51.0 million, marking a 7.5% growth[28]. - For the first half of 2024, total net sales were $230.8 million, a decrease of 2.4% from $235.8 million in the first half of 2023[28]. - Net income for Q2 2024 was $6.0 million, down from $6.5 million in Q2 2023, leading to diluted earnings per share of $0.51 compared to $0.55 last year[28]. - The company reported a total comprehensive income of $6.0 million for Q2 2024, consistent with the net income figure[28]. Expenses and Profitability - Operating expenses increased to $27.5 million in Q2 2024 from $23.3 million in Q2 2023, primarily due to higher selling, general, and administrative expenses[28]. - Gross profit margin for Q2 2024 was 35.7%, slightly up from 35.5% in the prior year[7]. - Gross profit for Q2 2024 was $42.4 million, compared to $40.8 million in Q2 2023, resulting in a gross margin of 35.7%[28]. - The cost of sales for Q2 2024 was $76.4 million, up from $74.1 million in Q2 2023, reflecting increased costs in both products and services[28]. - The company reported a gross profit margin of 36.4% for the six months ended June 30, 2024, compared to 35.6% in the same period of 2023[35]. - The prepaid debit segment saw a significant increase in EBITDA, rising 37.9% to $17,418 for the six months ended June 30, 2024, from $12,634 in the same period of 2023[42]. - Total EBITDA for the six months ended June 30, 2024, was $36,976, a decrease of 19.2% from $45,763 in the same period of 2023[40]. Debt and Financing - The company completed a refinancing of its debt, issuing $285 million of Senior Secured Notes due 2029 and entering a new $75 million asset-based revolving credit facility[3][6]. - The company ended Q2 2024 with a Net Leverage Ratio of 3.3x, with expectations for year-end 2024 Net Leverage Ratio to be between 3.0x and 3.5x[5][14]. - Long-term debt increased to $269,654 thousand as of June 30, 2024, from $264,997 thousand at December 31, 2023, indicating a rise of 1.0%[30]. - Total current liabilities rose to $68,949 thousand as of June 30, 2024, compared to $49,445 thousand at December 31, 2023, an increase of 39.6%[30]. - Total net debt as of June 30, 2024, was $281,081, resulting in a net leverage ratio of 3.3, compared to 3.1 as of December 31, 2023[46]. Cash Flow - Free Cash Flow outlook for 2024 is expected to be approximately half of the 2023 level, impacted by increased capital spending and upfront incentives related to a contract with a larger customer[14][19]. - Cash provided by operating activities for the six months ended June 30, 2024, was $4,108 thousand, compared to $10,322 thousand in the same period of 2023, a decline of 60.3%[31]. - Free cash flow for the three months ended June 30, 2024, was $(5,995), compared to $(128) in the same period of 2023[44]. Market Position and Strategy - The company has sold over 100 million eco-focused cards since launch in late 2019, reinforcing its position as a leader in eco-focused payment card solutions[5]. - CPI Card Group Inc. is focused on enhancing its product offerings and expanding market reach to drive future growth[25]. - The company continues to face risks related to supply chain disruptions and inflationary pressures, which may impact future performance[23]. Segment Performance - The prepaid debit segment saw a 17.2% increase in net sales for the six months ended June 30, 2024, totaling $48,013 thousand, up from $40,951 thousand in 2023[33]. - The company experienced a loss from operations in the "Other" segment of $(34,743) thousand for the six months ended June 30, 2024, compared to $(28,322) thousand in the same period of 2023, reflecting a deterioration of 22.7%[36]. - The company experienced a $7,180 decrease in EBITDA from the debit and credit segment for the six months ended June 30, 2024, totaling $52,467 compared to $59,647 in the same period of 2023[41]. - EBITDA for the three months ended June 30, 2024, was $18,879, a decrease of 12.1% from $21,475 in the same period of 2023[37]. - The prepaid debit segment's EBITDA margin was 36.3% for the six months ended June 30, 2024, compared to 30.9% in the same period of 2023[42].

Often, the direction of a stock's price movement reverses quickly after taking a position in it, making investors incur a short-term capital loss. So, it's important to ensure that there are enough factors -- such as sound fundamentals, positive earnings estimate revisions, etc. -- that could keep the momentum in the stock going. However, it's not enough to look at the price change for around three months, as it doesn't reflect any trend reversal that might have happened in a shorter time frame. It's import ...