Strong Net Sales Growth, Significantly Improved
Bottom-Line Performance
Net Sales Up 16% and 12% Year Over Year in the
Fourth Quarter and Full Year, Respectively
Net Income of $7.3 Million and $16.1 Million,
Improving 404% and 415% in the Fourth Quarter and Full Year,
Respectively
Adjusted EBITDA of $17.5 Million and $57.5
Million, Up 99% and 53% in the Fourth Quarter and Full Year,
Respectively
Cash of $58 Million at Year End
CPI Card Group Inc. (OTCQX: PMTS; TSX: PMTS) (“CPI” or the
“Company”) today reported financial results for the fourth quarter
and full year ended December 31, 2020.
“Our 2020 results were strong, driven by another year of solid
execution of our customer-centric strategy whereby net sales
increased 12% and our profitability significantly increased,” said
Scott Scheirman, President and Chief Executive Officer of CPI.
“Despite challenges presented by the COVID-19 pandemic, we believe
we gained overall market share in 2020 and executed key initiatives
to even better position CPI to meet market and customer needs in
2021 and beyond.”
Scheirman continued, “We believe we are well-positioned to
capitalize on market opportunities, including the ongoing
transition to contactless cards in the U.S. and the market demand
for innovative and differentiated products such as our eco-focused
Second Wave® contactless product, a debit or credit card featuring
a core made with recovered ocean-bound plastic, and Card@Once®, our
Software-as-a-Service instant issuance solution that enables
financial institutions to instantly issue debit and credit cards in
branch.”
Fourth Quarter and Full Year 2020 Financial
Highlights
Net sales increased 16% and 12% year-over-year to $84.1 million
and $312.2 million in the fourth quarter and full year 2020,
respectively. Gross profit increased 41% and 21% year-over-year in
the fourth quarter and full year 2020, respectively. Gross profit
margin increased to 36.8% in the fourth quarter of 2020, compared
to 30.2% in the prior year period. Gross profit margin increased to
35.3% from 32.8% in the full year 2020 compared to the prior
year.
Income from operations was $12.4 million and $38.4 million in
the fourth quarter and full year 2020, respectively, compared with
$3.7 million and $24.7 million in the fourth quarter and full year
2019, respectively. In the second quarter of 2019, the Company
recognized a $6.0 million gain related to the cash settlement of
litigation, which was included in income from operations.
Fourth quarter 2020 net income was $7.3 million, or $0.64 per
diluted share, compared to a net loss of $2.4 million, or a $0.21
loss per diluted share, in the fourth quarter of 2019. For the full
year 2020, net income was $16.1 million, or $1.44 per diluted
share, compared to a net loss of $5.1 million, or a $0.46 loss per
diluted share, in 2019.
Adjusted EBITDA increased 99% and 53% year-over-year to $17.5
million and $57.5 million in the fourth quarter and full year 2020,
respectively.
Fourth Quarter and Full Year 2020 Segment Information
Debit and Credit:
Debit and Credit Segment net sales increased 13% year over year
to $69.6 million in the fourth quarter and 18% to $250.4 million
for full year 2020. Growth for the fourth quarter and full year
2020 was driven primarily by higher volumes of contactless card
sales, including Second Wave® cards featuring a core made with
recovered ocean bound plastic. In addition, net sales increased
from CPI On-Demand® card personalization due to higher volumes from
our existing customers, new customers and from COVID-19 related
government disbursement work. This growth was partially offset
primarily by COVID-19 impacts, including reduced volumes in card
personalization stemming from fewer new accounts and requests for
replacement cards. Card@Once® product sales were also primarily
impacted by COVID-19 due to reduced hours of operation, lack of
access or closure of certain bank branches.
Prepaid Debit:
Prepaid Debit Segment net sales increased 34% year over year to
$14.9 million in the fourth quarter and decreased 1% to $63.6
million for full year 2020. Growth for the fourth quarter was
primarily due to increased customer demand. For the full year, the
decrease was the result of lower sales volumes primarily associated
with COVID-19 impacts, including lower retail store traffic.
Balance Sheet, Liquidity, and Cash Flow
As of December 31, 2020, cash and cash equivalents was $57.6
million. Cash provided by operating activities was $11.9 million
and capital expenditures were $3.8 million in the fourth quarter of
2020, yielding Adjusted Free Cash Flow of $8.1 million. For the
full year 2020, cash provided by operating activities was $22.1
million and capital expenditures were $7.1 million, yielding
Adjusted Free Cash Flow of $15.0 million. This compares with the
full year 2019 when cash provided by operating activities was $3.0
million, or a $3.0 million cash usage when excluding the $6.0
million cash received from a litigation settlement, and capital
expenditures were $4.2 million, resulting in Adjusted Free Cash
Flow use of $7.2 million. For the full year 2020, cash provided by
operating activities and Adjusted Free Cash Flow increased $19.1
million and $22.2 million year-over-year, respectively.
Total debt principal outstanding, comprised of the Company’s $30
million Senior Credit Facility and its $312.5 million First Lien
Term Loan, was $342.5 million at December 31, 2020. As of December
31, 2020, $8.0 million of debt principal was classified as a
current liability as a result of an excess free cash flow
calculation, which the company will offer to prepay pursuant to the
terms of the debt agreements. Net of debt issuance costs and
discount, total long-term debt, net of current maturities, was
$328.7 million as of December 31, 2020. The Company’s Senior Credit
Facility matures in May 2022 and the First Lien Term Loan matures
in August 2022.
“Solid execution led to strong top-line growth and further
leveraging of our business model, enabling us to significantly
improve our bottom line and generate positive free cash flow”, said
John Lowe, Chief Financial Officer. “Our full year financial and
operating performance is reflective of solid progress against our
key strategic priorities. We believe we are well positioned and
have adequate cash and liquidity to support our business plan
moving forward.”
Additional Investor Commentary
The Company has provided additional written commentary regarding
its fourth quarter and full year performance and other business
matters. This earnings press release and the additional written
commentary are available at 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, 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.
Adjusted EBITDA
Adjusted EBITDA is presented on a continuing operations basis
and is defined as EBITDA (which represents earnings before
interest, taxes, depreciation and amortization, all on a continuing
operations basis) adjusted for litigation and related charges
incurred in connection with certain patent and shareholder
litigation; stock-based compensation expense; estimated sales tax
expense (benefit); restructuring and other charges; loss on
Revolving Credit Facility termination; foreign currency gain or
loss; litigation settlement gain; 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 computation in our First Lien
Term Loan and Senior Credit Facility agreements, which generally
conforms to the definition above, and impacts certain credit
measures and covenants, including a covenant requiring the Company
to have at least $25 million Adjusted EBITDA (as defined in our
Senior Credit Facility) for the previous four consecutive fiscal
quarters in total, at the end of each quarterly period ending on or
after March 31, 2020. 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, unusual 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-operating,
unusual 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 represent the reduction
of cash that could be used for other purposes. Further, although
not included in the calculation of Adjusted EBITDA presented in
this release, the measure as defined in our credit facilities 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. 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 provided by (used
in) operating activities - 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. Adjusted Free Cash Flow should not
be considered in isolation, or as a substitute for, cash (used in)
provided by operating activities - continuing operations or any
other measures of liquidity derived in accordance with GAAP.
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
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 compliant by one or more of the payment brands:
Visa, Mastercard®, American Express® and Discover®. Learn more at
www.cpicardgroup.com.
Forward-Looking Statements
Certain statements and information in this presentation (as well
as information included in other written or oral statements we make
from time to time) may contain or 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, and Section 21E of the Securities Exchange Act of 1934, as
amended. The words “believe,” “estimate,” “project,” “expect,”
“anticipate,” “plan,” “intend,” “foresee,” “should,” “would,”
“could,” “guides,” “provides guidance,” “provides outlook” or other
similar expressions are intended to identify forward-looking
statements, which are 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
forward-looking statements, because they relate to future events,
are by their very nature subject to many important risks and
uncertainties that could cause actual results or other events to
differ materially from those contemplated.
These risks and uncertainties include, but are not limited to:
the potential effects of COVID-19 on our business, including our
supply-chain, customer demand, workforce, operations and ability to
comply with certain covenants in our credit facilities; our lack of
eligibility to participate in government relief programs related to
COVID-19 or inability to realize material benefits from such
programs; our substantial indebtedness, including inability to make
debt service payments or refinance such indebtedness; the
restrictive terms of our credit facilities 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; a disruption or other failure in
our supply chain; the effects of current or additional U.S.
government tariffs as well as economic downturns or disruptions,
including delays or interruptions in our ability to source raw
materials and components used in our products from foreign
countries; system security risks, data protection breaches and
cyber-attacks; 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; failure
to comply with regulations, customer contractual requirements and
evolving industry standards regarding consumer privacy and data use
and security; disruptions in production at one or more of our
facilities; our failure to retain our existing customers or
identify and attract new customers; our inability to recruit,
retain and develop qualified personnel, including key personnel;
our inability to adequately protect our trade secrets and
intellectual property rights from misappropriation or infringement
claims and risks related to open source software; defects in our
software; problems in production quality, materials and process; a
loss of market share or a decline in profitability resulting from
competition; our inability to develop, introduce and commercialize
new products; new and developing technologies that make our
existing technology solutions and products obsolete or less
relevant or our failure to introduce new products and services in a
timely manner; costs and impacts to our financial results 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 businesses, new U.S. tax legislation
increasing the corporate income tax rate and challenges to our
income tax positions; failure to meet the continued listing
standards of the Toronto Stock Exchange or the rules of the OTCQX®
Best Market; a continued decrease in the value of our common stock
combined with our common stock no longer being traded on a United
States national securities exchange, which may prevent investors or
potential investors from investing or achieving a meaningful degree
of liquidity; quarterly variation in our operating results; our
inability to realize the full value of our long-lived assets; our
failure to operate our business in accordance with the Payment Card
Industry (“PCI”) Security Standards Council security standards or
other industry standards; 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; 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 and services; the effect of legal and regulatory
proceedings; our ability to comply with a wide variety of
environmental, health and safety laws and regulations and the
exposure to liability for any failure to comply; risks associated
with the controlling stockholders’ ownership of our stock; the
influence of securities analysts over the trading market for and
price of our common stock; our inability to sell, exit, reconfigure
or consolidate businesses or facilities that no longer meet with
our strategy; potential conflicts of interest that may arise due to
our board of directors being comprised in part of directors who are
principals of our majority stockholders; certain provisions of our
organizational documents and other contractual provisions that may
delay or prevent a change in control and make it difficult for
stockholders other than our majority stockholders to change the
composition of our board of directors; 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 Income (Loss) - Unaudited for the
three months and full years ended December 31, 2020 and 2019
Exhibit B
Condensed Consolidated Balance Sheets –
Unaudited as of December 31, 2020 and December 31, 2019
Exhibit C
Condensed Consolidated Statements of Cash
Flows - Unaudited for the years ended December 31, 2020 and
2019
Exhibit D
Segment Summary Information – Unaudited
for the three months and full years ended December 31, 2020 and
2019
Exhibit E
Supplemental GAAP to Non-GAAP
Reconciliations - Unaudited for the three months and full years
ended December 31, 2020 and 2019
EXHIBIT A
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations and Comprehensive Income (Loss)
(Dollars in Thousands, Except
Per Share Amounts)
(Unaudited)
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Net sales:
Products
$
46,928
$
44,096
$
171,968
$
143,941
Services
37,212
28,529
140,221
134,132
Total net sales
84,140
72,625
312,189
278,073
Cost of sales:
Products (exclusive of depreciation and
amortization shown below)
27,862
29,120
107,642
94,889
Services (exclusive of depreciation and
amortization shown below)
22,552
18,752
83,538
80,894
Depreciation and amortization
2,763
2,817
10,701
11,220
Total cost of sales
53,177
50,689
201,881
187,003
Gross profit
30,963
21,936
110,308
91,070
Operating expenses:
Selling, general and administrative
(exclusive of depreciation and amortization shown below)
16,898
16,787
65,791
66,328
Depreciation and amortization
1,628
1,492
6,126
6,031
Litigation settlement gain
—
—
—
(6,000
)
Total operating expenses, net
18,526
18,279
71,917
66,359
Income from operations
12,437
3,657
38,391
24,711
Other expense, net:
Interest, net
(6,239
)
(6,044
)
(25,397
)
(24,891
)
Foreign currency gain (loss)
3
(15
)
(7
)
(1,335
)
Other income (expense), net
(12
)
(29
)
(102
)
(4
)
Total other expense, net
(6,248
)
(6,088
)
(25,506
)
(26,230
)
Income (loss) before income taxes
6,189
(2,431
)
12,885
(1,519
)
Income tax benefit (expense)
1,127
144
3,305
(3,474
)
Net income (loss) from continuing
operations
7,316
(2,287
)
16,190
(4,993
)
Discontinued operations:
Net loss from discontinued operation, net
of tax
(31
)
(108
)
(61
)
(124
)
Net income (loss)
$
7,285
$
(2,395
)
$
16,129
$
(5,117
)
Basic net income (loss) per share from
continuing operations:
$
0.65
$
(0.20
)
$
1.44
$
(0.45
)
Basic net income (loss) per share:
$
0.65
$
(0.21
)
$
1.44
$
(0.46
)
Diluted net income (loss) per share from
continuing operations:
$
0.65
$
(0.20
)
$
1.44
$
(0.45
)
Diluted net income (loss) per share:
$
0.64
$
(0.21
)
$
1.44
$
(0.46
)
Basic weighted-average shares
outstanding:
11,230,482
11,224,191
11,228,707
11,196,710
Diluted weighted-average shares
outstanding:
11,326,078
11,224,191
11,232,004
11,196,710
Comprehensive income (loss)
Net income (loss)
$
7,285
$
(2,395
)
$
16,129
$
(5,117
)
Reclassification adjustment to foreign
currency loss
—
—
—
1,329
Currency translation adjustment
—
—
—
31
Total comprehensive income (loss)
$
7,285
$
(2,395
)
$
16,129
$
(3,757
)
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,
2020
2019
Assets
Current assets:
Cash and cash equivalents
$
57,603
$
18,682
Accounts receivable, net of allowances of
$289 and $395, respectively
54,592
42,832
Inventories
24,796
20,192
Prepaid expenses and other current
assets
5,032
6,345
Income taxes receivable
10,511
4,164
Total current assets
152,534
92,215
Plant, equipment, leasehold improvements
and operating leases right-of-use assets, net
39,403
41,612
Intangible assets, net
26,207
30,802
Goodwill
47,150
47,150
Other assets
857
1,232
Total assets
$
266,151
$
213,011
Liabilities and stockholders’
deficit
Current liabilities:
Accounts payable
$
18,883
$
16,482
Accrued expenses
28,149
24,735
Current portion of Long-term debt
8,027
—
Deferred revenue and customer deposits
1,868
468
Total current liabilities
56,927
41,685
Long-term debt
328,681
307,778
Deferred income taxes
7,409
6,366
Other long-term liabilities
11,171
11,478
Total liabilities
404,188
367,307
Commitments and contingencies
Series A Preferred Stock; $0.001 par
value—100,000 shares authorized; 0 shares issued and
outstanding
—
—
Stockholders’ deficit:
Common Stock; $0.001 par value—100,000,000
shares authorized; 11,230,482 and 11,224,191 shares issued and
outstanding at December 31, 2020 and 2019, respectively
11
11
Capital deficiency
(111,858
)
(111,988
)
Accumulated loss
(26,190
)
(42,319
)
Total stockholders’ deficit
(138,037
)
(154,296
)
Total liabilities and stockholders'
deficit
$
266,151
$
213,011
EXHIBIT C
CPI Card Group Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Year Ended December
31,
2020
2019
Operating activities
Net income (loss)
$
16,129
$
(5,117
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Loss from discontinued operations
61
124
Depreciation and amortization expense
16,827
17,251
Stock-based compensation expense
136
250
Amortization of debt issuance costs and
debt discount
3,453
1,960
Deferred income taxes
1,043
969
Reclassification adjustment to foreign
currency loss
—
1,329
Other, net
1,834
153
Changes in operating assets and
liabilities:
Accounts receivable
(11,662
)
(688
)
Inventories
(6,105
)
(10,410
)
Prepaid expenses and other assets
494
(1,328
)
Income taxes
(6,346
)
1,369
Accounts payable
1,657
1,127
Accrued expenses
2,958
(3,810
)
Deferred revenue and customer deposits
1,404
(446
)
Other liabilities
192
232
Cash provided by operating activities -
continuing operations
22,075
2,965
Cash used in operating activities -
discontinued operations
(61
)
(124
)
Investing activities
Capital expenditures for plant, equipment
and leasehold improvements
(7,093
)
(4,175
)
Cash received from sale of Canadian
subsidiary
—
1,451
Other
—
150
Cash used in investing activities
(7,093
)
(2,574
)
Financing activities
Proceeds from Senior Credit Facility, net
of discount
29,100
—
Debt issuance costs
(2,507
)
—
Proceeds from revolving credit
facility
—
11,500
Principal payment on revolving credit
facility
—
(11,500
)
Payments on financing leases
(2,616
)
(1,926
)
Cash provided by (used in) financing
activities
23,977
(1,926
)
Effect of exchange rates on cash
23
50
Net increase (decrease) in cash and cash
equivalents
38,921
(1,609
)
Cash and cash equivalents, beginning of
period
18,682
20,291
Cash and cash equivalents, end of
period
$
57,603
$
18,682
Supplemental disclosures of cash flow
information
Cash paid during the period for:
Interest
$
22,750
$
23,036
Income tax payments, net
$
1,043
$
780
Right-of-use assets obtained in exchange
for lease obligations:
Operating leases
$
3,260
$
8,533
Financing leases
$
1,718
$
6,438
Accounts payable and accrued expenses for
capital expenditures for plant, equipment and leasehold
improvements
$
1,052
$
308
EXHIBIT D
CPI Card Group Inc. and
Subsidiaries
Segment Summary
Information
For the Three Months and Year
Ended December 31, 2020 and 2019
(Dollars in Thousands)
(Unaudited)
Net Sales
Three Months Ended December
31,
2020
2019
$ Change
% Change
Net sales by segment:
Debit and Credit
$
69,572
$
61,624
$
7,948
12.9
%
Prepaid Debit
14,916
11,168
3,748
33.6
%
Eliminations
(348
)
(167
)
(181
)
*
%
Total
$
84,140
$
72,625
$
11,515
15.9
%
* Calculation not meaningful
Year Ended December
31,
2020
2019
$ Change
% Change
Net sales by segment:
Debit and Credit
$
250,427
$
213,141
$
37,286
17.5
%
Prepaid Debit
63,596
64,330
(734
)
(1.1
)%
Other
—
1,679
(1,679
)
*
%
Eliminations
(1,834
)
(1,077
)
(757
)
*
%
Total
$
312,189
$
278,073
$
34,116
12.3
%
* Calculation not meaningful
Gross Profit
Three Months Ended December
31,
2020
% of Net Sales
2019
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
25,152
36.2
%
$
18,893
30.7
%
$
6,259
33.1
%
Prepaid Debit
5,811
39.0
%
3,043
27.2
%
2,768
91.0
%
Total
$
30,963
36.8
%
$
21,936
30.2
%
$
9,027
41.2
%
* Calculation not meaningful
Year Ended December
31,
2020
% of Net Sales
2019
% of Net Sales
$ Change
% Change
Gross profit by segment:
Debit and Credit
$
85,833
34.3
%
$
66,353
31.1
%
$
19,480
29.4
%
Prepaid Debit
24,475
38.5
%
24,814
38.6
%
(339
)
(1.4
)%
Other
—
*
%
(97
)
(5.8
)%
97
*
%
Total
$
110,308
35.3
%
$
91,070
32.8
%
$
19,238
21.1
%
* Calculation not meaningful
Income from Operations
Three Months Ended December
31,
2020
% of Net Sales
2019
% of Net Sales
$ Change
% Change
Income (loss) from Operations by
segment:
Debit and Credit
$
16,934
24.3
%
$
11,112
18.0
%
$
5,822
52.4
%
Prepaid Debit
4,563
30.6
%
1,878
16.8
%
2,685
143.0
%
Other
(9,060
)
*
%
(9,333
)
*
%
273
2.9
%
Total
$
12,437
14.8
%
$
3,657
5.0
%
$
8,780
240.1
%
* Calculation not meaningful
Year Ended December
31,
2020
% of Net Sales
2019
% of Net Sales
$ Change
% Change
Income (loss) from Operations by
segment:
Debit and Credit
$
54,848
21.9
%
$
35,149
16.5
%
$
19,699
56.0
%
Prepaid Debit
19,942
31.4
%
20,383
31.7
%
(441
)
(2.2
)%
Other
(36,399
)
*
%
(30,821
)
*
%
(5,578
)
(18.1
)%
Total
$
38,391
12.3
%
$
24,711
8.9
%
$
13,680
55.4
%
* Calculation not meaningful
EBITDA
Three Months Ended December
31,
2020
% of Net Sales
2019
% of Net Sales
$ Change
% Change
EBITDA by segment
Debit and Credit
$
19,449
28.0
%
$
13,643
22.1
%
$
5,806
42.6
%
Prepaid Debit
5,182
34.7
%
2,455
22.0
%
2,727
111.1
%
Other
(7,812
)
*
%
(8,176
)
*
%
364
4.5
%
Total
$
16,819
20.0
%
$
7,922
10.9
%
$
8,897
112.3
%
* Calculation not meaningful
Year Ended December
31,
2020
% of Net Sales
2019
% of Net Sales
$ Change
% Change
EBITDA by segment
Debit and Credit
$
64,522
25.8
%
$
45,635
21.4
%
$
18,887
41.4
%
Prepaid Debit
22,156
34.8
%
22,456
34.9
%
(300
)
(1.3
)%
Other
(31,569
)
*
%
(27,468
)
*
%
(4,101
)
(14.9
)%
Total
$
55,109
17.7
%
$
40,623
14.6
%
$
14,486
35.7
%
* Calculation not meaningful
Reconciliation of Income (loss)
from
Operations by Segment to EBITDA by
Segment
Three Months Ended December
31, 2020
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
16,934
$
4,563
$
(9,060
)
$
12,437
Depreciation and amortization
2,522
617
1,252
4,391
Other (expenses) income
(7
)
2
(4
)
(9
)
EBITDA
$
19,449
$
5,182
$
(7,812
)
$
16,819
Three Months Ended December
31, 2019
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
11,112
$
1,878
$
(9,333
)
$
3,657
Depreciation and amortization
2,554
579
1,176
4,309
Other (expenses) income
(23
)
(2
)
(19
)
(44
)
EBITDA
$
13,643
$
2,455
$
(8,176
)
$
7,922
Year Ended December 31,
2020
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
54,848
19,942
(36,399
)
38,391
Depreciation and amortization
9,729
2,216
4,882
16,827
Other (expenses) income
(55
)
(2
)
(52
)
(109
)
EBITDA
$
64,522
$
22,156
$
(31,569
)
$
55,109
Year Ended December 31,
2019
Debit and Credit
Prepaid Debit
Other
Total
EBITDA by segment:
Income (loss) from operations
$
35,149
20,383
(30,821
)
24,711
Depreciation and amortization
10,520
2,094
4,637
17,251
Other (expenses) income
(34
)
(21
)
(1,284
)
(1,339
)
EBITDA
$
45,635
$
22,456
$
(27,468
)
$
40,623
EXHIBIT E
CPI Card Group Inc. and
Subsidiaries
Supplemental GAAP to Non-GAAP
Reconciliation
(Dollars in Thousands)
(Unaudited)
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Reconciliation of net income (loss)
from continuing operations (GAAP) to EBITDA and Adjusted
EBITDA
Net income (loss) from continuing
operations
$
7,316
$
(2,287)
$
16,190
$
(4,993)
Interest expense, net
6,239
6,044
25,397
24,891
Income tax (benefit) expense
(1,127)
(144)
(3,305)
3,474
Depreciation and amortization
4,391
4,309
16,827
17,251
EBITDA
$
16,819
$
7,922
$
55,109
$
40,623
Adjustments to EBITDA
Litigation and related charges (1)
—
18
—
46
Sales tax expense(2)
633
189
926
584
Stock-based compensation expense
52
(66)
136
250
Restructuring and other charges (3)
40
720
1,269
720
Loss on Revolving Credit Facility
termination(4)
—
—
92
—
Litigation settlement gain (5)
—
—
—
(6,000)
Foreign currency (gain) loss (6)
(3)
15
7
1,335
Subtotal of adjustments to EBITDA
722
876
2,430
(3,065)
Adjusted EBITDA
$
17,541
$
8,798
$
57,539
$
37,558
Net income (% change 2020 vs. 2019)
404.2%
415.2%
Adjusted EBITDA Margin (% of Net
Sales)
20.8%
12.1%
18.4%
13.5%
Adjusted EBITDA growth (% change 2020 vs.
2019)
99.4%
53.2%
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Reconciliation of cash provided by
operating activities - continuing operations (GAAP) to adjusted
free cash flow:
Cash provided by operating activities -
continuing operations
$
11,867
$
5,964
$
22,075
$
2,965
Capital expenditures for plant, equipment
and leasehold improvements
(3,773)
(877)
(7,093)
(4,175)
Cash received from litigation settlement
(5)
—
—
—
(6,000)
Adjusted free cash flow - continuing
operations
$
8,094
$
5,087
$
14,982
$
(7,210)
Note that tables in this exhibit are presented on a continuing
operations basis.
(1)
Represents net legal costs incurred in
connection with certain patent and shareholder litigation.
(2)
The Company revised its prior period
financial statements to adjust immaterial items, primarily due to
estimated sales tax expense relating to 2017 through 2020. Refer to
Note 2 of the Form 10-K for the year ended December 31, 2020 for an
explanation of the immaterial prior period adjustments.
(3)
Represents restructuring severance
charges.
(4)
The Company terminated the Revolving
Credit Facility during the first quarter of 2020 and expensed the
remaining unamortized deferred financing costs.
(5)
During the second quarter of 2019, the
Company recognized in operating income a $6.0 million gain related
to the cash settlement of litigation.
(6)
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 in 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210225005571/en/
CPI Card Group Inc. Investor Relations: (877) 369-9016
InvestorRelations@cpicardgroup.com
CPI Card Group Inc. Media Relations:
Media@cpicardgroup.com
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