Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Mar. 01, 2023 | Jun. 30, 2022 | |
Cover Abstract | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2022 | ||
Document Transition Report | false | ||
Entity File Number | 001-37584 | ||
Entity Registrant Name | CPI Card Group Inc. | ||
Entity Central Index Key | 0001641614 | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 26-0344657 | ||
Entity Address, Address Line One | 10368 W. Centennial Road | ||
Entity Address, City or Town | Littleton | ||
Entity Address, State or Province | CO | ||
Entity Address, Postal Zip Code | 80127 | ||
City Area Code | 720 | ||
Local Phone Number | 681-6304 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Title of 12(b) Security | Common Stock, $0.001 par value | ||
Trading Symbol | PMTS | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 76.2 | ||
Entity Common Stock, Shares Outstanding | 11,391,580 | ||
Document Fiscal Year Focus | 2022 | ||
Document Fiscal Period Focus | FY | ||
Auditor Name | KPMG LLP | ||
Auditor Firm ID | 185 | ||
Auditor Location | Denver, Colorado |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 11,037 | $ 20,683 |
Accounts receivable, net | 80,583 | 60,953 |
Inventories | 68,399 | 58,009 |
Prepaid expenses and other current assets | 7,379 | 5,522 |
Income taxes receivable | 172 | 534 |
Total current assets | 167,570 | 145,701 |
Plant, equipment, leasehold improvements and operating lease right-of-use assets, net | 57,178 | 47,251 |
Intangible assets, net | 17,988 | 21,854 |
Goodwill | 47,150 | 47,150 |
Other assets | 6,780 | 6,184 |
Total assets | 296,666 | 268,140 |
Current liabilities: | ||
Accounts payable | 24,371 | 26,443 |
Accrued expenses | 40,070 | 37,150 |
Deferred revenue and customer deposits | 3,571 | 1,182 |
Total current liabilities | 68,012 | 64,775 |
Long-term debt | 285,522 | 303,626 |
Deferred income taxes | 6,808 | 5,253 |
Other long-term liabilities | 18,401 | 15,506 |
Total liabilities | 378,743 | 389,160 |
Commitments and contingencies (Note 14) | ||
Series A Preferred Stock; $0.001 par value-100,000 shares authorized; 0 shares issued and outstanding at December 31, 2022 and 2021 | ||
Stockholders' deficit: | ||
Common stock; $0.001 par value-100,000,000 shares authorized; 11,390,355 and 11,255,466 shares issued and outstanding at December 31, 2022 and 2021, respectively | 11 | 11 |
Capital deficiency | (108,379) | (110,782) |
Accumulated earnings (loss) | 26,291 | (10,249) |
Total stockholders' deficit | (82,077) | (121,020) |
Total liabilities and stockholders' deficit | $ 296,666 | $ 268,140 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Consolidated Balance Sheets | ||
Allowance on accounts receivable | $ 218 | $ 86 |
Preferred shares, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred shares, authorized shares (in shares) | 100,000 | 100,000 |
Preferred shares, issued shares (in shares) | 0 | 0 |
Preferred shares, outstanding shares (in shares) | 0 | 0 |
Common shares, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common shares, authorized shares (in shares) | 100,000,000 | 100,000,000 |
Common shares, issued shares (in shares) | 11,390,355 | 11,255,466 |
Common shares, outstanding shares (in shares) | 11,390,355 | 11,255,466 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Net sales: | ||
Net Sales | $ 475,745 | $ 375,119 |
Cost of sales: | ||
Depreciation and amortization | 9,031 | 8,837 |
Total cost of sales | 299,978 | 233,693 |
Gross profit | 175,767 | 141,426 |
Operating expenses: | ||
Selling, general and administrative (exclusive of depreciation and amortization shown below) | 90,782 | 75,701 |
Depreciation and amortization | 5,855 | 6,261 |
Total operating expenses | 96,637 | 81,962 |
Income from operations | 79,130 | 59,464 |
Other expense, net: | ||
Interest, net | (29,616) | (30,608) |
Other (expense) income, net | 107 | 14 |
Loss on debt extinguishment | (474) | (5,048) |
Total other expense, net | (29,983) | (35,642) |
Income before income taxes | 49,147 | 23,822 |
Income tax expense | (12,607) | (7,881) |
Net income | $ 36,540 | $ 15,941 |
Basic earnings per share: (in dollar per share) | $ 3.24 | $ 1.42 |
Diluted earnings per share: (in dollar per share) | $ 3.11 | $ 1.36 |
Basic weighted-average shares outstanding (in shares) | 11,291,202 | 11,239,049 |
Diluted weighted-average shares outstanding (in shares) | 11,749,105 | 11,763,963 |
Comprehensive income: | ||
Net income | $ 36,540 | $ 15,941 |
Total comprehensive income | 36,540 | 15,941 |
Products | ||
Net sales: | ||
Net Sales | 281,190 | 199,586 |
Cost of sales: | ||
Products and Services (exclusive of depreciation and amortization shown below) | 171,017 | 121,601 |
Services | ||
Net sales: | ||
Net Sales | 194,555 | 175,533 |
Cost of sales: | ||
Products and Services (exclusive of depreciation and amortization shown below) | $ 119,930 | $ 103,255 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Deficit - USD ($) $ in Thousands | Common Stock | Capital deficiency | Accumulated loss | Total |
Beginning balance at Dec. 31, 2020 | $ 11 | $ (111,858) | $ (26,190) | $ (138,037) |
Beginning balance (in shares) at Dec. 31, 2020 | 11,230,482 | |||
Shares issued under stock-based compensation plans | (174) | (174) | ||
Shares issued under stock-based compensation plans (in shares) | 24,984 | |||
Stock-based compensation | 1,250 | 1,250 | ||
Components of comprehensive income: | ||||
Net income | 15,941 | 15,941 | ||
Ending balance at Dec. 31, 2021 | $ 11 | (110,782) | (10,249) | $ (121,020) |
Ending balance (in shares) at Dec. 31, 2021 | 11,255,466 | 11,255,466 | ||
Shares issued under stock-based compensation plans | (1,076) | $ (1,076) | ||
Shares issued under stock-based compensation plans (in shares) | 134,889 | |||
Stock-based compensation | 3,479 | 3,479 | ||
Components of comprehensive income: | ||||
Net income | 36,540 | 36,540 | ||
Ending balance at Dec. 31, 2022 | $ 11 | $ (108,379) | $ 26,291 | $ (82,077) |
Ending balance (in shares) at Dec. 31, 2022 | 11,390,355 | 11,390,355 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Operating activities | ||
Net income | $ 36,540 | $ 15,941 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization expense | 14,886 | 15,098 |
Stock-based compensation expense | 3,479 | 1,250 |
Amortization of debt issuance costs and debt discount | 1,931 | 2,367 |
Loss on debt extinguishment | 474 | 5,048 |
Deferred income tax | 1,555 | (2,156) |
Other, net | 1,094 | 213 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (19,745) | (6,361) |
Inventories | (10,702) | (33,388) |
Prepaid expenses and other assets | (2,700) | (4,062) |
Income taxes, net | 362 | 9,977 |
Accounts payable | (453) | 6,582 |
Accrued expenses and other liabilities | 2,226 | 10,410 |
Deferred revenue and customer deposits | 2,389 | (690) |
Cash provided by operating activities | 31,336 | 20,229 |
Investing activities | ||
Capital expenditures for plant, equipment and leasehold improvements | (17,867) | (10,074) |
Other | 95 | 156 |
Cash used in investing activities | (17,772) | (9,918) |
Financing activities | ||
Principal payments on First Lien Term Loan | (312,500) | |
Principal payments on Senior Credit Facility | (30,000) | |
Principal payments on Senior Notes | (24,938) | |
Principal payments on ABL Revolver | (30,000) | (15,000) |
Proceeds from Senior Notes | 310,000 | |
Proceeds from ABL Revolver, net of discount | 35,000 | 14,750 |
Debt issuance costs | (262) | (9,452) |
Payments on debt extinguishment and other | (1,677) | (2,859) |
Proceeds from finance lease financing | 2,074 | |
Payments on finance lease obligations | (3,360) | (2,171) |
Cash used in financing activities | (23,163) | (47,232) |
Effect of exchange rate on cash | (47) | 1 |
Net decrease in cash and cash equivalents | (9,646) | (36,920) |
Cash and cash equivalents, beginning of period | 20,683 | 57,603 |
Cash and cash equivalents, end of period | 11,037 | 20,683 |
Supplemental disclosures of cash flow information | ||
Cash paid during the period for: Interest | 27,714 | 22,268 |
Cash paid during the period for: Income taxes paid | 12,584 | 9,792 |
Cash paid during the period for: Income taxes (refunded) | (451) | (9,846) |
Right-of-use assets obtained in exchange for lease obligations- Operating leases | 816 | 6,932 |
Right-of-use assets obtained in exchange for lease obligations- Financing leases | 9,124 | 1,897 |
Accounts payable and accrued expenses for capital expenditures for plant, equipment and leasehold improvements | $ 462 | $ 2,972 |
Business
Business | 12 Months Ended |
Dec. 31, 2022 | |
Business | |
Business | 1. Business CPI Card Group Inc. (which, together with its subsidiary companies, is referred to herein as “CPI” or the “Company”) is a payment 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 issued on the networks of the Payment Card Brands (Visa, Mastercard, American Express and Discover). 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 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. 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. COVID-19 Update The COVID-19 pandemic and associated counteracting measures implemented by governments and businesses around the world have impacted, and continue to impact, economies and societies globally, including the locations where CPI, its customers and suppliers conduct business. The Company believes the global impacts from COVID-19, along with other macro-economic factors, have contributed to, among other things certain adverse effects on its supply chain, production lead times, labor availability, employee absenteeism and other costs. Though the Company has implemented measures to attempt to mitigate the impacts of the challenges described above, the Company believes that such impacts, and the associated costs, may continue throughout 2023 and beyond. The long-term implications of COVID-19 on the Company’s results of operations and overall financial performance remain uncertain. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law. The CARES Act, among other things, included provisions relating to refundable payroll tax credits, deferment of employer social security payments, changes in net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitation and technical corrections to tax depreciation methods for qualified improvement property. Refer to Note 11, “Income Taxes” for a discussion of the CARES Act income tax impacts on the Company. In addition, we deferred employer social security payments in 2020 in accordance with the CARES Act, and the first installment repayment was made in the fourth quarter of 2021, and the second and final installment repayment was made in the fourth quarter of 2022. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying Consolidated Financial Statements include the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents and they are stated at cost, which approximates fair value. Trade Accounts Receivable and Concentration of Credit Risk Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company performs ongoing credit evaluations of its customers and generally requires no collateral to secure accounts receivable. December 31, 2022 2021 Trade accounts receivable $ 68,886 $ 50,042 Unbilled accounts receivable 11,915 10,997 80,801 61,039 Less allowance for doubtful accounts (218) (86) $ 80,583 $ 60,953 The Company maintains an allowance for potentially uncollectible accounts receivable based upon its assessment of the collectability of accounts receivable. Accounts are written off against the allowance when it is determined collection will not occur. The allowance for bad debt activity for the years ended December 31, 2022 and 2021 is summarized as follows: Balance as of December 31, 2020 $ 289 Write-off of uncollectible accounts (203) Balance as of December 31, 2021 $ 86 Bad debt expense 115 Recoveries collected 17 Balance as of December 31, 2022 $ 218 During 2021, the Company wrote-off uncollectible accounts primarily relating to reserves previously established for outstanding receivables from the Company’s Canadian operations that were disposed in 2019. For the years ended December 31, 2022 and 2021, one customer represented 16% and 18%, respectively, of the Company’s consolidated net sales. Inventories Inventories consist of raw materials and finished goods, and are measured at the lower of cost or net realizable value (determined on a first-in, first-out or specific identification basis). Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Finished goods inventory represents primarily stock cards and Card Once printers. The stock cards are not produced for a specific customer, but are ready to be personalized and sold as customer orders are received. The Company monitors inventory for events or circumstances that may indicate the net realizable value is less than the carrying value of inventory, such as negative margins, expiration of material usage, and other forms of obsolescence, and records adjustments to the valuation of inventory, as necessary. For the year ended December 31, 2022 approximately 97% of our purchased microchips and antennas came from four main suppliers, and approximately 68% came from one supplier. Approximately 92% of our purchased microchips and antennas for the year ended December 31, 2021 came from four main suppliers, and approximately 64% came from one supplier. Plant, Equipment and Leasehold Improvements Plant, equipment and leasehold improvements are recorded at cost. Accumulated depreciation is computed using the straight-line method over the lesser of the estimated useful life of the related assets (generally 3 to 10 years for machinery and equipment, furniture, computer equipment, and leasehold improvements) or, when applicable, the lease term. Maintenance and repairs that do not extend the useful life of the respective assets are charged to expense as incurred. Long-lived assets with finite lives are reviewed for impairment whenever events indicate that the carrying amount of the asset or the carrying amounts of the asset group containing the asset may not be recoverable. In such reviews, estimated undiscounted future cash flows associated with these assets or asset groups are compared with their carrying value to determine if a write-down to fair value is required. Goodwill and Intangible Assets The Company accounts for its goodwill under the authoritative guidance for goodwill and other intangible assets (ASC 350) and the provisions of ASU 2017-04, Simplifying the Test for Goodwill Impairment and tests at least annually or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable. The Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The Company performs its goodwill impairment test by comparing the fair value of the reporting unit with the carrying amount. If this qualitative assessment indicates it is more likely than not the fair value of a reporting unit is less than the carrying amount, a one-step quantitative test is then performed. Factors management considers in this assessment include macroeconomic, industry and market considerations, overall financial performance (both current and projected), cost increases impacting earnings and cash flows, changes in management and strategy, and changes in the composition or carrying amount of net assets. In the event a reporting unit’s carrying value exceeds its fair value, the Company recognizes an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value. Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets, and are reviewed for impairment whenever events indicate that the carrying amount of the asset may not be recoverable. In such reviews, estimated undiscounted future cash flows associated with these assets are compared with their carrying value to determine if a write-down to fair value is required. Sales Tax The Company records sales tax collected from its customers on a net basis, and therefore excludes it from net sales as defined in ASC 606, Revenue from Contracts with Customers Income Taxes The Company accounts for income taxes using an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, then these deferred tax assets will be adjusted through the Company’s income tax expense in the period in which this determination is made. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. The reserves are established when the Company believes that certain positions are likely to be challenged and may not be fully sustained on review by tax authorities. The Company adjusts uncertain tax positions in light of changing facts and circumstances, such as the closing of a tax audit or refinement of an estimate. Stock-Based Compensation The Company accounts for stock-based compensation pursuant to ASC 718, Share-Based Payments. The Company accounts for forfeitures as they occur and reverses previously recognized expense for the unvested portion of the forfeited shares. The Company recognizes compensation expense on awards on a straight-line basis over the vesting period for each tranche of an award. Upon the exercise of stock options, shares of common stock are issued from authorized common shares. Refer to Note 16 “Stock-Based Compensation” for additional discussion regarding details of the Company's stock-based compensation plans. 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 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, contactless dual-interface EMV, contactless and magnetic stripe cards, CPI’s eco-focused solutions, including Second Wave and Earthwise ® . 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 SaaS 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. 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 Use of Estimates The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These accounting principles require management to make assumptions and estimates relating to the reporting of assets and liabilities in its preparation of the 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. Actual results could differ from those estimates. Recent Accounting Pronouncements Recently Issued Accounting Pronouncements In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This ASU changes the model for the recognition of credit losses from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires the Company to estimate the total credit losses expected on the portfolio of financial instruments. The effective date of ASU 2016-13 was amended by ASU 2019-10, Credit Losses Effective Dates. Since CPI is a smaller reporting company, adoption of this accounting standard is effective for the Company for fiscal years beginning after December 15, 2022, and interim periods therein, with early adoption permitted. The Company elected not to early adopt ASU 2016-13 and adopted as of January 1, 2023. The adoption of the standard did not have a material impact on the Company’s consolidated financial position or results of operations. |
Net Sales
Net Sales | 12 Months Ended |
Dec. 31, 2022 | |
Net Sales. | |
Net Sales | 3. Net Sales The Company disaggregates its net sales by major source as follows: For the year ended December 31, 2022 Products Services Total Debit and Credit $ 282,081 $ 108,478 $ 390,559 Prepaid Debit — 86,136 86,136 Intersegment eliminations (891) (59) (950) Total $ 281,190 $ 194,555 $ 475,745 For the year ended December 31, 2021 Products Services Total Debit and Credit $ 199,825 $ 96,379 $ 296,204 Prepaid Debit — 79,213 79,213 Intersegment eliminations (239) (59) (298) Total $ 199,586 $ 175,533 $ 375,119 |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2022 | |
Inventories | |
Inventories | 4. Inventories Inventories are summarized below: December 31, 2022 2021 Raw materials $ 61,434 $ 54,254 Finished goods 10,300 6,778 Inventory reserve (3,335) (3,023) $ 68,399 $ 58,009 |
Plant, Equipment, Leasehold Imp
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets | 12 Months Ended |
Dec. 31, 2022 | |
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets | |
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets | 5. 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: December 31, 2022 2021 Machinery and equipment $ 64,786 $ 64,051 Machinery and equipment under financing leases 15,717 9,088 Furniture, fixtures and computer equipment 3,072 4,570 Leasehold improvements 14,703 14,142 Construction in progress 3,304 5,268 101,582 97,119 Less accumulated depreciation and amortization (55,109) (61,937) Operating lease right-of-use assets, net of accumulated amortization 10,705 12,069 $ 57,178 $ 47,251 Depreciation expense of plant, equipment and leasehold improvements including depreciation of assets under financing leases was $11,020 and $10,745 for the years ended December 31, 2022 and 2021, respectively. Operating lease right-of-use assets, net of accumulated amortization, are further described in Note 9, “Financing and Operating Leases.” There were no impairments of the Company’s plant, equipment, leasehold improvements and operating leases right-of-use assets for the years ended December 31, 2022 and 2021. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 12 Months Ended |
Dec. 31, 2022 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 6. Goodwill and Other Intangible Assets The Company reports all of its goodwill in the Debit and Credit segment at December 31, 2022 and 2021. The Company completed its goodwill impairment testing as of October 1, 2022 and did not identify any goodwill impairment during the years ended December 31, 2022 and 2021. Intangible assets consist of customer relationships, acquired technology, and trademarks. Intangible amortization expense totaled $3,866 and $4,353 for the years ended December 31, 2022 and 2021, respectively. There were no impairments of the Company’s amortizable intangible assets for the years ended December 31, 2022 and 2021. At December 31, 2022 and 2021, intangible assets, excluding goodwill, were comprised of the following: December 31, 2022 December 31, 2021 Weighted Average Accumulated Net Book Accumulated Net Book Life (Years) Cost Amortization Value Cost Amortization Value Customer relationships 17.2 $ 55,454 $ (38,695) $ 16,759 $ 55,454 $ (35,419) $ 20,035 Acquired technology 10 7,101 (6,767) 334 7,101 (6,567) 534 Trademarks 8.7 3,330 (2,435) 895 3,330 (2,045) 1,285 Intangible assets subject to amortization $ 65,885 $ (47,897) $ 17,988 $ 65,885 $ (44,031) $ 21,854 The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of December 31, 2022 was as follows: 2023 $ 3,867 2024 3,630 2025 3,440 2026 2,471 2027 2,313 Thereafter 2,267 $ 17,988 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 12 Months Ended |
Dec. 31, 2022 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 7. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In determining fair value, the Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: ● Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. ● Level 2 — Observable inputs other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term for the assets or liabilities. ● Level 3 — Valuations based on unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. The Company’s financial assets and liabilities that are not required to be re-measured at fair value in the consolidated balance sheets were as follows: Carrying Fair Value Measurement at Value as of Fair Value as of December 31, 2022 December 31, December 31, (Using Fair Value Hierarchy) 2022 2022 Level 1 Level 2 Level 3 Liabilities: Senior Notes $ 285,000 $ 281,438 $ — $ 281,438 $ — ABL Revolver $ 5,000 $ 5,000 $ — $ 5,000 $ — Carrying Fair Value Measurement at Value as of Fair Value as of December 31, 2021 December 31, December 31, (Using Fair Value Hierarchy) 2021 2021 Level 1 Level 2 Level 3 Liabilities: Senior Notes $ 310,000 $ 327,050 $ — $ 327,050 $ — The aggregate fair value of the Company’s Senior Notes (as defined in Note 10 “Long-Term Debt”) was based on bank quotes. The fair value measurement associated with the ABL Revolver (as defined in Note 10, “Long-Term Debt”) approximates its carrying value as of December 31, 2022, given the applicable variable interest rates and nature of the security interest in Company assets. The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable each approximate fair value due to their short-term nature. |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Dec. 31, 2022 | |
Accrued Expenses. | |
Accrued Expenses | 8. Accrued Expenses Accrued expenses consisted of the following: December 31, 2022 2021 Accrued payroll and related employee expenses $ 7,727 $ 7,558 Accrued employee performance bonuses 8,576 6,900 Employer payroll taxes, including social security deferral 1,092 1,910 Accrued rebates 2,668 1,423 Estimated sales tax liability 622 1,019 Accrued interest 7,275 7,955 Current operating and financing lease liabilities 5,697 4,114 Other 6,413 6,271 Total accrued expenses $ 40,070 $ 37,150 Other accrued expenses as of December 31, 2022 and 2021 consisted primarily of miscellaneous accruals for invoices not yet received, and other items such as accrued royalties, self-insurance claims that have yet to be reported, and the current portion of uncertain tax position reserves. |
Financing and Operating Leases
Financing and Operating Leases | 12 Months Ended |
Dec. 31, 2022 | |
Financing and Operating Leases | |
Financing and Operating Leases | 9. Financing and Operating Leases Right-of-use (“ROU”) represents the right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. A lease is deemed to exist when the Company has the right to control the use of identified property, plant or equipment, as conveyed through a contract, for a certain period of time and consideration paid. The right to control is deemed to occur when the Company has the right to obtain substantially all of the economic benefits of the identified assets and the right to direct the use of such assets. Certain leases contain escalation provisions and/or renewal options, giving the Company the right to extend the leases by up to 10 years The components of operating and finance lease costs were as follows: Year Ended December 31, 2022 2021 Operating lease costs $ 3,064 $ 2,258 Variable lease costs 642 676 Short-term operating lease costs — 416 Total expense from operating leases $ 3,706 $ 3,350 Finance lease costs: Right-of-use amortization expense $ 1,718 $ 1,009 Interest on lease liabilities 482 380 Total financing lease costs $ 2,200 $ 1,389 The following table reflects balances for operating and financing leases: December 31, 2022 2021 Operating leases: Operating lease right-of-use assets, net of amortization $ 10,705 $ 12,069 Current operating lease liabilities $ 2,355 $ 1,857 Non-current operating lease liabilities 8,905 10,703 Total operating lease liabilities $ 11,260 $ 12,560 Financing leases: Property, equipment and leasehold improvements $ 15,717 $ 9,088 Accumulated depreciation (3,135) (2,451) Total financing leases in property, equipment and leasehold improvements, net $ 12,582 $ 6,637 Current financing lease liabilities $ 3,342 $ 2,257 Non-current financing lease liabilities 7,355 2,668 Total financing lease liabilities $ 10,697 $ 4,925 Finance and operating lease ROU assets are recorded in “Plant, equipment, leasehold improvements, and operating lease right-of-use assets, net.” Financing and operating lease liabilities are recorded in “Accrued expenses” and “Other long-term liabilities.” Components of lease expense were as follows: December 31, 2022 2021 Weighted-average remaining lease term: Operating leases 5.06 6.05 Financing leases 3.60 2.73 Weighted-average discount rate: Operating leases 7.93% 8.04% Financing leases 6.62% 8.01% Future cash payment with respect to lease obligations as of December 31, 2022 were as follows: Operating Financing Lease Leases Year Ending 2023 $ 3,164 $ 3,953 2024 2,896 3,139 2025 2,090 2,848 2026 1,958 1,488 2027 1,907 557 Thereafter 1,750 — Total lease payments 13,765 11,985 Less imputed interest (2,505) (1,288) Total $ 11,260 $ 10,697 |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Dec. 31, 2022 | |
Long-Term Debt. | |
Long-Term Debt | 10. Long-Term Debt At December 31, 2022 and 2021, long-term debt consisted of the following: Interest December 31, Rate (1) 2022 2021 Senior Notes 8.625 % $ 285,000 $ 310,000 ABL Revolver 5.661 % 5,000 — Unamortized deferred financing costs (4,478) (6,374) Total long-term debt 285,522 303,626 Less current maturities — — Long-term debt, net of current maturities $ 285,522 $ 303,626 (1) The Senior Notes bear interest at a fixed rate and the ABL Revolver bears interest at a variable rate. On March 15, 2021, the Company completed a private offering by its wholly-owned subsidiary, CPI CG Inc., of $310,000 aggregate principal amount of 8.625% Senior Secured Notes due 2026 (the “Senior Notes”) and related guarantees. The Senior Notes bear interest at a rate of 8.625% per annum and mature on March 15, 2026. Interest is payable on the Senior Notes on March 15 and September 15 of each year. On March 15, 2021, the Company and CPI CG Inc., as borrower, entered into a Credit Agreement with Wells Fargo Bank, National Association, as lender, administrative agent and collateral agent, providing for an asset-based, senior secured revolving credit facility of up to $50,000 (the “ABL Revolver”). The ABL Revolver matures on the earliest to occur of March 15, 2026 and the date that is 90 days prior to the maturity of the Senior Notes. On March 3, 2022, the Company and CPI CG Inc. entered into Amendment No. 1 to the Credit Agreement (the “Amendment”), which amended the ABL Revolver. The Amendment, among other things, increased the available borrowing capacity under the ABL Revolver to $75,000, increased the uncommitted accordion feature to $25,000 from $15,000, and revised the interest rate provisions to replace the prior LIBOR benchmark with updated benchmark provisions using the secured overnight financing rate (“SOFR”) administered by the Federal Reserve Bank of New York. On October 11, 2022, the Company and CPI CG Inc. entered into Amendment No. 2 to the Credit Agreement, which amended the ABL Revolver to adjust certain monthly document delivery terms and to clarify the treatment of certain inventory. Borrowings under the amended ABL Revolver bear interest at a rate per annum equal to the applicable term SOFR adjusted for a credit spread, plus an applicable interest rate margin. The Company may select a one, three or six month term SOFR, which is adjusted for a credit spread of 0.10% to 0.30% depending on the term selected. Through March 31, 2023, the applicable interest rate margin ranges from 1.50% to 1.75% depending on the average excess availability of the facility for the most recently completed quarter. The unused portion of the ABL Revolver commitment accrues a monthly unused line fee, 0.50% per annum through March 31, 2023, times the aggregate amount of Revolver commitments less the average Revolver usage during the immediately preceding month. Unused line fee expense was $246 and $182 for the year ended December 31, 2022 and 2021, respectively. The interest rate margin and unused line fee percentage changes, effective April 1, 2023, to between 1.25% and 1.75% (interest rate margin) and 0.375% and 0.50% (unused commitment fee). The ABL Revolver includes limitations on the Company’s ability to borrow in certain situations, including limitations based on the calculation of a borrowing capacity and further limitations that are triggered if the amount available to borrow under the ABL Revolver is less than $7,500. 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 or b) the $75,000 of available borrowing capacity under the ABL Revolver (“Borrowing Base”). The Borrowing Base is further reduced by credit line reserves, 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 $7,500 and until such time that borrowing capacity equals or exceeds $7,500 for 30 consecutive days, the Company must maintain a fixed charge coverage ratio (as defined in the Credit Agreement for the ABL Revolver) greater than 1.00, calculated for the trailing 12 months, in order to borrow under the ABL Revolver. On March 15, 2021, the Company used net proceeds from the Senior Notes, together with cash on hand and initial borrowings of $15,000 under the ABL Revolver, to pay in full and terminate a previous Senior Credit Facility and a previous First Lien Term Loan, and to pay related fees and expenses. Early termination of the Senior Credit Facility required payment of a “make-whole” premium of $2,635 as an early termination penalty, which was paid on March 15, 2021, and recorded as interest expense on the consolidated statement of comprehensive income for the year ended December 31, 2021. On March 11, 2022, the Company used the available borrowing capacity under the ABL Revolver to fund the redemption of $20,000 aggregate principal amount of the Senior Notes at a redemption price equal to 103% of the principal amount thereof plus accrued and unpaid interest thereon to the redemption date. The difference between the par value and the purchase price of $600 is recorded in “Interest Expense” on the consolidated statement of comprehensive income for the year ended December 31, 2022. On December 28, 2022, the Company purchased $5,000 aggregate principal amount of the Senior Notes at a purchase price equal to 98.75% of the principal amount thereof plus accrued and unpaid interest thereon to the purchase date. The difference between the par value and the purchase price of $63 is recorded in “Interest, net” on the consolidated statement of comprehensive income for the year ended December 31, 2022. The Senior Notes are guaranteed by the Company and certain of its current and future wholly-owned domestic subsidiaries (other than CPI CG Inc. as the issuer of the Senior Notes) that guarantee the ABL Revolver. The Senior Notes are secured by substantially all of the assets of CPI CG Inc. and the guarantors, subject to customary exceptions. The ABL Revolver is guaranteed by the Company and its subsidiaries (other than CPI CG Inc. as borrower and excluded subsidiaries), and is secured by substantially all of the assets of CPI CG Inc. and the guarantors, subject to customary exceptions. The Senior Notes and the ABL Revolver contain covenants limiting the ability of the Company, CPI CG Inc. 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 CPI CG Inc. 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. 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, certain asset sales and based on an annual excess cash flow calculation. The annual excess cash flow calculation is determined pursuant to the terms of that certain Indenture, dated as of March 15, 2021, by and among CPI CG Inc., the Company, the subsidiary guarantors and U.S. Bank National Association, as trustee, with any required prepayments to be made after the issuance of the Company’s annual financial statements. No such payment was required to be made in 2022 based on the Company’s operating results for the year ended December 31, 2021. Deferred Financing Costs and Discount Certain costs and discounts 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. The remaining unamortized debt issuance costs recorded on the Senior Notes were $4,557 and is reported as a reduction to the long-term debt balance as of December 31, 2022. The remaining unamortized net discount and debt issuance costs on the ABL Revolver and related Amendment were $1,539 and are recorded as other assets (current and long-term) on the consolidated balance sheet as of December 31, 2022. During the year ended December 31, 2021, the Company recorded a $5,048 loss on debt extinguishment relating to the unamortized deferred financing costs and debt discount in connection with the termination of the Senior Credit Facility and First Lien Term Loan, as described earlier. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2022 | |
Income Taxes | |
Income Taxes | 11. Income Taxes Income tax expense and effective income tax rates consist of the following: December 31, 2022 2021 Current taxes: Domestic $ 11,047 $ 10,038 Foreign 5 (1) 11,052 10,037 Deferred taxes: Domestic 1,554 (2,154) Foreign 1 (2) 1,555 (2,156) Income tax expense $ 12,607 $ 7,881 Income before income taxes: Domestic income $ 49,108 $ 23,761 Foreign income 39 61 Total $ 49,147 $ 23,822 Effective income tax rate 25.7 % 33.1 % The Company’s effective tax rates on pre-tax income were 25.7% and 33.1% for the years ended December 31, 2022 and 2021, respectively. The decrease in the Company’s effective tax rate for the year ended December 31, 2022 compared to the prior year was primarily due to a decrease in unrecognized tax benefits due to the lapse of statute of limitations and favorable settlements paid to state tax authorities. For the years ended December 31, 2022 and 2021, the effective tax rate differs from the U.S. federal statutory income tax rate as follows: December 31, 2022 2021 Tax at federal statutory rate 21.0 % 21.0 % State taxes, net 5.4 7.4 Unrecognized tax benefits (2.0) 1.4 Tax credits (0.1) (0.2) Permanent items 1.0 2.4 Other 0.4 1.1 Effective income tax rate 25.7 % 33.1 % For the year ended December 31, 2022 the effective tax rate differs from the federal statutory rate primarily due to state income taxes, which had a tax rate impact of 5.4%. Other items impacting the effective tax rate in 2022 include unrecognized tax benefits and permanent items. The components of the deferred tax assets and liabilities are as follows: December 31, 2022 2021 Deferred tax assets: Accrued expense $ 3,830 $ 3,664 Net operating loss carryforward 257 305 Stock compensation 1,303 894 Interest limitation 2,474 3,693 Lease liability 2,891 3,222 Capital loss carryover 2,135 2,076 Research and development costs 1,434 — Other 3,609 2,867 Total gross deferred tax assets 17,933 16,721 Valuation allowance (2,791) (2,832) Net deferred tax assets 15,142 13,889 Deferred tax liabilities: Plant, equipment and leasehold improvements (9,510) (5,773) Intangible assets (8,020) (8,284) Right-of-use assets (2,749) (3,098) Other (1,671) (1,987) Total gross deferred tax liabilities (21,950) (19,142) Net deferred tax liabilities $ (6,808) $ (5,253) The valuation allowance as of December 31, 2022, is primarily relating to a capital loss realized on the sale of a foreign subsidiary whereby the Company does not anticipate a capital gain in the foreseeable future that would allow for the recognition of the capital loss carryover. In addition, the Company has a partial valuation allowance on certain state interest deduction limitations, which the Company estimates may not be fully utilized. Under a provision in the 2017 U.S. Tax Cuts and Jobs Act, beginning in 2022, research and development costs incurred are no longer allowed as an immediate deduction for federal income tax purposes. Rather, these expenditures incurred must be capitalized and amortized over a five-year period for activities conducted in the United States and a 15 year period for activities conducted outside the United States. The Company has various state and local operating loss carryforwards which will expire at various dates from 2032 to 2038. The Company does expect to be able to utilize these losses prior to expiration. The Company received income tax refunds in 2022 of $451 from the State of Tennessee related to a favorable filing position. The Company received income tax refunds in 2021 of $9,846, which were primarily comprised of U.S. federal income tax refund claims attributable to the CARES Act provisions, including alternative minimum tax credits and NOL carrybacks. The Company has recorded compensation for certain covered employees in excess of $1,000 per year. Under Internal Revenue Code (IRC) Section 162(m), the Company is prohibited from deducting the amount of tax compensation that exceeds $1,000 per year for these employees. The covered employees are defined as the Chief Executive Officer, Chief Financial Officer, and the three next-highest-compensated officers of the Company. The Company considers the impact of the estimated IRC Section 162(m) limitations on the future deductibility of existing temporary differences. Unrecognized Tax Benefits Unrecognized tax benefits represent the aggregate tax effect of differences between the tax return positions and the amounts otherwise recognized in the Company’s consolidated financial statements, and are reflected in “Accrued expenses” and “Other long-term liabilities” in the Company’s consolidated balance sheets. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax provision only when based upon the technical merits, it is “more-likely-than-not” that the tax position will be sustained upon examination. Balance as of December 31, 2021 $ 2,350 Increase related to current year tax position 58 Decrease related to prior year tax position (54) Decrease related to settlements with tax authorities, net of federal benefit (147) Lapse of statute of limitations (812) Balance as of December 31, 2022 $ 1,395 The Company recognizes interest and penalties with respect to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest and penalties related to unrecognized tax benefits for the year ended December 31, 2022 is $285, and was $289 for the year ended December 31, 2021. The Company believes that it is reasonably possible that approximately $89 of its unrecognized tax benefits may be recognized by the end of 2023 as a result of settlements with various state taxing authorities, which is reflected in “Accrued expenses” in the Company’s consolidated balance sheet as of December 31, 2022. The Company recognized a decrease of up to $965 of its unrecognized tax benefits, including interest and penalties, related to an asset basis tax position and research and development tax credits as a result of a lapse of the statute of limitations. |
Stockholders' Deficit
Stockholders' Deficit | 12 Months Ended |
Dec. 31, 2022 | |
Stockholders' Deficit | |
Stockholders' Deficit | 12. Stockholders’ Deficit Common Stock Common Stock has a par value of $0.001 per share. Holders of Common Stock are entitled to receive dividends and distributions subject to the participation rights of holders of all classes of stock at the time outstanding, as such holders may have prior rights as to dividends pursuant to the rights of any series of Preferred Stock. Upon any liquidation, dissolution, or winding up of the Company, after required payments are made to holders of any series of Preferred Stock, any remaining assets of the Company will be distributed ratably to the holders of Common Stock. Holders of Common Stock are entitled to one vote per share. |
Earnings per Share
Earnings per Share | 12 Months Ended |
Dec. 31, 2022 | |
Earnings per Share | |
Earnings per Share | 13. 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. 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 years ended December 31, 2022 and 2021, 27,813 and 121,993 potentially dilutive securities, respectively, are excluded from the calculation of diluted earnings per share because their inclusions would be anti-dilutive. The following table sets forth the computation of basic and diluted earnings per share: Year Ended December 31, 2022 2021 Numerator: Net income $ 36,540 $ 15,941 Denominator: Basic weighted-average shares outstanding 11,291,202 11,239,049 Dilutive shares 457,903 524,914 Diluted weighted-average shares outstanding 11,749,105 11,763,963 Basic earnings per share $ 3.24 $ 1.42 Diluted earnings per share $ 3.11 $ 1.36 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies | |
Commitments and Contingencies | 14. Commitments and Contingencies Commitments Refer to Note 9 “Financing and Operating Leases” for details on the Company’s future cash payments with respect to financing and operating leases. During the normal course of business, the Company enters into non-cancellable agreements to purchase goods and services, including production equipment and information technology systems. The Company leases real property for its facilities under non-cancellable operating lease agreements. Land and facility leases expire at various dates between 2023 and 2029 and contain various provisions for rental adjustments and renewals. The leases typically require the Company to pay property taxes, insurance and normal maintenance costs. The Company’s financing leases expire at various dates between 2023 and 2027 and contain purchase options which the Company may exercise to keep the machinery in use. 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. Smart Packaging Solutions SA v. CPI Card Group Inc. On April 20, 2021, Smart Packaging Solutions, SA (“SPS”) filed a patent infringement lawsuit against the Company in the United States District Court for the District of Delaware seeking an unspecified amount of damages and equitable relief. In the complaint, SPS alleges that the Company infringed four patents that SPS has exclusively licensed from Feinics AmaTech Teoranta. The patents all relate to antenna technology. SPS alleges that the Company incorporates the patented technology into its products that use contactless communication. The Company does not produce antennas; it purchases certain antenna-related components from SPS and a number of other suppliers. The Company’s motion to dismiss the complaint is currently pending. Additionally, a third party, Infineon, has filed requests for Inter Parties Review (“IPR”) proceedings concerning each of the four patents. As a result, the Delaware District Court stayed the case pending resolution of the requests for review. The United States Patent Office has instituted proceedings with respect to all of the IPR requests. The current proceedings in the patent office are scheduled to run through September 2023. Should the patents survive review by the United States Patent Office, the Company intends to defend the suit vigorously. However, no assurance can be given that this matter will be resolved favorably. Due to the stage of this matter, the Company is unable to predict the outcome or the possible loss or range of loss, if any, associated with this matter, and no liability has been recorded as of December 31, 2022. In addition to the matter described above, the Company may be 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 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. Any potential loss, or range of loss, that may result from this matter is not currently reasonably estimable. |
Employee Benefit Plan
Employee Benefit Plan | 12 Months Ended |
Dec. 31, 2022 | |
Employee Benefit Plan | |
Employee Benefit Plan | 15. Employee Benefit Plan The Company maintains a qualified defined-contribution plan under the provisions of the Internal Revenue Code Section 401(k), which covers substantially all employees in the United States who meet certain eligibility requirements. Under the plan, participants may defer their salary subject to statutory limitations and may direct the contributions among various investment options. The Company matches 100% of the participant’s first 3% of deferrals and 50% matching on each of the 4 th th The aggregate amounts charged to expense in connection with the plan were $1,932 and $1,604 for the years ended December 31, 2022 and 2021, respectively. |
Stock Based Compensation
Stock Based Compensation | 12 Months Ended |
Dec. 31, 2022 | |
Stock Based Compensation | |
Stock Based Compensation | 16. Stock-Based Compensation CPI Card Group Inc. Omnibus Incentive Plan In October 2015, the Company adopted the CPI Card Group Inc. Omnibus Incentive Plan (the “Omnibus Plan”) pursuant to which cash and equity-based incentives may be granted to participating employees, advisors and directors. On May 27, 2021, the Company’s stockholders approved an amendment and restatement of the Omnibus Plan to, among other things, 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 2,200,000 shares of Common Stock issuable under the Omnibus Plan. As of December 31, 2022, there were 944,123 shares of Common Stock available for grant under the Omnibus Plan. 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. The following is a summary of the activity in outstanding stock options under the Omnibus Plan: Weighted-Average Weighted-Average Remaining Aggregate Exercise Contractual Term Intrinsic Options Price (in Years) Value Outstanding as of December 31, 2021 778,835 $ 18.02 5.59 Granted 44,905 14.95 6.27 Exercised (28,752) 6.47 — Expired (1,320) 21.75 — Forfeited (13,045) 26.55 — Outstanding as of December 31, 2022 780,623 $ 18.12 4.65 $ 15,902 Options vested and exercisable as of December 31, 2022 680,564 $ 17.34 4.45 $ 14,636 Options vested and expected to vest as of December 31, 2022 780,623 $ 18.12 4.65 $ 15,902 The following is a summary of the activity in unvested stock options under the Omnibus Plan: Weighted-Average Grant-Date Number Fair Value Unvested as of December 31, 2021 127,357 $ 17.42 Granted 44,905 8.99 Vested (59,158) 17.42 Forfeited (13,045) 15.68 Unvested as of December 31, 2022 100,059 $ 6.02 Unvested stock options of 100,059 as of December 31, 2022 have a seven-year options exercised during the years ended December 31, 2022 and 2021 was $414 and $802, respectively. The total fair value of options vested during the years ended December 31, 2022 and 2021 was $1,031 and $50, respectively. The fair value of the stock option awards granted for the years ended December 31, 2022 and 2021, were determined using a Black-Scholes option-pricing model with the following weighted-average assumptions: December 31, 2022 2021 Expected term in years (1) 4.25 4.25 Volatility (2) 77.6 % 78.6 % Risk-free interest rate (3) 2.86 % 0.71 % Dividend yield (4) — % — % (1) The Company estimated the expected term based on the average of the weighted-average vesting period and the contractual term of the stock option awards by utilizing the “simplified method”, as the Company does not have sufficient available historical data to estimate the expected term of these stock option awards. (2) Volatility was based on a weighting of the Company’s historical volatility and its peer group, which is comprised of companies with similar industry, size, and financial leverage. (3) The risk-free interest rate was determined by using the United States Treasury rate for the period consistent with the expected option term described above. (4) The Company’s expected annual dividend yield was zero based on current practice. The following table summarizes the changes in the number of outstanding restricted stock units for the year ended December 31, 2022 under the Omnibus Plan: Weighted-Average Remaining Weighted-Average Amortization Grant-Date Period Shares Fair Value (in Years) Outstanding as of December 31, 2021 261,982 $ 13.19 Granted 35,795 16.87 Vested (179,311) 7.47 Forfeited (19,802) 11.64 Outstanding as of December 31, 2022 98,664 $ 25.23 1.08 The restricted stock unit awards contain conditions associated with continued employment or service. Restricted stock units granted in 2022 are expected to vest ratably over a two-year period on each anniversary of the grant date. On the vesting date, shares of Common Stock will be issued to the award recipients. The weighted average fair value of restricted stock units granted during the years ended December 31, 2022 and 2021 was $16.87 and $29.61, respectively. The total fair value of shares vested was during the year ended December 31, 2022 was $1,340 and there were no shares vested during the year ended December 31, 2021. Compensation expense for the Omnibus Plan for the years ended December 31, 2022 and 2021 was $3,479 and $1,250 , respectively, and the Company realized total tax benefits during the years ended December 31, 2022 and 2021 from stock-based compensation of $442 and $31 , respectively. As of December 31, 2022, the total unrecognized compensation expense related to unvested options and restricted stock units is $1,477 , which the Company expects to recognize over an estimated weighted-average period of approximately 1.05 years. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2022 | |
Segment Reporting | |
Segment Reporting | 17. 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. 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 December 31, 2022, the Company’s reportable segments were as follows: ● Debit and Credit; ● Prepaid Debit; and ● Other. Debit and Credit Segment 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. Products produced by this segment primarily include EMV and non-EMV Financial Payment Cards, including contact and contactless cards, and Earth Elements TM Prepaid Debit Segment The Prepaid Debit segment primarily provides integrated prepaid card services to Prepaid Debit Card providers 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 Payment Card Industry Security Standards Council by multiple Payment Card Brands. Other The Other segment includes corporate expenses. Performance Measures of Reportable Segments Net sales and EBITDA of the Company’s reportable segments for the years ended December 31, 2022 and 2021 were as follows: Net Sales EBITDA December 31, December 31, 2022 2021 2022 2021 Debit and Credit $ 390,559 $ 296,204 $ 118,478 $ 87,499 Prepaid Debit 86,136 79,213 27,844 29,156 Other — — (52,673) (47,127) Intersegment eliminations (950) (298) — — Total $ 475,745 $ 375,119 $ 93,649 $ 69,528 The following table provides a reconciliation of total segment EBITDA to net income for the years ended December 31, 2022 and 2021: December 31, 2022 2021 Total segment EBITDA $ 93,649 $ 69,528 Interest, net (29,616) (30,608) Income tax expense (12,607) (7,881) Depreciation and amortization (14,886) (15,098) Net income $ 36,540 $ 15,941 Balance Sheet Data of Reportable Segments Total assets of the Company’s reportable segments as of December 31, 2022 and 2021 were as follows: December 31, 2022 2021 Debit and Credit $ 238,610 $ 210,492 Prepaid Debit 38,138 31,480 Other 19,918 26,168 Total assets $ 296,666 $ 268,140 Capital Expenditures of Reportable Segments Total capital expenditures of the Company’s reportable segments as of December 31, 2022 and 2021 were as follows: December 31, 2022 2021 Debit and Credit $ 15,283 $ 6,826 Prepaid Debit 2,309 2,774 Other 275 474 Total company capital expenditures $ 17,867 $ 10,074 Net Sales to Geographic Location; Property, Equipment and Leasehold Improvements and Long-Lived assets by Geographic Segments Each of the Company’s Net Sales, Property, Equipment and Leasehold Improvements, and Long-Lived assets relating to geographic locations outside of the United States is insignificant. Net Sales by Product and Services Net sales from products and services sold by the Company for the years ended December 31, 2022 and 2021 were as follows: December 31, 2022 2021 Product net sales (1) $ 281,190 $ 199,586 Services net sales (2) 194,555 175,533 Total net sales $ 475,745 $ 375,119 (1) “Products” net sales include the design and production of Financial Payment Cards in contact-EMV, contactless EMV, metal, contactless and magnetic stripe card formats. The Company also generates “Products” revenue from the sale of Card Once printers and consumables, private label credit cards and retail gift cards. (2) “Services” net sales include revenue from the personalization and fulfillment of Financial Payment Cards, providing tamper-evident security packaging and fulfillment services to Prepaid Debit Card program managers and SaaS personalization of instant issuance cards. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying Consolidated Financial Statements include the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents and they are stated at cost, which approximates fair value. |
Trade Accounts Receivable and Concentration of Credit Risk | Trade Accounts Receivable and Concentration of Credit Risk Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company performs ongoing credit evaluations of its customers and generally requires no collateral to secure accounts receivable. December 31, 2022 2021 Trade accounts receivable $ 68,886 $ 50,042 Unbilled accounts receivable 11,915 10,997 80,801 61,039 Less allowance for doubtful accounts (218) (86) $ 80,583 $ 60,953 The Company maintains an allowance for potentially uncollectible accounts receivable based upon its assessment of the collectability of accounts receivable. Accounts are written off against the allowance when it is determined collection will not occur. The allowance for bad debt activity for the years ended December 31, 2022 and 2021 is summarized as follows: Balance as of December 31, 2020 $ 289 Write-off of uncollectible accounts (203) Balance as of December 31, 2021 $ 86 Bad debt expense 115 Recoveries collected 17 Balance as of December 31, 2022 $ 218 During 2021, the Company wrote-off uncollectible accounts primarily relating to reserves previously established for outstanding receivables from the Company’s Canadian operations that were disposed in 2019. For the years ended December 31, 2022 and 2021, one customer represented 16% and 18%, respectively, of the Company’s consolidated net sales. |
Inventories | Inventories Inventories consist of raw materials and finished goods, and are measured at the lower of cost or net realizable value (determined on a first-in, first-out or specific identification basis). Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Finished goods inventory represents primarily stock cards and Card Once printers. The stock cards are not produced for a specific customer, but are ready to be personalized and sold as customer orders are received. The Company monitors inventory for events or circumstances that may indicate the net realizable value is less than the carrying value of inventory, such as negative margins, expiration of material usage, and other forms of obsolescence, and records adjustments to the valuation of inventory, as necessary. For the year ended December 31, 2022 approximately 97% of our purchased microchips and antennas came from four main suppliers, and approximately 68% came from one supplier. Approximately 92% of our purchased microchips and antennas for the year ended December 31, 2021 came from four main suppliers, and approximately 64% came from one supplier. |
Plant, Equipment and Leasehold Improvements | Plant, Equipment and Leasehold Improvements Plant, equipment and leasehold improvements are recorded at cost. Accumulated depreciation is computed using the straight-line method over the lesser of the estimated useful life of the related assets (generally 3 to 10 years for machinery and equipment, furniture, computer equipment, and leasehold improvements) or, when applicable, the lease term. Maintenance and repairs that do not extend the useful life of the respective assets are charged to expense as incurred. Long-lived assets with finite lives are reviewed for impairment whenever events indicate that the carrying amount of the asset or the carrying amounts of the asset group containing the asset may not be recoverable. In such reviews, estimated undiscounted future cash flows associated with these assets or asset groups are compared with their carrying value to determine if a write-down to fair value is required. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets The Company accounts for its goodwill under the authoritative guidance for goodwill and other intangible assets (ASC 350) and the provisions of ASU 2017-04, Simplifying the Test for Goodwill Impairment and tests at least annually or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable. The Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The Company performs its goodwill impairment test by comparing the fair value of the reporting unit with the carrying amount. If this qualitative assessment indicates it is more likely than not the fair value of a reporting unit is less than the carrying amount, a one-step quantitative test is then performed. Factors management considers in this assessment include macroeconomic, industry and market considerations, overall financial performance (both current and projected), cost increases impacting earnings and cash flows, changes in management and strategy, and changes in the composition or carrying amount of net assets. In the event a reporting unit’s carrying value exceeds its fair value, the Company recognizes an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value. Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets, and are reviewed for impairment whenever events indicate that the carrying amount of the asset may not be recoverable. In such reviews, estimated undiscounted future cash flows associated with these assets are compared with their carrying value to determine if a write-down to fair value is required. |
Sales Tax | Sales Tax The Company records sales tax collected from its customers on a net basis, and therefore excludes it from net sales as defined in ASC 606, Revenue from Contracts with Customers |
Income Taxes | Income Taxes The Company accounts for income taxes using an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, then these deferred tax assets will be adjusted through the Company’s income tax expense in the period in which this determination is made. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. The reserves are established when the Company believes that certain positions are likely to be challenged and may not be fully sustained on review by tax authorities. The Company adjusts uncertain tax positions in light of changing facts and circumstances, such as the closing of a tax audit or refinement of an estimate. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for stock-based compensation pursuant to ASC 718, Share-Based Payments. The Company accounts for forfeitures as they occur and reverses previously recognized expense for the unvested portion of the forfeited shares. The Company recognizes compensation expense on awards on a straight-line basis over the vesting period for each tranche of an award. Upon the exercise of stock options, shares of common stock are issued from authorized common shares. Refer to Note 16 “Stock-Based Compensation” for additional discussion regarding details of the Company's stock-based compensation plans. |
Net Sales | 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 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, contactless dual-interface EMV, contactless and magnetic stripe cards, CPI’s eco-focused solutions, including Second Wave and Earthwise ® . 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 SaaS 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. 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 |
Use of Estimates | Use of Estimates The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These accounting principles require management to make assumptions and estimates relating to the reporting of assets and liabilities in its preparation of the 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. Actual results could differ from those estimates. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Issued Accounting Pronouncements In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This ASU changes the model for the recognition of credit losses from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires the Company to estimate the total credit losses expected on the portfolio of financial instruments. The effective date of ASU 2016-13 was amended by ASU 2019-10, Credit Losses Effective Dates. Since CPI is a smaller reporting company, adoption of this accounting standard is effective for the Company for fiscal years beginning after December 15, 2022, and interim periods therein, with early adoption permitted. The Company elected not to early adopt ASU 2016-13 and adopted as of January 1, 2023. The adoption of the standard did not have a material impact on the Company’s consolidated financial position or results of operations. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Summary of Significant Accounting Policies | |
Schedule of trade accounts receivable | December 31, 2022 2021 Trade accounts receivable $ 68,886 $ 50,042 Unbilled accounts receivable 11,915 10,997 80,801 61,039 Less allowance for doubtful accounts (218) (86) $ 80,583 $ 60,953 |
Schedule of allowance for bad debt and credit activity | Balance as of December 31, 2020 $ 289 Write-off of uncollectible accounts (203) Balance as of December 31, 2021 $ 86 Bad debt expense 115 Recoveries collected 17 Balance as of December 31, 2022 $ 218 |
Net Sales (Tables)
Net Sales (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Net Sales. | |
Schedule of disaggregation of net sales by major source | For the year ended December 31, 2022 Products Services Total Debit and Credit $ 282,081 $ 108,478 $ 390,559 Prepaid Debit — 86,136 86,136 Intersegment eliminations (891) (59) (950) Total $ 281,190 $ 194,555 $ 475,745 For the year ended December 31, 2021 Products Services Total Debit and Credit $ 199,825 $ 96,379 $ 296,204 Prepaid Debit — 79,213 79,213 Intersegment eliminations (239) (59) (298) Total $ 199,586 $ 175,533 $ 375,119 |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Inventories | |
Schedule of inventories | December 31, 2022 2021 Raw materials $ 61,434 $ 54,254 Finished goods 10,300 6,778 Inventory reserve (3,335) (3,023) $ 68,399 $ 58,009 |
Plant, Equipment, Leasehold I_2
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets | |
Schedule of plant, equipment, leasehold improvements and operating lease right-to-use assets | December 31, 2022 2021 Machinery and equipment $ 64,786 $ 64,051 Machinery and equipment under financing leases 15,717 9,088 Furniture, fixtures and computer equipment 3,072 4,570 Leasehold improvements 14,703 14,142 Construction in progress 3,304 5,268 101,582 97,119 Less accumulated depreciation and amortization (55,109) (61,937) Operating lease right-of-use assets, net of accumulated amortization 10,705 12,069 $ 57,178 $ 47,251 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Goodwill and Other Intangible Assets | |
Schedule of intangible assets excluding goodwill | December 31, 2022 December 31, 2021 Weighted Average Accumulated Net Book Accumulated Net Book Life (Years) Cost Amortization Value Cost Amortization Value Customer relationships 17.2 $ 55,454 $ (38,695) $ 16,759 $ 55,454 $ (35,419) $ 20,035 Acquired technology 10 7,101 (6,767) 334 7,101 (6,567) 534 Trademarks 8.7 3,330 (2,435) 895 3,330 (2,045) 1,285 Intangible assets subject to amortization $ 65,885 $ (47,897) $ 17,988 $ 65,885 $ (44,031) $ 21,854 |
Schedule of future aggregate amortization expense for identified amortizable intangibles | 2023 $ 3,867 2024 3,630 2025 3,440 2026 2,471 2027 2,313 Thereafter 2,267 $ 17,988 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Fair Value of Financial Instruments | |
Schedule of financial assets and liabilities subject to fair value measurements | Carrying Fair Value Measurement at Value as of Fair Value as of December 31, 2022 December 31, December 31, (Using Fair Value Hierarchy) 2022 2022 Level 1 Level 2 Level 3 Liabilities: Senior Notes $ 285,000 $ 281,438 $ — $ 281,438 $ — ABL Revolver $ 5,000 $ 5,000 $ — $ 5,000 $ — Carrying Fair Value Measurement at Value as of Fair Value as of December 31, 2021 December 31, December 31, (Using Fair Value Hierarchy) 2021 2021 Level 1 Level 2 Level 3 Liabilities: Senior Notes $ 310,000 $ 327,050 $ — $ 327,050 $ — |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Accrued Expenses. | |
Schedule of Accrued Expenses | December 31, 2022 2021 Accrued payroll and related employee expenses $ 7,727 $ 7,558 Accrued employee performance bonuses 8,576 6,900 Employer payroll taxes, including social security deferral 1,092 1,910 Accrued rebates 2,668 1,423 Estimated sales tax liability 622 1,019 Accrued interest 7,275 7,955 Current operating and financing lease liabilities 5,697 4,114 Other 6,413 6,271 Total accrued expenses $ 40,070 $ 37,150 |
Financing and Operating Leases
Financing and Operating Leases (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Financing and Operating Leases | |
Schedule of operating and finance lease costs | Year Ended December 31, 2022 2021 Operating lease costs $ 3,064 $ 2,258 Variable lease costs 642 676 Short-term operating lease costs — 416 Total expense from operating leases $ 3,706 $ 3,350 Finance lease costs: Right-of-use amortization expense $ 1,718 $ 1,009 Interest on lease liabilities 482 380 Total financing lease costs $ 2,200 $ 1,389 |
Schedule of balances for operating and financing leases | December 31, 2022 2021 Operating leases: Operating lease right-of-use assets, net of amortization $ 10,705 $ 12,069 Current operating lease liabilities $ 2,355 $ 1,857 Non-current operating lease liabilities 8,905 10,703 Total operating lease liabilities $ 11,260 $ 12,560 Financing leases: Property, equipment and leasehold improvements $ 15,717 $ 9,088 Accumulated depreciation (3,135) (2,451) Total financing leases in property, equipment and leasehold improvements, net $ 12,582 $ 6,637 Current financing lease liabilities $ 3,342 $ 2,257 Non-current financing lease liabilities 7,355 2,668 Total financing lease liabilities $ 10,697 $ 4,925 |
Schedule of components of lease expense | December 31, 2022 2021 Weighted-average remaining lease term: Operating leases 5.06 6.05 Financing leases 3.60 2.73 Weighted-average discount rate: Operating leases 7.93% 8.04% Financing leases 6.62% 8.01% |
Schedule of future cash payment of operating lease obligations | Future cash payment with respect to lease obligations as of December 31, 2022 were as follows: Operating Financing Lease Leases Year Ending 2023 $ 3,164 $ 3,953 2024 2,896 3,139 2025 2,090 2,848 2026 1,958 1,488 2027 1,907 557 Thereafter 1,750 — Total lease payments 13,765 11,985 Less imputed interest (2,505) (1,288) Total $ 11,260 $ 10,697 |
Schedule of future cash payment of financing lease obligations | Operating Financing Lease Leases Year Ending 2023 $ 3,164 $ 3,953 2024 2,896 3,139 2025 2,090 2,848 2026 1,958 1,488 2027 1,907 557 Thereafter 1,750 — Total lease payments 13,765 11,985 Less imputed interest (2,505) (1,288) Total $ 11,260 $ 10,697 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Long-Term Debt. | |
Schedule of long-term debt | Interest December 31, Rate (1) 2022 2021 Senior Notes 8.625 % $ 285,000 $ 310,000 ABL Revolver 5.661 % 5,000 — Unamortized deferred financing costs (4,478) (6,374) Total long-term debt 285,522 303,626 Less current maturities — — Long-term debt, net of current maturities $ 285,522 $ 303,626 (1) The Senior Notes bear interest at a fixed rate and the ABL Revolver bears interest at a variable rate. |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Income Taxes | |
Schedule of income tax (benefit) expense from continuing operations and effective income tax rates | December 31, 2022 2021 Current taxes: Domestic $ 11,047 $ 10,038 Foreign 5 (1) 11,052 10,037 Deferred taxes: Domestic 1,554 (2,154) Foreign 1 (2) 1,555 (2,156) Income tax expense $ 12,607 $ 7,881 Income before income taxes: Domestic income $ 49,108 $ 23,761 Foreign income 39 61 Total $ 49,147 $ 23,822 Effective income tax rate 25.7 % 33.1 % |
Schedule of effective income tax rate reconciliation | December 31, 2022 2021 Tax at federal statutory rate 21.0 % 21.0 % State taxes, net 5.4 7.4 Unrecognized tax benefits (2.0) 1.4 Tax credits (0.1) (0.2) Permanent items 1.0 2.4 Other 0.4 1.1 Effective income tax rate 25.7 % 33.1 % |
Schedule of components of deferred tax assets and liabilities | December 31, 2022 2021 Deferred tax assets: Accrued expense $ 3,830 $ 3,664 Net operating loss carryforward 257 305 Stock compensation 1,303 894 Interest limitation 2,474 3,693 Lease liability 2,891 3,222 Capital loss carryover 2,135 2,076 Research and development costs 1,434 — Other 3,609 2,867 Total gross deferred tax assets 17,933 16,721 Valuation allowance (2,791) (2,832) Net deferred tax assets 15,142 13,889 Deferred tax liabilities: Plant, equipment and leasehold improvements (9,510) (5,773) Intangible assets (8,020) (8,284) Right-of-use assets (2,749) (3,098) Other (1,671) (1,987) Total gross deferred tax liabilities (21,950) (19,142) Net deferred tax liabilities $ (6,808) $ (5,253) |
Unrecognized Tax Benefits | Balance as of December 31, 2021 $ 2,350 Increase related to current year tax position 58 Decrease related to prior year tax position (54) Decrease related to settlements with tax authorities, net of federal benefit (147) Lapse of statute of limitations (812) Balance as of December 31, 2022 $ 1,395 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Earnings per Share | |
Computation of basic and diluted earnings per share | Year Ended December 31, 2022 2021 Numerator: Net income $ 36,540 $ 15,941 Denominator: Basic weighted-average shares outstanding 11,291,202 11,239,049 Dilutive shares 457,903 524,914 Diluted weighted-average shares outstanding 11,749,105 11,763,963 Basic earnings per share $ 3.24 $ 1.42 Diluted earnings per share $ 3.11 $ 1.36 |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Stock Based Compensation | |
Summary of outstanding and exercisable stock options | Weighted-Average Weighted-Average Remaining Aggregate Exercise Contractual Term Intrinsic Options Price (in Years) Value Outstanding as of December 31, 2021 778,835 $ 18.02 5.59 Granted 44,905 14.95 6.27 Exercised (28,752) 6.47 — Expired (1,320) 21.75 — Forfeited (13,045) 26.55 — Outstanding as of December 31, 2022 780,623 $ 18.12 4.65 $ 15,902 Options vested and exercisable as of December 31, 2022 680,564 $ 17.34 4.45 $ 14,636 Options vested and expected to vest as of December 31, 2022 780,623 $ 18.12 4.65 $ 15,902 |
Schedule of vesting for unvested options | Weighted-Average Grant-Date Number Fair Value Unvested as of December 31, 2021 127,357 $ 17.42 Granted 44,905 8.99 Vested (59,158) 17.42 Forfeited (13,045) 15.68 Unvested as of December 31, 2022 100,059 $ 6.02 |
Schedule of valuation assumptions | December 31, 2022 2021 Expected term in years (1) 4.25 4.25 Volatility (2) 77.6 % 78.6 % Risk-free interest rate (3) 2.86 % 0.71 % Dividend yield (4) — % — % (1) The Company estimated the expected term based on the average of the weighted-average vesting period and the contractual term of the stock option awards by utilizing the “simplified method”, as the Company does not have sufficient available historical data to estimate the expected term of these stock option awards. (2) Volatility was based on a weighting of the Company’s historical volatility and its peer group, which is comprised of companies with similar industry, size, and financial leverage. (3) The risk-free interest rate was determined by using the United States Treasury rate for the period consistent with the expected option term described above. (4) The Company’s expected annual dividend yield was zero based on current practice. |
Summary of changes in outstanding restricted stock units | Weighted-Average Remaining Weighted-Average Amortization Grant-Date Period Shares Fair Value (in Years) Outstanding as of December 31, 2021 261,982 $ 13.19 Granted 35,795 16.87 Vested (179,311) 7.47 Forfeited (19,802) 11.64 Outstanding as of December 31, 2022 98,664 $ 25.23 1.08 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Segment Reporting | |
Schedule of revenue and EBITDA of the company's reportable segments | Net Sales EBITDA December 31, December 31, 2022 2021 2022 2021 Debit and Credit $ 390,559 $ 296,204 $ 118,478 $ 87,499 Prepaid Debit 86,136 79,213 27,844 29,156 Other — — (52,673) (47,127) Intersegment eliminations (950) (298) — — Total $ 475,745 $ 375,119 $ 93,649 $ 69,528 |
Schedule of reconciliation of total segment EBITDA to income before taxes | December 31, 2022 2021 Total segment EBITDA $ 93,649 $ 69,528 Interest, net (29,616) (30,608) Income tax expense (12,607) (7,881) Depreciation and amortization (14,886) (15,098) Net income $ 36,540 $ 15,941 |
Schedule of total assets of the company's reportable segments | December 31, 2022 2021 Debit and Credit $ 238,610 $ 210,492 Prepaid Debit 38,138 31,480 Other 19,918 26,168 Total assets $ 296,666 $ 268,140 |
Total capital expenditures of the Company's reportable segments | December 31, 2022 2021 Debit and Credit $ 15,283 $ 6,826 Prepaid Debit 2,309 2,774 Other 275 474 Total company capital expenditures $ 17,867 $ 10,074 |
Schedule of net sales from product and services sold by the company | December 31, 2022 2021 Product net sales (1) $ 281,190 $ 199,586 Services net sales (2) 194,555 175,533 Total net sales $ 475,745 $ 375,119 (1) “Products” net sales include the design and production of Financial Payment Cards in contact-EMV, contactless EMV, metal, contactless and magnetic stripe card formats. The Company also generates “Products” revenue from the sale of Card Once printers and consumables, private label credit cards and retail gift cards. (2) “Services” net sales include revenue from the personalization and fulfillment of Financial Payment Cards, providing tamper-evident security packaging and fulfillment services to Prepaid Debit Card program managers and SaaS personalization of instant issuance cards. |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Trade Accounts Receivable (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Trade Accounts Receivable | |||
Trade accounts receivable | $ 68,886 | $ 50,042 | |
Unbilled accounts receivable | 11,915 | 10,997 | |
Trade and unbilled accounts receivable | 80,801 | 61,039 | |
Less allowance for doubtful accounts | (218) | (86) | $ (289) |
Accounts receivable, net | $ 80,583 | $ 60,953 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Bad debts and Concentration of Credit Risk (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 USD ($) item customer | Dec. 31, 2021 USD ($) customer item | |
Allowance for bad debt and credit activity | ||
Beginning balance | $ 86 | $ 289 |
Bad debt expense | 115 | |
Write-off of uncollectible accounts | (203) | |
Recoveries collected | 17 | |
Ending balance | $ 218 | $ 86 |
Customer Concentration Risk | Net sales | Major Customer Number One | ||
Allowance for bad debt and credit activity | ||
Number of customers | customer | 1 | 1 |
Concentration risk (as a percent) | 16% | 18% |
Supplier Concentration Risk [Member] | Cost of Goods and Service Benchmark [Member] | Four Suppliers [Member] | ||
Allowance for bad debt and credit activity | ||
Concentration risk (as a percent) | 97% | 92% |
Number of suppliers | item | 4 | 4 |
Supplier Concentration Risk [Member] | Cost of Goods and Service Benchmark [Member] | One Supplier [Member] | ||
Allowance for bad debt and credit activity | ||
Concentration risk (as a percent) | 68% | 64% |
Number of suppliers | item | 1 | 1 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Plant, Equipment and Leasehold Improvements (Details) | 12 Months Ended |
Dec. 31, 2022 | |
Minimum | |
Plant, Equipment and Leasehold Improvements | |
Useful life (in years) | 3 years |
Maximum | |
Plant, Equipment and Leasehold Improvements | |
Useful life (in years) | 10 years |
Net Sales (Details)
Net Sales (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Disaggregation of Revenue | ||
Net Sales | $ 475,745 | $ 375,119 |
Operating Segments | Debit and Credit | ||
Disaggregation of Revenue | ||
Net Sales | 390,559 | 296,204 |
Operating Segments | Prepaid Debit | ||
Disaggregation of Revenue | ||
Net Sales | 86,136 | 79,213 |
Intersegment eliminations | ||
Disaggregation of Revenue | ||
Net Sales | (950) | (298) |
Products | ||
Disaggregation of Revenue | ||
Net Sales | 281,190 | 199,586 |
Products | Operating Segments | Debit and Credit | ||
Disaggregation of Revenue | ||
Net Sales | 282,081 | 199,825 |
Products | Intersegment eliminations | ||
Disaggregation of Revenue | ||
Net Sales | (891) | (239) |
Services | ||
Disaggregation of Revenue | ||
Net Sales | 194,555 | 175,533 |
Services | Operating Segments | Debit and Credit | ||
Disaggregation of Revenue | ||
Net Sales | 108,478 | 96,379 |
Services | Operating Segments | Prepaid Debit | ||
Disaggregation of Revenue | ||
Net Sales | 86,136 | 79,213 |
Services | Intersegment eliminations | ||
Disaggregation of Revenue | ||
Net Sales | $ (59) | $ (59) |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Inventories | ||
Raw materials | $ 61,434 | $ 54,254 |
Finished goods | 10,300 | 6,778 |
Inventory reserve | (3,335) | (3,023) |
Inventory | $ 68,399 | $ 58,009 |
Plant, Equipment, Leasehold I_3
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Plant, Equipment and Leasehold Improvements | ||
Plant, equipment and leasehold improvements, gross | $ 101,582,000 | $ 97,119,000 |
Less accumulated depreciation and amortization | (55,109,000) | (61,937,000) |
Operating lease right-of-use assets, net of accumulated amortization | 10,705,000 | 12,069,000 |
Total property, equipment and leasehold improvements, net | 57,178,000 | 47,251,000 |
Depreciation | 11,020,000 | 10,745,000 |
Impairments of the Company's plant, equipment, and leasehold improvement assets | 0 | 0 |
Machinery and equipment | ||
Plant, Equipment and Leasehold Improvements | ||
Plant, equipment and leasehold improvements, gross | 64,786,000 | 64,051,000 |
Machinery and equipment under financing leases | ||
Plant, Equipment and Leasehold Improvements | ||
Plant, equipment and leasehold improvements, gross | 15,717,000 | 9,088,000 |
Furniture, fixtures and computer equipment | ||
Plant, Equipment and Leasehold Improvements | ||
Plant, equipment and leasehold improvements, gross | 3,072,000 | 4,570,000 |
Leasehold improvements | ||
Plant, Equipment and Leasehold Improvements | ||
Plant, equipment and leasehold improvements, gross | 14,703,000 | 14,142,000 |
Construction in progress | ||
Plant, Equipment and Leasehold Improvements | ||
Plant, equipment and leasehold improvements, gross | $ 3,304,000 | $ 5,268,000 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Intangible Assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Intangible Assets | ||
Impairment of acquired finite-lived intangible assets | $ 0 | $ 0 |
Intangible amortization expense | 3,866,000 | 4,353,000 |
Intangible assets subject to amortization, Gross Book Value | 65,885,000 | 65,885,000 |
Intangible assets subject to amortization, Accumulated Amortization | (47,897,000) | (44,031,000) |
Intangible assets subject to amortization, Net Book Value | $ 17,988,000 | 21,854,000 |
Customer relationships | ||
Intangible Assets | ||
Weighted Average Life | 17 years 2 months 12 days | |
Intangible assets subject to amortization, Gross Book Value | $ 55,454,000 | 55,454,000 |
Intangible assets subject to amortization, Accumulated Amortization | (38,695,000) | (35,419,000) |
Intangible assets subject to amortization, Net Book Value | $ 16,759,000 | 20,035,000 |
Acquired Technology | ||
Intangible Assets | ||
Weighted Average Life | 10 years | |
Intangible assets subject to amortization, Gross Book Value | $ 7,101,000 | 7,101,000 |
Intangible assets subject to amortization, Accumulated Amortization | (6,767,000) | (6,567,000) |
Intangible assets subject to amortization, Net Book Value | $ 334,000 | 534,000 |
Trademarks | ||
Intangible Assets | ||
Weighted Average Life | 8 years 8 months 12 days | |
Intangible assets subject to amortization, Gross Book Value | $ 3,330,000 | 3,330,000 |
Intangible assets subject to amortization, Accumulated Amortization | (2,435,000) | (2,045,000) |
Intangible assets subject to amortization, Net Book Value | $ 895,000 | $ 1,285,000 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Future Aggregate Amortization Expense (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Estimated future aggregate amortization expense | ||
2023 | $ 3,867 | |
2024 | 3,630 | |
2025 | 3,440 | |
2026 | 2,471 | |
2027 | 2,313 | |
Thereafter | 2,267 | |
Intangible assets subject to amortization, Net Book Value | $ 17,988 | $ 21,854 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 | Mar. 15, 2021 |
Senior Notes | |||
Liabilities: | |||
Carrying amount | $ 285,000 | $ 310,000 | $ 310,000 |
ABL Revolver. | |||
Liabilities: | |||
Carrying amount | 5,000 | ||
Level 2 | Senior Notes | |||
Liabilities: | |||
Long-term debt | 281,438 | 327,050 | |
Level 2 | ABL Revolver. | |||
Liabilities: | |||
Long-term debt | 5,000 | ||
Estimate of Fair Value | Senior Notes | |||
Liabilities: | |||
Long-term debt | 281,438 | $ 327,050 | |
Estimate of Fair Value | ABL Revolver. | |||
Liabilities: | |||
Long-term debt | $ 5,000 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Accrued Expenses. | ||
Accrued payroll and related employee expenses | $ 7,727 | $ 7,558 |
Accrued employee performance bonuses | 8,576 | 6,900 |
Employer payroll taxes, including social security deferral | 1,092 | 1,910 |
Accrued rebates | 2,668 | 1,423 |
Estimated sales tax liability | 622 | 1,019 |
Accrued interest | 7,275 | 7,955 |
Current operating and financing lease liabilities | 5,697 | 4,114 |
Other | 6,413 | 6,271 |
Total accrued expenses | $ 40,070 | $ 37,150 |
Financing and Operating Lease_2
Financing and Operating Leases - Components of Operating and Finance Lease Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Finance lease option to extend | true | |
Operating lease option to extend | true | |
Operating lease costs: | ||
Operating lease costs | $ 3,064 | $ 2,258 |
Variable lease costs | 642 | 676 |
Short-term operating lease costs | 416 | |
Total expense from operating leases | 3,706 | 3,350 |
Finance lease costs: | ||
Right-of-use amortization expense | 1,718 | 1,009 |
Interest on lease liabilities | 482 | 380 |
Total financing lease cost | $ 2,200 | $ 1,389 |
Maximum | ||
Finance lease extension term | 10 years | |
Operating lease extension term | 10 years |
Financing and Operating Lease_3
Financing and Operating Leases - Operating and Financing Leases (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Leases | ||
Operating lease right-of-use assets, net of amortization | $ 10,705 | $ 12,069 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Property, Plant, Equipment and Operating Lease Right-of-Use Asset | Property, Plant, Equipment and Operating Lease Right-of-Use Asset |
Current operating lease liabilities | $ 2,355 | $ 1,857 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accrued Liabilities, Current | Accrued Liabilities, Current |
Non-current operating lease liabilities | $ 8,905 | $ 10,703 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Other Liabilities, Noncurrent | Other Liabilities, Noncurrent |
Total operating lease liabilities | $ 11,260 | $ 12,560 |
Property, equipment and leasehold improvements | 101,582 | 97,119 |
Accumulated depreciation | (55,109) | (61,937) |
Total property, equipment and leasehold improvements, net | 57,178 | 47,251 |
Current financing lease liabilities | $ 3,342 | $ 2,257 |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | Accrued Liabilities, Current | Accrued Liabilities, Current |
Non-current financing lease liabilities | $ 7,355 | $ 2,668 |
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Other Liabilities, Noncurrent | Other Liabilities, Noncurrent |
Total financing lease liabilities | $ 10,697 | $ 4,925 |
Financing leases | ||
Leases | ||
Property, equipment and leasehold improvements | 15,717 | 9,088 |
Accumulated depreciation | (3,135) | (2,451) |
Total property, equipment and leasehold improvements, net | $ 12,582 | $ 6,637 |
Financing and Operating Lease_4
Financing and Operating Leases - Components of Lease Expense (Details) | Dec. 31, 2022 | Dec. 31, 2021 |
Weighted Average Remaining Lease Term | ||
Weighted Average Remaining Lease Term - Operating Leases | 5 years 21 days | 6 years 18 days |
Weighted Average Remaining Lease Term - Financing Leases | 3 years 7 months 6 days | 2 years 8 months 23 days |
Weighted Average Discount Rate | ||
Weighted Average Discount Rate - Operating Leases | 7.93% | 8.04% |
Weighted Average Discount Rate - Financing Leases | 6.62% | 8.01% |
Financing and Operating Lease_5
Financing and Operating Leases - Lease Maturity (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Financing and Operating Leases | ||
Cash paid on operating lease liabilities | $ 2,425 | $ 2,007 |
Operating Leases | ||
2023 | 3,164 | |
2024 | 2,896 | |
2025 | 2,090 | |
2026 | 1,958 | |
2027 | 1,907 | |
Thereafter | 1,750 | |
Total operating lease payment | 13,765 | |
Less imputed interest | (2,505) | |
Total operating lease liabilities | 11,260 | 12,560 |
Financing Leases | ||
2023 | 3,953 | |
2024 | 3,139 | |
2025 | 2,848 | |
2026 | 1,488 | |
2027 | 557 | |
Total financing lease payment | 11,985 | |
Less imputed interest | (1,288) | |
Total financing lease liabilities | $ 10,697 | $ 4,925 |
Long-Term Debt - Long-Term Debt
Long-Term Debt - Long-Term Debt (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 | Mar. 15, 2021 |
Long-term Debt | |||
Unamortized deferred financing costs | $ (4,478) | $ (6,374) | |
Total debt | 285,522 | 303,626 | |
Total long-term debt | 285,522 | 303,626 | |
Senior Notes | |||
Long-term Debt | |||
Long-term debt | $ 285,000 | 310,000 | $ 310,000 |
Senior Notes | |||
Long-term Debt | |||
Interest rate (as a percent) | 8.625% | ||
Long-term debt | $ 285,000 | $ 310,000 | |
ABL Revolver. | |||
Long-term Debt | |||
Interest rate (as a percent) | 5.661% | ||
Long-term debt | $ 5,000 |
Long-Term Debt - First Lien Cre
Long-Term Debt - First Lien Credit Facility (Details) | 12 Months Ended | |||||||
Apr. 01, 2023 | Dec. 28, 2022 USD ($) | Mar. 03, 2022 USD ($) | Mar. 15, 2021 USD ($) | Mar. 11, 2021 USD ($) | Dec. 31, 2022 USD ($) item | Dec. 31, 2021 USD ($) | Mar. 15, 2022 USD ($) | |
Long-term Debt | ||||||||
Proceeds from Revolving Credit Facility | $ 35,000,000 | $ 14,750,000 | ||||||
Loss on debt extinguishment | (474,000) | (5,048,000) | ||||||
Senior Notes | ||||||||
Long-term Debt | ||||||||
Interest rate (as a percent) | 8.625% | |||||||
Repayment of debt | $ 5,000,000 | $ 20,000,000 | ||||||
Long-term debt | $ 310,000,000 | 285,000,000 | 310,000,000 | |||||
Prepayment of debt | 0 | |||||||
Debi issuance cost | 4,557,000 | |||||||
Gain (loss) on repurchase of debt | $ 63,000 | (600,000) | ||||||
Redemption percentage (as a percent) | 98.75% | 103% | ||||||
ABL Revolver | ||||||||
Long-term Debt | ||||||||
Maximum borrowing capacity | $ 75,000,000 | 50,000,000 | 75,000,000 | |||||
Maximum uncommitted accordion feature amount | $ 25,000,000 | $ 15,000,000 | ||||||
Proceeds from Revolving Credit Facility | 15,000,000 | |||||||
Debi issuance cost | 1,539,000 | |||||||
Available to borrow threshold amount | $ 7,500,000 | |||||||
Number of consecutive days at or above available to borrow threshold amount | item | 30 | |||||||
Minimum fixed coverage ratio (as a percent) | 1 | |||||||
Unused commitment fee expense | $ 246,000 | $ 182,000 | ||||||
ABL Revolver | Minimum | ||||||||
Long-term Debt | ||||||||
Unused commitment fee (as a percent) | 0.375% | |||||||
ABL Revolver | Maximum | ||||||||
Long-term Debt | ||||||||
Unused commitment fee (as a percent) | 0.50% | 0.50% | ||||||
ABL Revolver | SOFR | Minimum | ||||||||
Long-term Debt | ||||||||
Applicable margin over reference rate (as a percent) | 1.25% | 0.10% | ||||||
ABL Revolver | SOFR | Maximum | ||||||||
Long-term Debt | ||||||||
Applicable margin over reference rate (as a percent) | 1.75% | 0.30% | ||||||
Senior Credit Facility | ||||||||
Long-term Debt | ||||||||
Early termination penalty | $ 2,635,000 | |||||||
Senior Credit Facility | Minimum | ||||||||
Long-term Debt | ||||||||
Unused commitment fee (as a percent) | 1.50% | |||||||
Senior Credit Facility | Maximum | ||||||||
Long-term Debt | ||||||||
Unused commitment fee (as a percent) | 1.75% |
Income Taxes - Continuing Opera
Income Taxes - Continuing Operations - Other (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Current taxes: | ||
Domestic | $ 11,047 | $ 10,038 |
Foreign | 5 | (1) |
Current income tax (benefit) expense | 11,052 | 10,037 |
Deferred taxes: | ||
Domestic | 1,554 | (2,154) |
Foreign | 1 | (2) |
Deferred income tax (benefit) expense | 1,555 | (2,156) |
Income tax expense (benefit) | 12,607 | 7,881 |
Income before income taxes | ||
Domestic income | 49,108 | 23,761 |
Foreign income | 39 | 61 |
Income before income taxes | $ 49,147 | $ 23,822 |
Effective Income Tax Rate Reconciliation, Percent | 25.70% | 33.10% |
Income Taxes - Effective Income
Income Taxes - Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Effective Income Tax Rate Reconciliation | ||
Tax at federal statutory rate (as a percent) | 21% | 21% |
State taxes, net (as a percent) | 5.40% | 7.40% |
Unrecognized tax benefits (as a percent) | (2.00%) | 1.40% |
Tax credits (as a percent) | (0.10%) | (0.20%) |
Permanent items (as a percent) | 1% | 2.40% |
Other (as a percent) | 0.40% | 1.10% |
Effective income tax rate (as a percent) | 25.70% | 33.10% |
Income Taxes - Components of De
Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred tax assets: | ||
Accrued expense | $ 3,830 | $ 3,664 |
Net operating loss carryforward | 257 | 305 |
Stock compensation | 1,303 | 894 |
Interest limitation | 2,474 | 3,693 |
Lease liability | 2,891 | 3,222 |
Capital loss carryforward | 2,135 | 2,076 |
Federal research and development costs | 1,434 | |
Other | 3,609 | 2,867 |
Total gross deferred tax asset | 17,933 | 16,721 |
Valuation allowance | (2,791) | (2,832) |
Net deferred tax assets | 15,142 | 13,889 |
Deferred tax liabilities: | ||
Plant, property and leasehold improvements | (9,510) | (5,773) |
Intangible assets | (8,020) | (8,284) |
Right-to-use assets | (2,749) | (3,098) |
Other | (1,671) | (1,987) |
Total gross deferred tax liabilities | (21,950) | (19,142) |
Net deferred tax liabilities | $ (6,808) | $ (5,253) |
Income Taxes - Unrecognized Tax
Income Taxes - Unrecognized Tax Benefits (Details) - USD ($) | 12 Months Ended | ||
Feb. 23, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Unrecognized Tax Benefits | |||
Proceeds from income tax refunds | $ 451,000 | $ 9,846,000 | |
Unrecognized Tax Benefits, Beginning Balance | 2,350,000 | ||
Increase related to current year tax position | 58,000 | ||
Decrease related to prior year tax position | $ (54,000) | ||
Decrease related to settlements with tax authorities, net of federal benefit | (147,000) | ||
Lapse of statue of limitations | (812,000) | ||
Unrecognized Tax Benefits, Ending Balance | 1,395,000 | 2,350,000 | |
Unrecognized Tax Benefits, Decrease Resulting from Asset Basis Tax Position and Research and Development Credits, Recognized In Next Twelve Months | 965,000 | ||
Unrecognized tax benefits expected to be recognized in next twelve months | 89,000 | ||
Unrecognized tax benefits, accrued interest and penalties | $ 285,000 | $ 289,000 |
Stockholders' Deficit (Details)
Stockholders' Deficit (Details) | Dec. 31, 2022 Vote / shares $ / shares | Dec. 31, 2021 $ / shares |
Stockholders' Deficit | ||
Common shares, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 |
Common Stock | ||
Class of Stock | ||
Voting rights per share | Vote / shares | 1 |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Numerator: | ||
Net income | $ 36,540 | $ 15,941 |
Denominator: | ||
Basic weighted-average common shares outstanding (in shares) | 11,291,202 | 11,239,049 |
Dilutive shares | 457,903 | 524,914 |
Diluted weighted-average shares outstanding (in shares) | 11,749,105 | 11,763,963 |
Basic earnings per share: (in dollar per share) | $ 3.24 | $ 1.42 |
Diluted earnings per share: (in dollar per share) | $ 3.11 | $ 1.36 |
Outstanding stock based awards | ||
Potential antidilutive effect of share-based compensation excluded (in shares) | 27,813 | 121,993 |
Commitments and Contingencies -
Commitments and Contingencies - Contingencies (Details) | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | Apr. 20, 2021 item |
Commitments and Contingencies | |||
Estimated sales tax liability | $ 622,000 | $ 1,019,000 | |
Smart Packaging Solutions SA v. CPI Card Group, Inc. | Pending Litigation | |||
Commitments and Contingencies | |||
The number of patents involved in lawsuit | item | 4 | ||
Loss contingency accrual | $ 0 |
Employee Benefit Plan (Details)
Employee Benefit Plan (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Employee Benefits | ||
Employee benefit plan, Company's portion vested at time of match (as a percent) | 100% | |
Employee benefit plan expense | $ 1,932 | $ 1,604 |
Participant's first 3% of deferrals | ||
Employee Benefits | ||
Employee benefit plan, Company match (as a percent) | 100% | |
Participant's second 2% of deferrals | ||
Employee Benefits | ||
Employee benefit plan, Company match (as a percent) | 50% |
Stock Based Compensation - Omni
Stock Based Compensation - Omnibus Incentive Plan (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
May 27, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Weighted- Average Remaining Contractual Term (in Years) | |||
Balance (in years) | 4 years 7 months 24 days | 5 years 7 months 2 days | |
Granted (in years) | 6 years 3 months 7 days | ||
Weighted-Average Remaining Contractual Term (in Years): Options vested and exercisable | 4 years 5 months 12 days | ||
Weighted-Average Remaining Contractual Term (in Years): Options vested and expected to vest | 4 years 7 months 24 days | ||
Omnibus Plan | Stock Options | |||
Stock based compensation | |||
Number of additional shares authorized | 1,000,000 | ||
Number of shares available for grant | 2,200,000 | 944,123 | |
Stock options granted (in shares) | 44,905 | ||
Stock option life (in years) | 7 years | ||
Number of shares | |||
Balance at beginning of year (in shares) | 778,835 | ||
Granted (in shares) | 44,905 | ||
Exercised (in shares) | (28,752) | ||
Expired (in shares) | (1,320) | ||
Forfeited (in shares) | (13,045) | ||
Balance at end of year (in shares) | 780,623 | 778,835 | |
Options: Options vested and exercisable | 680,564 | ||
Options: Options vested and expected to vest | 780,623 | ||
Weighted-Average Exercise Price | |||
Balance at beginning of year (in dollars per share) | $ 18.02 | ||
Granted (in dollars per share) | 14.95 | ||
Exercised (in dollars per share) | 6.47 | ||
Expired (in dollars per share) | 21.75 | ||
Forfeited (in dollars per share) | 26.55 | ||
Balance at end of year (in dollars per share) | 18.12 | $ 18.02 | |
Weighted-Average Exercise Price: Options vested and exercisable | 17.34 | ||
Weighted-Average Exercise Price: Options vested and expected to vest | $ 18.12 | ||
Number of unvested options scheduled to vest | |||
Non-Vested Options as of beginning of period | 127,357 | ||
Granted (in shares) | 44,905 | ||
Vested (in shares) | (59,158) | ||
Forfeited (in shares) | (13,045) | ||
Non-Vested Options as of end of period | 100,059 | 127,357 | |
Weighted-Average Grant Date Fair Value | |||
Non-Vested, beginning balance | $ 17.42 | ||
Granted: Weighted-Average Grant Date Fair Value | 8.99 | $ 17.42 | |
Vested: Weighted-Average Grant Date Fair Value | 17.42 | ||
Forfeited: Weighted-Average Grant Date Fair Value | 15.68 | ||
Non-Vested, ending balance | $ 6.02 | $ 17.42 | |
Valuation Assumptions: | |||
Expected term in years | 4 years 3 months | 4 years 3 months | |
Volatility (as a percent) | 77.60% | 78.60% | |
Risk-free interest rate | 2.86% | 0.71% | |
Dividend yield (as a percent) | 0% | 0% | |
Granted: Weighted-Average Grant Date Fair Value | $ 8.99 | $ 17.42 | |
Aggregate intrinsic value of stock option awards outstanding | $ 15,902 | ||
Aggregate intrinsic value of stock option awards vested and exercisable | 14,636 | ||
Aggregate intrinsic value of stock option awards vested and expected to vest | 15,902 | ||
Intrinsic value of options exercised | 414 | $ 802 | |
Total fair value of options vested | $ 1,031 | $ 50 | |
2021 | Omnibus Plan | Stock Options | |||
Number of unvested options scheduled to vest | |||
Non-Vested Options as of end of period | 100,059 | ||
Valuation Assumptions: | |||
Term of award | P7Y | ||
Vesting period | 2 years |
Stock Based Compensation - Rest
Stock Based Compensation - Restricted Stock Units (Details) - Omnibus Plan - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Weighted Average Grant Date Fair Value | ||
income tax benefit from share based compensation arrangement | $ 442 | $ 31 |
Unrecognized compensation expense | $ 1,477 | |
Period over which compensation expense expected to recognize | 1 year 18 days | |
Restricted stock units | ||
Number of Restricted Stock Units | ||
Units outstanding at the beginning of the period (in shares) | 261,982 | |
Granted (in shares) | 35,795 | |
Exercised (in shares) | (179,311) | |
Forfeited (in shares) | (19,802) | |
Units outstanding at the end of the period (in shares) | 98,664 | 261,982 |
Weighted Average Grant Date Fair Value | ||
Units outstanding at the beginning of the period (in dollars per shares) | $ 13.19 | |
Granted (in dollars per share) | 16.87 | $ 29.61 |
Exercised (in dollars per share) | 7.47 | |
Forfeited (in dollars per share) | 11.64 | |
Units outstanding at the end of the period (in dollars per shares) | $ 25.23 | $ 13.19 |
Weighted-Average Remaining Amortization Period | 1 year 29 days | |
Total fair value of shares vested | $ 1,340 | $ 0 |
Vesting period | 2 years | |
Compensation expense | $ 3,479 | $ 1,250 |
Segment Reporting - Revenue and
Segment Reporting - Revenue and EBITDA from Continuing Operations (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Segment Reporting | ||
Net Sales | $ 475,745 | $ 375,119 |
EBITDA | 93,649 | 69,528 |
Debit and Credit | ||
Segment Reporting | ||
EBITDA | 118,478 | 87,499 |
Prepaid Debit | ||
Segment Reporting | ||
EBITDA | 27,844 | 29,156 |
Other | ||
Segment Reporting | ||
EBITDA | (52,673) | (47,127) |
Operating Segments | Debit and Credit | ||
Segment Reporting | ||
Net Sales | 390,559 | 296,204 |
Operating Segments | Prepaid Debit | ||
Segment Reporting | ||
Net Sales | 86,136 | 79,213 |
Intersegment eliminations | ||
Segment Reporting | ||
Net Sales | $ (950) | $ (298) |
Segment Reporting - Reconciliat
Segment Reporting - Reconciliation of EBITDA to net income (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Reconciliation of total segment EBITDA to income before taxes | ||
Total segment EBITDA | $ 93,649 | $ 69,528 |
Interest, net | (29,616) | (30,608) |
Income tax expense | (12,607) | (7,881) |
Depreciation and amortization | (14,886) | (15,098) |
Net income | $ 36,540 | $ 15,941 |
Segment Reporting - Balance She
Segment Reporting - Balance Sheet Data (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Segment Reporting | ||
Total assets | $ 296,666 | $ 268,140 |
Operating Segments | ||
Segment Reporting | ||
Total assets | 296,666 | 268,140 |
Operating Segments | Debit and Credit | ||
Segment Reporting | ||
Total assets | 238,610 | 210,492 |
Operating Segments | Prepaid Debit | ||
Segment Reporting | ||
Total assets | 38,138 | 31,480 |
Operating Segments | Other | ||
Segment Reporting | ||
Total assets | $ 19,918 | $ 26,168 |
Segment Reporting - Capital Exp
Segment Reporting - Capital Expenditure (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Segment Reporting | ||
Capital Expenditures | $ 17,867 | $ 10,074 |
Debit and Credit | ||
Segment Reporting | ||
Capital Expenditures | 15,283 | 6,826 |
Prepaid Debit | ||
Segment Reporting | ||
Capital Expenditures | 2,309 | 2,774 |
Other | ||
Segment Reporting | ||
Capital Expenditures | $ 275 | $ 474 |
Segment Reporting - Net Sales b
Segment Reporting - Net Sales by Product and Services (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Segment Reporting | ||
Net Sales | $ 475,745 | $ 375,119 |
Products | ||
Segment Reporting | ||
Net Sales | 281,190 | 199,586 |
Services | ||
Segment Reporting | ||
Net Sales | $ 194,555 | $ 175,533 |