PMTS - Earnings call transcript Q1 2022

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Operator

Welcome to CPI Card Group's First Quarter 2021 Earnings Call. My name is Charlotte, and I will be your operator today. [Operator Instructions].

Now I would like to turn the call over to Mike Salop, CPI's Head of Investor Relations.

Mike Salop

Thanks, operator, and good morning, everyone. Card Quarter CPI and Earnings the Call. Conference to Group's XXXX First Webcast Welcome May and President X, today is Chief date Today's XXXX, Card Officer; Amintore are Financial Executive Officer. from on Group Scott Chief Scheirman, and and Schenkel, CPI call the

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

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

And XXXX, call Investor will the to for XX-Q CPI's ended President now be website. Chief over and Officer, to I'd on available the Executive Scott like Form XX, March turn Relations CPI's addition, Scheirman. In quarter

Scott Scheirman

Mike, good morning, everyone. and Thanks,

overview and we results review the the performance expectations will more During detail, call for Amintore of today's the long-term update quarter, XXXX then our in I review quarterly provide in financial and our questions. first CPI's strategy. an will call, will open

XX% significantly We million, we from improved the is with and quarterly to record sales $XXX to levels. our increased since we are which quarter pleased level in start our margins became public fourth the XXXX year as sales

credit by growth cards, related quarter Software-as-a-Service-based was Card@Once debit driven services strength issuance and contactless our and with personalization including from particular segment instance the solutions. First our

sold Our was these contactless in sales card growth million by quarter. eco-focused over of we as of cards the XX driven cards

selection priced than of of provided installation, to only once to service Our adoption and contactless eco-focused the also SaaS-based share average instant continues again product grew faster gain and consumable issuance company but sales innovative initial us upon annuity ongoing model as selling Card@Once opportunities grow not us higher cards. overall. also us benefit offers revenue This of revenue. provides incremental solutions industry card presents market the solution

sales Our portfolio the strong were XXXX, which given to in new performance prepaid flat significant compared which the exceptionally prior first from a segment year, benefited good is addition. a quarter

potential from to macro The capacity, year other our impacts despite sales quarter we double-digit of low chain shortages, remains which increase. challenging in and and issues sales among increased labor the prior the lockdown China war, ongoing overall for from previous growth in performance, production additional the Thanks full very increases, we of increased our mid-single-digit year supply and the outlook uncertainty Russian-Ukraine XXXX. have environment cost a to compared pressures the interest strong of outlook comparisons with growth, up deliver factors. rate is to margin As inventory quarter strong and were first EBITDA a adjusted in quarter overall, improvements able strong purchases first with result the the sales of the to our

remains However, strong. demand customer

year XX%, accelerating top our through serve single-digit for inflationary original to reflecting increase offsets range expect quarter, sales into of to be to EBITDA capacity now in a continued moving believe adjusted high more increasing the our to move digits we have costs. expect and the The below as outlook is EBITDA we adjusted our We're our from increases for slightly in and full the expectations improved margin production impact year. did of has go well-positioned we We effect price range and outlook, the to growth. the are increased mid- improved, we from we also first Our expectations and customers. mid-single result some on price

back constraints customer partially for expect that the strong pressure anticipated EBITDA overall, the XXXX, above of of continue capacity partially range supply offset by top to we held by and benefits we sales, expect performance of adjusted higher to So growth demand, and rise. expectations with higher cost continued sales with original our end

Turning financial spend will strategy. me few let shortly. to Slide into X. go Amintore a detail reiterating on more first, But the our long-term and results opportunities minutes

significant we gained advances. have market over implemented and We last working. markets, strategies quarter further first years have growing As demonstrate believe I results the the mentioned are last overall in X the share quarter, we

customer are the Our we innovation competitive have small- driven and model market and instant in player market-leading four leader are market for U.S. a prepaid And and for business payment key conversion eco-focused strong several contactless our debit U.S. deep market products card medium-sized We believe a solutions. issuance solutions and cards. of ongoing focus, facilitating a to quality and strategic institutions priorities segments. cards, performance financial we continuous personalization customer service,

resellers, reported remains credit, X% and grown and more and where the December XX, cards annual X-year all Visa as in growth by products latest rate at MasterCard, shows by have part compounded establish prepaid the participate growing, evidenced of we and robust platforms helped the figures a We issuers healthy markets services and U.S. end-to-end us period in circulation over and and have and solutions with fintechs. which XXXX. believe relationships that debit managers recently, quality Our program customer of long-standing institution prepaid and sizes financial ended

markets the our XXXX. improved to our strategy, And over performance the and people. to position positioning, and we coming our further I environment, pressures years. believe in confident great despite in in increased growth And we strong drive continue our past and the remain to financial significantly in expect profit cost X the current I have We gains deliver years. opportunities share have our profitability

Now I will our Amintore? over detail. to Amintore to review first turn the results call more in quarter

Amintore Schenkel

X. on Thank my I you, Scott, Slide begin everyone. and will good morning, overview

segment in First including the quarter net to by year debit contactless a quarter to increase and quarter, $XXX.X flat increased increases segment credit credit customer sales sales was to strong instant primarily compared new and cards, Card@Once in cards million XX% compared due from and XX% issuance onboarding higher-priced prior segment. of growth strong as and of prior solution. Debit Prepaid growth our the in the driven personalization portfolios. debit significant first our benefited increased with eco-focused year XXXX related sales were

noted record and have now levels. current sales delivered outlook XXXX in in be to to the year in we levels prepaid below only expected due As the sales XXXX. March, debit between the the we XXXX expect we slightly outlook, Based provided our we prepaid segment XXXX to be on

EBITDA million due approximately the margin by increased XXXX First $XX from gross quarter primarily of from prior materials the from the decreased operating [Sarbanes-Oxley]. basis primarily points XXX% leverage, X% to the income of and costs in inflationary XX% were while to refinancing due per as the increased high, costs. growth operating in compliance year's soft the the declined SG&A offset compensation $X expenses of rest XX.X% to impact prior higher million, quarter incurring primarily $XX.X material, consulting quarter in expenses. to due year last related margin expenses year the Adjusted prior million expenses. SG&A the SG&A profit in gross margin partially to fourth the due XXXX from levels EBITDA due margins increasing $XX XX.X% year increased on increased sales. costs resulting increased from well million quarter quarter $X.X as and million quarter of labor increased XX.X% and $X compensation increased to EBITDA to lower was to profit SG&A quarter Gross $XX.X $XXX,XXX first of Last the the the leverage impact quarter. and first to by first incurred while as costs adjusted increased million accounting sales labor XX.X% to began of debt to increased in the quarter increased XXXX before particularly to we Net adjusted first XXX million, and year costs. in compared year and the

will So be the quarters. challenging remaining comparisons in the as not

costs X higher impacted XX% quarters XX.X% in the XXXX SG&A EBITDA and quarter, increased expenses labor adjusted the was our in it the as remaining While margin results. averaged first

the first in Our as of substantially XX.X% fourth the adjusted XX.X% year recorded EBITDA quarter increased expected. margin we this quarter margin from

due leverage, offset X. Turning operations the quarter by I $X million, the increased driven by drivers this in Income segment from quarter on segment to flat the partially now Prepaid $XX.X and material slide. Debit costs. sales so labor the earlier, from sales discuss XX% million net on to I Credit in to costs growth. income will labor the Debit mentioned higher and to decreased operating operations material and profitability Slide increased for just our segments XX% segment on sales higher and segment

flow sheet, Slide on balance cash Turning to the X. liquidity and

million, $XX.X we outstanding note capital balance proceeds had to cash and Our was our $XX needs. fund $XX and on XX utilized million ABL our borrowings of as million temporary revolver working with of March redemption

the million outstanding, by of but of quarter compared March usage priority Based expected, usage first a we due of cash first of to as over is to just will We opportunistic was the flow materials $XX in also accounts XX% continue free remainder a of flow senior increased Increased the with our and in $XX we support which growth to inventory $XX.X demand the we have and was activities the purchases. ratio XX in primarily anticipate be to million, $X.X year, the $XXX million improvement XXXX. operating driven We inventory leverage of in secured flow for and a purchases on resulted growth first of Xx. meet million $XX usage notes in being increase quarter. supply future our This expenditures. $X.X can customer to of quarter cash million in capital needs. utilized as sales usage receivables ensure Cash and million net million, customers' levels was from to continue our working a free availability capital on

we lowering further and in to ratio funds of returning these possible and stockholders adjusted net maintaining ample expectations Scott investing adjusted deleveraging Our year call structure now updated what with low To full mid- growth, mentioned EBITDA allocation priorities reiterate our have double-digit the acquisitions, share single and slightly remarks. focused an through priorities, earlier, the liquidity EBITDA to to Scott? margin and strategic business, Scott Consistent growth our closing sales potentially XXXX sheet including digit to some XX%. pass below the we continue capital to for I will time. back remain target leverage high over on balance repurchases. reflect

Scott Scheirman

the the to Thanks, start Customer able first deliver execute sales to XX% Overall, a pleased challenging am we Amintore. to increase were and remained I in environment in demand with strong, business performance quarter. the year. a

of thank our working these to As to hard for like deliver always, all results. I'd employees

despite the to pressures our range and of We uncertainties. outlook supply reflect expectations chain labor, sales have higher and EBITDA inflationary and end XXXX higher a for adjusted updated top

we the We flow any forward excited are for now joining the our Thank move in call and to for and as of for We're of the $XX our look you redemption have call And long-term quarter progress year. completed open to we remainder our about opportunities, improved you notes expect today. we senior on of updating million forward. first will secured pleased cash our also questions. the the

Operator

Jaeson Instructions] question Our first from [Operator from Lake Schmidt comes Street.

Jaeson Schmidt

Congrats on some results. really impressive

QX. Just start wanted of with to kind

I that you all it, guess chain relatedly, are any in concerned to you at were how because just sort there demand? supply demand of given And I QX forward was, but unable then the strong backdrop? about was of fulfill pull missed any if Sorry

Scott Scheirman

very this Scott. strong, Jaeson, is is appreciate Customer robust. it's I you very demand [indiscernible].

So QX, [indiscernible] have great but have results, material. we clearly still some in

and in did] what could have very more [Indiscernible] yes, [than we strong customer, QX is So we and very robust. sold

of there The part I pull would forward. question say be your some. second on may

our with closely as there appropriate very work broadly if any we [indiscernible], However, and in have capacity need planning we [indiscernible]. customers is

forward pull provide with obviously we So can know as customers, there today we the got [indiscernible] projects that who more have worked are our in I its some, today. customers have market

Jaeson Schmidt

more Okay. market helpful. here, is being share combination the vision at improving driven of just guess, upward That's I And conditions sort a or looking really that the or gains overall segment, both? then by prepaid of

Scott Scheirman

customer a things. it it's anticipated, days been couple But ago. importantly, stronger say I'd call first think XX to more product of demand what bit I we set. I it, our speaks XX than just has a had the just really or think

job Our very team Minnesota. up in in high. Minneapolis a does great quality is The

Our innovative very our fraud, It helps appeal. Prepaid with are packaging. prevent it helps [shells] also solutions drive but

So turn continue time, with programs to win just share of to here, got being -- leader customers. I customers think we've to wallet to a over market we us and and our new continue continue

So business. very with pleased that

Jaeson Schmidt

situation in nice just fluid one of dynamics sort is the of margin, me, then to XX.X% about being that for jump last the supply going think lots know with the on. it fair year? and chain rebound Okay. Really in I'll and low is I Perfect. back the watermark queue. the gross for But And

Scott Scheirman

mentioned chain environment adjusted confident and today. are line levels, inflation, and probably We're challenges outlook in the there Jaeson, guidance bit uncertainty line EBITDA provided. that that we've -- so I'd very guidance quite you with dynamic adjusted the there. We've in still outlook we’ve that the growth guidance top towards what say supply our provided a a and is is we've low guide with the But provided, out EBITDA provided of the we've forth. I we outlook EBITDA would top unemployment and

Operator

Instructions]. [Operator

question Our from of Research. the comes Kartik from Northcoast Mehta line next

Kartik Mehta

of start upon Scott, perspective seen I or you underwriting standards more business think economy? banks what was you making any in the you seen because to get could from pressure signs your hoping business And what's have happen stricter happening have any the of in that? if

Scott Scheirman

I signs of seen have any not Kartik, that.

more the the who at They're have In been fact look reported cards. if has quarter robust. banks XXXX, issuing you underwriting of in first their

per In last fact, an the outstanding have X% basis, years annual it's robust. over pretty year, said cards on Visa X and MasterCard up average are

So on we pullback have not any that. seen

thing I business, of year. are every in by our that think about issues. driven is million that's one cards XX% really issued really XXX reoccurring important

-- So it It stolen normal could could it lot credit be just cards. be be cycle. a a could reoccurrence fraud,

are nature. of every So that the year XXX good news reoccurring least at million in cards that are our XX% business, in issued

predict a in with with real impact potential any So to card issuance. given that but impact sure, don't the XX% having see future, it's that meaningful hard for of reoccurring see what we

Kartik Mehta

new quarter And that couple that out just get card as basis, at cards? wondering this last this to to do, the of know versus up, of I'm I you know renewals there from the don't in because with -- look across a explorations they or follow during quarterly you I a have the change quarter, on but of any new in if the XX down if banks terms percentage -- XX, years in of very kind trying slowed Scott, last pandemic. holders been

Scott Scheirman

on card to a on on hard share more competing basis, something an that's innovative think, far issuing view is research consumers would product. basis. of to if as a is it And example, We It's at It the your same an over cards wallet. where are quarterly but eco-focused customer as had that very from switch eco-focused banks look spot know annual I for point we cards our benefit. of XX% for are it

eco-focused sold one XX cards. think reasons we're in we the winning I the why marketplace, So of million

customers products of I gain our and to wallet. that continue will got share think solutions So we've help

Operator

Salop to further time. turn now questions the no remarks. are will back I the closing Mark at call There Instructions]. for this [Operator

Mike Salop

for Thanks, first today. day. a Thank Charlotte. you, joining I hope Okay. you. you our have call quarter everyone, good Thank

Operator

today's First Quarter That Call. Group CPI concludes Earnings Card you. Thank

CPI Card (PMTS) 9 May 222022 Q1 Earnings call transcript