PMTS - Earnings call transcript Q2 2021

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Operator

Hello everyone, and welcome to the CPI Card Group Second Quarter 2021 Earnings Conference Call. My name is Harry, I will be your operator today. I will now hand the call over to your host Brian [indiscernible] to begin. Brian, please go ahead.

Unidentified Company Representative

Thank you, Harry, and good morning everyone. Card and quarter conference CPI XXXX first the webcast earnings call. to Group and second half Welcome

On the John call Scott Officer. Scheirman, today from CPI and Executive Card Chief Officer; and Lowe, Financial President Chief Group is

differ and we actual These may forward-looking from the statements. statements to call materially Private are Before that Litigation results Reform defined risks they contain I'd subject remind statements like in everyone uncertainties begin, expressed Act cause this the are Securities as to that under could to of those certain XXXX. forward-looking

not to including, the measures and Reconciliations financial non-GAAP limited reflect see EBITDA of call. comparable the more after Card that in undertake measures the of For press these are risks cash margin, All EBITDA, no the reflect adjusted we GAAP one be a discussion included free well morning. adjusted such most on flow. accompanies but on expectations obligation directly the slide EBITDA, events issued Also we in release, adjusted and today's call, the to presentation this course most and Relations website, forward-looking company with uncertainties, of will filings of financial measures, Investor this or CPI's current the this release press discussing please today's made as conference presentation call accessible as today that and to Copies our occur are non-GAAP CPI recent investor.cpicardgroup.com. statements SEDAR. update to during Group's statement only SEC any

on Investor to Officer the to SEC of also Executive will I'd now Form XX, and Relations be with Chief President addition, website. later Scott six turn the CPI's XX-Q available And CPI's and months XXXX quarter will over the and CPI. be today, call Scheirman, June In filed for like ended

Scott Scheirman

second for Thank you, us for morning, call. our And everyone. good you conference quarter today Thank joining Brian.

strategic highlights we CPI the overview vision and in During detail second and CPI's conclude then strong discuss and are the recent financial a performance, half first team results an financial and of and our our proud call. priorities. today's call, had John I company's more of I accomplishments. quarter XXXX, of will will before provide

from per sales higher XX% was share the EBITDA quarter. of delivered prior the times contactless a was some ongoing share million. than in year over diluted XXX% XX% to during the support We highlights during quarter ones new earnings $X.XX earnings to to $X.X net year the with five customers, second transition the million, in by increase second the last and nearly income winning $XX.X Net year. second our per Here's the and continuing by cards. Diluted customers existing adjusted quarter, $X.XX last growing increased

in new including second Our by sales growth the half first and quarter earning was FinTech customers, space. driven net

with to Additionally, and net Debit cards growth our drove in average the shift and Credit ongoing sales prices higher contact selling segment.

increased We segment. with business Debit new Prepaid in our customers also won existing and volumes

in choice. to executed our balance $XX the in Our million zero and cash during down we strategy performance the deleverage customer meet while this of investing continuing in on ABL sheet. We as balance nearly Revolver the needs second the to quarter partner a accomplished to $XX business debts our refinanced has half on the of further our We first and the in resulted flow, strong first million our XXXX. capital quarter pay

In Exchange. the NASDAQ addition, recent listing Stock are on excited our we about

dedication the our the unpredictable and and safety pandemic. the and organization trading I the and am COVID-XX to markets. ticker for under progress how of are made. commitment through NASDAQ want We our now We extend global employees the have gratitude serving we say to our customers on I to proud PMTS their difficult

X. Turning to Slide

priorities our customer has vision to performance steadfast continue growth a strong in on the and to achieve XXXX. half these resulted first maintain strategic of in Executing commitment We and financial priorities.

are, priorities first, focus. deep customer Our

quality service. and customer products leading market Second,

market competitive fourth, and innovation, continuous business Third, model. a

experience. solutions that to of end-to-end our Slide FinTech energy listen These helping and first focus space, and fast innovative and partner strive new direct institution elevate to CPI and X. of financial expectations high payments needs their of collaboration, quality our to to focus personalize, our through be customers, Beginning services. the to Turning customers' with the first our unique exceed space. indirect innovative and our customers, and attractive We products of and payment delivery on solutions solution of services. choosing the focus, in we trusted to the to through customers and products priority Evidence the produce, deliver and customer needs thousands our differentiated the deliver to deep is are ability small our acquisition customers medium on priority design, to growing including the and the their in fulfill continue

where make and high designs tamper-evident our robust We packaging the our continue segment, debit market CPI in quality innovative succeed to leader. prepaid

was position including earning U.S. demonstrated with net XXXX. and that existing in volumes national customers another half strong Our sales large of new our drove by growth additional portfolios chain, the first

those of long which that support trusted industry. institutions, institutions, prepaid and standing proud customer financial our small include bank platforms processes relationships and and size, that the program are large We medium support managers

further of By leading customer effectively service. second is priority on quality as provide CPI and choice. priority we products this market a Five establish Our Star executing to partner

cards plastic card PVC, the example, card market For up we to Second made core made launched the XX% payment the The was Recycled joins card first XXXX, ocean-bound upcycled plastic. our first recycled a featuring to featuring high it plastic with card on the in recovered design. Earthwise Wave of dependence half content and Earthwise

now three We our Earth of eco-focused options. Elements which portfolio includes proud are different

eco-focused also in to payment solutions providing corporate selling in over XXXX. their We customers, ESG them are believe not cards the We goals. helps portfolio our our their this support introducing own leader XX to space, but portfolio since U.S. the market evidenced as by million card eco-focused only eco-focused customers eco-focused growing in allows

comes and in of continuous Our their enhance flexibility priority payments, customers solutions differentiated eco-focused contactless to issued third the personalization On-Demand customers CPI solutions solutions, of our solutions. elevate deliver with brands. and to our unique card support payment the innovation form in experience essentially migration their the products This and that, collaborating

Card@Once Premier card. digital recent card Our solutions now collaboration that In Software-as-a-Service our instantly customers utilizes our market offers plug-and-play end-to-end in solution providing platform cards our service, prepaid our to A Second and our Unifimoney. credit solution its Unifi which is branch with premium banking for payment solutions. Wave issue leading example

enable environmentally company conscious first-use growing an consumers and another Unifimoney expand Wave Second entering space. by payment of helping diverting as reduce FinTech to while a Our This cards engage looks waste CPI ocean. their a plastic from into FinTech that card they to yet plastic offerings the growing example is in market payment the

higher with growth focused of segments is higher of offering contactless-enabled cards installed instant the has market payment believe issuance Visa payment enables debit XX% resolution U.S. solutions. demand and our contactless across X,XXX and cards expect by were and across Card@Once Card@Once by transition increase XX% our contactless-enabled and more continues enabled, statements will in innovation XXXX. debit of printer U.S. solutions the ongoing be defined of that of and debit is environmentally from net consistent and penetration to financial approximately contactless contactless contributed addition will card. In the priced believe end and of that XXXX. now by debit end and sales credit with the issuers Card@Once XX% circulation XX,XXX We XXXX over to solutions, instant which We SecureCard, than This U.S. Software-as-a-Service more at regarding growth. have their cards transition the of in credit the continue U.S. which by Spectrum premium close Spectrum number with produce a market. personalization to be credit latest credit our And recent the card Card@Once solutions, XXXX to approximately The issuance addition to led to year-over-year institutions. we estimated end solution, to the

model we increased competitive and priority remain market on is strategic focused Our efficiency. business fourth productivity as driving

efficiencies, retain unmatched capitalize on to allocate We evolve. four continuous our to innovation us attract summarize, priorities as and continues well business world-class enabling customer companies. service. is leading To and grow in capabilities, quality competitive core our us industry to continue Execution in opportunities is customers deep and market customer and CPI on to strategic resources and customers, well growing FinTech market traditional to positioned business to market gain innovation to model believe expand invest focus, solutions, that provide and we of service, products as our a enabling an

to first Lowe in review second I successfully continuing turn over first financial John? results financial strategic we We highlights and the XXXX proud are our the our and now to more forward delivered half and the the of of John CFO, half quarter look implement detail. operating to priorities in in will future. call our strong to

John Lowe

to from Thank earlier, sales you, first half Net growth million. review as second Debit from XX% XXXX quarter new the I growth second Prepaid driven were a driven increase $XX second segments as well will growth increased transition in and Credit results X, both sales contactless Good the segment. XX% cards, from Slide from and Scott. the begin XXXX. our compared segment, customer customers. XX% morning, of our quarter existing of my Debit of everyone. increase primarily quarter Results a our On by by was with to ongoing described and with net Scott

technology, and contact cards. As cards than a have only selling have contactless a price higher reminder, additional generally

COVID-XX attributable sales lower was in and than net quarter year by both the half the prior primarily also which Our demand believe expected, to we segments were in second impacted customer pandemic. first

year-over-year strong primarily Second due to increased second to second the last in the net was XXX increased quarter from incentive leverage XX.X%, gross year, compared increased and margins from of operating over XX% quarter sales. mainly healthcare SG&A Gross profit quarter basis million, performance expenses. the to the to compensation to higher expenses year. selling higher due and second points performance for up quarter business prior $XX due

of to per XXXX. the to quarter, largely business. quarter income quarter of compared During increase generated of million, per EBITDA Adjusted year-over-year, or diluted sales The XXXX. second the share, earnings the was million million earnings was the leverage operating due $X.X of $X.X $X.XX an to net in increase share in million net second and growth net of $XX.X we of $X.XX income and compared second XX% diluted $XX.X

Our adjusted increased points XXX basis EBITDA margin XX.X%. to

to XX. Slide Turning

to half to On gross compared net a of due year, and XX% $XX XXXX the primary contactless The strong XXX payment segment. driven half sales half growth and up leverage. $XXX in Credit transition increase and sales XX% basis, volumes Prepaid year-to-date the by increase growth by due in I new year-over-year. of XX% Debit the nearly Debit higher net XXXX Prepaid sales included increased Year-to-date, SG&A of and we sales to and drivers segment. first segment, similar million growth gross million, from in expanded second Debit customers, quarter our our cards, overall points XX% expenses basis net operating generated net First from our a reasons described increased year-over-year margins the profit from first the prior of to existing to of ongoing growth we earlier.

was extinguishment Year-to-date, share. Additionally, termination we relating costs the first term This XXXX. per beginning triggering the in of our status quarter our premium to million which second increase of firstly and $X net costs accelerated costs CPI in pretax expense, and diluted filer half debt of these and senior loan of quarter second from expect make-whole resulted income the or of XXXX. $X.X credit $X.XX million earnings interest million incurred compliance in $X.X inclusive incremental the a is an facility to

net income income adjusted per diluted the million This XXXX premium Excluding the million make-whole in earnings up was of $XX.X half or income items, half for per of XXXX. adjusted of excludes $X.XX compares in first net adjusted XXXX. share. EBITDA first these and $XX.X half of tax first $X effect, earnings XX% $X.XX adjusted debt which diluted extinguishment pre-tax loss the the was Year-to-date, the and million, with compared or share to

Turning to our segments XX. on Slide

segment net XX% Credit Second nearly to million. and quarter up year-over-year were $XX sales Debit

in for leverage segment Credit quarter. to million Higher and Debit the $X.X XX% for increased volume During the growth demand. product contactless our in and quarter, existing benefited operations sales second growth, from million. and customer new net card year-over-year drove issuance year-over-year strong quarter $XX solutions CPI performance and personalization. instant and Card@Once increases we've the The the on Income the sales from in or second operating

of million inventory For million income year-over-year of XX% $XXX XX% growth the absorption, sales with prior Net of retail up over Debit greater in lower operations store the The XX% quarter was XXXX. the of $X.X The year impacted net the volumes year. million. prior sales year-over-year to replenishment $XX.X income our to second from Debit Prepaid the XXXX, was operating first with in XXX% half, Prepaid debit and income of overhead XX% COVID-XX from in Credit traffic sales net in by including and nearly $XX up was included restrictions. operations were segment favorable increased strong up existing second million year-over-year from from XXXX. segment sales segment quarter customers, margins the cost increase in to drove resulting associated

drivers the sales prepaid public company. due cost CPI $XX.X over second This sales prior of by sales million, increase of the the favorable first strong Net growth and year. The was increased XX% XXXX, or first highest million. absorption. representing sales XXXX over to Income operations during For the for a half quarter. net debit year XX% net half half driven the $XX.X million from were as since nearly for similar $XX performance became first prior the growth was net the

Turning XX. to Slide

of balance million. XXXX, $XX.X as cash June Our was XX,

XX, we $XX $XX our quarter, bringing borrowing available more the paid resulting balance available outstanding During total on million, of second second debt than $XX for ABL at the outstanding to off total and principal quarter second at the liquidity million March more $XXX down million million revolver million in year end with the of from of at $XXX We than ended XXXX. and quarter. end $XXX million the

generated first and from $XX In the of free June to ratio less leverage the cash cash flow from in of XXXX than XXXX. debt XX, million, of half five compared year, of the activities the operating end times was resulted of million the in improvement improvement on million first net $XX.X year. at capital an we for million $X.X Our times spent expenditures. This a four months as six prior $X.X strong

the chain first support of invested in inventories During $XX to six business we million supply help over the months constraints. and XXXX mitigate

Our operations from cash primarily included CARES income from cash flow tax in million also refunds, $X filing. Act

top business, which ample in sheet. far are our ability exhibited and liquidity, commitment we grow half capital the de-leveraging we Our have thus execute business demonstrates summarize, and to our on first momentum our XXXX results balance priorities, To strategies. bottom investing maintaining the the our achieved and line the believe in XXXX to

is While our customer our focus net quarter-to-quarter share always new can growth, and fluctuate. existing through on sales gaining

not customer forward, the including look may strong XXXX, growth the our sales of net drivers volumes onboarding sales we due in of As half net half. to new certain growth repeat second in first

related to companies, many constraints. in operational In and chain impacts supply global addition, like we're experiencing labor and costs increase shortages

be forward. We're working as are the greater first these we While expected these initiatives related actively to on to impacts. impacts than smaller half, look

our our has will supply which on and ongoing include focus inventory. to continue investments addition to in chain, In

and and also greater plan also support equipment to capabilities to invest We on to efficiencies continue our our focused employee and in We're capacity operations. recruiting customers. provide retention for our to strategies increase

to of and summary, in evaluate our and improve address sheet progress XXXX, various made first we performance proud In the have help are of enhancing these will impacts. strengthening We the liquidity. we to pursue balance financial initiatives half our including

on customers. now to As and Scott call our remarks. back to high always, closing I some and will committed we pass quality products providing remain Scott? focused for the solutions

Scott Scheirman

John. Thanks,

our business of every hard market strive half and net you quality plus up, a positioned choice margin We enter displayed our partner half CPI work leading Thank of our to providing thousand sales I we which that better make throughout to second customer the call today. in competitive strong well of attribute to products our performance wrapping business market we pleased are business and of employees the growth being XXXX, with on through remain the our as to by are service our we We joining company. year. solid believe which for model. day first by was We a reflected committed the the expansion. that In execution strategies deliver

Operator

concludes joining you This lines. you your today's disconnect now for Thank and call. may

CPI Card (PMTS) 12 Aug 212021 Q2 Earnings call transcript