PMTS

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 9:00 a.m. ET Head of Investor Relations - Davis Barker President and Chief Executive Officer - John Lowe Chief Financial Officer - Terra Grantham Operator: Welcome to CPI's Second Quarter 2026 Earnings Call. My name is Alexandra and I will be your operator today. [Operator Instructions] Now I would like to turn the call over to Davis Barker, Head of Investor Relations. Davis Barker: Thank you, operator. Welcome to CPI's Second Quarter and First Half 2026 Earnings Call. As a brief introduction, I recently joined the CPI team and I'm incredibly excited to partner with CPI's leadership to share our compelling story with the investment community. Joining me on the call today are John Lowe, President and Chief Executive Officer; and Terra Grantham, Chief Financial Officer. Before we begin on Slide 2, I'd like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For a discussion of such risks and uncertainties, please see CPI's most recent filings with the SEC. All forward-looking statements made today reflect our current expectations only and we undertake no obligation to update any statement to reflect the events that occur after this call. During today's call, the company will be discussing one or more non-GAAP financial measures, including, but not limited to, EBITDA, adjusted EBITDA margin, net leverage ratio and free cash flow. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the press release and slide presentation we issued this morning. Today's press release as well as the presentation that accompanies this conference call and the Form 10-Q are accessible on CPI's Investor Relations website at investor.cpicardgroup.com. We will open the call for Q&A after our remarks. I would now like to turn the call over to John. John Lowe: Thanks, Davis and welcome aboard. We're excited to have you on the CPI team. Good morning, everyone and welcome to the call. Before I begin, I'd like to officially congratulate Terra on her appointment as Chief Financial Officer. Since joining CPI in 2017, Terra has been a key driver of CPI's evolution into a payments technology leader. And after an outstanding job as interim CFO, I couldn't be more excited to have her in the role permanently. Turning to Slide 3. The CPI team delivered a strong second quarter and first half of 2026. We achieved revenue growth of 15% in the second quarter and 17% in the first half, resulting in a record first half revenue for the company. Our performance reflected continued momentum in Secure Card Solutions, including another quarter of strong execution from Arroweye, which continues to exceed our original expectations. We completed another strategic acquisition, buying an instant issuance solution known as TRISM, which further supports the expansion of our higher growth, higher-margin Integrated Paytech segment. We also received tariff refunds in the second quarter, which benefited the P&L by more than $3 million. These successes were partially offset by some market choppiness in prepaid as we continue to see softness within that segment, which we expect will continue into late 2026. We delivered good profitability growth, exceeding our expectations with second quarter adjusted EBITDA increasing 7% to $24 million, while generating a company record free cash flow of $36 million in the first half. Strong performance in our Secure Card Solutions is driving significant operating cash flow growth as higher volumes accelerate inventory optimization initiatives. Just as importantly, we continue to strengthen our balance sheet, reducing net leverage to 2.7x and redeeming $26.5 million of our senior notes shortly after quarter end. These results reinforce the strength of our business model and our ability to consistently generate strong operating cash flow, delever our balance sheet and create additional value through disciplined capital allocation. With our strong first half performance and visibility into the second half of the year, we are pleased to raise our full year revenue growth and free cash flow guidance while reaffirming all other guidance targets. Terra will share more about our updated outlook shortly. Beyond the financial results, what excites me most is the continued progress we're making executing our strategy and diversifying CPI. We continue to see strong momentum across our cloud-based and digital solutions, which are helping us generate new recurring revenue streams, deepen customer relationships and expand our role in the payments ecosystem. During the quarter, we continued to build go-to-market momentum across our businesses. In our Integrated Paytech segment, we're excited to expand the reach of our cloud-based push provisioning and Card@Once solutions with Blossom, a leading digital banking and payments platform serving 350-plus credit unions; and CU*Answers, a leading core processing and a digital banking provider, serving more than 400 credit unions across the U.S. We continue to be excited about the momentum we're building as we expand our reach into the payments ecosystem as a provider of digital solutions, leveraging our tokenization capabilities. In our Secure Card Solutions segment, we hit a new milestone with Arroweye, where we executed our 25th new customer win since closing the acquisition in May of last year. We are also excited to have extended our relationship with Vericast, a data-driven fintech that services roughly 60% of U.S. commercial banks and credit unions and a customer relationship that spans more than 2 decades. On the prepaid side, while the current year remains choppy, we remain excited about our long-term opportunities in the open loop market and the much larger closed-loop market. This quarter, we've continued to win share and are now serving all of the top prepaid program managers in the U.S., further strengthening our position as the center of the prepaid market and creating new opportunities to deliver our secure packaging solutions. We are making good progress with Karta, on our joint pilot to launch prepaid packages with SafeToBuy chip embedded technology at one of the largest U.S. national retailers, and we are seeing encouraging signs in the adoption of closed loop, a market where we estimate is approximately 5x the size of open loop. Given our leadership position in prepaid packaging, chip-enabled solutions and customer relationships, we believe CPI is uniquely positioned to capitalize on the prepaid market as it actions to reduce fraud. Altogether, these wins across our business are a great example of how CPI is leveraging both physical and digital payment solutions to create value for customers and drive profitable growth. Turning to Slide 4. Let me briefly remind everyone of the foundation of our strategy. Everything we do is built around 3 core growth pillars: our proprietary technology platform, our marketable base of thousands of customer relationships across the payments ecosystem and our ability to deliver innovative payment solutions that evolve alongside market needs. These pillars continue to drive growth and diversification across the company and our acquisition of TRISM instant issuance is an excellent example of that strategy in action. Turning to Slide 5. TRISM expands our leadership position in the attractive U.S. instant issuance market and roughly doubles our instant issuance addressable market by enabling us to serve larger financial institutions that prefer an on-premise solution. The acquisition increases our instant issuance presence to nearly 20,000 locations across over 3,000 financial institutions, adds recurring revenue and long-term customer relationships and creates attractive cross-selling opportunities across CPI's broader portfolio. I met with the TRISM team last week and on behalf of the leadership team and all of CPI, we are excited to have TRISM as part of our team. TRISM is expected to increase Integrated Paytech growth to approximately 20% in 2026, while maintaining a gross margin profile of over 50%, consistent with our existing Integrated Paytech business. Additionally, this acquisition had little impact on leverage, enabling us to complete the strategic acquisition while maintaining our disciplined approach to capital allocation. In summary, we delivered an excellent second quarter. We gained share, generated strong revenue growth and profitability expansion, delivered record first half free cash flow and continued to improve our balance sheet. We are executing our strategy to grow and diversify the business, positioning CPI well for the second half of the year and beyond. With that, I'll turn the call over to Terra to provide more detail on our financial results and outlook for the remainder of the year. Terra Grantham: Thanks, John. Before I begin, I'd like to thank John, our Board of Directors and the entire CPI team for their confidence and support as I take on the CFO role. I look forward to continuing to partner with our leadership team as we execute our strategy, drive profitable growth and create long-term value for our shareholders. I'll begin with our consolidated revenue and profitability results on Slide 7. We are pleased with our second quarter and first half financial performance. Our strong results for the second quarter were better than our expectations, although the mix of performance across the business evolved as the first half progressed. Strong performance in Secure Card Solutions helped offset a slower-than-expected start to the year in Prepaid Solutions. Revenue increased 15% in the second quarter to $149 million compared to $130 million in the prior year period, driven by increased volumes of contactless cards and higher personalization solutions as well as contributions from the acquisition of Arroweye. Excluding Arroweye, total organic revenue grew 12% in the second quarter, reflecting the underlying strength of our business. Second quarter gross profit increased 21%, resulting in a gross profit margin of 32.5% in the second quarter, an increase of approximately 160 basis points from 30.9% in the prior year period, primarily driven by a benefit of more than $3 million of tariff refunds. Second quarter adjusted EBITDA was $24 million, representing growth of 7%, driven by revenue growth and the benefits of tariff refunds. Gross margin and adjusted EBITDA margins were impacted by unfavorable segment mix due to softness in higher-margin prepaid revenue that was partially offset by continued growth in Secure Card Solutions, which, while profitable, carries lower margins than our prepaid business. SG&A expenses were $37 million in the second quarter compared to $31 million in the prior year period. The increase in SG&A was driven by Arroweye integration expenses and investments in digital and technology as we fuel our efforts to grow and diversify in our higher-margin, more recurring revenue businesses like Card@Once and digital. Integration and transaction-related costs primarily related to Arroweye were nearly $3 million in the second quarter. We expect these to be significantly lower in the second half of the year. We will have TRISM integration expenses in the second half but at significantly lower spend levels. These investments have and will continue to support our long-term growth strategy through expanded capabilities and revenue and operating synergies. And as a reminder, these costs are not included in adjusted EBITDA but do impact net income. We are driving initiatives designed to improve margins over time. During the second quarter, we progressed supplier negotiations, realized incremental acquisition synergies, including freight, scale efficiencies, advanced work site optimization across our Secure Card Solutions footprint and moved our automation initiatives forward. We also continued our focus on expanding our growth in higher-margin solutions, including metal cards in our Integrated Paytech segment. While some of these initiatives are already generating benefits, we expect a larger impact as we move through the year. Turning to our segment results on Slide 8. In Secure Card Solutions, second quarter revenue increased 17% to $111 million, driven by increased volumes of contactless cards, higher personalization and $5 million of Arroweye contribution. Excluding Arroweye, second quarter organic revenue in the secure card segment increased 13% with strong underlying growth in our largest segment. In Prepaid Solutions, second quarter revenue increased 18% to $23 million, primarily due to a change in accounting that was implemented in the second quarter of 2025, partially offset by comparisons with strong sales of higher-value packaging solutions in the prior year period. As I shared at the start of my remarks, we experienced a slower-than-expected start to the year in prepaid as customer ordering patterns remained uneven. While the recovery has been slower than originally anticipated, we continue to be well positioned to capture new revenue opportunities in this market, including in closed loop, where we are continuing to see strong customer interest and in our strategic partnership with Karta. Within Integrated Paytech, second quarter revenue increased 4%, driven by increased Card@Once revenue and a very small contribution from the TRISM instant issuance acquisition, which closed in late June. We continue to expect Integrated Paytech to deliver approximately 20% growth for the full year, an increase from 15% expected at the start of the year. While this implies a significant increase in growth in the second half of the year, we have confidence in this expectation based upon continued adoption of our Card@Once and digital solutions, contributions from TRISM and the benefits of favorable comps versus the prior year. We generated exceptional cash flow in the first half of the year. Cash flow from operating activities was a record $42 million in the first half compared with $10 million in the prior year period. Free cash flow was $36 million compared with $1 million in the prior year period, driven by lower working capital usage, including reductions in chip inventory, a strong Secure Card Solutions performance accelerated inventory optimization initiatives. Our free cash flow through the first 6 months of the year is a record for the company. Capital expenditures totaled $6 million in the first half, down from $9 million in the prior year period as capital spending last year included investments for our new Indiana production facility. We now expect full year CapEx to be slightly below our 2025 levels, driven by a reduction in certain equipment investments and lower software capitalization than planned. We are focusing CapEx on growing our digital solutions, enhancing our technology, driving automation and other key growth investments. On the balance sheet, at quarter end, we had $21 million of cash, $92 million of available borrowing capacity under our ABL revolver and $265 million of senior notes outstanding prior to our $26.5 million senior note redemption in mid-July. Net leverage ended the quarter at 2.7x, down from 3.6x at this point last year. The progress on our balance sheet reflects our commitment to deleveraging and reducing our interest expense while continuing to grow adjusted EBITDA. Wrapping up with our 2026 financial outlook on Slide 10. As John shared at the beginning of the call, we are pleased to be increasing our 2026 financial guidance on revenue growth and free cash flow while holding our guidance on adjusted EBITDA and year-end net leverage. Our adjusted EBITDA outlook remains unchanged as the benefits from stronger Secure Card Solutions performance and tariff refunds are expected to largely be offset by continued investment in Integrated Paytech and ongoing choppiness in our higher-margin Prepaid Solutions segment. We now expect revenue growth of high single digits to low double digits, adjusted EBITDA growth of low to mid-single digits, free cash flow ranging from $45 million to $50 million, an increase from our prior guidance of a conversion rate in line with 2025. 2025 free cash flow was $41 million. Year-end net leverage from 2.5x to 3.0x. And as we already shared, we are raising our Integrated Paytech segment revenue growth from 15% to approximately 20%, helped by our acquisition of TRISM. Overall, our first half results keep us on track to achieve our updated full year objectives. We currently expect third quarter revenue and adjusted EBITDA to be slightly better than the second quarter as we progress toward our updated guidance. The actions we are taking to grow the business, expand our market opportunity, improve margins and generate strong cash flow position us well for the remainder of 2026 and beyond. I'll now turn the call back to John for some closing remarks. John Lowe: Thanks, Terra. We delivered a strong first half of 2026, achieving double-digit revenue growth and record free cash flow while continuing to execute on our strategy to grow and diversify the business. We expanded our digital and cloud capabilities, secured exciting customer wins, completed another strategic acquisition and continued building momentum across our portfolio. At the same time, we strengthened our balance sheet, reduced debt and maintain the flexibility to invest in future growth while creating value for shareholders. As I wrap up today's remarks, I want to recognize the CPI team for delivering a strong first half and positioning us for an even stronger second half of 2026. We have a robust sales pipeline, an increasingly high-quality recurring revenue customer base and a clear focus on generating profitable growth. Operator, we will now open the call up for questions. Operator: [Operator Instructions] Your first question comes from the line of Peter Heckmann with D.A. Davidson. Peter Heckmann: Good to see the nice strong first half results. I had a question on the TRISM acquisition. I infer that this is a relatively small deal. I think in the original press release, you said that you didn't expect it to change your net leverage ratio at all. I did hop on a little bit late, so I apologize if you already covered it. But I guess, in terms of thinking about like incremental revenue perhaps that you could pick up for 2027, should we be thinking about maybe something like for the full year, like $5 million to $10 million in revenue? And then just in terms of like the rationale for that deal, I don't think there's very many players in the instant card issuance market. And so absorbing this one, should really help your competitive position and see if you can talk a little bit about what attributes the deal brings to CPI. John Lowe: Yes, Pete, good question. No problem jumping on late. We can cover that. So just to start, TRISM is a great strategic acquisition for us. You think about our position in the instant issuance market broadly, we historically have been the market leader by far in Software-as-a-Service kind of cloud-based solution where you're servicing those small to medium banks that don't have the ability to manage their own technology. We would also compete against a couple of other players that would have on-premise solutions where they're typically servicing the larger banks with a greater number of locations that have large technology operations that can manage things on their own and they want that somewhat. They want to buy the software but they want to manage it on site on their own. And so TRISM fits into that latter mold. So it really grows our addressable market, essentially double from where we were and a great investment for us. That said, going to your other question, size-wise, we talked about TRISM increasing our Integrated Paytech segment guidance this year from 15% to 20%. If you just ran that math, that's roughly $3.5 million, $4 million is what we expect for the latter part of this year. That said, that's because we're getting them kind of up and running under the CPI umbrella. We would expect that run rate to be double and probably a little bit larger in 2027. So I don't want to necessarily give guidance yet. But I wouldn't expect just to be able to double that and that's the guidance for '27, put it that way. Pete, that answer your question? Operator: Your next question comes from the line of Jacob Stephan with Lake Street Capital Markets. Jacob Stephan: First, maybe just kind of building off of that last one on TRISM. When I look at IPT, it grew kind of low single digits in the first half but your fiscal year guide is 20%. I think TRISM is probably in the $3 million to $4 million range. What's the other $10 million that you're expecting to ramp in the second half? John Lowe: So really 3 things. One, our Card@Once business, we do have strong confidence in kind of the second half of the year. We see line of sight to greater growth there and that's good for us. You add in TRISM, that's, as I mentioned, a small percentage of the growth. And then if you just look at comparables for '26 compared to '25, Q3 was a pretty good quarter in '26 but -- Q4 in '26 or '25 was a little bit slower for the quarter. So we would expect a fairly strong growth in Q3 for Integrated Paytech segment and very strong growth in Q4 '26 for Integrated Paytech. So we're confident in the business and our line of sight to hit the 20% guidance for the year. Jacob Stephan: Okay. Great. Maybe just on secure card, that was up 25% in the first half. I guess how much of the incremental was Arroweye versus kind of your organic contactless personalization? And can that kind of maintain against -- as we look at the second half of the year? Terra Grantham: Yes. So I think if you look, Jacob, at our organic growth, it was also very strong in the first half of the year and in Q2. So overall, for CPI, our organic growth for Q2 was 12% and for the first half was 14% and the majority of that was driven by strong organic growth in Secure Card Solutions. Jacob Stephan: Okay. Last one for me. Just on the free cash flow, obviously, $36 million is outstanding in the first half. I guess with your guide being -- your commentary being $45 million to $50 million, what kind of reverses in the second half? And how much inventory kind of release is left in the model? John Lowe: Well, Jacob, first, I'd say I just want to thank the team. I mean we had a tremendous amount of cash flow in the second quarter. That's a -- really first half is a record for us. The performance in the business is really driving what I would say, significant volume growth, which ultimately drives inventory optimization, which we've been pushing to do for a period of time post COVID. And so we knew we'd get to this point. But now we look forward and we're excited about the cash flow prospectively. But I'll let Terra cover kind of second half a little bit. Terra Grantham: Yes. So again, I'll echo what John said, very happy with our free cash flow performance in the first half. And a lot of that was driven by inventory, I would say, acceleration of our inventory optimization. And I do want to say we actually continue to focus on that and we expect our inventory to continue to improve in the second half. But we do have some other items in the second half that are -- will not be as positive in the first half, primarily kind of around our AR and AP, which we did have some timing things there. So really good performance in the first half and some of that was team efforts and strong working capital management but we also had a little bit of timing. And then we do expect higher CapEx in the second half as well. But overall, we're very focused on continuing to drive cash flow, super excited about that strong performance and strong working capital management as we continue to go forward. Operator: Your next question comes from the line of Peter Heckmann with D.A. Davidson. Peter Heckmann: John, sorry about that. I was on mute. And I did have a follow-up question but your answer to the prior question on TRISM was very helpful. Just thinking about -- and again, apologize if I missed it but could you just go into a little bit of detail in terms of progress on anti-fraud packaging on the closed-loop prepaid cards, if you've had any progress there and whether or not you have had any change in terms of your thoughts about the relative opportunity there over the next 18 months? John Lowe: Yes, Pete, no problem. And good question. The prepaid market broadly, we said this in the last couple of quarters, I think we're extremely well positioned for what may occur on a go-forward basis. Just like any other market, things change on a kind of a slow basis, if you know what I mean. So it's hard to put a specific date on changes. But if you think about the 2 big markets, right, open loop, where we've been a leader for a long time, closed loop, where we're just entering into, closed loop is about 5x the size of open loop from a volume perspective. And the value of closed loop continues to rise as there's regulation change in the states and retailers, merchandisers essentially demanding greater packaging around closed loop cards. And that's where we fit in because we're the largest prepaid packager in the United States by far. And on the open loop side, when you add in our ability to take our chip expertise, if you will, that we have on the Secure Card Solutions side, the IPT side, that is something that we're already in pilot with one of the largest national retailers in the United States. We're kind of in the second stages of that pilot. It seems to be going well. So just like anything else, things take time but we're excited about the opportunity. And again, I wouldn't put a number on where -- what that means for '27 or '28. But I will say we're happy about our position in the market and we're excited about what's to come in prepaid broadly. Peter Heckmann: Okay. That's helpful. And then just last question on metal cards. I know it's a very small portion of your overall business but I do think it's getting bigger. If I remember correctly, you had a pretty good year last year. And I think I've seen a couple of advertisements here and there. Can you talk a little bit about how your metal cards differ from maybe the other major metal card provider and where you see some opportunities there? John Lowe: Yes, good question. Well, we didn't really cover it this morning but we did have decent metal sales in Q2. We had pretty strong metal sales in Q1. It's just a much smaller part of the business. That said, where we compete is at a more value price point than some of our competitors but also while providing a high-value kind of marketable product, if you will. The latest one that our teams have been working on is almost like an on-demand metal product. And that we've been slightly advertising, I'd say, it's kind of in early days. But metal is a market we will continue to participate in, continue to innovate in. And we feel like our value proposition within the market, especially for those thousands of small to medium banks we serve, we feel like we're well positioned to capitalize on metals as it continues to grow from a market perspective. Operator: Your next question comes from the line of Andrew Scutt with ROTH Capital Partners. Andrew Scutt: Continued progress. First, going to piggyback off the previous -- this question on prepaid. Just outside the packaging, you guys kind of mentioned a little bit of lumpiness in demand in the quarter. Can you guys just kind of talk about what pockets you're kind of seeing that are working and maybe some of the areas where demand might be lagging a little bit behind expectations? John Lowe: Yes. I mean I think we said this, we knew the first half of the year would be a little bit weak. I'd say the second half, we just expect things to continue further as the market tries to figure out how to protect against fraud. And the demand side, most of that is in the open loop side of the market because that's the majority of what we service as well as our leading position is in open loop. But that said, Andrew, closed loop, just as a reminder, we really started entering the closed-loop market in the latter part of 2025. Did a small amount of closed loop in the latter part of '25 but had really decent growth in closed loop. I mean it's still small in relation to the whole business but closed loop is very positive for us and we see a ton of customer interest from where we're positioned and what our capabilities are, especially on the packaging side for closed loop. So again, I think the prepaid market will remain choppy for -- through late '26. That's our expectation. But that said, I mean, we're well positioned to grow with the prepaid market and somewhat are supporting that growth through the innovation that we have from a packaging and a chip expertise perspective. Andrew Scutt: Great. Appreciate the color. And then second for me, it was wonderful to hear the continued organic growth in Secure Card Solutions. Now kind of as we think of the transition to the Fort Wayne facility, how has that kind of helped you absorb these additional volumes? And kind of can you help us quantify how much more capacity you have for continued growth? John Lowe: Yes. I mean I'll start and then ask Terra to jump in. I mean we're excited about Fort Wayne. I mean the Fort Wayne team is doing a great job. We're now able to move work pretty much between Fort Wayne and our other site in Colorado pretty easily. The team has innovated quite a bit to make those 2 sites streamlined. That helps us to manage kind of where to put the best work for the best margin, if you will. But that said, capacity-wise, I think we do have ways to go before we're at full capacity and we essentially built the site looking 10-plus years out, not necessarily for next year. But Terra, any color you would give? Terra Grantham: Yes. I mean I would just add that, I mean, we were definitely at a point where we were kind of running out of capacity. So it was a really important investment for us to continue to be able to grow the business. And as John said, not at full capacity yet. But as you can see in our results, we are continuing to grow in our Secure Card Solutions business, gaining share there. And certainly, that's a very important component that we've invested in that Indiana business to -- or sorry, in that Indiana site to be able to facilitate that growth as well as future growth. Operator: Your next question and final question will come from Hal Goetsch with B. Riley Securities. Harold Goetsch: Terrific results. You mentioned prepaid is going to be choppy through late 2026. And are you facing basically tough comparisons? Or what is the cause maybe of what you would think maybe is a very consistent business that's very choppy this year, even Q1 -- Q2 growth is much better than Q1. What are some explanations for that? And if you have any extra color? John Lowe: Well, there's kind of 2 things. One, we did have some strong quarters last year, I would say. Prepaid had a especially a really good Q4 of 2025, if you go back and look at it. So there are kind of high comparables in comparison. And we've seen that in the prepaid business and where we sit in the market, just given our position in the market, as the market ebbs and flows, right, we experience that. But just going back broadly, I mean, if you think about our position and the market trying to protect against fraud, I think the point we would make is, we still believe it's a growing market. We've heard that from our customers. Our position in the closed-loop side, there's a lot of opportunity there. And whether you're in the open loop or closed loop side, it all comes back to how do you protect against fraud? Do you implement greater packaging? Or do you implement some sort of chip solution? And we, by far, are the largest packager of prepaid cards in the U.S. and have extremely deep chip expertise, which is a unique combination that no one else has in the market. So I wish I had better information on the prepaid goal for this year but I think it's going to be a little bit choppy this year but we're confident in the longer-term growth and opportunity set in the prepaid business. Harold Goetsch: Yes. Two quick follow-ups. One is on the balance sheet. So terrific work there. But a lot of the free cash flow stems from like really getting inventories in line, accounts receivables lower. Were there some big invoices outstanding in receivables? So it's a big working capital benefit, probably won't get too much more of that but still great to see bringing that -- be able to pay down that term loan. Any other comments on like the free cash flow situation as we probably shouldn't expect this kind of performance every first half of the year, should we? Terra Grantham: Yes. I mean there were definitely some specific drivers, Hal, of our strong Q1 performance. And as we've talked about, the inventory optimization was accelerated by our strong growth in our Secure Card Solutions. But some of that is due to timing. However, I just kind of wanted to remind, we did take up our free cash flow guidance, though, for the full year, so to -- $45 million to $50 million. So definitely really strong performance and expect a really great performance for the full year as well. Harold Goetsch: Okay. And last one for me, like after -- in Fort Wayne, new plant kind of running, maybe getting optimized, is it -- any color on the benefits that new plant has done? Any lessons learned or any color of the learning curve of the new plant? Is it producing for you, what's you thought? Above expectations? In line? Any color would be great. John Lowe: Yes. I mean, Hal -- I mean we've talked about the automation we've been investing in, really just kind of a more advanced site, if you will. I'd say the other side of it is, we've been bringing customers through regularly. And we're investing where many in our industry are not putting those dollars to work to really modernize their locations, right? They're trying to squeeze as much out of a site as they can. And that investment is something that really shows to our customers, shows them that we're willing to help them win in what they're doing. And so margin-wise, things will continue to improve and efficiency will continue to improve. But I think people underestimate the value of investing for customers and that's a strategy that we'll continue to employ. But Terra, anything else you would add? Terra Grantham: Yes. I mean I think one of the initiatives, too, that is exciting that we've done as we've built out that facility is something John mentioned earlier, which is being able to really move things across site. So that really helps us as well in terms of getting to a, I'll call it, that optimized production mix and making sure that we're able to put jobs in the most profitable place within that network. Operator: As there are no further questions in the queue, I would now like to turn the call back over to John Lowe for closing remarks. John Lowe: Well, thanks, everyone, for joining us. Before we sign off, I'd like to thank our employees for their continued dedication, our customers for their trust and partnership and our shareholders for their ongoing support. We look forward to delivering a strong second half of 2026. Have a great day. Operator: This concludes today's call. Thank you for attending. You may now disconnect. 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This article first appeared on GuruFocus. Revenue: Increased 15% in Q2 2026 to $149 million, up from $130 million in the prior year period; first half revenue grew 17%, resulting in a record first half. Organic Revenue Growth: Total organic revenue grew 12% in Q2, excluding the Arroweye acquisition. Gross Profit: Increased 21% in Q2, with gross profit margin expanding to 32.5%, up approximately 160 basis points from 30.9% in the prior year period. Adjusted EBITDA: Increased 7% to $24 million in Q2. SG&A Expenses: Totaled $37 million in Q2, compared to $31 million in the prior year period, driven by Arroweye integration expenses and investments in digital and technology. Cash Flow from Operations: Record $42 million in the first half, compared with $10 million in the prior year period. Free Cash Flow: Record $36 million in the first half, compared with $1 million in the prior year period. Capital Expenditures: Totaled $6 million in the first half, down from $9 million in the prior year period. Net Leverage: Ended Q2 at 2.7 times, down from 3.6 times at the same point last year. Secure Card Solutions Revenue: Increased 17% to $111 million in Q2, driven by increased volumes of contactless cards, higher personalization, and $5 million of Arroweye contribution; organic revenue grew 13%. Prepaid Solutions Revenue: Increased 18% to $23 million in Q2, primarily due to a change in accounting implemented in Q2 2025. Integrated Paytech Revenue: Increased 4% in Q2, driven by increased Card@Once revenue and a small contribution from the TRISM acquisition. Tariff Refunds: Received more than $3 million in Q2, benefiting the P&L. Senior Notes Redemption: Redeemed $26.5 million of senior notes shortly after quarter end. Warning! GuruFocus has detected 6 Warning Signs with PMTS. Is PMTS fairly valued? Test your thesis with our free DCF calculator. Release Date: August 06, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. CPI Card Group Inc (NASDAQ:PMTS) delivered strong Q2 2026 results with 15% revenue growth and record first-half free cash flow of $36 million. The company raised its full-year 2026 revenue growth and free cash flow guidance, reflecting confidence in continued momentum. CPI Card Group Inc (NASDAQ:PMTS) completed the strategic acquisition of TRISM, expanding its instant issuance market presence and boosting Integrated Paytech growth to approximately 20%. The company reduced net leverage to 2.7 times and redeemed $26.5 million of senior notes, strengthening its balance sheet. CPI Card Group Inc (NASDAQ:PMTS) achieved strong organic growth of 12% in Q2, driven by Secure Card Solutions, and secured 25 new customer wins for Arroweye since its acquisition. Prepaid Solutions segment experienced market choppiness and slower-than-expected recovery, with softness expected to continue into late 2026. Adjusted EBITDA growth was modest at 7% in Q2, impacted by unfavorable segment mix due to lower-margin Secure Card Solutions growth offsetting higher-margin prepaid softness. SG&A expenses increased to $37 million in Q2, driven by Arroweye integration costs and investments in digital and technology, impacting net income. Integrated Paytech segment revenue growth was only 4% in Q2, with significant acceleration required in the second half to meet the 20% full-year guidance. The company expects continued choppiness in prepaid demand, with high comparables from Q4 2025 and uncertainty in the open-loop market. Q: Can you provide more detail on the TRISM acquisition, including its expected revenue contribution and strategic rationale?A: John Lowe, President and CEO, explained that TRISM expands CPI's leadership in the US instant issuance market by adding an on-premise solution for larger financial institutions, roughly doubling the addressable market. The acquisition adds nearly 20,000 locations across over 3,000 financial institutions. For 2026, TRISM is expected to contribute approximately $3.5 million to $4 million in revenue, with the run rate expected to at least double in 2027. The deal had little impact on leverage and maintains the Integrated Paytech segment's gross margin profile of over 50%. Q: Integrated Paytech grew only low single digits in the first half, but full-year guidance is 20%. What drives the significant acceleration in the second half?A: John Lowe attributed the expected acceleration to three factors: strong line of sight to greater growth in the Card@Once business, contributions from the TRISM acquisition, and favorable year-over-year comparisons, particularly in Q4. He expressed confidence in the business's ability to hit the 20% growth guidance for the full year. Q: How much of the strong Secure Card Solutions growth was organic versus from Arroweye, and can this momentum continue?A: Terra Grantham, CFO, confirmed that organic growth was very strong, with total company organic revenue up 12% in Q2 and 14% in the first half, driven primarily by strong organic growth in Secure Card Solutions. This was on top of the Arroweye contribution, indicating robust underlying demand for contactless cards and personalization services. Q: What drove the record free cash flow of $36 million in the first half, and what should we expect in the second half?A: Terra Grantham noted that the exceptional cash flow was driven by accelerated inventory optimization, aided by strong volume growth, along with some favorable timing in accounts receivable and payable. While inventory improvements are expected to continue, the second half will see higher CapEx and less favorable timing. The company raised full-year free cash flow guidance to $45 million to $50 million, reflecting continued strong performance. Q: Can you provide an update on the progress of anti-fraud packaging for closed-loop prepaid cards and the overall opportunity?A: John Lowe stated that the prepaid market remains choppy through late 2026, but CPI is extremely well positioned. The closed-loop market is approximately 5 times the size of open loop, and CPI is the largest prepaid packager in the US. The company is in the second stage of a pilot with a major national retailer for its SafeToBuy chip-embedded technology. While it's difficult to put a specific date on market changes, CPI's unique combination of packaging leadership and chip expertise positions it well for long-term growth. Q: Can you discuss the performance of the metal cards business and how it differentiates from competitors?A: John Lowe noted that metal card sales were strong in both Q1 and Q2, though it remains a small part of the business. CPI competes at a more value-oriented price point while providing a high-quality product. The company is innovating with an on-demand metal product and believes its value proposition is well-suited for the thousands of small to medium banks it serves, positioning it to capitalize on the growing metal card market. Q: What are the specific pockets of strength and weakness in the prepaid segment?A: John Lowe explained that the softness is primarily in the open-loop market, which constitutes the majority of CPI's prepaid business. However, the closed-loop market, which CPI entered in late 2025, is showing decent growth and strong customer interest, though it remains small relative to the overall business. The company expects the prepaid market to remain choppy through late 2026 but is confident in its long-term positioning. Q: How has the new Fort Wayne facility helped absorb additional volumes, and how much capacity remains for future growth?A: John Lowe stated that the Fort Wayne team is performing well, and the company can now move work between Fort Wayne and its Colorado site to optimize margins. The facility was built with a 10-plus year outlook, so there is significant capacity remaining. Terra Grantham added that the investment was critical as the company was running out of capacity, and the ability to shift work across sites helps optimize the production mix. Q: Can you explain the causes of the choppiness in the prepaid business and whether it's due to tough comparisons?A: John Lowe attributed the choppiness to a combination of strong prior-year comparisons, particularly a very strong Q4 2025, and the market's ongoing efforts to address fraud. Despite the near-term softness, CPI remains confident in the long-term growth of the prepaid market, driven by its leadership in packaging and deep chip expertise, a combination no other competitor offers. Q: Should we expect the same level of working capital benefits in future periods, and are there any other comments on the free cash flow situation?A: Terra Grantham acknowledged that some of the strong cash flow was due to timing, but emphasized that the company raised its full-year free cash flow guidance to $45 million to $50 million. The inventory optimization was accelerated by strong Secure Card Solutions growth, and the company expects a very strong full-year performance, though the first half's record results may not be repeated every year. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Interested in CPI Card Group Inc.? Here are five stocks we like better. CPI Card Group raised its 2026 outlook for revenue growth to high single digits to low double digits and free cash flow to $45 million-$50 million, while maintaining low- to mid-single-digit adjusted EBITDA growth guidance. Second-quarter revenue rose 15% to $149 million, driven by a 17% increase in Secure Card Solutions, Arroweye contributions and tariff refunds. First-half free cash flow reached a record $36 million, up from $1 million a year earlier. The TRISM Instant Issuance acquisition approximately doubles CPI’s addressable instant-issuance market and is expected to help drive Integrated Paytech growth to about 20% in 2026, with $3.5 million-$4 million of revenue anticipated in the latter part of the year. CPI Card Group’s Quiet Cash Machine Faces a Digital Reality Check CPI Card Group (NASDAQ:PMTS) reported second-quarter revenue growth of 15% and raised its full-year revenue growth and free-cash-flow outlook, citing continued strength in its Secure Card Solutions business, contributions from acquisitions and tariff refunds. The company said second-quarter revenue rose to $149 million from $130 million a year earlier. Organic revenue, excluding the contribution from Arroweye, increased 12%. For the first half of 2026, revenue increased 17%, producing what management described as record first-half revenue. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Second-quarter adjusted EBITDA increased 7% to $24 million, while first-half free cash flow reached a company record of $36 million, compared with $1 million in the prior-year period. John Lowe said the company’s results reflected strong execution in Secure Card Solutions and continued momentum from Arroweye, which CPI acquired in May 2025. Secure Card Solutions revenue increased 17% to $111 million during the second quarter. The increase was driven by higher volumes of contactless cards, higher personalization revenue and a $5 million contribution from Arroweye. Excluding Arroweye, organic revenue in the segment rose 13%. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Terra Grantham, CPI’s newly appointed CFO, said Secure Card Solutions helped offset a slower-than-expected start to the year in Prepaid Solutions. The company continues to expect choppiness in the prepaid market through late 2026, as customer ordering patterns remain uneven. Prepaid Solutions revenue increased 18% to $23 million, although the comparison was affected by an accounting change implemented in the second quarter of 2025. The segment also faced comparisons with stronger sales of higher-value packaging solutions a year earlier. → Ulta's Growth Is Real, But So Are the Risks Management said it remains focused on longer-term prepaid opportunities, particularly in the closed-loop market, which it estimates is roughly five times the size of the open-loop market. CPI said it is now serving all of the top prepaid program managers in the U.S. and is seeing customer interest in closed-loop packaging designed to address fraud concerns. The company is also continuing a pilot with Karta involving SafeToBuy chip-embedded prepaid packages at one of the largest U.S. national retailers. Lowe said the pilot had moved into its second stage and appeared to be progressing well, though he did not provide a timetable or revenue estimate. During the quarter, CPI acquired TRISM Instant Issuance, a provider of on-premise instant card issuance technology. Management said the acquisition approximately doubles CPI’s instant-issuance addressable market by enabling the company to serve larger financial institutions that prefer to manage issuance technology on site rather than through a cloud-based software-as-a-service offering. CPI said the transaction expands its instant-issuance presence to nearly 20,000 locations across more than 3,000 financial institutions. TRISM also adds recurring revenue, longer-term customer relationships and opportunities to sell other CPI offerings. Management expects TRISM to help lift Integrated Paytech revenue growth to approximately 20% in 2026, up from its prior expectation of 15%. In response to an analyst question, Lowe said TRISM is expected to contribute roughly $3.5 million to $4 million in revenue during the latter portion of 2026. He added that its 2027 run rate should be at least double that amount, though the company did not provide formal 2027 guidance. Integrated Paytech revenue increased 4% in the second quarter, supported by higher Card@Once revenue and a small contribution from TRISM, which closed in late June. Management said it expects stronger growth in the second half from Card@Once and digital solutions, TRISM contributions and more favorable comparisons with the prior year. The company also highlighted agreements to expand the reach of its cloud-based Push Provisioning and Card@Once solutions through Blossom, which serves more than 350 credit unions, and CU*Answers, which serves more than 400 credit unions. Arroweye recorded its 25th new customer win since its acquisition, CPI said. Second-quarter gross profit increased 21%, and gross margin expanded about 160 basis points to 32.5%. Grantham said the result primarily reflected more than $3 million in tariff refunds received during the quarter. The tariff refunds and revenue growth supported adjusted EBITDA, though margins were affected by the sales mix. Higher-margin prepaid revenue was softer, while Secure Card Solutions grew but carries lower margins than the prepaid business. SG&A expenses rose to $37 million from $31 million, reflecting Arroweye integration costs and investments in digital and technology initiatives. Arroweye-related integration and transaction expenses were nearly $3 million in the second quarter. Grantham said those costs should decline significantly in the second half, while TRISM integration expenses are expected to be lower. First-half operating cash flow totaled $42 million, up from $10 million a year earlier. The company attributed free-cash-flow growth to reduced working-capital usage, lower chip inventory, Secure Card Solutions performance and inventory optimization efforts. Management said some first-half cash-flow benefits were timing-related and expects higher capital expenditures in the second half. At quarter-end, CPI had $21 million in cash and $92 million of available borrowing capacity under its asset-based lending revolver. It had $265 million of senior notes outstanding before redeeming $26.5 million of notes in mid-July. Net leverage was 2.7 times at quarter-end, compared with 3.6 times a year earlier. CPI raised its 2026 outlook for revenue growth to high single digits to low double digits and increased its free-cash-flow expectation to $45 million to $50 million. The company previously guided to free-cash-flow conversion in line with 2025, when free cash flow was $41 million. The company maintained its outlook for adjusted EBITDA growth of low to mid-single digits and year-end net leverage of 2.5 times to 3.0 times. Grantham said CPI expects third-quarter revenue and adjusted EBITDA to be slightly above second-quarter levels. Management said the Fort Wayne, Indiana, production facility is supporting capacity expansion and allowing production to be moved more efficiently between Indiana and Colorado. Lowe said the site was built with more than a decade of future growth in mind and still has capacity available as Secure Card Solutions volumes increase. CPI Card Group, Inc (NASDAQ: PMTS) is a leading provider of payment, identification and related credential solutions for financial institutions, governments and private enterprises. The company specializes in the design, manufacturing and personalization of secure plastic and metal cards, including EMV chip, magnetic-stripe and contactless cards. CPI Card Group also offers digital credentialing services and cloud-based card management tools that enable real-time controls, mobile wallet integration, fraud monitoring and analytics. With a focus on security and innovation, CPI Card Group integrates advanced features such as holograms, microprinting, RFID/NFC technology and laser-engraved artwork into its card products. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "CPI Card Group Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved record first half revenue growth of 17%, primarily driven by strong volumes in contactless cards and personalization solutions within the Secure Card Solutions segment. Successfully integrated Arroweye and acquired TRISM, the latter of which doubles the addressable market for instant issuance by adding on-premise solutions for large financial institutions. Performance was bolstered by a $3 million tariff refund benefit, though overall margins faced headwinds from an unfavorable segment mix due to softness in high-margin prepaid revenue. Strategic focus on digital and cloud-based solutions is deepening customer relationships through new recurring revenue streams and expanded go-to-market partnerships with digital banking platforms. Operational efficiency initiatives, including site optimization between Indiana and Colorado facilities and supplier negotiations, are beginning to yield margin benefits. Record free cash flow of $36 million in the first half was driven by accelerated inventory optimization following post-COVID supply chain stabilization. Raised full-year revenue growth guidance to high single digits to low double digits, reflecting confidence in Secure Card momentum and the TRISM acquisition. Integrated Paytech revenue growth expectations increased from 15% to approximately 20% for 2026, assuming a significant ramp in the second half driven by Card@Once adoption and TRISM contributions. Management expects Prepaid Solutions to remain choppy through late 2026 as the market navigates fraud prevention transitions, including shifts toward closed-loop and chip-embedded packaging. Full-year free cash flow guidance raised to $45 million to $50 million, though second-half cash generation is expected to be lower than the first half due to timing of working capital and higher planned CapEx. Adjusted EBITDA guidance remains unchanged as growth in Secure Card and tariff benefits are offset by continued investments in digital technology and prepaid segment softness. Redeemed $26.5 million of senior notes in July 2026, successfully reducing net leverage to 2.7x from 3.6x in the prior year. Integration and transaction costs, primarily related to Arroweye, impacted net income by nearly $3 million in Q2 but are expected to be significantly lower in the second half. The Indiana production facility is currently under-capacity, providing a 10-year growth runway and the ability to optimize production mix across the site network. A change in accounting implementation for Prepaid Solutions in Q2 2025 created a year-over-year revenue growth tailwind that partially masked underlying market softness. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. TRISM expands CPI's reach into large financial institutions that prefer on-premise software management over cloud-based SaaS solutions. The deal is expected to contribute $3.5 million to $4 million in revenue for the remainder of 2026, with a higher run rate expected in 2027. The acquisition maintains the Integrated Paytech segment's gross margin profile of over 50%. Growth is predicated on three factors: strong line-of-sight for Card@Once business, the incremental contribution from TRISM, and favorable year-over-year comparisons against a slow Q4 2025. CPI is currently in the second stage of a pilot with a major U.S. retailer for chip-embedded prepaid packaging. Management views the closed-loop market as approximately 5x the size of the open-loop market and a significant long-term growth opportunity despite current choppiness. While inventory optimization was a major driver, management noted that some first-half benefits were due to the timing of accounts receivable and payable. Second-half cash flow will be impacted by higher capital expenditures focused on digital solutions and automation.

Second Quarter Revenue Increased 15% to $149 Million Net Income Increased 294% to $2 Million; Adjusted EBITDA Increased 7% to $24 Million Record Cash Flow From Operations of $42 Million in the First Half; Net Leverage Ratio Down to 2.7x Raising Revenue Growth and Free Cash Flow Guidance; Increasing IPT Revenue Guidance to 20% DENVER, August 06, 2026--(BUSINESS WIRE)--CPI Card Group Inc. (Nasdaq: PMTS) ("CPI" or the "Company"), a payments technology leader providing a comprehensive range of physical and digital payment solutions for U.S. financial institutions, processors, fintechs, prepaid program managers and more, today reported financial results for the quarter ended June 30, 2026, and increased its 2026 financial guidance targets for revenue growth and Free Cash Flow, while affirming all other guidance targets. CPI’s second quarter exceeded the Company’s expectations, increasing revenue 15% to $149 million, driven by strong performance in its Secure Card Solutions segment. Net income in the quarter increased 294% to more than $2 million and Adjusted EBITDA increased 7% to $24 million, primarily driven by Secure Card Solutions overperformance and the benefit of more than $3 million of tariff refunds, partially offset by uneven demand in our Prepaid Solutions segment. Strong performance in CPI's Secure Card Solutions segment is driving significant operating cash flow growth as higher volumes accelerate inventory optimization initiatives. The Company further advanced its strategy of providing payment technology solutions that help its customers win, driven by three primary growth pillars that underpin CPI’s value proposition: A proprietary technology platform with a vast reach into the U.S. payments eco-system; A marketable base of thousands of deep and broad relationships across the U.S. payments market; and A proven track record of delivering evolving payment solutions that reflect changing market needs. "Through the first six months of the year CPI generated double-digit revenue growth, strong Adjusted EBITDA growth and record Free Cash Flow, while continuing to gain share by investing in our long-term strategy of growth and diversification to help our customers win," said John Lowe, President and Chief Executive Officer. "The acquisition of TRISM is an excellent example of how we continue to execute on our strategy and grow our addressable market and solutions with strong profitability and growth potential. With the TRISM acquisition, we believe we have doubled our addressable market in U.S. instant issuance and are now the clear leader." CPI today also increased its financial guidance for revenue and Free Cash Flow for 2026. The Company now projects high-single-digit to low-double-digit revenue growth, up from previous guidance of high-single-digit growth, and Free Cash Flow ranging from $45 million to $50 million, up from a conversion rate in-line with 2025 results of $41 million. All other financial guidance targets including low-to-mid single-digit Adjusted EBITDA growth and a Net Leverage Ratio between 2.5x to 3.0x were reaffirmed. The Company's Adjusted EBITDA outlook remains unchanged as the benefits from stronger Secure Card Solutions performance and tariff refunds are expected to largely be offset by continued investment in Integrated Paytech ("IPT") and ongoing uneven demand in the higher-margin Prepaid Solutions segment. The Company also raised its 2026 annual revenue growth guidance in the IPT segment from 15% plus to approximately 20% with the acquisition of TRISM. Strategic, Business, and Capital Highlights CPI acquired TRISM to further advance its market leadership position and effectively double CPI's addressable market in U.S. instant issuance solutions by enabling the Company to serve mid-to-large financial institutions that prefer on-premise solutions, complementing Card@Once cloud-based offerings focused on Small and Medium-sized Enterprises ("SME") financial institutions. With the addition of TRISM, CPI now serves more than 3,000 U.S. financial institutions with instant issuance, compared to approximately 2,500 prior to the acquisition. The Company continued to successfully integrate Arroweye, a leading provider of digitally-driven on-demand payment card solutions for the U.S. market, which is performing ahead of CPI's original investment case and delivering meaningful revenue and cost synergies. CPI is progressing well with Karta, an Australia-based payments technology firm in which CPI purchased a minority investment during 2025, to integrate their SafeToBuy chip-based technology solution with CPI's prepaid solutions in the U.S. market, including the expansion of a pilot with one of the U.S. national retailers. The Company continues to advance its market and product expansion strategies, including closed loop prepaid payment solutions and digital offerings such as push provisioning leveraging tokenization capabilities for mobile wallets. The Company generated strong Free Cash Flow in the second quarter, ended the quarter with a Net Leverage Ratio of 2.7x, and on July 15 redeemed $26.5 million, or 10%, of its Senior Notes, reflecting a continued focus on reducing leverage and lowering future interest expense. Second Quarter 2026 Financial Highlights Revenue increased 15% to $149.2 million in the second quarter of 2026, compared to the prior year period. Secure Card Solutions segment revenue increased 17% to $110.9 million, driven by increased sales of contactless cards and personalization services, as well as the addition of Arroweye. Segment gross profit increased 29% and gross margin increased 250 basis points, primarily due to increased revenue and tariff refunds. Prepaid Solutions segment revenue increased 18% to $22.6 million, primarily due to the change in accounting that was implemented in the second quarter of 2025, partially offset by comparisons with strong sales of higher-value packaging solutions in the prior year period. Segment gross profit increased 17% and gross margin remained consistent at over 28%. Integrated Paytech segment revenue increased 4% to $20.1 million, while gross profit margin remained consistent at over 55%. Gross profit increased 21% to $48.5 million, driven primarily by sales growth and tariff refunds. Net income increased 294% to $2.0 million, or $0.17 diluted earnings per share, impacted by $2.8 million of integration costs primarily related to Arroweye, and Adjusted EBITDA increased 7% to $24.1 million. First Half 2026 Financial Highlights Revenue increased 17% to a company record of $296.3 million in the first half of 2026, compared to the prior year period. Secure Card Solutions segment revenue increased 25% to $220.7 million, driven by increased sales of contactless cards and personalization services, as well as the addition of Arroweye. Segment gross profit increased 31% and gross margin increased 110 basis points, primarily due to increased revenue and tariff refunds. Prepaid Solutions segment revenue decreased 3% to $44.7 million, primarily due to comparisons with strong sales of higher-value packaging solutions in the prior year period, partially offset by the change in accounting that was implemented in the second quarter of 2025. Gross profit and gross margin decreased primarily due to lower operating leverage, partially offset by the change in accounting that was implemented in the second quarter of 2025. Integrated Paytech segment revenue increased 2% to $39.5 million compared to strong revenue levels in 2025, while gross profit margins remained consistent at over 55%. Segment revenue growth in the second half of the year is expected to increase driven by momentum in Card@Once and Digital solutions and the addition of TRISM instant issuance. Gross profit increased 15% to $92.6 million, driven by sales growth. Gross profit margin of 31.3% decreased from 32.0% prior year, primarily due to negative segment sales mix and increased depreciation expenses, partially offset by increased revenue and tariff refunds. Net income decreased 23% to $4.1 million, or $0.34 diluted earnings per share, impacted by $5.9 million of integration costs primarily related to Arroweye, and Adjusted EBITDA increased 8% to $47.2 million. Balance Sheet, Liquidity and Cash Flow The Company generated cash from operating activities of $42.1 million in the first half, which compared to $9.9 million in the prior year period; and set a company record for Free Cash Flow of $36.1 million in the first half, which compared to $0.8 million in the prior year. The increase in Free Cash Flow was primarily driven by company performance, strong working capital management and lower capital spending compared to the prior year period. As of June 30, 2026, the Company had $21.4 million of cash and cash equivalents and $265.0 million of 10% Senior Secured Notes due 2029. The Net Leverage Ratio decreased to 2.7x, down from 3.6x in the second quarter last year and 3.1x at year-end. "We are pleased with our execution in the second quarter as we continued to balance disciplined expense management with targeted investments in growth and margin initiatives, technology and the integration of recent acquisitions," said Terra Grantham, Chief Financial Officer. "We also generated a record $36 million of Free Cash Flow in the first half of 2026, reduced our Net Leverage Ratio to 2.7x, and redeemed $26.5 million of Senior Notes in July, further strengthening our balance sheet while maintaining the flexibility to invest in long-term growth opportunities." The Company’s capital structure and allocation priorities are focused on investing in the business, including strategic acquisitions; deleveraging the balance sheet; and returning funds to stockholders. Outlook for 2026 The Company raised its financial outlook for 2026 revenue growth and Free Cash Flow and reiterated all other guidance targets: Revenue: high-single to low-double-digit growth Adjusted EBITDA: low-to-mid single-digit growth Free Cash Flow in the $45 million to $50 million range Year-end Net Leverage Ratio between 2.5x and 3.0x Conference Call and Webcast CPI will hold a conference call on August 6, 2026, at 9:00 a.m. Eastern Time to review its second quarter results. To participate in the Company's conference call via telephone or online: To participate by phone, dial 1-833-461-5787 (U.S. and Canada) or 1-585-542-9983 (international) and enter conference ID 620163779. Click here to join the webcast in a live or archived format. Non-GAAP Financial Measures In addition to financial results reported in accordance with U.S. generally accepted accounting principles ("GAAP"), we have provided the following non-GAAP financial measures in this release: Revenue excluding the Impact of an Accounting Change, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow, Free Cash Flow conversion, LTM Adjusted EBITDA and Net Leverage Ratio. These non-GAAP financial measures are utilized by management in comparing our operating performance on a consistent basis between fiscal periods and serve as a basis for certain Company compensation programs. We believe that these financial measures are appropriate to enhance an overall understanding of our underlying operating performance trends compared to historical and prospective periods and our peers. Management also believes that these measures are useful to investors in their analysis of our results of operations and provide improved comparability between fiscal periods. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Our non-GAAP measures may be different from similarly titled measures of other companies. Investors are encouraged to review the reconciliation of these historical non-GAAP measures to their most directly comparable GAAP financial measures included in Exhibit E and Exhibit F to this press release. Revenue excluding the Impact of an Accounting Change Revenue excluding the Impact of an Accounting Change has been presented in Exhibit F and defined as revenue excluding the impact from an accounting change implemented in the second quarter of 2025 resulting from the Company moving from over-time revenue recognition for certain WIP orders to point-in-time recognition (revenue booked when shipped). This adjustment reflects WIP orders that were recognized at the end of the first quarter of 2025 as if such orders were consistently recognized using point-in-time recognition during the second quarter of 2025 for the results for the second quarter of 2025 and reflects WIP orders that were recognized at December 31, 2024 as if such orders were consistently recognized using point-in-time recognition during the year to date period presented for 2025. EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, and LTM Adjusted EBITDA Adjusted EBITDA is defined as EBITDA (which represents earnings before interest, taxes, depreciation and amortization) adjusted for litigation; stock-based compensation expense; restructuring and other charges, including executive retention and severance and acquisition-related costs; costs related to production facility modernization efforts; loss on debt extinguishment; gross profit related to the impact from the accounting change related to revenue described above; and other items that are unusual in nature, infrequently occurring or not considered part of our core operations, as set forth in the reconciliation in Exhibit E. Adjusted EBITDA is intended to show our unleveraged, pre-tax operating results and therefore reflects our financial performance based on operational factors, excluding non-operational, unusual or non-recurring losses or gains. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for, analysis of our results as reported under GAAP. For example, Adjusted EBITDA does not reflect: (a) our capital expenditures, future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements for, our working capital needs; (c) the significant interest expenses or the cash requirements necessary to service interest or principal payments on our debt; (d) tax payments that represent a reduction in cash available to us; (e) any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; (f) the impact of earnings or charges resulting from matters that we and the lender under our credit agreement may not consider indicative of our ongoing operations; or (g) the impact of any discontinued operations. In particular, our definition of Adjusted EBITDA allows us to add back certain non-operating, unusual or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur, vary greatly and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results. In addition, certain of these expenses represent the reduction of cash that could be used for other purposes. Adjusted EBITDA margin as shown in Exhibit E is computed as Adjusted EBITDA divided by total revenue. We define LTM Adjusted EBITDA as Adjusted EBITDA (defined previously) for the last twelve months. LTM Adjusted EBITDA is used in the computation of Net Leverage Ratio, and is reconciled in Exhibit E. Free Cash Flow We define Free Cash Flow as cash flow provided by (used in) operating activities less capital expenditures. We use this metric in analyzing our ability to service and repay our debt. However, this measure does not represent funds available for investment or other discretionary uses since it does not deduct cash used to make principal payments on outstanding debt and financing lease liabilities. Free Cash Flow should not be considered in isolation, or as a substitute for, cash (used in) provided by operating activities or any other measures of liquidity derived in accordance with GAAP. Net Leverage Ratio Management and various investors use the ratio of debt principal outstanding, plus finance lease obligations, less cash, divided by LTM Adjusted EBITDA, or "Net Leverage Ratio", as a measure of our financial strength when making key investment decisions and evaluating us against peers. Financial Expectations for 2026 We have provided Adjusted EBITDA expectations for 2026 on a non-GAAP basis because certain reconciling items are dependent on future events that either cannot be controlled or cannot be reliably predicted because they are not part of the Company’s routine activities, any of which could be significant. About CPI CPI is a payments technology company that is integral to the payments ecosystem. CPI’s connections, people, and solutions enable payments for a broad and expanding customer base including thousands of U.S. financial institutions, processors, fintechs, prepaid program managers and more, and these customers count on us to deliver what's next. We continue to transform alongside the market, and for decades have invested in building deep connections and flexible solutions for our customers. Our proprietary platform and expertise uniquely position CPI to deliver today, tomorrow, and into the future as the market expands and payment methods evolve. Learn more at www.cpicardgroup.com. Forward-Looking Statements Certain statements and information in this release (as well as information included in other written or oral statements we make from time to time) may contain or constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The words "believe," "estimate," "project," "expect," "anticipate," "affirm," "plan," "intend," "foresee," "should," "would," "could," "continue," "committed," "attempt," "aim," "target," "objective," "guides," "seek," "focus," "provides guidance," "provides outlook" or other similar expressions are intended to identify forward-looking statements, which are not historical in nature. These forward-looking statements, including statements about our strategic initiatives and market opportunities, including our financial outlook for 2026, the impact of our investments in Arroweye and other solutions, and our qualitative color on our business in 2026 and beyond; are based on our current expectations and beliefs concerning future developments and their potential effect on us and other information currently available. Such forward-looking statements, because they relate to future events, are by their very nature subject to many important risks and uncertainties that could cause actual results or other events to differ materially from those contemplated. These risks and uncertainties include, but are not limited to: (i) risks relating to our business and industry, such as a deterioration in general economic conditions, including due to inflationary conditions, resulting in reduced consumer confidence and business spending, and a decline in consumer credit worthiness impacting demand for our products; the unpredictability of our operating results, including an inability to anticipate changes in customer inventory management practices and its impact on our business; our failure to retain our existing key customers or identify and attract new customers; the highly competitive, saturated and consolidated nature of our marketplace; our inability to develop, introduce and commercialize new products and related services, including due to our inability to undertake research and development activities; new and developing technologies that make our existing technology solutions and products obsolete or less relevant or our failure to introduce new products and related services in a timely manner or at all; system security risks, data protection breaches and cyber-attacks; the usage, or lack thereof, of artificial intelligence technologies; disruptions, delays or other failures in our supply chain, including as a result of inflationary pressures, single-source suppliers, failure or inability of suppliers to comply with our code of conduct or contractual requirements, trade restrictions, tariffs, foreign conflicts or political unrest in countries in which our suppliers operate, and our inability to pass related costs on to our customers or difficulty meeting customers’ delivery expectations due to extended lead times; changes in U.S. and global trade policy and the impact of tariffs on our business and results of operations; interruptions in our operations, including our information technology systems, or in the operations of the third parties that operate computing infrastructure on which we rely; defects in our software and computing systems; disruptions in production at one or more of our facilities due to weather conditions, climate change, political instability, or social unrest; problems in production quality, materials and process and costs relating to product defects and any related product liability and/or warranty claims and damage to our reputation; our inability to recruit, retain and develop qualified personnel, including key personnel, and implement effective succession processes; our substantial indebtedness, including the restrictive terms of our indebtedness and covenants of future agreements governing indebtedness and the resulting restraints on our ability to pursue our business strategies; our inability to make debt service payments or refinance such indebtedness; our inability to successfully execute on, integrate, or achieve the anticipated benefits of acquisitions, including the acquisition of Arroweye Solutions, Inc. ("Arroweye"), or execute on divestitures, strategic relationships, or investments; our status as an accelerated filer and complying with the Sarbanes-Oxley Act of 2002 and the costs associated with such compliance and implementation of procedures thereunder; our failure to maintain effective internal control over financial reporting and risks relating to investor confidence in our financial reporting; environmental, social and governance ("ESG") preferences and demands of various stakeholders and the related impact on our ability to access capital, produce our products in conformity with stakeholder preferences, comply with stakeholder demands and comply with any related legal or regulatory requirements or restrictions; negative perceptions of our products due to the impact of our products and production processes on the environment and other ESG-related risks; damage to our reputation or brand image; our inability to adequately protect our trade secrets and intellectual property rights from misappropriation, infringement claims brought against us and risks related to open source software; our inability to renew licenses with key technology licensors; our limited ability to raise capital, which may lead to delays in innovation or the abandonment of our strategic initiatives; costs and impacts related to additional tax collection efforts by states, unclaimed property laws, or future increases in U.S. federal or state income taxes, resulting in additional expenses which we may be unable to pass along to our customers; our inability to realize the full value of our long-lived assets; costs and potential liabilities associated with compliance or failure to comply with laws and regulations, customer contractual requirements and evolving industry standards regarding consumer privacy and data use and security; our failure to operate our business in accordance with the Payment Card Industry Security Standards Council security standards or other industry standards; the effects of ongoing foreign conflicts on the global economy; adverse conditions in the banking system and financial markets, including the failure of banks and financial institutions; our failure to comply with environmental, health and safety laws and regulations that apply to our products and the raw materials we use in our production processes; (ii) risks relating to ownership of our common stock, such as those associated with concentrated ownership of our stock by our significant stockholders and potential conflicts of interests with other stockholders; the impact of concentrated ownership of our common stock and the sale or perceived sale of a substantial amount of common stock on the trading volume and market price of our common stock; potential conflicts of interest that may arise due to our Board of Directors being comprised in part of directors who are principals of or were nominated by our significant stockholders; the influence of securities analysts over the trading market for and price of our common stock, particularly due to the lack of substantial research coverage of our common stock; the impact of stockholder activism or actual or threatened securities litigation on the trading price and volatility of our common stock; certain provisions of our organizational documents and other contractual provisions that may delay or prevent a change in control and make it difficult for stockholders other than our significant stockholders to change the composition of our Board of Directors; and (iii) general risks, such as relating to our ability to comply with a wide variety of complex evolving laws and regulations and the exposure to liability for any failure to comply; the effect of legal and regulatory proceedings and the adequacy of our insurance policies; and other risks that are described in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 5, 2026, and our other reports filed from time to time with the Securities and Exchange Commission (the "SEC"). We caution and advise readers not to place undue reliance on forward-looking statements, which speak only as of the date hereof. These statements are based on assumptions that may not be realized and involve risks and uncertainties that could cause actual results or other events to differ materially from the expectations and beliefs contained herein. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. For more information: CPI encourages investors to use its investor relations website as a way of easily finding information about the Company. CPI promptly makes available on this website the reports that the Company files or furnishes with the SEC, corporate governance information and press releases. View source version on businesswire.com: https://www.businesswire.com/news/home/20260806374565/en/ Contacts CPI Investor Relations: Davis Barker, Head of Investor Relations & Corporate Development (877) [email protected] CPI Media Relations: [email protected]

CPI Card Group Inc. (PMTS) came out with quarterly earnings of $0.56 per share, beating the Zacks Consensus Estimate of $0.45 per share. This compares to earnings of $0.04 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +24.44%. A quarter ago, it was expected that this company would post earnings of $0.24 per share when it actually produced earnings of $0.38, delivering a surprise of +58.33%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. CPI Card Group, which belongs to the Zacks Financial - Miscellaneous Services industry, posted revenues of $149.18 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 5.13%. This compares to year-ago revenues of $129.75 million. The company has topped consensus revenue estimates three times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. CPI Card Group shares have added about 54.8% since the beginning of the year versus the S&P 500's gain of 12.8%. While CPI Card Group has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for CPI Card Group was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.84 on $147.4 million in revenues for the coming quarter and $2.85 on $598.5 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Financial - Miscellaneous Services is currently in the bottom 37% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Chicago Atlantic Real Estate Finance, Inc. (REFI), another stock in the same industry, has yet to report results for the quarter ended June 2026. The results are expected to be released on August 11. This company is expected to post quarterly earnings of $0.48 per share in its upcoming report, which represents a year-over-year change of -5.9%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Chicago Atlantic Real Estate Finance, Inc.'s revenues are expected to be $13.84 million, down 4.1% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CPI Card Group Inc. (PMTS) : Free Stock Analysis Report Chicago Atlantic Real Estate Finance, Inc. (REFI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

The most recent earnings report from CPI Card Group Inc. (NASDAQ:PMTS) was disappointing for shareholders. While the headline numbers were soft, we believe that investors might be missing some encouraging factors. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. Many investors haven't heard of the accrual ratio from cashflow, but it is actually a useful measure of how well a company's profit is backed up by free cash flow (FCF) during a given period. To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'. That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking. Over the twelve months to March 2026, CPI Card Group recorded an accrual ratio of -0.17. Therefore, its statutory earnings were very significantly less than its free cashflow. Indeed, in the last twelve months it reported free cash flow of US$51m, well over the US$12.2m it reported in profit. CPI Card Group's free cash flow improved over the last year, which is generally good to see. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates. Happily for shareholders, CPI Card Group produced plenty of free cash flow to back up its statutory profit numbers. Because of this, we think CPI Card Group's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! On the other hand, its EPS actually shrunk in the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing CPI Card Group at this point in time. For example, we've found that CPI Card Group has 4 warning signs (1 is a bit unpleasant!) that deserve your attention before going any further with your analysis. Today we've zoomed in on a single data point to better understand the nature of CPI Card Group's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Q1 results: Revenue rose 20% to $147 million and Adjusted EBITDA increased 9%, while net income fell 57% to $2.1 million mainly due to $3 million of pre-tax integration costs; operating cash flow and free cash flow improved to $13.6 million and $10.1 million, respectively. Segment trends: Secure Card Solutions led growth with revenue up 35% (including a $16 million contribution from Arroweye) driven by contactless metal and personalization, while Prepaid fell 17% on order timing but is expected to recover for the year, and Integrated PayTech remains profitable with >55% margins and management projecting >15% full-year growth. Strategy and outlook: Management reaffirmed the full-year guidance (high single‑digit revenue growth; low‑ to mid‑single‑digit Adjusted EBITDA growth; year‑end net leverage 2.5x–3x), expects Q2 revenue similar to Q1, and is pushing digital initiatives including a Fiserv marketing relationship and a chip‑embedded prepaid card pilot. Interested in CPI Card Group Inc.? Here are five stocks we like better. CPI Card Group’s Quiet Cash Machine Faces a Digital Reality Check CPI Card Group (NASDAQ:PMTS) executives said the company got off to a “solid start” in 2026, reporting first-quarter revenue growth of 20% and reaffirming its full-year outlook as it continues integrating its Arroweye acquisition and investing in its technology and go-to-market initiatives. President and CEO John Lowe said CPI exceeded internal expectations in the quarter, with results supported by “another strong contribution from Arroweye” and growth across the company’s secure card solutions businesses. Interim CFO Terra Grantham reported first-quarter revenue rose 20% to $147 million. → Roblox Stock Slides to New Low as Safety Changes Weigh on Outlook Grantham said first-quarter net income declined 57% to $2.1 million, “primarily affected by $3 million of pre-tax integration costs,” while Adjusted EBITDA increased 9% on sales growth, including Arroweye. Cash generation improved in the period. Grantham said cash flow from operating activities increased to $13.6 million from $5.6 million a year earlier, driven by working capital, and free cash flow rose to $10.1 million from $0.3 million. → The Real SpaceX Play: 5 Chip Stocks Powering the IPO Before It Launches Secure Card Solutions was the key driver in the quarter. Grantham said segment revenue increased 35%, including a $16 million contribution from Arroweye. Lowe attributed the performance to strength in contactless solutions—“led by continued strength of contactless metal”—and “increased sales of personalization services.” Prepaid Solutions revenue declined 17% in the first quarter. Grantham said the decrease reflected “timing of orders from key customers,” partly offset by better-than-expected closed-loop card sales. Lowe said the company anticipated a slow start for prepaid in 2026 but continues to expect growth for the full year, adding that closed-loop prepaid performed “very well” off fourth-quarter 2025 levels. → 3 Emerging Markets ETFs to Maximize Exposure to High-Potential Countries Integrated PayTech revenue increased 1% due to a strong prior-year comparison, according to Grantham, while the segment maintained “strong growth margins at over 55%.” Management reiterated its expectation that Integrated PayTech will grow more than 15% for the full year. Grantham said gross profit margin fell to 30.0% from 33.2%, reflecting lower sales and margins in prepaid and higher production costs, partially offset by increased Secure Card Solutions volume. She cited $2 million of higher depreciation—primarily tied to Arroweye and the company’s new secure card production facility—and $1.2 million of tariff expenses in the quarter. Grantham said CPI expects prepaid margins to improve in the second quarter on higher revenue levels, and expects overall company margins to be “much stronger in the second half of the year.” She added that margin comparisons should improve going forward as Arroweye depreciation and tariffs “primarily began impacting results in the second quarter of 2025.” SG&A expenses increased $6.5 million year over year, which Grantham attributed mainly to Arroweye integration costs, inclusion of Arroweye operating expenses, higher incentive compensation, increased severance, and higher technology spending. Lowe said CPI is executing its strategy to “grow and diversify the business” by expanding its proprietary technology platform, broadening its “marketable base” of relationships, and evolving payment solutions. He pointed to growing demand for digital solutions among financial institutions and increased focus on prepaid security. On Integrated PayTech, Lowe described CPI’s instant issuance Card@Once platform as a SaaS offering built “from the ground up” over “10+ years,” with “thousands of customers across the U.S.” He said CPI expects instant issuance to be “a large chunk of the growth” in Integrated PayTech in 2026, and highlighted a referral/marketing relationship with Fiserv that management discussed at year-end and named publicly in the quarter. Asked what changed with Fiserv, Lowe said “the main difference is we called out their name,” adding that CPI is “actively marketing our solutions with the help of Fiserv” and is seeing “positive customer interest.” In prepaid, Lowe said CPI continues to test chip-embedded cards, referencing a pilot with a “large national retailer” around “card-to-safe-to-buy technology,” along with work involving Karta. He said CPI believes it is well positioned if the U.S. prepaid market transitions toward chip and contactless over time. Management reaffirmed the full-year outlook issued in March. Grantham said that outlook includes: High single-digit revenue growth Low to mid-single digit Adjusted EBITDA growth Free cash flow conversion at similar levels to 2025 Year-end net leverage ratio between 2.5x and 3x For the second quarter, Grantham said CPI expects revenue to be similar to first-quarter levels, while Adjusted EBITDA is expected to be “slightly lower than prior year” due to the timing of investment spending, including spending delayed from the first quarter. On leverage and liquidity, Grantham said CPI ended the quarter with $19 million in cash, $15 million of borrowings on its ABL revolver, and $265 million of senior notes outstanding. Lowe said net leverage ended the quarter “just below 3x,” down from levels seen after the Arroweye acquisition. CPI Card Group, Inc (NASDAQ: PMTS) is a leading provider of payment, identification and related credential solutions for financial institutions, governments and private enterprises. The company specializes in the design, manufacturing and personalization of secure plastic and metal cards, including EMV chip, magnetic-stripe and contactless cards. CPI Card Group also offers digital credentialing services and cloud-based card management tools that enable real-time controls, mobile wallet integration, fraud monitoring and analytics. With a focus on security and innovation, CPI Card Group integrates advanced features such as holograms, microprinting, RFID/NFC technology and laser-engraved artwork into its card products. The article "CPI Card Group Q1 Earnings Call Highlights" was originally published by MarketBeat.

Delivered 20% revenue growth in Q1, primarily driven by a 35% increase in Secure Card Solutions, which benefited from the ArrowEye acquisition and strong demand for contactless metal cards. Performance in Secure Card Solutions was bolstered by increased sales of personalization services and value-driven metal solutions as financial institutions seek premium offerings. Prepaid Solutions experienced a 17% decline due to the timing of customer orders and a broader market transition toward enhanced security features, though closed-loop revenue showed sequential growth. Integrated Paytech growth was muted at 1% due to a difficult comparison with a strong prior-year quarter, but management maintains confidence in a full-year growth target exceeding 15%. Operational efficiency is being driven by the new Indiana production facility, which is expected to handle 30% more volume this year than the previous facility could accommodate at capacity. The company is leveraging a new referral agreement with Fiserv to expand its marketable base and drive adoption of its proprietary technology platform across the U.S. payments ecosystem. Affirmed full-year 2026 guidance for high single-digit revenue growth and low- to mid-single-digit adjusted EBITDA growth, with Q4 expected to be the strongest period. Anticipates a significant ramp in Integrated Paytech during the second half of the year, supported by the Fiserv partnership and increasing demand for digital and Instant Issuance solutions. Expects gross margins to improve in the second half of 2026 as Prepaid segment revenue levels and margins improve, and as overall company gross margins benefit from higher volumes and operational efficiencies. Integration costs are projected to remain elevated in Q2 before dropping significantly in the second half of the year as technology and go-to-market investments conclude. Management is exploring the long-term transition of the U.S. prepaid market toward chip-embedded cards, currently advancing a pilot with a large national retailer. Net income was impacted by $3 million in pretax integration costs related to the ArrowEye acquisition, including technology investments and vendor termination fees. Gross profit margin declined to 30% from 33.2%, pressured by $2 million in increased depreciation and $1.2 million in tariff expenses. Net leverage ratio improved to just below 3.0x, returning toward the company's target range following the temporary spike caused by the ArrowEye acquisition. Supply chain conditions have largely normalized, though the company continues to monitor potential cost impacts from geopolitical tensions in the Middle East. Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management expects the segment to grow over 15% in 2026, fueled by the Fiserv referral agreement and strong demand for the Card@Once SaaS platform. The Fiserv deal allows CPI to market solutions directly to thousands of Fiserv's existing financial institution customers. Debit and credit markets are nearly fully penetrated with contactless technology, which management describes as being in the 'late innings' of transition. The prepaid market represents a significant future growth opportunity as it lags behind in chip and contactless adoption compared to standard banking cards. Current spending is focused on technology alignment and go-to-market strategies to capture revenue synergies, which have already resulted in over 10 new deals. One-time vendor termination fees contributed to the Q1 expense spike, but these costs are expected to diminish rapidly after Q2. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.

Image source: The Motley Fool. Tuesday, May 5, 2026 at 9 a.m. ET President and Chief Executive Officer — John D. Lowe Interim Chief Financial Officer — Tara Grantham Senior Vice President, Investor Relations and Corporate Development — Michael A. Salop Michael A. Salop: Thanks, operator. Welcome to CPI Card Group Inc.'s first quarter 2026 earnings webcast and conference call. Today's date is 05/05/2026, and on the call today from CPI Card Group Inc. are John D. Lowe, president and chief executive officer, and Tara Grantham, interim chief financial officer. Before we begin, I would like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause results to differ materially from those expressed in the forward-looking statements. For a discussion of such risks and uncertainties, please see CPI Card Group Inc.'s most recent filings with the SEC. All forward-looking statements made today reflect our current expectations only. We undertake no obligation to update any statements to reflect events that occur after this call. Also, during the course of today's call, the company will be discussing one or more non-GAAP financial measures, including, but not limited to, EBITDA, adjusted EBITDA, adjusted EBITDA margin, net leverage ratio, and free cash flow. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the press release and slide presentation we issued this morning. Copies of today's press release as well as the presentation that accompanies this conference call and the Form 10-Q are accessible on CPI Card Group Inc.'s Investor Relations website, investor.cpicardgroup.com. On today's call, all growth rates refer to comparisons with the prior-year period unless otherwise noted. The agenda for today's call can be found on slide three. We will open the call for questions after our remarks. I will now turn the call over to John. John D. Lowe: Good morning, everyone. Overall, we are off to a solid start in 2026 and are on track to achieve our full-year outlook. We are executing on our initiatives to deliver on our strategy of growing and diversifying the business by helping our customers win as we expand our proprietary technology platform, grow our marketable base of relationships, and evolve our payment solutions to meet market needs. We exceeded our expectations in the first quarter, delivering 20% revenue growth, which reflected another strong contribution from AOI, as well as good growth across our other Secure Card Solutions businesses. This included strong performance from our contactless solutions, led by continued strength of contactless metal as we emphasize our offerings of value-driven metal solutions, and increased sales of personalization services. As expected, our Prepaid Solutions segment had a slow start to the year, but we continue to anticipate growth for the full year. Integrated Paytech grew only slightly due to comparisons with a strong prior-year quarter, and we continue to expect the segment to grow more than 15% for the full year. Adjusted EBITDA increased 9% in the quarter, and we generated strong cash flow with more than $10 million of free cash flow in the quarter. We also improved our financial position, ending the quarter with a net leverage ratio just below three times. Based on first quarter results and our current forecast, we are affirming the full-year financial outlook we provided in March. Tara will give you more details on first quarter results in a few minutes, but first, I would like to provide a brief strategic update on slide five. As I said before, we are executing on our strategy as we start 2026 and are fortunate to operate in multiple growing markets. In addition to ongoing increases in cards in circulation in the U.S. payments market, our business is supported by increased demand for digital solutions by financial institutions and an increased focus on security for prepaid cards and packages. As we discussed last quarter, our strategy is to continue providing payment technology solutions that help our customers win, driven by three primary growth pillars that underpin our value proposition. First, our proprietary technology platform with a vast reach into the U.S. payments ecosystem. Second, our marketable base of thousands of deep and broad relationships across the U.S. payments market. And third, our proven track record of delivering evolving payment solutions that reflect changing market needs. We continue to make progress on driving our strategy forward, laying more pipes to further expand our platform, expanding our marketable base of relationships, and introducing new solutions for the market. We mentioned at year-end that we had locked in a new referral agreement giving us the opportunity to significantly advance our marketable base for our Integrated Paytech segment. We are excited to share that we are actively marketing our solutions with the help of Fiserv and are seeing positive customer interest. And we continue to expand our pipes on our technology platform, creating further integrations and customer connections for our digital solutions. We have also expanded our solution set by delivering for the closed loop prepaid market, seeing strong closed loop revenue growth from Q4 2025 in the first quarter. And we continue to explore the viability of chip-embedded cards in the U.S. prepaid market, advancing our extensive pilot with a large national retailer testing Card Safe-to-Buy technology. We believe our strategic efforts and investments will continue to drive long-term growth, expanding our addressable markets and providing the solutions needed by the market as it continues to evolve, creating value for our company and our shareholders. We will continue to update you on progress throughout the year, but now I would like to turn the call over to Tara to take you through the first quarter results in more detail. Tara? Tara Grantham: Thanks, John. I will begin with the segment results on slide seven. Overall, as John said, we are pleased with our first quarter performance. First quarter revenue increased 20% to $147 million, led by our Secure Card Solutions segment. Secure Card Solutions revenue increased 35%, which included a $16 million contribution from ArrowEye. As John mentioned, we experienced strength across this segment in the first quarter with good growth from our contactless solutions and personalization services. Our Prepaid Solutions segment declined 17% in the first quarter, reflecting timing of orders from key customers, with the first quarter decline partially offset by better-than-expected incremental sales of closed loop cards. Integrated Paytech increased 1% in the quarter due to comparisons with a strong prior year while we maintained strong gross margins at over 55%. As John said, we still expect to grow revenue in this segment by more than 15% in 2026. Turning to profitability on slide eight, first quarter net income declined by 57% to $2.1 million, primarily affected by $3 million of pretax integration costs, while adjusted EBITDA increased 9%, driven by sales growth including the addition of AOI. Integration costs were high in Q1, and we expect them to remain at similar levels in Q2 but drop significantly in the second half of the year. Our 2026 integration costs are meant to drive revenue synergies and lower operating costs and primarily result from go-to-market spending, technology investments, and certain vendor termination fees as we drive operating synergies. As a reminder, integration costs are not included in adjusted EBITDA but do impact net income. Gross profit margin declined from 33.2% to 30%, affected by lower sales and margins in our Prepaid segment and increased production costs including tariffs and depreciation, partially offset by benefits from increased sales from Secure Card Solutions. Production costs in the quarter compared to prior year included $2 million of increased depreciation primarily related to ArrowEye and the new Secure Card production facility and $1.2 million of tariff expenses. We expect Prepaid margins to improve in the second quarter with higher revenue levels, and we also expect overall company gross margins to be much stronger in the second half of the year. Margin comparisons with prior year should also improve going forward as ArrowEye depreciation and tariff primarily began impacting results in 2025. Overall, we anticipate full-year gross margins to be relatively consistent with prior-year levels. We have multiple initiatives in place to drive margin improvement over time, including targeted supplier negotiations, automation investments, production optimization across our sites, driving more favorable product mix, and achievement of ArrowEye synergies. We are also managing discretionary spending and driving operational efficiencies as volume increases, including in our new Indiana production facility, where we expect volumes this year to be 30% higher than 2024 levels in our old production facility. First quarter SG&A expenses increased $6.5 million from the prior year, primarily due to ArrowEye integration costs, the inclusion of ArrowEye operating expenses, increased employee performance-based incentive compensation, increased severance, and higher technology spending. Investment spending was less than anticipated in the first quarter, and we expect that to ramp over the remainder of the year beginning in the second quarter. Turning to slide nine, we had strong cash flow generation in the first quarter. Our cash flow generated from operating activities for the quarter increased from $5.6 million last year to $13.6 million, driven by strong working capital management. Free cash flow increased from $300,000 in the prior year to $10.1 million in 2026. We spent $3.5 million on CapEx in the quarter compared to $5.3 million in the prior year, although we still anticipate full-year capital spending to be similar to 2025 levels, with increased focus on technology spending. On the balance sheet, at quarter-end, we had $19 million of cash, $15 million of borrowings on our ABL revolver, and $265 million of senior notes outstanding. Turning to our 2026 financial outlook on slide 10, we are affirming the full-year outlook provided in March. This includes high single-digit revenue growth, low- to mid-single-digit adjusted EBITDA growth, free cash flow conversion at similar levels to 2025, and a year-end net leverage ratio between 2.5x and 3.0x. We expect Q2 revenue to be similar to Q1 levels, with adjusted EBITDA expected to be slightly lower than the prior year due to timing of investment spending, including some spending that was delayed from the first quarter. I will now turn the call back to John for some closing remarks. John D. Lowe: Thanks, Sarah. Turning to slide 11 to summarize before we open the call for Q&A. We are executing on our strategy with a better-than-expected start of the year. The segment trends are largely as we anticipated, and we are on track to achieve our full-year outlook. We also generated strong cash flow and brought net leverage back down to just below three times after the temporary increases following last year's ROI acquisition. We intend to continue growing and diversifying our business, leveraging our expanding proprietary technology platform, our extensive marketable base, and our evolving portfolio of payment solutions to meet market needs, drive growth, and enable our customers to win. Operator? We will now open the call for questions. Operator: Thank you. We will now open the call for any questions. If you would like to ask a question, please press star then 1. If you would like to withdraw your question, press star 1 again. Your first question will come from Peter James Heckmann with D.A. Davidson. Peter James Heckmann: Hey, good morning. Thanks for taking my question. In terms of thinking about Instant Issuance, Card@Once solutions, you did not mention it in the prepared remarks, but what are you thinking for this year in terms of base business as well as some of the tangential areas that you have expanded into over the last fifteen months? John D. Lowe: Yeah. Pete, good morning. We are excited about Instant Issuance. It is a great platform for us. Just as a reminder, it is a software-as-a-service platform. We built it from the ground up. It took us, you know, ten-plus years to build it, especially all the integrations into what we refer to as the payments ecosystem that we service. So we have thousands of customers across the U.S., and we expect that to be a large chunk of the growth out of our Integrated Paytech segment for 2026, growing that segment from an outlook perspective greater than 15%. I think the Fiserv deal we announced helps us grow. And just on the breakout between Instant Issuance and everything digital — I will say digital — we are essentially building the business there. It is small in relation to the rest of the business, but we are seeing strong customer demand, a good pipeline, and we continue to build out the pipes and integrations, if you will, to continue to service multiple areas of the market. So we are excited about what we are doing in Instant Issuance, but broadly in digital too. Peter James Heckmann: Okay. Great. And then just in terms of contactless, where do you think we are in terms of contactless cards? I have not seen recently any information that would suggest what percentage of cards out today have a contactless chip embedded. John D. Lowe: Good question. What we produce today is 90% plus contactless. So, you know, we used to use the baseball analogy. I would say we are in the very late innings of the transition. That is on the debit and credit side. I would say on the prepaid side of our business, there is a lot of opportunity. The volumes within prepaid broadly, when including open loop and closed loop, are somewhat greater on an annual basis than even the debit and credit side in terms of what is produced. So to the extent that market starts to move more towards chip, it starts to move specifically towards contactless — which is what we are doing with Carta and what we are doing with a large national retailer, where we have a pilot underway, which we are having positive kind of movement on, if you will. If that market continues to move towards chip and grows, we will see a long transition there. It is what we would expect, and we would be in a unique position to capitalize on that transition. So on the debit and credit side of your question, I think we are late innings; we are pretty much fully penetrated, but I think there is a lot of opportunity on the prepaid side. Peter James Heckmann: Got it. I appreciate it. I will get back in the queue. John D. Lowe: Yep. Thanks, Pete. Operator: Your next question comes from Jacob Michael Stephan with Lake Street Capital Markets. Jacob Michael Stephan: Hey, guys. Good morning. Nice quarter. I just wanted to ask on the Fiserv relationship. It seems like that was expanded a little bit. Maybe you could touch on some of the things and ways that it was different from the past contract with them, or agreement. And then maybe touching on the supply chain a little bit — last year about this time we were talking a lot about tariffs. From a supply chain perspective and chip tightness, what are you seeing out there in the market today? And lastly, you are kind of expecting a bigger ramp in the second half from the Integrated Paytech segment. What are going to be the main drivers of that growth in Paytech? John D. Lowe: Yeah. No. Jacob, I think the main difference is we call out their name. We had entered into this agreement around year-end, so we mentioned an agreement at year-end, but we just did not call out Fiserv's name. I would say getting marketing teams together to finalize documents takes a long time, but the agreement is in place. We are excited about it. We are seeing positive customer interest in Q1, kind of ramping up, if you will, and Fiserv is a great partner. We love working with them. They have thousands of customers across the United States that we have worked with them to build good relationships with and make sure we are helping our customers win and helping their customers win at the same time. On supply chain, broadly I would say it has normalized, and I think that is credit to not only the teams that we put in place to manage it that continue to focus on how to manage things well, especially today in light of the Iran war. That is another kind of thing to tackle from a cost perspective, although that is not significant, I would say. But tariffs are something we had to work through from a supply chain perspective. I would say tariffs have somewhat normalized as well. But we are — just to get ahead of your probably next question — we are expecting refunds on tariffs. But we do not necessarily have a timing aspect to that. We hope to see them at one point, but as I tell my team, I will believe it when I see it. Put it that way. On the second-half ramp in Integrated Paytech, a lot of it is in relation to the deal that we signed with Fiserv. That is a chunk of it. Another chunk is just the growth in the business as it stands. Last year, it grew roughly at a 20% rate. If we look back over time, it has been growing at a faster pace generally than the rest of the business, and that is because we have a unique value proposition in the market. I am talking about our Instant Issuance solution specifically. On the digital side of the house, that is an area that is growing even faster. Now you are talking about smaller dollars — so it is smaller dollars growing — but at the same time, that is an area we continue to see just a large amount of interest in, and we are trying to build out that business as quickly as we can to support that large customer interest. So it is our Instant Issuance solution growth, which we have seen historically be pretty strong — we are confident in that, especially in light of the new deal — and digital growing just given what we are seeing in the market and the customer demand. Jacob Michael Stephan: Got it. Very helpful. Appreciate it. Thank you. John D. Lowe: Yep. Thank you. Operator: Your final question will come from Craig Irwin with ROTH Capital Partners. John D. Lowe: Hey, Craig. We cannot hear you. Craig Irwin: Thank you. Sorry about that. Can you hear me now? John D. Lowe: Yes, we can. Okay. Perfect. Good morning. Craig Irwin: Good morning. So can you help us unpack the comments around Indiana, the 30% increase in volume? Is this something novel in the last quarter? Did something materially change there? And then with 30% higher volumes, this clearly is not translating to the top line. Is there a mix issue or price erosion or something like that impacting the contribution to revenue growth and, obviously, profit growth if the revenue is not following? Any color there would be helpful. John D. Lowe: Yeah. Craig, good question. The reason that we shared that number specifically is it is an indicator as we have kind of come to the end of building out Indiana. You know, just a step back, it took about a year plus to build. The team in Indiana has done a great job. We essentially had nearly zero customer complaints as we were transitioning. And the reason for the growth in volume disclosure is really the fact that we could not have done what we were doing in our old facility. We were at capacity. If you go back two, three years — in 2022, as an example, when the market was insatiable in a sense — we were busting the team. So there were multiple reasons to move, but I think moving has been a large success for us. And I think your question about margins — there is depreciation on ROI. There are tariffs that have come up. Those types of things have affected our margins. There is always a competitive pricing market, but I would not say the pricing is irrational. I would say that overall, from a margin perspective, we have definitely had some impacts, but nothing that has created an irrational pricing market. I do not know. Derek, you would provide any other comments. Tara Grantham: Yes. So I would just say that we did grow pretty strongly in our overall Secure Card Solutions space, up 35% overall, and then from an organic basis, we did grow 15%, so we did get strong top line growth in that solution, and that was in part driven by contactless growth across our Secure Card Solutions. So, related to that, as John said, we did get operating leverage based on that growth. It was offset by things like tariffs as well as the higher depreciation across the business related to our new Indiana facility as well as related to the acquisition of ARY. John D. Lowe: Craig, one thing I would add, though, we do expect our overall gross margins — they are somewhat stabilized. Right? So we would expect them to be somewhat stable over the course of the year, if not increasing. Tara and team are doing a good job driving a lot of margin improvement goals. So between that and the growth of the business and the leverage we expect to get, I know we have had a lot of impacts over the last year and a half, two years, but we do expect margins — not only on a gross margin basis, but on an EBITDA basis — to improve over the course of the year. We expect this year, similar to last year, fourth quarter to be our biggest quarter. And so think of Q1 as kind of a starting point for the year, if you will. Craig Irwin: Understood. That makes sense. So then, ROI — I will admit, I was a little surprised to see the increased integration expenses this quarter. I thought that you were a long way down the path of already integrating that. Can you maybe give us some detail around the actions that are being completed right now? What did you complete over the last couple of months? Strategically, I thought that you might be actually adding a little bit more CapEx for ROI and focusing on the growth of that platform, given that personalization really is such an exciting opportunity. John D. Lowe: Yeah. I mean, I would say the integration costs we are spending now are really in two big areas. One is technology, and one is go to market. And when we look at ROI and its position in the market specifically, when we look at our broader solutions that we provide outside of Airline, we see a lot of revenue synergies. Airline signed, even in their first deal — I mean, 10 plus deals — and we have not owned them, I mean, since essentially one year ago from now. So we have seen really strong progress in terms of AirWise performance on a revenue basis. And the other side that we are spending on is operating synergies, trying to make sure that the way that we operate on the floor is — I would not call fully integrated, but essentially aligned with everything we are doing on a broader basis, which ultimately means we get purchasing power, things of that nature. So there were some termination fees from a vendor perspective as we transition vendors. Things of that nature pop up, and unfortunately they are not small. But we do expect integration to drop off in the second half of the year. We expect a little bit in Q2 — that will continue — but in the second half of the year, you should see that drop off dramatically. Craig Irwin: Thank you for that. I will take the rest of my questions offline. John D. Lowe: Thanks, Greg. Operator: Your next question will come from Harold Lee Goetsch with B. Riley Securities. Harold Lee Goetsch: Hey. Thanks for taking my question. On the Prepaid statement, it was said it was down 17% in the quarter. Can you give us some of the friction points? And again, were there some maybe significant nonrecurring customer revenues that came in 2025 and before that are at least driving these declines? Or is the channel rather full right now and we are working through channel inventories? And is organic growth through the channel slower than expected? Thanks. John D. Lowe: Yeah. Hal, on the Prepaid side, just as a reminder, the whole business and the market in general — think of on the open loop side — we have leading market share. We are positioned really well, especially if that market starts moving towards chip. And so if you think about the broader market and our customers, they are trying to determine, based upon not only regulatory demands, but just customer demands, how do you increase security around the package itself? You can do that in two ways. You can increase the actual security around the package itself, or you can put a chip in the prepaid card itself. And that is why we are working with Carta. That is the pilot we are working with the large national retailer on. And because of that kind of testing and transition that we ultimately do expect to occur over a long period of time, we are seeing the normal-course open loop market be weaker. And we knew coming into the year this would be a slow start to the year. We are hearing that from our customers on the Prepaid side. That is because we believe from a longer-term transition perspective the value of the market is going to grow, and we are well positioned to capitalize on that. The other side on Prepaid is the closed loop side of the business, and that actually has performed very well for us. It is fairly small today, but we had pretty strong growth over Q4 of last year in Q1. And so we are excited about where the Prepaid business is going, but it is definitely a weaker quarter for us. And you can see this in the Prepaid financials. That business gains a significant amount of operating leverage as it grows, and you saw the opposite in Q1, and that brought down broader margins. Tara Grantham: Yeah. Just a reminder that we do expect good growth across our segments this year, including in Prepaid. So even though it was down in Q1, we do expect better growth throughout the year. And just looking back, still very confident in that business. Look back to 2024, we did grow that business 26%. And even though we were down last year, we were only down 3% once you adjusted for the accounting change that we made in Q2. So I do expect that return to growth as well as the increase in gross margins throughout the year. John D. Lowe: Okay. Thank you very much. Thanks, Hal. Operator: And there are no questions in the queue. I would like to turn the call back over to John D. Lowe for any closing remarks. John D. Lowe: Thank you to all of our CPI Card Group Inc. employees for their dedication and for continuing to deliver for CPI Card Group Inc. and our customers. Tara Grantham: Thank you all for joining our call this morning, and we hope you have a great day. Operator: Thank you for your participation. This does conclude today's conference. You may now disconnect. Before you buy stock in Cpi Card Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cpi Card Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Cpi Card (PMTS) Q1 2026 Earnings Transcript was originally published by The Motley Fool