CPI Card Group: Mixed Earnings Call with Positive Outlook

CPI Card Group Inc. ((PMTS)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for CPI Card Group Inc. was a mixed bag of optimism and challenges. The company reported strong sales growth and successful market expansions, yet faced hurdles with gross margin pressures and unexpected tariffs. Despite these challenges, CPI Card Group has raised its revenue outlook for 2025, reflecting a positive long-term perspective.

Strong Sales Growth

CPI Card Group’s Secure Card business demonstrated robust performance with volume and sales growth exceeding 15% in the first half of the year. The Card@Once solution saw an impressive growth of over 20%, while the Prepaid business sales increased by 17%, excluding the impact of accounting changes. This growth underscores the company’s successful strategies in driving sales across its key segments.

Successful Arroweye Acquisition

The acquisition of Arroweye has proven to be a strategic success, contributing nearly $10 million in revenue in less than two months. This exceeded expectations for both sales and profitability, highlighting the acquisition’s immediate positive impact on the company’s financials.

Expansion into New Markets

CPI Card Group has successfully expanded its Card@Once solution into the government disbursement space and secured commitments for closed-loop prepaid packages. This diversification into new markets is a testament to the company’s strategic efforts to broaden its market reach and capitalize on new opportunities.

Increased Revenue Outlook

The company has revised its net sales outlook for 2025, anticipating low double-digit to mid-teens growth. This optimistic forecast is driven by the successful Arroweye acquisition and continued organic growth, positioning CPI Card Group for a promising future.

Gross Margin Pressure

Despite the positive sales growth, CPI Card Group experienced a decrease in gross margins to 30.9%. This was attributed to a challenging sales mix, increased production costs, and higher tariffs, which collectively impacted the company’s profitability.

Tariff and Cost Challenges

Unexpected tariffs are projected to cost the company approximately $5 million in 2025. Additionally, one-time costs and inefficiencies from transitioning to a new facility have posed further challenges, affecting the company’s cost structure.

Revenue Recognition Accounting Change

A one-time non-cash accounting change negatively impacted net sales by $8 million in the second quarter, particularly affecting the Prepaid segment. This accounting adjustment has been a notable factor in the company’s financial reporting for the period.

Forward-Looking Guidance

Looking ahead, CPI Card Group has provided an optimistic outlook for 2025, with expectations of low double-digit to mid-teens sales growth. Despite the anticipated $5 million impact from increased tariffs, the company maintains its adjusted EBITDA outlook. Strategic investments in new markets and facilities, along with the Arroweye acquisition, are expected to drive long-term growth and profitability.

In conclusion, CPI Card Group Inc.’s earnings call reflected a blend of strong sales performance and strategic acquisitions, alongside challenges from gross margin pressures and tariffs. The company’s increased revenue outlook for 2025 signifies confidence in its growth trajectory, driven by successful market expansions and strategic investments.