Fourth Quarter Net Sales of $68.5 million, Up
19% Year-Over-Year
Fourth Quarter Continuing Operations - GAAP Net
Loss of $7.2 Million, $5.4 Million on an Adjusted Basis
Fourth Quarter Adjusted EBITDA from Continuing
Operations of $5.1 Million, A 53% Year-Over-Year Increase
Cash of $20.3 million, Available Revolver of
$20.0 million, Available Liquidity of $40.3 million at Year End
Call scheduled for Wednesday, March 6, 2019 at 9:00 a.m. Eastern
Time
CPI Card Group Inc. (Nasdaq: PMTS; TSX: PMTS.TO) (“CPI Card
Group” or the “Company”) today reported financial results for the
fourth quarter and full year ended December 31, 2018.
Scott Scheirman, President and Chief Executive Officer of CPI,
stated, “Fourth quarter financial results reflect the continued
progress we are making towards strengthening our business and
fostering changes that we believe will help us to achieve long-term
success. Our fourth quarter performance was highlighted by top-line
growth of 19% year over year, marking our fourth consecutive
quarter of year-over-year net sales growth. During the quarter, we
saw continued top line momentum across the business, particularly
in our emerging products and solutions.”
Scheirman continued, “As we enter 2019, we remain committed to
our strategy of deep customer focus, providing market-leading
quality products and customer service, developing a
market-competitive business model and continuous innovation.
Through continued thoughtful, disciplined execution of these highly
targeted initiatives, we believe we can achieve our vision of being
the partner of choice for our customers by providing market-leading
quality products and customer service with a market competitive
business model.”
Financial results, including non-GAAP measures, discussed in
this press release for all periods reflect continuing operations
unless otherwise noted. The sale of CPI U.K., which had
historically been reported as the U.K. Limited segment, has been
accounted for as discontinued operations, and comparative financial
information has been restated in accordance with U.S. GAAP (“GAAP”)
requirements. All earnings per share amounts reflect the
one-for-five reverse stock split, which occurred in December
2017.
Fourth Quarter and Full Year 2018 Consolidated Financial
Highlights from Continuing Operations
Net sales were $68.5 million in the fourth quarter of 2018, an
increase of 19.2% from the fourth quarter of 2017. For the full
year ended December 31, 2018, net sales were $255.8 million, an
increase of 14.3% over the prior year. Loss from operations was
$0.4 million in the fourth quarter of 2018 compared with a loss
from operations of $21.5 million in the fourth quarter of 2017. As
a reminder, the Company recorded a non-cash impairment charge of
$19.1 million in the fourth quarter of 2017, of which $17.2 million
related to the U.S. Debit and Credit segment, and the remaining
$1.9 million related to the Other segment. The Company generated
income from operations of $4.6 million during the full year 2018
compared with a loss from operations of $19.3 million during the
full year 2017. Net loss was $7.2 million, or $0.65 per diluted
share, and $14.8 million, or $1.33 per diluted share, for the
fourth quarter and full year 2018, respectively. This compares with
a net loss of $14.4 million, or $1.29 per diluted share, and $23.1
million, or $2.08 per diluted share, for the fourth quarter and
full year 2017, respectively. The Company’s net loss was impacted
by a reduction in the effective tax rate for the year ended 2018
compared to the prior year, which lowered the income tax benefit by
$12.2 million, due primarily to U.S. tax reform legislation.
Adjusted EBITDA for the fourth quarter of 2018 was $5.1 million,
up 52.7% compared with $3.3 million in the prior year fourth
quarter. For the full year 2018, adjusted EBITDA increased 16.6% to
$27.1 million compared to the full year 2017. These year-over-year
improvements are primarily the result of net sales growth and lower
costs resulting from cost optimization initiatives implemented
throughout 2018.
Fourth Quarter and Full Year 2018 Segment Information from
Continuing Operations
U.S. Debit and Credit:
Net sales increased 23.9% to $49.6 million in the fourth quarter
of 2018 compared with the fourth quarter of 2017. The increase in
U.S. Debit and Credit segment net sales was driven primarily by
increased sales from our emerging products and solutions, including
CPI Metals™, dual-interface EMV® cards, and Card@Once®. Full year
2018 segment net sales were $178.6 million, an increase of 10.1%
compared to 2017. EMV card volumes, excluding metal and dual
interface, were up 17% and 5% during the fourth quarter and full
year 2018, respectively, compared with the fourth quarter and full
year 2017, while average selling prices declined on a year over
year basis.
U.S. Prepaid Debit:
Net sales increased 6.0% to $17.1 million in the fourth quarter
of 2018 compared with the fourth quarter of 2017, driven by
additional sales volumes from our existing customer base. Full year
2018 segment net sales were $69.2 million, an increase of 21.4%
compared to 2017.
Balance Sheet, Liquidity, and Cash Flow from Continuing
Operations
Cash provided by operating activities for the fourth quarter of
2018 was $8.9 million and capital expenditures totaled $0.6
million, yielding free cash flow of $8.3 million during the fourth
quarter. For the full year ended December 31, 2018, cash provided
by operating activities was $7.0 million, capital expenditures
totaled $5.6 million and free cash flow was $1.4 million.
At December 31, 2018, the Company had $20.3 million of cash and
cash equivalents and a $40.0 million revolving credit facility, of
which $20.0 million was available for borrowing.
Total debt principal outstanding, comprised of the Company’s
First Lien Term Loan, was $312.5 million at December 31, 2018,
unchanged from December 31, 2017. Net of debt issuance costs and
discount, recorded debt was $305.8 million as of December 31, 2018.
The Company’s First Lien Term Loan matures on August 17, 2022 and
includes no financial covenants.
John Lowe, Chief Financial Officer, stated, “We continued to
deliver solid top-line performance in the fourth quarter of 2018,
which helped boost our fourth quarter adjusted EBITDA performance
by more than 50% compared with the fourth quarter of last year. Our
continued disciplined approach of driving revenue growth and
operational efficiency yielded positive free cash flow generation
from continuing operations for the full year 2018. We continue to
believe we have adequate cash and liquidity to support our business
plans.”
EMV® is a registered trademark or trademark of EMVCo LLC in the
United States and other countries.
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: Adjusted Net Income
(Loss), Adjusted Diluted Earnings (Loss) per Share, EBITDA,
reconciliation of US Debit and Credit segment EBITDA excluding
impairments, Adjusted EBITDA, and Free Cash Flow. These non-GAAP
financial measures are utilized by management in comparing our
operating performance on a consistent basis between fiscal periods.
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 Net Income (Loss) and Adjusted Diluted Earnings (Loss)
per Share
Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss)
per Share are presented on a continuing operations basis and
exclude the impact of impairments, amortization of intangible
assets; litigation and related charges incurred in connection with
certain patent and shareholder litigation; stock-based compensation
expense; restructuring and other charges; and other
non-operational, non-cash or non-recurring items, net of their
income tax impact. In 2017, an income tax rate of 35% was used to
calculate the related tax impact on adjustments noted above.
Beginning in the first quarter of 2018, a 21% tax rate is used to
calculate Adjusted Net Income (Loss) and Adjusted Diluted Earnings
(Loss) per Share. In conjunction with U.S. government comprehensive
tax reform, there was a reduction of the U.S. federal tax rate from
35.0% to 21.0% effective in 2018. We believe that Adjusted Net
Income (Loss) and Adjusted Diluted Earnings (Loss) per Share are
useful in assessing our financial performance by excluding items
that are not indicative of our core operating performance or that
may obscure trends useful in evaluating our results of
operations.
EBITDA
EBITDA represents earnings before interest, taxes, depreciation
and amortization, all on a continuing operations basis. EBITDA is
presented because it is an important supplemental measure of
performance, and it is frequently used by analysts, investors and
other interested parties in the evaluation of companies in our
industry. EBITDA is also presented and compared by analysts and
investors in evaluating our ability to meet debt service
obligations. Other companies in our industry may calculate EBITDA
differently. EBITDA is not a measurement of financial performance
under GAAP and should not be considered as an alternative to cash
flow from operating activities or as a measure of liquidity or an
alternative to net (loss) income or net (loss) income from
continuing operations as indicators of operating performance or any
other measures of performance derived in accordance with GAAP.
Because EBITDA is calculated before recurring cash charges,
including interest expense and taxes, and is not adjusted for
capital expenditures or other recurring cash requirements of the
business, it should not be considered as a measure of discretionary
cash available to invest in the growth of the business.
Reconciliation of US Debit and Credit segment EBITDA excluding
impairments are presented to show EBITDA without the effects of
impairment charges. We feel this measurement is important to show
the comparison for periods with and without impairment charges to
better reflect comparability between periods.
Adjusted EBITDA
Adjusted EBITDA is presented on a continuing operations basis
and is defined as EBITDA adjusted for impairments, litigation and
related charges incurred in connection with certain patent and
shareholder litigation; stock-based compensation expense;
restructuring and other charges; foreign currency gain or loss; and
other items that are unusual in nature, infrequently occurring or
not considered part of our core operations, as set forth in the
reconciliation on Exhibit E. Adjusted EBITDA is also a defined term
in our existing credit agreement, which generally conforms to the
definition above, and impacts certain credit measures and
compliance targets within the credit agreement. Adjusted EBITDA is
intended to show our unleveraged, pre-tax operating results and
therefore reflects our financial performance based on operational
factors, excluding non-operational, non-cash or non-recurring
losses or gains. Adjusted EBITDA has important limitations as an
analytical tool, and you should not consider it in isolation, or as
a substitute for, analysis of our results as reported under GAAP.
For example, Adjusted EBITDA does not reflect: (a) our capital
expenditures, future requirements for capital expenditures or
contractual commitments; (b) changes in, or cash requirements for,
our working capital needs; (c) the significant interest expenses or
the cash requirements necessary to service interest or principal
payments on our debt; (d) tax payments that represent a reduction
in cash available to us; (e) any cash requirements for the assets
being depreciated and amortized that may have to be replaced in the
future; (f) the impact of earnings or charges resulting from
matters that we and the lenders under our credit agreement may not
consider indicative of our ongoing operations; or (g) the impact of
any discontinued operations. In particular, our definition of
Adjusted EBITDA allows us to add back certain non-cash,
non-operating or non-recurring charges that are deducted in
calculating net (loss) income, even though these are expenses that
may recur, vary greatly and are difficult to predict and can
represent the effect of long-term strategies as opposed to
short-term results.
In addition, certain of these expenses can represent the
reduction of cash that could be used for other purposes. Further,
although not included in the calculation of Adjusted EBITDA, the
measure may at times allow us to add estimated cost savings and
operating synergies related to operational changes ranging from
acquisitions to dispositions to restructurings and/or exclude
one-time transition expenditures that we anticipate we will need to
incur to realize cost savings before such savings have occurred.
Further, management and various investors use the ratio of total
debt less cash to Adjusted EBITDA, or "net debt leverage," as a
measure of our financial strength and ability to incur incremental
indebtedness when making key investment decisions and evaluating us
against peers. The metric “total debt less cash” includes borrowed
long term debt and capital lease obligations, less cash. Adjusted
EBITDA margin percentage as shown in Exhibit E is computed as
Adjusted EBITDA divided by total net sales.
Free Cash Flow
We define Free Cash Flow as cash flow from continuing operations
less capital expenditures from continuing operations. We use this
metric in analyzing our ability to service and repay our debt.
However, this measure does not represent funds available for
investment or other discretionary uses since it does not deduct
cash used to service our debt, nor does it reflect the cash impacts
of our discontinued operations.
About CPI Card Group Inc.
CPI Card Group is a leading provider in payment card production
and related services, offering a single source for credit, debit
and prepaid debit cards including EMV® chip and dual interface,
personalization, instant issuance, fulfillment and digital payment
services. With more than 20 years of experience in the payments
market and as a trusted partner to financial institutions, CPI’s
solid reputation of product consistency, quality and outstanding
customer service supports our position as a leader in the market.
Serving our customers from locations throughout the United States
and Canada, we have a large network of high security facilities in
North America, each of which is certified by one or more of the
payment brands: Visa, Mastercard®, American Express, Discover and
Interac in Canada. Learn more at www.cpicardgroup.com.
Conference Call and Webcast
CPI Card Group Inc. will hold a conference call on March 6, 2019
at 9:00 a.m. ET to review its fourth quarter and full year 2018
results. To participate in the Company's conference call via
telephone or online:
Participant Toll-Free Dial-In Number: (800)
860-2442Participant International Dial-In Number: (412)
858-4600Webcast Link:
https://services.choruscall.com/links/pmts190306.html
Participants are advised to login for the live webcast 10
minutes prior to the scheduled start time.
A replay of the conference call and webcast will be available
until March 20, 2019 at:
Replay: (877) 344-7529 or (412)
317-0088;Conference ID: 10127909Webcast replay:
http://investor.cpicardgroup.com
Forward-Looking Statements
Certain statements and information in this earnings release may
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933, as amended (the “1933 Act”) and Section
21E of the Securities Exchange Act of 1934, as amended (the “1934
Act”). The words “believe,” “estimate,” “project,” “expect,”
“anticipate,” “plan,” “intend,” “foresee,” “should,” “would,”
“could” or other similar expressions are intended to identify
forward-looking statements, which are generally not historical in
nature. These forward-looking statements are based on our current
expectations and beliefs concerning future developments and their
potential effect on us, and other information currently available.
Such statements reflect our current views with respect to future
events and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended. We are
making investors aware that such forward-looking statements,
because they relate to future events, are by their very nature
subject to many important factors that could cause actual results
to differ materially from those contemplated. These risks and
uncertainties include, but are not limited to: our substantial
indebtedness, including inability to make debt service payments or
refinance such indebtedness; the restrictive terms of our credit
facility and covenants of future agreements governing indebtedness
and the resulting restraints on our ability to pursue our business
strategies; our limited ability to raise capital in the
future; system security risks, data protection breaches and
cyber-attacks and possible exposure to litigation and/or regulatory
penalties under applicable data privacy and other laws for failure
to prevent such incidents; interruptions in our operations,
including our IT systems, or in the operations of the third parties
that operate the data centers or computing infrastructure on which
we rely; our failure to maintain our listing on the NASDAQ Capital
Market; our inability to adequately protect our trade secrets and
intellectual property rights from misappropriation or infringement,
claims that our technology is infringing on the intellectual
property of others, and risks related to open source software;
defects in our software; problems in production quality and
process; our failure to retain our existing customers or identify
and attract new customers; a loss of market share or a decline in
profitability resulting from competition; our inability to recruit,
retain and develop qualified personnel, including key personnel;
our inability to sell, exit, reconfigure or consolidate businesses
or facilities that no longer meet with our strategy; our inability
to develop, introduce and commercialize new products; the effect of
legal and regulatory proceedings; developing technologies that make
our existing technology solutions and products less relevant or a
failure to introduce new products and services in a timely
manner; quarterly variation in our operating results;
infringement of our intellectual property rights, or claims that
our technology is infringing on third-party intellectual property;
our inability to realize the full value of our long-lived assets;
our failure to operate our business in accordance with the PCI
Security Standards Council (“PCI”) security standards or other
industry standards such as Payment Card Brand certification
standards; costs relating to the obligatory collection of sales tax
and claims for uncollected sales tax in states that impose sales
tax collection requirements on out-of-state companies; disruption
or delays in our manufacturing operations or supply chain; a
decline in U.S. and global market and economic conditions and
resulting decreases in consumer and business spending; costs
relating to product defects and any related product liability
and/or warranty claims; maintenance and further imposition of
tariffs and/or trade restrictions on goods imported into the United
States; our dependence on licensing arrangements; risks
associated with international operations; non-compliance with, and
changes in, laws in the United States and in foreign jurisdictions
in which we operate and sell our products; risks associated with
the controlling stockholders’ ownership of our stock; and other
risks that are described in Part I, Item 1A – Risk Factors of our
Form 10-K and our other reports filed from time to time with the
Securities and Exchange Commission (the “SEC”).
We caution and advise readers not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
These statements are based on assumptions that may not be realized
and involve risks and uncertainties that could cause actual results
to differ materially from the expectations and beliefs contained
herein. We undertake no obligation to publicly update or revise any
forward-looking statements after the date they are made, whether as
a result of new information, future events or otherwise.
For more information:
CPI encourages investors to use its investor relations website
as a way of easily finding information about the company. CPI
promptly makes available on this website, free of charge, the
reports that the company files or furnishes with the SEC, corporate
governance information and press releases. CPI uses its investor
relations site (http://investor.cpicardgroup.com) as a means of
disclosing material information and for complying with its
disclosure obligations under Regulation FD.
CPI Card Group Inc. Earnings Release Supplemental
Financial Information
Exhibit A Condensed Consolidated
Statements of Operations and Comprehensive Loss - Unaudited for the
three months and full years ended December 31, 2018 and 2017
Exhibit B Condensed Consolidated Balance Sheets – Unaudited as of
December 31, 2018 and 2017 Exhibit C Condensed Consolidated
Statements of Cash Flows - Unaudited for the years ended December
31, 2018 and 2017 Exhibit D Segment Summary Information –
Unaudited for the three months and full years ended December 31,
2018 and 2017 Exhibit E Supplemental GAAP to Non-GAAP
Reconciliations - Unaudited for the three months and full years
ended December 31, 2018 and 2017 EXHIBIT A
CPI
Card Group Inc. and Subsidiaries Condensed Consolidated
Statements of Operations and Comprehensive Loss (Dollars in
Thousands, Except Per Share Amounts) (Unaudited)
Three Months Ended December 31,
Year Ended December 31, 2018
2017 2018 2017 Net sales:
Products $ 34,158 $ 24,815 $ 125,069 $ 104,459 Services
34,358 32,674 130,745
119,285 Total net sales 68,516 57,489
255,814 223,744 Cost of sales:
Products (exclusive of depreciation and amortization shown below)
23,034 16,803 82,110 70,527 Services (exclusive of depreciation and
amortization shown below) 21,706 20,605 82,697 74,315 Depreciation
and amortization 2,797 2,634
12,417 10,697 Total cost of sales
47,537 40,042 177,224
155,539 Gross profit 20,979 17,447 78,590 68,205 Operating
expenses: Selling, general and administrative (exclusive of
depreciation and amortization shown below) 19,895 18,405 68,014
62,206 Impairments — 19,074 — 19,074 Depreciation and amortization
1,475 1,446 5,988
6,225 Total operating expenses 21,370
38,925 74,002 87,505 Income
(loss) from operations (391 ) (21,478 ) 4,588 (19,300 ) Other
expense, net: Interest, net (6,188 ) (5,318 ) (23,431 ) (20,850 )
Foreign currency (loss) gain (63 ) (3 ) (311 ) 517 Other income,
net 1 1 16 12
Total other expense, net (6,250 ) (5,320 )
(23,726 ) (20,321 ) Loss before income taxes
(6,641 ) (26,798 ) (19,138 ) (39,621 ) Income tax benefit (expense)
(594 ) 12,382 4,339
16,536 Net loss from continuing operations (7,235 ) (14,416
) (14,799 ) (23,085 ) Discontinued operations: Net (loss) income
from discontinued operation, net of taxes (112 ) (191
) (22,663 ) 1,075 Net loss $ (7,347 ) $
(14,607 ) $ (37,462 ) $ (22,010 ) Basic and Diluted Loss per
Share: Continuing operations $ (0.65 ) $ (1.29 ) $ (1.33 ) $ (2.08
) Discontinued operations (0.01 )
(0.02
)
(2.03
) 0.10
$
(0.66 ) $
(1.31
) $
(3.36
) $ (1.98 ) Weighted-average shares outstanding: Basic and
dilutive 11,160,377 11,134,633 11,149,554 11,117,454
Dividends declared per common share $ — $ — $ — $ 0.45
Comprehensive loss Net loss $ (7,347 ) $ (14,607 ) $ (37,462 ) $
(22,010 ) Reclassification adjustment from discontinued operations
— — 3,983 — Currency translation adjustment (118 ) 56
(205 ) 1,277 Total comprehensive loss $
(7,465 ) $ (14,551 ) $ (33,684 ) $ (20,733 )
EXHIBIT B
CPI Card Group Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (Dollars in Thousands, Except
Share and Per Share Amounts) (Unaudited)
December 31,
December 31, 2018 2017 Assets
Current assets: Cash and cash equivalents $ 20,291 $ 23,205
Accounts receivable, net of allowances of $211 and $48,
respectively 43,794 32,531 Inventories 9,827 13,799 Prepaid
expenses and other current assets 4,997 3,681 Income taxes
receivable 5,564 8,208 Assets of discontinued operation —
20,651 Total current assets 84,473 102,075
Plant, equipment and leasehold improvements, net 39,110 44,436
Intangible assets, net 35,437 40,093 Goodwill 47,150 47,150 Other
assets 1,034 251 Total assets $ 207,204
$ 234,005
Liabilities and stockholders’
deficit Current liabilities: Accounts payable $ 16,511 $ 13,239
Accrued expenses 23,853 12,789 Deferred revenue and customer
deposits 912 3,342 Liabilities of discontinued operation —
5,669 Total current liabilities 41,276 35,039
Long-term debt 305,818 303,869 Deferred income taxes 5,749 12,168
Other long-term liabilities 3,937 2,503
Total liabilities 356,780 353,579 Commitments and
contingencies Stockholders’ deficit: Common Stock; $0.001
par value—100,000,000 shares authorized; 11,160,377 and 11,134,714
shares issued and outstanding as of December 31, 2018 and December
31, 2017, respectively 11 11 Capital deficiency (112,223 ) (113,081
) Accumulated loss (36,004 ) (1,366 ) Accumulated other
comprehensive loss (1,360 ) (5,138 ) Total
stockholders’ deficit (149,576 ) (119,574 ) Total
liabilities and stockholders’ deficit $ 207,204 $ 234,005
EXHIBIT C
CPI Card Group Inc. and
Subsidiaries Condensed Consolidated Statements of Cash
Flows (Dollars in Thousands) (Unaudited)
Year Ended December 31, 2018
2017 Operating activities Net loss $ (37,462 )
$ (22,010 ) Adjustments to reconcile net loss to net cash provided
by operating activities: Loss (income) from discontinued operations
22,663 (1,075 ) Impairments — 19,074 Depreciation and amortization
expense 18,405 16,922 Stock-based compensation expense 961 1,989
Amortization of debt issuance costs and debt discount 1,949 1,947
Deferred income taxes (6,897 ) (9,167 ) Other, net 302 (165 )
Changes in operating assets and liabilities: Accounts receivable
(5,523 ) (6,396 ) Inventories (1,998 ) 2,826 Prepaid expenses and
other assets (2,108 ) 619 Income taxes 2,644 (8,581 ) Accounts
payable 2,411 5,655 Accrued expenses 10,436 (456 ) Deferred revenue
and customer deposits 632 599 Other liabilities 655
1,671 Cash provided by operating activities -
continuing operations 7,070 3,452 Cash used in operating activities
- discontinued operations (3,550 ) (1,025 )
Investing
activities Acquisitions of plant, equipment and leasehold
improvements (5,634 ) (7,263 ) Cash used in investing
activities - continuing operations (5,634 ) (7,263 ) Cash used in
investing activities - discontinued operations (220 ) (1,527 )
Financing activities Dividends paid on common stock — (7,540
) Payments on capital leases (519 ) — Taxes withheld and paid on
stock-based compensation awards — (341 ) Cash
used in financing activities (519 ) (7,881 ) Effect of exchange
rates on cash (61 ) 494 Net decrease in cash
and cash equivalents (2,914 ) (13,750 ) Cash and cash equivalents,
beginning of period 23,205 36,955 Cash
and cash equivalents, end of period $ 20,291 $ 23,205
EXHIBIT D
CPI Card Group Inc. and Subsidiaries
Segment Summary Information For the Three Months and Year
Ended December 31, 2018 and 2017 (Dollars in Thousands)
(Unaudited) Net Sales (1) and (2)
Three Months Ended December 31, 2018
2017 $ Change
% Change Net sales by segment:
U.S. Debit and Credit
$ 49,605 $ 40,042 $ 9,563 23.9 % U.S. Prepaid Debit 17,071 16,104
967 6.0 % Other 2,292 2,658 (366 )
(13.8
)%
Eliminations (452 ) (1,315 ) 863 * %
Total $ 68,516 $ 57,489 $ 11,027 19.2 %
* Calculation not meaningful
Year Ended December 31, 2018
2017 $ Change %
Change Net sales by segment:
U.S. Debit and Credit
$ 178,597 $ 162,216 $ 16,381 10.1 % U.S. Prepaid Debit 69,199
57,005 12,194 21.4 % Other 9,891 11,049 (1,158 )
(10.5
)%
Eliminations (1,873 ) (6,526 ) 4,653 *
% Total $ 255,814 $ 223,744 $ 32,070 14.3 %
* Calculation not meaningful
Gross Profit (1) and (2)
Three Months Ended December 31, 2018
% of NetSales 2017
% of NetSales $ Change
% Change Gross profit by segment:
U.S. Debit and Credit
$ 14,145 28.5 % $ 10,944 27.2 % $ 3,201 29.2 % U.S. Prepaid Debit
6,311 37.0 % 5,941 36.9 % 370 6.2 % Other 523 * % 562
* % (39 )
(6.9
)%
Total $ 20,979 30.6 % $ 17,447 30.3 % $ 3,532 20.2 %
* Calculation not meaningful
Year Ended December 31, 2018
% of NetSales 2017
% of NetSales $ Change
% Change Gross profit by segment:
U.S. Debit and Credit
$ 50,036 28.0 % $ 45,179 27.8 % $ 4,857 10.8 % U.S. Prepaid Debit
26,422 38.2 % 20,358 35.7 % 6,064 29.8 % Other 2,132 * %
2,668 * % (536 )
(20.1
)%
Total $ 78,590 30.7 % $ 68,205 30.5 % $ 10,385 15.2 %
* Calculation not meaningful
Income (loss) from Operations (1) and (2)
Three Months Ended December 31, 2018
% of NetSales 2017
% of NetSales $
Change % Change Income (loss) from
Operations by segment:
U.S. Debit and Credit
$ 6,764 13.6 % $ (12,645 )
(31.6
)%
$ 19,409 * % U.S. Prepaid Debit 4,996 29.3 % 5,084 31.6 % (88 )
(1.7
)%
Other (12,151 ) * % (13,917 ) * % 1,766
12.7 % Total $ (391 )
(0.6
)%
$ (21,478 )
(37.4
)%
$ 21,087 98.2 %
* Calculation not meaningful
Year Ended December 31, 2018
% of NetSales 2017
% of NetSales $ Change
% Change Income (loss) from Operations by
segment:
U.S. Debit and Credit
$ 22,414 12.6 % $ 2,121 1.3 % $ 20,293 956.8 % U.S. Prepaid Debit
21,928 31.7 % 16,679 29.3 % 5,249 31.5 % Other (39,754 ) * %
(38,100 ) * % (1,654 )
(4.3
)%
Total $ 4,588 1.8 % $ (19,300 )
(8.6
)%
$ 23,888 * %
* Calculation not meaningful
EBITDA (1), (2) and (3) Three
Months Ended December 31, 2018 % of
NetSales 2017 % of
NetSales $ Change
% Change EBITDA by segment
U.S. Debit and Credit
$ 9,425 19.0 % $ (10,255 )
(25.6
)%
$ 19,680 * % U.S. Prepaid Debit 5,445 31.9 % 5,592 34.7 % (147 )
(2.6
)%
Other (11,051 ) * % (12,737 ) * % 1,686
13.2 % Total $ 3,819 5.6 % $ (17,400 )
(30.3
)%
$ 21,219 121.9 % * Calculation not meaningful
Year Ended December 31, 2018 % of
NetSales 2017 % of
NetSales $ Change
% Change EBITDA by segment (1)
U.S. Debit and Credit
$ 34,213 19.2 % $ 11,618 7.2 % $ 22,595 194.5 % U.S. Prepaid Debit
23,782 34.4 % 18,847 33.1 % 4,935 26.2 % Other (35,297 ) * %
(32,314 ) * % (2,983 )
(9.2
)%
Total $ 22,698 8.9 % $ (1,849 )
(0.8
)%
$ 24,547 * % * Calculation not meaningful
____________________
Note the tables in this exhibit are presented on a continuing
operations basis. (1) On August 3, 2018, we completed the
sale of the U.K. Limited segment. During the second quarter of
2018, we met the criteria to report the U.K. Limited segment as a
discontinued operation. The financial position, results of
operations and cash flows have been restated for all periods to
conform with discontinued operations presentation. (2) During the
first quarter of 2018, we reorganized our United States business
operations and realigned our United States reporting segments to
correspond with the manner with which our chief decision maker
evaluates operating performance and makes decisions as to the
allocation of resources. As a result of this realignment, our CPI
on Demand business operations were moved from U.S. Prepaid Debit
into the U.S. Debit and Credit reporting segment, consistent with
the other related personalization operations. Segment information
for previous periods has been restated to conform with this
realignment and current period presentation. The restatement of
2017 segment information was not material. (3)
EBITDA is the primary measure used by
management to evaluate segment operating performance. The principal
difference between Income from operations and EBITDA is that EBITDA
is adjusted to exclude Depreciation and amortization expense of
$2,658 and $2,390 in U.S. Debit and Credit; $454 and $507 in U.S.
Prepaid Debit and $1,160 and $1,183 in Other for the three months
ended December 31, 2018 and 2017, respectively, and $11,801 and
$9,497 in U.S. Debit and Credit; $1,859 and $2,168 in U.S. Prepaid
Debit and $4,745 and $5,257 in Other for the years ended December
31, 2018 and 2017, respectively.
EXHIBIT E
CPI Card Group Inc. and Subsidiaries
Supplemental GAAP to Non-GAAP Reconciliation (Dollars in
Thousands, Except Shares and Per Share Amounts)
(Unaudited) Three
Months Ended December 31, Year Ended December
31, 2018 2017 2018
2017 EBITDA and Adjusted EBITDA: Net loss from
continuing operations $ (7,235 ) $ (14,416 ) $ (14,799 ) $ (23,085
) Interest expense, net 6,188 5,318 23,431 20,850 Income tax
(benefit) expense 594 (12,382 ) (4,339 ) (16,536 ) Depreciation and
amortization 4,272 4,080 18,405
16,922
EBITDA $ 3,819 $ (17,400 ) $
22,698 $ (1,849 )
Adjustments to EBITDA
Impairments(1) — 19,074 — 19,074 Litigation and related charges (2)
3 1,015 1,042 4,514 Stock-based compensation expense 219 622 961
1,989 Restructuring and other charges (3) 955 — 2,051 — Foreign
currency loss (gain) 63 3 311
(517 ) Subtotal of adjustments to EBITDA 1,240
20,714 4,365 25,060
Adjusted EBITDA $ 5,059 $ 3,314 $
27,063 $ 23,211
Adjusted EBITDA Margin (%
of Net Sales) 7.4 % 5.8 % 10.6 %
10.4 %
% increase period over period 52.7 % —
16.6 % —
Three Months
Ended December 31, Year Ended December 31, 2018
2017 2018 2017 Adjusted net loss from
continuing operations and loss per share - continuing
operations: Net loss from continuing operations $ (7,235 ) $
(14,416 ) $ (14,799 ) $ (23,085 ) Impairments(1) — 19,074 — 19,074
Amortization of intangible assets 1,164 1,140 4,655 4,655
Litigation and related charges (2) 3 1,015 1,042 4,514 Stock-based
compensation expense 219 622 961 1,989 Restructuring and other
charges (3) 955 — 2,051 — Tax effect of above items (492 )
(7,648 ) (1,829 ) (10,581 )
Adjusted net
loss from continuing operations $ (5,386 ) $ (213 ) $ (7,919 )
$ (3,434 )
Three Months Ended December 31,
Year Ended December 31, 2018 2017 2018
2017 Weighted-average number of shares outstanding:
Basic 11,160,377 11,134,633 11,149,554 11,117,454 Effect of
dilutive equity awards — — —
— Weighted-average diluted shares outstanding
11,160,377 11,134,633 11,149,554
11,117,454
Three Months Ended December
31, Year Ended December 31, 2018 2017
2018 2017 Reconciliation of loss per share -
continuing operations (GAAP) to adjusted diluted loss per share -
continuing operations: Diluted (loss) per share (GAAP) -
continuing operations $ (0.65 ) $ (1.29 ) $ (1.33 ) $ (2.08 )
Impact of net (loss) income adjustments 0.17
1.27
0.62 1.77
Adjusted diluted
loss per share - continuing operations $ (0.48 ) $
(0.02
) $ (0.71 ) $ (0.31 )
Three Months Ended December
31, Year Ended December 31, 2018 2017
2018 2017 Reconciliation of cash provided by
operating activities - continuing operations (GAAP) to free cash
flow: Cash provided by operating activities - continuing
operations $ 8,914 $ 7,546 $ 7,070 $ 3,452 Acquisitions of plant,
equipment and leasehold improvements (606 ) (974 )
(5,634 ) (7,263 ) Free cash flow - continuing
operations $ 8,308 $ 6,572 $ 1,436 $ (3,811 )
Three Months Ended December 31, Year Ended
December 31, 2018 2017 2018 2017
Reconciliation of US Debit and Credit Segment EBITDA excluding
impairments EBITDA $ 9,425 $ (10,255 ) $ 34,213 $ 11,618
Impairment (1)
— 17,181 — 17,181
US Debit and Credit Segment EBITDA excluding goodwill
impairment $ 9,425 $ 6,926 $ 34,213 $ 28,799
EBITDA Margin (% of Net Sales) 19.0 %
17.3 % 19.2 % 17.8 %
% increase period over
period 36.1 % — 18.8 % —
____________________
Note that tables in this exhibit are presented on a continuing
operations basis.
(1)
Impairment charges of goodwill and intangibles in 2017 of
$19.1 million includes $17.2 million related to U.S. Debit and
Credit and $1.9 million related to Other.
(2)
Represents net legal costs incurred with certain patent and
shareholder litigation.
(3)
Represents primarily employee and lease termination costs incurred
in connection with the decision to consolidate three
personalization operations in the United States to two facilities,
and employee termination costs incurred in the fourth quarter of
2018 in connection with the sale of our Canadian operations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190306005201/en/
CPI Card Group Inc. Investor Relations:Jennifer
Almquist(877) 369-9016InvestorRelations@cpicardgroup.comCPI Card
Group Inc. Media Relations:Media@cpicardgroup.com
CPI Card (NASDAQ:PMTS)
Historical Stock Chart
From Mar 2024 to Apr 2024
CPI Card (NASDAQ:PMTS)
Historical Stock Chart
From Apr 2023 to Apr 2024