On August 5, 2024, CPI Card Group Inc (PMTS, Financial) released its 8-K filing for the second quarter of 2024. CPI Card Group Inc is a payment technology company engaged in providing financial payment card solutions and services. It offers credit, debit, and prepaid cards. The business segments of the group are Debit and Credit, which produces Financial Payment Cards and provides integrated card services to card-issuing banks in the United States, and Prepaid Debit, which provides integrated card services to Prepaid Debit Card program managers in the United States and Others. It derives key revenue from the Debit and Credit segment.
Performance Overview
For the second quarter of 2024, CPI Card Group Inc reported net sales of $118.8 million, a 3% increase compared to the same period last year. This growth was driven by strong performance in the Prepaid segment and improved trends in debit and credit card sales. However, net income decreased by 8% to $6.0 million, or $0.51 diluted earnings per share, falling short of the analyst estimate of $0.58 per share. Adjusted EBITDA also saw a decline of 6% to $21.9 million.
Financial Achievements and Challenges
Despite the increase in net sales, CPI Card Group Inc faced challenges with higher selling, general, and administrative (SG&A) expenses, which impacted its income from operations. The SG&A increase was primarily due to higher compensation expenses, including increased stock compensation. The company’s gross profit margin improved slightly to 35.7% from 35.5% in the prior year’s second quarter.
“We continue to execute our strategy and are pleased to deliver solid improvement in card sales and ongoing growth in our other business lines in the quarter,” said John Lowe, President and Chief Executive Officer.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Net Sales | $118.8 million | $114.96 million |
| Gross Profit | $42.4 million | $40.8 million |
| Net Income | $6.0 million | $6.5 million |
| Adjusted EBITDA | $21.9 million | $23.3 million |
Balance Sheet and Cash Flow
As of June 30, 2024, CPI Card Group Inc had cash and cash equivalents of $7.5 million. The company generated $4.1 million in cash from operating activities in the first half of 2024, compared to $10.3 million in the same period last year. Free Cash Flow was $1.4 million, down from $3.7 million in the prior year. The decrease in cash generation was driven by lower net income and increased working capital usage.
Outlook for 2024
The company updated its financial outlook for 2024, increasing its net sales outlook to mid-single digit growth, driven by strong Prepaid growth and improved trends in debit and credit card sales. However, the Adjusted EBITDA outlook remains a slight increase from the prior year. The Free Cash Flow outlook was maintained at approximately half of the 2023 level due to increased capital spending investment and the impact of a contract with a large customer.
“We were pleased to deliver stronger sales trends and improved gross margins in the second quarter and to complete the refinancing of our debt in July,” said Jeff Hochstadt, Chief Financial Officer of CPI.
For more detailed information, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from CPI Card Group Inc for further details.
