Net Sales of $61.5 million, up 12%
year-over-year
Continuing Operations - GAAP Net Loss of $0.8
million; Adjusted Net Income of $1.1 million
Adjusted EBITDA of $8.9 million
Q2 Ending Cash of $17.8 million, Available
Revolver of $20.0 million, Available Liquidity of $37.8 million
Call scheduled for Thursday, August 9, 2018 at
9:00 a.m. Eastern Time
CPI Card Group Inc. (Nasdaq:PMTS; TSX:PMTS) (“CPI Card Group” or
the “Company”) today reported financial results for the second
quarter ended June 30, 2018.
Scott Scheirman, President and Chief Executive Officer of CPI,
stated, “We are pleased with our second quarter results, which
include 12% year-over-year revenue growth driven by strong
performance in Prepaid and growth of our emerging products and
solutions. We are tracking in line with our business plan through
the first half of 2018. During the second quarter, we continued to
expand relationships with new and existing customers by executing
on our strategic priorities of deep customer focus, providing
market-leading quality products and customer service, a market
competitive business model and continuous innovation. At the same
time, we made an important strategic move to sharpen our focus on
our core customers, markets, products and solutions by selling our
U.K. business.”
Second Quarter 2018 – Continuing Operations Consolidated
Financial Highlights
Financial results included in this press release for all periods
reflect continuing operations. The sale of CPI U.K., which had
historically been reported as the U.K. Limited segment, has been
accounted for as a discontinued operation, and comparative
financial information has been restated in accordance with U.S.
GAAP (“GAAP”) requirements.
Net sales were $61.5 million in the second quarter of 2018,
representing an increase of 12% from the second quarter of 2017.
Income from operations was $2.7 million in the second quarter of
2018, up from $0.7 million in the second quarter of 2017. GAAP net
loss from continuing operations in the second quarter of 2018 was
$0.8 million, or a loss from continuing operations of $0.07 per
diluted share, compared to a net loss from continuing operations of
$3.3 million, or a loss from continuing operations of $0.30 per
diluted share, in the second quarter of 2017.
Adjusted EBITDA for the second quarter of 2018 was $8.9 million,
compared with $7.2 million in the prior year period, primarily
reflecting revenue growth from more profitable emerging products
and solutions. Adjusted Net Income from continuing operations in
the second quarter of 2018 was $1.1 million, or an adjusted income
from continuing operations of $0.10 per diluted share, compared
with Adjusted Net Loss from continuing operations of $1.1 million
in the second quarter of 2017.
All earnings per share amounts reflect the one-for-five reverse
stock split, which occurred in December 2017.
Second Quarter 2018 – Continuing Operations Segment
Information
U.S. Debit and Credit:
Net sales were $43.8 million in the second quarter of 2018,
representing an increase of 3.5% from the second quarter of 2017.
The increase in U.S. Debit and Credit segment net sales was driven
predominantly by an increase in revenue from our emerging products
and solutions, including Card@Once® and metal cards, partially
offset by decreases in Non-EMV and other sales, card
personalization and fulfillment and EMV® card revenues due to lower
EMV® card average selling prices. Sales volumes of EMV® cards
increased in the second quarter of 2018 compared to first quarter
of 2018 and the second quarter of 2017.
U.S. Prepaid Debit:
Net sales were $15.4 million in the second quarter of 2018,
representing an increase of 25.9% from the second quarter of 2017.
The year-over-year increase in U.S. Prepaid Debit segment net sales
was driven primarily by additional sales volumes from a new
portfolio win with an existing customer.
Balance Sheet, Cash Flow, Liquidity
Cash used in operating activities for the first half of 2018 was
$1.4 million, and capital expenditures totaled $2.1 million. Free
cash flow for the first half of 2018 was a use of $3.5 million, on
a continuing operations basis.
At June 30, 2018, the Company had $17.8 million of cash and cash
equivalents and a $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 June 30, 2018,
unchanged from December 31, 2017. Net of debt issuance costs and
discount, recorded debt was $304.8 million as of June 30, 2018. The
Company’s First Lien Term Loan matures on August 17, 2022 and
includes no financial covenants.
John Lowe, Chief Financial Officer, stated, “I am thrilled to be
part of the CPI Card Group team. When deciding to join CPI, I was
attracted to its strong position in our market space, its talented
and dedicated team and history as an innovator in the industry. My
past eight weeks with the Company have served to further solidify
the reasons why I joined CPI, and I look forward to partnering with
Scott and the entire CPI team to advance our long-term strategy for
growth and profitability. Our second quarter financial and
operating performance is reflective of the solid progress we are
making against our key strategic priorities, and we believe we have
adequate cash and liquidity to support our business plan moving
forward.”
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,
all reported on a continuing operations basis: Adjusted Net Income
(Loss), Adjusted Diluted Earnings (Loss) per Share, EBITDA,
Adjusted EBITDA and Free Cash Flow. 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 – Continuing Operations
Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss)
per Share – Continuing Operations 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 -
Continuing Operations. We believe that Adjusted Net Income (Loss)
and Adjusted Diluted Earnings (Loss) per Share - Continuing
Operations 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, on a continuing operations basis. 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, on a continuing operations basis, 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 - Continuing Operations as cash flow
from continuing 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.
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 and Canada,
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 August 9,
2018 at 9:00 a.m. ET to discuss its second quarter 2018 results. To
participate in the Company's live conference call via telephone or
online:
Participant Toll-Free Dial-In Number: (800) 860-2442
Participant International Dial-In Number: (412) 858-4600
Conference ID: CPI Call
Webcast Link:
https://services.choruscall.com/links/pmts180807.html
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 7:00 p.m. ET on August 9,
2018 until 8.00 p.m. ET on August 16, 2018. To access the replay,
please dial (877) 344-7529 or (412) 317-0088; Conference ID:
10122210.
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 - Unaudited for the three and six months
ended June 30, 2018 and 2017 Exhibit B Condensed
Consolidated Balance Sheets – Unaudited as of June 30, 2018 and
December 31, 2017 Exhibit C Condensed Consolidated
Statements of Cash Flows - Unaudited for the six months ended June
30, 2018 and 2017 Exhibit D Segment Summary Information –
Unaudited for the three and six months ended June 30, 2018 and 2017
Exhibit E Supplemental GAAP to Non-GAAP Reconciliations -
Unaudited for the three and six months ended June 30, 2018 and 2017
EXHIBIT A
CPI Card Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and
Comprehensive Loss (Dollars in Thousands, Except Per Share
Amounts) (Unaudited) Three Months Ended June
30, Six Months Ended June 30, 2018
2017 2018 2017 Net sales: Products $
31,494 $ 26,640 $ 56,238 $ 52,866 Services 29,960
28,196 60,073 52,391
Total net sales 61,454 54,836
116,311 105,257 Cost of sales:
Products (exclusive of depreciation and
amortization shownbelow)
18,962 17,943 35,280 35,106
Services (exclusive of depreciation and
amortization shownbelow)
19,116 17,533 39,780 33,444 Depreciation and amortization
3,501 2,694 6,949 5,393
Total cost of sales 41,579 38,170
82,009 73,943 Gross profit
19,875 16,666 34,302 31,314 Operating expenses:
Selling, general and administrative
(exclusive of depreciationand amortization shown below)
15,756 14,304 31,084 29,228 Depreciation and amortization
1,465 1,641 2,927 3,277
Total operating expenses 17,221 15,945
34,011 32,505 Income (loss) from
operations 2,654 721 291 (1,191 ) Other expense, net: Interest, net
(5,586 ) (5,165 ) (11,092 ) (10,228 ) Foreign currency (loss) gain
(466 ) 153 (264 ) 172 Other income, net 3 4
7 6 Total other expense, net
(6,049 ) (5,008 ) (11,349 ) (10,050 )
Loss from continuing operations before income taxes (3,395 ) (4,287
) (11,058 ) (11,241 ) Income tax benefit 2,593
1,014 4,578 3,371 Net loss from
continuing operations (802 ) (3,273 ) (6,480 ) (7,870 ) Net (loss)
income from discontinued operation (15,907 ) 1,112
(17,521 ) 1,202 Net loss $ (16,709 ) $
(2,161 ) $ (24,001 ) $ (6,668 ) Basic and diluted loss per share:
Continuing operations $ (0.07 ) $ (0.30 ) $ (0.58 ) $ (0.71 )
Discontinued operation (1.43 ) 0.10
(1.57 ) 0.11 Net loss per share $ (1.50 ) $ (0.20 ) $
(2.15 ) $ (0.60 ) Weighted-average shares outstanding: Basic and
diluted 11,143,230 11,122,436 11,138,972 11,103,655 Dividends
declared per common share $ — $ 0.225 $ — $ 0.45 Comprehensive
loss: Net loss $ (16,709 ) $ (2,161 ) $ (24,001 ) $ (6,668 )
Currency translation adjustment (495 ) 586
(185 ) 787 Total comprehensive loss $ (17,204
) $ (1,575 ) $ (24,186 ) $ (5,881 ) EXHIBIT B
CPI
Card Group Inc. and Subsidiaries Condensed Consolidated
Balance Sheets (Dollars in Thousands, Except Share and Per
Share Amounts) June 30, December 31,
2018 2017 (Unaudited) Assets Current
assets: Cash and cash equivalents $ 17,750 $ 23,205 Accounts
receivable, net 43,601 32,531 Inventories 10,455 13,799 Prepaid
expenses and other current assets 3,901 3,681 Income taxes
receivable 6,718 8,208 Assets of discontinued operation
8,016 20,651 Total current assets 90,441
102,075 Plant, equipment and leasehold improvements, net 40,038
44,436 Intangible assets, net 37,765 40,093 Goodwill 47,150 47,150
Other assets 205 251 Total assets $
215,599 $ 234,005
Liabilities and
stockholders’ deficit Current liabilities: Accounts payable $
15,678 $ 13,239 Accrued expenses 15,705 12,789 Income taxes payable
678 — Deferred revenue and customer deposits 509 3,342 Liabilities
of discontinued operation 7,807 5,669
Total current liabilities 40,377 35,039 Long-term debt 304,841
303,869 Deferred income taxes 7,925 12,168 Other long-term
liabilities 2,716 2,503 Total
liabilities 355,859 353,579 Commitments
and contingencies Stockholders’ deficit:
Common stock; $0.001 par value—100,000,000
shares authorized; 11,159,714 and11,134,714 shares issued and
outstanding as of June 30, 2018 and December 31,
2017,respectively
11 11 Capital deficiency (112,377 ) (113,081 ) Accumulated loss
(22,571 ) (1,366 ) Accumulated other comprehensive loss
(5,323 ) (5,138 ) Total stockholders’ deficit
(140,260 ) (119,574 ) Total liabilities and stockholders’
deficit $ 215,599 $ 234,005
EXHIBIT C
CPI Card Group Inc. and Subsidiaries Condensed
Consolidated Statements of Cash Flows (Dollars in
Thousands) (Unaudited) Six Months Ended June
30, 2018 2017 Operating activities Net
loss $ (24,001 ) $ (6,668 ) Adjustments to reconcile net loss to
net cash used in operating activities: Loss (income) from
discontinued operation 17,521 (1,202 ) Depreciation and
amortization expense 9,876 8,670 Stock-based compensation expense
784 860 Amortization of debt issuance costs and debt discount 972
975 Deferred income taxes (4,782 ) (540 ) Other, net 158 94 Changes
in operating assets and liabilities: Accounts receivable (6,577 )
(6,964 ) Inventories (2,466 ) (1,776 ) Prepaid expenses and other
assets (299 ) (31 ) Income taxes 2,284 (3,987 ) Accounts payable
2,271 3,399 Accrued expenses 3,093 (1,228 ) Deferred revenue and
customer deposits 25 555 Other liabilities (212 ) 422
Cash used in operating activities - continuing operations
(1,353 ) (7,421 ) Cash used in operating activities -
discontinued operation (1,152 ) (841 )
Investing
activities Acquisitions of plant, equipment and leasehold
improvements (2,109 ) (4,343 ) Cash used in investing
activities - continuing operations (2,109 ) (4,343 )
Cash used in investing activities - discontinued operation
(536 ) (1,440 )
Financing activities Payments on
capital lease obligations (306 ) — Dividends paid on common stock —
(5,026 ) Taxes withheld and paid on stock-based compensation awards
— (339 )
Cash used in financing activities
(306 ) (5,365 ) Effect of exchange rates on cash 1
386 Net decrease in cash and cash equivalents (5,455
) (19,024 ) Cash and cash equivalents, beginning of period
23,205 36,955 Cash and cash equivalents, end
of period $ 17,750 $ 17,931
Supplemental
disclosures of cash flow information Cash paid during the
period for: Interest $ 9,783 $ 9,096 Income taxes,
net (refunds) payments $ (1,504 ) $ 1,068 Capital lease
obligations incurred for certain machinery and equipment leases $
821 $ — Accounts payable for acquisitions of plant,
equipment and leasehold improvements $ 970 $ 1,233
EXHIBIT D
CPI Card Group Inc. and
Subsidiaries Segment Summary Information For the
Three and Six Months Ended June 30, 2018 and 2017 (Dollars
in Thousands) (Unaudited)
Net Sales (1) and (2)
Three Months Ended June 30, 2018 2017 $
Change % Change Net sales by segment: U.S Debit and
Credit $ 43,843 $ 42,369 $ 1,474 3.5 % U.S. Prepaid Debit 15,427
12,258 3,169 25.9 % Other 2,980 3,226 (246 ) (7.6 ) % Eliminations
(796 ) (3,017 ) 2,221 * % Total $
61,454 $ 54,836 $ 6,618 12.1 %
* Calculation not meaningful
Six Months Ended June 30, 2018 2017
$ Change % Change Net sales by segment: U.S Debit and
Credit $ 80,991 $ 82,120 $ (1,129 ) (1.4 ) % U.S. Prepaid Debit
30,938 21,757 9,181 42.2 % Other 5,679 5,729 (50 ) (0.9 ) %
Eliminations (1,297 ) (4,349 ) 3,052 *
% Total $ 116,311 $ 105,257 $ 11,054 10.5 %
* Calculation not meaningful
Gross Profit (1) and (2) Three
Months Ended June 30, 2018
% of Net
Sales
2017
% of Net
Sales
$ Change % Change Gross profit by segment: U.S Debit
and Credit $ 13,856 31.6 % $ 12,089 28.5 % $ 1,767 14.6 %
U.S. Prepaid Debit 5,305 34.4 % 4,012 32.7 % 1,293 32.2 % Other
714 24.0 % 565 17.5 % 149
* % Total $ 19,875 32.3 % $ 16,666 30.4 % $
3,209 19.3 %
* Calculation not meaningful
Six Months Ended June 30, 2018
% of Net
Sales
2017
% of Net
Sales
$ Change % Change Gross profit by segment: U.S Debit
and Credit $ 22,340 27.6 % $ 23,599 28.7 % $ (1,259 ) (5.3 ) % U.S.
Prepaid Debit 10,673 34.5 % 6,555 30.1 % 4,118 62.8 % Other
1,289 22.7 % 1,160 20.2 % 129
* % Total $ 34,302 29.5 % $ 31,314 29.8 % $
2,988 9.5 %
* Calculation not meaningful
Income from Operations (1) and (2)
Three Months Ended June 30, 2018
% of Net
Sales
2017
% of Net
Sales
$Change % Change Income from operations by segment:
U.S Debit and Credit $ 6,636 15.1 % $ 5,554 13.1 % $ 1,082 19.5 %
U.S. Prepaid Debit 4,218 27.3 % 3,057 24.9 % 1,161 38.0 % Other
(8,200 ) * % (7,890 ) * % (310 ) * %
Total $ 2,654 4.3 % $ 721 1.3 % $ 1,933
268.1 %
* Calculation not meaningful
Six Months Ended June 30, 2018
% of Net
Sales
2017
% of Net
Sales
$Change % Change Income (loss) from operations by
segment: U.S Debit and Credit $ 9,158 11.3 % $ 10,574 12.9 % $
(1,416 ) (13.4 ) % U.S. Prepaid Debit 8,543 27.6 % 4,492 20.6 %
4,051 90.2 % Other (17,410 ) * % (16,257 ) * %
(1,153 ) * % Total $ 291 0.3 % $ (1,191 ) (1.1 ) % $
1,482 (124.4 ) %
* Calculation not meaningful
EBITDA (1), (2) and (3)
Three Months Ended June 30, 2018
% of Net
Sales
2017
% of Net
Sales
$ Change % Change EBITDA by segment: U.S Debit and
Credit $ 9,933 22.7 % $ 7,943 18.7 % $ 1,990 25.1 % U.S. Prepaid
Debit 4,687 30.4 % 3,636 29.7 % 1,051 28.9 % Other (7,463 )
* % (6,366 ) * % (1,097 ) * % Total $ 7,157
11.6 % $ 5,213 9.5 % $ 1,944 37.3 %
* Calculation not meaningful
Six Months Ended June 30, 2018
% of Net
Sales
2017
% of Net
Sales
$ Change % Change EBITDA by segment: U.S Debit and
Credit $ 15,651 19.3 % $ 15,346 18.7 % $ 305 2.0 % U.S. Prepaid
Debit 9,506 30.7 % 5,649 26.0 % 3,857 68.3 % Other (15,247 )
* % (13,338 ) * % (1,909 ) * % Total $ 9,910
8.5 % $ 7,657 7.3 % $ 2,253 29.4 %
* Calculation not meaningful
(1) During the second quarter of 2018, the
Company met the criteria to report the U.K. Limited segment as a
discontinued operation. The financial position, results of
operations and cash flows have been restated for all periods to
conform with discontinued operations presentation.
(2) 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 2017 segment
information was not material.
(3) 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 $3,294 and $2,385 in U.S. Debit and Credit; $468 and $577 in
U.S. Prepaid Debit and $1,204 and $1,373 in Other for the three
months ended June 30, 2018 and 2017, respectively, and $6,498 and
$4,772 in U.S. Debit and Credit; $962 and $1,157 in U.S. Prepaid
Debit and $2,416 and $2,741 in Other for the six months ended June
30, 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 June 30, Six Months Ended June 30,
2018 2017 2018 2017 EBITDA and
Adjusted EBITDA: Net loss from continuing operations $ (802 ) $
(3,273 ) $ (6,480 ) $ (7,870 ) Interest expense, net 5,586 5,165
11,092 10,228 Income tax benefit (2,593 ) (1,014 ) (4,578 ) (3,371
) Depreciation and amortization 4,966 4,335
9,876 8,670
EBITDA $
7,157 $ 5,213 $ 9,910 $ 7,657
Adjustments to EBITDA:
Stock-based compensation expense 389 314 784 860 Litigation and
related charges (1) 135 1,806 831 2,386 Restructuring (2) 766 —
1,095 — Foreign currency loss (gain) 466 (153
) 264 (172 ) Subtotal of adjustments to EBITDA
1,756 1,967 2,974
3,074
Adjusted EBITDA $ 8,913 $ 7,180 $
12,884 $ 10,731
Three Months Ended June
30, Six Months Ended June 30, 2018 2017
2018 2017
Adjusted net income (loss) from
continuing operations and loss per share - continuing
operations:
Net loss from continuing operations $ (802 ) $ (3,273 ) $ (6,480 )
$ (7,870 ) Amortization of intangible assets 1,164 1,172 2,328
2,343 Stock-based compensation expense 389 314 784 860 Litigation
and related charges (1) 135 1,806 831 2,386 Restructuring (2) 766 —
1,095 — Tax effect of above items (515 ) (1,152 )
(1,058 ) (1,956 )
Adjusted net income (loss) from
continuing operations $ 1,137 $ (1,133 ) $ (2,500 ) $
(4,237 )
(1)
Represents legal costs incurred in connection with certain
patent and shareholder litigation.
(2)
Represents primarily employee and lease termination costs incurred
in connection with the decision to consolidate three
personalization operations in the United States into two
facilities.
Three Months Ended June 30,
Six Months Ended June 30, 2018 2017
2018 2017 Weighted-average number of shares
outstanding: Basic 11,143,230 11,122,436 11,138,972 11,103,655
Effect of dilutive equity awards 29,240 —
— — Weighted-average diluted shares
outstanding 11,172,470 11,122,436
11,138,972 11,103,655
Three Months
Ended June 30, Six Months Ended June 30, 2018
2017 2018 2017
Reconciliation of diluted loss per
share - continuing operations (GAAP) to adjusted diluted
earnings (loss) per share - continuing operations:
Diluted loss per share - continuing operations (GAAP) $ (0.07 ) $
(0.30 ) $ (0.58 ) $ (0.71 ) Impact of net income adjustments -
continuing operations 0.17 0.19
0.36 0.33
Adjusted diluted earnings (loss)
per share - continuing operations $ 0.10 $ (0.11 ) $
(0.22 ) $ (0.38 )
Three Months Ended June 30, Six
Months Ended June 30, 2018 2017 2018
2017
Reconciliation of cash provided by
(used in) operating activities - continuing operations
(GAAP) to free cash flow:
Cash provided by (used in) operating
activities - continuingoperations
$ 216 $ (980 ) $ (1,353 ) $ (7,421 ) Acquisitions of plant,
equipment and leasehold improvements (1,419 ) (2,092
) (2,109 ) (4,343 ) Free cash flow - continuing
operations $ (1,203 ) $ (3,072 ) $ (3,462 ) $ (11,764 )
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CPI Card Group Inc.Investor Relations:William Maina,
877-369-9016InvestorRelations@cpicardgroup.comorMedia
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