CPI Card Group Inc. 10-Q

Item 1 . Financial Statements ​ CPI Card Group Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except share and per share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2026 ​ 2025 Assets ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ Cash and cash equivalents $ 19,296 ​ $ 21,700 Accounts receivable, net ​ 88,681 ​ ​ 95,436 Inventories, net ​ 65,504 ​ ​ 72,243 Prepaid expenses and other current assets ​ 15,407 ​ ​ 15,565 Total current assets ​ 188,888 ​ ​ 204,944 Plant, equipment, leasehold improvements and operating lease right-of-use assets, net ​ 106,676 ​ ​ 108,433 Intangible assets, net of accumulated amortization of $ 60,735 and $ 59,741 , respectively ​ 17,550 ​ ​ 18,544 Goodwill ​ 48,764 ​ ​ 48,764 Other assets ​ 24,576 ​ ​ 22,506 Total assets $ 386,454 ​ $ 403,191 Liabilities and stockholders’ deficit ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ Accounts payable $ 22,469 ​ $ 27,802 Accrued expenses ​ 48,260 ​ ​ 52,379 Deferred revenue and customer deposits ​ 3,600 ​ ​ 3,916 Total current liabilities ​ 74,329 ​ ​ 84,097 Long-term debt ​ 276,903 ​ ​ 286,668 Deferred income taxes ​ 2,565 ​ ​ 2,251 Other long-term liabilities ​ 46,667 ​ ​ 47,508 Total liabilities ​ 400,464 ​ ​ 420,524 ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 9) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ deficit: ​ ​ ​ ​ ​ Series A Preferred Stock; $ 0.001 par value— 100,000 shares authorized; 0 shares issued and outstanding at March 31, 2026 and December 31, 2025 ​ — ​ ​ — Common stock; $ 0.001 par value— 100,000,000 shares authorized; 11,475,608 and 11,456,061 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively ​ 11 ​ ​ 11 Capital deficit ​ ( 100,824 ) ​ ​ ( 102,091 ) Accumulated earnings ​ 86,803 ​ ​ 84,747 Total stockholders’ deficit ​ ( 14,010 ) ​ ​ ( 17,333 ) Total liabilities and stockholders’ deficit $ 386,454 ​ $ 403,191 ​ See accompanying notes to condensed consolidated financial statements ​ ​ ​ 3 Table of Contents CPI Card Group Inc. and Subsidiaries Condensed Consolidated Statements of Operations and Comprehensive Income (in thousands, except share and per share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2026 ​ ​ ​ 2025 Revenue $ 147,108 ​ $ 122,761 Cost of goods sold ​ 102,984 ​ ​ 82,065 Gross profit ​ 44,124 ​ ​ 40,696 Selling, general and administrative expenses ​ 33,130 ​ ​ 26,592 Income from operations ​ 10,994 ​ ​ 14,104 Other expense, net: ​ ​ ​ ​ ​ Interest, net ​ ( 7,656 ) ​ ​ ( 7,685 ) Other income, net ​ 32 ​ ​ 18 Total other expense, net ​ ( 7,624 ) ​ ​ ( 7,667 ) Income before income taxes and equity in losses of unconsolidated affiliates ​ 3,370 ​ ​ 6,437 Income tax expense ​ ( 1,158 ) ​ ​ ( 1,663 ) Equity in losses of unconsolidated affiliates ​ ( 156 ) ​ ​ — Net income $ 2,056 ​ $ 4,774 ​ ​ ​ ​ ​ ​ Basic and diluted earnings per share: ​ ​ ​ ​ ​ Basic earnings per share $ 0.18 ​ $ 0.42 Diluted earnings per share $ 0.17 ​ $ 0.40 ​ ​ ​ ​ ​ ​ Basic weighted-average shares outstanding ​ 11,457,573 ​ ​ 11,245,844 Diluted weighted-average shares outstanding ​ 11,857,270 ​ ​ 12,008,523 ​ ​ ​ ​ ​ ​ Comprehensive income: ​ ​ ​ ​ ​ Net income $ 2,056 ​ $ 4,774 Total comprehensive income $ 2,056 ​ $ 4,774 See accompanying notes to condensed consolidated financial statements ​ ​ ​ 4 Table of Contents CPI Card Group Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ Deficit (in thousands, except share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock ​ Capital ​ Accumulated ​ Stockholders ​ Shares ​ Amount ​ deficit ​ earnings ​ deficit December 31, 2025 11,456,061 ​ $ 11 ​ $ ( 102,091 ) ​ $ 84,747 ​ $ ( 17,333 ) Shares issued under stock-based compensation plans 19,547 ​ ​ — ​ ​ ( 136 ) ​ ​ — ​ ​ ( 136 ) Stock-based compensation — ​ ​ — ​ ​ 1,403 ​ ​ — ​ ​ 1,403 Components of comprehensive income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income — ​ ​ — ​ ​ — ​ ​ 2,056 ​ ​ 2,056 March 31, 2026 11,475,608 ​ $ 11 ​ $ ( 100,824 ) ​ $ 86,803 ​ $ ( 14,010 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock ​ Capital ​ Accumulated ​ Stockholders ​ Shares ​ Amount ​ deficit ​ earnings ​ deficit December 31, 2024 11,240,507 ​ $ 11 ​ $ ( 105,429 ) ​ $ 69,797 ​ $ ( 35,621 ) Shares issued under stock-based compensation plans 40,982 ​ ​ — ​ ​ ( 541 ) ​ ​ — ​ ​ ( 541 ) Stock-based compensation — ​ ​ — ​ ​ 1,671 ​ ​ — ​ ​ 1,671 Components of comprehensive income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income — ​ ​ — ​ ​ — ​ ​ 4,774 ​ ​ 4,774 March 31, 2025 11,281,489 ​ $ 11 ​ $ ( 104,299 ) ​ $ 74,571 ​ $ ( 29,717 ) ​ See accompanying notes to condensed consolidated financial statements ​ ​ 5 Table of Contents CPI Card Group Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2026 ​ ​ ​ 2025 Operating activities ​ ​ ​ ​ ​ Net income $ 2,056 ​ $ 4,774 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ Depreciation expense ​ 5,409 ​ ​ 3,387 Amortization expense ​ 994 ​ ​ 860 Stock-based compensation expense ​ 1,403 ​ ​ 1,671 Amortization of debt issuance costs ​ 328 ​ ​ 329 Deferred income taxes and other, net ​ 189 ​ ​ ( 314 ) Changes in operating assets and liabilities: ​ ​ ​ ​ ​ Accounts receivable, net ​ 6,755 ​ ​ 9,998 Inventories ​ 7,055 ​ ​ ( 2,460 ) Prepaid expenses and other assets ​ ( 3,235 ) ​ ​ ( 1,348 ) Income taxes, net ​ 1,362 ​ ​ 444 Accounts payable ​ ( 3,957 ) ​ ​ 5,120 Accrued expenses and other liabilities ​ ( 4,395 ) ​ ​ ( 16,937 ) Deferred revenue and customer deposits ​ ( 316 ) ​ ​ 69 Cash provided by operating activities ​ 13,648 ​ ​ 5,593 Investing activities ​ ​ ​ ​ ​ Capital expenditures for plant, equipment and leasehold improvements, net ​ ( 3,513 ) ​ ​ ( 5,301 ) Other ​ — ​ ​ 50 Cash used in investing activities ​ ( 3,513 ) ​ ​ ( 5,251 ) Financing activities ​ ​ ​ ​ ​ Payments on debt ​ ( 10,000 ) ​ ​ — Payments on finance lease obligations ​ ( 2,403 ) ​ ​ ( 1,825 ) Taxes withheld and paid on stock-based compensation awards ​ ( 136 ) ​ ​ ( 541 ) Cash used in financing activities ​ ( 12,539 ) ​ ​ ( 2,366 ) Net decrease in cash and cash equivalents ​ ( 2,404 ) ​ ​ ( 2,024 ) Cash and cash equivalents, beginning of period ​ 21,700 ​ ​ 33,544 Cash and cash equivalents, end of period $ 19,296 ​ $ 31,520 Supplemental disclosures of cash flow information ​ ​ ​ ​ ​ Cash paid (refunded) during the period for: ​ ​ ​ ​ ​ Interest paid $ 14,332 ​ $ 14,998 Income taxes paid $ — ​ $ 2 Income taxes refunded $ ( 527 ) ​ $ — Right-of-use assets obtained in exchange for lease obligations: ​ ​ ​ ​ ​ Operating leases $ 187 ​ $ 7,382 Financing leases $ 2,454 ​ $ 1,888 Accounts payable and accrued expenses for capital expenditures for plant, equipment and leasehold improvements $ 616 ​ $ 1,654 Non-cash equity in losses of unconsolidated affiliates $ ( 156 ) ​ $ — ​ See accompanying notes to condensed consolidated financial statements ​ 6 Table of Contents CPI Card Group Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (dollars in thousands, except share and per share amounts or as otherwise indicated) (Unaudited) ​ 1. Business Overview and Summary of Significant Accounting Policies Business Overview CPI Card Group Inc. (which, together with its subsidiary companies, is referred to herein as “CPI” or the “Company”) is a payments technology company providing a comprehensive range of physical and digital payment solutions for U.S. financial institutions, processors, fintechs, prepaid program managers, and more. CPI is a leader in several areas of the U.S. payment card solutions market, including debit and credit card production, personalization, and Software-as-a-Service-based (“SaaS-based”) instant issuance solutions. CPI is also a market leader in the production of “Prepaid Debit Cards,” defined as debit cards issued on the networks of the “Payment Card Brands” (Visa, Mastercard ® , American Express ® and Discover ® ) but not linked to a traditional bank account, and related secure packaging solutions. CPI’s revenues are primarily generated from the production of and related offerings of secure debit and credit cards that are issued on the networks of the Payment Card Brands, including Prepaid Debit Cards. In connection with the Company’s increased strategic focus on expanding and developing additional proprietary integrated technological solutions for its customer base and to reflect the manner in which the Company’s Chief Operating Decision Maker (“CODM”), the Chief Executive Officer (“CEO”), manages the Company’s business, the Company implemented a revised segment structure to assess performance and allocate resources, beginning in the first quarter of 2026. The changes in the Company’s segment structure primarily relate to the separation of the results of the Company’s proprietary integrated technological related solutions into a separate segment from the former Debit and Credit segment. As of March 31, 2026, the Company’s business consists of the following reportable segments: ● Secure Card Solutions: primarily produces secure debit and credit cards and provides card personalization services for U.S. card-issuing financial institutions, including highly customizable, on-demand payment card solutions acquired through the purchase of Arroweye Solutions, Inc. (“Arroweye”) during the second quarter of 2025; ​ ● Prepaid Solutions: primarily provides prepaid debit cards and secure packaging solutions and other integrated prepaid card services to prepaid program managers in the U.S.; and ​ ● Integrated Paytech: primarily provides a SaaS-based instant issuance solution, which gives customers the ability to issue an instant personalized debit or credit card within a customer location; and other digital payment solutions such as push provisioning for mobile wallets. ​ Refer to Note 11, “Segment Reporting,” for segment results for the three months ended March 31, 2026 and 2025 under the revised segment structure. ​ Basis of Presentation Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the results of the interim periods presented. The condensed consolidated balance sheet as of December 31, 2025 is derived from the audited financial statements as of that date. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. ​ 7 Table of Contents Use of Estimates Management uses estimates and assumptions relating to the reporting of assets and liabilities as of the date of the financial statements, the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures in the preparation of the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, leases, valuation allowances for inventories and deferred taxes, revenue recognized for work performed but not completed, recognition of amounts and timing of contract costs, and uncertain tax positions. Actual results could differ from those estimates. Revenue Recognition During the second quarter of 2025, the Company reassessed certain aspects of its revenue recognition practices under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), and the legal enforceability of certain contract terms based on evolving business practices where the Company and a customer deviate from contract terms after an order is placed but before it is shipped. This assessment highlights the Company’s approach relating to goods that are in production but have not yet shipped, reflecting its emphasis on maintaining long-term customer relationships. Such deviations may impact the legal enforceability of payment terms for goods that are in the process of being produced but have not shipped. As a result, the Company concluded that certain contracts no longer meet the criteria for over-time revenue recognition under ASC 606. Effective prospectively beginning in the second quarter of 2025, the Company began recognizing revenue for these contracts at a point in time, typically upon shipment or customer acceptance. Additionally, in connection with the acquisition and integration of Arroweye during the second quarter of 2025, the Company assessed Arroweye’s customer contracts and determined that Arroweye revenue should also be recognized at point-in-time. Customer Contracts The Company often enters into Master Services Agreements (“MSAs”) with its customers. Generally, enforceable rights and obligations for goods and services occur only when a customer places a purchase order or statement of work to obtain goods or services under an MSA. The contract term as defined by ASC 606 is the length of time it takes to deliver the goods or services promised under the purchase order or statement of work. As such, the Company's contracts are generally short term in nature. Costs to Obtain a Contract with a Customer Costs to obtain a contract (“contract costs”) include only costs that the Company would not have incurred if the contract had not been obtained. For contracts in which the term is greater than one year, these costs are recorded as an asset and amortized consistent with the timing of the related revenue over the life of the contract. The current portion of the asset is included in “Prepaid expenses and other current assets” and the noncurrent portion is included in “Other assets” on the Company's condensed consolidated balance sheets. Contract costs incurred but unpaid are included in “Accrued expenses” on the Company's condensed consolidated balance sheets. Contract costs are expensed as incurred when the amortization period is one year or less. Recent Accounting Pronouncements Recently Issued Accounting Pronouncements ​ In December 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements , which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. Adoption of this accounting standard is effective for the Company for fiscal years beginning after December 15, 2027, and interim periods within annual reporting periods beginning after December 15, 2028. The Company is evaluating the impact of adoption of this standard and does not anticipate that it will have a material impact on the Company’s consolidated financial position, results of operations or cash flows. ​ 8 Table of Contents In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which will require disclosure of disaggregated information about certain expense captions presented in the income statement. Adoption of this accounting standard is effective for the Company for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The requirements should be applied on a prospective basis while retrospective application is permitted. The Company is evaluating the impact of adoption of this standard and does not anticipate that it will have a material impact on the Company’s consolidated financial position, results of operations or cash flows. ​ ​ ​ 2 . Inventories Inventories consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ ​ December 31, ​ ​ 2026 ​ ​ 2025 Raw materials $ 52,042 $ 61,564 Work in process ​ 5,286 ​ ​ 3,868 Finished goods ​ 8,176 ​ 6,811 Total inventories, net $ 65,504 $ 72,243 ​ ​ ​ ​ ​ 5 3. Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets ​ Plant, equipment, leasehold improvements and operating lease right-of-use assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ ​ December 31, ​ ​ 2026 ​ ​ 2025 Machinery and equipment $ 87,239 $ 85,835 Machinery and equipment under financing leases ​ 49,614 ​ ​ 48,194 Furniture, fixtures and computer equipment ​ 6,631 ​ 5,795 Leasehold improvements ​ 33,101 ​ 32,892 Construction in progress ​ 5,463 ​ 4,746 Operating lease right-of-use assets ​ 27,331 ​ ​ 27,390 ​ ​ 209,379 ​ ​ 204,852 Less accumulated depreciation and amortization ​ ( 102,703 ) ​ ( 96,419 ) Total plant, equipment, leasehold improvements and operating lease right-of-use assets, net $ 106,676 $ 108,433 ​ ​ ​ ​ 4. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In determining fair value, the Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: ● Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. ​ ● Level 2— Observable inputs other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term for the assets or liabilities. ​ ● Level 3— Valuations based on unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. ​ 9 Table of Contents The Company’s financial assets and liabilities that are not required to be re-measured at fair value in the condensed consolidated balance sheets were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Estimated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Value as of ​ Fair Value as of ​ Fair Value Measurement at March 31, 2026 ​ March 31, ​ March 31, ​ (Using Fair Value Hierarchy) ​ 2026 ​ 2026 ​ Level 1 ​ Level 2 ​ Level 3 Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Senior Notes $ 265,000 ​ $ 279,670 ​ $ — ​ $ 279,670 ​ $ — ABL Revolver $ 15,000 ​ $ 15,000 ​ $ — ​ $ 15,000 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Estimated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Value as of ​ Fair Value as of ​ Fair Value Measurement at December 31, 2025 ​ December 31, ​ December 31, ​ (Using Fair Value Hierarchy) ​ 2025 ​ 2025 ​ Level 1 ​ Level 2 ​ Level 3 Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Senior Notes $ 265,000 $ 281,616 ​ $ — $ 281,616 ​ $ — ABL Revolver $ 25,000 ​ $ 25,000 ​ $ — ​ $ 25,000 ​ $ — ​ The aggregate fair value of the Company’s Senior Notes (defined in Note 6, “Long-Term Debt”) was based on quoted prices for identical or similar liabilities in markets that are not active and, as a result, they are classified as Level 2 inputs. The fair value measurement associated with the ABL Revolver (defined in Note 6, “Long-Term Debt”) approximates its carrying value as of March 31, 2026 and December 31, 2025, given the applicable variable interest rates. The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable each approximate fair value due to their short-term nature. 5. Accrued Expenses ​ Accrued expenses consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2026 ​ 2025 Accrued payroll and related employee expenses $ 12,020 $ 13,634 Accrued employee performance-based incentive compensation ​ 2,424 ​ 2,664 Employer payroll taxes ​ 2,326 ​ 845 Accrued rebates ​ 3,496 ​ ​ 2,819 Accrued interest ​ 5,871 ​ ​ 12,792 Current operating and financing lease liabilities ​ 12,904 ​ ​ 12,457 Other ​ 9,219 ​ ​ 7,168 Total accrued expenses $ 48,260 ​ $ 52,379 ​ Other accrued expenses as of March 31, 2026, and December 31, 2025, consisted primarily of miscellaneous accruals for invoices not yet received, accrued sales and use tax, and self-insurance claims incurred but not yet reported. ​ 6. Long-Term Debt ​ As of March 31, 2026, and December 31, 2025, long-term debt consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ ​ ​ December 31, ​ ​ 2026 ​ 2025 Senior Notes ​ $ 265,000 ​ $ 265,000 ABL Revolver ​ ​ 15,000 ​ ​ 25,000 Unamortized deferred financing costs ​ ( 3,097 ) ​ ( 3,332 ) Total long-term debt ​ ​ 276,903 ​ ​ 286,668 Less current maturities ​ ​ — ​ ​ — Long-term debt, net of current maturities ​ $ 276,903 ​ $ 286,668 ​ 10 Table of Contents Senior Notes ​ On July 11, 2024 (the “Closing Date”), the Company completed a private offering by its wholly-owned subsidiary, CPI CG Inc., of $ 285.0 million aggregate principal amount of 10.000 % Senior Secured Notes due 2029 (the “Senior Notes”) and related guarantees at an issue price of 100 %. The Senior Notes mature on July 15, 2029 and interest is payable on January 15 and July 15 of each year. The Company has obligations to make an offer to repay the Senior Notes requiring prepayment in advance of the maturity date upon the occurrence of certain events, including a change of control and certain asset sales. ABL Revolver On the Closing Date, the Company and CPI CG Inc. as borrower (the “Borrower”), entered into a credit agreement with JPMorgan Chase Bank, N.A., as lender, administrative agent and collateral agent (“JPMorgan”), providing for an asset-based, senior secured revolving credit facility (the “ABL Revolver”) of up to $ 75.0 million. The ABL Revolver matures on the earliest to occur of July 11, 2029, and the date that is 91 days prior to the maturity of the Senior Notes. On July 2, 2025, the Company, the Borrower, and JPMorgan entered into Amendment No. 1 to Credit Agreement (the “Amendment”), which amends the ABL Revolver to, among other things, increase the available borrowing capacity from $ 75.0 million to $ 100.0 million. The Amendment did not modify the maturity date of the ABL Revolver nor the interest rate. Borrowings under the ABL Revolver bear interest at a rate per annum that ranges based on the applicable term secured overnight financing rate as administered by the Federal Reserve Bank of New York plus 1.50 % to 1.75 % (subject, in each case, to a credit spread adjustment of 0.10 % ), based on the average daily borrowing capacity under the ABL Revolver over the most recently completed month. The unused portion of the ABL Revolver commitment accrues a commitment fee, which ranges from 0.375 % to 0.50 % per annum, based on the average daily excess availability under the ABL Revolver over the immediately preceding month. Deferred Financing Costs Certain costs incurred with borrowings are reflected as a reduction to the long-term debt balance. These costs are amortized as an adjustment to interest expense over the life of the borrowing. As of March 31, 2026, the remaining unamortized debt issuance costs recorded on the Senior Notes were $ 3.1 million and were reported as a reduction to the long-term debt balance. 7. Income Taxes ​ The Company’s effective tax rates on pre-tax income were 34.4 % and 25.8 % for the three months ended March 31, 2026 and 2025, respectively. The increase in the Company’s effective tax rate for the three months ended March 31, 2026, compared to the prior year related to decreased deductibility of stock-based compensation realized upon certain stock option exercises and restricted stock unit vesting and an increase in the valuation allowance related to states decoupling from recent favorable tax legislation changes. ​ ​ 11 Table of Contents For the three months ended March 31, 2026 and 2025, the effective tax rates differ from the U.S. federal statutory income tax rate as follows: ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ ​ 2026 ​ ​ ​ ​ 2025 ​ Tax at federal statutory rate 21.0 % ​ 21.0 % State taxes, net 5.6 ​ ​ 4.9 ​ Valuation allowance 5.7 ​ ​ — ​ Permanent items (1) 2.5 ​ ​ 0.4 ​ Tax credits ( 0.4 ) ​ ​ ( 0.5 ) ​ Effective income tax rate 34.4 % ​ 25.8 % (1) Includes the deductibility limitations on excess compensation. ​ 8. Earnings per Share Basic and diluted earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if outstanding stock options at the presented dates are exercised and shares of restricted stock have vested. For the three months ended March 31, 2026 and 2025, 51,954 and 18,390 potentially dilutive securities, respectively, were excluded from the calculation of diluted earnings per share. The effect of these shares was anti-dilutive under the treasury stock method, as the assumed proceeds of the options and restricted stock per unit were above our average share price during the periods. ​ The following table sets forth the computation of basic and diluted earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2026 ​ ​ ​ 2025 Numerator: ​ ​ ​ ​ ​ Net income $ 2,056 ​ $ 4,774 ​ ​ ​ ​ ​ ​ Denominator: ​ ​ ​ ​ ​ Basic weighted-average common shares outstanding 11,457,573 ​ 11,245,844 Dilutive shares ​ 399,697 ​ ​ 762,679 Diluted weighted-average common shares outstanding ​ 11,857,270 ​ ​ 12,008,523 ​ ​ ​ ​ ​ ​ Basic earnings per share $ 0.18 ​ $ 0.42 ​ ​ ​ ​ ​ ​ Diluted earnings per share $ 0.17 ​ $ 0.40 ​ 9 . Commitments and Contingencies Contingencies In accordance with applicable accounting guidance, the Company establishes an accrued expense when loss contingencies are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. As a matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. Once the loss contingency is deemed to be both probable and estimable, the Company will establish an accrued expense and record a corresponding amount of expense. The Company expenses professional fees associated with litigation claims and assessments as incurred. The Company is subject to routine legal proceedings in the ordinary course of business. The Company believes that the ultimate resolution of any such matters will not have a material adverse effect on its business, financial condition or results of operations. ​ 12 Table of Contents 10. Stock-Based Compensation In October 2015, the Company adopted the CPI Card Group Inc. Omnibus Incentive Plan (as amended and supplemented, the “Omnibus Plan”) pursuant to which cash and equity-based incentives may be granted to participating employees, advisors, and directors. Effective January 30, 2024, the Company’s stockholders approved an amendment to the Omnibus Plan to increase the total number of shares of the Company’s common stock reserved and available for issuance thereunder by 1,000,000 shares, resulting in a total of 3,200,000 shares issuable under the Omnibus Plan. As of March 31, 2026, there were 701,979 shares of common stock available for grant under the Omnibus Plan. In March 2026, the Company granted certain executives two performance cash awards (PCAs) with a total grant date fair value of $ 3.4 million using a Monte Carlo simulation model. These PCAs will vest on December 31, 2026 and December 31, 2028 and are expected to settle in the first quarters of 2027 and 2029, respectively, subject to continuous employment and the achievement of certain Company performance goals including the Company’s relative total shareholder return of stock against the Russell 2000 index. As the award is liability-classified, the award is remeasured at fair value at each reporting date and at settlement, with changes recognized as stock-based compensation expense. During the three months ended March 31, 2026, the Company granted 81,858 restricted stock units at a weighted average grant date fair value of $ 14.51 . As of March 31, 2026, there were 570,690 outstanding restricted stock units at a weighted average grant date fair value of $ 19.57 . As of March 31, 2026, there were 597,934 options outstanding at a weighted average exercise price of $ 14.98 . No options were granted during the three months ended March 31, 2026. Options have seven-year terms and are issued with exercise prices equal to the fair market value of the Company’s common stock on the grant date. All equity awards are contingent and issued only upon approval by the compensation committee of the Company’s board of directors, or as otherwise permitted under the Omnibus Plan. The Company accounts for stock-based compensation pursuant to ASC 718, Share-Based Payments. All stock-based compensation is required to be measured at fair value and expensed over the requisite service period, generally defined as the applicable vesting period. The Company accounts for forfeitures as they occur and reverses previously recognized expenses for the unvested portion of the forfeited shares. Upon the exercise of stock options, shares of common stock are issued from authorized common shares. 11. Segment Reporting The Company’s CODM is its CEO, who is charged with the management of the Company and is responsible for the evaluation of operating performance and decision-making about the allocation of resources to operating segments based on the measures of revenue and EBITDA . As the Company uses the term, “EBITDA” is defined as income before interest expense, income taxes, depreciation and amortization. The Company’s CODM believes EBITDA is a meaningful measure and is useful as a supplement to GAAP measures as it represents a transparent view of the Company’s operating performance that is unaffected by fluctuations in property, equipment and leasehold improvement additions. The Company’s CODM uses EBITDA to perform periodic reviews and comparison of operating trends and to identify strategies to improve the allocation of resources amongst segments. Effective for the quarter ending March 31, 2026, the Company implemented a change in the structure of its reportable segments to align with its internal management reporting and operating structure and consistent with the Company’s increased strategic focus on expanding and developing additional proprietary integrated technological solutions for its customer base. This change was made to reflect the revised manner in which the Company’s CODM manages the Company’s business, including for performance assessment and resource allocation. Operating results for prior periods have been recast to conform to the current period presentation. The updated information reflects only reclassification of prior period segment data and does not represent a restatement of previously issued financial statements. 13 Table of Contents As of March 31, 2026, the Company’s reportable segments were as follows: ● Secure Card Solutions: primarily produces secure debit and credit cards and provides card personalization services for U.S. card-issuing financial institutions, including highly customizable, on-demand payment card solutions acquired through the purchase of Arroweye during the second quarter of 2025; ​ ● Prepaid Solutions: primarily provides prepaid debit cards and secure packaging solutions and other integrated prepaid card services to prepaid program managers in the U.S.; and ​ ● Integrated Paytech: primarily provides a SaaS-based instant issuance solution, which gives customers the ability to issue an instant personalized debit or credit card within a customer location; and other digital payment solutions such as push provisioning for mobile wallets. ​ Performance Measures of Reportable Segments ​ Revenue and EBITDA of the Company’s reportable segments, as well as a reconciliation of total segment EBITDA to income from operations and net income for the three months ended March 31, 2026 and 2025, were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2026 ​ ​ Secure Card Solutions ​ Prepaid Solutions ​ Integrated Paytech ​ Total Reportable Segments ​ Intersegment Eliminations ​ Corporate ​ Consolidated ​ Revenue $ 109,851 ​ $ 22,049 ​ $ 19,382 ​ $ 151,282 ​ $ ( 4,174 ) ​ $ — ​ $ 147,108 ​ Cost of goods sold ​ 82,149 ​ ​ 16,383 ​ ​ 8,626 ​ ​ 107,158 ​ ​ ( 4,174 ) ​ ​ — ​ ​ 102,984 ​ Gross profit ​ 27,702 ​ ​ 5,666 ​ ​ 10,756 ​ ​ 44,124 ​ ​ — ​ ​ — ​ ​ 44,124 ​ Selling, general and administrative expenses ​ 10,434 ​ ​ 1,573 ​ ​ 3,891 ​ ​ 15,898 ​ ​ — ​ ​ 17,232 ​ ​ 33,130 ​ Income (loss) from operations $ 17,268 ​ $ 4,093 ​ $ 6,865 ​ $ 28,226 ​ $ — ​ $ ( 17,232 ) ​ $ 10,994 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations $ 17,268 ​ $ 4,093 ​ $ 6,865 ​ $ 28,226 ​ $ — ​ $ ( 17,232 ) ​ $ 10,994 ​ Depreciation and amortization ​ 4,346 ​ ​ 1,274 ​ ​ 90 ​ ​ 5,710 ​ ​ — ​ ​ 693 ​ ​ 6,403 ​ Other income (expense), net ​ 34 ​ ​ ( 156 ) ​ ​ — ​ ​ ( 122 ) ​ ​ — ​ ​ ( 2 ) ​ ​ ( 124 ) ​ EBITDA $ 21,648 ​ $ 5,211 ​ $ 6,955 ​ $ 33,814 ​ $ — ​ $ ( 16,541 ) ​ $ 17,273 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit margin ​ 25.2 % ​ 25.7 % ​ 55.5 % ​ 29.2 % ​ * % ​ * % ​ 30.0 % EBITDA margin ​ 19.7 % ​ 23.6 % ​ 35.9 % ​ 22.4 % ​ * % ​ * % ​ 11.7 % ​ ​ 14 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2025 ​ ​ Secure Card Solutions ​ Prepaid Solutions ​ Integrated Paytech ​ Total Reportable Segments ​ Intersegment Eliminations ​ Corporate ​ Consolidated ​ Revenue $ 81,642 ​ $ 26,713 ​ $ 19,253 ​ $ 127,608 ​ $ ( 4,847 ) ​ $ — ​ $ 122,761 ​ Cost of goods sold ​ 60,823 ​ ​ 17,271 ​ ​ 8,818 ​ ​ 86,912 ​ ​ ( 4,847 ) ​ ​ — ​ ​ 82,065 ​ Gross profit ​ 20,819 ​ ​ 9,442 ​ ​ 10,435 ​ ​ 40,696 ​ ​ — ​ ​ — ​ ​ 40,696 ​ Selling, general and administrative expenses ​ 6,509 ​ ​ 1,443 ​ ​ 3,042 ​ ​ 10,994 ​ ​ — ​ ​ 15,598 ​ ​ 26,592 ​ Income (loss) from operations $ 14,310 ​ $ 7,999 ​ $ 7,393 ​ $ 29,702 ​ $ — ​ $ ( 15,598 ) ​ $ 14,104 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations $ 14,310 ​ $ 7,999 ​ $ 7,393 ​ $ 29,702 ​ $ — ​ $ ( 15,598 ) ​ $ 14,104 ​ Depreciation and amortization ​ 2,240 ​ ​ 1,116 ​ ​ 31 ​ ​ 3,387 ​ ​ — ​ ​ 860 ​ ​ 4,247 ​ Other (expense) income, net ​ ( 7 ) ​ ​ 6 ​ ​ — ​ ​ ( 1 ) ​ ​ — ​ ​ 19 ​ ​ 18 ​ EBITDA $ 16,543 ​ $ 9,121 ​ $ 7,424 ​ $ 33,088 ​ $ — ​ $ ( 14,719 ) ​ $ 18,369 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit margin ​ 25.5 % ​ 35.3 % ​ 54.2 % ​ 31.9 % ​ * % ​ * % ​ 33.2 % EBITDA margin ​ 20.3 % ​ 34.1 % ​ 38.6 % ​ 25.9 % ​ * % ​ * % ​ 15.0 % * Calculation not meaningful. ​ Reconciliation of Net Income to EBITDA ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2026 ​ ​ ​ 2025 Net income $ 2,056 ​ $ 4,774 Interest, net ​ 7,656 ​ ​ 7,685 Income tax expense 1,158 ​ 1,663 Depreciation and amortization 6,403 ​ 4,247 EBITDA $ 17,273 ​ $ 18,369 ​ Goodwill by Reportable Segment ​ Under the Company’s reportable segment structure as of December 31, 2025, the Company reported all of its goodwill in the former Debit and Credit segment. In connection with the implementation of the Company’s revised segment structure in the first quarter of 2026, a portion of the Company’s goodwill in the former Debit and Credit segment as of December 31, 2025 is now included in the Integrated Paytech segment. As a result, total goodwill of the Company’s reportable segments as of March 31, 2026, and December 31, 2025, were as follows under the revised segment structure: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ ​ ​ ​ 2026 ​ 2025 Secure Card Solutions $ 33,636 ​ $ 33,636 Integrated Paytech ​ ​ 15,128 ​ 15,128 Total goodwill ​ $ 48,764 $ 48,764 ​ Balance Sheet Data and Capital Expenditures of Reportable Segments ​ The Company does not report assets or capital expenditures by segment as the Company’s CODM does not use this information to evaluate reportable segments. Accordingly, the Company does not regularly provide such information by segment to the CODM. ​ ​ ​ 15 Table of Contents