Workflow
CPI Card Group(PMTS) - 2025 Q2 - Quarterly Results
CPI Card GroupCPI Card Group(US:PMTS)2025-08-08 11:01

Executive Summary Overview of CPI Card Group's Q2 2025 performance and updated full-year 2025 financial outlook Second Quarter 2025 Performance Overview CPI Card Group reported a 9% increase in Q2 2025 net sales to $129.8 million (15% excluding an accounting change), driven by Arroweye's strong performance and growth in contactless debit and credit cards. Net income decreased 91% to $0.5 million due to acquisition costs, restructuring, and increased interest, while Adjusted EBITDA increased 3% to $22.5 million Q2 2025 Key Financials | Metric | Q2 2025 | Q2 2024 | Change (%) | | :----- | :------ | :------ | :--------- | | Net Sales | $129.8M | $118.8M | 9% | | Net Sales (excl. accounting change) | - | - | 15% | | Net Income | $0.5M | $6.0M | (91%) | | Adjusted EBITDA | $22.5M | $21.9M | 3% | - Net sales growth was led by Arroweye delivering approximately $10 million of net sales in less than 2 months, increased sales of contactless debit and credit cards including higher-priced metal cards, and strong performance from Card@Once® instant issuance solutions2 - Net income was impacted by transaction and integration costs related to the Arroweye acquisition, restructuring charges, the accounting change, and increased interest expense. The Adjusted EBITDA increase was primarily driven by sales growth, including the addition of Arroweye, partially offset by lower gross margins and increased tariff expenses3 2025 Financial Outlook Update CPI updated its full-year 2025 net sales outlook to low double-digit to mid-teens growth, primarily due to the Arroweye acquisition. The Adjusted EBITDA outlook remains unchanged at mid-to-high single-digit growth, with Arroweye's benefits offset by increased tariffs and unfavorable sales mix Updated 2025 Outlook | Metric | New 2025 Outlook | Previous 2025 Outlook | Change | | :----- | :--------------- | :-------------------- | :----- | | Net Sales Growth | Low double-digit to mid-teens | Mid-to-high single-digit | Increased | | Adjusted EBITDA Growth | Mid-to-high single-digit | Mid-to-high single-digit | Unchanged | - The Company believes long-term growth trends for the U.S. card market remain strong, led by ongoing consumer card growth, with Visa and Mastercard® U.S. debit and credit cards in circulation increasing at an 8% compound annual growth rate for the three-year period ending March 31, 20255 2025 Business Highlights Key business activities in 2025 include the acquisition of Arroweye Solutions, continued leadership in SaaS-based instant issuance with Card@Once®, expansion into healthcare payments and digital offerings, and a focus on eco-focused payment card solutions. The company also exercised an optional redemption feature on its 10% Senior Notes - On May 6, 2025, CPI acquired Arroweye Solutions, Inc., a leading provider of digitally-driven, on-demand payment card solutions for the U.S. market8 - CPI continues to be the leading provider of Software-as-a-Service-based instant issuance solutions in the U.S., with more than 17,000 Card@Once® installations across more than 2,000 financial institutions, generating strong recurring revenue streams8 - CPI continues to advance its market and product expansion strategies, including healthcare payment solutions, digital offerings such as push provisioning capabilities for mobile wallets and payment card fraud solutions, and closed-loop prepaid solutions8 - CPI continues to be a leading provider of eco-focused payment card solutions in the U.S. market, with more than 450 million eco-focused debit, credit, and prepaid card or package solutions sold8 - On July 15, 2025, CPI exercised the optional redemption feature on its 10% Senior Notes due 2029 and retired $20 million of principal at a redemption price of 103% of par, plus accrued interest8 Financial Performance Detailed financial results for Q2 and H1 2025, including balance sheet, liquidity, and cash flow analysis Second Quarter 2025 Financial Results In Q2 2025, net sales grew 9% (15% adjusted for accounting change) to $129.8 million, driven by Arroweye and contactless cards. Gross profit decreased 5% to $40.1 million, with margin declining to 30.9% due to sales mix and increased production costs. Net income fell 91% to $0.5 million, impacted by acquisition costs and restructuring, while Adjusted EBITDA rose 3% to $22.5 million Consolidated Results (Q2 2025) Consolidated financial performance for Q2 2025, highlighting key revenue, profit, and earnings metrics Q2 2025 Consolidated Financials | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (%) | | :----- | :--------------------- | :--------------------- | :--------- | | Net Sales | $129,753 | $118,818 | 9.2% | | Gross Profit | $40,120 | $42,388 | (5.4%) | | Gross Profit Margin | 30.9% | 35.7% | (4.8 pp) | | Income from Operations | $9,423 | $14,909 | (36.8%) | | Net Income | $518 | $6,001 | (91.4%) | | Diluted EPS | $0.04 | $0.51 | (92.2%) | | Adjusted EBITDA | $22,487 | $21,912 | 2.6% | - Gross profit margin of 30.9% decreased from 35.7% in the prior-year second quarter, as benefits of operating leverage from sales growth were offset by negative impacts from sales mix and increased production costs, including tariffs, depreciation, and expenses associated with the transition to a new secure card production facility89 Segment Performance (Q2 2025) Net sales performance across Debit and Credit and Prepaid Debit segments for Q2 2025 Q2 2025 Net Sales by Segment | Segment | Q2 2025 Net Sales | Q2 2024 Net Sales | Change ($) | Change (%) | | :------ | :---------------- | :---------------- | :--------- | :--------- | | Debit and Credit | $110.8M | $95.6M | $15.1M | 15.8% | | Debit and Credit (excl. accounting change) | $113.4M | $96.4M | $17.0M | 17.6% | | Prepaid Debit | $19.2M | $23.8M | ($4.6M) | (19.3%) | | Prepaid Debit (excl. accounting change) | $24.3M | $23.4M | $0.9M | 3.6% | Impact of Accounting Change (Q2 2025) Impact of the accounting change on revenue recognition for CPI Card Group in Q2 2025 - The accounting change implemented in the second quarter resulted from the Company moving from over-time revenue recognition for certain work-in-process ("WIP") orders to point-in-time recognition (revenue booked when shipped)1123 - This resulted in a one-time, non-cash, negative transition impact in the second quarter as approximately $8 million of second quarter shipments were recognized as WIP revenue in the first quarter under the over-time process, with no WIP revenue recognized in the second quarter under the point-in-time process. This impact affects quarterly timing of revenue recognition and associated reported net income but does not impact cash flow or Adjusted EBITDA11 First Half 2025 Financial Results For the first half of 2025, net sales increased 9% (14% adjusted) to $252.5 million. Gross profit decreased 4% to $80.8 million, with margin at 32.0%. Income from operations declined 19% to $23.5 million, and net income decreased 54% to $5.3 million. Adjusted EBITDA saw a 3% decrease to $43.6 million, primarily due to lower gross margins and increased tariffs Consolidated Results (H1 2025) Consolidated financial performance for H1 2025, highlighting key revenue, profit, and earnings metrics H1 2025 Consolidated Financials | Metric | H1 2025 (in thousands) | H1 2024 (in thousands) | Change (%) | | :----- | :--------------------- | :--------------------- | :--------- | | Net Sales | $252,514 | $230,754 | 9.4% | | Gross Profit | $80,816 | $83,906 | (3.7%) | | Gross Profit Margin | 32.0% | 36.4% | (4.4 pp) | | Income from Operations | $23,527 | $29,054 | (19.0%) | | Net Income | $5,292 | $11,456 | (53.8%) | | Diluted EPS | $0.44 | $0.97 | (54.6%) | | Adjusted EBITDA | $43,649 | $44,888 | (2.8%) | Segment Performance (H1 2025) Net sales performance across Debit and Credit and Prepaid Debit segments for H1 2025 H1 2025 Net Sales by Segment | Segment | H1 2025 Net Sales | H1 2024 Net Sales | Change ($) | Change (%) | | :------ | :---------------- | :---------------- | :--------- | :--------- | | Debit and Credit | $207.3M | $183.6M | $23.7M | 12.9% | | Debit and Credit (excl. accounting change) | $209.3M | $184.1M | $25.2M | 13.7% | | Prepaid Debit | $45.9M | $48.0M | ($2.1M) | (4.3%) | | Prepaid Debit (excl. accounting change) | $51.3M | $43.8M | $7.5M | 17.1% | Balance Sheet, Liquidity and Cash Flow In the first half of 2025, cash from operating activities increased to $9.9 million, while Free Cash Flow decreased to $0.8 million due to higher capital expenditures. The Arroweye acquisition for $45.6 million impacted the balance sheet, with cash and equivalents at $17.1 million and a Net Leverage Ratio of 3.6x as of June 30, 2025. The company aims to deleverage using future free cash flow H1 2025 Cash Flow Highlights | Metric | H1 2025 (in thousands) | H1 2024 (in thousands) | Change ($) | | :----- | :--------------------- | :--------------------- | :--------- | | Cash from Operating Activities | $9,937 | $4,108 | $5,829 | | Free Cash Flow | $825 | $1,364 | ($539) | - In May 2025, the Company completed the acquisition of Arroweye Solutions, Inc. for a purchase price of $45.6 million, subject to customary closing adjustments16 Key Balance Sheet and Leverage Metrics (June 30, 2025) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----- | :--------------------------- | :------------------------------- | | Cash and Cash Equivalents | $17,124 | $33,544 | | 10% Senior Secured Notes due 2029 | $285,000 | $285,000 | | ABL Revolving Credit Facility | $30,000 | $0 | | Net Leverage Ratio | 3.6x | 3.0x | - The Company's capital structure and allocation priorities are focused on investing in the business, including strategic acquisitions; deleveraging the balance sheet; and returning funds to stockholders. The Company plans to utilize future free cash flow over time to drive down net leverage, which was impacted by the Arroweye acquisition and other investments this year18 Financial Outlook CPI updated its 2025 full-year outlook, projecting low double-digit to mid-teens net sales growth, an increase from the previous mid-to-high single-digit forecast, primarily due to the Arroweye acquisition. The Adjusted EBITDA outlook remains unchanged at mid-to-high single-digit growth, with Arroweye's contribution expected to be offset by increased tariffs and unfavorable sales mix. This outlook assumes a stable economic environment and currently announced tariffs, excluding potential chip tariff impacts 2025 Financial Outlook | Metric | 2025 Outlook | Prior Outlook | Change | | :----- | :----------- | :------------ | :----- | | Net Sales Growth | Low double-digit to mid-teens | Mid-to-high single-digit | Increased | | Adjusted EBITDA Growth | Mid-to-high single-digit | Mid-to-high single-digit | Unchanged | - The outlook reflects a stable economic environment and the impact of currently announced tariffs. The outlook does not reflect potential impact from proposed chip tariffs announced on August 6, 2025, as details on the proposed tariffs, including timing and exemptions, have not been announced19 Non-GAAP Financial Measures Definitions and reconciliations for CPI Card Group's non-GAAP financial measures Definitions and Reconciliations This section defines key non-GAAP financial measures used by CPI Card Group, including Net Sales excluding the Impact of an Accounting Change, EBITDA, Adjusted EBITDA, Free Cash Flow, LTM Adjusted EBITDA, and Net Leverage Ratio. These measures are used by management to assess operating performance and are provided to enhance investor understanding, with reconciliations to GAAP measures available in Exhibits E and F - Non-GAAP financial measures are utilized by management in comparing operating performance on a consistent basis and serve as a basis for certain Company compensation programs. They are appropriate to enhance an overall understanding of underlying operating performance trends and provide improved comparability, but should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP22 - Net Sales excluding the Impact of an Accounting Change is defined as net sales excluding the impact from an accounting change implemented in the second quarter of 2025, resulting from the Company moving from over-time revenue recognition for certain WIP orders to point-in-time recognition23 - Adjusted EBITDA is defined as EBITDA adjusted for litigation; stock-based compensation expense; estimated sales tax expense; restructuring and other charges, including executive retention and severance and acquisition-related costs; costs related to production facility modernization efforts; loss on debt extinguishment; foreign currency gain or loss, gross profit related to the impact from the accounting change related to revenue; and other items that are unusual in nature, infrequently occurring or not considered part of core operations. It is intended to show unleveraged, pre-tax operating results2425 - Free Cash Flow is defined as cash flow provided by (used in) operating activities less capital expenditures. This metric is used in analyzing the ability to service and repay debt, but it does not represent funds available for investment or other discretionary uses27 - Net Leverage Ratio is defined as the ratio of debt principal outstanding, plus finance lease obligations, less cash, divided by LTM Adjusted EBITDA. Management and various investors use this ratio as a measure of financial strength when making key investment decisions and evaluating against peers29 Company Information Overview of CPI Card Group Inc., including business description and risk factors About CPI Card Group Inc. CPI Card Group is a payments technology company offering a full range of payment cards and digital solutions. The company focuses on customer relationships, innovation, and serving clients across various industries with high-security production facilities in the U.S., aiming to transform the industry and enhance daily payment experiences - CPI Card Group is a payments technology company providing a comprehensive range of payment cards and related digital solutions, with a focus on building personal relationships and earning trust30 - The company helps customers navigate the evolving world of payments, delivering innovative solutions, and serves clients across industry, size, and scale through experienced employees and a network of high-security production and card services facilities, all located in the United States31 Forward-Looking Statements and Risk Factors This section contains forward-looking statements regarding CPI's strategic initiatives, market opportunities, and financial outlook, which are subject to significant risks and uncertainties. These risks include general economic conditions, competition, technological changes, supply chain disruptions, tariffs, cybersecurity, ability to retain personnel, substantial indebtedness, and integration of acquisitions like Arroweye. Investors are cautioned against undue reliance on these statements - Forward-looking statements, including those about strategic initiatives, market opportunities, financial outlook for 2025, and the impact of investments, are based on current expectations and beliefs but are subject to many important risks and uncertainties that could cause actual results to differ materially32 - Key business and industry risks include deterioration in general economic conditions, unpredictability of operating results, failure to retain key customers, intense competition, inability to develop new products, technological obsolescence, system security risks, data breaches, cyber-attacks, supply chain disruptions, tariffs, and interruptions in operations33 - Financial and operational risks include inability to recruit/retain qualified personnel, substantial indebtedness and restrictive terms, inability to make debt service payments or refinance, inability to successfully execute/integrate acquisitions (like Arroweye), failure to maintain effective internal control over financial reporting, and ESG-related risks34 - Risks relating to common stock ownership include concentrated ownership by significant stockholders, potential conflicts of interest, impact of concentrated ownership and substantial stock sales on trading volume and market price, and the influence of securities analysts34 Exhibits Detailed financial statements and reconciliations, including consolidated statements and segment data Condensed Consolidated Statements of Operations and Comprehensive Income This exhibit presents the unaudited condensed consolidated statements of operations and comprehensive income for CPI Card Group Inc. for the three and six months ended June 30, 2025, and 2024, detailing net sales, cost of sales, gross profit, operating expenses, income from operations, other expenses, net income, and earnings per share Condensed Consolidated Statements of Operations (Q2 2025 vs 2024) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | | Net sales | $129,753 | $118,818 | | Cost of sales | $89,633 | $76,430 | | Gross profit | $40,120 | $42,388 | | Operating expenses | $30,697 | $27,479 | | Income from operations | $9,423 | $14,909 | | Total other expense, net | ($8,082) | ($6,608) | | Income before income taxes | $1,341 | $8,301 | | Income tax expense | ($823) | ($2,300) | | Net income | $518 | $6,001 | | Diluted earnings per share | $0.04 | $0.51 | Condensed Consolidated Statements of Operations (H1 2025 vs 2024) | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Net sales | $252,514 | $230,754 | | Cost of sales | $171,698 | $146,848 | | Gross profit | $80,816 | $83,906 | | Operating expenses | $57,289 | $54,852 | | Income from operations | $23,527 | $29,054 | | Total other expense, net | ($15,749) | ($13,098) | | Income before income taxes | $7,778 | $15,956 | | Income tax expense | ($2,486) | ($4,500) | | Net income | $5,292 | $11,456 | | Diluted earnings per share | $0.44 | $0.97 | Condensed Consolidated Balance Sheets This exhibit provides the unaudited condensed consolidated balance sheets for CPI Card Group Inc. as of June 30, 2025, and December 31, 2024, outlining assets (current and non-current) and liabilities and stockholders' deficit Condensed Consolidated Balance Sheets (June 30, 2025 vs Dec 31, 2024) | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Total current assets | $204,341 | $203,042 | | Total assets | $399,795 | $349,657 | | Total current liabilities | $79,032 | $75,587 | | Long-term debt | $310,911 | $280,405 | | Total liabilities | $428,821 | $385,278 | | Total stockholders' deficit | ($29,026) | ($35,621) | Condensed Consolidated Statements of Cash Flows This exhibit details the unaudited condensed consolidated statements of cash flows for CPI Card Group Inc. for the six months ended June 30, 2025, and 2024, categorizing cash flows from operating, investing, and financing activities, along with supplemental disclosures Condensed Consolidated Statements of Cash Flows (H1 2025 vs 2024) | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $9,937 | $4,108 | | Cash used in investing activities | ($51,504) | ($2,744) | | Cash provided by (used in) financing activities | $25,147 | ($6,298) | | Net decrease in cash and cash equivalents | ($16,420) | ($4,934) | | Cash and cash equivalents, end of period | $17,124 | $7,479 | Segment Summary Information This exhibit provides unaudited segment-level financial information for CPI Card Group Inc. for the three and six months ended June 30, 2025, and 2024, including net sales, gross profit, income from operations, and EBITDA by segment (Debit and Credit, Prepaid Debit), along with reconciliations Net Sales by Segment (Q2 2025 vs 2024) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :------------- | :------------------------------- | :------------------------------- | :--------- | | Debit and Credit | $110,757 | $95,620 | 15.8% | | Prepaid Debit | $19,222 | $23,815 | (19.3%) | | Total | $129,753 | $118,818 | 9.2% | Gross Profit by Segment (Q2 2025 vs 2024) | (in thousands) | Three Months Ended June 30, 2025 | % of Net Sales 2025 | Three Months Ended June 30, 2024 | % of Net Sales 2024 | Change (%) | | :------------- | :------------------------------- | :------------------ | :------------------------------- | :------------------ | :--------- | | Debit and Credit | $34,649 | 31.3% | $34,164 | 35.7% | 1.4% | | Prepaid Debit | $5,471 | 28.5% | $8,224 | 34.5% | (33.5%) | | Total | $40,120 | 30.9% | $42,388 | 35.7% | (5.4%) | Income from Operations by Segment (Q2 2025 vs 2024) | (in thousands) | Three Months Ended June 30, 2025 | % of Net Sales 2025 | Three Months Ended June 30, 2024 | % of Net Sales 2024 | Change (%) | | :------------- | :------------------------------- | :------------------ | :------------------------------- | :------------------ | :--------- | | Debit and Credit | $23,053 | 20.8% | $25,389 | 26.6% | (9.2%) | | Prepaid Debit | $4,171 | 21.7% | $6,909 | 29.0% | (39.6%) | | Total | $9,423 | 7.3% | $14,909 | 12.5% | (36.8%) | EBITDA by Segment (Q2 2025 vs 2024) | (in thousands) | Three Months Ended June 30, 2025 | % of Net Sales 2025 | Three Months Ended June 30, 2024 | % of Net Sales 2024 | Change (%) | | :------------- | :------------------------------- | :------------------ | :------------------------------- | :------------------ | :--------- | | Debit and Credit | $26,548 | 24.0% | $27,625 | 28.9% | (3.9%) | | Prepaid Debit | $5,297 | 27.6% | $7,803 | 32.8% | (32.1%) | | Total | $14,925 | 11.5% | $18,879 | 15.9% | (20.9%) | Supplemental GAAP to Non-GAAP Reconciliations (EBITDA, Free Cash Flow, Net Leverage) This exhibit presents unaudited reconciliations of GAAP to non-GAAP financial measures for CPI Card Group Inc., including EBITDA, Adjusted EBITDA, and Free Cash Flow for the three and six months ended June 30, 2025, and 2024. It also includes the calculation of LTM Adjusted EBITDA and Net Leverage Ratio as of June 30, 2025, and December 31, 2024, with detailed adjustments EBITDA and Adjusted EBITDA Reconciliation (Q2 2025 vs 2024) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | | Net income | $518 | $6,001 | | EBITDA | $14,925 | $18,879 | | Adjustments to EBITDA | $7,562 | $3,033 | | Adjusted EBITDA | $22,487 | $21,912 | | Adjusted EBITDA growth | 2.6% | - | Free Cash Flow Reconciliation (Q2 2025 vs 2024) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | | Cash provided by (used in) operating activities | $4,344 | ($4,757) | | Capital expenditures | ($3,811) | ($1,238) | | Free Cash Flow | $533 | ($5,995) | LTM Adjusted EBITDA Reconciliation (June 30, 2025 vs Dec 31, 2024) | (in thousands) | Last Twelve Months Ended June 30, 2025 | Last Twelve Months Ended December 31, 2024 | | :------------- | :------------------------------------- | :----------------------------------------- | | Net income | $13,357 | $19,521 | | EBITDA | $71,852 | $75,534 | | Adjustments to EBITDA | $18,785 | $16,342 | | LTM Adjusted EBITDA | $90,637 | $91,876 | Net Leverage Ratio Calculation (June 30, 2025 vs Dec 31, 2024) | (in thousands) | As of June 30, 2025 | As of December 31, 2024 | | :------------- | :------------------ | :---------------------- | | Total debt | $343,239 | $307,801 | | Less: Cash and cash equivalents | ($17,124) | ($33,544) | | Total net debt (a) | $326,115 | $274,257 | | LTM Adjusted EBITDA (b) | $90,637 | $91,876 | | Net Leverage Ratio (a)/(b) | 3.6x | 3.0x | Supplemental GAAP to Non-GAAP Reconciliations (Net Sales excluding accounting change) This exhibit provides unaudited supplemental reconciliations of net sales, adjusting for the impact of an accounting change in revenue recognition for the three and six months ended June 30, 2025, and 2024, for both consolidated CPI and its Debit and Credit and Prepaid Debit segments Consolidated Net Sales Adjusted for Accounting Change (Q2 2025 vs 2024) | (in thousands) | Q2 2025 As Reported | Q2 2025 Adjusted | Q2 2024 As Reported | Q2 2024 Adjusted | | :------------- | :------------------ | :--------------- | :------------------ | :--------------- | | Consolidated Net Sales | $129,753 | $137,474 | $118,818 | $119,243 | | Net sales growth (% Change 2025 vs. 2024) | 9.2% | 15.3% | - | - | Segment Net Sales Adjusted for Accounting Change (Q2 2025 vs 2024) | (in thousands) | Q2 2025 As Reported | Q2 2025 Adjusted | Q2 2024 As Reported | Q2 2024 Adjusted | | :------------- | :------------------ | :--------------- | :------------------ | :--------------- | | Debit and Credit Net Sales | $110,757 | $113,428 | $95,620 | $96,429 | | Debit and Credit Net sales growth (% Change 2025 vs. 2024) | 15.8% | 17.6% | - | - | | Prepaid Debit Net Sales | $19,222 | $24,274 | $23,815 | $23,431 | | Prepaid Debit Net sales growth (% Change 2025 vs. 2024) | (19.3%) | 3.6% | - | - |