CPI Card (PMTS) 5 Aug 24 2024 Q2 Earnings call transcript

In a recent earnings call, CPI Card Group, a leading provider of payment card solutions, reported a strong second quarter performance, marking a return to positive sales growth. The company, led by President and CEO John Lowe, highlighted several key themes and trends that demonstrate a positive outlook for its business.

Financial Performance and Growth Outlook

CPI Card Group reported a net sales increase of 3% compared to the previous year's second quarter, driven by growth in both its debit and credit and prepaid segments. The company's prepaid business, in particular, showed a 9% increase in sales, reflecting strong demand for its fraud-focused packaging solutions. Despite a slight decline in gross margins, the company's adjusted EBITDA margins declined primarily due to increased SG&A expenses resulting from strategic investments in people and the business.

Looking ahead, CPI Card Group expects strong growth in sales and adjusted EBITDA for the second half of the year, driven by the strong performance of its prepaid business and improvements in debit and credit sales trends. The company has updated its full-year outlook, increasing its expected sales growth from a slight increase to mid-single-digit growth, while maintaining its adjusted EBITDA outlook at slight growth compared to 2023.

Market Trends and Strategic Initiatives

CPI Card Group also highlighted its ongoing strategic initiatives, including its focus on gaining share in traditional markets and expanding into adjacent markets, particularly digital solutions. The company's prepaid business, which has been a significant growth driver, has been bolstered by its focus on customer service, quality, and innovation, with a particular emphasis on fraud prevention solutions. CPI Card Group has also made progress in entering adjacent markets, such as healthcare payment cards and digital push provisioning services for mobile wallets.

Financial and Capital Management

In addition to its strong financial performance, CPI Card Group announced the successful refinancing of its debt, issuing $285 million of new senior secured notes and entering into a new $75 million asset-based revolving credit facility. This refinancing extends the company's debt maturities out to 2029 and removes market risk in replacing previous notes maturing in 2026. The company also reported completing additional share repurchases under its share repurchase program, bringing the total to almost $9 million out of its $20 million authorization.

Outlook and Conclusion

Overall, CPI Card Group's second quarter earnings call painted a picture of a company with a solid financial performance, a positive outlook for future growth, and a strategic focus on both its traditional and emerging business segments. The company's confidence in its market position and its ability to capitalize on growth opportunities, particularly in digital solutions, bodes well for its future prospects. As CPI Card Group continues to execute its growth strategies, investors and analysts will be watching closely to see how these initiatives translate into sustained growth and profitability.