CPI Card Group Inc. Reports Fourth Quarter and Full Year 2023 Results
- Fourth-quarter net sales, net income, and Adjusted EBITDA declined significantly.
- Full-year net sales, net income, and Adjusted EBITDA also decreased.
- The company projects a gradual market recovery in 2024 with slight increases in net sales and Adjusted EBITDA.
- Significant decreases in financial metrics for both the fourth quarter and full year.
- Cautious customer spending expected to continue in 2024.
- Free Cash Flow for 2024 is expected to be lower due to increased capital spending.
Insights
Examining the reported financial results, a significant decline in net sales and net income is evident, signaling a contraction in CPI Card Group Inc.'s business performance. The 19% reduction in quarterly sales and a substantial 78% drop in net income reflect a tightened spending environment and potentially decreased demand for the company's offerings. The 27% decrease in Adjusted EBITDA, a key indicator of profitability, is also noteworthy. These figures suggest the company's operational efficiency and cost management may be under strain, which could be a concern for investors and stakeholders looking for stable returns and growth prospects.
The company's anticipation of a gradual market recovery in 2024, with projected sales growth, may provide a cautious optimism. However, the expected decrease in Free Cash Flow due to increased capital expenditures indicates a strategic reinvestment into the business, which could either be a potential growth driver or a risk factor depending on the execution and market response. The Free Cash Flow is a critical measure of financial health, as it represents the cash a company is able to generate after accounting for capital expenditures and a decrease might impact the company's ability to service debt, pay dividends, or reinvest in operations.
The Net Leverage Ratio of 3.1x remains relatively stable, suggesting that the company is maintaining its debt levels in proportion to its earnings before interest, taxes, depreciation and amortization. This ratio is important for assessing the company's ability to meet its debt obligations and is often used by creditors and investors to gauge financial stability.
The payments technology sector is highly competitive and subject to rapid changes in consumer behavior and technological advancements. CPI Card Group Inc.'s performance must be contextualized within these industry dynamics. The observed decline in net sales and net income may partly result from the broader market's cautious spending and inventory management, which the company acknowledges. However, it is essential to consider the company's market share and competitive positioning, especially given the mention of eco-focused cards and contactless technology adoption, which are growing trends in the industry.
The company's focus on expanding into adjacent markets and offering digital solutions suggests a strategic pivot that could potentially address the decline in traditional card volumes. This diversification could be a response to the increasing digitization of payments and the company's ability to capture market share in these new areas could be a critical factor for long-term growth. The mention of a compound annual growth rate of 10% for debit and credit cards in circulation is a positive indicator of underlying market demand, which CPI could leverage if they successfully innovate and align with consumer preferences.
From a legal and regulatory perspective, CPI Card Group Inc.'s financial results and strategic decisions must comply with the evolving landscape of financial regulations, especially concerning data security and privacy in the payments industry. The investment in a new state-of-the-art secure card production facility in Indiana is a significant development, likely aimed at enhancing security features and compliance with industry standards. This move could be seen as a proactive approach to mitigate legal risks and build trust with financial institutions and end consumers.
Additionally, the company's share repurchase authorization and the execution of stock buybacks reflect decisions that must adhere to SEC regulations and corporate governance standards. Share repurchases can impact shareholder value and must be carefully balanced with other capital allocation priorities, such as debt repayment and business investment. The legal implications of these financial strategies are crucial for maintaining corporate integrity and shareholder confidence.
Fourth Quarter Sales Affected by Cautious Customer Spending as Expected; Fourth Quarter Net Sales Decreased
Full Year Net Sales Decreased
Company Anticipates Gradual Market Recovery in 2024; Financial Outlook Projects Company to Return to Sales Growth for Full Year
As anticipated, fourth quarter sales were similar to third quarter levels as customers generally remained cautious with spending and continued their focus on managing inventory levels. Net sales decreased
For the full year, net sales decreased
The Company anticipates cautious customer spending will continue into 2024, with the market gradually recovering over the course of the year. The Company’s initial financial outlook for 2024 projects slight increases in both net sales and Adjusted EBITDA.
“Fourth quarter business trends were largely in-line with expectations, as customers continued to prioritize managing inventory levels,” said John Lowe, President and Chief Executive Officer. “We believe card issuance trends to consumers remain healthy and we will continue to focus on gaining market share through innovative solutions and leading customer service and quality.”
Lowe added, “Longer-term, we aim to supplement growth in our current portfolio by expanding into adjacent markets and offering additional products and services, including digital solutions, for our base of thousands of financial institution customers. In 2024, we are investing in these opportunities, as well as in our companywide go-to-market resources.”
Lowe was named President and CEO in January, succeeding Scott Scheirman, who previously announced his intent to retire in early 2024.
“I want to thank Scott for his leadership of the company over the last six years as we delivered a remarkable turnaround and are now positioned as a leader in the
The Company believes long-term growth trends for the
CPI is a top payment solutions provider in the
2023 Business Highlights
- A leading provider of eco-focused payment card solutions in the U.S. market, with more than 100 million eco-focused cards sold since launch in late 2019.
-
A leading provider of Software-as-a-Service-based instant issuance solutions in the
U.S. , with more than 15,000 Card@Once® installations across more than 2,000 financial institutions. -
Strong cash flow generation, with cash provided by operating activities increasing
9% and Free Cash Flow more than doubling from the 2022 levels. -
The Company reduced the outstanding balance on its
8.625% Senior Secured Notes by$17.1 million -
The Company announced a
$20 million $4 million
Fourth Quarter 2023 Financial Highlights
Net sales decreased
-
Debit and Credit segment net sales decreased
22% to$82.1 million -
Prepaid Debit segment net sales decreased
5% to$21.0 million
Fourth quarter gross profit decreased
Fourth quarter income from operations decreased
Full Year 2023 Financial Highlights
Net sales decreased
-
Debit and Credit segment net sales decreased
8% to$361.1 million -
Prepaid Debit segment net sales decreased
2% to$84.2 million
Full year gross profit decreased
Full year income from operations decreased
Balance Sheet, Liquidity and Cash Flow
The Company generated cash from operating activities of
As of December 31, 2023, cash and cash equivalents was
The Company retired
The Company’s capital structure and allocation priorities are to maintain ample liquidity; invest in the business, including strategic acquisitions; deleverage the balance sheet; and return funds to stockholders.
“We were able to significantly improve free cash flow generation in 2023 despite the challenging sales environment,” said Jeff Hochstadt, Chief Financial Officer of CPI. “We enhanced our balance sheet by reducing net debt last year, and plan to allocate capital to repurchase stock and invest in the business for long-term growth in 2024.”
Outlook for 2024
The Company expects cautious customer spending to continue into 2024 before the market recovers over the course of the year, with first quarter sales anticipated to be similar to the 2023 fourth quarter level. The Company projects slight increases in both net sales and Adjusted EBITDA for the full year, with declines in the first half of the year offset by growth in the second half.
Free Cash Flow for 2024 is expected to be
The Company expects its year-end 2024 Net Leverage Ratio to be between 3.0x and 3.5x.
Conference Call and Webcast
CPI Card Group Inc. will hold a conference call on March 7, 2024 at 9:00 a.m. Eastern Time (ET) to review its fourth quarter and full year 2023 results. To participate in the Company's conference call via telephone or online:
International: 646-960-0677
Conference ID: 8062733
Webcast Link: CPI Q4 Webcast or at https://investor.cpicardgroup.com
Participants are advised to login for the webcast 10 minutes prior to the scheduled start time.
A replay of the conference call will be available until March 21, 2024 at:
International: 647-362-9199
Conference ID: 8062733
A webcast replay of the conference call will also be available on CPI Card Group Inc.’s Investor Relations web site: https://investor.cpicardgroup.com
Non-GAAP Financial Measures
In addition to financial results reported in accordance with
Adjusted EBITDA
Adjusted EBITDA is presented on a continuing operations basis and is defined as EBITDA (which represents earnings before interest, taxes, depreciation and amortization) adjusted for litigation; stock-based compensation expense; estimated sales tax expense; restructuring and other charges, including severance and executive retention; loss on debt extinguishment; foreign currency gain or loss; and other items that are unusual in nature, infrequently occurring or not considered part of our core operations, as set forth in the reconciliation in Exhibit E. Adjusted EBITDA is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors, excluding non-operational, unusual or non-recurring losses or gains. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for, analysis of our results as reported under GAAP. For example, Adjusted EBITDA does not reflect: (a) our capital expenditures, future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements for, our working capital needs; (c) the significant interest expenses or the cash requirements necessary to service interest or principal payments on our debt; (d) tax payments that represent a reduction in cash available to us; (e) any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; (f) the impact of earnings or charges resulting from matters that we and the lenders under our credit agreement may not consider indicative of our ongoing operations; or (g) the impact of any discontinued operations. In particular, our definition of Adjusted EBITDA allows us to add back certain non-operating, unusual or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur, vary greatly and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results. In addition, certain of these expenses represent the reduction of cash that could be used for other purposes. Adjusted EBITDA margin percentage as shown in Exhibit E is computed as Adjusted EBITDA divided by total net sales.
We define LTM Adjusted EBITDA as Adjusted EBITDA (defined previously) for the last twelve months. LTM Adjusted EBITDA is used in the computation of Net Leverage Ratio, and is reconciled in Exhibit E.
Free Cash Flow
We define Free Cash Flow as cash flow provided by (used in) operating activities less capital expenditures. We use this metric in analyzing our ability to service and repay our debt. However, this measure does not represent funds available for investment or other discretionary uses since it does not deduct cash used to service our debt. Free Cash Flow should not be considered in isolation, or as a substitute for, cash (used in) provided by operating activities or any other measures of liquidity derived in accordance with GAAP.
Financial Expectations for 2024
We have provided Adjusted EBITDA expectations for 2024 on a non-GAAP basis because certain reconciling items are dependent on future events that either cannot be controlled or cannot be reliably predicted because they are not part of the Company’s routine activities, any of which could be significant.
Net Leverage Ratio
Management and various investors use the ratio of debt principal outstanding, plus finance lease obligations, less cash, divided by LTM Adjusted EBITDA, or “Net Leverage Ratio”, as a measure of our financial strength when making key investment decisions and evaluating us against peers.
About CPI Card Group Inc.
CPI Card Group is a payments technologies company providing a comprehensive range of credit, debit, and prepaid card and digital solutions, including Software-as-a-Service (SaaS) instant issuance. With a focus on building personal relationships and earning trust, we help our customers navigate the constantly evolving world of payments, while delivering innovative solutions that spark connections and support their brands. We serve clients across industry, size, and scale through our team of experienced, dedicated employees and our network of high-security production and card services facilities—located in
Forward-Looking Statements
Certain statements and information in this release (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 of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “believe,” “estimate,” “project,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” “continue,” “committed,” “attempt,” “aim,” “target,” “objective,” “guides,” “seek,” “focus,” “provides guidance,” “provides outlook” or other similar expressions are intended to identify forward-looking statements, which are not historical in nature. These forward-looking statements, including statements about our strategic initiatives and, market opportunities and goals, plans and projections regarding our financial position, including our guidance for the full-year 2024 results, are based on our current expectations and beliefs concerning future developments and their potential effect on us and other information currently available. Such forward-looking statements, because they relate to future events, are by their very nature subject to many important risks and uncertainties that could cause actual results or other events to differ materially from those contemplated.
These risks and uncertainties include, but are not limited to: a deterioration in general economic conditions, including inflationary conditions and resulting in reduced consumer confidence and business spending, and a decline in consumer credit worthiness impacting demand for our products; the unpredictability of our operating results, including an inability to anticipate changes in customer inventory management practices and its impact on our business; a disruption or other failure in our supply chain, including as a result of foreign conflicts and with respect to single source suppliers, or the failure or inability of suppliers to comply with our code of conduct or contractual requirements, or political unrest in countries in which our suppliers operate, or inflationary pressures, resulting in increased costs and inability to pass those costs on to our customers and extended production lead times and difficulty meeting customers’ delivery expectations; our failure to retain our existing customers or identify and attract new customers; our inability to recruit, retain and develop qualified personnel, including key personnel, and implement effective succession processes; adverse conditions in the banking system and financial markets, including the failure of banks and financial institutions; system security risks, data protection breaches and cyber-attacks; interruptions in our operations, including our information technology systems, or in the operations of the third parties that operate computing infrastructure on which we rely; our inability to develop, introduce and commercialize new products and services; the usage, or lack thereof, of artificial intelligence technologies; our substantial indebtedness, including inability to make debt service payments or refinance such indebtedness; the restrictive terms of our indebtedness and covenants of future agreements governing indebtedness and the resulting restraints on our ability to pursue our business strategies; our status as an accelerated filer and complying with the Sarbanes-Oxley Act of 2002 and the costs associated with such compliance and implementation of procedures thereunder; our failure to maintain effective internal control over financial reporting; disruptions in production at one or more of our facilities; problems in production quality, materials and process and costs relating to product defects and any related product liability and/or warranty claims; environmental, social and governance (“ESG”) preferences and demands of various stakeholders and our ability to conform to such preferences and demands and to comply with any related regulatory requirements; the effects of climate change, negative perceptions of our products due to the impact of our products and production processes on the environment and other ESG-related risks; damage to our reputation or brand image; disruptions in production due to weather conditions, climate change, political instability or social unrest; our inability to adequately protect our trade secrets and intellectual property rights from misappropriation, infringement claims brought against us and risks related to open source software; defects in our software and computing systems; our limited ability to raise capital; costs and impacts to our financial results relating to the obligatory collection of sales tax and claims for uncollected sales tax in states that impose sales tax collection requirements on out-of-state businesses or unclaimed property, as well as potential new
We caution and advise readers not to place undue reliance on forward-looking statements, which speak only as of the date hereof. These statements are based on assumptions that may not be realized and involve risks and uncertainties that could cause actual results or other events to differ materially from the expectations and beliefs contained herein. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.
For more information:
CPI encourages investors to use its investor relations website as a way of easily finding information about the Company. CPI promptly makes available on this website the reports that the Company files or furnishes with the SEC, corporate governance information and press releases.
CPI Card Group Inc. Earnings Release Supplemental Financial Information |
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Exhibit A |
Condensed Consolidated Statements of Operations and Comprehensive Income - Unaudited for the three months and full years ended December 31, 2023 and 2022 |
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Exhibit B |
Condensed Consolidated Balance Sheets – Unaudited as of December 31, 2023 and 2022 |
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Exhibit C |
Condensed Consolidated Statements of Cash Flows – Unaudited for the full years ended December 31, 2023 and 2022 |
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Exhibit D |
Segment Summary Information – Unaudited for the three months and full years ended December 31, 2023 and 2022 |
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Exhibit E |
Supplemental GAAP to Non-GAAP Reconciliations – Unaudited for the three months and full years ended December 31, 2023 and 2022 |
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EXHIBIT A |
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CPI Card Group Inc. and Subsidiaries |
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Condensed Consolidated Statements of Operations and Comprehensive Income |
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(in thousands, except share and per share amounts) |
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(Unaudited) |
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Three Months Ended |
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Year Ended |
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December 31, |
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December 31, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net sales: |
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Products |
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$ |
53,929 |
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|
$ |
72,323 |
|
|
$ |
249,354 |
|
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$ |
281,190 |
|
Services |
|
|
48,943 |
|
|
|
54,113 |
|
|
|
195,193 |
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|
194,555 |
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Total net sales |
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102,872 |
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126,436 |
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|
444,547 |
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|
475,745 |
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Cost of sales: |
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|
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Products (exclusive of depreciation and amortization shown below) |
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36,546 |
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|
|
42,166 |
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|
161,374 |
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|
|
171,017 |
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Services (exclusive of depreciation and amortization shown below) |
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28,205 |
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|
|
34,305 |
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|
|
117,397 |
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|
|
119,930 |
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Depreciation and amortization |
|
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2,703 |
|
|
|
2,467 |
|
|
|
10,287 |
|
|
|
9,031 |
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Total cost of sales |
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67,454 |
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|
|
78,938 |
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|
|
289,058 |
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|
|
299,978 |
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Gross profit |
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35,418 |
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|
|
47,498 |
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|
|
155,489 |
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|
175,767 |
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Operating expenses: |
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Selling, general and administrative (exclusive of depreciation and amortization shown below) |
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23,521 |
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23,447 |
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88,255 |
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|
90,782 |
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Depreciation and amortization |
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1,358 |
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|
|
1,401 |
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|
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5,644 |
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|
|
5,855 |
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Total operating expenses |
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24,879 |
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24,848 |
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93,899 |
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96,637 |
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Income from operations |
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10,539 |
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22,650 |
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61,590 |
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79,130 |
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Other expense, net: |
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Interest, net |
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(6,678 |
) |
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(7,282 |
) |
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(26,913 |
) |
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(29,616 |
) |
Other income (expense), net |
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30 |
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107 |
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(215 |
) |
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(367 |
) |
Total other expense, net |
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(6,648 |
) |
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(7,175 |
) |
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(27,128 |
) |
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(29,983 |
) |
Income before income taxes |
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3,891 |
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15,475 |
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34,462 |
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49,147 |
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Income tax expense |
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(1,159 |
) |
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(2,998 |
) |
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(10,477 |
) |
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(12,607 |
) |
Net income |
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$ |
2,732 |
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$ |
12,477 |
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$ |
23,985 |
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$ |
36,540 |
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Basic and diluted earnings per share: |
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Basic earnings per share |
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$ |
0.24 |
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$ |
1.10 |
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$ |
2.10 |
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$ |
3.24 |
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Diluted earnings per share |
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$ |
0.23 |
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$ |
1.06 |
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$ |
2.01 |
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$ |
3.11 |
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Basic weighted-average shares outstanding |
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11,449,379 |
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11,385,843 |
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11,426,124 |
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11,291,202 |
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Diluted weighted-average shares outstanding |
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11,782,476 |
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11,805,520 |
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11,917,556 |
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11,749,105 |
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Comprehensive income: |
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Net income |
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$ |
2,732 |
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$ |
12,477 |
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$ |
23,985 |
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$ |
36,540 |
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Total comprehensive income |
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$ |
2,732 |
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$ |
12,477 |
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$ |
23,985 |
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$ |
36,540 |
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EXHIBIT B |
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CPI Card Group Inc. and Subsidiaries |
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Condensed Consolidated Balance Sheets |
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(in thousands, except share and per share amounts) |
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(Unaudited) |
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December 31, |
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2023 |
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2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
12,413 |
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$ |
11,037 |
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Accounts receivable, net |
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73,724 |
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80,583 |
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Inventories, net |
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70,594 |
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68,399 |
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Prepaid expenses and other current assets |
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8,647 |
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7,551 |
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Total current assets |
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165,378 |
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167,570 |
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Plant, equipment, leasehold improvements and operating lease right-of-use assets, net |
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63,053 |
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57,178 |
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Intangible assets, net |
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14,122 |
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17,988 |
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Goodwill |
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47,150 |
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47,150 |
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Other assets |
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3,980 |
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6,780 |
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Total assets |
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$ |
293,683 |
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$ |
296,666 |
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Liabilities and stockholders’ deficit |
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Current liabilities: |
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Accounts payable |
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$ |
12,802 |
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$ |
24,371 |
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Accrued expenses |
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35,803 |
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40,070 |
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Deferred revenue and customer deposits |
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840 |
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3,571 |
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Total current liabilities |
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49,445 |
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68,012 |
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Long-term debt |
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264,997 |
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285,522 |
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Deferred income taxes |
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7,139 |
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6,808 |
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Other long-term liabilities |
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24,038 |
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|
18,401 |
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Total liabilities |
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345,619 |
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378,743 |
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Commitments and contingencies |
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Series A Preferred Stock; |
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— |
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— |
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Stockholders’ deficit: |
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Common stock; |
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11 |
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|
11 |
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Capital deficiency |
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(102,223 |
) |
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(108,379 |
) |
Accumulated earnings |
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50,276 |
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26,291 |
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Total stockholders’ deficit |
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(51,936 |
) |
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(82,077 |
) |
Total liabilities and stockholders’ deficit |
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$ |
293,683 |
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$ |
296,666 |
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EXHIBIT C |
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CPI Card Group Inc. and Subsidiaries |
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Condensed Consolidated Statements of Cash Flows |
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(in thousands) |
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(Unaudited) |
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Year Ended |
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December 31, |
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2023 |
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2022 |
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Operating activities |
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Net income |
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$ |
23,985 |
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$ |
36,540 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation expense |
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12,065 |
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|
|
11,020 |
|
Amortization expense |
|
|
3,866 |
|
|
|
3,866 |
|
Stock-based compensation expense |
|
|
7,507 |
|
|
|
3,479 |
|
Amortization of debt issuance costs and debt discount |
|
|
1,855 |
|
|
|
1,931 |
|
Loss on debt extinguishment |
|
|
243 |
|
|
|
474 |
|
Deferred income taxes |
|
|
331 |
|
|
|
1,555 |
|
Other, net |
|
|
(655 |
) |
|
|
1,094 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
6,795 |
|
|
|
(19,745 |
) |
Inventories |
|
|
(1,638 |
) |
|
|
(10,702 |
) |
Prepaid expenses and other assets |
|
|
2,346 |
|
|
|
(2,700 |
) |
Income taxes, net |
|
|
(1,162 |
) |
|
|
362 |
|
Accounts payable |
|
|
(11,260 |
) |
|
|
(453 |
) |
Accrued expenses and other liabilities |
|
|
(7,506 |
) |
|
|
2,226 |
|
Deferred revenue and customer deposits |
|
|
(2,731 |
) |
|
|
2,389 |
|
Cash provided by operating activities |
|
|
34,041 |
|
|
|
31,336 |
|
Investing activities |
|
|
|
|
|
|
||
Capital expenditures for plant, equipment and leasehold improvements, net |
|
|
(6,405 |
) |
|
|
(17,867 |
) |
Other |
|
|
183 |
|
|
|
95 |
|
Cash used in investing activities |
|
|
(6,222 |
) |
|
|
(17,772 |
) |
Financing activities |
|
|
|
|
|
|
||
Principal payments on Senior Notes |
|
|
(16,954 |
) |
|
|
(24,938 |
) |
Principal payments on ABL Revolver |
|
|
(18,000 |
) |
|
|
(30,000 |
) |
Proceeds from ABL Revolver |
|
|
13,000 |
|
|
|
35,000 |
|
Payments on debt extinguishment and other |
|
|
(368 |
) |
|
|
(1,939 |
) |
Proceeds from finance lease financing |
|
|
— |
|
|
|
2,074 |
|
Payments on finance lease obligations |
|
|
(3,871 |
) |
|
|
(3,360 |
) |
Common stock repurchased |
|
|
(250 |
) |
|
|
— |
|
Cash used in financing activities |
|
|
(26,443 |
) |
|
|
(23,163 |
) |
Effect of exchange rates on cash |
|
|
— |
|
|
|
(47 |
) |
Net increase (decrease) in cash and cash equivalents |
|
|
1,376 |
|
|
|
(9,646 |
) |
Cash and cash equivalents, beginning of period |
|
|
11,037 |
|
|
|
20,683 |
|
Cash and cash equivalents, end of period |
|
$ |
12,413 |
|
|
$ |
11,037 |
|
Supplemental disclosures of cash flow information |
|
|
|
|
|
|
||
Cash paid (refunded) during the period for: |
|
|
|
|
|
|
||
Interest |
|
$ |
25,738 |
|
|
$ |
27,714 |
|
Income taxes paid |
|
$ |
10,462 |
|
|
$ |
12,584 |
|
Income taxes refunded |
|
$ |
(86 |
) |
|
$ |
(451 |
) |
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
||
Operating leases |
|
$ |
3,091 |
|
|
$ |
816 |
|
Financing leases |
|
$ |
11,285 |
|
|
$ |
9,124 |
|
Accounts payable and accrued expenses for capital expenditures for plant, equipment and leasehold improvements |
|
$ |
102 |
|
|
$ |
462 |
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT D | ||||
CPI Card Group Inc. and Subsidiaries |
|||||||||||||||
Segment Summary Information |
|||||||||||||||
For the Three Months and Year Ended December 31, 2023 and 2022 |
|||||||||||||||
(dollars in thousands) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended December 31, |
|||||||||||||
|
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
|||||||
Net sales by segment: |
|
|
|
|
|
|
|
|
|
|
|
||||
Debit and Credit |
|
$ |
82,098 |
|
|
$ |
104,851 |
|
|
$ |
(22,753 |
) |
|
(21.7 |
)% |
Prepaid Debit |
|
|
20,951 |
|
|
|
22,126 |
|
|
|
(1,175 |
) |
|
(5.3 |
)% |
Eliminations |
|
|
(177 |
) |
|
|
(541 |
) |
|
|
364 |
|
|
*% |
% |
Total |
|
$ |
102,872 |
|
|
$ |
126,436 |
|
|
$ |
(23,564 |
) |
|
(18.6 |
)% |
*Calculation not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Year Ended December 31, |
|||||||||||||
|
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
|||||||
Net sales by segment: |
|
|
|
|
|
|
|
|
|
|
|
||||
Debit and Credit |
|
$ |
361,057 |
|
|
$ |
390,559 |
|
|
$ |
(29,502 |
) |
|
(7.6 |
)% |
Prepaid Debit |
|
|
84,237 |
|
|
|
86,136 |
|
|
|
(1,899 |
) |
|
(2.2 |
)% |
Eliminations |
|
|
(747 |
) |
|
|
(950 |
) |
|
|
203 |
|
|
* |
% |
Total |
|
$ |
444,547 |
|
|
$ |
475,745 |
|
|
$ |
(31,198 |
) |
|
(6.6 |
)% |
Gross Profit |
|
|
||||||||||||||||
|
|
Three Months Ended December 31, |
||||||||||||||||
|
|
2023 |
|
|
% of Net
|
|
2022 |
|
% of Net
|
|
$ Change |
|
% Change |
|||||
Gross profit by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Debit and Credit |
|
$ |
27,173 |
|
|
33.1 |
% |
$ |
39,825 |
|
38.0 |
% |
$ |
(12,652 |
) |
|
(31.8 |
)% |
Prepaid Debit |
|
|
8,245 |
|
|
39.4 |
% |
|
7,673 |
|
34.7 |
% |
|
572 |
|
|
7.5 |
% |
Total |
|
$ |
35,418 |
|
|
34.4 |
% |
$ |
47,498 |
|
37.6 |
% |
$ |
(12,080 |
) |
|
(25.4 |
)% |
|
||||||||||||||||||
|
|
Year Ended December 31, |
||||||||||||||||
|
|
2023 |
|
|
% of Net
|
|
2022 |
|
% of Net
|
|
$ Change |
|
% Change |
|||||
Gross profit by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Debit and Credit |
|
$ |
126,776 |
|
|
35.1 |
% |
$ |
144,214 |
|
36.9 |
% |
$ |
(17,438 |
) |
|
(12.1 |
)% |
Prepaid Debit |
|
|
28,713 |
|
|
34.1 |
% |
|
31,553 |
|
36.6 |
% |
|
(2,840 |
) |
|
(9.0 |
)% |
Total |
|
$ |
155,489 |
|
|
35.0 |
% |
$ |
175,767 |
|
36.9 |
% |
$ |
(20,278 |
) |
|
(11.5 |
)% |
Income from Operations |
|
|
||||||||||||||||||
|
|
Three Months Ended December 31, |
||||||||||||||||||
|
|
2023 |
|
|
% of Net
|
|
2022 |
|
% of Net
|
|
|
$ Change |
|
% Change |
||||||
Income (loss) from operations by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Debit and Credit |
|
$ |
19,008 |
|
|
|
23.2 |
% |
$ |
31,198 |
|
|
29.8 |
% |
$ |
(12,190 |
) |
|
(39.1 |
)% |
Prepaid Debit |
|
|
6,991 |
|
|
|
33.4 |
% |
|
5,184 |
|
|
23.4 |
% |
|
1,807 |
|
|
34.9 |
% |
Other |
|
|
(15,460 |
) |
|
|
* |
% |
|
(13,732 |
) |
|
* |
% |
|
(1,728 |
) |
|
(12.6 |
)% |
Total |
|
$ |
10,539 |
|
|
|
10.2 |
% |
$ |
22,650 |
|
|
17.9 |
% |
$ |
(12,111 |
) |
|
(53.5 |
)% |
|
|
Year Ended December 31, |
||||||||||||||||||
|
|
2023 |
|
|
% of Net
|
|
2022 |
|
% of Net
|
|
|
$ Change |
|
% Change |
||||||
Income (loss) from operations by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Debit and Credit |
|
$ |
94,906 |
|
|
|
26.3 |
% |
$ |
110,045 |
|
|
28.2 |
% |
$ |
(15,139 |
) |
|
(13.8 |
)% |
Prepaid Debit |
|
|
24,927 |
|
|
|
29.6 |
% |
|
25,577 |
|
|
29.7 |
% |
|
(650 |
) |
|
(2.5 |
)% |
Other |
|
|
(58,243 |
) |
|
|
* |
% |
|
(56,492 |
) |
|
* |
% |
|
(1,751 |
) |
|
(3.1 |
)% |
Total |
|
$ |
61,590 |
|
|
|
13.9 |
% |
$ |
79,130 |
|
|
16.6 |
% |
$ |
(17,540 |
) |
|
(22.2 |
)% |
EBITDA |
|
|
||||||||||||||||||
|
|
Three Months Ended December 31, |
||||||||||||||||||
|
|
2023 |
|
|
% of Net
|
|
2022 |
|
% of Net
|
|
$ Change |
|
% Change |
|||||||
EBITDA by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Debit and Credit |
|
$ |
21,227 |
|
|
|
25.9 |
% |
$ |
33,436 |
|
|
31.9 |
% |
$ |
(12,209 |
) |
|
(36.5 |
)% |
Prepaid Debit |
|
|
7,848 |
|
|
|
37.5 |
% |
|
5,743 |
|
|
26.0 |
% |
|
2,105 |
|
|
36.7 |
% |
Other |
|
|
(14,445 |
) |
|
|
* |
% |
|
(12,554 |
) |
|
* |
% |
|
(1,891 |
) |
|
(15.1 |
)% |
Total |
|
$ |
14,630 |
|
|
|
14.2 |
% |
$ |
26,625 |
|
|
21.1 |
% |
$ |
(11,995 |
) |
|
(45.1 |
)% |
|
|
Year Ended December 31, |
||||||||||||||||||
|
|
2023 |
|
|
% of Net
|
|
2022 |
|
% of Net
|
|
$ Change |
|
% Change |
|||||||
EBITDA by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Debit and Credit |
|
$ |
103,960 |
|
|
|
28.8 |
% |
$ |
118,478 |
|
|
30.3 |
% |
$ |
(14,518 |
) |
|
(12.3 |
)% |
Prepaid Debit |
|
|
27,786 |
|
|
|
33.0 |
% |
|
27,844 |
|
|
32.3 |
% |
|
(58 |
) |
|
(0.2 |
)% |
Other |
|
|
(54,440 |
) |
|
|
* |
% |
|
(52,673 |
) |
|
* |
% |
|
(1,767 |
) |
|
(3.4 |
)% |
Total |
|
$ |
77,306 |
|
|
|
17.4 |
% |
$ |
93,649 |
|
|
19.7 |
% |
$ |
(16,343 |
) |
|
(17.5 |
)% |
Reconciliation of Income (Loss) from |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operations by Segment to EBITDA by Segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended December 31, 2023 |
||||||||||||||
|
|
Debit and Credit |
|
Prepaid Debit |
|
Other |
|
Total |
||||||||
EBITDA by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from operations |
|
$ |
19,008 |
|
|
$ |
6,991 |
|
|
$ |
(15,460 |
) |
|
$ |
10,539 |
|
Depreciation and amortization |
|
|
2,189 |
|
|
|
857 |
|
|
|
1,015 |
|
|
|
4,061 |
|
Other income (expenses) |
|
|
30 |
|
|
|
— |
|
|
|
— |
|
|
|
30 |
|
EBITDA |
|
$ |
21,227 |
|
|
$ |
7,848 |
|
|
$ |
(14,445 |
) |
|
$ |
14,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended December 31, 2022 |
||||||||||||||
|
|
Debit and Credit |
|
Prepaid Debit |
|
Other |
|
Total |
||||||||
EBITDA by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from operations |
|
$ |
31,198 |
|
|
$ |
5,184 |
|
|
$ |
(13,732 |
) |
|
$ |
22,650 |
|
Depreciation and amortization |
|
|
2,238 |
|
|
|
599 |
|
|
|
1,031 |
|
|
|
3,868 |
|
Other income (expenses) |
|
|
— |
|
|
|
(40 |
) |
|
|
147 |
|
|
|
107 |
|
EBITDA |
|
$ |
33,436 |
|
|
$ |
5,743 |
|
|
$ |
(12,554 |
) |
|
$ |
26,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Year Ended December 31, 2023 |
||||||||||||||
|
|
Debit and Credit |
|
Prepaid Debit |
|
Other |
|
Total |
||||||||
EBITDA by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from operations |
|
$ |
94,906 |
|
|
$ |
24,927 |
|
|
$ |
(58,243 |
) |
|
$ |
61,590 |
|
Depreciation and amortization |
|
|
9,025 |
|
|
|
2,860 |
|
|
|
4,046 |
|
|
|
15,931 |
|
Other income (expenses) |
|
|
29 |
|
|
|
(1 |
) |
|
|
(243 |
) |
|
|
(215 |
) |
EBITDA |
|
$ |
103,960 |
|
|
$ |
27,786 |
|
|
$ |
(54,440 |
) |
|
$ |
77,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Year Ended December 31, 2022 |
||||||||||||||
|
|
Debit and Credit |
|
Prepaid Debit |
|
Other |
|
Total |
||||||||
EBITDA by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from operations |
|
$ |
110,045 |
|
|
$ |
25,577 |
|
|
$ |
(56,492 |
) |
|
$ |
79,130 |
|
Depreciation and amortization |
|
|
8,440 |
|
|
|
2,310 |
|
|
|
4,136 |
|
|
|
14,886 |
|
Other income (expenses) |
|
|
(7 |
) |
|
|
(43 |
) |
|
|
(317 |
) |
|
|
(367 |
) |
EBITDA |
|
$ |
118,478 |
|
|
$ |
27,844 |
|
|
$ |
(52,673 |
) |
|
$ |
93,649 |
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT E |
||||||
CPI Card Group Inc. and Subsidiaries |
||||||||||||||||
Supplemental GAAP to Non-GAAP Reconciliation |
||||||||||||||||
(dollars in thousands) |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended |
|
Year Ended |
||||||||||||
|
|
December 31, |
|
December 31, |
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
EBITDA and Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
2,732 |
|
|
$ |
12,477 |
|
|
$ |
23,985 |
|
|
$ |
36,540 |
|
Interest, net |
|
|
6,678 |
|
|
|
7,282 |
|
|
|
26,913 |
|
|
|
29,616 |
|
Income tax expense |
|
|
1,159 |
|
|
|
2,998 |
|
|
|
10,477 |
|
|
|
12,607 |
|
Depreciation and amortization |
|
|
4,061 |
|
|
|
3,868 |
|
|
|
15,931 |
|
|
|
14,886 |
|
EBITDA |
|
$ |
14,630 |
|
|
$ |
26,625 |
|
|
$ |
77,306 |
|
|
$ |
93,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjustments to EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation expense |
|
|
3,076 |
|
|
|
551 |
|
|
|
7,507 |
|
|
|
3,479 |
|
Sales tax (benefit) expense (1) |
|
|
(105 |
) |
|
|
(56 |
) |
|
|
(70 |
) |
|
|
18 |
|
Restructuring and other charges (2) |
|
|
2,302 |
|
|
|
— |
|
|
|
4,531 |
|
|
|
— |
|
Loss on debt extinguishment (3) |
|
|
— |
|
|
|
79 |
|
|
|
243 |
|
|
|
474 |
|
Foreign currency (gain) loss |
|
|
(28 |
) |
|
|
4 |
|
|
|
(26 |
) |
|
|
83 |
|
Subtotal of adjustments to EBITDA |
|
|
5,245 |
|
|
|
578 |
|
|
|
12,185 |
|
|
|
4,054 |
|
Adjusted EBITDA |
|
$ |
19,875 |
|
|
$ |
27,203 |
|
|
$ |
89,491 |
|
|
$ |
97,703 |
|
Net income margin (% of Net sales) |
|
|
2.7 |
% |
|
|
9.9 |
% |
|
|
5.4 |
% |
|
|
7.7 |
% |
Net income growth (% Change 2023 vs. 2022) |
|
|
(78.1 |
)% |
|
|
|
|
|
(34.4 |
)% |
|
|
|
||
Adjusted EBITDA margin (% of Net sales) |
|
|
19.3 |
% |
|
|
21.5 |
% |
|
|
20.1 |
% |
|
|
20.5 |
% |
Adjusted EBITDA growth (% Change 2023 vs. 2022) |
|
|
(26.9 |
)% |
|
|
|
|
|
(8.4 |
)% |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended |
|
Year Ended |
||||||||||||
|
|
December 31, |
|
December 31, |
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Free Cash Flow: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash provided by operating activities |
|
$ |
11,775 |
|
|
$ |
19,623 |
|
|
$ |
34,041 |
|
|
$ |
31,336 |
|
Capital expenditures for plant, equipment and leasehold improvements, net |
|
|
(329 |
) |
|
|
(3,427 |
) |
|
|
(6,405 |
) |
|
|
(17,867 |
) |
Free cash flow |
|
$ |
11,446 |
|
|
$ |
16,196 |
|
|
$ |
27,636 |
|
|
$ |
13,469 |
|
| ________________________________ | ||
(1) |
Represents estimated sales tax (benefit) expense relating to a contingent liability due to historical activity in certain states where it is probable that the Company will be subject to sales tax plus interest and penalties. |
|
(2) |
The 2023 amount represents accrued executive retention to be paid in 2024 and costs related to production facility modernization efforts. |
|
(3) |
The Company redeemed a portion of the |
|
|
As of |
||||||
|
December 31, |
||||||
|
2023 |
|
2022 |
||||
Calculation of Net Leverage Ratio: |
|
|
|
|
|
||
Senior Notes |
$ |
267,897 |
|
|
$ |
285,000 |
|
ABL revolver |
|
— |
|
|
|
5,000 |
|
Finance lease obligations |
|
18,106 |
|
|
|
10,697 |
|
Total debt |
|
286,003 |
|
|
|
300,697 |
|
Less: Cash and cash equivalents |
|
(12,413 |
) |
|
|
(11,037 |
) |
Total net debt (a) |
$ |
273,590 |
|
|
$ |
289,660 |
|
LTM Adjusted EBITDA (b) |
$ |
89,491 |
|
|
$ |
97,703 |
|
Net Leverage Ratio (a)/(b) |
|
3.1 |
|
|
|
3.0 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240307370173/en/
CPI Card Group Inc. Investor Relations:
(877) 369-9016
InvestorRelations@cpicardgroup.com
CPI Card Group Inc. Media Relations:
Media@cpicardgroup.com
Source: CPI Card Group
FAQ
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