CPI Card Group Inc 10-Q for FY2021 Q2

CPI Card Group Inc. (PMTS)

10-Q 2021-08-12 For: 2021-06-30

Added on April 10, 2026

About this 10-Q

CPI Card Group Inc filed this 10-Q on August 12, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $93.22M; up 30.6% from $71.38M a year earlier
Net income: $6.23M; up 387.3% from net income of $1.28M a year earlier
Diluted EPS: $0.53; up 381.8% from $0.11 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		35

Item 1A — Risk Factors		35

Item 6 — Exhibits		36

Signatures		37


	June 30,		December 31,
	2021		2020

Assets
Current assets:
Cash and cash equivalents	$	30,667	$	57,603
Accounts receivable, net of allowances of $237 and $289, respectively		55,979		54,592
Inventories		40,273		24,796
Prepaid expenses and other current assets		6,036		5,032
Income taxes receivable		2,522		10,511
Total current assets		135,477		152,534
Plant, equipment, leasehold improvements and operating lease right-of-use assets, net		39,257		39,403
Intangible assets, net		23,909		26,207
Goodwill		47,150		47,150
Other assets		2,575		857
Total assets	$	248,368	$	266,151
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	20,778	$	18,883
Accrued expenses		31,809		28,149
Current portion of long-term debt		—		8,027
Deferred revenue and customer deposits		1,157		1,868
Total current liabilities		53,744		56,927
Long-term debt		302,877		328,681
Deferred income taxes		7,447		7,409
Other long-term liabilities		13,563		11,171
Total liabilities		377,631		404,188
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, 2021 and December 31, 2020		-		-
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000 shares authorized; 11,237,056 and 11,230,482 shares issued and outstanding at June 30, 2021 and December 31, 2020		11		11
Capital deficiency		(111,726)		(111,858)
Accumulated loss		(17,548)		(26,190)
Total stockholders’ deficit		(129,263)		(138,037)
Total liabilities and stockholders’ deficit	$	248,368	$	266,151


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net sales:
Products	$	47,156	$	39,077	$	94,169	$	81,578
Services		46,063		32,301		88,142		63,769
Total net sales		93,219		71,378		182,311		145,347
Cost of sales:
Products (exclusive of depreciation and amortization shown below)		27,928		25,911		55,215		52,290
Services (exclusive of depreciation and amortization shown below)		25,939		19,666		49,607		38,853
Depreciation and amortization		2,264		2,711		4,680		5,466
Total cost of sales		56,131		48,288		109,502		96,609
Gross profit		37,088		23,090		72,809		48,738
Operating expenses:
Selling, general and administrative (exclusive of depreciation and amortization shown below)		19,748		16,613		35,894		33,276
Depreciation and amortization		1,553		1,505		3,359		2,990
Total operating expenses		21,301		18,118		39,253		36,266
Income from operations		15,787		4,972		33,556		12,472
Other expense, net:
Interest, net		(7,037)		(6,772)		(16,013)		(12,860)
Other income (expense), net		4		(32)		29		(35)
Loss on debt extinguishment		—		—		(5,048)		(92)
Total other expense, net		(7,033)		(6,804)		(21,032)		(12,987)
Income (loss) from continuing operations before income taxes		8,754		(1,832)		12,524		(515)
Income tax (expense) benefit		(2,522)		3,115		(3,882)		3,580
Net income from continuing operations		6,232		1,283		8,642		3,065
Net loss from discontinued operations, net of tax (Note 1)		—		(4)		—		(30)
Net income	$	6,232	$	1,279	$	8,642	$	3,035

Basic and diluted earnings per share:
Basic earnings per share from continuing operations:	$	0.55	$	0.11	$	0.77	$	0.27
Diluted earnings per share from continuing operations:	$	0.53	$	0.11	$	0.74	$	0.27

Basic earnings per share:	$	0.55	$	0.11	$	0.77	$	0.27
Diluted earnings per share:	$	0.53	$	0.11	$	0.74	$	0.27

Basic weighted-average shares outstanding:		11,233,002		11,229,819		11,231,742		11,227,160
Diluted weighted-average shares outstanding:		11,762,481		11,233,852		11,720,148		11,242,272

Comprehensive income:
Net income	$	6,232	$	1,279	$	8,642	$	3,035
Total comprehensive income	$	6,232	$	1,279	$	8,642	$	3,035


	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)
Shares issued under stock-based compensation plans									—
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)

	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings (loss)		Total
March 31, 2020	11,229,819		11		(111,953)		(40,563)	$	(152,505)
Stock-based compensation			—		18		—		18
Components of comprehensive income:
Net income			—		—		1,279		1,279
June 30, 2020	11,229,819	$	11	$	(111,935)	$	(39,284)	$	(151,208)

	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings (loss)		Total
December 31, 2019	11,224,191		11		(111,988)		(42,319)	$	(154,296)
Shares issued under stock-based compensation plans	5,628		—		—		—		—
Stock-based compensation			—		53		—		53
Components of comprehensive income:
Net income			—		—		3,035		3,035
June 30, 2020	11,229,819	$	11	$	(111,935)	$	(39,284)	$	(151,208)


	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

	Three Months Ended June 30, 2020
	Products		Services		Total
Debit and Credit	$	39,541	$	18,765	$	58,306
Prepaid Debit		—		13,536		13,536
Intersegment eliminations		(464)		—		(464)
Total	$	39,077	$	32,301	$	71,378

	Six Months Ended June 30, 2020
	Products		Services		Total
Debit and Credit	$	82,452	$	35,693	$	118,145
Prepaid Debit		—		28,076		28,076
Intersegment eliminations		(874)		—		(874)
Total	$	81,578	$	63,769	$	145,347


	June 30, 2021		December 31, 2020

Trade accounts receivable	$	46,802	$	44,305
Unbilled accounts receivable		9,414		10,576
		56,216		54,881
Less allowance for doubtful accounts		(237)		(289)
	$	55,979	$	54,592


	June 30, 2021		December 31, 2020

Raw materials	$	38,021	$	23,009
Finished goods		5,223		4,635
Inventory reserve		(2,971)		(2,848)
	$	40,273	$	24,796


	June 30, 2021		December 31, 2020

Machinery and equipment	$	60,555	$	55,459
Machinery and equipment under financing leases		7,676		9,974
Furniture, fixtures and computer equipment		4,420		4,410
Leasehold improvements		13,879		15,083
Construction in progress		1,523		2,386
		88,053		87,312
Less accumulated depreciation and amortization		(58,206)		(55,092)
Operating lease right-of-use assets, net of accumulated amortization		9,410		7,183
	$	39,257	$	39,403


		June 30, 2021						December 31, 2020
	Weighted Average			Accumulated		Net Book				Accumulated		Net Book
	Life (Years)	Cost		Amortization		Value		Cost		Amortization		Value

Customer relationships	17.2	$	55,454	$	(33,780)	$	21,674	$	55,454		(32,141)	$	23,313
Technology and software	8		7,101		(6,345)		756		7,101		(5,881)		1,220
Trademarks	8.7		3,330		(1,851)		1,479		3,330		(1,656)		1,674
Intangible assets subject to amortization		$	65,885	$	(41,976)	$	23,909	$	65,885	$	(39,678)	$	26,207


2021 (excluding the six months ended June 30, 2021)	$	2,054
2022		3,867
2023		3,867
2024		3,630
2025		3,440
Thereafter		7,051
	$	23,909


	Carrying		Estimated
	Value as of		Fair Value as of		Fair Value Measurement at June 30, 2021
	June 30,		June 30,		(Using Fair Value Hierarchy)
	2021		2021		Level 1		Level 2		Level 3
Liabilities:
Senior Notes	$	310,000	$	329,375	$	—	$	329,375	$	—


	June 30, 2021		December 31, 2020

Accrued payroll and related employee expenses	$	5,132	$	4,938
Accrued employee performance bonus		5,543		4,873
Employer payroll tax, including social security deferral		2,959		3,034
Accrued rebates		1,730		1,178
Sales tax liability		1,549		1,696
Accrued interest		7,824		4,145
Operating and financing lease liability (current portion)		3,506		4,407
Other		3,566		3,878
Total accrued expenses	$	31,809	$	28,149



	Three Months Ended		Three Months Ended
	June 30, 2021		June 30, 2020
Operating lease costs	$	532	$	671
Variable lease costs		165		176
Short-term operating lease costs		122		-
Total expense from operating leases	$	819	$	847

Finance lease cost:
Right-of-use amortization expense		309		329
Interest on lease liabilities		99		117
Total financing lease costs	$	408	$	446


	Six Months Ended		Six Months Ended
	June 30, 2021		June 30, 2020
Operating lease costs	$	1,041	$	1,342
Variable lease costs		329		349
Short-term operating lease costs		294		-
Total expense from operating leases	$	1,664	$	1,691

Finance lease cost:
Right-of-use amortization expense		602		656
Interest on lease liabilities		205		246
Total financing lease costs	$	807	$	902


		Operating		Financing
		Lease		Leases

2021 (excluding the six months ended June 30, 2021)		1,357		1,058
2022		2,344		2,136
2023		2,216		1,191
2024		2,014		390
2025		1,442		132
Thereafter		3,615		32
Total lease payments		12,988		4,939
Less imputed interest		(3,041)		(560)
Total	$	9,947	$	4,379


	June 30,
	2021		2020
Tax at federal statutory rate	21.0	%	21.0	%
State taxes, net	6.0		10.4
Valuation allowance	0.0		11.4
Permanent items	2.8		10.8
Tax benefit CARES Act	0.0		643.0
Other	1.2		(1.5)
Effective income tax rate	31.0	%	695.1	%


				Weighted-
		Weighted-		Average
		Average		Remaining
		Exercise		Contractual Term
	Options	Price		(in Years)
Outstanding as of December 31, 2020	706,372	$	15.20	6.44
Exercised	(6,574)		5.25	-
Forfeited	—		-	-
Outstanding as of June 30, 2021	699,798	$	15.29	5.91
Options vested and exercisable as of June 30, 2021	666,498	$	15.95	5.85
Options vested and expected to vest as of June 30, 2021	699,798	$	15.29	5.91



	June 30, 2021		December 31, 2020
Operating leases
Operating lease right-of-use assets, net of amortization	$	9,410	$	7,183

Operating lease liability (current)	$	1,742	$	2,267
Long-term operating liability		8,205		5,491
Total operating lease liabilities	$	9,947	$	7,758

Financing leases
Property, equipment and leasehold improvements	$	7,676	$	9,974
Accumulated depreciation		(1,931)		(2,422)
Total property, equipment and leasehold improvements, net	$	5,745	$	7,552

Financing lease liability (current)	$	1,764	$	2,140
Long-term financing liability		2,615		3,052
Total financing lease liabilities	$	4,379	$	5,192


	Interest		June 30,		December 31,
	Rate ⁽¹⁾		2021		2020
Senior Notes	8.625	%	$	310,000	$	—
ABL Revolver	—	%		—		—
First Lien Term Loan	5.500	%		—		312,500
Senior Credit Facility	9.500	%		—		30,000
Unamortized deferred financing costs				(7,123)		(3,804)
Unamortized discount				—		(1,988)
Total long-term debt			$	302,877	$	336,708
Less current maturities				—		(8,027)
Long-term debt, net of current maturities			$	302,877	$	328,681


		Weighted-Average
	Options	Grant-Date Fair Value

Unvested as of December 31, 2020	45,319	$	1.10
Vested	(12,019)		1.70
Unvested as of June 30, 2021	33,300	$	0.98


	Net Sales
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Debit and Credit	$	72,860	$	58,306	$	142,677	$	118,145
Prepaid Debit		20,383		13,536		39,841		28,076
Intersegment eliminations		(24)		(464)		(207)		(874)
Total	$	93,219	$	71,378	$	182,311	$	145,347


	EBITDA
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Debit and Credit	$	22,322	$	13,121	$	44,722	$	28,080
Prepaid Debit		8,106		3,982		15,679		8,642
Other		(10,820)		(7,947)		(23,825)		(15,921)
Total	$	19,608	$	9,156	$	36,576	$	20,801


	Three Months Ended June 30,
			% of 2021				% of 2020
	2021		Net Sales		2020		Net Sales		$ Change		% Change

	(dollars in thousands)
Gross profit by segment:
Debit and Credit	$	28,263	38.8	%	$	18,553	31.8	%	$	9,710	52.3	%
Prepaid Debit		8,825	43.3	%		4,537	33.5	%		4,288	94.5	%
Total	$	37,088	39.8	%	$	23,090	32.3	%	$	13,998	60.6	%



Exhibit Number		Exhibit Description
10.1		Amended and Restated CPI Card Group Inc. Omnibus Incentive Plan (as amended and restated effective May 27, 2021) (incorporated by reference to the Company’s Current Report on Form 8-K filed May 28, 2021).
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 12, 2021	/s/ John Lowe
	John Lowe
	Chief Financial Officer
	(Principal Financial Officer)