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, ​ 2025 ​ 2024 Assets ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ Cash and cash equivalents $ 31,520 ​ $ 33,544 Accounts receivable, net ​ 75,493 ​ ​ 85,491 Inventories, net ​ 75,251 ​ ​ 72,660 Prepaid expenses and other current assets ​ 10,345 ​ ​ 11,347 Total current assets ​ 192,609 ​ ​ 203,042 Plant, equipment, leasehold improvements and operating lease right-of-use assets, net ​ 80,272 ​ ​ 68,648 Intangible assets, net of accumulated amortization of $ 56,253 and $ 55,393 , respectively ​ 9,632 ​ ​ 10,492 Goodwill ​ 47,150 ​ ​ 47,150 Other assets ​ 22,250 ​ ​ 20,325 Total assets $ 351,913 ​ $ 349,657 Liabilities and stockholders’ deficit ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ Accounts payable $ 22,056 ​ $ 16,123 Accrued expenses ​ 41,597 ​ ​ 57,979 Deferred revenue and customer deposits ​ 1,554 ​ ​ 1,485 Total current liabilities ​ 65,207 ​ ​ 75,587 Long-term debt ​ 280,658 ​ ​ 280,405 Deferred income taxes ​ 3,136 ​ ​ 3,318 Other long-term liabilities ​ 32,629 ​ ​ 25,968 Total liabilities ​ 381,630 ​ ​ 385,278 ​ ​ ​ ​ ​ ​ 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 March 31, 2025 and December 31, 2024 ​ — ​ ​ — Common stock; $ 0.001 par value— 100,000,000 shares authorized; 11,281,489 and 11,240,507 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively ​ 11 ​ ​ 11 Capital deficit ​ ( 104,299 ) ​ ​ ( 105,429 ) Accumulated earnings ​ 74,571 ​ ​ 69,797 Total stockholders’ deficit ​ ( 29,717 ) ​ ​ ( 35,621 ) Total liabilities and stockholders’ deficit $ 351,913 ​ $ 349,657 ​ 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, ​ 2025 2024 Net sales: ​ ​ ​ ​ ​ Products $ 69,175 ​ $ 58,158 Services ​ 53,586 ​ ​ 53,778 Total net sales ​ 122,761 ​ ​ 111,936 Cost of sales: ​ ​ ​ ​ ​ Products (exclusive of depreciation and amortization shown below) ​ 46,285 ​ ​ 37,802 Services (exclusive of depreciation and amortization shown below) ​ 32,630 ​ ​ 29,929 Depreciation and amortization ​ 3,150 ​ ​ 2,687 Total cost of sales ​ 82,065 ​ ​ 70,418 Gross profit ​ 40,696 ​ ​ 41,518 Operating expenses: ​ ​ ​ ​ ​ Selling, general and administrative (exclusive of depreciation and amortization shown below) ​ 25,495 ​ ​ 26,043 Depreciation and amortization ​ 1,097 ​ ​ 1,330 Total operating expenses ​ 26,592 ​ ​ 27,373 Income from operations ​ 14,104 ​ ​ 14,145 Other expense, net: ​ ​ ​ ​ ​ Interest, net ​ ( 7,685 ) ​ ​ ( 6,425 ) Other income (expense), net ​ 18 ​ ​ ( 65 ) Total other expense, net ​ ( 7,667 ) ​ ​ ( 6,490 ) Income before income taxes ​ 6,437 ​ ​ 7,655 Income tax expense ​ ( 1,663 ) ​ ​ ( 2,200 ) Net income $ 4,774 ​ $ 5,455 ​ ​ ​ ​ ​ ​ Basic and diluted earnings per share: ​ ​ ​ ​ ​ Basic earnings per share $ 0.42 ​ $ 0.48 Diluted earnings per share $ 0.40 ​ $ 0.46 ​ ​ ​ ​ ​ ​ Basic weighted-average shares outstanding ​ 11,245,844 ​ ​ 11,266,699 Diluted weighted-average shares outstanding ​ 12,008,523 ​ ​ 11,769,364 ​ ​ ​ ​ ​ ​ Comprehensive income: ​ ​ ​ ​ ​ Net income $ 4,774 ​ $ 5,455 Total comprehensive income $ 4,774 ​ $ 5,455 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, 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 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock ​ Capital ​ Accumulated ​ Stockholders ​ Shares ​ Amount ​ deficit ​ earnings ​ deficit December 31, 2023 11,446,155 ​ $ 11 ​ $ ( 102,223 ) ​ $ 50,276 ​ $ ( 51,936 ) Shares issued under stock-based compensation plans 13,579 ​ ​ — ​ ​ ( 109 ) ​ ​ — ​ ​ ( 109 ) Stock-based compensation — ​ ​ — ​ ​ 3,060 ​ ​ — ​ ​ 3,060 Repurchase and retirement of common shares ( 68,258 ) ​ ​ — ​ ​ ( 4,921 ) ​ ​ — ​ ​ ( 4,921 ) Components of comprehensive income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income — ​ ​ — ​ ​ — ​ ​ 5,455 ​ ​ 5,455 March 31, 2024 11,391,476 ​ $ 11 ​ $ ( 104,193 ) ​ $ 55,731 ​ $ ( 48,451 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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, ​ 2025 2024 Operating activities ​ ​ ​ ​ ​ Net income $ 4,774 ​ $ 5,455 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ Depreciation expense ​ 3,387 ​ ​ 3,049 Amortization expense ​ 860 ​ ​ 968 Stock-based compensation expense ​ 1,671 ​ ​ 3,060 Amortization of debt issuance costs ​ 329 ​ ​ 459 Deferred income taxes and other, net ​ ( 314 ) ​ ​ ( 174 ) Changes in operating assets and liabilities: ​ ​ ​ ​ ​ Accounts receivable, net ​ 9,998 ​ ​ 5,171 Inventories ​ ( 2,460 ) ​ ​ ( 12,984 ) Prepaid expenses and other assets ​ ( 1,348 ) ​ ​ ( 17,610 ) Income taxes, net ​ 444 ​ ​ 728 Accounts payable ​ 5,120 ​ ​ 10,681 Accrued expenses and other liabilities ​ ( 16,937 ) ​ ​ 9,730 Deferred revenue and customer deposits ​ 69 ​ ​ 332 Cash provided by operating activities ​ 5,593 ​ ​ 8,865 Investing activities ​ ​ ​ ​ ​ Capital expenditures for plant, equipment and leasehold improvements, net ​ ( 5,301 ) ​ ​ ( 1,506 ) Other ​ 50 ​ ​ — Cash used in investing activities ​ ( 5,251 ) ​ ​ ( 1,506 ) Financing activities ​ ​ ​ ​ ​ Payments on finance leases and other obligations ​ ( 1,825 ) ​ ​ ( 1,269 ) Common stock repurchased ​ — ​ ​ ( 1,250 ) Taxes withheld and paid on stock-based compensation awards ​ ( 541 ) ​ ​ ( 109 ) Cash used in financing activities ​ ( 2,366 ) ​ ​ ( 2,628 ) Net (decrease) increase in cash and cash equivalents ​ ( 2,024 ) ​ ​ 4,731 Cash and cash equivalents, beginning of period ​ 33,544 ​ ​ 12,413 Cash and cash equivalents, end of period $ 31,520 ​ $ 17,144 Supplemental disclosures of cash flow information ​ ​ ​ ​ ​ Cash paid (refunded) during the period for: ​ ​ ​ ​ ​ Interest $ 14,998 ​ $ 11,903 Income taxes paid $ 2 ​ $ 16 Income taxes refunded $ — ​ $ ( 163 ) Right-of-use assets obtained in exchange for lease obligations: ​ ​ ​ ​ ​ Operating leases $ 7,382 ​ $ — Financing leases $ 1,888 ​ $ — Accounts payable and accrued expenses for capital expenditures for plant, equipment and leasehold improvements $ 1,654 ​ $ 263 Unsettled share repurchases included in accrued expenses $ — ​ $ 4,404 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 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: 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.; and ● Other: primarily corporate expenses. 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, 2024 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, 2024. 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. Net Sales 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 7 Table of Contents 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; metal cards; 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. ​ Services Net Sales ​ 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 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, Revenue from Contracts with Customers , 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 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. ​ 8 Table of Contents 2. Accounts Receivable Accounts receivable consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ ​ December 31, ​ ​ 2025 ​ ​ 2024 Trade accounts receivable $ 67,030 $ 78,464 Unbilled accounts receivable ​ 8,599 ​ 7,213 ​ ​ 75,629 ​ 85,677 Less allowance for credit losses ​ ( 136 ) ​ ​ ( 186 ) Total accounts receivable, net $ 75,493 ​ $ 85,491 ​ ​ 3 . Inventories Inventories consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ ​ December 31, ​ ​ 2025 ​ ​ 2024 Raw materials $ 66,474 $ 64,818 Finished goods ​ 8,777 ​ 7,842 Total inventories, net $ 75,251 $ 72,660 ​ ​ 5 ​ 4. 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, ​ ​ 2025 ​ ​ 2024 Machinery and equipment $ 72,224 $ 71,781 Machinery and equipment under financing leases ​ 34,306 ​ ​ 32,272 Furniture, fixtures and computer equipment ​ 1,408 ​ 1,123 Leasehold improvements ​ 21,190 ​ 18,875 Construction in progress ​ 8,174 ​ 5,141 Operating lease right-of-use assets ​ 22,544 ​ ​ 15,090 ​ ​ 159,846 ​ ​ 144,282 Less accumulated depreciation and amortization ​ ( 79,574 ) ​ ( 75,634 ) Total plant, equipment, leasehold improvements and operating lease right-of-use assets, net $ 80,272 $ 68,648 ​ ​ ​ ​ 5. 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. ​ 9 Table of Contents ● 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. ​ 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, 2025 ​ March 31, ​ March 31, ​ (Using Fair Value Hierarchy) ​ 2025 ​ 2025 ​ Level 1 ​ Level 2 ​ Level 3 Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Senior Notes $ 285,000 ​ $ 305,036 ​ $ — ​ $ 305,036 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Estimated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Value as of ​ Fair Value as of ​ Fair Value Measurement at December 31, 2024 ​ December 31, ​ December 31, ​ (Using Fair Value Hierarchy) ​ 2024 ​ 2024 ​ Level 1 ​ Level 2 ​ Level 3 Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Senior Notes $ 285,000 $ 304,571 ​ $ — $ 304,571 ​ $ — ​ 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. 6. Accrued Expenses ​ Accrued expenses consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2025 ​ 2024 Accrued payroll and related employee expenses $ 9,343 $ 9,493 Accrued employee performance-based incentive compensation ​ 1,999 ​ 4,664 Employer payroll taxes ​ 2,033 ​ 868 Accrued rebates ​ 2,197 ​ ​ 3,956 Capitalized contract costs payable ​ — ​ ​ 8,000 Accrued interest ​ 5,998 ​ ​ 13,506 Current operating and financing lease liabilities ​ 9,776 ​ ​ 9,065 Income taxes payable ​ 2,362 ​ ​ 881 Other ​ 7,889 ​ ​ 7,546 Total accrued expenses $ 41,597 ​ $ 57,979 ​ 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. ​ ​ ​ 10 Table of Contents 7. Long-Term Debt ​ As of March 31, 2025, and December 31, 2024, long-term debt consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2025 ​ 2024 Senior Notes ​ $ 285,000 ​ $ 285,000 Unamortized deferred financing costs ​ ( 4,342 ) ​ ( 4,595 ) Total long-term debt ​ ​ 280,658 ​ ​ 280,405 Less current maturities ​ ​ — ​ ​ — Long-term debt, net of current maturities ​ $ 280,658 ​ $ 280,405 ​ 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, 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. 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. As of March 31, 2025, there were no outstanding borrowings on the ABL Revolver. 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 using the effective interest rate method. 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. 8. Income Taxes 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. ​ ​ 11 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ March 31, ​ ​ 2025 ​ 2024 ​ Tax at federal statutory rate 21.0 % ​ 21.0 % State taxes, net 4.9 ​ ​ 6.1 ​ Permanent items (1) 0.4 ​ ​ 2.0 ​ Tax credits ( 0.5 ) ​ ​ ( 0.4 ) ​ Effective income tax rate 25.8 % ​ 28.7 % (1) Includes the deductibility limitations on excess compensation. ​ 9. Stockholders’ Deficit ​ Share Repurchases ​ 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 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. 10. 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, 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 March 31, ​ 2025 2024 Numerator: ​ ​ ​ ​ ​ Net income $ 4,774 ​ $ 5,455 ​ ​ ​ ​ ​ ​ Denominator: ​ ​ ​ ​ ​ Basic weighted-average common shares outstanding 11,245,844 ​ 11,266,699 Dilutive shares ​ 762,679 ​ ​ 502,665 Diluted weighted-average common shares outstanding ​ 12,008,523 ​ ​ 11,769,364 ​ ​ ​ ​ ​ ​ Basic earnings per share $ 0.42 ​ $ 0.48 ​ ​ ​ ​ ​ ​ Diluted earnings per share $ 0.40 ​ $ 0.46 ​ ​ 12 Table of Contents 11 . 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. Voluntary Disclosure Program The Company is subject to unclaimed or abandoned property (escheat) laws which require it to turn over to state governmental authorities the property of others held by the Company that has been unclaimed for specified periods of time. Property subject to escheat laws generally relates to uncashed checks, trade accounts receivable credits and unpaid payable balances. During the second quarter of 2022, the Company received a letter from the Delaware Secretary of State inviting the Company to participate in the Delaware Secretary of State’s Abandoned or Unclaimed Property Voluntary Disclosure Agreement Program to avoid being sent an audit notice by the Delaware Department of Finance. 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 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. 12. 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, 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. 13 Table of Contents 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. 13. Segment Reporting 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. The Company’s chief operating decision maker 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 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 March 31, 2025, the Company’s reportable segments were as follows: ● Debit and Credit; ● Prepaid Debit; and ● Othe r. ​ Debit and Credit Segment 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 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. Other The Other segment includes corporate expenses. ​ 14 Table of Contents 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 months ended March 31, 2025 and 2024, were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2025 ​ Debit and Credit ​ Prepaid Debit ​ Other ​ Intersegment Eliminations ​ Total Net sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Products $ 69,625 ​ $ — ​ $ — ​ $ ( 450 ) ​ $ 69,175 Services ​ 26,895 ​ ​ 26,713 ​ ​ — ​ ​ ( 22 ) ​ ​ 53,586 Total net sales ​ 96,520 ​ ​ 26,713 ​ ​ — ​ ​ ( 472 ) ​ ​ 122,761 Cost of sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Products (1) ​ 46,735 ​ ​ — ​ ​ — ​ ​ ( 450 ) ​ ​ 46,285 Services (1) ​ 16,433 ​ ​ 16,219 ​ ​ — ​ ​ ( 22 ) ​ ​ 32,630 Depreciation and amortization ​ 2,098 ​ ​ 1,052 ​ ​ — ​ ​ — ​ ​ 3,150 Total cost of sales ​ 65,266 ​ ​ 17,271 ​ ​ — ​ ​ ( 472 ) ​ ​ 82,065 Gross profit ​ 31,254 ​ ​ 9,442 ​ ​ — ​ ​ — ​ ​ 40,696 Operating expenses ​ 9,551 ​ ​ 1,443 ​ ​ 15,598 ​ ​ — ​ ​ 26,592 Income (loss) from operations $ 21,703 ​ $ 7,999 ​ $ ( 15,598 ) ​ $ — ​ $ 14,104 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations $ 21,703 ​ $ 7,999 ​ $ ( 15,598 ) ​ $ — ​ $ 14,104 Depreciation and amortization ​ 2,271 ​ ​ 1,116 ​ ​ 860 ​ ​ — ​ ​ 4,247 Other income (expense) ​ ( 7 ) ​ ​ 6 ​ ​ 19 ​ ​ — ​ ​ 18 EBITDA $ 23,967 ​ $ 9,121 ​ $ ( 14,719 ) ​ $ — ​ $ 18,369 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit margin ​ 32.4 % ​ ​ 35.3 % ​ ​ * ​ ​ * ​ ​ 33.2 % EBITDA margin ​ 24.8 % ​ ​ 34.1 % ​ ​ * ​ ​ * ​ ​ 15.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2024 ​ Debit and Credit ​ Prepaid Debit ​ Other ​ Intersegment Eliminations ​ Total Net sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Products $ 58,371 ​ $ — ​ $ — ​ $ ( 213 ) ​ $ 58,158 Services ​ 29,602 ​ ​ 24,198 ​ ​ — ​ ​ ( 22 ) ​ ​ 53,778 Total net sales ​ 87,973 ​ ​ 24,198 ​ ​ — ​ ​ ( 235 ) ​ ​ 111,936 Cost of sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Products (1) ​ 38,015 ​ ​ — ​ ​ — ​ ​ ( 213 ) ​ ​ 37,802 Services (1) ​ 16,592 ​ ​ 13,359 ​ ​ — ​ ​ ( 22 ) ​ ​ 29,929 Depreciation and amortization ​ 1,871 ​ ​ 816 ​ ​ — ​ ​ — ​ ​ 2,687 Total cost of sales ​ 56,478 ​ ​ 14,175 ​ ​ — ​ ​ ( 235 ) ​ ​ 70,418 Gross profit ​ 31,495 ​ ​ 10,023 ​ ​ — ​ ​ — ​ ​ 41,518 Operating expenses ​ 8,741 ​ ​ 1,278 ​ ​ 17,354 ​ ​ — ​ ​ 27,373 Income (loss) from operations $ 22,754 ​ $ 8,745 ​ $ ( 17,354 ) ​ $ — ​ $ 14,145 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EBITDA by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations $ 22,754 ​ $ 8,745 ​ $ ( 17,354 ) ​ $ — ​ $ 14,145 Depreciation and amortization ​ 2,150 ​ ​ 871 ​ ​ 996 ​ ​ — ​ ​ 4,017 Other income (expense) ​ ( 62 ) ​ ​ ( 1 ) ​ ​ ( 2 ) ​ ​ — ​ ​ ( 65 ) EBITDA $ 24,842 ​ $ 9,615 ​ $ ( 16,360 ) ​ $ — ​ $ 18,097 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit margin ​ 35.8 % ​ ​ 41.4 % ​ ​ * ​ ​ * ​ ​ 37.1 % EBITDA margin ​ 28.2 % ​ ​ 39.7 % ​ ​ * ​ ​ * ​ ​ 16.2 % * Calculation not meaningful. (1) Exclusive of depreciation and amortization. 15 Table of Contents Reconciliation of Net Income to EBITDA ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2025 2024 Net income $ 4,774 ​ $ 5,455 Interest, net ​ 7,685 ​ ​ 6,425 Income tax expense 1,663 ​ 2,200 Depreciation and amortization 4,247 ​ 4,017 EBITDA $ 18,369 ​ $ 18,097 ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2025 ​ 2024 Debit and Credit $ 260,525 ​ $ 248,970 Prepaid Debit ​ ​ 54,376 ​ 60,621 Other ​ ​ 37,012 ​ 40,066 Total assets ​ $ 351,913 $ 349,657 ​ 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, ​ 2025 2024 Debit and Credit $ 4,712 $ 750 Prepaid Debit ​ ​ 589 ​ 756 Total capital expenditures ​ $ 5,301 $ 1,506 ​ ​ ​ 14. 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 16 Table of Contents