What changed in this filing

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Item 1. Financial Statements

2025-05-07 compared with 2024-11-05 · 137 added, 221 removed, 263 unchanged (58% of the section changed)

4 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

Current assets:

4 unchanged sentences

Total current assets

Plant, equipment, leasehold improvements and operating lease right-of-use assets, net of accumulated depreciation of $ 72,651 and $ 66,436 respectively

Plant, equipment, leasehold improvements and operating lease right-of-use assets, net

Intangible assets, net of accumulated amortization of $ 56,253 and $ 55,393 , respectively

10 unchanged sentences

Commitments and contingencies (Note 11)

Stockholders’ deficit:

Series A Preferred Stock;

$ 0.001 par value— 100,000 shares authorized;

0 shares issued and outstanding at September 30, 2024 and December 31, 2023

Stockholders’ deficit:

0 shares issued and outstanding at March 31, 2025 and December 31, 2024

Common stock;

$ 0.001 par value— 100,000,000 shares authorized;

11,159,418 and 11,446,155 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Capital deficiency

11,281,489 and 11,240,507 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Capital deficit

Accumulated earnings

6 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Total net sales

11 unchanged sentences

Interest, net

Loss on debt extinguishment

Other expense, net

Other income (expense), net

Total other expense, net

Income before income taxes

Income tax benefit (expense)

Income tax expense

Basic and diluted earnings per share:

9 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Deficit

(in thousands, except per share amounts)

June 30, 2024

Shares issued under stock-based compensation plans

Stock-based compensation

Repurchase and retirement of common shares

Components of comprehensive income:

September 30, 2024

(in thousands, except share amounts)

December 31, 2024

1 unchanged sentence

Stock-based compensation

Repurchase and retirement of common shares

Components of comprehensive income:

September 30, 2024

June 30, 2023

Shares issued under stock-based compensation plans

Stock-based compensation

Components of comprehensive income:

September 30, 2023

March 31, 2025

December 31, 2023

1 unchanged sentence

Stock-based compensation

Repurchase and retirement of common shares

Components of comprehensive income:

September 30, 2023

March 31, 2024

See accompanying notes to condensed consolidated financial statements

3 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

4 unchanged sentences

Amortization of debt issuance costs

Loss on early extinguishment of debt

Deferred income taxes and other, net

11 unchanged sentences

Financing activities

Principal payments on 2026 Senior Notes

Proceeds from 2029 Senior Notes

Net proceeds from ABL Revolver

Payments on finance lease obligations

Payments on finance leases and other obligations

Common stock repurchased

Debt issuance costs

Payment for debt early redemption premium

Taxes withheld and paid on stock-based compensation awards

Cash used in financing activities

Effect of exchange rates on cash

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

8 unchanged sentences

Accounts payable and accrued expenses for capital expenditures for plant, equipment and leasehold improvements

Unsettled share repurchases included in accrued expenses

See accompanying notes to condensed consolidated financial statements

6 unchanged sentences

CPI Card Group Inc.

(which, together with its subsidiary companies, is referred to herein as “CPI” or the “Company”) is a payments technology company and leading provider of comprehensive Financial Payment Card solutions in the United States.

CPI is engaged in the design, production, data personalization, packaging and fulfillment of Financial Payment Cards, which the Company defines as credit, debit and Prepaid Debit Cards (defined below) issued on the networks of the Payment Card Brands (Visa, Mastercard ® , American Express ® and Discover ® ).

CPI defines “Prepaid Debit Cards” as debit cards issued on the networks of the Payment Card Brands, but not linked to a traditional bank account.

CPI also offers an instant card issuance solution, which provides customers the ability to issue a personalized debit or credit card within the bank branch to individual cardholders.

CPI serves its customers through a network of high-security production and card services facilities in the United States, each of which is audited for compliance with the standards of the Payment Card Industry Security Standards Council (“PCI Security Standards Council”) by one or more of the Payment Card Brands.

CPI’s network of high-security production facilities allows the Company to optimize its solutions offerings and serve its customers.

(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 payment cards and related digital solutions.

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 services.

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 services related to secure debit and credit cards that are issued on the networks of the Payment Card Brands, including Prepaid Debit Cards.

The Company’s business consists of the following reportable segments:

Debit and Credit, Prepaid Debit and Other.

The Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services to card-issuing financial institutions primarily in the United States.

The Prepaid Debit segment primarily provides integrated card services to Prepaid Debit Card program managers primarily in the United States.

The Company’s “Other” segment includes corporate expenses.

● Debit and Credit:

primarily produces secure debit and credit cards and provides card services for U.S.

card-issuing financial institutions.

Services include personalization;

instant issuance, which provides customers the ability to issue an instant personalized debit or credit card on-demand within a customer location;

and other payment solutions such as digital push provisioning for mobile wallets;

● Prepaid Debit:

primarily provides secure packaging solutions, Prepaid Debit Cards, and other integrated prepaid card services to prepaid program managers in the U.S.;

primarily corporate expenses.

Basis of Presentation

4 unchanged sentences

Use of Estimates

Management uses estimates and assumptions relating to the reporting of assets and liabilities at 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 and uncertain tax positions.

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.

Actual results could differ from those estimates.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which will require enhanced segment disclosures.

Adoption of this accounting standard is effective for the Company for fiscal years beginning after December 15, 2023.

The application of ASU 2023-07 is not expected to have a material impact on the Company’s consolidated financial position, results of operations, or cash flows .

In December 2023, the Financial Accounting Standards Board issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures which will require a disaggregated rate reconciliation disclosure as well as additional information regarding taxes paid.

Adoption of this accounting standard is effective for the Company for fiscal years beginning after December 15, 2024.

The Company is evaluating the impact of adoption of this standard and does not anticipate that the application of ASU 2023-09 will have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

The Company disaggregates its net sales by major source as follows:

Three Months Ended September 30, 2024

Debit and Credit

Prepaid Debit

Intersegment eliminations

Nine Months Ended September 30, 2024

Debit and Credit

Prepaid Debit

Intersegment eliminations

Three Months Ended September 30, 2023

Debit and Credit

Prepaid Debit

Intersegment eliminations

Nine Months Ended September 30, 2023

Debit and Credit

Prepaid Debit

Intersegment eliminations

Products Net Sales

“Products” net sales are recognized when obligations under the terms of a contract with a customer are satisfied.

In most instances, this occurs over time as cards are produced for specific customers and have no alternative use and the Company has an enforceable right to payment for work performed.

For work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts.

Items included in “Products” net sales are the design and production of Financial Payment Cards, including

contact-EMV ®(1) , contactless dual-interface EMV, contactless and magnetic stripe cards, CPI’s eco-focused solutions, including Second Wave ® and Earthwise ® cards made with upcycled plastic, metal cards, private label credit cards and retail gift cards.

Card@Once ® printers and consumables are also included in “Products” net sales, and their associated revenues are recognized at the time of shipping.

In most instances, this occurs over time as cards are produced for specific customers and have no alternative use and the

Company has an enforceable right to payment for work performed.

For work performed but not billed, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts.

Items included in “Products” net sales are the design and production of payment cards, including contact, contactless, eco-focused, and magnetic stripe cards;

CPI’s eco-focused solutions, including cards made with upcycled plastic;

private label credit cards;

and retail gift cards.

Card@Once hardware and consumables are also included in “Products” net sales, with associated revenues recognized at the time of shipping.

The Company includes gross shipping and handling revenue in net sales, and shipping and handling costs in cost of sales.

(1) Europay, Mastercard and Visa (“EMV ® ”) is a global technical standard maintained by EMV Co, LLC.

EMV ® is a registered trademark in the U.S.

and other countries and an unregistered trademark elsewhere.

The EMV trademark is owned by EMV Co, LLC.

Services Net Sales

Net sales are recognized for “Services” as the services are performed.

Items included in “Services” net sales include the personalization and fulfillment of Financial Payment Cards, providing tamper-evident secure packaging and fulfillment services to Prepaid Debit Card program managers, and software-as-a-service personalization of instant issuance debit cards.

As applicable, for work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts.

Net sales for “Services” are recognized as the services are performed.

Items included in “Services” net sales include the personalization and fulfillment of payment cards, including SaaS-based personalization of instant issuance solutions, and the providing of tamper-evident secure packaging and fulfillment services to prepaid program managers.

As applicable, for work performed but not billed, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts.

Customer Contracts

4 unchanged sentences

Costs to Obtain a Contract with a Customer

Costs to obtain a contract (“contract costs”) include only those costs incurred to obtain a contract that the Company would not have incurred if the contract had not been obtained.

For contracts where 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.

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.

1 unchanged sentence

Contract costs are expensed as incurred when the amortization period is one year or less.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which will require a disaggregated rate reconciliation disclosure as well as additional information regarding taxes paid on an annual basis.

Adoption of this accounting standard is effective for the Company for fiscal years beginning after December 15, 2024.

The Company has elected not to early adopt this accounting standard.

The adoption of this standard will result in additional income tax disclosures for the year ended December 31, 2025;

however, the Company does not anticipate that it will have a material impact on the Company’s consolidated financial position and results of operations.

In November 2024, the Financial Accounting Standards Board 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 and results of operations.

Accounts Receivable

Accounts receivable consisted of the following:

September 30,

Trade accounts receivable

1 unchanged sentence

Less allowance for credit losses

Total accounts receivable, net

Inventories consisted of the following:

September 30,

Raw materials

Finished goods

Inventory reserve

Total inventories, net

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:

September 30,

Machinery and equipment

5 unchanged sentences

Less accumulated depreciation and amortization

Total plant, equipment, leasehold improvements and

operating lease right-of-use assets, net

Fair Value of Financial Instruments

7 unchanged sentences

Fair Value as of

Fair Value Measurement at September 30, 2024

September 30,

Fair Value Measurement at March 31, 2025

(Using Fair Value Hierarchy)

2029 Senior Notes

Fair Value as of

1 unchanged sentence

(Using Fair Value Hierarchy)

2026 Senior Notes

The aggregate fair value of the Company’s 2029 Senior Notes and 2026 Senior Notes (each defined in Note 8, “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 aggregate fair value of the Company’s Senior Notes (defined in Note 7, “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 carrying amounts for cash and cash equivalents, accounts receivable and accounts payable each approximate fair value due to their short-term nature.

1 unchanged sentence

Accrued expenses consisted of the following:

September 30,

Accrued payroll and related employee expenses

5 unchanged sentences

Current operating and financing lease liabilities

Accrued share repurchases

Income taxes payable

Total accrued expenses

Other accrued expenses as of September 30, 2024, and December 31, 2023, consisted primarily of executive retention and severance, miscellaneous accruals for invoices not yet received, and self-insurance claims incurred but yet to be recorded.

Other accrued expenses as of March 31, 2025, and December 31, 2024, consisted primarily of miscellaneous accruals for invoices not yet received, accrued taxes, and self-insurance claims incurred but yet to be reported.

Long-Term Debt

As of September 30, 2024, and December 31, 2023, long-term debt consisted of the following:

September 30,

2029 Senior Notes

2026 Senior Notes

As of March 31, 2025, and December 31, 2024, long-term debt consisted of the following:

Unamortized deferred financing costs

2 unchanged sentences

Long-term debt, net of current maturities

2029 Senior Notes

On July 11, 2024 (the “Closing Date”), the Company completed a private offering by its wholly-owned subsidiary, CPI CG Inc.

(the “Issuer”), of $ 285.0 million aggregate principal amount of 10.000 % Senior Secured Notes due 2029 (the “2029 Senior Notes”) and related guarantees at an issue price of 100 %.

The notes and related guarantees were offered and sold in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended, to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act and outside the United States to certain non-U.S.

persons in compliance with Regulation S under the Securities Act.

Net proceeds from the 2029 Senior Notes, together with cash on hand, were used to redeem the entire principal balance of $ 267.9 million of 8.625 % Senior Secured Notes due 2026 (the “2026 Senior Notes”) as of the Closing Date, and to pay related fees, an early redemption premium of 2.156 %, and other expenses.

The early redemption premium paid is recorded in “Interest, net” on the condensed consolidated statement of operations and comprehensive income for the three and nine months ended September 30, 2024.

The 2029 Senior Notes mature on July 15, 2029.

Interest is payable on the 2029 Senior Notes on January 15 and July 15 of each year, beginning on January 15, 2025.

The 2029 Senior Notes are guaranteed by the Company and its domestic subsidiaries (other than the Issuer), and are secured by substantially all of the assets of the Issuer and the guarantors, subject to customary exceptions.

The Company may be required to make an offer to repurchase the 2029 Senior Notes, upon the occurrence of certain events including a change of control or certain asset sales.

The 2029 Senior Notes also require the Company to comply with certain covenants limiting the ability of the Company and the Company’s restricted subsidiaries to, among other things, incur or guarantee additional debt or issue disqualified stock or certain preferred stock;

create or incur liens;

pay dividends, redeem stock or make other distributions;

make certain investments;

create restrictions on the ability of our restricted subsidiaries to pay dividends to the Company or make other intercompany transfers;

transfer or sell assets;

merge or consolidate;

and enter into certain transactions with affiliates.

2029 ABL Revolver

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.

On the Closing Date, the Company and CPI CG Inc.

as borrower (the “Borrower”), entered into a credit agreement (the “ABL Credit Agreement”) with JPMorgan Chase Bank, N.A., as lender, administrative agent and collateral agent, providing for an asset-based, senior secured revolving credit facility (the “2029 ABL Revolver”) of up to $ 75.0 million (the “Maximum Revolver Amount”).

The 2029 ABL Revolver is guaranteed by the Company and its subsidiaries (other than certain excluded subsidiaries), and is secured by substantially all of the assets of the Company, the Borrower and the subsidiary guarantors, subject to customary exceptions.

The 2029 ABL Revolver consists of revolving loans, letters of credit and swing line loans provided by lenders, with a sublimit on letters of credit outstanding at any time of $ 10.0 million.

The 2029 ABL Revolver also includes an uncommitted accordion feature whereby the Borrower may increase the 2029 ABL Revolver commitment by an aggregate amount not to exceed $ 25.0 million, subject to certain conditions.

as borrower, entered into a credit agreement with JPMorgan Chase Bank, N.A., as lender, administrative agent and collateral agent, 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.

As of the Closing Date, the Borrower had $ 4.0 million of outstanding borrowings under a prior Credit Agreement with Wells Fargo Bank, N.A.

entered into in March 2021 (the “2026 ABL Revolver”).

The Company used

initial borrowings under the 2029 ABL Revolver, together with cash on hand and proceeds under the notes, to repay in full and terminate the 2026 ABL Revolver and to pay related fees and expenses, and will use future borrowings for general corporate purposes.

Borrowings under the 2029 ABL Revolver bear interest at a rate per annum that ranges based on the applicable term secured overnight financing rate (“SOFR”) 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 2029 ABL Revolver over the most recently completed month.

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.

The 2029 ABL Revolver includes limitations on the Borrower’s ability to borrow in certain situations, including limitations based on the calculation of borrowing capacity and further limitations that are triggered if the amount available to borrow under the ABL Revolver is less than the greater of $ 7.5 million and 10 % of the Maximum Revolver Amount.

The borrowing capacity represents the net availability under the ABL Revolver and is calculated as the lesser of a) the total of certain eligible assets, including cash, accounts receivable and inventories, further reduced by stated contribution percentages and adjustments (the “Borrowing Base”) and b) the Maximum Revolver Amount.

The Borrowing Base is further reduced by credit line reserves and letters of credit, as well as the loan ledger balance outstanding on the ABL Revolver.

Additionally, commencing with the month immediately following a date on which borrowing capacity is below the greater of $ 7.5 million and 10 % of the Maximum Revolver Amount and until such time that borrowing capacity equals or exceeds the greater of $ 7.5 million and 10 % of the Maximum Revolver Amount for 30 consecutive days, the Company must maintain a fixed charge coverage ratio (as defined in the Credit Agreement for the ABL Revolver) of at least 1.00 to 1.00, calculated for the trailing 12 months, in order to borrow under the ABL Revolver.

The 2029 ABL Revolver contains covenants limiting the ability of the Company, the Borrower and the Company’s restricted subsidiaries to, among other things, incur or guarantee additional debt or issue disqualified stock or certain preferred stock;

create or incur liens;

pay dividends, redeem stock or make other distributions;

make certain investments;

create restrictions on the ability of the Borrower and its restricted subsidiaries to pay dividends to the Company or make other intercompany transfers;

transfer or sell assets;

merge or consolidate;

and enter into certain transactions with affiliates, subject to a number of important exceptions and qualifications as set forth in the respective agreements.

As of March 31, 2025, there were no outstanding borrowings on the ABL Revolver.

Deferred Financing Costs

1 unchanged sentence

These costs are amortized as an adjustment to interest expense over the life of the borrowing using the effective interest rate method.

As of September 30, 2024, the remaining unamortized debt issuance costs recorded on the 2029 Senior Notes were $ 4.8 million and are reported as a reduction to the long-term debt balance.

The remaining unamortized debt issuance costs on the 2029 ABL Revolver were $ 1.5 million and are recorded as other assets (current and long-term) on the consolidated balance sheet as of September 30, 2024.

During the three months ended September 30, 2024, the Company recorded a $ 3.0 million loss on debt extinguishment relating to the unamortized deferred financing costs in connection with the redemption of the 2026 Senior Notes and the termination of the 2026 ABL Revolver.

The Company’s effective tax rates on pre-tax income were ( 57.9 )% and 37.7 % for the three months ended September 30, 2024 and 2023, respectively, and 24.0 % and 30.5 % for the nine months ended September 30, 2024 and 2023, respectively.

The benefit recognized for the three months ended September 30, 2024 and the decrease in the effective tax rate for the nine months ended September 30, 2024 related to increased deductibility of stock compensation realized upon certain stock option exercises and restricted stock unit vesting.

The effective tax rate for the three and nine months ended September 30, 2023 was impacted by the limitation of executive compensation deductibility related to the former CEO’s retention agreement.

For the nine months ended September 30, 2024 and 2023, the effective tax rate differs from the U.S.

As of March 31, 2025, the remaining unamortized debt issuance costs recorded on the Senior Notes were $ 4.3 million and were reported as a reduction to the long-term debt balance.

The remaining unamortized debt issuance costs on the ABL Revolver were $ 1.3 million and were recorded as other assets on the condensed consolidated balance sheet as of March 31, 2025.

The Company’s effective tax rates on pre-tax income were 25.8 % and 28.7 % for the three months ended March 31, 2025 and 2024, respectively.

The decrease in the Company’s effective tax rate for the three months ended March 31, 2025, compared to the prior year related to increased deductibility of stock-based compensation realized upon certain stock option exercises and restricted stock unit vesting.

The effective tax rate for the three months ended March 31, 2024, was impacted by limitation of executive compensation deductibility related to the prior-Chief Executive Officer’s (“CEO’s”) retention agreement.

For the three months ended March 31, 2025 and 2024, the effective tax rates differ from the U.S.

federal statutory income tax rate as follows:

September 30,

Tax at federal statutory rate

State taxes, net

Valuation allowance

Permanent items (1)

1 unchanged sentence

(1) Includes the deductibility limitations on excess compensation.

(2) The 2024 amount primarily relates to increased deductibility of stock compensation realized upon certain stock option exercises and restricted stock unit vesting.

Stockholders’ Deficit

1 unchanged sentence

On November 2, 2023, the Company's board of directors approved a share repurchase plan authorizing the Company to repurchase up to $ 20.0 million of the Company's common stock, par value $ 0.001 per share.

This authorization expires on December 31, 2024.

During the nine months ended September 30, 2024, the Company repurchased 473,284 shares of its common stock at an average price of $ 18.16 per share, excluding commissions, or $ 8.6 million in aggregate, on a trade date basis.

This amount includes 364,848 shares purchased from a stockholder that was part of our majority stockholder group at an average price of $ 18.09 per share, in accordance with the Stock Repurchase Agreements entered into with Tricor Pacific Capital Partners (Fund IV) US, LP (“Parallel49”).

As of September 30, 2024, the Company had an authorized amount of $ 11.2 million remaining under the share repurchase plan.

Secondary Offering

On September 30, 2024, the majority stockholder group members Tricor Pacific Capital Partners (Fund IV), LP and Tricor Pacific Capital Partners (Fund IV) US, LP entered into an underwriting agreement for the sale of an aggregate of 1,380,000 shares of CPI common stock in a public offering.

In conjunction with the Company’s initial public offering in October 2015, the Company entered into a registration rights agreement with its majority stockholder group whereby the Company is required to pay expenses incurred in an offering of shares of CPI common stock by the Company’s majority stockholder group other than underwriters’ fees, discounts, commissions, and certain transfer taxes.

The offering contemplated in the underwriting agreement closed on October 2, 2024, and total expenses to be paid by the Company on behalf of the majority stockholder group pursuant to the registration rights agreement for the offering were approximately $ 0.5 million.

The Company did not sell any securities in the offering and did not receive any proceeds from the sale of the shares offered by the majority stockholder group.

This authorization expired on December 31, 2024 with a remaining unused authorized amount of $ 11.2 million .

During the three months ended March 31, 2024, the Company repurchased 68,258 shares of its common stock at an average price of $ 18.29 per sha re, excluding commissions, or $ 1.2 million in aggregate, on a trade date basis.

As a result of these share repurchases and repurchases during the fourth quarter of 2023, the Company was obligated to purchase 244,314 shares from one of the Company’s significant stockholders at an average price of $ 18.03 per share, in accordance with the stock repurchase agreem ents entered into with Tricor Pacific Capital Partners (Fund IV) US, LP.

Earnings per Share

Basic and diluted earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period.

Shares excluded from the calculation of diluted earnings per share because their inclusion would be anti-dilutive were 5,728 and 160,384 for the three months ended September 30, 2024 and 2023, respectively, and 24,298 and 210,457 for the nine months ended September 30, 2024 and 2023, respectively.

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, 2025 and 2024, 18,390 and 39,933 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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Basic weighted-average common shares outstanding

17 unchanged sentences

On August 31, 2022, the Company entered into Delaware’s Voluntary Disclosure Agreement Program in order to voluntarily comply with Delaware’s abandoned property law in exchange for certain protections and benefits.

The Company intends to work in good faith to complete a review of its books and records related to unclaimed or abandoned property during the periods required under the program.

The Company continues to work in good faith to complete a review of its books and records related to unclaimed or abandoned property during the periods required under the program.

Any potential loss, or range of loss, that may result from this matter is not currently reasonably estimable.

3 unchanged sentences

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 September 30, 2024, there were 935,337 shares of Common Stock available for grant under the Omnibus Plan.

In June 2023, the Company announced an award comprised of 25 % nonqualified stock options and 75 % restricted stock units to its CEO at the time as an incentive to remain employed by the Company through February 28,

The first one -third of the awards was granted in June 2023, the second one -third was granted in August 2023, and the remainder was granted in November 2023.

All of these awards will vest ratably over a two-year period irrespective of employment status with expense related to these awards to be recognized by the Company through February 28, 2024.

As part of the CEO’s incentive package, the requisite service and exercise periods for his awards granted in 2023 prior to June 2023 were also modified with expense related to the modification being recognized in June 2023 through February 2024.

During 2024, executives receive a quarterly restricted stock unit grant comprising one-fourth of the annual equity-based incentive component of their total compensation.

The number of shares awarded will be determined based on a value tied to the monthly average closing price of the Company’s common stock.

As of September 30, 2024, there were 795,128 options outstanding at a weighted average exercise price of $ 20.62 .

No options were granted during the nine months ended September 30, 2024.

Options have 7-year terms and are issued with exercise prices equal to the fair market value of the Company’s common stock on the grant date.

During the nine months ended September 30, 2024, the Company granted 157,966 restricted stock units at a weighted average grant date fair value of $ 22.17 , and as of September 30, 2024, there were 635,312 outstanding restricted stock units at a weighted average grant date fair value of $ 20.82 .

As of March 31, 2025, there were 831,980 shares of common stock available for grant under the Omnibus Plan.

In January 2024, the Company granted 60,000 performance stock units (PSU) in connection with the appointment of its CEO, with a grant date fair value of $ 0.9 million using a Monte Carlo simulation model.

The PSU award will vest, subject to continuous employment, in equal one -third increments upon the attainment of the rolling weighted average closing price of the Company’s common stock equaling or exceeding each of $ 35.00 , $ 50.00 , and $ 65.00 , in each case, for at least 90 consecutive trading days during the five-year performance period commencing on the grant date.

In February 2025, the Company granted executives a performance cash award (PCA) with a grant date fair value of $ 2.0 million using a Monte Carlo simulation model.

The PCA will vest on December 31, 2025, 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.

During the three months ended March 31, 2025, the Company granted 38,456 restricted stock units at a weighted average grant date fair value of $ 29.17 , and as of March 31, 2025, there were 593,461 outstanding restricted stock units at a weighted average grant date fair value of $ 22.38 .

As of March 31, 2025, there were 752,641 options outstanding at a weighted average exercise price of $ 21.40 .

No options were granted during the three months ended March 31, 2025.

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.

1 unchanged sentence

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 expense for the unvested portion of the forfeited shares.

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.

Segment Reporting

The Company has identified reportable segments that represent 10% or more of its net sales, EBITDA (as defined below) or total assets, or when the Company believes information about the segment would be useful to the readers of the financial statements.

The Company’s chief operating decision maker is its Chief Executive Officer, who is charged with 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 measures, such as net sales and EBITDA.

EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate segment operating performance.

The Company’s chief operating decision maker 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 net sales and EBITDA.

As the Company uses the term, “EBITDA” is defined as income before interest expense, income taxes, depreciation and amortization.

1 unchanged sentence

The Company’s chief operating decision maker uses EBITDA to perform periodic reviews and comparison of operating trends and to identify strategies to improve the allocation of resources amongst segments.

As of September 30, 2024, the Company’s reportable segments were as follows:

As of March 31, 2025, the Company’s reportable segments were as follows:

● Debit and Credit;

1 unchanged sentence

Debit and Credit Segment

The Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services, including digital services, for card-issuing financial institutions primarily in the United States.

Products produced by this segment primarily include EMV and non-EMV Financial Payment Cards, including contact and contactless cards, and Eco-Focused Cards.

The Company also sells Card@Once instant card issuance solutions, and private label credit cards that are not issued on the networks of the Payment Card Brands.

The Company provides print-on-demand services, where images, personalized payment cards, and related collateral are produced on a one-by-one, on demand basis for customers.

This segment also provides a variety of integrated card services, including card personalization and fulfillment services and instant issuance services.

The Debit and Credit segment facilities and operations are audited for compliance with the standards of the PCI Security Standards Council by multiple Payment Card Brands.

The Debit and Credit segment primarily produces secure debit and credit cards and provides card services, including digital services, for U.S.

card-issuing financial institutions.

Products produced by this segment primarily include payment cards, including contact, contactless, eco-focused, and magnetic stripe cards.

This segment also provides personalization services;

instant issuance solutions, which provide customers the ability to issue an instant personalized debit or credit card on-demand within a customer location;

and other payment solutions such as digital push provisioning for mobile wallets.

Prepaid Debit Segment

The Prepaid Debit segment primarily provides integrated prepaid card services to Prepaid Debit Card providers primarily in the United States, including tamper-evident security packaging.

This segment also produces Financial Payment Cards issued on the networks of the Payment Card Brands that are included in the tamper-evident security packages.

The Prepaid Debit segment facilities and operations are audited for compliance with the standards of the PCI Security Standards Council by multiple Payment Card Brands.

The Prepaid Debit segment primarily provides integrated prepaid card services to prepaid program managers primarily in the U.S., including payment cards issued on the networks of the Payment Card Brands and related tamper-evident secure packaging.

The Other segment includes corporate expenses.

Performance Measures of Reportable Segments

Net sales 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 and nine months ended September 30, 2024 and 2023, were as follows:

Three Months Ended September 30, 2024

Net sales 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, 2025 and 2024, were as follows:

Three Months Ended March 31, 2025

Debit and Credit

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Intersegment Eliminations

Total net sales

Cost of sales

Operating expenses

Income (loss) from operations

EBITDA by segment:

Income (loss) from operations

Depreciation and amortization

Other income (expense)

Nine Months Ended September 30, 2024

Debit and Credit

Prepaid Debit

Intersegment Eliminations

Cost of sales

Total cost of sales

Operating expenses

4 unchanged sentences

Other income (expense)

Three Months Ended September 30, 2023

Gross profit margin

EBITDA margin

Three Months Ended March 31, 2024

Debit and Credit

1 unchanged sentence

Intersegment Eliminations

Total net sales

Cost of sales

Operating expenses

Income (loss) from operations

EBITDA by segment:

Income (loss) from operations

Depreciation and amortization

Other income (expense)

Nine Months Ended September 30, 2023

Debit and Credit

Prepaid Debit

Intersegment Eliminations

Cost of sales

Total cost of sales

Operating expenses

4 unchanged sentences

Other income (expense)

Three Months Ended September 30,

Nine Months Ended September 30,

Gross profit margin

EBITDA margin

Calculation not meaningful.

Exclusive of depreciation and amortization.

Reconciliation of Net Income to EBITDA

Three Months Ended March 31,

Interest, net

1 unchanged sentence

Depreciation and amortization

Balance Sheet Data of Reportable Segments

Total assets of the Company’s reportable segments as of March 31, 2025, and December 31, 2024, were as follows:

Debit and Credit

Prepaid Debit

Capital Expenditures of Reportable Segments

Total capital expenditures of the Company’s reportable segments as of March 31, 2025 and 2024, were as follows:

Three Months Ended March 31,

Debit and Credit

Prepaid Debit

Total capital expenditures

Subsequent Events

On May 6, 2025, the Company entered into a definitive agreement to acquire, and completed the acquisition of, Arroweye Solutions, Inc.

(“Arroweye”), a leading provider of digitally-driven on-demand payment card solutions for the U.S.

market, based in Las Vegas, Nevada.

The purchase price was $ 45.6 million, subject to customary post-closing working capital adjustments, and was funded through a combination of cash on hand and the Company’s available capacity under the ABL Revolver.

The business is expected to be included in the Debit and Credit segment.

Given the timing of the closing of the transaction and the issuance of the interim financial statements, the Company has not yet completed its initial accounting for the business combination and therefore is unable to disclose details of the assets acquired and liabilities assumed.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements