CPI Card Group Inc 10-Q for FY2023 Q1

CPI Card Group Inc. (PMTS)

10-Q 2023-05-09 For: 2023-03-31

Added on April 10, 2026

About this 10-Q

CPI Card Group Inc filed this 10-Q on May 9, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $120.85M; up 8.5% from $111.42M a year earlier
Net income: $10.87M; up 81.2% from net income of $6M a year earlier
Diluted EPS: $0.91; up 78.4% from $0.51 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		16

Item 3 — Quantitative and Qualitative Disclosures About Market Risk		24

Item 4 — Controls and Procedures		24

Part II — Other Information

Item 1 — Legal Proceedings		25

Item 1A — Risk Factors		25

Item 6 — Exhibits		27

Signatures		28


	March 31,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	14,157	$	11,037
Accounts receivable, net		76,231		80,583
Inventories, net		69,715		68,399
Prepaid expenses and other current assets		8,229		7,551
Total current assets		168,332		167,570
Plant, equipment, leasehold improvements and operating lease right-of-use assets, net of accumulated depreciation of $64,580 and $61,922, respectively		60,215		57,178
Intangible assets, net of accumulated amortization of $48,864 and $47,897, respectively		17,021		17,988
Goodwill		47,150		47,150
Other assets		5,490		6,780
Total assets	$	298,208	$	296,666
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	25,915	$	24,371
Accrued expenses		29,430		40,070
Deferred revenue and customer deposits		2,115		3,571
Total current liabilities		57,460		68,012
Long-term debt		285,984		285,522
Deferred income taxes		6,537		6,808
Other long-term liabilities		18,959		18,401
Total liabilities		368,940		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 March 31, 2023 and December 31, 2022		—		—
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000 shares authorized; 11,424,628 and 11,390,355 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		11		11
Capital deficiency		(107,907)		(108,379)
Accumulated earnings		37,164		26,291
Total stockholders’ deficit		(70,732)		(82,077)
Total liabilities and stockholders’ deficit	$	298,208	$	296,666


	Three Months Ended March 31,
	2023		2022
Net sales:
Products	$	75,790	$	68,316
Services		45,062		43,108
Total net sales		120,852		111,424
Cost of sales:
Products (exclusive of depreciation and amortization shown below)		45,980		43,094
Services (exclusive of depreciation and amortization shown below)		29,404		26,857
Depreciation and amortization		2,374		2,195
Total cost of sales		77,758		72,146
Gross profit		43,094		39,278
Operating expenses:
Selling, general and administrative (exclusive of depreciation and amortization shown below)		21,066		19,882
Depreciation and amortization		1,430		1,415
Total operating expenses		22,496		21,297
Income from operations		20,598		17,981
Other expense, net:
Interest, net		(6,781)		(7,865)
Other expense, net		(114)		(396)
Total other expense, net		(6,895)		(8,261)
Income before income taxes		13,703		9,720
Income tax expense		(2,830)		(3,718)
Net income	$	10,873	$	6,002

Basic and diluted earnings per share:
Basic earnings per share	$	0.95	$	0.53
Diluted earnings per share	$	0.91	$	0.51

Basic weighted-average shares outstanding		11,394,919		11,255,466
Diluted weighted-average shares outstanding		11,901,581		11,717,849

Comprehensive income:
Net income	$	10,873	$	6,002
Total comprehensive income	$	10,873	$	6,002



	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	34,273		—		(69)		—		(69)
Stock-based compensation			—		541		—		541
Components of comprehensive income:
Net income			—		—		10,873		10,873
March 31, 2023	11,424,628	$	11	$	(107,907)	$	37,164	$	(70,732)



	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	—		—		—		—		—
Stock-based compensation			—		961		—		961
Components of comprehensive income:
Net income			—		—		6,002		6,002
March 31, 2022	11,255,466	$	11	$	(109,821)	$	(4,247)	$	(114,057)


	Three Months Ended March 31, 2023
	Products		Services		Total

	(dollars in thousands)
Debit and Credit	$	76,032	$	25,953	$	101,985
Prepaid Debit		—		19,130		19,130
Intersegment eliminations		(242)		(21)		(263)
Total	$	75,790	$	45,062	$	120,852

	Three Months Ended March 31, 2022
	Products		Services		Total

	(dollars in thousands)
Debit and Credit	$	68,348	$	23,667	$	92,015
Prepaid Debit		—		19,461		19,461
Intersegment eliminations		(32)		(20)		(52)
Total	$	68,316	$	43,108	$	111,424


	Carrying		Estimated
	Value as of		Fair Value as of		Fair Value Measurement at March 31, 2023
	March 31,		March 31,		(Using Fair Value Hierarchy)
	2023		2023		Level 1		Level 2		Level 3

	(dollars in thousands)
Liabilities:
Senior Notes	$	277,000	$	272,499	$	—	$	272,499	$	—
ABL Revolver	$	13,000	$	13,000	$	—	$	13,000	$	—


	Interest		March 31,		December 31,
	Rate ⁽¹⁾		2023		2022

			(dollars in thousands)
Senior Notes	8.625	%	$	277,000	$	285,000
ABL Revolver	6.387	%		13,000		5,000
Unamortized deferred financing costs				(4,016)		(4,478)
Total long-term debt				285,984		285,522
Less current maturities				—		—
Long-term debt, net of current maturities			$	285,984	$	285,522


	Three Months Ended March 31, 2023
	Debit and Credit		Prepaid Debit		Other		Intersegment Eliminations		Total

	(dollars in thousands)
Net sales	$	101,985	$	19,130	$	—	$	(263)	$	120,852
Cost of sales		63,801		14,220		—		(263)		77,758
Gross profit		38,184		4,910		—		—		43,094
Operating expenses		8,158		1,233		13,105		—		22,496
Income from operations	$	30,026	$	3,677	$	(13,105)	$	—	$	20,598

EBITDA by segment:
Income from operations	$	30,026	$	3,677	$	(13,105)	$	—	$	20,598
Depreciation and amortization		2,161		624		1,019		—		3,804
Other income (expenses)		5		—		(119)		—		(114)
EBITDA	$	32,192	$	4,301	$	(12,205)	$	—	$	24,288


	Three Months Ended March 31, 2022
	Debit and Credit		Prepaid Debit		Other		Intersegment Eliminations		Total

	(dollars in thousands)
Net sales	$	92,015	$	19,461	$	—	$	(52)	$	111,424
Cost of sales		59,785		12,413		—		(52)		72,146
Gross profit		32,230		7,048		—		—		39,278
Operating expenses		8,120		1,080		12,097		—		21,297
Income from operations	$	24,110	$	5,968	$	(12,097)	$	—	$	17,981

EBITDA by segment:
Income from operations	$	24,110	$	5,968	$	(12,097)	$	—	$	17,981
Depreciation and amortization		1,980		598		1,032		—		3,610
Other income (expenses)		4		(2)		(398)		—		(396)
EBITDA	$	26,094	$	6,564	$	(11,463)	$	—	$	21,195


	Three Months Ended
	March 31,
	2023		2022		$ Change		% Change

	(dollars in thousands)
Net sales: ⁽¹⁾
Products	$	75,790	$	68,316	$	7,474	10.9	%
Services		45,062		43,108		1,954	4.5	%
Total net sales		120,852		111,424		9,428	8.5	%
Cost of sales ⁽¹⁾		77,758		72,146		5,612	7.8	%
Gross profit		43,094		39,278		3,816	9.7	%
Operating expenses		22,496		21,297		1,199	5.6	%
Income from operations		20,598		17,981		2,617	14.6	%
Other expense, net:
Interest, net		(6,781)		(7,865)		1,084	(13.8)	%
Other expense, net		(114)		(396)		282	(71.2)	%
Income before taxes		13,703		9,720		3,983	41.0	%
Income tax expense		(2,830)		(3,718)		888	(23.9)	%
Net income	$	10,873	$	6,002	$	4,871	81.2	%

Gross profit margin		35.7%		35.3%

Exhibit Number		Exhibit Description
10.1		Offer Letter, dated May 3, 2023 by and between CPI Card Group Inc. and Jeffrey Hochstadt.
10.2		Form of Nonqualified Stock Option Agreement by and between CPI Card Group Inc. and Lane Dubin.
10.3		Form of Restricted Stock Unit Agreement by and between CPI Card Group Inc. and Lane Dubin.
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.
May 9, 2023	/s/ Scott Scheirman
	Scott Scheirman
	Chief Executive Officer
	(Principal Executive Officer)

May 9, 2023	/s/ Amintore Schenkel
	Amintore Schenkel
	Chief Financial Officer
	(Principal Financial Officer)


May 9, 2023	/s/ Donna Abbey
	Donna Abbey
	Chief Accounting Officer
	(Principal Accounting Officer)


	Three Months Ended March 31,
	2023		2022
Operating activities
Net income	$	10,873	$	6,002
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense		2,837		2,643
Amortization expense		967		967
Stock-based compensation expense		541		961
Amortization of debt issuance costs and debt discount		473		486
Loss on debt extinguishment		119		395
Deferred income taxes		(271)		642
Other, net		12		768
Changes in operating assets and liabilities:
Accounts receivable		4,335		(10,300)
Inventories		(1,464)		(12,579)
Prepaid expenses and other assets		310		(2,057)
Income taxes, net		550		932
Accounts payable		1,533		4,173
Accrued expenses and other liabilities		(11,358)		(8,310)
Deferred revenue and customer deposits		(1,456)		(684)
Cash provided by (used in) operating activities		8,001		(15,961)
Investing activities
Capital expenditures for plant, equipment and leasehold improvements		(4,145)		(3,154)
Other		50		5
Cash used in investing activities		(4,095)		(3,149)
Financing activities
Principal payments on Senior Notes		(7,903)		(20,000)
Proceeds from ABL Revolver		8,000		30,000
Payments on debt extinguishment and other		(69)		(862)
Proceeds from finance lease financing		—		2,074
Payments on finance lease obligations		(820)		(649)
Cash (used in) provided by financing activities		(792)		10,563
Effect of exchange rates on cash		6		—
Net increase (decrease) in cash and cash equivalents		3,120		(8,547)
Cash and cash equivalents, beginning of period		11,037		20,683
Cash and cash equivalents, end of period	$	14,157	$	12,136
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	12,608	$	13,553


		March 31,		December 31,
		2023		2022

	(dollars in thousands)
Trade accounts receivable	$	64,910	$	68,886
Unbilled accounts receivable		11,556		11,915
		76,466		80,801
Less allowance		(235)		(218)
	$	76,231	$	80,583


		March 31,		December 31,
		2023		2022

	(dollars in thousands)
Raw materials	$	63,739	$	61,434
Finished goods		9,459		10,300
Inventory reserve		(3,483)		(3,335)
	$	69,715	$	68,399


		March 31,		December 31,
		2023		2022

	(dollars in thousands)
Machinery and equipment	$	68,575	$	64,786
Machinery and equipment under financing leases		16,733		15,717
Furniture, fixtures and computer equipment		3,005		3,072
Leasehold improvements		15,032		14,703
Construction in progress		3,764		3,304
Operating lease right-of-use assets		17,686		17,518
		124,795		119,100
Less accumulated depreciation and amortization		(64,580)		(61,922)
	$	60,215	$	57,178

Title:	Chief Financial Officer
Hiring Manager:	Scott Scheirman, President & CEO
Salary:	Your base salary paid bi-weekly in this position will be $15,384.
	This amount annualized equals $400,000 per year.
Tentative Start Date:	May 4, 2023, and assuming CFO role on May 15, 2023

CPI CARD GROUP INC.

By:	Amintore Schenkel, Chief Financial Officer

Signature:

PARTICIPANT

Name:		Lane Dubin

Signature:


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