Net Sales of $59.1 million, up 5%
year-over-year
GAAP Net Loss of $7.3 million; Adjusted Net
Loss of $5.2 million
Adjusted EBITDA of $2.7 million
Q1 Ending Cash of $20.2 million, Undrawn
Available Revolver of $20.0 million, Available Liquidity of $40.2
million
Call scheduled for Tuesday, May 8, 2018 at 5:00 p.m. Eastern
Time
CPI Card Group Inc. (Nasdaq: PMTS; TSX: PMTS) (“CPI Card Group”
or the “Company”) today reported financial results for the first
quarter ended March 31, 2018.
Scott Scheirman, President and Chief Executive Officer of CPI,
stated, “Our first quarter results were in line with our
expectations and highlighted by 5% year-over-year revenue growth
reflecting strong performance in Prepaid and continued growth of
our emerging products and solutions, somewhat offset by the impact
of the challenging U.S. debit and credit card manufacturing
environment. During the first quarter, we continued to win new
business with our existing customers, added new customers, and
capitalized on opportunities to expand into new client verticals.
We are seeing good momentum in early 2018 in support of our
strategic priorities, including recent significant portfolio wins
with two of our large Prepaid customers as well as growth of our
instant issuance and premium card offerings. We remain intensely
focused on our strategy of deep customer focus, providing
market-leading quality products and customer service, a market
competitive business model, and continuous innovation.”
First Quarter 2018 Consolidated Financial Highlights
(results consistent with May 2, 2018 preannouncement)
Net sales were $59.1 million in the first quarter of 2018,
representing an increase of 5% from the first quarter of 2017. Loss
from operations was $4.0 million in the first quarter of 2018,
compared with a loss from operations of $1.8 million in the first
quarter of 2017. GAAP net loss in the first quarter of 2018 was
$7.3 million, or a loss of $0.65 per diluted share, compared to a
net loss of $4.5 million, or a loss of $0.40 per diluted share in
the first quarter of 2017.
Adjusted EBITDA for the first quarter of 2018 was $2.7 million,
compared with $3.9 million in the prior year period, reflecting
revenue growth and ongoing efficiency initiatives offset primarily
by the impact of absorption of overhead costs from lower volumes,
softness in the U.K. Limited segment, and investments to enhance
our products and solutions. Adjusted Net Loss in the first quarter
of 2018 was $5.2 million, or a loss of $0.47 per diluted share,
compared with Adjusted Net Loss of $3.0 million, or $0.26 per
diluted share in the first quarter of 2017.
All earnings per share amounts reflect the one-for-five reverse
stock split which occurred in December 2017.
First Quarter 2018 Segment Information
U.S. Debit and Credit:
Net sales were $37.1 million in the first quarter of 2018,
representing a decrease of 6.5% from the first quarter of 2017. The
decrease in U.S. Debit and Credit segment net sales was driven
predominantly by a decline in the number of cards sold in the first
quarter compared with the first quarter of 2017 and lower EMV® card
average selling prices, partially offset by growth in our emerging
products and solutions.
U.S. Prepaid Debit:
Net sales were $15.5 million in the first quarter of 2018,
representing an increase of 63.3% from the first quarter of 2017.
The year-over-year increase in U.S. Prepaid Debit segment net sales
was driven primarily by additional volumes from recent client
portfolio wins.
U.K. Limited:
Net sales were $4.2 million in the first quarter of 2018,
representing a decrease of 24.6% from the first quarter of 2017.
The lower net sales are a result of softness in the U.K. retail
sector and a decline in sales relating to certain customers,
partially offset by positive effects of foreign currency exchange
rates. On a constant currency basis, U.K. Limited segment net sales
for the first quarter of 2018 decreased 32.9% compared with the
prior year.
Balance Sheet, Cash Flow, Liquidity
Cash used in operating activities for the first quarter of 2018
was $1.8 million, and capital expenditures totaled $1.1 million.
Free cash flow for the first quarter of 2018 was a use of $2.9
million.
At March 31, 2018, the Company had $20.2 million of cash and
cash equivalents, and an undrawn $40.0 million revolving credit
facility, of which $20.0 million was available for borrowing.
Total debt principal outstanding, comprised of the Company’s
First Lien Term Loan, was $312.5 million at March 31, 2018,
unchanged from December 31, 2017. Net of debt issuance costs and
discount, recorded debt was $304.4 million as of March 31, 2018.
The Company’s First Lien Term Loan matures on August 17, 2022 and
includes no financial covenants.
Lillian Etzkorn, Chief Financial Officer, stated, “Our first
quarter financial results were in-line with our expectations. We
generated revenue growth of 5% year-over-year driven primarily by
our Prepaid Debit segment and emerging products and solutions.
Adjusted EBITDA of $2.7 million in the first quarter reflects our
top-line growth and ongoing efficiency initiatives, offset
primarily by the impact of absorption of overhead costs from lower
volumes, weaker U.K. Limited results, and investments to enhance
our products and solutions. We continue to believe that we have
adequate cash and liquidity to support our business plan.”
EMV® is a registered trademark or trademark of EMVCo LLC in the
United States and other countries.
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:
Adjusted Net Income (Loss), Adjusted Diluted Earnings (Loss) per
Share, EBITDA, Adjusted EBITDA, Free Cash Flow, and Constant
Currency. 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 Net Income (Loss) and Adjusted Diluted Earnings (Loss)
per Share
Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss)
per Share exclude the impact of amortization of intangible assets,
litigation and related charges incurred in connection with certain
patent and shareholder litigation, stock-based compensation
expense, restructuring and other charges, and other
non-operational, non-cash or non-recurring items, net of their
income tax impact. Beginning in the first quarter of 2018, a 21%
tax rate is used to calculate Adjusted Net Income (Loss) and
Adjusted Diluted Earnings (Loss) per Share. We believe that
Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) per
Share are useful in assessing our financial performance by
excluding items that are not indicative of our core operating
performance or that may obscure trends useful in evaluating our
results of operations.
EBITDA
EBITDA represents earnings before interest, taxes, depreciation
and amortization. EBITDA is presented because it is an important
supplemental measure of performance, and it is frequently used by
analysts, investors and other interested parties in the evaluation
of companies in our industry. EBITDA is also presented and compared
by analysts and investors in evaluating our ability to meet debt
service obligations. Other companies in our industry may calculate
EBITDA differently. EBITDA is not a measurement of financial
performance under GAAP and should not be considered as an
alternative to cash flow from operating activities or as a measure
of liquidity or an alternative to net (loss) income as indicators
of operating performance or any other measures of performance
derived in accordance with GAAP. Because EBITDA is calculated
before recurring cash charges, including interest expense and
taxes, and is not adjusted for capital expenditures or other
recurring cash requirements of the business, it should not be
considered as a measure of discretionary cash available to invest
in the growth of the business.
Adjusted EBITDA
Adjusted EBITDA is defined as EBITDA adjusted for litigation and
related charges incurred in connection with certain patent and
shareholder litigation, stock-based compensation expense,
restructuring and other charges, foreign currency gain or loss, 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 term
in our existing credit agreement, which generally conforms to the
definition above, and impacts certain credit measures and
compliance targets within the credit agreement. 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, non-cash 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; or (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. In particular, our
definition of Adjusted EBITDA allows us to add back certain
non-cash, non-operating 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 can represent the
reduction of cash that could be used for other corporate purposes.
Further, although not included in the calculation of Adjusted
EBITDA, the measure 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. Further, management and various investors use the ratio
of total debt less cash to Adjusted EBITDA, or "net debt leverage",
as a measure of our financial strength and ability to incur
incremental indebtedness when making key investment decisions and
evaluating us against peers.
Free Cash Flow
We define Free Cash Flow as cash flow from operations less
capital expenditures, and 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.
Constant Currency
Constant currency results show our current period operating
results as if foreign currency exchange rates had remained the same
as those in effect in the prior year period. We present certain
constant currency results to facilitate comparisons to our
historical operating results.
About CPI Card Group Inc.
CPI Card Group is a leading provider in payment card production
and related services, offering a single source for credit, debit
and prepaid debit cards, including EMV chip, personalization,
instant issuance, fulfillment and mobile payment services. With
more than 20 years of experience in the payments market and as a
trusted partner to financial institutions, CPI’s solid reputation
of product consistency, quality and outstanding customer service
supports our position as a leader in the market. Serving our
customers from locations throughout the United States, Canada and
the United Kingdom, we have a leading network of high security
facilities in the United States and Canada, each of which is
certified by one or more of the payment brands: Visa, MasterCard,
American Express, Discover and Interac in Canada. Learn more at
www.cpicardgroup.com.
Conference Call and Webcast
CPI Card Group Inc. will host a conference call on May 8, 2018
at 5:00 p.m. ET to discuss its first quarter 2018 results. To
participate in the Company's live conference call via telephone or
online:
Participant Toll-Free Dial-In Number: (844) 392-3771 Participant
International Dial-In Number: (636) 812-6483 Conference ID: 3493588
Webcast Link:
https://edge.media-server.com/m6/p/9nmy5fz4
Participants are advised to login for the live webcast 10
minutes prior to the scheduled start time. A webcast replay and
transcript of the conference call will be available on CPI Card
Group Inc.’s Investor Relations web site:
http://investor.cpicardgroup.com/
Following the completion of the conference call, a replay of the
conference call will be available from 8:30 p.m. ET on May 8, 2018
until 11:59 p.m. ET on May 15, 2018. To access the replay, please
dial (855) 859-2056 or (404) 537-3406; Conference ID: 3493588.
Forward-Looking Statements
Statements in this press release that are not statements of
historical fact are “forward -looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.
These forward looking statements may be identified by terms such as
statements about our plans, objectives, expectations, assumptions
or future events. Words such as “may,” “will,” “should,” “could,”
“expect,” “anticipate,” “believe,” “estimate,” “intend,”
“continue,” “project,” “plan,” “foresee,” and other similar
expressions are intended to identify forward-looking statements,
which are generally not historical in nature. These statements
involve risks and uncertainties that could cause actual results to
differ materially from those described in such statements. These
risks and uncertainties include, but are not limited to: system
security risks, data protection breaches and
cyber-attacks; interruptions in our operations, including our
IT systems; defects in our software; failure to identify and
attract new customers or to retain our existing
customers; problems in production quality and process; failure
to meet our customers’ demands in a timely manner; a loss of
market share or a decline in profitability resulting from
competition; developing technologies that make our existing
technology solutions and products less relevant or a failure to
introduce new products and services in a timely
manner; disruptions relating to the development and execution
of our strategy, or a failure to realize the anticipated benefits
of such strategy; our inability to sell, exit, reconfigure or
consolidate businesses or facilities that no longer meet with our
strategy; our inability to develop, introduce and commercialize new
products; our substantial indebtedness, including inability to make
debt service payments or refinance such indebtedness; the
restrictive terms of our credit facility and covenants of future
agreements governing indebtedness; our limited ability to
raise capital in the future; our inability to adequately protect
our trade secrets and intellectual property rights from
misappropriation or infringement; our dependence on the timely
supply of materials, products and specialized equipment from
third-party suppliers; a competitive disadvantage resulting from
chip operating systems developed by our competitors; price erosion
in the financial payment card industry; failure to accurately
predict demand for our products and services; quarterly variation
in our operating results; the effect of legal and regulatory
proceedings; infringement of our intellectual property rights, or
claims that our technology is infringing on third-party
intellectual property; our inability to realize the full value of
our long-lived assets; the impact of U.S. tax reform legislation;
our failure to operate our business in accordance with data privacy
laws, the PCI Security Standards Council (“PCI”) security standards
or other industry standards, such as Payment Card Brand
certification standards; costs relating to product defects; a
decline in U.S. and global market and economic conditions;
potential imposition of tariffs and/or trade restrictions on goods
imported into the United States; economic conditions and
regulatory changes leading up to and following the United Kingdom’s
exit from the European Union; our dependence on licensing
arrangements; inability to renew leases for our facilities or renew
leases at existing terms; dependence on our senior leadership
team; inability to recruit, retain and develop qualified personnel;
the continued viability of the Payment Card Brands; non-compliance
with, and changes in, laws in the United States and in foreign
jurisdictions in which we operate and sell our products; failure to
maintain our listing on the NASDAQ and other risks and other risk
factors or uncertainties identified from time to time in our
filings with the Securities and Exchange Commission. Although we
believe that the expectations reflected in such forward-looking
statements are reasonable, we can give no assurance that such
expectations will prove to have been correct. Reference is made to
a more complete discussion of forward-looking statements and
applicable risks contained under the captions “Cautionary Statement
Regarding Forward-Looking Information” and “Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2017
filed with the SEC on March 13, 2018. CPI Card Group Inc.
undertakes no obligation to update or revise any of its
forward-looking statements, 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 (Loss) Income - Unaudited for the
three months ended March 31, 2018 and 2017 Exhibit B
Condensed Consolidated Balance Sheets – Unaudited as of March 31,
2018 and December 31, 2017 Exhibit C Condensed Consolidated
Statements of Cash Flows - Unaudited for the three months ended
March 31, 2018 and 2017 Exhibit D Segment Summary
Information – Unaudited for the three months ended March 31, 2018
and 2017 Exhibit E Supplemental GAAP to Non-GAAP
Reconciliations - Unaudited for the three months ended March 31,
2018 and 2017 EXHIBIT A
CPI Card Group Inc.
and Subsidiaries Condensed Consolidated Statements of
Operations and Comprehensive (Loss) Income (Dollars in
Thousands, Except Share and Per Share Amounts)
(Unaudited) Three Months Ended March 31,
2018 2017 Net sales: Products $ 27,560 $ 29,764
Services 31,510 26,244 Total net sales
59,070 56,008 Cost of sales: Products
(exclusive of depreciation and amortization shown below) 19,082
19,688 Services (exclusive of depreciation and amortization shown
below) 21,916 17,441 Depreciation and amortization 3,630
2,784 Total cost of sales 44,628
39,913 Gross profit 14,442 16,095 Operating expenses:
Selling, general and administrative (exclusive of depreciation and
amortization shown below) 16,815 16,155 Depreciation and
amortization 1,595 1,749 Total
operating expenses 18,410 17,904 Loss
from operations (3,968 ) (1,809 ) Other expense, net: Interest, net
(5,519 ) (5,062 ) Foreign currency gain 207 73 Other income, net
4 1 Total other expense, net
(5,308 ) (4,988 ) Loss before income taxes (9,276 )
(6,797 ) Income tax benefit 1,985 2,291
Net loss $ (7,291 ) $ (4,506 ) Basic and diluted loss
per share: $ (0.65 ) $ (0.40 ) Weighted-average shares outstanding:
Basic 11,134,714 11,084,875 Diluted 11,134,714 11,084,875
Dividends declared per common share $ — $ 0.225
Comprehensive loss Net loss $ (7,291 ) $ (4,506 ) Currency
translation adjustment 309 201 Total
comprehensive loss $ (6,982 ) $ (4,305 )
EXHIBIT B
CPI Card Group Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (Dollars in Thousands, Except
Share and Per Share Amounts) March
31, December 31, 2018 2017
(Unaudited) Assets Current assets: Cash and cash
equivalents $ 20,196 $ 23,205 Accounts receivable, net of
allowances of $53 and $53, respectively 42,277 37,537 Inventories
8,603 16,237 Prepaid expenses and other current assets 4,261 3,960
Income taxes receivable 8,926 8,435
Total current assets 84,263 89,374 Plant, equipment and leasehold
improvements, net 50,244 49,300 Intangible assets, net 40,303
41,472 Goodwill 53,859 53,611 Other assets 234
248 Total assets $ 228,903 $ 234,005
Liabilities and stockholders’ deficit Current liabilities:
Accounts payable $ 15,344 $ 16,545 Accrued expenses 14,972 13,820
Income taxes payable 678 — Deferred revenue and customer deposits
403 4,177 Total current liabilities
31,397 34,542 Long-term debt 304,355 303,869 Deferred income taxes
11,209 12,286 Other long-term liabilities 5,361
2,882 Total liabilities 352,322 353,579
Commitments and contingencies Stockholders’ deficit: Common
stock; $0.001 par value—100,000,000 shares authorized; 11,134,714
shares issued and outstanding at March 31, 2018 and December 31,
2017 11 11 Capital deficiency (112,740 ) (113,081 ) Accumulated
loss (5,861 ) (1,366 ) Accumulated other comprehensive loss
(4,829 ) (5,138 ) Total stockholders’ deficit
(123,419 ) (119,574 ) Total liabilities and stockholders’
deficit $ 228,903 $ 234,005
EXHIBIT C
CPI Card Group Inc. and Subsidiaries Condensed
Consolidated Statements of Cash Flows (Dollars in
Thousands) (Unaudited) Three Months Ended
March 31, 2018 2017 Operating activities
Net loss $ (7,291 ) $ (4,506 ) Adjustments to reconcile net loss to
net cash used in operating activities: Depreciation and
amortization 5,225 4,533 Stock-based compensation expense 395 546
Amortization of debt issuance costs and debt discount 486 484
Deferred income taxes (1,622 ) (351 ) Other, net (195 ) (39 )
Changes in operating assets and liabilities: Accounts receivable
2,074 (2,375 ) Inventories 681 (4,551 ) Prepaid expenses and other
assets (282 ) (485 ) Income taxes 194 (2,005 ) Accounts payable
(1,423 ) 1,751 Accrued expenses 421 (1,794 ) Deferred revenue and
customer deposits (142 ) 3,424 Other liabilities (306 )
357 Cash used in operating activities (1,785 ) (5,011
)
Investing activities Acquisitions of plant, equipment and
leasehold improvements (1,161 ) (3,283 ) Cash used in
investing activities (1,161 ) (3,283 )
Financing activities
Payments on capital lease obligations (129 ) — Dividends paid on
common stock — (2,527 ) Taxes withheld and paid on stock-based
compensation — (336 ) Cash used in financing
activities (129 ) (2,863 ) Effect of exchange rates on cash
66 108 Net decrease in cash and cash
equivalents (3,009 ) (11,049 ) Cash and cash equivalents, beginning
of period 23,205 36,955 Cash and cash
equivalents, end of period $ 20,196 $ 25,906
Supplemental disclosures of cash flow information Cash paid
during the period for: Interest $ 4,760 $ 4,488
Income taxes, net (refunds) payments $ (88 ) $ 65 Capital
lease obligations incurred for certain machinery and equipment
leases $ 3,734 $ - Accounts payable for acquisitions
of plant, equipment and leasehold improvements $ 400 $ 536
EXHIBIT D
CPI
Card Group Inc. and Subsidiaries Segment Summary
Information For the Three Months Ended March 31, 2018 and
2017 (Dollars in Thousands) (Unaudited)
Net Sales (1) Three Months Ended March
31, 2018 2017
$ Change
% Change (dollars in thousands) Net sales by
segment:
U.S. Debit and Credit
$ 37,148 $ 39,751 $ (2,603 ) (6.5 ) % U.S. Prepaid Debit 15,512
9,497 6,015 63.3 % U.K. Limited 4,213 5,587 (1,374 ) (24.6 ) %
Other 2,699 2,503 196
7.8
% Eliminations (502 ) (1,330 ) 828
*
% Total $ 59,070 $ 56,008 $ 3,062 5.5 %
Gross
Profit (1) Three Months Ended March 31,
2018 % of NetSales 2017 % of
NetSales $ Change % Change (dollars in
thousands) Gross profit by segment:
U.S. Debit and Credit
$ 8,483 22.8 % $ 11,510 29.0 % $ (3,027 ) (26.3 ) % U.S. Prepaid
Debit 5,368 34.6 % 2,541 26.8 % 2,827 111.3 % U.K. Limited 16 0.4 %
1,449 25.9 % (1,433 ) (98.9 ) % Other 575 21.3 % 595
23.8 % (20 )
*
% Total $ 14,442 24.4 % $ 16,095 28.7 % $ (1,653 ) (10.3 ) %
(Loss) Income from Operations (1) Three Months
Ended March 31, 2018 % of NetSales
2017 % of NetSales $ Change %
Change (dollars in thousands) (Loss) Income from
Operations by segment:
U.S. Debit and Credit
$ 2,522 6.8 % $ 5,020 12.6 % $ (2,498 ) (49.8 ) % U.S. Prepaid
Debit 4,325 27.9 % 1,433 15.1 % 2,892 201.8 % U.K. Limited (1,357 )
(32.2 ) % 115 2.1 % (1,472 )
*
% Other (9,458 )
*
(8,377 )
*
(1,081 )
*
Total $ (3,968 ) (6.7 ) % $ (1,809 ) (3.2 ) % $ (2,159 ) 119.3 %
EBITDA (1) Three Months Ended March 31,
2018 % of NetSales 2017 % of
NetSales $ Change % Change (dollars in
thousands) EBITDA by segment (2)
U.S. Debit and Credit
$ 5,719 15.4 % $ 7,402 18.6 % $ (1,683 ) (22.7 ) % U.S. Prepaid
Debit 4,819 31.1 % 2,013 21.2 % 2,806 139.4 % U.K. Limited (1,102 )
(26.2 ) % 325 5.8 % (1,427 ) (439.1 ) % Corporate and Other
(7,968 )
*
(6,942 ) * (1,026 )
*
Total $ 1,468 2.5 % $ 2,798 5.0 % $ (1,330 ) (47.5 )
%
* Not meaningful
(1) During the first quarter of 2018, we reorganized our
United States business operations and realigned our United States
reporting segments to correspond with the manner with which our
chief decision maker evaluates operating performance and makes
decisions as to the allocation of resources. As a result of this
realignment, our CPI on Demand business operations have been moved
from U.S. Prepaid Debit into the U.S. Debit and Credit reporting
segment, consistent with the other related personalization
operations. Segment information for previous periods has been
restated to conform with this realignment and current period
presentation. The restatement of first quarter 2017 segment
information was not material.
(2) EBITDA is the primary measure used by
management to evaluate segment operating performance. The principal
difference between (Loss) Income from operations and EBITDA is that
EBITDA is adjusted to exclude Depreciation and amortization expense
of $3,204 and $2,357 in U.S. Debit and Credit, $494 and $576 in
U.S. Prepaid Debit, $250 and $157 in U.K. Limited and $1,277 and
$1,443 in Corporate and Other for the three months ended March 31,
2018 and 2017, respectively.
EXHIBIT E
CPI Card Group Inc. and
Subsidiaries Supplemental GAAP to Non-GAAP
Reconciliation (Dollars in Thousands, Except Shares and Per
Share Amounts) (Unaudited) Three
Months Ended March 31, 2018 2017 EBITDA and
Adjusted EBITDA: Net loss $ (7,291 ) $ (4,506 ) Interest
expense, net 5,519 5,062 Income tax benefit (1,985 ) (2,291 )
Depreciation and amortization 5,225 4,533
EBITDA $ 1,468 $ 2,798
Adjustments to
EBITDA Stock-based compensation expense 395 546 Litigation and
related charges (1) 696 580 Restructuring (2) 329 — Foreign
currency gain (207 ) (73 ) Subtotal of adjustments to
EBITDA 1,213 1,053
Adjusted
EBITDA $ 2,681 $ 3,851
Three
Months Ended March 31, 2018 2017 Adjusted net
loss and loss per share: Net loss $ (7,291 ) $ (4,506 )
Amortization of intangible assets 1,221 1,223 Stock-based
compensation expense 395 546 Litigation and related charges (1) 696
580 Restructuring (2) 329 — Tax effect of above items (555 )
(822 )
Adjusted net loss $ (5,205 ) $ (2,979 )
(1) Represents legal costs incurred in
connection with certain patent and shareholder litigation. (2)
Represents employee termination costs incurred primarily in
connection with the decision to consolidate three personalization
operations in the United States into two facilities.
Three Months Ended March 31, 2018 2017
Weighted-average number of shares outstanding:
Basic 11,134,714 11,084,875 Effect of dilutive equity awards
— — Weighted-average diluted shares outstanding
11,134,714 11,084,875
Three Months Ended
March 31, 2018 2017 Reconciliation of diluted
loss per share (GAAP) to adjusted diluted loss per share:
Diluted loss per share (GAAP) $ (0.65 ) $ (0.40 ) Impact of net
income adjustments 0.19 0.14
Adjusted diluted loss per share $ (0.47 ) $ (0.26 )
Three Months Ended March 31, 2018 2017
Constant Currency: U.K. Limited net sales, as reported
(GAAP) $ 4,213 $ 5,587 Foreign currency translation impact
(462 ) — U.K. Limited net sales, constant currency
adjusted $ 3,751 $ 5,587 Net sales change, as
reported (GAAP) (24.6 ) % Net sales change, constant currency
adjusted (32.9 ) %
Three Months Ended March 31,
2018 2017 Reconciliation of cash used in operating
activities (GAAP) to free cash flow: Cash used in operating
activities $ (1,785 ) $ (5,011 ) Acquisitions of plant, equipment
and leasehold improvements (1,161 ) (3,283 ) Free
cash flow $ (2,946 ) $ (8,294 )
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CPI Card Group Inc.Investor Relations:William Maina,
877-369-9016InvestorRelations@cpicardgroup.comorMedia
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