CPI Card Group Inc. Reports First Quarter 2025 Results

Net Sales Increased 10%; Net Income Decreased 12%; Adjusted EBITDA Decreased 8%

Debit and Credit Net Sales Increased 10%; Prepaid Debit Net Sales Increased 10%

Net Sales and Adjusted EBITDA Outlook for 2025 Affirmed

CPI Announces Acquisition of Arroweye Solutions, Inc.

LITTLETON, Colo.--(BUSINESS WIRE)--May 07, 2025-- 

CPI Card Group Inc. (Nasdaq: PMTS) ("CPI" or the "Company"), a payments technology company providing a comprehensive range of payment cards and related digital solutions, today reported financial results for the first quarter ended March 31, 2025 and updated its financial outlook for 2025. The Company also announced the acquisition of Arroweye Solutions, Inc. ("Arroweye"), a leading provider of digitally-driven on-demand payment card solutions for the U.S. market.

CPI's first quarter net sales increased 10% to $122.8 million and, as expected, net income decreased 12% to $4.8 million and Adjusted EBITDA decreased 8% to $21.2 million, compared to the prior year period. Sales growth was led by strong performance from contactless debit and credit cards, as well as ongoing growth from prepaid card solutions. Net income declined in the quarter as sales growth was offset by unfavorable sales mix, including comparisons with a very strong Prepaid margin in the first quarter of 2024, and higher interest expense.

"We are pleased with our first quarter sales performance, led by strong growth from our debit and credit card portfolio," said John Lowe, President and Chief Executive Officer. "Our outlook remains intact, and we plan to continue to execute our strategies to gain share and diversify our business, as evidenced by our acquisition of Arroweye Solutions."

Lowe continued, "Adding Arroweye's zero-inventory, rapid turnaround payment card solutions to the CPI portfolio brings us additional capabilities, advanced technology, and increased capacity, and complements the existing offerings we currently provide to our extensive customer base."

CPI affirmed its 2025 outlook of mid-to-high single-digit organic growth for both net sales and Adjusted EBITDA. The Company expects to gain share in its core markets in 2025 and plans to continue to invest in its market expansion strategy. The outlook assumes a stable U.S. economic environment and reflects the impact of known tariffs. The outlook does not include any contribution from the acquisition of Arroweye.

The Company believes long-term growth trends for the U.S. card market remain strong, led by consumer card growth, widespread adoption of eco-focused cards and the ongoing conversion to contactless cards. Based on figures released by the networks, Visa and Mastercard$(R)$ U.S. debit and credit cards in circulation increased at a compound annual growth rate of 9% for the three-year period ending December 31, 2024.

2025 Business Highlights

   -- On May 6, 2025, CPI acquired Arroweye Solutions, Inc., a leading provider 
      of digitally-driven on-demand payment card solutions for the U.S. market. 
      A press release providing details of the acquisition can be found on 
      CPI's investor relations website at https://investor.cpicardgroup.com. 
 
   -- CPI continues to be a leading provider of eco-focused payment card 
      solutions in the U.S. market, with more than 350 million eco-focused 
      debit, credit, and prepaid card or package solutions sold since launch. 
      This includes more than 200 million eco-focused prepaid card solutions, 
      consisting of either eco-focused cards or eco-focused packages, since 
      certification in 2023. 
 
   -- CPI continues to be a leading provider of Software-as-a-Service-based 
      instant issuance solutions in the U.S., with more than 16,000 
      Card@Once(R) installations across more than 2,000 financial institutions. 
 
   -- The Company continues to advance its market and product expansion 
      strategies, including healthcare payment solutions, digital offerings 
      such as push provisioning capabilities for mobile wallets and payment 
      card fraud solutions, and closed-loop prepaid solutions. 

First Quarter 2025 Financial Highlights

Net sales increased 10% year-over-year to $122.8 million in the first quarter of 2025.

   -- Debit and Credit segment net sales increased 10% to $96.5 million, driven 
      by increased sales of contactless cards, including eco-focused cards. 
 
   -- Prepaid Debit segment net sales increased 10% to $26.7 million, 
      reflecting strong sales to existing customers, including sales of 
      higher-value packaging solutions, and increased sales of healthcare 
      payment solutions. 

Gross profit decreased 2% to $40.7 million and gross profit margin of 33.2% decreased from 37.1% in the prior year first quarter, as benefits of operating leverage from sales growth were offset by impacts from sales mix and increased production costs.

Income from operations was flat at $14.1 million. Net income decreased 12% to $4.8 million, or $0.40 diluted earnings per share, primarily due to lower gross profit and increased interest expense, partially offset by decreased operating expenses. Adjusted EBITDA decreased 8% to $21.2 million, primarily due to lower gross profit.

Balance Sheet, Liquidity and Cash Flow

The Company generated cash from operating activities of $5.6 million in the first quarter, which compared to $8.9 million in the prior year period, and Free Cash Flow of $0.3 million, which compared to $7.4 million in the prior year. The decrease in cash generation compared to the prior year was primarily driven by higher capital expenditures, primarily related to the new Indiana secure card production facility, lower net income excluding non-cash items, and slightly increased working capital usage.

As of March 31, 2025, cash and cash equivalents was $31.5 million. There were $285 million of 10% Senior Secured Notes due 2029 and no borrowings from the ABL revolving credit facility outstanding at quarter-end.

"We are balancing investing for long-term growth with tightly managing spending in the current market environment," said Jeff Hochstadt, Chief Financial Officer of CPI. "We have implemented cost savings and supply-chain actions to mitigate current known tariff risk and aid margins as the year progresses, and will continue to adapt as the environment evolves."

The Company's capital structure and allocation priorities are focused on investing in the business, including strategic acquisitions; deleveraging the balance sheet; and returning funds to stockholders.

Outlook for 2025

The Company affirmed its outlook for 2025 of mid-to-high single-digit organic growth for both net sales and Adjusted EBITDA. The outlook reflects a stable economic environment and the impact of currently announced tariffs. Results could be further impacted if the U.S. economy entered recessionary conditions or if additional significant tariffs are introduced. The Company has taken actions to reduce certain operating expenses in response to tariff and sales mix impacts.

The outlook does not include any expected contribution from the Arroweye acquisition which was announced today.

Conference Call and Webcast

CPI Card Group Inc. will hold a conference call on May 7, 2025 at 9:00 a.m. Eastern Time $(ET)$ to review its first quarter results. To participate in the Company's conference call via telephone or online:

U.S. dial-in number (toll-free): 888-330-3573

International: 646-960-0677

Conference ID: 8062733

Webcast Link: CPI Card Group Q1 Webcast or at https://investor.cpicardgroup.com

Participants are advised to login for the webcast 10 minutes prior to the scheduled start time.

A replay of the conference call will be available until May 14, 2025 at:

U.S. and Canada (toll-free): 800-770-2030

International: 609-800-9909

Canada: 647-362-9199

Conference ID: 8062733

A webcast replay of the conference call will also be available on CPI Card Group Inc.'s Investor Relations website: https://investor.cpicardgroup.com

Non-GAAP Financial Measures

In addition to financial results reported in accordance with U.S. generally accepted accounting principles ("GAAP"), we have provided the following non-GAAP financial measures in this release, all reported on a continuing operations basis: EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, LTM Adjusted EBITDA and Net Leverage Ratio. These non-GAAP financial measures are utilized by management in comparing our operating performance on a consistent basis between fiscal periods and serve as a basis for certain Company compensation programs. We believe that these financial measures are appropriate to enhance an overall understanding of our underlying operating performance trends compared to historical and prospective periods and our peers. Management also believes that these measures are useful to investors in their analysis of our results of operations and provide improved comparability between fiscal periods. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Our non-GAAP measures may be different from similarly titled measures of other companies. Investors are encouraged to review the reconciliation of these historical non-GAAP measures to their most directly comparable GAAP financial measures included in Exhibit E to this press release.

Adjusted EBITDA

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