CPI Card Group Inc 10-Q for FY2022 Q2

CPI Card Group Inc. (PMTS)

10-Q 2022-08-08 For: 2022-06-30

Added on April 10, 2026

About this 10-Q

CPI Card Group Inc filed this 10-Q on August 8, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).

Headline figures

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $113.31M; up 21.6% from $93.22M a year earlier
Net income: $6.15M; down 1.3% from net income of $6.23M a year earlier
Diluted EPS: $0.52; down 1.9% from $0.53 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		22

Item 3 — Quantitative and Qualitative Disclosures About Market Risk		34

Item 4 — Controls and Procedures		35

Part II — Other Information

Item 1 — Legal Proceedings		36

Item 1A — Risk Factors		36

Item 6 — Exhibits		37

Signatures		38


	June 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	9,051	$	20,683
Accounts receivable, net of allowances of $162 and $86, respectively		73,157		60,953
Inventories		75,797		58,009
Prepaid expenses and other current assets		5,070		5,522
Income taxes receivable		278		534
Total current assets		163,353		145,701
Plant, equipment, leasehold improvements and operating lease right-of-use assets, net		52,203		47,251
Intangible assets, net		19,921		21,854
Goodwill		47,150		47,150
Other assets		7,057		6,184
Total assets	$	289,684	$	268,140
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	28,815	$	26,443
Accrued expenses		34,288		37,150
Deferred revenue and customer deposits		834		1,182
Total current liabilities		63,937		64,775
Long-term debt		309,739		303,626
Deferred income taxes		5,558		5,253
Other long-term liabilities		17,415		15,506
Total liabilities		396,649		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 June 30, 2022 and December 31, 2021		—		—
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000 shares authorized; 11,262,688 and 11,255,466 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		11		11
Capital deficiency		(108,880)		(110,782)
Accumulated earnings (loss)		1,904		(10,249)
Total stockholders’ deficit		(106,965)		(121,020)
Total liabilities and stockholders’ deficit	$	289,684	$	268,140


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales:
Products	$	68,945	$	47,156	$	137,261	$	94,169
Services		44,363		46,063		87,471		88,142
Total net sales		113,308		93,219		224,732		182,311
Cost of sales:
Products (exclusive of depreciation and amortization shown below)		43,055		27,928		86,149		55,215
Services (exclusive of depreciation and amortization shown below)		27,578		25,939		54,435		49,607
Depreciation and amortization		2,124		2,264		4,319		4,680
Total cost of sales		72,757		56,131		144,903		109,502
Gross profit		40,551		37,088		79,829		72,809
Operating expenses:
Selling, general and administrative (exclusive of depreciation and amortization shown below)		24,050		19,748		43,932		35,894
Depreciation and amortization		1,447		1,553		2,862		3,359
Total operating expenses		25,497		21,301		46,794		39,253
Income from operations		15,054		15,787		33,035		33,556
Other expense, net:
Interest, net		(7,146)		(7,037)		(15,011)		(16,013)
Other (expense) income, net		(15)		4		(16)		29
Loss on debt extinguishment		—		—		(395)		(5,048)
Total other expense, net		(7,161)		(7,033)		(15,422)		(21,032)
Income before income taxes		7,893		8,754		17,613		12,524
Income tax expense		(1,742)		(2,522)		(5,460)		(3,882)
Net income	$	6,151	$	6,232	$	12,153	$	8,642

Basic and diluted earnings per share:
Basic earnings per share	$	0.55	$	0.55	$	1.08	$	0.77
Diluted earnings per share	$	0.52	$	0.53	$	1.04	$	0.74

Basic weighted-average shares outstanding		11,257,733		11,233,002		11,256,600		11,231,742
Diluted weighted-average shares outstanding		11,721,744		11,762,481		11,718,836		11,720,148

Comprehensive income:
Net income	$	6,151	$	6,232	$	12,153	$	8,642
Total comprehensive income	$	6,151	$	6,232	$	12,153	$	8,642


	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings (loss)		Total
March 31, 2022	11,255,466	$	11	$	(109,821)	$	(4,247)	$	(114,057)
Stock-based compensation	—		—		1,001		—		1,001
Stock option exercises	7,222		—		(60)		—		(60)
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)
Stock-based compensation	—		—		1,962		—		1,962
Stock option exercises	7,222		—		(60)		—		(60)
Components of comprehensive income:
Net income	—		—		—		12,153		12,153
June 30, 2022	11,262,688	$	11	$	(108,880)	$	1,904	$	(106,965)


	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings (loss)		Total
March 31, 2021	11,230,482	$	11	$	(111,807)	$	(23,780)	$	(135,576)
Stock-based compensation	—		—		47		—		47
Stock option exercises	6,574		—		34		—		34
Components of comprehensive income:
Net income	—		—		—		6,232		6,232
June 30, 2021	11,237,056	$	11	$	(111,726)	$	(17,548)	$	(129,263)


	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	—		—		98		—		98
Stock option exercises	6,574		—		34		—		34
Components of comprehensive income:
Net income	—		—		—		8,642		8,642
June 30, 2021	11,237,056	$	11	$	(111,726)	$	(17,548)	$	(129,263)


	Three Months Ended June 30, 2022
	Products		Services		Total
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
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

	Three Months Ended June 30, 2021
	Products		Services		Total
Debit and Credit	$	47,180	$	25,680	$	72,860
Prepaid Debit		—		20,383		20,383
Intersegment eliminations		(24)		—		(24)
Total	$	47,156	$	46,063	$	93,219

	Six Months Ended June 30, 2021
	Products		Services		Total
Debit and Credit	$	94,359		48,318	$	142,677
Prepaid Debit		—		39,841		39,841
Intersegment eliminations		(190)		(17)		(207)
Total	$	94,169	$	88,142	$	182,311


2022 (excluding the six months ended June 30, 2022)	$	1,933
2023		3,867
2024		3,630
2025		3,440
2026		2,471
Thereafter		4,580
	$	19,921


	Carrying		Estimated
	Value as of		Fair Value as of		Fair Value Measurement at June 30, 2022
	June 30,		June 30,		(Using Fair Value Hierarchy)
	2022		2022		Level 1		Level 2		Level 3
Liabilities:
Senior Notes	$	290,000	$	273,371	$	—	$	273,371	$	—
ABL Revolver	$	25,000	$	25,000	$	—	$	25,000	$	—



	Three Months Ended		Three Months Ended
	June 30, 2022		June 30, 2021
Operating lease costs	$	783	$	532
Variable lease costs		147		165
Short-term operating lease costs		—		122
Total expense from operating leases	$	930	$	819

Finance lease costs:
Right-of-use amortization expense	$	394	$	309
Interest on lease liabilities		128		99
Total financing lease costs	$	522	$	408


	Six Months Ended		Six Months Ended
	June 30, 2022		June 30, 2021
Operating lease costs	$	1,499	$	1,041
Variable lease costs		286		329
Short-term operating lease costs		—		294
Total expense from operating leases	$	1,785	$	1,664

Finance lease costs:
Right-of-use amortization expense	$	784	$	602
Interest on lease liabilities		218		205
Total financing lease costs	$	1,002	$	807


		Operating		Financing
		Leases		Leases
2022 (excluding the six months ended June 30, 2022)	$	1,576	$	1,696
2023		3,164		2,381
2024		2,896		1,583
2025		2,090		1,292
2026		1,958		318
Thereafter		3,657		41
Total lease payments		15,341		7,311
Less imputed interest		(2,977)		(739)
Total	$	12,364	$	6,572


	Interest		June 30,		December 31,
	Rate		2022		2021
Senior Notes	8.625	%	$	290,000	$	310,000
ABL Revolver⁽¹⁾	2.997	%		25,000		—
Unamortized deferred financing costs				(5,261)		(6,374)
Total long-term debt				309,739		303,626
Less current maturities				—		—
Long-term debt, net of current maturities			$	309,739	$	303,626


				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	30,452		14.42	6.80
Exercised	(14,075)		4.04	—
Expired	(1,320)		21.75	—
Forfeited	(6,460)		29.62	—
Outstanding as of June 30, 2022	787,432	$	18.03	5.15
Options vested and exercisable as of June 30, 2022	636,083	$	16.00	4.86
Options vested and expected to vest as of June 30, 2022	787,432	$	18.03	5.15


		Weighted-Average
	Options	Grant-Date Fair Value

Unvested as of December 31, 2021	127,357	$	17.42
Granted	30,452		8.62
Forfeited	(6,460)		17.43
Unvested as of June 30, 2022	151,349	$	15.65


		June 30,		December 31,
		2022		2021
Trade accounts receivable	$	62,284	$	50,042
Unbilled accounts receivable		11,035		10,997
		73,319		61,039
Less allowance for doubtful accounts		(162)		(86)
	$	73,157	$	60,953


		June 30,		December 31,
		2022		2021
Raw materials	$	67,319	$	54,254
Finished goods		11,566		6,778
Inventory reserve		(3,088)		(3,023)
	$	75,797	$	58,009


		June 30,		December 31,
		2022		2021
Machinery and equipment	$	68,631	$	64,051
Machinery and equipment under financing leases		12,166		9,088
Furniture, fixtures and computer equipment		5,273		4,570
Leasehold improvements		14,651		14,142
Construction in progress		5,953		5,268
		106,674		97,119
Less accumulated depreciation and amortization		(66,354)		(61,937)
Operating lease right-of-use assets, net of accumulated amortization		11,883		12,069
	$	52,203	$	47,251


		June 30,						December 31,
		2022						2021
	Weighted Average			Accumulated		Net Book				Accumulated		Net Book
	Life (Years)	Cost		Amortization		Value		Cost		Amortization		Value
Customer relationships	17.2	$	55,454	$	(37,058)	$	18,396	$	55,454	$	(35,419)	$	20,035
Technology and software	8		7,101		(6,667)		434		7,101		(6,567)		534
Trademarks	8.7		3,330		(2,239)		1,091		3,330		(2,045)		1,285
Intangible assets subject to amortization		$	65,885	$	(45,964)	$	19,921	$	65,885	$	(44,031)	$	21,854


	Six Months Ended
	June 30, 2022
Expected term in years ⁽¹⁾	4.25
Volatility ⁽²⁾	77.50	%
Risk-free interest rate ⁽³⁾	2.44	%
Dividend yield ⁽⁴⁾	—	%


	Net Sales
	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Debit and Credit	$	94,181	$	72,860	$	186,196	$	142,677
Prepaid Debit		19,214		20,383		38,675		39,841
Intersegment eliminations		(87)		(24)		(139)		(207)
Total	$	113,308	$	93,219	$	224,732	$	182,311


	EBITDA
	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Debit and Credit	$	27,273	$	22,322	$	53,367	$	44,722
Prepaid Debit		5,899		8,106		12,463		15,679
Other		(14,562)		(10,820)		(26,025)		(23,825)
Total	$	18,610	$	19,608	$	39,805	$	36,576


	Three Months Ended June 30,
			% of 2022				% of 2021
	2022		Net Sales		2021		Net Sales		$ Change		% Change

	(dollars in thousands)
Gross profit by segment:
Debit and Credit	$	34,088	36.2	%	$	28,263	38.8	%	$	5,825	20.6	%
Prepaid Debit		6,463	33.6	%		8,825	43.3	%		(2,362)	(26.8)	%
Total	$	40,551	35.8	%	$	37,088	39.8	%	$	3,463	9.3	%

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, 2022	/s/ Amintore Schenkel
	Amintore Schenkel
	Chief Financial Officer
	(Principal Financial Officer)


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