CPI Card Group Inc. (PMTS) came out with quarterly earnings of $0.57 per share, beating the Zacks Consensus Estimate of $0.55 per share. This compares to earnings of $0.23 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 3.64%. A quarter ago, it was expected that this company would post earnings of $0.50 per share when it actually produced earnings of $0.66, delivering a surprise of 32%.Over the last four quarters, the company ...

Market Position and Growth - CPI Card Group is a leader in the U.S. payment card solutions market, focusing on debit and credit card production, personalization, and SaaS-based instant issuance services[18]. - The company has increased installations of its Card@Once instant issuance solution from approximately 11,000 customer locations in 2019 to more than 16,000 in 2024, indicating significant growth in this segment[37]. - In 2024, one customer accounted for approximately 18% of total net sales, with nearly two-thirds of net sales coming from the top 10 customers, who have been served for an average of over 10 years[48]. - CPI aims to expand its addressable market by diversifying product offerings and entering non-traditional industry verticals, such as healthcare and the gig economy[25]. - The U.S. payment card solutions market has experienced growth driven by new account openings and stable recurring revenue from card reissuance due to expiration and replacement activities[20]. Product and Technology Development - CPI's eco-focused card solutions, including Second Wave and Earthwise cards, incorporate upcycled materials and address increasing demand for environmentally friendly products[29]. - The company has developed technology integrations with financial institution platform providers and card processors to enhance its digital solutions offerings, including digital push provisioning services[45]. - CPI's comprehensive end-to-end card solutions are integral to many customers' card programs, providing a full suite of products and services while maintaining security requirements[44]. - CPI's proprietary and patented solutions, such as the Card@Once system, provide a competitive advantage by enabling faster card issuance and personalization[45]. - The company aims to diversify its product offerings, including digital solutions, to remain competitive and capitalize on cross-selling opportunities[103]. Supply Chain and Operational Challenges - Approximately 95% of the company's purchased microchips and antennas come from three main suppliers, with 78% sourced from a single supplier[63]. - The company has committed approximately $190 million to a capacity reservation agreement with a chip supplier, with $62 million remaining as of December 31, 2024[64]. - The company has experienced extended production lead times due to labor shortages and supply chain constraints, affecting its ability to meet customer delivery expectations[95]. - Disruptions in the supply chain, including reliance on specific suppliers for critical components, could negatively impact production and customer fulfillment[112]. - The company experienced delays and increased costs during the COVID-19 pandemic, highlighting vulnerabilities in its supply chain[113]. Financial and Regulatory Risks - CPI's substantial indebtedness and covenants may limit its ability to capitalize on business opportunities and impact cash flow management[84]. - The company is subject to various federal and state regulations, including those related to privacy and data security, impacting its operations[68]. - The company may face significant costs related to compliance with evolving data privacy and security laws, which could adversely affect operations and financial results[165]. - The company is subject to PCI Security Standards, and failure to comply could result in loss of eligibility to provide products and services, impacting revenue and profitability[166][168]. - The company may need to raise additional funds in the future, and unfavorable market conditions could limit access to capital, delaying innovation[158]. Environmental, Social, and Governance (ESG) Considerations - The company emphasizes environmental sustainability practices in its operations, aligning with its business model and customer needs[56]. - Stakeholder expectations regarding environmental, social, and governance (ESG) matters may impose additional costs and risks, potentially affecting demand for the company's products[143]. - The company may face challenges in meeting evolving consumer concerns regarding the environmental impact of its products, which could require significant research and development costs[144]. - Future ESG reporting requirements may lead to increased costs for monitoring and compliance, impacting the company's financial condition and operations[146]. - Environmental regulations related to climate change may impose additional costs and liabilities on the company, potentially affecting its financial position and operations[182]. Cybersecurity and Risk Management - The cybersecurity program is based on frameworks established by the National Institute of Standards and Technology (NIST) and focuses on risk management and incident response[205]. - The Security Committee conducts annual cybersecurity risk assessments to prioritize initiatives for enhancing security controls[207]. - The company has implemented third-party risk management controls to mitigate cybersecurity threats associated with service providers[210]. - Regular independent cyber audits are conducted to assess the effectiveness of cybersecurity controls and alignment with industry standards[214]. - The board of directors oversees cybersecurity risk management and receives regular updates on material security risks[215]. Corporate Governance and Ownership - The concentration of ownership by significant stockholders, such as the Tricor Funds, may influence corporate decisions and affect the market price of the company's securities[183]. - The Tricor Funds have the right to designate nominees for the board of directors as long as they own 5% or more of the total shares outstanding[194]. - The company has opted out of Section 203 of the Delaware General Corporation Law, which generally restricts business combinations with stockholders owning 15% or more of voting stock for three years[195]. - The board of directors has the ability to issue preferred stock without stockholder approval, which may hinder changes in control[197]. - Stockholder activism and securities litigation could divert management's attention and resources, potentially hindering the execution of business strategies[191].

Exhibit 99.1 CPI Card Group Inc. Reports Fourth Quarter and Full Year 2024 Results Date: March 4, 2025 Fourth Quarter Net Sales Increased 22% to $125 Million; Net Income Increased 148% to $7 Million; Adjusted EBITDA Increased 10% to $22 Million Full Year Net Sales Increased 8% to $481 Million; Prepaid Debit Net Sales Increased 26% and Exceeded $100 Million Outlook for 2025 Projects Mid-to-high Single-digit Net Sales and Adjusted EBITDA Growth Littleton, CO. March 4, 2025 -- CPI Card Group Inc. (Nasdaq: PMTS ...

| --- | --- | --- | --- | --- | --- | |-------------------------------------------|-------|-------|-------|-------|-------| | | | | | | | | 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]

Financial Performance - Net sales increased 18% year-over-year to $124.8 million in Q3 2024, driven by strong growth in Debit and Credit segments[2] - Net income decreased 66% to $1.3 million, impacted by $8.8 million in pre-tax debt refinancing costs[2] - Adjusted EBITDA increased 18% to $25.1 million, reflecting the positive impact of sales growth[2] - Total net sales for Q3 2024 reached $124.75 million, a 17.8% increase from $105.86 million in Q3 2023[40] - Product sales amounted to $69.65 million in Q3 2024, up from $55.69 million in Q3 2023, reflecting a 25% growth[40] - Service sales increased to $55.10 million in Q3 2024, compared to $50.17 million in Q3 2023, marking a 9.7% rise[40] - Gross profit for Q3 2024 was $44.70 million, a 23.5% increase from $36.15 million in Q3 2023[40] - Income from operations for Q3 2024 was $17.80 million, compared to $12.96 million in Q3 2023, indicating a 37.5% increase[40] - Net income for Q3 2024 was $1.29 million, down from $3.86 million in Q3 2023, reflecting a decrease of 66.6%[40] - Basic earnings per share for Q3 2024 were $0.12, compared to $0.34 in Q3 2023, a decline of 64.7%[40] - The company reported total comprehensive income of $1.29 million for Q3 2024, down from $3.86 million in Q3 2023[40] Segment Performance - Debit and Credit segment net sales rose 19% to $99.8 million, supported by strong contactless card sales[11] - Prepaid Debit segment net sales increased 13% to $25.2 million, indicating strong sales to existing customers[11] - The prepaid debit segment net sales increased by 12.7% to $25,173,000 for the three months ended September 30, 2024, from $22,335,000 in 2023[43] Outlook and Guidance - The company updated its 2024 outlook to mid-to-high single-digit net sales growth and low single-digit Adjusted EBITDA growth[4] - Free Cash Flow outlook for 2024 was adjusted to be slightly below 2023 levels, primarily due to working capital improvements[24] Debt and Financing - CPI completed a debt refinancing, issuing $285 million of new 10% Senior Secured Notes due 2029[9] - The company redeemed $267.9 million of the 8.625% Senior Secured Notes due 2026 in July 2024[55] - Long-term debt increased to $280,152,000 as of September 30, 2024, compared to $264,997,000 at December 31, 2023, reflecting a rise of 5.7%[41] - Total debt increased to $305,096 from $286,003, reflecting a growth of approximately 6.7%[58] - The company experienced a loss on early extinguishment of debt amounting to $8,763,000 for the nine months ended September 30, 2024[42] Cash Flow and Assets - Cash provided by operating activities for the nine months ended September 30, 2024, was $16,652,000, down from $22,266,000 in the same period of 2023[42] - Cash and cash equivalents at the end of the period were $14,650,000, an increase from $12,413,000 at the beginning of the period[42] - Cash and cash equivalents increased to $14,650 from $12,413, marking an increase of about 18.1%[58] - Total assets increased to $342,349,000 as of September 30, 2024, up from $293,683,000 at December 31, 2023, representing a growth of 16.6%[41] Operational Metrics - Operating expenses for Q3 2024 totaled $26.90 million, up from $23.19 million in Q3 2023, representing a 11.7% increase[40] - The company reported a capital deficiency of $105,827,000 as of September 30, 2024, compared to $102,223,000 at December 31, 2023[41] - The company experienced a 26.9% increase in prepaid debit income for the nine months ended September 30, 2024, totaling $22,765 compared to $17,936 in 2023[47] Adjusted Metrics - EBITDA for the three months ended September 30, 2024, was $18,430, up 9.0% from $16,913 in the same period of 2023[53] - Adjusted EBITDA for the three months ended September 30, 2024, was $25,080, reflecting an 18.1% increase compared to $21,238 in the same period of 2023[54] - LTM Adjusted EBITDA for the latest period is $89,843, slightly up from $89,491, showing a marginal increase of 0.4%[57] - The Net Leverage Ratio increased to 3.2 from 3.1, indicating a higher level of debt relative to EBITDA[58] Other Financial Information - Stock-based compensation expense increased to $10,012 from $7,507, reflecting a rise of approximately 33.4%[57] - Subtotal of adjustments to EBITDA rose to $19,807 from $12,185, representing an increase of approximately 62.7%[57] - Loss on debt extinguishment increased to $2,987 from $243, a significant rise of about 1,131.7%[57] - Foreign currency gain remained relatively stable, with a slight change from $(26) to $(28)[57] - Restructuring and other charges showed a change from $(70) to $6,941, indicating a significant shift in expenses[57] Strategic Focus - CPI Card Group is focused on expanding its product offerings and enhancing customer relationships to navigate the evolving payments landscape[34]

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 ...