Q1 2024 CPI Card Group Inc Earnings Call Transcript
Key Points
- CPI Card Group Inc (PMTS) reported solid first-quarter performance, aligning with full-year net sales and adjusted EBITDA outlook despite anticipated challenges.
- The company experienced strong growth in its prepaid business, as well as instant issuance and card personalization services, which helped offset the decline in card sales.
- Gross margin improved compared to the prior year's first quarter, reflecting lower production costs primarily due to labor efficiencies.
- CPI Card Group Inc (PMTS) successfully advanced its strategic initiatives, including a significant contract expansion with a major customer that will increase share and sales through 2029.
- The company continues to expand into adjacent markets, such as digital solutions and health savings account cards, aiming to supplement core growth and increase market share.
- Net sales declined by 7% in the first quarter, and net income decreased by 50% compared to the same period last year.
- The decline in net income was significantly impacted by costs related to the CEO transition and a lower tax benefit compared to the previous year.
- CPI Card Group Inc (PMTS) is still facing challenges with card inventory levels being worked down by customers, which affects card sales volumes.
- The company's SG&A expenses increased by $5 million from the prior year, driven primarily by higher compensation costs.
- While the company has adjusted its full-year free cash flow outlook to be approximately past the 2023 level, it anticipates upfront incentives required for a new contract will negatively impact cash flow in 2024.
Welcome to the CPI Card Group's first-quarter 2024 earnings call. My name is Kathleen, and I will be your operator today. (Operator Instructions)
And now, I would like to turn the call over to Mike Salop, CPI's Head of Investor Relations. Please go ahead.
Thanks, operator, and good morning, everyone. Welcome to the CPI Card Group first-quarter 2024 earnings webcast and conference call. Today's date is May 7, 2024, and on the call today from CPI Card Group are John Lowe, President and Chief Executive Officer; and Jeff Hochstadt, Chief Financial Officer.
Before we begin, I'd like to remind everyone that this call may contain forward-looking statements, as they are defined under the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For a discussion of such risks and uncertainties, please see CPI Card Group's most recent filings with
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