Financial Data and Key Metrics Changes - The company reported a 7% decline in net sales for the first quarter compared to the prior year, with net income decreasing by 50% to $5.5 million and adjusted EBITDA declining by 8% to $23 million [27][28][30] - The adjusted EBITDA margin slightly decreased from 20.7% to 20.5% due to lower sales and higher operating expenses, although improved gross margins helped offset some of the decline [28][41] - The net leverage ratio remained consistent at 3.1x, indicating stable financial leverage [42] Business Line Data and Key Metrics Changes - The Debit and Credit segment experienced a 14% sales decline, while the Prepaid segment saw a 26% increase, driven by strong demand and lower production costs [6][7] - Income from operations for the Debit and Credit segment decreased by 24% to $22.8 million, while the Prepaid segment's income from operations increased by 138% to $8.7 million [7][8] Market Data and Key Metrics Changes - Cards in circulation in the U.S. grew at a 9% CAGR over the past three years, with a 7% increase compared to the prior year quarter, indicating a healthy market for card issuance [5][27] - The adoption of contactless cards is increasing, with Visa reporting that tap-to-pay penetration at points of sale in the U.S. is nearing 50% [5] Company Strategy and Development Direction - The company aims to grow its traditional business while expanding into adjacent markets, including digital solutions, to enhance long-term growth [4][26] - A significant contract was signed in the first quarter to expand relationships with a major customer, expected to contribute to growth starting in 2025 [4][45] Management's Comments on Operating Environment and Future Outlook - Management anticipates that the first half of the year will be challenging due to customers working down card inventory levels, but expects a return to growth in the second half of the year [3][8] - The company affirmed its full-year net sales and adjusted EBITDA outlook, projecting slight increases for the year [8][30] Other Important Information - The company generated $8.9 million in cash flow from operating activities and reported free cash flow of $7.4 million for the quarter, an improvement from the prior year [42] - The company has made progress on its share repurchase program, committing to purchase approximately $6 million against a $20 million authorization [42][29] Q&A Session Summary Question: Was the stronger performance in the Prepaid segment driven by a single customer or was it more broad-based? - Management indicated that while there was strong performance from a larger customer, the prepaid business overall was strong, benefiting from demand in the health savings account space [11][12] Question: Can you provide insights on the gross margin expansion? - The gross margin improvement was primarily due to lower production costs and labor efficiencies, as the previous year included costs from transitioning the workforce [32][41] Question: When do you expect the excess inventory situation to be fully resolved? - Management noted that while card volumes were slightly up in Q1, it is difficult to pinpoint when inventories will normalize, but they remain confident in the overall health of the U.S. card market [47]

[PART I — Financial Information](index=3&type=section&id=Part%20I%20%E2%80%94%20Financial%20Information) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2024 [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20%E2%80%94%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents CPI Card Group Inc.'s unaudited condensed consolidated financial statements and accompanying notes for Q1 2024 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at March 31, 2024, and December 31, 2023 | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Total Assets | $319,780 | $293,683 | | Total Liabilities | $368,231 | $345,619 | | Total Stockholders' Deficit | $(48,451) | $(51,936) | - Total assets increased by **$26.1 million**, primarily driven by increases in cash and cash equivalents, inventories, and other assets. Total liabilities increased by **$22.6 million**, mainly due to higher accounts payable and accrued expenses. Stockholders' deficit improved by **$3.5 million**[8](index=8&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) This section details the company's financial performance, including net sales, gross profit, and net income for Q1 2024 and Q1 2023 | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change ($) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net Sales | $111,936 | $120,852 | $(8,916) | (7.4)% | | Gross Profit | $41,518 | $43,094 | $(1,576) | (3.7)% | | Income from Operations| $14,145 | $20,598 | $(6,453) | (31.3)% | | Net Income | $5,455 | $10,873 | $(5,418) | (49.8)% | | Basic EPS | $0.48 | $0.95 | $(0.47) | (49.5)% | | Diluted EPS | $0.46 | $0.91 | $(0.45) | (49.5)% | - Net sales decreased by **7.4%** year-over-year, primarily due to a decline in product sales. Net income saw a significant decrease of **49.8%** compared to the prior year, leading to a nearly **50%** reduction in both basic and diluted EPS[11](index=11&type=chunk) [Condensed Consolidated Statements of Stockholders' Deficit](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficit) This section outlines changes in the company's equity, including net income, share repurchases, and stock-based compensation adjustments | Metric (in thousands) | December 31, 2023 | March 31, 2024 | | :-------------------- | :---------------- | :------------- | | Total Stockholders' Deficit | $(51,936) | $(48,451) | | Accumulated Earnings | $50,276 | $55,731 | - The total stockholders' deficit improved from **$(51,936) thousand** at December 31, 2023, to **$(48,451) thousand** at March 31, 2024, primarily driven by net income of **$5,455 thousand**, partially offset by share repurchases and stock-based compensation adjustments[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the cash inflows and outflows from operating, investing, and financing activities for Q1 2024 and Q1 2023 | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Cash provided by operating activities | $8,865 | $8,001 | | Cash used in investing activities | $(1,506) | $(4,095) | | Cash used in financing activities | $(2,628) | $(792) | | Net increase in cash and cash equivalents | $4,731 | $3,120 | | Cash and cash equivalents, end of period | $17,144 | $14,157 | - Cash provided by operating activities increased to **$8.9 million** in Q1 2024 from **$8.0 million** in Q1 2023, mainly due to lower employee performance incentive compensation payments, despite a **$5.0 million** payment to the prior CEO and increased inventory purchases. Cash used in investing activities decreased significantly, while cash used in financing activities increased due to common stock repurchases[16](index=16&type=chunk)[111](index=111&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Business Overview and Summary of Significant Accounting Policies](index=7&type=section&id=1.%20Business%20Overview%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note describes the company's core business, operational segments, and key accounting policies and estimates - CPI Card Group Inc. is a payments technology company and a leading provider of comprehensive Financial Payment Card solutions in the United States, specializing in the design, production, data personalization, packaging, and fulfillment of credit, debit, and Prepaid Debit Cards[17](index=17&type=chunk) - The Company operates through three reportable segments: Debit and Credit, Prepaid Debit, and Other (corporate expenses)[19](index=19&type=chunk) - Management uses estimates and assumptions for financial reporting, including property and equipment, goodwill, intangible assets, leases, inventory and deferred tax valuation allowances, and revenue recognition for uncompleted work[21](index=21&type=chunk) - The Company is evaluating new accounting standards ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes), effective for fiscal years beginning after December 15, 2023, and December 15, 2024, respectively, and does not anticipate a material impact on its financial position, results of operations, or cash flows[23](index=23&type=chunk)[24](index=24&type=chunk) [2. Net Sales](index=8&type=section&id=2.%20Net%20Sales) This note disaggregates net sales by segment and product/service type, detailing revenue recognition policies | Segment (in thousands) | Products (Q1 2024) | Services (Q1 2024) | Total (Q1 2024) | Products (Q1 2023) | Services (Q1 2023) | Total (Q1 2023) | | :--------------------- | :----------------- | :----------------- | :-------------- | :----------------- | :----------------- | :-------------- | | Debit and Credit | $58,371 | $29,602 | $87,973 | $76,032 | $25,953 | $101,985 | | Prepaid Debit | — | $24,198 | $24,198 | — | $19,130 | $19,130 | | Intersegment eliminations | $(213) | $(22) | $(235) | $(242) | $(21) | $(263) | | **Total Net Sales** | **$58,158** | **$53,778** | **$111,936** | **$75,790** | **$45,062** | **$120,852** | - Total net sales decreased by **7.4%** year-over-year. Products net sales declined by **23.3%** to **$58.2 million**, while Services net sales increased by **19.3%** to **$53.8 million**[25](index=25&type=chunk) - Product sales include design and production of various Financial Payment Cards and Card@Once® printers, recognized over time or at shipping. Service sales include personalization, fulfillment, and software-as-a-service, recognized as performed[26](index=26&type=chunk)[28](index=28&type=chunk) [3. Accounts Receivable](index=9&type=section&id=3.%20Accounts%20Receivable) This note details the composition of accounts receivable, including trade and unbilled amounts, and the allowance for credit losses | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Trade accounts receivable | $59,788 | $69,245 | | Unbilled accounts receivable | $8,997 | $4,725 | | Less allowance for credit losses | $(246) | $(246) | | **Total Accounts Receivable, net** | **$68,539** | **$73,724** | - Net accounts receivable decreased by **$5.2 million** from December 31, 2023, to March 31, 2024, primarily due to a reduction in trade accounts receivable, partially offset by an increase in unbilled accounts receivable[32](index=32&type=chunk) [4. Inventories](index=9&type=section&id=4.%20Inventories) This note provides a breakdown of inventory components, including raw materials, finished goods, and the inventory reserve | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Raw materials | $79,825 | $66,210 | | Finished goods | $6,531 | $7,162 | | Inventory reserve | $(2,975) | $(2,778) |\ | **Total Inventories, net** | **$83,381** | **$70,594** | - Net inventories increased by **$12.8 million** from December 31, 2023, to March 31, 2024, primarily driven by a significant increase in raw materials[33](index=33&type=chunk) [5. Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets](index=10&type=section&id=5.%20Plant%2C%20Equipment%2C%20Leasehold%20Improvements%20and%20Operating%20Lease%20Right-of-Use%20Assets) This note details the company's property, plant, and equipment, including leasehold improvements and right-of-use assets, net of depreciation | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Total Gross Assets | $131,072 | $129,489 | | Less accumulated depreciation and amortization | $(70,039) | $(66,436) | | **Net Assets** | **$61,033** | **$63,053** | - Net plant, equipment, leasehold improvements, and operating lease right-of-use assets decreased by **$2.0 million** from December 31, 2023, to March 31, 2024, primarily due to higher accumulated depreciation and amortization[36](index=36&type=chunk) [6. Fair Value of Financial Instruments](index=10&type=section&id=6.%20Fair%20Value%20of%20Financial%20Instruments) This note discusses the fair value measurements of financial instruments, particularly the Senior Notes, and their classification within the fair value hierarchy | Liability (in thousands) | Carrying Value (Mar 31, 2024) | Estimated Fair Value (Mar 31, 2024) | Carrying Value (Dec 31, 2023) | Estimated Fair Value (Dec 31, 2023) | | :----------------------- | :---------------------------- | :---------------------------------- | :---------------------------- | :---------------------------------- | | Senior Notes | $267,897 | $267,147 | $267,897 | $261,834 | - The fair value of the Company's Senior Notes increased from **$261.8 million** at December 31, 2023, to **$267.1 million** at March 31, 2024, based on bank quotes, while the carrying value remained constant[37](index=37&type=chunk) - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1 prices), and Level 3 (unobservable inputs). The Senior Notes are classified as Level 2[37](index=37&type=chunk)[39](index=39&type=chunk) [7. Accrued Expenses](index=11&type=section&id=7.%20Accrued%20Expenses) This note provides a detailed breakdown of accrued expenses, including payroll, bonuses, capitalized contract costs, and interest | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Accrued payroll and related employee expenses | $8,146 | $11,431 | | Accrued employee performance bonuses | $2,009 | $667 | | Capitalized contract costs payable | $15,000 | — | | Accrued interest | $999 | $6,830 | | Accrued share repurchases | $4,404 | $733 | | **Total Accrued Expenses** | **$49,203** | **$35,803** | - Total accrued expenses increased by **$13.4 million** from December 31, 2023, to March 31, 2024, primarily due to **$15.0 million** in capitalized contract costs payable and higher accrued employee performance bonuses and share repurchases, partially offset by lower accrued payroll and interest[40](index=40&type=chunk) [8. Long-Term Debt](index=11&type=section&id=8.%20Long-Term%20Debt) This note details the company's long-term debt obligations, including Senior Notes and the ABL Revolver, and their key terms | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Senior Notes | $267,897 | $267,897 | | Unamortized deferred financing costs | $(2,571) | $(2,900) | | **Total Long-Term Debt** | **$265,326** | **$264,997** | - Long-term debt, net of current maturities, remained stable at approximately **$265 million**, consisting primarily of **$310.0 million** aggregate principal amount of **8.625% Senior Secured Notes** due March 15, 2026[41](index=41&type=chunk)[42](index=42&type=chunk) - The ABL Revolver, with an increased borrowing capacity of **$75.0 million**, matures on the earliest of March 15, 2026, or 90 days prior to the Senior Notes' maturity, and bears interest based on SOFR plus an applicable margin[44](index=44&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) [9. Income Taxes](index=12&type=section&id=9.%20Income%20Taxes) This note explains the components of the effective income tax rate and factors influencing tax expense | Effective Tax Rate Component | March 31, 2024 | March 31, 2023 | | :--------------------------- | :------------- | :------------- | | Tax at federal statutory rate | 21.0 % | 21.0 % | | State taxes, net | 6.1 % | 4.7 % | | Valuation allowance | — | (5.2)% | | Permanent items | 3.0 % | 1.2 % | | Deductibility limitations on excess compensation | (1.8)% | 0.1 % | | Other | 0.4 % | (1.1)% | | **Effective income tax rate** | **28.7 %** | **20.7 %** | - The effective tax rate increased to **28.7%** for Q1 2024 from **20.7%** for Q1 2023, primarily due to the reduction of a valuation allowance in the prior year related to a state's law change[49](index=49&type=chunk) [10. Stockholders' Deficit](index=12&type=section&id=10.%20Stockholders'%20Deficit) This note details changes in stockholders' deficit, including share repurchase plans and obligations - The Company's board approved a share repurchase plan on November 2, 2023, authorizing up to **$20.0 million** in common stock repurchases, expiring December 31, 2024[51](index=51&type=chunk) - During Q1 2024, the Company repurchased **68,258 shares** for **$1.2 million** at an average price of **$18.29 per share**. As of March 31, 2024, **$14.1 million** remained under the authorization[52](index=52&type=chunk)[53](index=53&type=chunk) - An obligation exists to purchase **244,314 shares** from a majority stockholder (Parallel49) at **$18.03 per share**, with payment due in Q2 2024, based on a multiple of open market purchases[52](index=52&type=chunk)[53](index=53&type=chunk) [11. Earnings per Share](index=13&type=section&id=11.%20Earnings%20per%20Share) This note presents the calculation of basic and diluted earnings per share and the factors affecting them | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----- | :-------------------------------- | :-------------------------------- | | Net income | $5,455 | $10,873 | | Basic weighted-average common shares outstanding | 11,266,699 | 11,394,919 | | Diluted weighted-average common shares outstanding | 11,769,364 | 11,901,581 | | Basic earnings per share | $0.48 | $0.95 | | Diluted earnings per share | $0.46 | $0.91 | - Basic EPS decreased by **49.5%** to **$0.48** in Q1 2024 from **$0.95** in Q1 2023, and diluted EPS decreased by **49.5%** to **$0.46** from **$0.91**, reflecting the lower net income[55](index=55&type=chunk) [12. Commitments and Contingencies](index=13&type=section&id=12.%20Commitments%20and%20Contingencies) This note discloses information regarding legal proceedings, including a patent infringement lawsuit, and participation in a voluntary disclosure program - The Company is involved in a patent infringement lawsuit (Smart Packaging Solutions SA v. CPI Card Group Inc.) where SPS alleges infringement of antenna technology patents. The case is stayed pending Inter Parties Review (IPR) proceedings, where three of the four patents have been invalidated, and relevant claims in the fourth have also been invalidated. The Company expects the litigation to be dismissed[57](index=57&type=chunk) - The Company is participating in Delaware's Voluntary Disclosure Agreement Program for abandoned or unclaimed property to comply with escheat laws and avoid an audit, but any potential loss is not currently estimable[60](index=60&type=chunk) [13. Stock-Based Compensation](index=14&type=section&id=13.%20Stock-Based%20Compensation) This note details the company's stock-based compensation plans, including share availability, grants, and expense recognition - Stockholders approved an amendment to the Omnibus Incentive Plan, increasing available shares by **1,000,000** to a total of **3,200,000**. As of March 31, 2024, **962,285 shares** were available for grant[61](index=61&type=chunk) - In Q1 2024, the Company granted **89,452 restricted stock units (RSUs)** at a weighted average fair value of **$18.25** and **60,000 performance stock units (PSUs)** to the new CEO, with a grant date fair value of **$0.9 million**, vesting upon stock price targets (**$35, $50, $65**) over five years[65](index=65&type=chunk)[66](index=66&type=chunk) - Stock-based compensation expense is measured at fair value and expensed over the requisite service period, with forfeitures accounted for as they occur[67](index=67&type=chunk)[68](index=68&type=chunk) [14. Segment Reporting](index=15&type=section&id=14.%20Segment%20Reporting) This note provides financial information by reportable segment, including net sales, gross profit, and EBITDA - The Company's reportable segments are Debit and Credit, Prepaid Debit, and Other (corporate expenses). The CEO uses net sales and EBITDA to evaluate segment performance and allocate resources[69](index=69&type=chunk)[70](index=70&type=chunk)[74](index=74&type=chunk) Segment Performance (Q1 2024) | Segment (in thousands) | Net Sales (Q1 2024) | Gross Profit (Q1 2024) | Income (loss) from operations (Q1 2024) | EBITDA (Q1 2024) | | :--------------------- | :------------------ | :--------------------- | :-------------------------------------- | :--------------- | | Debit and Credit | $87,973 | $31,495 | $22,754 | $24,842 | | Prepaid Debit | $24,198 | $10,023 | $8,745 | $9,615 | | Other | — | — | $(17,354) | $(16,360) | | **Total** | **$111,936** | **$41,518** | **$14,145** | **$18,097** | Segment Performance (Q1 2023) | Segment (in thousands) | Net Sales (Q1 2023) | Gross Profit (Q1 2023) | Income (loss) from operations (Q1 2023) | EBITDA (Q1 2023) | | :--------------------- | :------------------ | :--------------------- | :-------------------------------------- | :--------------- | | Debit and Credit | $101,985 | $38,184 | $30,026 | $32,192 | | Prepaid Debit | $19,130 | $4,910 | $3,677 | $4,301 | | Other | — | — | $(13,105) | $(12,205) | | **Total** | **$120,852** | **$43,094** | **$20,598** | **$24,288** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202%20%E2%80%94%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on CPI Card Group Inc.'s financial condition and results of operations for Q1 2024, including key trends, segment analysis, and liquidity [Overview](index=18&type=section&id=Overview) This section provides a general description of CPI Card Group Inc.'s business, market position, and customer base - CPI Card Group Inc. is a leading payments technology company providing comprehensive Financial Payment Card solutions in the U.S., including credit, debit, and Prepaid Debit Cards, and instant card issuance solutions[81](index=81&type=chunk) - The Company serves a diverse customer base, including large issuers, Prepaid Debit Card program managers, fintechs, and small-to-mid-sized financial institutions, through a network of high-security production facilities[82](index=82&type=chunk)[83](index=83&type=chunk) - Key market positions include the U.S. prepaid debit market, small-to-mid-sized financial institutions, large issuers, and the fintech market[85](index=85&type=chunk) [Trends and Uncertainties That May Affect our Financial Performance](index=19&type=section&id=Trends%20and%20Uncertainties%20That%20May%20Affect%20our%20Financial%20Performance) This section discusses economic and industry factors that could impact the company's future financial results - Economic slowdown concerns are leading some customers, particularly in banking and financial services, to reduce or delay spending and request pricing concessions[86](index=86&type=chunk) - Improved supply-chain lead times have shifted customer focus to reducing existing inventory levels, impacting demand for the Company's products[86](index=86&type=chunk) - Negative liquidity events and increased loan loss reserves in the banking system have led to reduced demand in the Debit and Credit segment[86](index=86&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) This section analyzes the consolidated financial performance, including net sales, gross profit, operating expenses, and net income | Metric (in thousands) | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Net Sales | $111,936 | $120,852 | $(8,916) | (7.4)% | | Products Net Sales | $58,158 | $75,790 | $(17,632) | (23.3)% | | Services Net Sales | $53,778 | $45,062 | $8,716 | 19.3 % | | Gross Profit | $41,518 | $43,094 | $(1,576) | (3.7)% | | Gross Profit Margin | 37.1% | 35.7% | 1.4 pp | | | Operating Expenses | $27,373 | $22,496 | $4,877 | 21.7 % | | Income from Operations| $14,145 | $20,598 | $(6,453) | (31.3)% | | Net Income | $5,455 | $10,873 | $(5,418) | (49.8)% | - Total net sales decreased by **7.4%** due to lower product sales volumes in the Debit and Credit segment, partially offset by higher service sales in both Prepaid Debit and Debit and Credit segments[89](index=89&type=chunk) - Gross profit decreased by **3.7%** due to lower net sales, but gross profit margin increased to **37.1%** from **35.7%** due to lower production costs and the absence of prior year's staffing model transition expenses[90](index=90&type=chunk)[91](index=91&type=chunk) - Operating expenses increased by **21.7%** primarily due to higher compensation-related expenses, including executive retention and severance, and increased stock compensation[92](index=92&type=chunk) - Net income decreased by **49.8%** due to lower income from operations and a higher effective tax rate (**28.7%** vs. **20.7%**), which was positively impacted in the prior year by a valuation allowance reduction[87](index=87&type=chunk)[96](index=96&type=chunk) [Segment Discussion](index=21&type=section&id=Segment%20Discussion) This section provides a detailed analysis of the financial performance for each of the company's reportable segments [Debit and Credit](index=21&type=section&id=Debit%20and%20Credit) This section analyzes the financial performance of the Debit and Credit segment, including sales and profitability trends | Metric (in thousands) | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Net sales | $87,973 | $101,985 | $(14,012) | (13.7)% | | Gross profit | $31,495 | $38,184 | $(6,689) | (17.5)% | | Income from operations| $22,754 | $30,026 | $(7,272) | (24.2)% | | Gross profit margin | 35.8% | 37.4% | (1.6 pp) | | - Net sales for Debit and Credit decreased by **13.7%** due to lower product sales, specifically volume declines in contactless and EMV cards, partially offset by increased personalization and Card@Once services[97](index=97&type=chunk) - Gross profit and gross profit margin decreased primarily due to lower net sales and increased compensation-related operating expenses[98](index=98&type=chunk)[99](index=99&type=chunk) [Prepaid Debit](index=22&type=section&id=Prepaid%20Debit) This section analyzes the financial performance of the Prepaid Debit segment, focusing on sales growth and margin improvements | Metric (in thousands) | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Net sales | $24,198 | $19,130 | $5,068 | 26.5 % | | Gross profit | $10,023 | $4,910 | $5,113 | 104.1 % | | Income from operations| $8,745 | $3,677 | $5,068 | 137.8 % | | Gross profit margin | 41.4% | 25.7% | 15.7 pp | | - Net sales for Prepaid Debit increased by **26.5%** due to higher volumes from existing customers[101](index=101&type=chunk) - Gross profit and gross profit margin significantly increased by **104.1%** and **15.7 percentage points**, respectively, driven by higher net sales and lower production costs, as the prior year was negatively impacted by staffing model transition expenses[102](index=102&type=chunk) [Other](index=22&type=section&id=Other) This section discusses the operating expenses categorized under the 'Other' segment, primarily corporate overhead | Metric (in thousands) | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Operating expenses | $17,354 | $13,105 | $4,249 | 32.4 % | - Operating expenses for the Other segment (corporate expenses) increased by **32.4%** due to higher compensation-related expenses, including executive retention and severance, and increased stock compensation[106](index=106&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its financial obligations, including cash position, borrowing capacity, and material cash requirements - As of March 31, 2024, the Company had **$17.1 million** in cash and cash equivalents and **$74.7 million** in available borrowing capacity under its ABL Revolver[107](index=107&type=chunk)[108](index=108&type=chunk) - Cash provided by operating activities increased to **$8.9 million** in Q1 2024 from **$8.0 million** in Q1 2023, primarily due to lower employee performance incentive compensation payments, partially offset by a **$5.0 million** payment to the prior CEO and increased inventory purchases[111](index=111&type=chunk) - The Company's material cash requirements include **$23.5 million** in interest payments on Senior Notes over the next 12 months, operating and finance lease payments, and purchase obligations[124](index=124&type=chunk)[125](index=125&type=chunk) - A new build-to-suit lease agreement was entered into in February 2024 for relocating and modernizing the Fort Wayne, Indiana production facility, with an annual base rent of **$0.9 million** for ten years, commencing March 1, 2025, or later[128](index=128&type=chunk) - The Company repurchased **$1.2 million** of common stock in Q1 2024 and has an obligation to repurchase an additional **$4.4 million** from a majority stockholder in Q2 2024, with **$14.1 million** remaining under the **$20.0 million** share repurchase authorization[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203%20%E2%80%94%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company is not required to provide quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company - Disclosure not required due to smaller reporting company status[131](index=131&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204%20%E2%80%94%20Controls%20and%20Procedures) Management evaluated the effectiveness of the company's disclosure controls and procedures, concluding they were effective with no material changes - Disclosure controls and procedures were effective as of March 31, 2024[132](index=132&type=chunk) - No material changes occurred in internal control over financial reporting during the fiscal quarter[133](index=133&type=chunk) [PART II — Other Information](index=26&type=section&id=Part%20II%20%E2%80%94%20Other%20Information) This section provides additional information not covered in Part I, including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=26&type=section&id=Item%201%20%E2%80%94%20Legal%20Proceedings) This section refers to Note 12 of the Condensed Consolidated Financial Statements for information regarding legal proceedings - Refer to Note 12 of the Condensed Consolidated Financial Statements for details on legal proceedings[135](index=135&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A%20%E2%80%94%20Risk%20Factors) This section states that no material changes to the previously disclosed risk factors have occurred - No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2023[136](index=136&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202%20%E2%80%94%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities and obligations under its approved plan - A share repurchase plan for up to **$20.0 million** of common stock was approved on November 2, 2023, expiring December 31, 2024[137](index=137&type=chunk) Common Stock Repurchases (Q1 2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------- | :------------------------------- | :--------------------------- | | January 1 - 31 | 23,876 | $18.58 | | February 1 - 29 | 22,650 | $18.96 | | March 1 - 31 | 21,732 | $17.28 | | **Total** | **68,258** | **$18.29** | - As of March 31, 2024, the Company was obligated to repurchase **244,314 shares** from Parallel49 at an average price of **$18.03 per share**, with a related payment of **$4.4 million** made in April 2024[139](index=139&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203%20%E2%80%94%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period - No defaults upon senior securities[140](index=140&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204%20%E2%80%94%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Not applicable[141](index=141&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205%20%E2%80%94%20Other%20Information) This section confirms no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024[143](index=143&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206%20%E2%80%94%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including employment agreements and certifications - Exhibits include Employment Agreement for John Lowe, CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and various XBRL interactive data files[144](index=144&type=chunk)[145](index=145&type=chunk) [SIGNATURES](index=28&type=section&id=SIGNATURES) This section lists the individuals who signed the report on behalf of the company - The report was signed on May 7, 2024, by John Lowe (President and CEO), Jeffrey Hochstadt (CFO), and Donna Abbey Carmignani (Chief Accounting Officer)[150](index=150&type=chunk)

Exhibit 99.1 CPI Card Group Inc. Reports First Quarter 2024 Results Date: May 7, 2024 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 Littleton, CO. May 7, 2024 -- CPI Card Group Inc. (Nasdaq: PMTS) ("CPI" or the "Company"), a payments ...

CPI Card Group Inc. (NASDAQ:PMTS) Q4 2023 Earnings Conference Call March 7, 2024 9:00 AM ET Company Participants Mike Salop - Head, IR John Lowe - President and CEO Jeff Hochstadt - CFO Conference Call Participants Jaeson Schmidt - Lake Street Capital Markets Operator Welcome to CPI Card Group's Fourth Quarter 2023 Earnings Call. My name is Audra, and I will be your operator today. [Operator Instructions] Now I would like to turn the call over to Mike Salop, CPI's Head of Investor Relations. Please go ahead ...

Form 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2023 OR Table of Contents (Exact name of the registrant as specified in its charter) ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number 001-37584 CPI Card Group Inc. (Address of principal exec ...

Exhibit 99.1 CPI Card Group Inc. Reports Fourth Quarter and Full Year 2023 Results Date: March 7, 2024 Fourth Quarter Sales Affected by Cautious Customer Spending as Expected; Fourth Quarter Net Sales Decreased 19%; Net Income Decreased 78%; Adjusted EBITDA Decreased 27% Full Year Net Sales Decreased 7% to $445 Million; Net Income Decreased 34% to $24 Million; Adjusted EBITDA Decreased 8% to $89 Million Company Anticipates Gradual Market Recovery in 2024; Financial Outlook Projects Company to Return to Sale ...

CPI Card Group Inc. (NASDAQ:PMTS) Q3 2023 Earnings Conference Call November 7, 2023 9:00 AM ET Company Participants Mike Salop - Head, IR Scott Scheirman - President and CEO John Lowe - EVP, End-to-End Payment Solutions Jeff Hochstadt - CFO Conference Call Participants Jaeson Schmidt - Lake Street Hal Goetsch - B. Riley Securities Operator Welcome to CPI Card Group's Third Quarter 2023 Earnings Call. My name is Chris, and I'll be your operator today. [Operator Instructions]. Now I'd like to turn the call ov ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the Quarterly Period Ended September 30, 2023 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from to | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Common Stock, $0.00 ...

| --- | --- | --- | |---------------------------------------------|-------|-------| | | | | | | | | | | | | | | | | | Second Quarter 2023 Investor Presentation | | | | August 8, 2023 | | | 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 presentation, all reported on a continuing operations basis: EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, F ...

CPI Card Group Inc. (NASDAQ:PMTS) Q2 2023 Earnings Conference Call August 8, 2023 9:00 AM ET Company Participants Mike Salop - Head, Investor Relations Scott Scheirman - President & Chief Executive Officer John Lowe - Executive Vice President, End-to-End Payment Solutions Jeff Hochstadt - Chief Financial Officer Conference Call Participants Jaeson Schmidt - Lake Street Capital Markets Bill Charters - Sabal Capital Operator Welcome to the CPI Card Group's Second Quarter 2023 Earnings Call. My name is Chris, ...