CPI Card Group(PMTS) - 2021 Q1 - Quarterly Report

Financial Performance - Total net sales for the three months ended March 31, 2021, were $89,092,000, representing a 20.5% increase from $73,969,000 in the same period of 2020[8] - Gross profit for the first quarter of 2021 was $35,721,000, up 39.3% from $25,648,000 in Q1 2020[8] - Net income from continuing operations for Q1 2021 was $2,410,000, compared to $1,782,000 in Q1 2020, reflecting a 35.2% increase[8] - Basic and diluted earnings per share for Q1 2021 were $0.21, compared to $0.16 in Q1 2020, indicating a 31.3% increase[8] - EBITDA for the same period increased to $16,968,000 in 2021 from $11,645,000 in 2020, representing a 45.5% growth[108] - Net income for the three months ended March 31, 2021, was $2,410,000, compared to $1,756,000 in 2020, marking a 37.2% increase[108] Assets and Liabilities - Total current assets decreased to $133,198,000 as of March 31, 2021, down from $152,534,000 at the end of 2020, a decline of 12.7%[7] - Total liabilities decreased to $381,870,000 as of March 31, 2021, down from $404,188,000 at the end of 2020, a reduction of 5.5%[7] - Total assets decreased to $246,294,000 as of March 31, 2021, from $266,151,000 at December 31, 2020, a decline of 7.4%[91] - As of March 31, 2021, total long-term debt amounted to $317.5 million, a decrease from $336.7 million as of December 31, 2020, reflecting a reduction in borrowings[51] - The Company had total liabilities of $381.9 million as of March 31, 2021, down from $404.2 million at the end of 2020[7] Cash Flow - Cash and cash equivalents at the end of Q1 2021 were $24,884,000, down from $57,603,000 at the end of 2020, a decrease of 56.8%[12] - Operating activities generated a net cash flow of $144,000 for continuing operations in Q1 2021, compared to $3,204,000 in Q1 2020[12] - Cash provided by operating activities decreased to $0.1 million for the three months ended March 31, 2021, compared to $3.2 million in the same period of 2020[144] - Cash used in investing activities increased to $2.4 million for the three months ended March 31, 2021, from $0.9 million in the prior year, primarily for capital expenditures[146] - Cash used in financing activities was $30.5 million during the three months ended March 31, 2021, with proceeds from the Senior Notes and ABL Revolver totaling $310 million and $14.8 million, respectively[147] Inventory and Receivables - Trade accounts receivable as of March 31, 2021, amounted to $49,708, an increase from $44,305 as of December 31, 2020[32] - Raw materials inventory increased to $31,802 as of March 31, 2021, compared to $23,009 as of December 31, 2020, reflecting a rise of 38.4%[33] - Accounts receivable increased to $60,479 million as of March 31, 2021, up from $54,592 million at December 31, 2020, reflecting a growth of approximately 3.2%[32] - Inventories rose to $33,490 million as of March 31, 2021, compared to $24,796 million at December 31, 2020, indicating a significant increase of about 35%[33] Debt and Financing - The Company issued $310 million in senior secured notes with an interest rate of 8.625%, maturing on March 15, 2026, to refinance existing debt[52] - The ABL Revolver was established with a borrowing capacity of up to $50 million, with an interest rate of 1.356% as of March 31, 2021[52] - The Company had outstanding borrowings of $30 million under the Senior Credit Facility and $304.7 million under the First Lien Term Loan prior to their termination[54] - The Company recorded a loss of $5.048 million on debt extinguishment due to the termination of the Senior Credit Facility and First Lien Term Loan[63] - The early termination of the Senior Credit Facility incurred a "make-whole" premium of $2,635, recorded as interest expense for Q1 2021[54] Tax and Compliance - The effective income tax rate for the three months ended March 31, 2021, was 36.1%, with an income tax expense of $1.36 million on a pre-tax income of $3.77 million[64] - The effective income tax rate for the three months ended March 31, 2021, was 36.1%, compared to (35.3)% in 2020, reflecting significant changes due to the CARES Act provisions[65] - The Company believes approximately $852 million of unrecognized tax benefits may be recognized in the next year due to settlements with taxing authorities[67] Operational Insights - The company continues to monitor supply chain impacts due to COVID-19, which may affect future operations and costs[16] - The company continues to monitor its supply chain and has purchased additional inventory to mitigate potential constraints due to COVID-19[16] - The company serves approximately 2,000 direct customers, including major debit and credit card issuers in the U.S.[101] - The company is focused on maintaining compliance with PCI Security Standards to ensure the security of its operations[102] Segment Performance - The Company’s reportable segments include Debit and Credit, Prepaid Debit, and Other, with the Debit and Credit segment primarily producing Financial Payment Cards[85] - The Debit and Credit segment generated net sales of $69,817,000 in Q1 2021, up from $59,839,000 in Q1 2020, reflecting a 16.5% increase[90] - The Prepaid Debit segment's net sales rose to $19,458,000 in Q1 2021 from $14,540,000 in Q1 2020, an increase of 33.7%[90] Legal Matters - The Company is currently involved in a patent infringement lawsuit filed by Smart Packaging Solutions, which alleges infringement of four patents related to antenna technology[73]