PMTS Reports Third Quarter 2017 Results
Tue November 7, 2017 4:10 PM
EPS of $0.02 misses by $-0.03 Revenue of $68.04M (- 16.2% Y/Y) misses by $-6.69M
Third Quarter Net Sales of $68.0 million
GAAP loss per diluted share of $(0.01); Adjusted diluted EPS of $0.02
Adjusted EBITDA of $9.6 million
Third Quarter Cash Provided by Operating Activities of $1.3 million
Cash of $14.8 million, Undrawn Revolver of $20.0 million, Available Liquidity of $34.8 million
New Leadership Initiated Robust Review of Business Strategies and Market Opportunities; Discontinued Providing Guidance as Review Underway and Initiatives are Executed to Drive Shareholder Value
Confident in Long-Term Opportunities and will Provide an Update on Plans and Initiatives during Fourth Quarter 2017 Earnings Call
Call scheduled for Tuesday, November 7, 2017 at 5:00 p.m. Eastern Time
LITTLETON, Colo.--(BUSINESS WIRE)-- CPI Card Group Inc. (Nasdaq: PMTS; TSX: PMTS) (“CPI Card Group” or the “Company”) today reported financial results for the third quarter ended September 30, 2017.
Scott Scheirman, President and Chief Executive Officer of CPI Card Group (PMTS), stated, “We believe CPI has strong long-term opportunities. We expect cards in circulation will continue to grow in the U.S. over the long-term, which bodes well for card replacement driven demand, and the migration to EMV continues to progress. Furthermore, we are excited about the momentum that is building in our newer products and solutions including Card@Once, CPI on Demand (formerly “Print on Demand”) and premium metal cards. In addition, we continue to view the potential migration of the U.S. market to dual-interface cards as an attractive long-term opportunity. We believe our dedicated and passionate employees, strong market position and diverse suite of products and differentiated solutions position us very well. However, we also need to enhance our strategies and sharpen our execution to better serve our customers and drive growth in order to deliver shareholder value. I’m personally looking forward to working with our employees, customers and partners to achieve these objectives.”
Business Review & 2017 Financial Outlook
CPI believes that it has the products and innovative solutions in place to navigate the challenging U.S. card manufacturing market and capitalize on the significant long-term growth opportunities within the broader payments space. With this solid foundation established, CPI believes that customers and stockholders will benefit from the Company conducting a thorough review of its business strategies and market opportunities. As a result, CPI has initiated a review of its business with an objective to better serve the needs of customers and deliver shareholder value. The Company has discontinued providing guidance so that it can enhance its strategies and execute initiatives to achieve these objectives. CPI plans to provide an update with key indicators of performance during the fourth quarter earnings call.
Mr. Scheirman stated, “While we remain confident in our long-term success, we believe that it is prudent to take the time to review and assess the business, enhance our strategies and execute our key initiatives. We plan to provide an update on our plans, initiatives, and guidance policies when we report fourth quarter 2017 results.”
Third Quarter 2017 Segment Information
U.S. Debit and Credit:
Net sales were $39.3 million in the third quarter of 2017, representing a decrease of 20.0% from the third quarter of 2016. The decrease in U.S. Debit and Credit segment net sales was driven predominantly by a decline in the number of EMV® chip cards sold in the third quarter compared with the third quarter of 2016 and lower EMV® card average selling prices, as well as a $3.6 million decrease in card personalization and fulfillment services revenue.
U.S. Prepaid Debit:
Net sales were $19.9 million in the third quarter of 2017, representing a decrease of 13.7% from the third quarter of 2016. The year-over-year decline in U.S. Prepaid Debit segment net sales was driven primarily by lower volumes, partially offset by higher net sales related to CPI on Demand (formerly “Print on Demand”) services.
U.K. Limited:
Net sales were $7.0 million in the third quarter of 2017, representing a decrease of 8.2% from the third quarter of 2016. The lower net sales resulted from a prior year loyalty card project which did not recur during the third quarter of 2017, partially offset by higher retail gift card net sales.
Balance Sheet, Cash Flow, Liquidity & Other Select Financial Information
At September 30, 2017, the Company had $14.8 million of cash and cash equivalents and an undrawn $40.0 million revolving credit facility, of which $20.0 million was available for borrowing.
Total debt principal outstanding, comprised of the Company’s First Lien Term Loan, was $312.5 million at September 30, 2017, unchanged from December 31, 2016. Net of debt issuance costs and discount, recorded debt was $303.4 million as of September 30, 2017. The Company’s First Lien Term Loan matures on August 17, 2022 and includes no financial leverage covenants.
Cash provided by operating activities for the three months ended September 30, 2017 was $1.3 million, a decrease from $6.6 million in the prior year period, but an increase of $4.6 million from a use of $(3.3) million in the second quarter of 2017. Capital expenditures totaled $2.0 million for the three months ended September 30, 2017 compared with $5.4 million in the prior year period. Free cash flow for the three months ended September 30, 2017 was $(0.7) million, compared with $1.2 million in the prior year period.
Interest expense, net, was $5.3 million in the third quarter of 2017, up modestly from $5.0 million in the third quarter of 2016 due primarily to higher average interest rates on the Company’s outstanding debt balance.
Lillian Etzkorn, Chief Financial Officer, stated, “I am pleased with the improvement in our operating cash flow trend in the third quarter, and we remain intensely focused on returning to consistent positive cash flow generation. We expect positive cash flow from operations for the balance of 2017. Our primary objective is to deliver long-term shareholder value by making the investments necessary to better position CPI to capitalize on the growth opportunities in our industry, and we plan to aggressively improve our cost structure and operating efficiencies, while also improving our net leverage position.”
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