CPI Card Group Inc 10-Q for FY2023 Q2

CPI Card Group Inc. (PMTS)

10-Q 2023-08-08 For: 2023-06-30

Added on April 10, 2026

About this 10-Q

CPI Card Group Inc filed this 10-Q on August 8, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $114.96M; up 1.5% from $113.31M a year earlier
Net income: $6.52M; up 6.0% from net income of $6.15M a year earlier
Diluted EPS: $0.55; up 5.8% from $0.52 a year earlier

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Delaware		26-0344657
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

10368 W. Centennial Road
Littleton, CO		80127
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	PMTS	Nasdaq Global Market



Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

		Emerging growth company	☐


		Page
Part I — Financial Information

Item 1 — Financial Statements (Unaudited)		3

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations		18

Item 3 — Quantitative and Qualitative Disclosures About Market Risk		27

Item 4 — Controls and Procedures		27

Part II — Other Information

Item 1 — Legal Proceedings		28

Item 1A — Risk Factors		28

Item 6 — Exhibits		29

Signatures		30


	June 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	11,168	$	11,037
Accounts receivable, net		75,291		80,583
Inventories, net		75,241		68,399
Prepaid expenses and other current assets		8,353		7,551
Total current assets		170,053		167,570
Plant, equipment, leasehold improvements and operating lease right-of-use assets, net of accumulated depreciation of $67,023 and $61,922, respectively		58,941		57,178
Intangible assets, net of accumulated amortization of $49,831 and $47,897, respectively		16,054		17,988
Goodwill		47,150		47,150
Other assets		7,871		6,780
Total assets	$	300,069	$	296,666
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	22,570	$	24,371
Accrued expenses		30,500		40,070
Deferred revenue and customer deposits		727		3,571
Total current liabilities		53,797		68,012
Long-term debt		284,416		285,522
Deferred income taxes		7,234		6,808
Other long-term liabilities		17,592		18,401
Total liabilities		363,039		378,743
Commitments and contingencies (Note 11)
Series A Preferred Stock; $0.001 par value—100,000 shares authorized; 0 shares issued and outstanding at June 30, 2023 and December 31, 2022		—		—
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000 shares authorized; 11,430,245 and 11,390,355 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		11		11
Capital deficiency		(106,668)		(108,379)
Accumulated earnings		43,687		26,291
Total stockholders’ deficit		(62,970)		(82,077)
Total liabilities and stockholders’ deficit	$	300,069	$	296,666


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net sales:
Products	$	63,946	$	68,945	$	139,736	$	137,261
Services		51,014		44,363		96,076		87,471
Total net sales		114,960		113,308		235,812		224,732
Cost of sales:
Products (exclusive of depreciation and amortization shown below)		41,308		43,055		87,288		86,149
Services (exclusive of depreciation and amortization shown below)		30,214		27,578		59,618		54,435
Depreciation and amortization		2,613		2,124		4,987		4,319
Total cost of sales		74,135		72,757		151,893		144,903
Gross profit		40,825		40,551		83,919		79,829
Operating expenses:
Selling, general and administrative (exclusive of depreciation and amortization shown below)		21,885		24,050		42,951		43,932
Depreciation and amortization		1,448		1,447		2,878		2,862
Total operating expenses		23,333		25,497		45,829		46,794
Income from operations		17,492		15,054		38,090		33,035
Other expense, net:
Interest, net		(6,740)		(7,146)		(13,521)		(15,011)
Other expense, net		(78)		(15)		(192)		(411)
Total other expense, net		(6,818)		(7,161)		(13,713)		(15,422)
Income before income taxes		10,674		7,893		24,377		17,613
Income tax expense		(4,151)		(1,742)		(6,981)		(5,460)
Net income	$	6,523	$	6,151	$	17,396	$	12,153

Basic and diluted earnings per share:
Basic earnings per share	$	0.57	$	0.55	$	1.52	$	1.08
Diluted earnings per share	$	0.55	$	0.52	$	1.46	$	1.04

Basic weighted-average shares outstanding		11,427,404		11,257,733		11,411,162		11,256,600
Diluted weighted-average shares outstanding		11,876,568		11,721,744		11,888,219		11,718,836

Comprehensive income:
Net income	$	6,523	$	6,151	$	17,396	$	12,153
Total comprehensive income	$	6,523	$	6,151	$	17,396	$	12,153


	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings		Total
March 31, 2023	11,424,628	$	11	$	(107,907)	$	37,164	$	(70,732)
Shares issued under stock-based compensation plans	5,617		—		(51)		—		(51)
Stock-based compensation			—		1,290		—		1,290
Components of comprehensive income:
Net income			—		—		6,523		6,523
June 30, 2023	11,430,245	$	11	$	(106,668)	$	43,687	$	(62,970)


	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings		Total
December 31, 2022	11,390,355	$	11	$	(108,379)	$	26,291	$	(82,077)
Shares issued under stock-based compensation plans	39,890		—		(120)		—		(120)
Stock-based compensation			—		1,831		—		1,831
Components of comprehensive income:
Net income			—		—		17,396		17,396
June 30, 2023	11,430,245	$	11	$	(106,668)	$	43,687	$	(62,970)


	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings (loss)		Total
March 31, 2022	11,255,466	$	11	$	(109,821)	$	(4,247)	$	(114,057)
Shares issued under stock-based compensation plans	7,222		—		(60)		—		(60)
Stock-based compensation			—		1,001		—		1,001
Components of comprehensive income:
Net income			—		—		6,151		6,151
June 30, 2022	11,262,688	$	11	$	(108,880)	$	1,904	$	(106,965)


	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings (loss)		Total
December 31, 2021	11,255,466	$	11	$	(110,782)	$	(10,249)	$	(121,020)
Shares issued under stock-based compensation plans	7,222		—		(60)		—		(60)
Stock-based compensation			—		1,962		—		1,962
Components of comprehensive income:
Net income			—		—		12,153		12,153
June 30, 2022	11,262,688	$	11	$	(108,880)	$	1,904	$	(106,965)


	Three Months Ended June 30, 2023
	Products		Services		Total

	(dollars in thousands)
Debit and Credit	$	64,001	$	29,193	$	93,194
Prepaid Debit		—		21,821		21,821
Intersegment eliminations		(55)		—		(55)
Total	$	63,946	$	51,014	$	114,960

	Six Months Ended June 30, 2023
	Products		Services		Total

	(dollars in thousands)
Debit and Credit	$	140,033	$	55,146	$	195,179
Prepaid Debit		—		40,951		40,951
Intersegment eliminations		(297)		(21)		(318)
Total	$	139,736	$	96,076	$	235,812

	Three Months Ended June 30, 2022
	Products		Services		Total

	(dollars in thousands)
Debit and Credit	$	69,031	$	25,150	$	94,181
Prepaid Debit		—		19,214		19,214
Intersegment eliminations		(86)		(1)		(87)
Total	$	68,945	$	44,363	$	113,308

	Six Months Ended June 30, 2022
	Products		Services		Total

	(dollars in thousands)
Debit and Credit	$	137,379	$	48,817	$	186,196
Prepaid Debit		—		38,675		38,675
Intersegment eliminations		(118)		(21)		(139)
Total	$	137,261	$	87,471	$	224,732


	Carrying		Estimated
	Value as of		Fair Value as of		Fair Value Measurement at June 30, 2023
	June 30,		June 30,		(Using Fair Value Hierarchy)
	2023		2023		Level 1		Level 2		Level 3

	(dollars in thousands)
Liabilities:
Senior Notes	$	270,000	$	259,835	$	—	$	259,835	$	—
ABL Revolver	$	18,000	$	18,000	$	—	$	18,000	$	—


	Interest		June 30,		December 31,
	Rate ⁽¹⁾		2023		2022

			(dollars in thousands)
Senior Notes	8.625	%	$	270,000	$	285,000
ABL Revolver	6.461	%		18,000		5,000
Unamortized deferred financing costs				(3,584)		(4,478)
Total long-term debt				284,416		285,522
Less current maturities				—		—
Long-term debt, net of current maturities			$	284,416	$	285,522


	Three Months Ended June 30, 2023
	Debit and Credit		Prepaid Debit		Other		Intersegment Eliminations		Total

	(dollars in thousands)
Net sales	$	93,194	$	21,821	$	—	$	(55)	$	114,960
Cost of sales		60,156		14,034		—		(55)		74,135
Gross profit		33,038		7,787		—		—		40,825
Operating expenses		7,957		159		15,217		—		23,333
Income (loss) from operations	$	25,081	$	7,628	$	(15,217)	$	—	$	17,492

EBITDA by segment:
Income (loss) from operations	$	25,081	$	7,628	$	(15,217)	$	—	$	17,492
Depreciation and amortization		2,353		704		1,004		—		4,061
Other income (expenses)		21		1		(100)		—		(78)
EBITDA	$	27,455	$	8,333	$	(14,313)	$	—	$	21,475


	Six Months Ended June 30, 2023
	Debit and Credit		Prepaid Debit		Other		Intersegment Eliminations		Total

	(dollars in thousands)
Net sales	$	195,179	$	40,951	$	—	$	(318)	$	235,812
Cost of sales		123,957		28,254		—		(318)		151,893
Gross profit		71,222		12,697		—		—		83,919
Operating expenses		16,115		1,392		28,322		—		45,829
Income (loss) from operations	$	55,107	$	11,305	$	(28,322)	$	—	$	38,090

EBITDA by segment:
Income (loss) from operations	$	55,107	$	11,305	$	(28,322)	$	—	$	38,090
Depreciation and amortization		4,514		1,328		2,023		—		7,865
Other income (expenses)		26		1		(219)		—		(192)
EBITDA	$	59,647	$	12,634	$	(26,518)	$	—	$	45,763


	Three Months Ended June 30, 2022
	Debit and Credit		Prepaid Debit		Other		Intersegment Eliminations		Total

	(dollars in thousands)
Net sales	$	94,181	$	19,214	$	—	$	(87)	$	113,308
Cost of sales		60,093		12,751		—		(87)		72,757
Gross profit		34,088		6,463		—		—		40,551
Operating expenses		8,769		1,147		15,581		—		25,497
Income (loss) from operations	$	25,319	$	5,316	$	(15,581)	$	—	$	15,054

EBITDA by segment:
Income (loss) from operations	$	25,319	$	5,316	$	(15,581)	$	—	$	15,054
Depreciation and amortization		1,950		584		1,037		—		3,571
Other income (expenses)		4		(1)		(18)		—		(15)
EBITDA	$	27,273	$	5,899	$	(14,562)	$	—	$	18,610


	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change

	(dollars in thousands)
Net sales: ⁽¹⁾
Products	$	63,946	$	68,945	$	(4,999)	(7.3)	%	$	139,736	$	137,261	$	2,475	1.8	%
Services		51,014		44,363		6,651	15.0	%		96,076		87,471		8,605	9.8	%
Total net sales		114,960		113,308		1,652	1.5	%		235,812		224,732		11,080	4.9	%
Cost of sales ⁽¹⁾		74,135		72,757		1,378	1.9	%		151,893		144,903		6,990	4.8	%
Gross profit		40,825		40,551		274	0.7	%		83,919		79,829		4,090	5.1	%
Operating expenses		23,333		25,497		(2,164)	(8.5)	%		45,829		46,794		(965)	(2.1)	%
Income from operations		17,492		15,054		2,438	16.2	%		38,090		33,035		5,055	15.3	%
Other expense, net:
Interest, net		(6,740)		(7,146)		406	(5.7)	%		(13,521)		(15,011)		1,490	(9.9)	%
Other expense, net		(78)		(15)		(63)	*			(192)		(411)		219	(53.3)	%
Income before taxes		10,674		7,893		2,781	35.2	%		24,377		17,613		6,764	38.4	%
Income tax expense		(4,151)		(1,742)		(2,409)	138.3	%		(6,981)		(5,460)		(1,521)	27.9	%
Net income	$	6,523	$	6,151	$	372	6.0	%	$	17,396	$	12,153	$	5,243	43.1	%

Gross profit margin		35.5%		35.8%						35.6%		35.5%

Exhibit Number		Exhibit Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).



	CPI CARD GROUP INC.
August 8, 2023	/s/ Scott Scheirman
	Scott Scheirman
	Chief Executive Officer
	(Principal Executive Officer)

August 8, 2023	/s/ Jeffrey Hochstadt
	Jeffrey Hochstadt
	Chief Financial Officer
	(Principal Financial Officer)


August 8, 2023	/s/ Donna Abbey
	Donna Abbey
	Chief Accounting Officer
	(Principal Accounting Officer)


	Six Months Ended June 30,
	2023		2022
Operating activities
Net income	$	17,396	$	12,153
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense		5,931		5,248
Amortization expense		1,934		1,933
Stock-based compensation expense		1,831		1,962
Amortization of debt issuance costs and debt discount		936		967
Loss on debt extinguishment		218		395
Deferred income taxes		426		305
Other, net		253		788
Changes in operating assets and liabilities:
Accounts receivable		5,287		(12,280)
Inventories		(7,351)		(17,853)
Prepaid expenses and other assets		(1,381)		(409)
Income taxes, net		(772)		256
Accounts payable		(1,758)		1,690
Accrued expenses and other liabilities		(9,784)		(2,955)
Deferred revenue and customer deposits		(2,844)		(348)
Cash provided by (used in) operating activities		10,322		(8,148)
Investing activities
Capital expenditures for plant, equipment and leasehold improvements		(6,594)		(8,179)
Other		128		15
Cash used in investing activities		(6,466)		(8,164)
Financing activities
Principal payments on Senior Notes		(14,877)		(20,000)
Principal payments on ABL Revolver		—		(10,000)
Proceeds from ABL Revolver		13,000		35,000
Payments on debt extinguishment and other		(120)		(922)
Proceeds from finance lease financing		—		2,074
Payments on finance lease obligations		(1,739)		(1,435)
Cash (used in) provided by financing activities		(3,736)		4,717
Effect of exchange rates on cash		11		(37)
Net increase (decrease) in cash and cash equivalents		131		(11,632)
Cash and cash equivalents, beginning of period		11,037		20,683
Cash and cash equivalents, end of period	$	11,168	$	9,051
Supplemental disclosures of cash flow information
Cash paid (refunded) during the period for:


		June 30,		December 31,
		2023		2022

	(dollars in thousands)
Trade accounts receivable	$	66,139	$	68,886
Unbilled accounts receivable		9,375		11,915
		75,514		80,801
Less allowance		(223)		(218)
	$	75,291	$	80,583


		June 30,		December 31,
		2023		2022

	(dollars in thousands)
Raw materials	$	68,511	$	61,434
Finished goods		10,574		10,300
Inventory reserve		(3,844)		(3,335)
	$	75,241	$	68,399


		June 30,		December 31,
		2023		2022

	(dollars in thousands)
Machinery and equipment	$	73,038	$	64,786
Machinery and equipment under financing leases		16,384		15,717
Furniture, fixtures and computer equipment		2,892		3,072
Leasehold improvements		15,249		14,703
Construction in progress		1,164		3,304
Operating lease right-of-use assets		17,237		17,518
		125,964		119,100
Less accumulated depreciation and amortization		(67,023)		(61,922)
	$	58,941	$	57,178


	/s/ Scott Scheirman
	Scott Scheirman
	President and Chief Executive Officer
	(Principal Executive Officer)