CPI Card Group (PMTS) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales increased 3–3.4% year-over-year to $118.8 million, led by prepaid, instant issuance, and card personalization services, with improved secure card sales trends versus Q1.

• Net income declined 8% to $6.0 million, and Adjusted EBITDA decreased 6% to $21.9 million, impacted by higher SG&A from compensation, stock-based expenses, and CEO transition costs.

• Gross margin improved to 35.7% in Q2 2024, while Adjusted EBITDA margin declined to 18.4%.

• The company refinanced $267.9 million of 2026 Senior Notes with $285 million of 2029 Senior Notes at 10% interest and established a new $75 million revolving credit facility in July 2024.

• Share repurchase program advanced, with approximately $9 million repurchased or committed since inception, including open market and majority shareholder transactions.

Financial highlights

• Q2 2024 net sales rose 3–3.4% year-over-year to $118.8 million; gross profit was $42.4 million (35.7% margin); net income was $6.0 million, down 8%.

• Adjusted EBITDA declined 6% to $21.9 million; Adjusted EBITDA margin dropped to 18.4%.

• Free cash flow for H1 2024 was $1.4 million, down from $3.7 million in the prior year.

• Operating expenses rose 17.8–20% in Q2 2024, mainly due to higher compensation, stock-based expenses, and severance.

• Year-to-date net sales decreased 2%, net income dropped 34%, and Adjusted EBITDA fell 7%.

Outlook and guidance

• Full-year 2024 net sales outlook raised to mid-single digit growth, driven by prepaid strength and improved debit/credit trends.

• Adjusted EBITDA expected to show slight growth for the year; Free Cash Flow projected at about half of 2023 levels due to higher capital spending and customer incentives.

• Year-end 2024 Net Leverage Ratio expected between 3.0x and 3.5x.

• Management anticipates continued higher inventory levels in 2024 due to supplier capacity agreements.

• The company believes current cash, operating cash flows, and credit facility are adequate to fund operations, debt service, and capital needs.