CPI Card Group Inc 10-Q for FY2022 Q1

CPI Card Group Inc. (PMTS)

10-Q 2022-05-05 For: 2022-03-31

Added on April 10, 2026

About this 10-Q

CPI Card Group Inc filed this 10-Q on May 5, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $111.42M; up 25.1% from $89.09M a year earlier
Net income: $6M; up 149.0% from net income of $2.41M a year earlier
Diluted EPS: $0.51; up 142.9% from $0.21 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		21

Item 3 — Quantitative and Qualitative Disclosures About Market Risk		31

Item 4 — Controls and Procedures		31


Part II — Other Information

Item 1 — Legal Proceedings		32

Item 1A — Risk Factors		32

Item 6 — Exhibits		33

Signatures		34


	March 31,		December 31,
	2022		2021

Assets
Current assets:
Cash and cash equivalents	$	12,136	$	20,683
Accounts receivable, net of allowances of $162 and $86, respectively		71,177		60,953
Inventories		70,516		58,009
Prepaid expenses and other current assets		6,166		5,522
Income taxes receivable		-		534
Total current assets		159,995		145,701
Plant, equipment, leasehold improvements and operating lease right-of-use assets, net		49,963		47,251
Intangible assets, net		20,887		21,854
Goodwill		47,150		47,150
Other assets		7,740		6,184
Total assets	$	285,735	$	268,140
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	30,384	$	26,443
Accrued expenses		29,672		37,150
Deferred revenue and customer deposits		498		1,182
Total current liabilities		60,554		64,775
Long-term debt		314,388		303,626
Deferred income taxes		5,895		5,253
Other long-term liabilities		18,955		15,506
Total liabilities		399,792		389,160
Commitments and contingencies (Note 14)
Series A Preferred Stock; $0.001 par value—100,000 shares authorized; 0 shares issued and outstanding at March 31, 2022 and December 31, 2021		—		—
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000 shares authorized; 11,255,466 shares issued and outstanding at March 31, 2022 and December 31, 2021		11		11
Capital deficiency		(109,821)		(110,782)
Accumulated loss		(4,247)		(10,249)
Total stockholders’ deficit		(114,057)		(121,020)
Total liabilities and stockholders’ deficit	$	285,735	$	268,140


	Three Months Ended March 31,
	2022		2021
Net sales:
Products	$	68,316	$	47,013
Services		43,108		42,079
Total net sales		111,424		89,092
Cost of sales:
Products (exclusive of depreciation and amortization shown below)		43,094		27,287
Services (exclusive of depreciation and amortization shown below)		26,857		23,668
Depreciation and amortization		2,195		2,416
Total cost of sales		72,146		53,371
Gross profit		39,278		35,721
Operating expenses:
Selling, general and administrative (exclusive of depreciation and amortization shown below)		19,882		16,146
Depreciation and amortization		1,415		1,806
Total operating expenses		21,297		17,952
Income from operations		17,981		17,769
Other expense, net:
Interest, net		(7,865)		(8,976)
Other income (expense), net		(1)		25
Loss on debt extinguishment		(395)		(5,048)
Total other expense, net		(8,261)		(13,999)
Income before income taxes		9,720		3,770
Income tax expense		(3,718)		(1,360)
Net income	$	6,002	$	2,410

Basic and diluted earnings per share:
Basic earnings per share:	$	0.53	$	0.21
Diluted earnings per share:	$	0.51	$	0.21

Basic weighted-average shares outstanding:		11,255,466		11,230,482
Diluted weighted-average shares outstanding:		11,717,849		11,639,015

Comprehensive income:
Net income	$	6,002	$	2,410
Total comprehensive income	$	6,002	$	2,410


	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings (loss)		Total
December 31, 2021	11,255,466	$	11	$	(110,782)	$	(10,249)	$	(121,020)
Stock-based compensation			—		961		—		961
Stock option exercises			—		—		—		—
Components of comprehensive income:
Net income			—		—		6,002		6,002
March 31, 2022	11,255,466	$	11	$	(109,821)	$	(4,247)	$	(114,057)


	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings (loss)		Total
December 31, 2020	11,230,482	$	11	$	(111,858)	$	(26,190)	$	(138,037)
Stock-based compensation			—		51		—		51
Components of comprehensive income:
Net income			—		—		2,410		2,410
March 31, 2021	11,230,482	$	11	$	(111,807)	$	(23,780)	$	(135,576)


	Three Months Ended March 31, 2022
	Products		Services		Total
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


	Three Months Ended March 31, 2021
	Products		Services		Total
Debit and Credit	$	47,179	$	22,638	$	69,817
Prepaid Debit		—		19,458		19,458
Intersegment eliminations		(166)		(17)		(183)
Total	$	47,013	$	42,079	$	89,092


	March 31, 2022		December 31, 2021

Trade accounts receivable	$	59,487	$	50,042
Unbilled accounts receivable		11,852		10,997
		71,339		61,039
Less allowance for doubtful accounts		(162)		(86)
	$	71,177	$	60,953


	March 31, 2022		December 31, 2021

Raw materials	$	66,522	$	54,254
Finished goods		7,090		6,778
Inventory reserve		(3,096)		(3,023)
	$	70,516	$	58,009


	March 31, 2022		December 31, 2021

Machinery and equipment	$	65,916	$	64,051
Machinery and equipment under financing leases		12,630		9,088
Furniture, fixtures and computer equipment		5,641		4,570
Leasehold improvements		14,456		14,142
Construction in progress		3,421		5,268
		102,064		97,119
Less accumulated depreciation and amortization		(64,517)		(61,937)
Operating lease right-of-use assets, net of accumulated amortization		12,416		12,069
	$	49,963	$	47,251


		March 31, 2022						December 31, 2021
	Weighted Average			Accumulated		Net Book				Accumulated		Net Book
	Life (Years)	Cost		Amortization		Value		Cost		Amortization		Value

Customer relationships	17.2	$	55,454	$	(36,238)	$	19,216	$	55,454	$	(35,419)	$	20,035
Technology and software	8		7,101		(6,617)		484		7,101		(6,567)		534
Trademarks	8.7		3,330		(2,143)		1,187		3,330		(2,045)		1,285
Intangible assets subject to amortization		$	65,885	$	(44,998)	$	20,887	$	65,885	$	(44,031)	$	21,854


2022 (excluding the three months ended March 31, 2022)	$	2,899
2023		3,867
2024		3,630
2025		3,440
2026		2,471
Thereafter		4,580
	$	20,887


	Carrying		Estimated
	Value as of		Fair Value as of		Fair Value Measurement at March 31, 2022
	March 31,		March 31,		(Using Fair Value Hierarchy)
	2022		2022		Level 1		Level 2		Level 3
Liabilities:
Senior Notes	$	290,000	$	280,575	$	—	$	280,575	$	—
ABL Revolver	$	30,000	$	30,000	$	—	$	30,000	$	—


	March 31, 2022		December 31, 2021

Accrued payroll and related employee expenses	$	8,157	$	7,558
Accrued employee performance bonus		2,005		6,900
Employer payroll tax, including social security deferral		1,607		1,910
Accrued rebates		1,993		1,423
Estimated sales tax liability		1,004		1,019
Accrued Interest		1,219		7,955
Operating and financing lease liability (current portion)		5,072		4,114
Other		8,615		6,271
Total accrued expenses	$	29,672	$	37,150


		Operating		Financing
		Lease		Leases

2022 (excluding the three months ended March 31, 2022)	$	2,400	$	2,603
2022		3,164		2,502
2023		2,896		1,705
2024		2,090		1,414
2025		1,958		446
Thereafter		3,654		40
Total lease payments		16,162		8,710
Less imputed interest		(3,229)		(888)
Total	$	12,933	$	7,822


	March 31,
	2022		2021
Tax at federal statutory rate	21.0	%	21.0	%
State taxes, net	8.9		11.8
Valuation allowance	6.3		—
Permanent items	1.7		3.9
Other	0.3		(0.6)
Effective income tax rate	38.2	%	36.1	%


				Weighted-
		Weighted-		Average
		Average		Remaining
		Exercise		Contractual Term
	Options	Price		(in Years)
Outstanding as of December 31, 2021	778,835	$	18.02	5.59
Granted	10,888		14.32	6.91
Exercised	—		—	—
Forfeited	(3,870)		29.62	—
Outstanding as of March 31, 2022	785,853	$	17.91	5.36
Options vested and exercisable as of March 31, 2022	651,478	$	15.76	5.12
Options vested and expected to vest as of March 31, 2022	785,853	$	17.91	5.36


		Weighted-Average
	Options	Grant-Date Fair Value

Unvested as of December 31, 2021	127,357	$	17.42
Granted	10,888		8.49
Forfeited	(3,870)		17.43
Unvested as of March 31, 2022	134,375	$	16.70



	Three Months Ended		Three Months Ended
	March 31, 2022		March 31, 2021
Operating lease costs	$	716	$	509
Variable lease costs		139		164
Short-term operating lease costs		-		172
Total expense from operating leases	$	855	$	845

Finance lease cost:
Right-of-use amortization expense		390		293
Interest on lease liabilities		90		106
Total financing lease costs	$	480	$	399



	March 31, 2022		December 31, 2021
Operating leases
Operating lease right-of-use assets, net of amortization	$	12,416	$	12,069

Operating lease liability (current)	$	2,249	$	1,857
Long-term operating liability		10,684		10,703
Total operating lease liabilities	$	12,933	$	12,560

Financing leases
Property, equipment and leasehold improvements	$	12,630	$	9,088
Accumulated depreciation		(2,864)		(2,451)
Total financing leases in property, equipment and leasehold improvements, net	$	9,766	$	6,637

Financing lease liability (current)	$	2,822	$	2,257
Long-term financing liability		5,000		2,668
Total financing lease liabilities	$	7,822	$	4,925


	Interest		March 31,		December 31,
	Rate		2022		2021
Senior Notes	8.625	%	$	290,000	$	310,000
ABL Revolver	2.060	%		30,000		—
Unamortized deferred financing costs				(5,612)		(6,374)
Total long-term debt				314,388		303,626
Less current maturities				—		—
Long-term debt, net of current maturities			$	314,388	$	303,626


	Three Months Ended
	March 31, 2022
Expected term in years ⁽¹⁾	4.25
Volatility ⁽²⁾	77.44	%
Risk-free interest rate ⁽³⁾	1.91	%
Dividend yield ⁽⁴⁾	—	%


	Net Sales
	Three Months Ended March 31,
	2022		2021
Debit and Credit	$	92,015	$	69,817
Prepaid Debit		19,461		19,458
Intersegment eliminations		(52)		(183)
Total	$	111,424	$	89,092


	EBITDA
	Three Months Ended March 31,
	2022		2021
Debit and Credit	$	26,094	$	22,400
Prepaid Debit		6,564		7,573
Other		(11,463)		(13,005)
Total	$	21,195	$	16,968


	Three Months Ended March 31,
			% of 2022				% of 2021
	2022		Net Sales		2021		Net Sales		$ Change		% Change

	(dollars in thousands)
Gross profit by segment:
Debit and Credit	$	32,230	35.0	%	$	27,549	39.5	%	$	4,681	17.0	%
Prepaid Debit		7,048	36.2	%		8,172	42.0	%		(1,124)	(13.8)	%
Total	$	39,278	35.3	%	$	35,721	40.1	%	$	3,557	10.0	%

Exhibit Number		Exhibit Description
10.1		Form of 2022 Executive Short-Term Incentive Plan
10.2		Form of 2022 Employee Short-Term Incentive Plan
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 5, 2022	/s/ Amintore Schenkel
	Amintore Schenkel
	Chief Financial Officer
	(Principal Financial Officer)


	CPI CARD GROUP INC.

	By:
	Name:	Sonya Vollmer
	Its:	Chief Human Resources Officer


1. Payable if Quarterly Threshold Performance Metric Achieved:	50% of the Applicable Portion of the Participant’s Target Quarterly Performance Incentive
2. Payable if Quarterly Target Performance Metric Achieved:	100% of the Applicable Portion of the Participant’s Target Quarterly Performance Incentive
3. Payable if Quarterly Maximum Performance Metric Achieved:	200% of the Applicable Portion of the Participant’s Target¹ Quarterly Performance Incentive
4. Payable if Cumulative Quarterly Threshold Performance Metric Achieved:	50% of the Applicable Portion of the Participant’s aggregate Target Quarterly Performance Incentive through the end of the Applicable Performance Period
5. Payable if Cumulative Quarterly Target Performance Metric Achieved:	100% of the Applicable Portion of the Participant’s aggregate Target Quarterly Performance Incentive through the end of the Applicable Performance Period
6. Payable if Cumulative Quarterly Maximum Performance Metric Achieved:	200% of the Applicable Portion of the Participant’s aggregate Target Quarterly Performance Incentive through the end of the Applicable Performance Period²
7. Payable if Annual Threshold Performance Metric Achieved:	50% of the Applicable Portion of the Participant’s Target Annual Performance Incentive
8. Payable if Annual Target Performance Metric Achieved:	100% of the Applicable Portion of the Participant’s Target Annual Performance Incentive
9. Payable if Annual Maximum Performance Metric Achieved:	200% of the Applicable Portion of the Participant’s Target Annual Performance Incentive
10. Portion of Applicable Portion Payable if Achievement is Between Performance Metrics:	Calculated on the basis of straight-line interpolation

Performance Period:	First Performance Period	Second Performance Period	Third Performance Period	Fourth Performance Period	Annual Performance Period
Quarterly Threshold Performance Goal	18,000,000	17,680,000	18,270,000	15,400,000	N/A
Quarterly Target Performance Goal	21,180,000	20,800,000	21,490,000	18,120,000	N/A
Quarterly Maximum Performance Goal	23,300,000	22,880,000	23,640,000	19,930,000	N/A
Annual Threshold Performance Goal³	N/A	N/A	N/A	N/A	69,350,000
Annual Target Performance Goal	N/A	N/A	N/A	N/A	81,590,000
Annual Maximum Performance Goal	N/A	N/A	N/A	N/A	89,750,000
Cumulative Quarterly Threshold Performance Goal	N/A	35,680,000	53,950,000	69,350,000	N/A
Cumulative Quarterly Target Performance Goal	N/A	41,980,000	63,470,000	81,590,000	N/A
Cumulative Quarterly Maximum Performance Goal	N/A	46,180,000	69,820,000	89,750,000	N/A


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