Earnings Call: CPI Card Group Sees Its Second Highest Sales Quarter in History

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Earnings Call: CPI Card Group Sees Its Second Highest Sales Quarter in History

CPI Card Group (PMTS), a global leader in financial and EMV chip card manufacturing, demonstrated strong performance in the third quarter of 2024, with net sales and adjusted EBITDA increasing by approximately 20%. The company experienced its second-highest sales quarter in its history, supported by a 25% increase in product sales, particularly in eco-friendly contactless cards. The prepaid segment also recorded significant growth. CPI Card Group raised its full-year outlook, expressing optimism for the upcoming fourth quarter and beyond.

Key Points:

  • Net sales increased by 18%, with product sales rising by 25%.
  • Adjusted EBITDA grew by 18%, reaching $25.1 million.
  • Gross margins improved by 170 basis points.
  • The prepaid segment grew by 13%, while operating income in the Bank Card and Credit Card segment increased by 30%.
  • The company completed debt refinancing and a share buyback program.
  • CPI Card Group raised its financial outlook for 2024, expecting mid-to-high single-digit net sales growth and low single-digit adjusted EBITDA growth.
  • The new manufacturing facility in Indiana is expected to enhance capacity and efficiency.

Company Outlook:

CPI Card Group anticipates stronger performance in the fourth quarter of 2024. The company expects mid-to-high single-digit net sales growth and low single-digit adjusted EBITDA growth for the full year. The Indiana manufacturing facility, planned to be operational by mid-2025, is expected to double the company's footprint and cost around $20 million.

Declining Points:

  • Net income decreased by 66% due to debt refinancing costs.
  • Operating income in the Bank Card and Credit Card segment declined by 1% year-to-date.
  • Free cash flow decreased compared to last year due to increased working capital usage and cash outflows related to debt refinancing.

Rising Points:

  • Significant 27% growth year-to-date in the prepaid segment.
  • Positive momentum across various business segments, including instant issuance and personalization.
  • Strong demand for fraud protection and expansion into healthcare-related prepaid services.

Shortcomings:

While product sales have rebounded with a 25% growth, they have yet to reach the peak levels of 2022.

Q&A Highlights:

Management emphasized the importance of rising demand for fraud protection and expansion into healthcare-related prepaid services. There are positive expectations for continued growth in the prepaid and bank card/credit card segments for the remainder of the year.

CPI Card Group (PMTS) has demonstrated resilience and strategic growth in the third quarter of 2024, achieving significant increases in net sales and adjusted EBITDA. The company’s focus on eco-friendly products and digital solutions has paid off, leading to substantial gains in the Prepaid segment and overall product sales. With a strong balance sheet, clear strategic direction, and investments in new facilities, CPI Card Group is well-positioned for future growth. The company’s commitment to innovation and market expansion, particularly in fraud prevention and healthcare-related services, offers a promising outlook for the remainder of the year and beyond. The involvement of CPI Card Group's employees and stakeholders was noted as playing a vital role in this success during the earnings discussion.

InvestingPro Forecasts:

The strong performance of CPI Card Group (PMTS) in Q3 2024 is further supported by recent InvestingPro data and insights. The company’s market capitalization stands at $293.72 million, reflecting its solid position in the financial and EMV chip card manufacturing sector.

One of the most striking InvestingPro insights indicates that PMTS has shown "high returns in the past year." This aligns perfectly with the company's reported strong performance and upgraded outlook. In fact, InvestingPro data reveals an impressive total return of 51.82% over the past year, emphasizing the market's positive reaction to CPI Card Group’s strategic initiatives and financial results.

Another relevant InvestingPro insight states, "Analysts forecast the company will be profitable this year." This prediction is consistent with the company's reported net sales and adjusted EBITDA growth, aligning with optimistic forecasts for the fourth quarter and beyond.

InvestingPro data also shows a strong total return of 32.56% over the past six months, related to the company's reported second-largest sales quarter in history and significant growth in the Prepaid segment.

It is worth noting that InvestingPro offers additional insights and forecasts for PMTS, which can provide investors with a more comprehensive understanding of the company’s financial health and market position.

These InvestingPro forecasts complete the analysis of the article, reinforcing CPI Card Group’s strong market performance and positive outlook. For investors seeking deeper insights into PMTS's finances and market trends, InvestingPro provides additional tips and real-time metrics.