What changed in this filing

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Item 1. Financial Statements

2025-08-08 compared with 2025-05-07 · 144 added, 54 removed, 346 unchanged (36% of the section changed)

26 unchanged sentences

$ 0.001 par value— 100,000 shares authorized;

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

0 shares issued and outstanding at June 30, 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

11,334,910 and 11,240,507 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

Capital deficit

7 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Total net sales

11 unchanged sentences

Interest, net

Other income (expense), net

Other (expense) income, net

Total other expense, net

13 unchanged sentences

(in thousands, except share amounts)

March 31, 2025

Shares issued under stock-based compensation plans

Stock-based compensation

Components of comprehensive income:

June 30, 2025

December 31, 2024

2 unchanged sentences

Components of comprehensive income:

June 30, 2025

March 31, 2024

Shares issued under stock-based compensation plans

Stock-based compensation

Repurchase and retirement of common shares

Components of comprehensive income:

June 30, 2024

December 31, 2023

3 unchanged sentences

Components of comprehensive income:

March 31, 2024

June 30, 2024

See accompanying notes to condensed consolidated financial statements

3 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

15 unchanged sentences

Capital expenditures for plant, equipment and leasehold improvements, net

Cash paid for acquisition, net of cash acquired

Cash used in investing activities

Financing activities

Proceeds from borrowings on debt

Payments on debt

Payments on finance leases and other obligations

Common stock repurchased

Debt issuance costs

Taxes withheld and paid on stock-based compensation awards

Cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

41 unchanged sentences

Actual results could differ from those estimates.

Business Combinations

The Company accounts for business combinations using the acquisition method of accounting, which requires that most assets (both tangible and intangible) and liabilities are recognized at fair value at the date of acquisition.

The excess of the purchase price over the fair value of net assets is recognized as goodwill.

Certain adjustments to the assessed fair values of the assets and liabilities made subsequent to the acquisition date, but within the measurement period, which is one year or less, are recorded as adjustments to goodwill.

Results of operations of the acquired company are included in the Company’s results from the date of the acquisition.

Acquisition-related costs are expensed as incurred and included in “Selling, general, and administrative expenses” in the Company’s condensed consolidated statement of operations and comprehensive income.

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 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.

The Company reassessed certain aspects of its revenue recognition practices under ASC 606, Revenue from Contracts with Customers , 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 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 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 now recognizes 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 Solutions, Inc.

("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.

Services Net Sales

5 unchanged sentences

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.

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.

26 unchanged sentences

Raw materials

Work in process

Finished goods

Total inventories, net

Arroweye Acquisition

On May 6, 2025, the Company acquired Arroweye, a leading provider of digitally-driven on-demand payment card solutions for the U.S.

market, based in Las Vegas, Nevada, for a purchase price of $ 45.6 million, subject to customary post-closing working capital adjustments.

As of June 30, 2025, the estimated adjusted purchase price was $ 46.0 million.

The acquisition was funded through a combination of cash on hand and the Company’s available capacity under the ABL Revolver (defined in Note 8, “Long-Term Debt”), with $ 1.5 million of the purchase price held in escrow.

The Company incurred $ 2.3 million of acquisition-related costs during the six months ended June 30, 2025, which are presented in “Selling, general and administrative” expenses in the Company’s condensed consolidated statement of operations and comprehensive income.

The final consideration and the final purchase price allocation are subject to an additional working capital adjustment, further analysis of tax balances, final valuation of identifiable intangible assets, and other items.

The Arroweye financial results are included in the Company's Debit and Credit segment from the date of acquisition.

All assets and liabilities have been recorded at fair value, excluding deferred tax liabilities.

The following table summarizes the preliminary allocations of purchase price:

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

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

Intangible assets

Deferred income taxes

Accounts payable

Accrued expenses

Accrued long-term operating leases

Total purchase price

The goodwill recognized for Arroweye is primarily attributable to the assembled workforce and is recorded in the Debit and Credit segment.

The amount attributed to goodwill is not tax deductible.

The preliminary estimated fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:

Weighted Average

Acquired technology

Customer relationships

Total identifiable intangible assets acquired

The fair values of the trademark and customer relationships were determined using, in respective order, the relief from royalty and excess earnings methodologies of the income approach.

The fair value of acquired technology was determined using the cost to replace methodology of the cost approach.

The valuations of the intangible assets were derived using Level 3 inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates.

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:

17 unchanged sentences

Fair Value as of

Fair Value Measurement at March 31, 2025

Fair Value Measurement at June 30, 2025

(Using Fair Value Hierarchy)

3 unchanged sentences

The aggregate fair value of the Company’s Senior Notes (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 fair value measurement associated with the ABL Revolver approximates its carrying value as of June 30, 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.

10 unchanged sentences

Total accrued expenses

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.

Other accrued expenses as of June 30, 2025, and December 31, 2024, consisted primarily of miscellaneous accruals for invoices not yet received, self-insurance claims incurred but yet to be reported, and accrued restructuring and severance.

Long-Term Debt

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

As of June 30, 2025, and December 31, 2024, long-term debt consisted of the following:

Unamortized deferred financing costs

6 unchanged sentences

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.

as borrower (the “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.

1 unchanged sentence

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.

As of June 30, 2025, the Company had $ 30.0 million of 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.

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.

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

As of June 30, 2025, the remaining unamortized debt issuance costs recorded on the Senior Notes were $ 4.1 million and were reported as a reduction to the long-term debt balance.

The remaining unamortized debt issuance costs on the ABL Revolver were $ 1.4 million and were recorded as other assets on the condensed consolidated balance sheet as of June 30, 2025.

The Company’s effective tax rates on pre-tax income were 61.4 % and 27.7 % for the three months ended June 30, 2025 and 2024, respectively, and 32.0 % and 28.2 % for the six months ended June 30, 2025 and 2024, respectively.

The increase in the Company’s effective tax rate for the three months and six months ended June 30, 2025, compared to the prior year related to limitations on deductibility of executive compensation and non-deductible acquisition-related costs and increased state tax expenses related to the acquisition of Arroweye.

For the six months ended June 30, 2025 and 2024, the effective tax rates differ from the U.S.

federal statutory income tax rate as follows:

4 unchanged sentences

(1) Includes the deductibility limitations on excess compensation .

As part of the acquisition of Arroweye completed on May 6, 2025, the Company acquired operating loss (NOL) carryforwards of over $ 85.8 million.

The utilization of these NOLs will be subject to applicable limitations and include both NOLs with a 20-year carryover period ($ 72.1 million), as well as NOLs with no expiration period ($ 13.7 million).

Due to the likelihood of expiration, a gross valuation allowance was calculated of $ 46.5 million and a net deferred tax asset (DTA) value of $ 8.6 million was recorded, specifically related to the NOLs.

During the three and six months ended June 30, 2025, the Company utilized $ 2.2 million of these NOL carryforwards to offset a portion of its taxable income for the period.

This resulted in the utilization of approximately $ 0.5 million of the DTA and a corresponding reduction of the current income tax liability.

The remaining unutilized DTA, net of valuation allowance, specifically related to acquired NOLs is $ 8.1 million, which the Company expects to use in future periods, subject to applicable limitations .

Stockholders’ Deficit

2 unchanged sentences

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.

During the six months ended June 30, 2024, the Company repurchased 352,750 shares of its common stock at an average price of $ 18.14 per sha re, excluding commissions, or $ 6.4 million in aggregate, on a trade date basis.

As a result of certain of these share repurchases, the Company was obligated to purchase 120,534 shares from one of the Company’s significant stockholders at an average price of $ 18.23 per share in the subsequent quarter, in accordance with the stock repurchase agreem ents entered into with Tricor Pacific Capital Partners (Fund IV) US, LP.

Earnings per Share

1 unchanged sentence

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.

For the three months ended June 30, 2025 and 2024, 9,363 and 15,185 potentially dilutive securities, respectively, and for the six months ended June 30, 2025 and 2024, 10,693 and 24,298 , 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,

Three Months Ended June 30,

Six Months Ended June 30,

Basic weighted-average common shares outstanding

23 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 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.

As of June 30, 2025, there were 780,053 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 Chief Executive Officer (“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.

1 unchanged sentence

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.

Because the award is liability-classified, the award is remeasured at fair value at each reporting date and at settlement, which changes recognized as stock-based compensation expense.

During the six months ended June 30, 2025, the Company granted 112,828 restricted stock units at a weighted average grant date fair value of $ 24.95 , and as of June 30, 2025, there were 545,360 outstanding restricted stock units at a weighted average grant date fair value of $ 22.23 .

As of June 30, 2025, there were 747,937 options outstanding at a weighted average exercise price of $ 21.46 .

No options were granted during the six months ended June 30, 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.

9 unchanged sentences

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:

As of June 30, 2025, the Company’s reportable segments were as follows:

● Debit and Credit;

11 unchanged sentences

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

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 six months ended June 30, 2025 and 2024, were as follows:

Three Months Ended June 30, 2025

Debit and Credit

13 unchanged sentences

EBITDA margin

Three Months Ended March 31, 2024

Six Months Ended June 30, 2025

Debit and Credit

13 unchanged sentences

EBITDA margin

Three Months Ended June 30, 2024

Debit and Credit

Prepaid Debit

Intersegment Eliminations

Total net sales

Cost of sales

Depreciation and amortization

Total cost of sales

Operating expenses

Income (loss) from operations

EBITDA by segment:

Income (loss) from operations

Depreciation and amortization

Other income (expense)

Gross profit margin

EBITDA margin

Six Months Ended June 30, 2024

Debit and Credit

Prepaid Debit

Intersegment Eliminations

Total net sales

Cost of sales

Depreciation and amortization

Total cost of sales

Operating expenses

Income (loss) from operations

EBITDA by segment:

Income (loss) from operations

Depreciation and amortization

Other income (expense)

Gross profit margin

EBITDA margin

Calculation not meaningful.

1 unchanged sentence

Reconciliation of Net Income to EBITDA

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Interest, net

2 unchanged sentences

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:

Total assets of the Company’s reportable segments as of June 30, 2025, and December 31, 2024, were as follows:

Debit and Credit

1 unchanged sentence

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,

Total capital expenditures of the Company’s reportable segments as of June 30, 2025 and 2024, were as follows:

Six Months Ended June 30,

Debit and Credit

2 unchanged sentences

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.

On July 2, 2025, the Company and the Borrower entered into Amendment No.

1 to Credit Agreement (the “Amendment”), which amends the ABL Revolver to, among other things, increase the available borrowing capacity to $ 100.0 million from $ 75.0 million.

The amendment did not modify the maturity date of the agreement nor the interest rate.

On July 15, 2025, the Company redeemed $ 20.0 million of its outstanding $ 285.0 million aggregate principal amount Senior Notes.

The redemption was made pursuant to the terms of the indenture governing the terms of the Senior Notes, at a redemption price of 103.000 % of par plus accrued and unpaid interest to the date of redemption.

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