CPI Card (PMTS) 10-Q7 Nov 232023 Q3 Quarterly reportFinancial data

Company Profile

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2023	Nov. 01, 2023
Cover Abstract
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Document Transition Report	false
Entity File Number	001-37584
Entity Registrant Name	CPI Card Group Inc.
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
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	PMTS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		11,456,146
Entity Central Index Key	0001641614
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Amendment Flag	false

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 10,473	$ 11,037
Accounts receivable, net	67,546	80,583
Inventories, net	74,080	68,399
Prepaid expenses and other current assets	8,747	7,551
Total current assets	160,846	167,570
Plant, equipment, leasehold improvements and operating lease right-of-use assets, net of accumulated depreciation of $66,437 and $61,922, respectively	62,643	57,178
Intangible assets, net of accumulated amortization of $50,797 and $47,897, respectively	15,088	17,988
Goodwill	47,150	47,150
Other assets	6,388	6,780
Total assets	292,115	296,666
Current liabilities:
Accounts payable	16,876	24,371
Accrued expenses	27,967	40,070
Deferred revenue and customer deposits	787	3,571
Total current liabilities	45,630	68,012
Long-term debt	272,669	285,522
Deferred income taxes	7,920	6,808
Other long-term liabilities	22,616	18,401
Total liabilities	348,835	378,743
Commitments and contingencies (Note 11)
Series A Preferred Stock; $0.001 par value-100,000 shares authorized; 0 shares issued and outstanding at September 30, 2023 and December 31, 2022
Stockholders' deficit:
Common stock; $0.001 par value-100,000,000 shares authorized; 11,453,549 and 11,390,355 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	11	11
Capital deficiency	(104,275)	(108,379)
Accumulated earnings	47,544	26,291
Total stockholders' deficit	(56,720)	(82,077)
Total liabilities and stockholders' deficit	$ 292,115	$ 296,666

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Condensed Consolidated Balance Sheets
Accumulated depreciation and amortization	$ 66,437	$ 61,922
Intangible assets accumulated amortization	$ 50,797	$ 47,897
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)	11,453,549	11,390,355
Common shares, outstanding shares (in shares)	11,453,549	11,390,355

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations and Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Net sales:
Net sales	$ 105,863	$ 124,577	$ 341,675	$ 349,309
Cost of sales:
Depreciation and amortization	2,597	2,245	7,584	6,564
Total cost of sales	69,711	76,137	221,604	221,040
Gross profit	36,152	48,440	120,071	128,269
Operating expenses:
Selling, general and administrative (exclusive of depreciation and amortization shown below)	21,783	23,403	64,734	67,335
Depreciation and amortization	1,408	1,592	4,286	4,454
Total operating expenses	23,191	24,995	69,020	71,789
Income from operations	12,961	23,445	51,051	56,480
Other expense, net:
Interest, net	(6,714)	(7,323)	(20,235)	(22,334)
Other expense, net	(53)	(63)	(245)	(474)
Total other expense, net	(6,767)	(7,386)	(20,480)	(22,808)
Income before income taxes	6,194	16,059	30,571	33,672
Income tax expense	(2,337)	(4,149)	(9,318)	(9,609)
Net income	$ 3,857	$ 11,910	$ 21,253	$ 24,063
Basic earnings per share: (in dollars per share)	$ 0.34	$ 1.06	$ 1.86	$ 2.14
Diluted earnings per share: (in dollars per share)	$ 0.33	$ 1.01	$ 1.79	$ 2.05
Basic weighted-average shares outstanding (in shares)	11,432,794	11,265,767	11,418,372	11,259,655
Diluted weighted-average shares outstanding (in shares)	11,827,816	11,788,921	11,861,868	11,730,668
Comprehensive income:
Net income	$ 3,857	$ 11,910	$ 21,253	$ 24,063
Total comprehensive income	3,857	11,910	21,253	24,063
Products
Net sales:
Net sales	55,689	71,606	195,425	208,867
Cost of sales:
Products and Services (exclusive of depreciation and amortization shown below)	37,540	42,702	124,828	128,851
Services
Net sales:
Net sales	50,174	52,971	146,250	140,442
Cost of sales:
Products and Services (exclusive of depreciation and amortization shown below)	$ 29,574	$ 31,190	$ 89,192	$ 85,625

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Stockholders' Deficit - USD ($) $ in Thousands	Common Stock	Capital deficiency	Accumulated earnings	Total
Beginning balance at Dec. 31, 2021	$ 11	$ (110,782)	$ (10,249)	$ (121,020)
Beginning balance (in shares) at Dec. 31, 2021	11,255,466
Shares issued under stock-based compensation plans		(231)		(231)
Shares issued under stock-based compensation plans (in shares)	32,443
Stock-based compensation		2,928		2,928
Components of comprehensive income:
Net income			24,063	24,063
Ending balance at Sep. 30, 2022	$ 11	(108,085)	13,814	(94,260)
Ending balance (in shares) at Sep. 30, 2022	11,287,909
Beginning balance at Jun. 30, 2022	$ 11	(108,880)	1,904	(106,965)
Beginning balance (in shares) at Jun. 30, 2022	11,262,688
Shares issued under stock-based compensation plans		(171)		(171)
Shares issued under stock-based compensation plans (in shares)	25,221
Stock-based compensation		966		966
Components of comprehensive income:
Net income			11,910	11,910
Ending balance at Sep. 30, 2022	$ 11	(108,085)	13,814	(94,260)
Ending balance (in shares) at Sep. 30, 2022	11,287,909
Beginning balance at Dec. 31, 2022	$ 11	(108,379)	26,291	$ (82,077)
Beginning balance (in shares) at Dec. 31, 2022	11,390,355			11,390,355
Shares issued under stock-based compensation plans		(327)		$ (327)
Shares issued under stock-based compensation plans (in shares)	63,194
Stock-based compensation		4,431		4,431
Components of comprehensive income:
Net income			21,253	21,253
Ending balance at Sep. 30, 2023	$ 11	(104,275)	47,544	$ (56,720)
Ending balance (in shares) at Sep. 30, 2023	11,453,549			11,453,549
Beginning balance at Jun. 30, 2023	$ 11	(106,668)	43,687	$ (62,970)
Beginning balance (in shares) at Jun. 30, 2023	11,430,245
Shares issued under stock-based compensation plans		(207)		(207)
Shares issued under stock-based compensation plans (in shares)	23,304
Stock-based compensation		2,600		2,600
Components of comprehensive income:
Net income			3,857	3,857
Ending balance at Sep. 30, 2023	$ 11	$ (104,275)	$ 47,544	$ (56,720)
Ending balance (in shares) at Sep. 30, 2023	11,453,549			11,453,549

Condensed Consolidated Statem_3

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Operating activities
Net income	$ 21,253	$ 24,063
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	8,970	8,118
Amortization expense	2,900	2,900
Stock-based compensation expense	4,431	2,928
Amortization of debt issuance costs and debt discount	1,397	1,449
Loss on debt extinguishment	243	395
Deferred income taxes	1,112	1,192
Other, net	(156)	437
Changes in operating assets and liabilities:
Accounts receivable	12,988	(14,862)
Inventories	(5,806)	(13,916)
Prepaid expenses and other assets	422	1,501
Income taxes, net	(1,616)	(1,577)
Accounts payable	(7,805)	(440)
Accrued expenses and other liabilities	(13,283)	(3,208)
Deferred revenue and customer deposits	(2,784)	2,733
Cash provided by operating activities	22,266	11,713
Investing activities
Capital expenditures for plant, equipment and leasehold improvements, net	(6,076)	(14,440)
Other	183	95
Cash used in investing activities	(5,893)	(14,345)
Financing activities
Principal payments on Senior Notes	(16,954)	(20,000)
Principal payments on ABL Revolver	(10,000)	(10,000)
Proceeds from ABL Revolver	13,000	35,000
Payments on debt extinguishment and other	(327)	(1,093)
Proceeds from finance lease financing		2,074
Payments on finance lease obligations	(2,655)	(2,457)
Cash (used in) provided by financing activities	(16,936)	3,524
Effect of exchange rates on cash	(1)	(68)
Net (decrease) increase in cash and cash equivalents	(564)	824
Cash and cash equivalents, beginning of period	11,037	20,683
Cash and cash equivalents, end of period	10,473	21,507
Supplemental disclosures of cash flow information
Cash paid (refunded) during the period for: Interest	25,307	27,026
Cash paid (refunded) during the period for: Income taxes paid	9,994	10,859
Cash paid (refunded) during the period for: Income taxes refunded	(25)	(449)
Right-of-use assets obtained in exchange for lease obligations- Operating leases	2,641	816
Right-of-use assets obtained in exchange for lease obligations- Financing leases	6,989	7,783
Accounts payable and accrued expenses for capital expenditures for plant, equipment and leasehold improvements	$ 977	$ 1,781

Business Overview and Summary o

Business Overview and Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2023
Business Overview and Summary of Significant Accounting Policies
Business Overview and Summary of Significant Accounting Policies	CPI Card Group Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Business Overview and Summary of Significant Accounting Policies Business Overview CPI Card Group Inc. (which, together with its subsidiary companies, is referred to herein as “CPI” or the “Company”) is a 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 (defined below) issued on the networks of the Payment Card Brands (Visa, Mastercard ® ® ® CPI serves its customers through a network of high-security production and card services facilities in the United States, each of which is audited for compliance with the standards of the Payment Card Industry Security Standards Council (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 for 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. Basis of Presentation Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the results of the interim periods presented. The condensed consolidated balance sheet as of December 31, 2022 is derived from the audited financial statements as of that date. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Use of Estimates Management uses estimates and assumptions relating to the reporting of assets and liabilities at the date of the financial statements, the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures in the preparation of the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, leases, valuation allowances for inventories and deferred taxes, revenue recognized for work performed but not completed and uncertain tax positions. Actual results could differ from those estimates. Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ ASU”) 2016 - 13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments methodology. Effective January 1, 2023, the Company adopted the CECL model. The adoption of the model did not have a material impact on the Company’s consolidated financial position or results of operations.

Net Sales

Net Sales	9 Months Ended
Net Sales	Sep. 30, 2023
Net Sales.
Net Sales	2. Net Sales The Company disaggregates its net sales by major source as follows: Three Months Ended September 30, 2023 Products Services Total (dollars in thousands) Debit and Credit $ 55,934 $ 27,846 $ 83,780 Prepaid Debit — 22,335 22,335 Intersegment eliminations (245) (7) (252) Total $ 55,689 $ 50,174 $ 105,863 Nine Months Ended September 30, 2023 Products Services Total (dollars in thousands) Debit and Credit $ 195,967 $ 82,992 $ 278,959 Prepaid Debit — 63,286 63,286 Intersegment eliminations (542) (28) (570) Total $ 195,425 $ 146,250 $ 341,675 Three Months Ended September 30, 2022 Products Services Total (dollars in thousands) Debit and Credit $ 71,857 $ 27,655 $ 99,512 Prepaid Debit — 25,335 25,335 Intersegment eliminations (251) (19) (270) Total $ 71,606 $ 52,971 $ 124,577 Nine Months Ended September 30, 2022 Products Services Total (dollars in thousands) Debit and Credit $ 209,236 $ 76,472 $ 285,708 Prepaid Debit — 64,010 64,010 Intersegment eliminations (369) (40) (409) Total $ 208,867 $ 140,442 $ 349,309 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 unbilled work performed but not completed, 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 ® ® ® ® EMV ® is a registered trademark in the U.S. and other countries and an unregistered trademark elsewhere. The EMV trademark is owned by EMV Co, LLC Services Net Sales Net sales are recognized for “Services” as the services are performed. Items included in “Services” net sales include the personalization and fulfillment of Financial Payment Cards, providing tamper-evident secure packaging and fulfillment services to Prepaid Debit Card program managers, and software-as-a-service personalization of instant issuance debit cards. As applicable, for unbilled work performed but not completed, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts. Customer Contracts The Company often enters into Master Services Agreements (“MSAs”) with its customers. Generally, enforceable rights and obligations for goods and services occur only when a customer places a purchase order or statement of work to obtain goods or services under an MSA. The contract term as defined by ASC 606, Revenue from Contracts with Customers, is the length of time it takes to deliver the goods or services promised under the purchase order or statement of work. As such, the Company's contracts are generally short term in nature.

Accounts Receivable

Accounts Receivable	9 Months Ended
Accounts Receivable	Sep. 30, 2023
Accounts Receivable
Accounts Receivable	3. Accounts Receivable Accounts receivable consisted of the following: September 30, December 31, 2023 2022 (dollars in thousands) Trade accounts receivable $ 58,402 $ 68,886 Unbilled accounts receivable 9,375 11,915 67,777 80,801 Less allowance (231) (218) $ 67,546 $ 80,583

Inventories

Inventories	9 Months Ended
Inventories	Sep. 30, 2023
Inventories
Inventories	4 Inventories Inventories consisted of the following: September 30, December 31, 2023 2022 (dollars in thousands) Raw materials $ 67,742 $ 61,434 Finished goods 9,799 10,300 Inventory reserve (3,461) (3,335) $ 74,080 $ 68,399

Plant, Equipment, Leasehold Imp

Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets	9 Months Ended
	Sep. 30, 2023
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets	5 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: September 30, December 31, 2023 2022 (dollars in thousands) Machinery and equipment $ 65,846 $ 64,786 Machinery and equipment under financing leases 21,205 15,717 Furniture, fixtures and computer equipment 2,357 3,072 Leasehold improvements 15,480 14,703 Construction in progress 4,511 3,304 Operating lease right-of-use assets 19,681 17,518 129,080 119,100 Less accumulated depreciation and amortization (66,437) (61,922) $ 62,643 $ 57,178

Fair Value of Financial Instrum

Fair Value of Financial Instruments	9 Months Ended
Fair Value of Financial Instruments	Sep. 30, 2023
Fair Value of Financial Instruments
Fair Value of Financial Instruments	6. 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 condensed consolidated balance sheets were as follows: Carrying Estimated Value as of Fair Value as of Fair Value Measurement at September 30, 2023 September 30, September 30, (Using Fair Value Hierarchy) 2023 2023 Level 1 Level 2 Level 3 (dollars in thousands) Liabilities: Senior Notes $ 267,897 $ 264,548 $ — $ 264,548 $ — ABL Revolver $ 8,000 $ 8,000 $ — $ 8,000 $ — Carrying Estimated Value as of Fair Value as of Fair Value Measurement at December 31, 2022 December 31, December 31, (Using Fair Value Hierarchy) 2022 2022 Level 1 Level 2 Level 3 (dollars in thousands) Liabilities: Senior Notes $ 285,000 $ 281,438 $ — $ 281,438 $ — ABL Revolver $ 5,000 $ 5,000 $ — $ 5,000 $ — The aggregate fair value of the Company’s Senior Notes (as defined in Note 8, “Long-Term Debt”) was based on bank quotes. The fair value measurement associated with the ABL Revolver (as defined in Note 8, “Long-Term Debt”) approximates its carrying value as of September 30, 2023, 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	9 Months Ended
Accrued Expenses	Sep. 30, 2023
Accrued Expenses.
Accrued Expenses	7. Accrued Expenses Accrued expenses consisted of the following: September 30, December 31, 2023 2022 (dollars in thousands) Accrued payroll and related employee expenses $ 10,098 $ 7,727 Accrued employee performance bonuses 1,038 8,576 Employer payroll taxes 913 1,092 Accrued rebates 3,977 2,668 Estimated sales tax liability 458 622 Accrued interest 970 7,275 Current operating and financing lease liabilities 6,652 5,697 Other 3,861 6,413 Total accrued expenses $ 27,967 $ 40,070 Other accrued expenses as of September 30, 2023, and December 31, 2022, consisted primarily of miscellaneous accruals for invoices not yet received, self-insurance claims that have yet to be reported, and accrued property taxes.

Long-Term Debt

Long-Term Debt	9 Months Ended
Long-Term Debt	Sep. 30, 2023
Long-Term Debt.
Long-Term Debt	8. Long-Term Debt As of September 30, 2023, and December 31, 2022, long-term debt consisted of the following: Interest September 30, December 31, Rate (1) 2023 2022 (dollars in thousands) Senior Notes 8.625 % $ 267,897 $ 285,000 ABL Revolver 6.674 % 8,000 5,000 Unamortized deferred financing costs (3,228) (4,478) Total long-term debt 272,669 285,522 Less current maturities — — Long-term debt, net of current maturities $ 272,669 $ 285,522 (1) The Senior Notes bear interest at a fixed rate and the ABL Revolver bears interest at a variable rate. Senior Notes On March 15, 2021, the Company completed a private offering by its wholly-owned subsidiary, CPI CG Inc., of $310.0 million 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. 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 is required to be made in 2023 based on the Company’s operating results for the year ended December 31, 2022. During the nine months ended September 30, 2023, the Company used cash on hand and available borrowing capacity under the ABL Revolver (defined below) to retire a portion of the Senior Notes totaling $17.1 million of the principal amount thereof plus accrued and unpaid interest thereon to the retirement dates. ABL 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 $50.0 million (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 $75.0 million, increased the uncommitted accordion feature to $25.0 million from $15.0 million, and revised the interest rate provisions to replace the prior LIBOR benchmark with updated benchmark provisions using the secured overnight financing rate (“SOFR”) as 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 ranged 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 accrued a monthly unused line fee, 0.50% per annum through March 31, 2023, multiplied by the aggregate amount of Revolver commitments less the average Revolver usage during the immediately preceding month. The interest rate margin and unused line fee percentage changed, effective April 1, 2023, to between 1.25% and 1.75% (interest rate margin) and 0.375% and 0.50% (unused line fee). 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 $3.2 million and are reported as a reduction to the long-term debt balance as of September 30, 2023. The remaining unamortized net discount and debt issuance costs on the ABL Revolver and related Amendment were $1.1 million and are recorded as other assets (current and long-term) on the condensed consolidated balance sheet as of September 30, 2023.

Income Taxes

Income Taxes	9 Months Ended
Income Taxes	Sep. 30, 2023
Income Taxes
Income Taxes	9. Income Taxes The Company’s effective tax rate on pre-tax income was 37.7% and 25.8% for the three months ended September 30, 2023, and 2022, respectively, and 30.5% and 28.5% for the nine months ended September 30, 2023, and 2022, respectively. The increase in the effective tax rate for the three and nine months ended September 30, 2023, was due to tax deduction limitations on executive compensation. The effective tax rate for the three months ended September 30, 2023, also increased due to the reduction of the federal valuation allowance recorded in the third quarter of 2022 as a result of increased deductibility of interest costs due to a tax election made by the Company in the third quarter of 2022. For the nine months ended September 30, 2023, and 2022, the effective tax rate differs from the U.S. federal statutory income tax rate as follows: September 30, 2023 2022 Tax at federal statutory rate 21.0 % 21.0 % State taxes, net 5.3 5.5 Valuation allowance (1.1) — Permanent items 2.0 1.3 Deductibility limitations on excess compensation 4.0 0.7 Other (0.7) — Effective income tax rate 30.5 % 28.5 %

Earnings per Share

Earnings per Share	9 Months Ended
Earnings per Share	Sep. 30, 2023
Earnings per Share
Earnings per Share	10. Earnings per Share Basic and diluted earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Shares excluded from the calculation of diluted earnings per share because their inclusion would be anti-dilutive were 160,384 and 5,425 for the three months ended September 30, 2023, and 2022, respectively, and 210,457 and 12,841 for the nine months ended September 30, 2023, and 2022, respectively. The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (dollars in thousands) Numerator: Net income $ 3,857 $ 11,910 $ 21,253 $ 24,063 Denominator: Basic weighted-average common shares outstanding 11,432,794 11,265,767 11,418,372 11,259,655 Dilutive shares 395,022 523,154 443,496 471,013 Diluted weighted-average common shares outstanding 11,827,816 11,788,921 11,861,868 11,730,668 Basic earnings per share $ 0.34 $ 1.06 $ 1.86 $ 2.14 Diluted earnings per share $ 0.33 $ 1.01 $ 1.79 $ 2.05

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
Commitments and Contingencies	Sep. 30, 2023
Commitments and Contingencies
Commitments and Contingencies	11 Commitments 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 2024 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 2028 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, 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 and three of the patents have been invalidated in the IPR proceedings and one remains under review. The remaining proceedings in the patent office are scheduled to run through November 2023. Should the remaining patent 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 September 30, 2023. 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.

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
Stock-Based Compensation	Sep. 30, 2023
Stock-Based Compensation
Stock-Based Compensation	12. Stock-Based Compensation 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, consultants, 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, resulting in a total of 2,200,000 shares of Common Stock issuable under the Omnibus Plan. Beginning in the first quarter of 2023, the Company’s employees that participate in the Company’s long-term incentive program will receive a quarterly grant comprising one-fourth of the annual equity-based incentive component of their total compensation. Executive awards will consist of a mix of restricted stock units and nonqualified stock options, and other employee awards will be comprised solely of restricted stock units. The number of shares awarded will be determined based on the grant-date fair value for nonqualified stock options and on a value tied to the monthly average closing price of the Company’s common stock for restricted stock units. In June 2023, the Company implemented an additional long-term incentive program under the Omnibus Plan, independent of the quarterly awards described above, designed to retain and incentivize executive officers and certain key employees, excluding the Company’s President and Chief Executive Officer (“CEO”), comprised of restricted stock units. The first tranche was awarded in June 2023 and the second tranche was awarded in August 2023. The third and final tranche will be awarded in November 2023, subject to continued employment at that date. The awards vest ratably over a three-year period, subject to continued employment. In June 2023, the Company also announced an award comprised of 25% nonqualified stock options and 75% restricted stock units to its CEO as an incentive to remain employed by the Company through February 28, 2024. The first one-third of the awards was granted in June 2023, the second one-third was granted in August 2023, and the remainder will be granted in November 2023. All of these awards will vest ratably over a two-year period irrespective of employment status with expense related to these awards to be recognized by the Company through February 28, 2024. As part of the CEO’s incentive package, the requisite service and exercise periods for his awards granted in 2023 prior to June 2023 were also modified with expense related to the modification being recognized in June 2023 through February 2024. All equity awards are contingent and issued only upon approval by the compensation committee of the Company’s board of directors, or as otherwise permitted under the Omnibus Plan. The Company accounts for stock-based compensation pursuant to ASC 718, Share-Based Payments. During the nine months ended September 30, 2023, the Company granted 92,655 options at a weighted average exercise price of $24.48 . As of September 30, 2023, there were 865,834 options outstanding at a weighted average exercise price of $18.82 . During the nine months ended September 30, 2023, the Company granted 429,655 restricted stock units at a weighted average grant date fair value of $23.65, and as of September 30, 2023, there were 450,747 outstanding restricted stock units at a weighted average grant date fair value of $23.39.

Segment Reporting

Segment Reporting	9 Months Ended
Segment Reporting	Sep. 30, 2023
Segment Reporting
Segment Reporting	13. 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 September 30, 2023, the Company’s reportable segments were as follows: ● Debit and Credit ● Prepaid Debit ● Othe r Debit and Credit Segment The Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services for card-issuing financial institutions primarily in the United States. Products produced by this segment primarily include EMV and non-EMV Financial Payment Cards, including contact and contactless cards, and Earth Elements TM Eco-Focused Cards. The Company also sells Card Once instant card issuance solutions, and private label credit cards that are not issued on the networks of the Payment Card Brands. The Company provides print-on-demand services, where images, personalized payment cards, and related collateral are produced on a one-by-one, on demand basis for customers. This segment also provides a variety of integrated card services, including card personalization and fulfillment services and instant issuance services. The Debit and Credit segment facilities and operations are audited for compliance with the standards of the PCI Security Standards Council by multiple Payment Card Brands. Prepaid Debit Segment The Prepaid Debit segment primarily provides integrated prepaid card services to Prepaid Debit Card program managers primarily in the United States, including tamper-evident security packaging. This segment also produces Financial Payment Cards issued on the networks of the Payment Card Brands that are included in the tamper-evident security packages. The Prepaid Debit segment facilities and operations are audited for compliance with the standards of the PCI Security Standards Council by multiple Payment Card Brands. Other The Other segment includes corporate expenses. Performance Measures of Reportable Segments Net sales and EBITDA of the Company’s reportable segments, as well as a reconciliation of total segment EBITDA to income from operations and net income for the three and nine months ended September 30, 2023 and 2022, were as follows: Three Months Ended September 30, 2023 Debit and Credit Prepaid Debit Other Intersegment Eliminations Total (dollars in thousands) Net sales $ 83,780 $ 22,335 $ — $ (252) $ 105,863 Cost of sales 55,399 14,564 — (252) 69,711 Gross profit 28,381 7,771 — — 36,152 Operating expenses 7,590 1,140 14,461 — 23,191 Income (loss) from operations $ 20,791 $ 6,631 $ (14,461) $ — $ 12,961 EBITDA by segment: Income (loss) from operations $ 20,791 $ 6,631 $ (14,461) $ — $ 12,961 Depreciation and amortization 2,322 675 1,008 — 4,005 Other expense, net (27) (2) (24) — (53) EBITDA $ 23,086 $ 7,304 $ (13,477) $ — $ 16,913 Nine Months Ended September 30, 2023 Debit and Credit Prepaid Debit Other Intersegment Eliminations Total (dollars in thousands) Net sales $ 278,959 $ 63,286 $ — $ (570) $ 341,675 Cost of sales 179,356 42,818 — (570) 221,604 Gross profit 99,603 20,468 — — 120,071 Operating expenses 23,705 2,532 42,783 — 69,020 Income (loss) from operations $ 75,898 $ 17,936 $ (42,783) $ — $ 51,051 EBITDA by segment: Income (loss) from operations $ 75,898 $ 17,936 $ (42,783) $ — $ 51,051 Depreciation and amortization 6,836 2,003 3,031 — 11,870 Other expense, net (1) (1) (243) — (245) EBITDA $ 82,733 $ 19,938 $ (39,995) $ — $ 62,676 Three Months Ended September 30, 2022 Debit and Credit Prepaid Debit Other Intersegment Eliminations Total (dollars in thousands) Net sales $ 99,512 $ 25,335 $ — $ (270) $ 124,577 Cost of sales 61,441 14,966 — (270) 76,137 Gross profit 38,071 10,369 — — 48,440 Operating expenses 8,653 1,260 15,082 — 24,995 Income (loss) from operations $ 29,418 $ 9,109 $ (15,082) $ — $ 23,445 EBITDA by segment: Income (loss) from operations $ 29,418 $ 9,109 $ (15,082) $ — $ 23,445 Depreciation and amortization 2,271 529 1,037 — 3,837 Other expense, net (14) — (49) — (63) EBITDA $ 31,675 $ 9,638 $ (14,094) $ — $ 27,219 Nine Months Ended September 30, 2022 Debit and Credit Prepaid Debit Other Intersegment Eliminations Total (dollars in thousands) Net sales $ 285,708 $ 64,010 $ — $ (409) $ 349,309 Cost of sales 181,319 40,130 — (409) 221,040 Gross profit 104,389 23,880 — — 128,269 Operating expenses 25,542 3,487 42,760 — 71,789 Income (loss) from operations $ 78,847 $ 20,393 $ (42,760) $ — $ 56,480 EBITDA by segment: Income (loss) from operations $ 78,847 $ 20,393 $ (42,760) $ — $ 56,480 Depreciation and amortization 6,202 1,711 3,105 — 11,018 Other expense, net (7) (3) (464) — (474) EBITDA $ 85,042 $ 22,101 $ (40,119) $ — $ 67,024 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (dollars in thousands) Total segment EBITDA $ 16,913 $ 27,219 $ 62,676 $ 67,024 Interest, net (6,714) (7,323) (20,235) (22,334) Income tax expense (2,337) (4,149) (9,318) (9,609) Depreciation and amortization (4,005) (3,837) (11,870) (11,018) Net income $ 3,857 $ 11,910 $ 21,253 $ 24,063

Business Overview and Summary_2

Business Overview and Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2023
Business Overview and Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the results of the interim periods presented. The condensed consolidated balance sheet as of December 31, 2022 is derived from the audited financial statements as of that date. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Use of Estimates	Use of Estimates Management uses estimates and assumptions relating to the reporting of assets and liabilities at the date of the financial statements, the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures in the preparation of the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, leases, valuation allowances for inventories and deferred taxes, revenue recognized for work performed but not completed and uncertain tax positions. Actual results could differ from those estimates.
Recent Accounting Pronouncements	Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ ASU”) 2016 - 13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments methodology. Effective January 1, 2023, the Company adopted the CECL model. The adoption of the model did not have a material impact on the Company’s consolidated financial position or results of operations.

Net Sales (Tables)

Net Sales (Tables)	9 Months Ended
Net Sales (Tables)	Sep. 30, 2023
Net Sales.
Schedule of disaggregation of net sales by major source	Three Months Ended September 30, 2023 Products Services Total (dollars in thousands) Debit and Credit $ 55,934 $ 27,846 $ 83,780 Prepaid Debit — 22,335 22,335 Intersegment eliminations (245) (7) (252) Total $ 55,689 $ 50,174 $ 105,863 Nine Months Ended September 30, 2023 Products Services Total (dollars in thousands) Debit and Credit $ 195,967 $ 82,992 $ 278,959 Prepaid Debit — 63,286 63,286 Intersegment eliminations (542) (28) (570) Total $ 195,425 $ 146,250 $ 341,675 Three Months Ended September 30, 2022 Products Services Total (dollars in thousands) Debit and Credit $ 71,857 $ 27,655 $ 99,512 Prepaid Debit — 25,335 25,335 Intersegment eliminations (251) (19) (270) Total $ 71,606 $ 52,971 $ 124,577 Nine Months Ended September 30, 2022 Products Services Total (dollars in thousands) Debit and Credit $ 209,236 $ 76,472 $ 285,708 Prepaid Debit — 64,010 64,010 Intersegment eliminations (369) (40) (409) Total $ 208,867 $ 140,442 $ 349,309

Accounts Receivable (Tables)

Accounts Receivable (Tables)	9 Months Ended
Accounts Receivable (Tables)	Sep. 30, 2023
Accounts Receivable
Schedule of accounts receivable	September 30, December 31, 2023 2022 (dollars in thousands) Trade accounts receivable $ 58,402 $ 68,886 Unbilled accounts receivable 9,375 11,915 67,777 80,801 Less allowance (231) (218) $ 67,546 $ 80,583

Inventories (Tables)

Inventories (Tables)	9 Months Ended
Inventories (Tables)	Sep. 30, 2023
Inventories
Schedule of inventories	September 30, December 31, 2023 2022 (dollars in thousands) Raw materials $ 67,742 $ 61,434 Finished goods 9,799 10,300 Inventory reserve (3,461) (3,335) $ 74,080 $ 68,399

Plant, Equipment, Leasehold I_2

Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets (Tables)	9 Months Ended
	Sep. 30, 2023
Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets
Schedule of plant, equipment, leasehold improvements and operating lease right-to-use assets	September 30, December 31, 2023 2022 (dollars in thousands) Machinery and equipment $ 65,846 $ 64,786 Machinery and equipment under financing leases 21,205 15,717 Furniture, fixtures and computer equipment 2,357 3,072 Leasehold improvements 15,480 14,703 Construction in progress 4,511 3,304 Operating lease right-of-use assets 19,681 17,518 129,080 119,100 Less accumulated depreciation and amortization (66,437) (61,922) $ 62,643 $ 57,178

Fair Value of Financial Instr_2

Fair Value of Financial Instruments (Tables)	9 Months Ended
Fair Value of Financial Instruments (Tables)	Sep. 30, 2023
Fair Value of Financial Instruments
Schedule of financial assets and liabilities subject to fair value measurements	The Company’s financial assets and liabilities that are not required to be re-measured at fair value in the condensed consolidated balance sheets were as follows: Carrying Estimated Value as of Fair Value as of Fair Value Measurement at September 30, 2023 September 30, September 30, (Using Fair Value Hierarchy) 2023 2023 Level 1 Level 2 Level 3 (dollars in thousands) Liabilities: Senior Notes $ 267,897 $ 264,548 $ — $ 264,548 $ — ABL Revolver $ 8,000 $ 8,000 $ — $ 8,000 $ — Carrying Estimated Value as of Fair Value as of Fair Value Measurement at December 31, 2022 December 31, December 31, (Using Fair Value Hierarchy) 2022 2022 Level 1 Level 2 Level 3 (dollars in thousands) Liabilities: Senior Notes $ 285,000 $ 281,438 $ — $ 281,438 $ — ABL Revolver $ 5,000 $ 5,000 $ — $ 5,000 $ —

Accrued Expenses (Tables)

Accrued Expenses (Tables)	9 Months Ended
Accrued Expenses (Tables)	Sep. 30, 2023
Accrued Expenses.
Schedule of accrued expenses	September 30, December 31, 2023 2022 (dollars in thousands) Accrued payroll and related employee expenses $ 10,098 $ 7,727 Accrued employee performance bonuses 1,038 8,576 Employer payroll taxes 913 1,092 Accrued rebates 3,977 2,668 Estimated sales tax liability 458 622 Accrued interest 970 7,275 Current operating and financing lease liabilities 6,652 5,697 Other 3,861 6,413 Total accrued expenses $ 27,967 $ 40,070

Long-Term Debt (Tables)

Long-Term Debt (Tables)	9 Months Ended
Long-Term Debt (Tables)	Sep. 30, 2023
Long-Term Debt.
Schedule of long-term debt	Interest September 30, December 31, Rate (1) 2023 2022 (dollars in thousands) Senior Notes 8.625 % $ 267,897 $ 285,000 ABL Revolver 6.674 % 8,000 5,000 Unamortized deferred financing costs (3,228) (4,478) Total long-term debt 272,669 285,522 Less current maturities — — Long-term debt, net of current maturities $ 272,669 $ 285,522 (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)	9 Months Ended
Income Taxes (Tables)	Sep. 30, 2023
Income Taxes
Schedule of effective income tax rate reconciliation	September 30, 2023 2022 Tax at federal statutory rate 21.0 % 21.0 % State taxes, net 5.3 5.5 Valuation allowance (1.1) — Permanent items 2.0 1.3 Deductibility limitations on excess compensation 4.0 0.7 Other (0.7) — Effective income tax rate 30.5 % 28.5 %

Earnings per Share (Tables)

Earnings per Share (Tables)	9 Months Ended
Earnings per Share (Tables)	Sep. 30, 2023
Earnings per Share
Computation of basic and diluted earnings per share	Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (dollars in thousands) Numerator: Net income $ 3,857 $ 11,910 $ 21,253 $ 24,063 Denominator: Basic weighted-average common shares outstanding 11,432,794 11,265,767 11,418,372 11,259,655 Dilutive shares 395,022 523,154 443,496 471,013 Diluted weighted-average common shares outstanding 11,827,816 11,788,921 11,861,868 11,730,668 Basic earnings per share $ 0.34 $ 1.06 $ 1.86 $ 2.14 Diluted earnings per share $ 0.33 $ 1.01 $ 1.79 $ 2.05

Segment Reporting (Tables)

Segment Reporting (Tables)	9 Months Ended
Segment Reporting (Tables)	Sep. 30, 2023
Segment Reporting
Schedule of revenue and EBITDA of the company's reportable segments	Three Months Ended September 30, 2023 Debit and Credit Prepaid Debit Other Intersegment Eliminations Total (dollars in thousands) Net sales $ 83,780 $ 22,335 $ — $ (252) $ 105,863 Cost of sales 55,399 14,564 — (252) 69,711 Gross profit 28,381 7,771 — — 36,152 Operating expenses 7,590 1,140 14,461 — 23,191 Income (loss) from operations $ 20,791 $ 6,631 $ (14,461) $ — $ 12,961 EBITDA by segment: Income (loss) from operations $ 20,791 $ 6,631 $ (14,461) $ — $ 12,961 Depreciation and amortization 2,322 675 1,008 — 4,005 Other expense, net (27) (2) (24) — (53) EBITDA $ 23,086 $ 7,304 $ (13,477) $ — $ 16,913 Nine Months Ended September 30, 2023 Debit and Credit Prepaid Debit Other Intersegment Eliminations Total (dollars in thousands) Net sales $ 278,959 $ 63,286 $ — $ (570) $ 341,675 Cost of sales 179,356 42,818 — (570) 221,604 Gross profit 99,603 20,468 — — 120,071 Operating expenses 23,705 2,532 42,783 — 69,020 Income (loss) from operations $ 75,898 $ 17,936 $ (42,783) $ — $ 51,051 EBITDA by segment: Income (loss) from operations $ 75,898 $ 17,936 $ (42,783) $ — $ 51,051 Depreciation and amortization 6,836 2,003 3,031 — 11,870 Other expense, net (1) (1) (243) — (245) EBITDA $ 82,733 $ 19,938 $ (39,995) $ — $ 62,676 Three Months Ended September 30, 2022 Debit and Credit Prepaid Debit Other Intersegment Eliminations Total (dollars in thousands) Net sales $ 99,512 $ 25,335 $ — $ (270) $ 124,577 Cost of sales 61,441 14,966 — (270) 76,137 Gross profit 38,071 10,369 — — 48,440 Operating expenses 8,653 1,260 15,082 — 24,995 Income (loss) from operations $ 29,418 $ 9,109 $ (15,082) $ — $ 23,445 EBITDA by segment: Income (loss) from operations $ 29,418 $ 9,109 $ (15,082) $ — $ 23,445 Depreciation and amortization 2,271 529 1,037 — 3,837 Other expense, net (14) — (49) — (63) EBITDA $ 31,675 $ 9,638 $ (14,094) $ — $ 27,219 Nine Months Ended September 30, 2022 Debit and Credit Prepaid Debit Other Intersegment Eliminations Total (dollars in thousands) Net sales $ 285,708 $ 64,010 $ — $ (409) $ 349,309 Cost of sales 181,319 40,130 — (409) 221,040 Gross profit 104,389 23,880 — — 128,269 Operating expenses 25,542 3,487 42,760 — 71,789 Income (loss) from operations $ 78,847 $ 20,393 $ (42,760) $ — $ 56,480 EBITDA by segment: Income (loss) from operations $ 78,847 $ 20,393 $ (42,760) $ — $ 56,480 Depreciation and amortization 6,202 1,711 3,105 — 11,018 Other expense, net (7) (3) (464) — (474) EBITDA $ 85,042 $ 22,101 $ (40,119) $ — $ 67,024
Schedule of reconciliation of total segment EBITDA to income before taxes	Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (dollars in thousands) Total segment EBITDA $ 16,913 $ 27,219 $ 62,676 $ 67,024 Interest, net (6,714) (7,323) (20,235) (22,334) Income tax expense (2,337) (4,149) (9,318) (9,609) Depreciation and amortization (4,005) (3,837) (11,870) (11,018) Net income $ 3,857 $ 11,910 $ 21,253 $ 24,063

Net Sales (Details)

Net Sales (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Net Sales (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Disaggregation of Revenue
Net sales	$ 105,863	$ 124,577	$ 341,675	$ 349,309
Operating Segments \| Debit and Credit
Disaggregation of Revenue
Net sales	83,780	99,512	278,959	285,708
Operating Segments \| Prepaid Debit
Disaggregation of Revenue
Net sales	22,335	25,335	63,286	64,010
Intersegment eliminations
Disaggregation of Revenue
Net sales	(252)	(270)	(570)	(409)
Products
Disaggregation of Revenue
Net sales	55,689	71,606	195,425	208,867
Products \| Operating Segments \| Debit and Credit
Disaggregation of Revenue
Net sales	55,934	71,857	195,967	209,236
Products \| Intersegment eliminations
Disaggregation of Revenue
Net sales	(245)	(251)	(542)	(369)
Services
Disaggregation of Revenue
Net sales	50,174	52,971	146,250	140,442
Services \| Operating Segments \| Debit and Credit
Disaggregation of Revenue
Net sales	27,846	27,655	82,992	76,472
Services \| Operating Segments \| Prepaid Debit
Disaggregation of Revenue
Net sales	22,335	25,335	63,286	64,010
Services \| Intersegment eliminations
Disaggregation of Revenue
Net sales	$ (7)	$ (19)	$ (28)	$ (40)

Accounts Receivable - Balance (

Accounts Receivable - Balance (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Accounts Receivable
Trade accounts receivable	$ 58,402	$ 68,886
Unbilled accounts receivable	9,375	11,915
Accounts receivable, gross	67,777	80,801
Less allowance	(231)	(218)
Accounts receivable, net	$ 67,546	$ 80,583

Inventories (Details)

Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Inventories
Raw materials	$ 67,742	$ 61,434
Finished goods	9,799	10,300
Inventory reserve	(3,461)	(3,335)
Inventory	$ 74,080	$ 68,399

Plant, Equipment, Leasehold I_3

Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Plant, Equipment and Leasehold Improvements
Plant, equipment and leasehold improvements, gross	$ 129,080	$ 119,100
Less accumulated depreciation and amortization	(66,437)	(61,922)
Total property, equipment and leasehold improvements, net	62,643	57,178
Machinery and equipment
Plant, Equipment and Leasehold Improvements
Plant, equipment and leasehold improvements, gross	65,846	64,786
Machinery and equipment under financing leases
Plant, Equipment and Leasehold Improvements
Plant, equipment and leasehold improvements, gross	21,205	15,717
Furniture, fixtures and computer equipment
Plant, Equipment and Leasehold Improvements
Plant, equipment and leasehold improvements, gross	2,357	3,072
Leasehold improvements
Plant, Equipment and Leasehold Improvements
Plant, equipment and leasehold improvements, gross	15,480	14,703
Construction in progress
Plant, Equipment and Leasehold Improvements
Plant, equipment and leasehold improvements, gross	4,511	3,304
Operating lease right-of-use assets
Plant, Equipment and Leasehold Improvements
Plant, equipment and leasehold improvements, gross	$ 19,681	$ 17,518

Fair Value of Financial Instr_3

Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022	Mar. 15, 2021
Senior Notes
Liabilities:
Carrying amount	$ 267,897	$ 285,000	$ 310,000
ABL Revolver
Liabilities:
Carrying amount	8,000	5,000
Level 2 \| Senior Notes
Liabilities:
Long-term debt	264,548	281,438
Level 2 \| ABL Revolver
Liabilities:
Long-term debt	8,000	5,000
Estimate of Fair Value \| Senior Notes
Liabilities:
Long-term debt	264,548	281,438
Estimate of Fair Value \| ABL Revolver
Liabilities:
Long-term debt	$ 8,000	$ 5,000

Accrued Expenses (Details)

Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Accrued Expenses.
Accrued payroll and related employee expenses	$ 10,098	$ 7,727
Accrued employee performance bonuses	1,038	8,576
Employer payroll taxes	913	1,092
Accrued rebates	3,977	2,668
Estimated sales tax liability	458	622
Accrued interest	970	7,275
Current operating and financing lease liabilities	6,652	5,697
Other	3,861	6,413
Total accrued expenses	$ 27,967	$ 40,070

Long-Term Debt - Long-Term Debt

Long-Term Debt - Long-Term Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022	Mar. 15, 2021
Long-term Debt
Unamortized deferred financing costs	$ (3,228)	$ (4,478)
Total long-term debt	272,669	285,522
Long-term debt, net of current maturities	$ 272,669	285,522
Senior Notes
Long-term Debt
Interest Rate (as a percent)	8.625%
Long-term debt	$ 267,897	285,000	$ 310,000
ABL Revolver
Long-term Debt
Interest Rate (as a percent)	6.674%
Long-term debt	$ 8,000	$ 5,000

Long-Term Debt - First Lien Cre

Long-Term Debt - First Lien Credit Facility (Details) - USD ($)			9 Months Ended	12 Months Ended
	Apr. 01, 2023	Mar. 03, 2022	Sep. 30, 2023	Dec. 31, 2022	Mar. 15, 2021
Senior Notes
Long-term Debt
Interest rate (as a percent)					8.625%
Repayment of debt			$ 17,100,000
Long-term debt			267,897,000	$ 285,000,000	$ 310,000,000
Prepayment of debt				0
Debi issuance cost			3,200,000
ABL Revolver
Long-term Debt
Maximum borrowing capacity		$ 75,000,000			50,000,000
Maximum uncommitted accordion feature amount		$ 25,000,000			$ 15,000,000
Long-term debt			8,000,000	$ 5,000,000
Debi issuance cost			$ 1,100,000
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 \| 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 - Effective Income

Income Taxes - Effective Income Tax Rate Reconciliation (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Effective Income Tax Rate Reconciliation
Tax at federal statutory rate (as a percent)			21%	21%
State taxes, net (as a percent)			5.30%	5.50%
Valuation allowance (as a percent)			(1.10%)
Permanent items (as a percent)			2%	1.30%
Deductibility limitations on excess compensation			4%	0.70%
Other (as a percent)			(0.70%)
Effective income tax rate (as a percent)	37.70%	25.80%	30.50%	28.50%

Income Taxes (Details)

Income Taxes (Details)	3 Months Ended		9 Months Ended
Income Taxes (Details)	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Taxes
Effective income tax rate	37.70%	25.80%	30.50%	28.50%

Earnings per Share (Details)

Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Numerator:
Net income	$ 3,857	$ 11,910	$ 21,253	$ 24,063
Denominator:
Basic weighted-average common shares outstanding (in shares)	11,432,794	11,265,767	11,418,372	11,259,655
Dilutive shares	395,022	523,154	443,496	471,013
Diluted weighted-average shares outstanding (in shares)	11,827,816	11,788,921	11,861,868	11,730,668
Basic earnings per share: (in dollars per share)	$ 0.34	$ 1.06	$ 1.86	$ 2.14
Diluted earnings per share: (in dollars per share)	$ 0.33	$ 1.01	$ 1.79	$ 2.05
Outstanding stock based awards
Potential antidilutive effect of share-based compensation excluded (in shares)	160,384	5,425	210,457	12,841

Commitments and Contingencies -

Commitments and Contingencies - Contingencies (Details) - Smart Packaging Solutions SA v. CPI Card Group, Inc. - Pending Litigation	Sep. 30, 2023 USD ($) item	Apr. 20, 2021 item
Commitments and Contingencies
The number of patents involved in lawsuit		4
The number of patents involved in lawsuit that have been invalidated	3
The number of patents involved in lawsuit that remain under review	1
Loss contingency accrual \| $	$ 0

Stock-Based Compensation - Omni

Stock-Based Compensation - Omnibus Incentive Plan (Details) - Omnibus Plan - Stock Options - $ / shares	9 Months Ended
	Sep. 30, 2023	May 27, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant		2,200,000
Stock options granted (in shares)	92,655
Granted (in dollars per share)	$ 24.48
Outstanding (in shares)	865,834
Exercise price (in dollars per share)	$ 18.82

Stock-Based Compensation - Rest

Stock-Based Compensation - Restricted Stock Units (Details) - Omnibus Plan - Restricted stock units	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in units) \| shares	429,655
Granted (in dollars per unit) \| $ / shares	$ 23.65
Outstanding (in units) \| shares	450,747
Outstanding (in dollars per unit) \| $ / shares	$ 23.39

Stock-Based Compensation - Addi

Stock-Based Compensation - Additional information (Details)	9 Months Ended
Stock-Based Compensation - Additional information (Details)	Sep. 30, 2023
Stock Options
Stock based compensation
Percentage of award in a plan	25%
Restricted stock units
Stock based compensation
Percentage of award in a plan	75%
June 2023 award one
Stock based compensation
Vesting period	3 years
June 2023 award one \| Awards vesting beginning the first anniversary of the grant date
Stock based compensation
Percentage of award granted	0.33%
June 2023 award two
Stock based compensation
Vesting period	2 years
June 2023 award two \| Awards vesting beginning the second anniversary of the grant date
Stock based compensation
Percentage of award granted	0.33%

Segment Reporting - Revenue and

Segment Reporting - Revenue and EBITDA from Continuing Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Segment Reporting
Net sales	$ 105,863	$ 124,577	$ 341,675	$ 349,309
Cost of sales	69,711	76,137	221,604	221,040
Gross profit	36,152	48,440	120,071	128,269
Operating expenses	23,191	24,995	69,020	71,789
Income from operations	12,961	23,445	51,051	56,480
EBITDA by segment:
Income (loss) from operations	12,961	23,445	51,051	56,480
Depreciation and amortization	4,005	3,837	11,870	11,018
Other income (expenses)	(53)	(63)	(245)	(474)
EBITDA	16,913	27,219	62,676	67,024
Operating Segments \| Debit and Credit
Segment Reporting
Net sales	83,780	99,512	278,959	285,708
Cost of sales	55,399	61,441	179,356	181,319
Gross profit	28,381	38,071	99,603	104,389
Operating expenses	7,590	8,653	23,705	25,542
Income from operations	20,791	29,418	75,898	78,847
EBITDA by segment:
Income (loss) from operations	20,791	29,418	75,898	78,847
Depreciation and amortization	2,322	2,271	6,836	6,202
Other income (expenses)	(27)	(14)	(1)	(7)
EBITDA	23,086	31,675	82,733	85,042
Operating Segments \| Prepaid Debit
Segment Reporting
Net sales	22,335	25,335	63,286	64,010
Cost of sales	14,564	14,966	42,818	40,130
Gross profit	7,771	10,369	20,468	23,880
Operating expenses	1,140	1,260	2,532	3,487
Income from operations	6,631	9,109	17,936	20,393
EBITDA by segment:
Income (loss) from operations	6,631	9,109	17,936	20,393
Depreciation and amortization	675	529	2,003	1,711
Other income (expenses)	(2)		(1)	(3)
EBITDA	7,304	9,638	19,938	22,101
Operating Segments \| Other
Segment Reporting
Operating expenses	14,461	15,082	42,783	42,760
Income from operations	(14,461)	(15,082)	(42,783)	(42,760)
EBITDA by segment:
Income (loss) from operations	(14,461)	(15,082)	(42,783)	(42,760)
Depreciation and amortization	1,008	1,037	3,031	3,105
Other income (expenses)	(24)	(49)	(243)	(464)
EBITDA	(13,477)	(14,094)	(39,995)	(40,119)
Intersegment eliminations
Segment Reporting
Net sales	(252)	(270)	(570)	(409)
Cost of sales	$ (252)	$ (270)	$ (570)	$ (409)

Segment Reporting - Reconciliat

Segment Reporting - Reconciliation of EBITDA to net income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
EBITDA by segment:
Total segment EBITDA	$ 16,913	$ 27,219	$ 62,676	$ 67,024
Interest, net	(6,714)	(7,323)	(20,235)	(22,334)
Income tax expense	(2,337)	(4,149)	(9,318)	(9,609)
Depreciation and amortization	(4,005)	(3,837)	(11,870)	(11,018)
Net income	$ 3,857	$ 11,910	$ 21,253	$ 24,063