Second Quarter Net Sales Up 9% Year Over Year,
Up 15% in First Half
Continuing Operations - GAAP Net Income
Improves to $1.6 Million in Second Quarter, Improves 76% to $1.5
Million Net Loss in First Half
Adjusted EBITDA of $8.5 Million in Second
Quarter, Up 28% Year Over Year to $16.5 Million in First Half
Cash of $17.5 Million, Available Revolver of
$20.0 million, Available Liquidity of $37.5 Million at Quarter
End
Call scheduled for Wednesday, August 7, 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
second quarter and first half ended June 30, 2019.
“Our customer-centric strategy continues to yield positive
top-line momentum, as reflected in the 15% year-over-year net sales
growth we have delivered so far this year,” said Scott Scheirman,
President and Chief Executive Officer of CPI. “During the first
half, our U.S. Debit and Credit segment increased net sales 24% on
greater volume and product diversification, and our Prepaid Debit
segment grew net sales 6% on top of a particularly strong first
half in 2018. We’ve executed solidly towards our goal 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 for the comparative 2018 periods, including
non-GAAP measures, discussed in this press release reflect
continuing operations unless otherwise noted. The sale of CPI U.K.,
which occurred in August 2018 and had historically been reported as
the U.K. Limited segment, was accounted for as discontinued
operations and comparative financial information has been restated
in accordance with U.S. GAAP (“GAAP”) requirements.
Second Quarter and First Half 2019 Consolidated Financial
Highlights from Continuing Operations
Net sales increased 8.9% to $66.9 million in the second quarter
of 2019, bringing year-to-date net sales to $133.8 million, a
year-over-year increase of 15.0%. During the second quarter, the
Company recognized in income from operations a $6.0 million gain
related to the cash settlement of litigation. The litigation has
been disclosed in the Company’s SEC filings since the Company
brought the complaint in 2017, and details of the settlement are
disclosed in the Company’s Form 10-Q filed earlier today. The gain
from this settlement, as well as a more favorable net sales mix,
drove second quarter and first half 2019 income from operations to
$10.1 million and $13.7 million, respectively, compared with $2.7
million and $0.3 million in the second quarter and first half of
2018, respectively.
Second quarter 2019 net income from continuing operations was
$1.6 million, or $0.14 per diluted share, compared to a net loss of
$0.8 million, or $0.07 per diluted share in the second quarter of
2018. For the year-to-date periods, net loss from continuing
operations was $1.5 million, or $0.14 per diluted share, in 2019
compared to a net loss of $6.5 million, or $0.58 per diluted share,
in 2018.
Adjusted EBITDA, which excludes the $6 million litigation
settlement gain, was $8.5 million and $16.5 million for the second
quarter and first half 2019, respectively. Year over year, second
quarter 2019 Adjusted EBITDA was down 4.4%, and first half 2019
Adjusted EBITDA was up 28.1%.
Second Quarter and First Half Segment Information from
Continuing Operations
U.S. Debit and Credit:
Second quarter net sales of $51.1 million represented an
increase of 16.5% year over year. This contributed to a first half
net sales year-over-year increase of 23.5%, to $100.0 million.
These increases were driven by a double-digit percentage increase
in EMV® card manufacturing volumes, propelled by dual-interface
EMV® cards, as well as higher card personalization and fulfillment
sales.
U.S. Prepaid Debit:
Second quarter net sales increased 3.5% year over year to $16.0
million and first half net sales increased 5.7% year over year to
$32.7 million. These increases were on top of strong 2018 net
sales, which included portfolio wins that, as expected, did not
recur in the 2019 periods.
Balance Sheet, Liquidity, and Cash Flow from Continuing
Operations
During the second quarter of 2019, the Company generated cash
from operating activities of $9.2 million, inclusive of the $6.0
million litigation settlement gain, and spent $0.5 million on
capital expenditures. This resulted in adjusted free cash flow
generation of $2.7 million in the second quarter. As expected, and
consistent with historical seasonal cash flow patterns, the
Company’s operations generated a use of cash during the first half
of 2019.
As of June 30, 2019, cash and cash equivalents was $17.5
million, an increase of $9.6 million from March 31, 2019. As of
June 30, 2019, the Company’s revolving credit facility had no
borrowings outstanding and available borrowings of $20.0 million.
The revolving credit facility matures August 17, 2020.
Total debt principal outstanding, comprised of the Company’s
First Lien Term Loan, was $312.5 million at June 30, 2019,
unchanged from December 31, 2018. Net of debt issuance costs and
discount, total debt was $306.8 million as of June 30, 2019. The
Company’s First Lien Term Loan matures in August 2022.
John Lowe, Chief Financial Officer, stated, “We continue to be
encouraged by solid year-over-year net sales growth which, in turn,
yielded greater operating leverage and enabled us to generate cash
in the second quarter. We believe we have adequate cash and
liquidity to support our business plan.”
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: EBITDA, Adjusted
EBITDA, Adjusted EBITDA margin, and Adjusted 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.
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.
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; a litigation settlement gain in the second
quarter of 2019; 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, letters of credit, 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.
Adjusted Free Cash Flow
We define Adjusted Free Cash Flow as cash flow from continuing
operations less capital expenditures from continuing operations,
adjusted for cash received from a litigation settlement gain in the
second quarter of 2019. 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 payment technology company and leading
provider of credit, debit and prepaid solutions delivered
physically, digitally and on-demand. CPI helps our customers foster
connections and build their brands through innovative and reliable
solutions, including financial payment cards, personalization and
fulfillment, and Software-as-a-Service (SaaS) instant issuance. CPI
has more than 20 years of experience in the payments market and is
a trusted partner to financial institutions and payments services
providers. Serving customers from locations throughout the United
States, CPI has a large network of high security facilities, each
of which is registered as PCI Card compliant by one or more of the
payment brands: Visa, Mastercard®, American Express and Discover®.
Learn more at www.cpicardgroup.com.
Conference Call and Webcast
CPI Card Group Inc. will hold a conference call on August 7,
2019 at 9:00 a.m. ET to review its second quarter and first half
2019 results. To participate in the Company's conference call via
telephone or online:
Participant Toll-Free Dial-In Number: (800)
860-2442 Participant International Dial-In Number: (412) 858-4600
Webcast Link:
https://services.choruscall.com/links/pmts190807.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 August 21, 2019 at:
Replay: (877) 344-7529 or (412) 317-0088;
Conference ID: 10133684 Webcast 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 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 information
technology 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 retailers; 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; 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 in our
Annual Report on Form 10-K for the year ended December 31, 2018
filed with the SEC on March 6, 2019 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 Income/ (Loss) - Unaudited for the
three and six months ended June 30, 2019 and 2018
Exhibit B
Condensed Consolidated Balance Sheets –
Unaudited as of June 30, 2019 and December 31, 2018
Exhibit C
Condensed Consolidated Statements of Cash
Flows - Unaudited for the six months ended June 30, 2019 and
2018
Exhibit D
Segment Summary Information – Unaudited
for the three and six months ended June 30, 2019 and 2018
Exhibit E
Supplemental GAAP to Non-GAAP
Reconciliations - Unaudited for the three and six months ended June
30, 2019 and 2018
EXHIBIT A
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations and Comprehensive Income (Loss)
(Amounts in Thousands, Except
Share and Per Share Amounts)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net sales:
Products
$
33,125
$
31,494
$
65,882
$
56,238
Services
33,776
29,960
67,885
60,073
Total net sales
66,901
61,454
133,767
116,311
Cost of sales:
Products (exclusive of depreciation and
amortization shown below)
22,098
18,962
43,587
35,280
Services (exclusive of depreciation and
amortization shown below)
19,647
19,116
40,813
39,780
Depreciation and amortization
2,775
3,501
5,465
6,949
Total cost of sales
44,520
41,579
89,865
82,009
Gross profit
22,381
19,875
43,902
34,302
Operating expenses, net:
Selling, general and administrative
(exclusive of depreciation and amortization shown below)
16,792
15,756
33,210
31,084
Depreciation and amortization
1,493
1,465
3,026
2,927
Litigation settlement gain (1)
(6,000
)
—
(6,000
)
—
Total operating expenses, net
12,285
17,221
30,236
34,011
Income from operations
10,096
2,654
13,666
291
Other expense, net:
Interest, net
(6,438
)
(5,586
)
(12,762
)
(11,092
)
Foreign currency loss
(1,321
)
(466
)
(1,280
)
(264
)
Other income (loss), net
(8
)
3
11
7
Total other expense, net
(7,767
)
(6,049
)
(14,031
)
(11,349
)
Income (loss) from continuing operations
before income taxes
2,329
(3,395
)
(365
)
(11,058
)
Income tax (expense) benefit
(777
)
2,593
(1,180
)
4,578
Net income (loss) from continuing
operations
1,552
(802
)
(1,545
)
(6,480
)
Net income (loss) from discontinued
operation, net of tax
(30
)
(15,907
)
12
(17,521
)
Net income (loss)
$
1,522
$
(16,709
)
$
(1,533
)
$
(24,001
)
Basic and diluted earnings (loss) per
share:
Basic and diluted-Continuing
operations
$
0.14
$
(0.07
)
$
(0.14
)
$
(0.58
)
Basic and diluted-Discontinued
operation
—
(1.43
)
—
(1.57
)
Net earnings (loss) per share
$
0.14
$
(1.50
)
$
(0.14
)
$
(2.15
)
Weighted-average common share
outstanding:
Basic
11,178,462
11,143,230
11,169,468
11,138,972
Dilutive
11,242,225
11,143,230
11,169,468
11,138,972
Comprehensive loss:
—
Net income (loss)
$
1,522
$
(16,709
)
$
(1,533
)
$
(24,001
)
Currency translation adjustment
0
(494
)
31
(185
)
Reclassification adjustment to foreign
currency loss
1,329
—
1,329
—
Total comprehensive income (loss)
$
2,851
$
(17,203
)
$
(173
)
$
(24,186
)
(1) During the second quarter, the Company
recognized in operating income a $6.0 million gain related to the
cash settlement of litigation. The litigation has been disclosed in
the Company’s SEC filings since the Company brought the complaint
in 2017, and details of the settlement are disclosed in the
Company’s Form 10-Q filed earlier today.
EXHIBIT B
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(Amounts in Thousands, Except
Share and Per Share Amounts)
June 30,
December 31,
2019
2018
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
17,484
$
20,291
Accounts receivable, net of allowances of
$290 and $211, respectively
42,220
43,794
Inventories
14,854
9,827
Prepaid expenses and other current
assets
4,106
4,997
Income taxes receivable
5,305
5,564
Total current assets
83,969
84,473
Plant, equipment and leasehold
improvements, net
45,515
39,110
Intangible assets, net
33,109
35,437
Goodwill
47,150
47,150
Other assets
549
1,034
Total assets
$
210,292
$
207,204
Liabilities and stockholders’
deficit
Current liabilities:
Accounts payable
$
14,415
$
16,511
Accrued expenses
20,846
23,853
Deferred revenue and customer deposits
350
912
Total current liabilities
35,611
41,276
Long-term debt
306,796
305,818
Deferred income taxes
6,342
5,749
Other long-term liabilities
11,008
3,937
Total liabilities
359,757
356,780
Commitments and contingencies
Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000
shares authorized; 11,223,528 and 11,160,377 shares issued and
outstanding as of June 30, 2019 and December 31, 2018,
respectively
11
11
Capital deficiency
(111,939
)
(112,223
)
Accumulated loss
(37,537
)
(36,004
)
Accumulated other comprehensive loss
—
(1,360
)
Total stockholders’ deficit
(149,465
)
(149,576
)
Total liabilities and stockholders’
deficit
$
210,292
$
207,204
EXHIBIT C
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(Amounts in Thousands)
(Unaudited)
Six Months Ended June
30,
2019
2018
Operating activities
Net loss
$
(1,533
)
$
(24,001
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss (income) from discontinued
operation
(12
)
17,521
Depreciation and amortization expense
8,491
9,876
Stock-based compensation expense
308
784
Amortization of debt issuance costs and
debt discount
979
972
Deferred income taxes
593
(4,782
)
Reclassification adjustment to foreign
currency loss
1,329
—
Other, net
(190
)
158
Changes in operating assets and
liabilities:
Accounts receivable
66
(6,577
)
Inventories
(5,028
)
(2,466
)
Prepaid expenses and other assets
1,593
(299
)
Income taxes
228
2,284
Accounts payable
(1,042
)
2,271
Accrued expenses
(6,249
)
3,093
Deferred revenue and customer deposits
(564
)
25
Other liabilities
74
(212
)
Cash used in operating activities -
continuing operations
(957
)
(1,353
)
Cash provided by (used in) operating
activities - discontinued operation
12
(1,152
)
Investing activities
Acquisitions of plant, equipment and
leasehold improvements
(2,686
)
(2,109
)
Cash received for sale of Canadian
subsidiary
1,451
—
Cash used in investing activities -
continuing operations
(1,235
)
(2,109
)
Cash used in investing activities -
discontinued operation
—
(536
)
Financing activities
Proceeds from revolving credit
facility
11,500
—
Payments on revolving credit facility
(11,500
)
—
Payments on financing leases
(663
)
(306
)
Cash used in financing activities
(663
)
(306
)
Effect of exchange rates on cash
36
1
Net decrease in cash and cash
equivalents
(2,807
)
(5,455
)
Cash and cash equivalents, beginning of
period
20,291
23,205
Cash and cash equivalents, end of
period
$
17,484
$
17,750
Supplemental disclosures of cash flow
information
Cash paid during the period for:
Interest
$
11,660
$
9,783
Income taxes, net payments (refunds)
$
340
$
(1,504
)
Right-to-use assets obtained in exchange
for lease obligations:
Operating leases
$
8,533
$
—
Financing leases
$
3,366
821
Accounts payable for acquisitions of
plant, equipment and leasehold improvements
$
841
$
970
EXHIBIT D
CPI Card Group Inc. and
Subsidiaries
Segment Summary
Information
For the Three Months Ended
June 30, 2019 and June 30, 2018
(Dollars in Thousands)
(Unaudited)
Net Sales
Three Months Ended June
30,
2019
2018
$ Change
% Change
Net sales by segment:
U.S Debit and Credit
$
51,086
$
43,843
$
7,243
16.5
%
U.S. Prepaid Debit
15,966
15,427
539
3.5
%
Other
—
2,980
(2,980
)
(100.0
)%
Eliminations
(151
)
(796
)
645
*
%
Total
$
66,901
$
61,454
$
5,447
8.9
%
Six Months Ended June
30,
2019
2018
$ Change
% Change
Net sales by segment:
U.S Debit and Credit
$
100,015
$
80,991
$
19,024
23.5
%
U.S. Prepaid Debit
32,710
30,938
1,772
5.7
%
Other
1,679
5,679
(4,000
)
(70.4
)%
Eliminations
(637
)
(1,297
)
660
*
%
Total
$
133,767
$
116,311
$
17,456
15.0
%
* Calculation not meaningful
Gross Profit
Three Months Ended June
30,
2019
% of Net Sales
2018
% of Net Sales
$ Change
% Change
Gross profit by segment:
U.S Debit and Credit
$
15,872
31.1
%
$
13,856
31.6
%
$
2,016
14.5
%
U.S. Prepaid Debit
6,509
40.8
%
5,305
34.4
%
1,204
22.7
%
Other
—
*
%
714
24.0
%
(714
)
*
%
Total
$
22,381
33.5
%
$
19,875
32.3
%
$
2,506
12.6
%
* Calculation not meaningful
Six Months Ended June
30,
2019
% of Net Sales
2018
% of Net Sales
$ Change
% Change
Gross profit by segment:
U.S Debit and Credit
$
31,144
31.1
%
$
22,340
27.6
%
$
8,804
39.4
%
U.S. Prepaid Debit
12,855
39.3
%
10,673
34.5
%
2,182
20.4
%
Other
(97
)
(5.8
)%
1,289
22.7
%
(1,386
)
*
%
Total
$
43,902
32.8
%
$
34,302
29.5
%
$
9,600
28.0
%
* Calculation not meaningful
Income from Operations
Three Months Ended June
30,
2019
% of Net Sales
2018
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
U.S Debit and Credit
$
7,985
15.6
%
$
6,636
15.1
%
$
1,349
20.3
%
U.S. Prepaid Debit
5,374
33.7
%
4,218
27.3
%
1,156
27.4
%
Other
(3,263
)
*
%
(8,200
)
*
%
4,937
60.2
%
Total
$
10,096
15.1
%
$
2,654
4.3
%
$
7,442
280.4
%
* Calculation not meaningful
Six Months Ended June
30,
2019
% of Net Sales
2018
% of Net Sales
$ Change
% Change
Income (loss) from operations by
segment:
U.S Debit and Credit
$
15,761
15.8
%
$
9,158
11.3
%
$
6,603
72.1
%
U.S. Prepaid Debit
10,690
32.7
%
8,543
27.6
%
2,147
25.1
%
Other
(12,785
)
*
%
(17,410
)
*
%
4,625
26.6
%
Total
$
13,666
10.2
%
$
291
0.3
%
$
13,375
4,596.2
%
* Calculation not meaningful
EBITDA
Three Months Ended June
30,
2019
% of Net Sales
2018
% of Net Sales
$ Change
% Change
EBITDA by segment:
U.S Debit and Credit
$
10,590
20.7
%
$
9,933
22.7
%
$
657
6.6
%
U.S. Prepaid Debit
5,880
36.8
%
4,687
30.4
%
1,193
25.5
%
Other
(3,435
)
*
%
(7,463
)
*
%
4,028
54.0
%
Total
$
13,035
19.5
%
$
7,157
11.6
%
$
5,878
82.1
%
Six Months Ended June
30,
2019
% of Net Sales
2018
% of Net Sales
$ Change
% Change
EBITDA by segment:
U.S Debit and Credit
$
20,970
21.0
%
$
15,651
19.3
%
$
5,319
34.0
%
U.S. Prepaid Debit
11,659
35.6
%
9,506
30.7
%
2,153
22.6
%
Other
(11,741
)
*
%
(15,247
)
*
%
3,506
23.0
%
Total
$
20,888
15.6
%
$
9,910
8.5
%
$
10,978
110.8
%
* Calculation not meaningful
Reconciliation of Income (loss)
from
Operations by Segment to EBITDA by
Segment
Three Months Ended June 30,
2019
U.S. Debit and Credit
U.S. Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
7,985
$
5,374
$
(3,263
)
$
10,096
Depreciation and amortization
2,613
525
1,130
4,268
Foreign currency loss and Other
expenses
(8
)
(19
)
(1,302
)
(1,329
)
EBITDA
$
10,590
$
5,880
$
(3,435
)
$
13,035
Three Months Ended June 30,
2018
U.S. Debit and Credit
U.S. Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
6,636
$
4,218
$
(8,200
)
$
2,654
Depreciation and amortization
3,294
468
1,204
4,966
Foreign currency loss and Other
expenses
3
1
(467
)
(463
)
EBITDA
$
9,933
$
4,687
$
(7,463
)
$
7,157
Six Months Ended June 30,
2019
U.S. Debit and Credit
U.S. Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
15,761
$
10,690
$
(12,785
)
$
13,666
Depreciation and amortization
5,217
988
2,286
8,491
Foreign currency loss and Other
expenses
(8
)
(19
)
(1,242
)
(1,269
)
EBITDA
$
20,970
$
11,659
$
(11,741
)
$
20,888
Six Months Ended June 30,
2018
U.S. Debit and Credit
U.S. Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
9,158
$
8,543
$
(17,410
)
$
291
Depreciation and amortization
6,498
962
2,416
9,876
Foreign currency loss and Other
expenses
(5
)
1
(253
)
(257
)
EBITDA
$
15,651
$
9,506
$
(15,247
)
$
9,910
* Calculation not meaningful
EXHIBIT E
CPI Card Group Inc. and
Subsidiaries
Supplemental GAAP to Non-GAAP
Reconciliation
(Dollars in Thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
EBITDA and Adjusted EBITDA:
Net income (loss) from continuing
operations
$
1,552
$
(802
)
$
(1,545
)
$
(6,480
)
Interest expense, net
6,438
5,586
12,762
11,092
Income tax expense (benefit)
777
(2,593
)
1,180
(4,578
)
Depreciation and amortization
4,268
4,966
8,491
9,876
EBITDA
$
13,035
$
7,157
$
20,888
$
9,910
Adjustments to EBITDA:
Stock-based compensation expense
161
389
308
784
Litigation and related charges (1)
8
135
28
831
Restructuring and other charges (2)
—
766
—
1,095
Litigation settlement gain (3)
(6,000
)
—
(6,000
)
—
Foreign currency loss (4)
1,321
466
1,280
264
Subtotal of adjustments to EBITDA
(4,510
)
1,756
(4,384
)
2,974
Adjusted EBITDA
$
8,525
$
8,913
$
16,504
$
12,884
Adjusted EBITDA margin (% of net
sales)
12.7
%
14.5
%
12.3
%
11.1
%
Adjusted EBITDA growth (% Change 2019 vs.
2018)
(4.4
)%
28.1
%
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Reconciliation of cash provided by
(used in) operating activities - continuing operations (GAAP) to
Adjusted Free Cash Flow:
Cash provided by (used in) operating
activities - continuing operations
$
9,239
$
216
$
(957
)
$
(1,353
)
Acquisitions of plant, equipment and
leasehold improvements
(540
)
(1,419
)
(2,686
)
(2,109
)
Cash received from litigation settlement
(3)
(6,000
)
—
(6,000
)
—
Adjusted free cash flow - continuing
operations
$
2,699
$
(1,203
)
$
(9,643
)
$
(3,462
)
____________________ Note that tables in this exhibit are presented
on a continuing operations basis.
(1)
Represents net legal costs incurred with certain patent and
shareholder litigation.
(2)
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.
(3)
During the second quarter of 2019, the Company recognized in
operating income a $6.0 million gain related to the cash settlement
of litigation. The litigation has been disclosed in the Company’s
SEC filings since the Company brought the complaint in 2017, and
details of the settlement are disclosed in the Company’s Form 10-Q
filed earlier today.
(4)
Foreign currency loss includes the release of the cumulative
translation adjustment from the balance sheet to the statement of
operations, done in connection with the disposition of the
Company’s Canadian subsidiary during the second quarter 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190807005110/en/
CPI Card Group Inc. Investor Relations: Jennifer Almquist
(877) 369-9016 InvestorRelations@cpicardgroup.com
CPI Card Group Inc. Media Relations:
Media@cpicardgroup.com
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