PMTS - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the CPI Card Group's Third Quarter 2018 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to William Maina, Investor Relations. Please go ahead.

William Maina

Thank you, Operator, and good morning everyone. Card quarter CPI call. earnings the to Group XXXX third conference Welcome Chief on Card Executive and Lowe, CPI call Officer; Officer. are John Participating from President Group today's Scott Scheirman, and Financial Chief

discussed on would Before forward-looking disclosures Securities at to contain they Litigation there may on press like we IR earnings with for our information for Act as that begin, about to this review the expectations filings Please reflects our a today that All be section everyone XXXX. factors call discussed release press statements of and the and that statements that made conference after under that disclosure is defined website. in accompanies forward-looking call the subjects we or a call. on the call. of to any along made website. of obligation on the company's the call. may the remind this and that no is only are Reform with occur SEC end release may this this forward-looking also statements this information update Private impact earnings the current is events refer The CPI's SEDAR our reflect undertake statements I presentation posted Please of the also Please accessible note

adjusted measures, figures and and adjusted reflect of operation more U.K. adjusted company CPI's course the loss, and including CPI's prepared Scheirman, financial the after today be reported on the diluted Limited call CPI. to now for the for presented President during all income and remarks. margin, with per Officer all accordance SEC, comparable earnings I'd on EBITDA, one like in discontinued loss will note adjusted that free will required of U.S. website as call, to share, a EBITDA, Please the or conclude EBITDA GAAP our to cash accounted call As a Chief release a this GAAP. Scott Executive including Please non-GAAP net flow reminder, today's by continuing discussing the reconciliations of segment the most turn measures. the disclosures basis. earnings see operations all And over Also

Scott Scheirman

well good you today. on pleased are our Slide both Thank net for highlights and months prepaid XX% quarter $XX relative sales to XXXX performing U.S. we morning find objectives We Will, Overall you third across of our up of Thanks will generated first everyone. and us sales third we're nine Beginning growth results debit joining credit million double-digit by X, of and our driven results. for net segments. and the quarter XXXX. year-over-year with debit

approximately U.S. and grew and credit year-over-year emerging primarily Our segment debit XX% our solutions. of products sales growth reflecting net

We on XXXX. of XX% on the generated in or revolving in we million available company's net $XX.X cash of by $XX.X sales reflecting with approximately to employee the compensation credit due million customer We incentive ago an the incremental quarter approximately segment $X from adjusted GAAP liquidity $XX third were growth million the and operations debit balance of prepaid million million quarter of operations recorded was performance on from third net basis. our our reflecting the million to $X.X period adjusted quarter year sales breakeven of Our facility. growth sheet, net compared base. approximately from in improved offset performance in total our ended finally, comprised third primarily the we continuing continuing loss additional And quarter EBITDA essentially $X and a business

third, continued of quality products entire competitive in model; focus; customer customer and our are improved priorities our the include; second, and business service; year-to-date deep our quarter pleased four are I key market believe XXXX. focus and Slide innovation. X, providing results in fourth, as first, mentioned market-leading performance to seeing continuous We third Turning we reflects organization the the recent our with a our on momentum which business and now we

success, strategic leadership was over examples to largest serving States additional continue intensifying service PSCU, existing card By Slide One our partner our calls, similar providing to the that extension. to primary focus, X, would to this insight the first which area deep of wins our to continue aspects this with contract business. in customers with serve CPI's which turning in also do experience credit our of credit against pleased Building customer increasing PSCU. long-standing update a of all a our you believe to of and deciding I Now with first is we ability first provide in our we I example we’re like their customer key improving recent highlight We're factor provides priorities. Dual would renewed this about. We of to in help win excited few theme customers for union everything come. combined manufacturer customer years upon Beginning XXX the EMV our this our solutions approach experience placing customer our past the on our Interface a additional by relationships United third the our organization to like is progress into fundamental their for business priority contract customer elevating with four centricity In to with we're to our and and recent business. dedication success part build strengthening focus driving be quarter, brands new unions. in customer our

institution metal, is standard secure and U.S. cards first dual cards. a to with The interface including EMV, manufacture financial leading

U.S.-based prepaid The second retailer major and with is a services. related cards provide to

quality our existing on customers and second share win focus growth products quality is suite market-leading customer in and deliver with priority with offer service The to a service. financial issuance XX% our an us to our our new solutions Moving of solid and instant expand products in XXXX and end approximately business. is service, to of increase Card@Once differentiated combined wallet continued approximately superior installation and approximately the helping We with quarter over of our customer ability third heightened XXXX card in solutions the Card@Once of market-leading and XXXX. to from quarter ended solution a quarter customer prior third ability of up from XXXX the XXXX installations the our installations testament to

based our with Group Card@Once We wins headquartered instant Foresight Indiana among others. of include see Financial grow and opportunities third Bank the Illinois, and continue customers. to both existing business in quarter new new Examples issuance to in in Centier

and prepaid and position the example and segment our another third net of to ability generated XX%. market-leading position to offering. sales growth quality our up leading business customers is we in in products net sales our year-to-date this have our driven prepaid believe Our strength quarter over Wins of were directly existing related which our XX% leadership provide services. In performance in with prepaid is the we

priority to X, a on now model. our Slide Turning business competitive market third

through focus productivity direct initiatives procurement to indirect continue We process primarily on increased savings. and our business to and and improvements drive efficiency

this we completed improved in is quarter, performance. U.S. consolidation. the third Our site our personalization to work In contributing area

our to initiatives. executing of focus divested we We're sharpen reminder to key priorities. business see the four on enabled our these U.K. our a beginning as addition which In is us benefits

by to products will market-leading focus further to excel CPI's will we doing and on opportunities customer continue better quality even business portfolio. us will so markets better equipped positioned service. in that allow ahead, optimizing to core to evaluate our be our Looking By we and provide

and priority fourth innovation, our CPI continuous metals focus to respect our cards. with of Lastly tap-and-go like I’d interface on dual or two emerging products to

from For CPI we're FinTech's. institutions traditional metals, customers both as and seeing financial such interest nontraditional

for to snitch we premium our product. While overall opportunity metal portion remains the see small a of business continue

seeing is and quarter. more dual of tap-and-go to Lowe John? we're financial interface the transition cards over XXXX. base in today market. with small and progress review a to optimistic our in Dual opportunity call of business some operating the you early look to customer For portion will to EMV we're results interface cards, this about detail in John overall our turn for forward and sharing our the third now I with signs

John Lowe

good and everyone. morning Scott, Thanks

operating our overview our XX of Slide we and As Scott On mentioned financial quarter XXXX. are will an third see pleased quarter third you with results.

XX.X% Card@Once. of Product including and was XXXX. sales our million sales by and fulfillment the increased dual net and CPI a as growth debit $XX.X third $XX.X increased personalization focus to in and solutions, third of reflect in driven August third net XX.X% This X U.S. on metals, efficiency all growth profit business. third profit gross our on and a Total for from in million, financial well discontinued XX.X% to reminder, our third year-over-year I'm quarter $XX.X in solutions cards, the initiatives. a products emerging exclude and compared products for quarter. the and in sold Services was net by X.X% driven million, results XX.X% million quarter a is top GAAP. $XX.X The operation as of XXXX. of and operations our Gross and year-over-year and was growth, today treated higher-margin margin prepaid continuing our $XX million with representing the sales sharing margin an of As and card million XX.X% ongoing of as reductions segment which business year-over-year primarily U.S. increase gross year-over-year cost EMV quarter line increase our were under quarter interface $XX primarily our U.K. segment, our reflects XXXX the primarily the

loss diluted for impacted quarter loss prior prior our or continuing per million, $XXX,XXX primarily was improved higher is from expense expenses compensation versus million the million a We from period. as third the of $X.X in in XXXX operations XXXX. is of from loss The $X.X due from share of our of the XXXX interest in This employee diluted operations Income with SG&A in of compared SG&A reported third quarter net XX.X% loss period. the $X.XX year in GAAP QX. net in year-over-year. the of operations $XX of result net XXXX were a XXXX Our share third or million, quarter incentive year-over-year. loss XX.X% $X.X performance per performance the third Higher increase in year up a a continuing $X.XX net quarter up to

third the from million. Turning for quarter EBITDA operations of to continuing our metrics. $X.X was XXXX non-GAAP Adjusted

from the per in share in operations the of period. approximately of Adjusted in the earlier. performance $X.X the due was EBITDA adjusted which I company's mentioned line in XX.X% growth incentive performance XX.X% top performance million XXXX approximately reflects margin net net XXXX or ago improved Our adjusted third year with compared was employee year by $X.XX quarter income continuing of offset with incremental EBITDA compensation loss compared Adjusted million prior to breakeven our $X period.

XX% review third $X.X $X.X increase products I prior The the segment existing in in sales year up on customer in debit emerging and million debit sold million cards, $X.X CPI the U.S. due and from XX. XX.X% year including XX.X debit in EBITDA compared cards Card@Once. was with XXXX in up recorded net increase prior period. the the sales to the $X.X sales was in of million EBITDA XX.X% for period. Slide XXXX. EMV segment Now cards and from year prepaid net million metal primarily in year-over-year. our XX% period. driven cards million was results The segment Prepaid from of will net and a of million U.S. sales our in increase $XX for credit up EMV, With third $XX.X million XXXX from third base. to up third net million quarter standard segment third our cards XX.X% were increased were quarter EMV volumes quarter interface was the primarily prior from solutions additional dual sales the respect quarter, net from approximately by XX.X million, XXXX, the QX XX.X up quarter, XX% sales

capital provided to positive of use third from reported operations $XXX,XXX period. $X.X yielding Turning in $X.X by third in compared $X.X cash decline continuing year flow Capital sales. cash from the $X.X compared to our in from of due period, quarter our The operations a Slide XXXX third year in with continuing million cash prior the were cash prior in quarter quarter negative the We free third operations approximately operations third XXXX. XX. reflects of changes flow XXXX XXXX overview expenditures continuing of continuing primarily quarter strong versus of million million of quarter million net working cash the $X.X of the in on flow free million year-over-year in to cash

and Moving million to and Slide total of end the June debt of our XX, was the XX, a was our year net net of million discounts, $XX.X $XX.X XX, million We principal XXXX. XXXX, our of ended $XX.X ending down balance debt outstanding at net times. recorded cash $XXX.X costs financing XX, September at was XXXX, $XXX.X balance debt September XX.X XXXX Including million $XXX.X with and balance ratio leverage million. as debt million. deferred quarter At from

XX, which $XX is revolving September had million borrowing. a facility XXXX, we of has available As undrawn million and for credit $XX

Our covenants term available believe as loan plan. liquidity and cash and million has $XX.X we support of of have business mature Total XX, adequate our September until no XXXX. liquidity financial not is was XXXX. August We to

ordering of including segment our reminder, fluctuate do business and factors a from As based several customers our seasonality. quarter-to-quarter results patterns on

I’d that imposed XX, materials. Slide current due relates our share CPI is to seen. on currently on to are impact The procurement. the cover insignificant industry to I'm on market direct to sourcing that we the and to tariff tariffs trends and like topic pleased Now focus

the call. with consistent discussed we conditions Regarding what with you last are our on earnings market,

industry XXXX levels that XXXX flat XXXX. card and then return will expect to continue growth be U.S. volume essentially We to versus manufacturing in in

this selling average to that anticipated EMV remainder standard products decline the we the addition, year for in will of In prices XXXX. during to similar continue market

I demand Scott modest expiration and now back closing steady-state our to some replacement remarks. personalization card by for call is For XXXX levels fulfillment, the loss turn issuance, for driven and expectation stolen more activity. of and new-car Scott? in will

Scott Scheirman

Thanks nine John. results the relative performed to first quarter our solid have objectives XXXX. well delivered third we We of for and months

position customer model. now a the progress partner our business to next and competitive choice call. you daily I continued our will Our key with call. us focus four am and Operator, on service pleased made which forward products our the we've believe remains of be providing market-leading you priorities with by sharing look we on may progress with earnings market the early quarter year to fourth end quality

Operator

now has you concluded. conference today's thank The presentation. We for attending

now disconnect. may You

CPI Card (PMTS) 7 Nov 182018 Q3 Earnings call transcript