CPI Card Group Inc 10-Q for FY2023 Q3

CPI Card Group Inc. (PMTS)

10-Q 2023-11-07 For: 2023-09-30

Added on April 10, 2026

About this 10-Q

CPI Card Group Inc filed this 10-Q on November 7, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).

Headline figures

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

Revenue: $105.86M; down 15.0% from $124.58M a year earlier
Net income: $3.86M; down 67.6% from net income of $11.91M a year earlier
Diluted EPS: $0.33; down 67.3% from $1.01 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		26

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


	September 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	10,473	$	11,037
Accounts receivable, net		67,546		80,583
Inventories, net		74,080		68,399
Prepaid expenses and other current assets		8,747		7,551
Total current assets		160,846		167,570
Plant, equipment, leasehold improvements and operating lease right-of-use assets, net of accumulated depreciation of $66,437 and $61,922, respectively		62,643		57,178
Intangible assets, net of accumulated amortization of $50,797 and $47,897, respectively		15,088		17,988
Goodwill		47,150		47,150
Other assets		6,388		6,780
Total assets	$	292,115	$	296,666
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	16,876	$	24,371
Accrued expenses		27,967		40,070
Deferred revenue and customer deposits		787		3,571
Total current liabilities		45,630		68,012
Long-term debt		272,669		285,522
Deferred income taxes		7,920		6,808
Other long-term liabilities		22,616		18,401
Total liabilities		348,835		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 September 30, 2023 and December 31, 2022		—		—
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000 shares authorized; 11,453,549 and 11,390,355 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		11		11
Capital deficiency		(104,275)		(108,379)
Accumulated earnings		47,544		26,291
Total stockholders’ deficit		(56,720)		(82,077)
Total liabilities and stockholders’ deficit	$	292,115	$	296,666


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net sales:
Products	$	55,689	$	71,606	$	195,425	$	208,867
Services		50,174		52,971		146,250		140,442
Total net sales		105,863		124,577		341,675		349,309
Cost of sales:
Products (exclusive of depreciation and amortization shown below)		37,540		42,702		124,828		128,851
Services (exclusive of depreciation and amortization shown below)		29,574		31,190		89,192		85,625
Depreciation and amortization		2,597		2,245		7,584		6,564
Total cost of sales		69,711		76,137		221,604		221,040
Gross profit		36,152		48,440		120,071		128,269
Operating expenses:
Selling, general and administrative (exclusive of depreciation and amortization shown below)		21,783		23,403		64,734		67,335
Depreciation and amortization		1,408		1,592		4,286		4,454
Total operating expenses		23,191		24,995		69,020		71,789
Income from operations		12,961		23,445		51,051		56,480
Other expense, net:
Interest, net		(6,714)		(7,323)		(20,235)		(22,334)
Other expense, net		(53)		(63)		(245)		(474)
Total other expense, net		(6,767)		(7,386)		(20,480)		(22,808)
Income before income taxes		6,194		16,059		30,571		33,672
Income tax expense		(2,337)		(4,149)		(9,318)		(9,609)
Net income	$	3,857	$	11,910	$	21,253	$	24,063

Basic and diluted earnings per share:
Basic earnings per share	$	0.34	$	1.06	$	1.86	$	2.14
Diluted earnings per share	$	0.33	$	1.01	$	1.79	$	2.05

Basic weighted-average shares outstanding		11,432,794		11,265,767		11,418,372		11,259,655
Diluted weighted-average shares outstanding		11,827,816		11,788,921		11,861,868		11,730,668

Comprehensive income:
Net income	$	3,857	$	11,910	$	21,253	$	24,063
Total comprehensive income	$	3,857	$	11,910	$	21,253	$	24,063


	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings		Total
June 30, 2023	11,430,245	$	11	$	(106,668)	$	43,687	$	(62,970)
Shares issued under stock-based compensation plans	23,304		—		(207)		—		(207)
Stock-based compensation	—		—		2,600		—		2,600
Components of comprehensive income:
Net income	—		—		—		3,857		3,857
September 30, 2023	11,453,549	$	11	$	(104,275)	$	47,544	$	(56,720)


	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	63,194		—		(327)		—		(327)
Stock-based compensation	—		—		4,431		—		4,431
Components of comprehensive income:
Net income	—		—		—		21,253		21,253
September 30, 2023	11,453,549	$	11	$	(104,275)	$	47,544	$	(56,720)


	Common Stock			Capital		Accumulated
	Shares	Amount		deficiency		earnings		Total
June 30, 2022	11,262,688	$	11	$	(108,880)	$	1,904	$	(106,965)
Shares issued under stock-based compensation plans	25,221		—		(171)		—		(171)
Stock-based compensation	—		—		966		—		966
Components of comprehensive income:
Net income	—		—		—		11,910		11,910
September 30, 2022	11,287,909	$	11	$	(108,085)	$	13,814	$	(94,260)


	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	32,443		—		(231)		—		(231)
Stock-based compensation	—		—		2,928		—		2,928
Components of comprehensive income:
Net income	—		—		—		24,063		24,063
September 30, 2022	11,287,909	$	11	$	(108,085)	$	13,814	$	(94,260)


	Three Months Ended September 30, 2023
	Products		Services		Total

	(dollars in thousands)
Debit and Credit	$	55,934	$	27,846	$	83,780
Prepaid Debit		—		22,335		22,335
Intersegment eliminations		(245)		(7)		(252)
Total	$	55,689	$	50,174	$	105,863

	Nine Months Ended September 30, 2023
	Products		Services		Total

	(dollars in thousands)
Debit and Credit	$	195,967	$	82,992	$	278,959
Prepaid Debit		—		63,286		63,286
Intersegment eliminations		(542)		(28)		(570)
Total	$	195,425	$	146,250	$	341,675

	Three Months Ended September 30, 2022
	Products		Services		Total

	(dollars in thousands)
Debit and Credit	$	71,857	$	27,655	$	99,512
Prepaid Debit		—		25,335		25,335
Intersegment eliminations		(251)		(19)		(270)
Total	$	71,606	$	52,971	$	124,577

	Nine Months Ended September 30, 2022
	Products		Services		Total

	(dollars in thousands)
Debit and Credit	$	209,236	$	76,472	$	285,708
Prepaid Debit		—		64,010		64,010
Intersegment eliminations		(369)		(40)		(409)
Total	$	208,867	$	140,442	$	349,309


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

	(dollars in thousands)
Liabilities:
Senior Notes	$	267,897	$	264,548	$	—	$	264,548	$	—
ABL Revolver	$	8,000	$	8,000	$	—	$	8,000	$	—


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

			(dollars in thousands)
Senior Notes	8.625	%	$	267,897	$	285,000
ABL Revolver	6.674	%		8,000		5,000
Unamortized deferred financing costs				(3,228)		(4,478)
Total long-term debt				272,669		285,522
Less current maturities				—		—
Long-term debt, net of current maturities			$	272,669	$	285,522


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

	(dollars in thousands)
Net sales	$	83,780	$	22,335	$	—	$	(252)	$	105,863
Cost of sales		55,399		14,564		—		(252)		69,711
Gross profit		28,381		7,771		—		—		36,152
Operating expenses		7,590		1,140		14,461		—		23,191
Income (loss) from operations	$	20,791	$	6,631	$	(14,461)	$	—	$	12,961

EBITDA by segment:
Income (loss) from operations	$	20,791	$	6,631	$	(14,461)	$	—	$	12,961
Depreciation and amortization		2,322		675		1,008		—		4,005
Other expense, net		(27)		(2)		(24)		—		(53)
EBITDA	$	23,086	$	7,304	$	(13,477)	$	—	$	16,913


	Nine Months Ended September 30, 2023
	Debit and Credit		Prepaid Debit		Other		Intersegment Eliminations		Total

	(dollars in thousands)
Net sales	$	278,959	$	63,286	$	—	$	(570)	$	341,675
Cost of sales		179,356		42,818		—		(570)		221,604
Gross profit		99,603		20,468		—		—		120,071
Operating expenses		23,705		2,532		42,783		—		69,020
Income (loss) from operations	$	75,898	$	17,936	$	(42,783)	$	—	$	51,051

EBITDA by segment:
Income (loss) from operations	$	75,898	$	17,936	$	(42,783)	$	—	$	51,051
Depreciation and amortization		6,836		2,003		3,031		—		11,870
Other expense, net		(1)		(1)		(243)		—		(245)
EBITDA	$	82,733	$	19,938	$	(39,995)	$	—	$	62,676


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

	(dollars in thousands)
Net sales	$	99,512	$	25,335	$	—	$	(270)	$	124,577
Cost of sales		61,441		14,966		—		(270)		76,137
Gross profit		38,071		10,369		—		—		48,440
Operating expenses		8,653		1,260		15,082		—		24,995
Income (loss) from operations	$	29,418	$	9,109	$	(15,082)	$	—	$	23,445

EBITDA by segment:
Income (loss) from operations	$	29,418	$	9,109	$	(15,082)	$	—	$	23,445
Depreciation and amortization		2,271		529		1,037		—		3,837
Other expense, net		(14)		—		(49)		—		(63)
EBITDA	$	31,675	$	9,638	$	(14,094)	$	—	$	27,219


	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change

	(dollars in thousands)
Net sales: ⁽¹⁾
Products	$	55,689	$	71,606	$	(15,917)	(22.2)	%	$	195,425	$	208,867	$	(13,442)	(6.4)	%
Services		50,174		52,971		(2,797)	(5.3)	%		146,250		140,442		5,808	4.1	%
Total net sales		105,863		124,577		(18,714)	(15.0)	%		341,675		349,309		(7,634)	(2.2)	%
Cost of sales ⁽¹⁾		69,711		76,137		(6,426)	(8.4)	%		221,604		221,040		564	0.3	%
Gross profit		36,152		48,440		(12,288)	(25.4)	%		120,071		128,269		(8,198)	(6.4)	%
Operating expenses		23,191		24,995		(1,804)	(7.2)	%		69,020		71,789		(2,769)	(3.9)	%
Income from operations		12,961		23,445		(10,484)	(44.7)	%		51,051		56,480		(5,429)	(9.6)	%
Other expense, net:
Interest, net		(6,714)		(7,323)		609	(8.3)	%		(20,235)		(22,334)		2,099	(9.4)	%
Other expense, net		(53)		(63)		10	*			(245)		(474)		229	(48.3)	%
Income before taxes		6,194		16,059		(9,865)	(61.4)	%		30,571		33,672		(3,101)	(9.2)	%
Income tax expense		(2,337)		(4,149)		1,812	(43.7)	%		(9,318)		(9,609)		291	(3.0)	%
Net income	$	3,857	$	11,910	$	(8,053)	(67.6)	%	$	21,253	$	24,063	$	(2,810)	(11.7)	%

Gross profit margin		34.1%		38.9%						35.1%		36.7%

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.
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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.
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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.
November 7, 2023	/s/ Scott Scheirman
	Scott Scheirman
	Chief Executive Officer
	(Principal Executive Officer)

November 7, 2023	/s/ Jeffrey Hochstadt
	Jeffrey Hochstadt
	Chief Financial Officer
	(Principal Financial Officer)


November 7, 2023	/s/ Donna Abbey
	Donna Abbey
	Chief Accounting Officer
	(Principal Accounting Officer)


	Nine Months Ended September 30,
	2023		2022
Operating activities
Net income	$	21,253	$	24,063
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		8,970		8,118
Amortization expense		2,900		2,900
Stock-based compensation expense		4,431		2,928
Amortization of debt issuance costs and debt discount		1,397		1,449
Loss on debt extinguishment		243		395
Deferred income taxes		1,112		1,192
Other, net		(156)		437
Changes in operating assets and liabilities:
Accounts receivable		12,988		(14,862)
Inventories		(5,806)		(13,916)
Prepaid expenses and other assets		422		1,501
Income taxes, net		(1,616)		(1,577)
Accounts payable		(7,805)		(440)
Accrued expenses and other liabilities		(13,283)		(3,208)
Deferred revenue and customer deposits		(2,784)		2,733
Cash provided by operating activities		22,266		11,713
Investing activities
Capital expenditures for plant, equipment and leasehold improvements, net		(6,076)		(14,440)
Other		183		95
Cash used in investing activities		(5,893)		(14,345)
Financing activities
Principal payments on Senior Notes		(16,954)		(20,000)
Principal payments on ABL Revolver		(10,000)		(10,000)
Proceeds from ABL Revolver		13,000		35,000
Payments on debt extinguishment and other		(327)		(1,093)
Proceeds from finance lease financing		—		2,074
Payments on finance lease obligations		(2,655)		(2,457)
Cash (used in) provided by financing activities		(16,936)		3,524
Effect of exchange rates on cash		(1)		(68)
Net (decrease) increase in cash and cash equivalents		(564)		824
Cash and cash equivalents, beginning of period		11,037		20,683
Cash and cash equivalents, end of period	$	10,473	$	21,507
Supplemental disclosures of cash flow information
Cash paid (refunded) during the period for:


		September 30,		December 31,
		2023		2022

	(dollars in thousands)
Trade accounts receivable	$	58,402	$	68,886
Unbilled accounts receivable		9,375		11,915
		67,777		80,801
Less allowance		(231)		(218)
	$	67,546	$	80,583


		September 30,		December 31,
		2023		2022

	(dollars in thousands)
Raw materials	$	67,742	$	61,434
Finished goods		9,799		10,300
Inventory reserve		(3,461)		(3,335)
	$	74,080	$	68,399


		September 30,		December 31,
		2023		2022

	(dollars in thousands)
Machinery and equipment	$	65,846	$	64,786
Machinery and equipment under financing leases		21,205		15,717
Furniture, fixtures and computer equipment		2,357		3,072
Leasehold improvements		15,480		14,703
Construction in progress		4,511		3,304
Operating lease right-of-use assets		19,681		17,518
		129,080		119,100
Less accumulated depreciation and amortization		(66,437)		(61,922)
	$	62,643	$	57,178


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