CPI Card Reports Q2 2026 Results: Full Earnings Call Transcript

CPI Card (NASDAQ: PMTS ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

The full earnings call is available at Summary CPI Card Group Inc. reported a strong second quarter and first half of 2026 with revenue growth of 15% and 17% respectively, achieving record first half revenue. The company completed the strategic acquisition of TRISM to expand its instant issuance market, which is expected to contribute significantly to Integrated PayTech growth. Adjusted EBITDA for the second quarter increased by 7% to $24 million, while the company generated record free cash flow of $36 million in the first half.

5 million of senior notes. Future outlook includes raised full-year revenue growth and free cash flow guidance, with expectations of high single-digit to low double-digit revenue growth. The company is seeing strong momentum in Secure Card Solutions and Integrated PayTech segments, with new customer wins and expanding digital solutions. Prepaid Solutions remain challenged with market softness, but long-term opportunities are anticipated in both open and closed loop markets.

Operational efficiencies and capacity expansion through the Fort Wayne facility are supporting growth and optimizing production capabilities. Full Transcript Alexandra, Operator Welcome to CPI's second quarter 2026 earnings call. My name is Alexandra and I will be your operator today. If you are viewing on the webcast, you may advance the slides forward by pressing the arrow buttons.

The call will be open for questions after the Company's remarks. If you would like to get in the queue for questions, please press star one to raise your hand; to withdraw your question, press star one again. Now I would like to turn the call over to Davis Barker, Head of Investor Relations. Davis Barker, Head of Investor Relations 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 Tara 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 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. 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, President and Chief Executive Officer Thanks, Davis. 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 Tara on her appointment as Chief Financial Officer. Since joining CPI in 2017, Tara 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 Erewi, 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. 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. Tara 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. 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 Erolye, where we executed our 25th new customer win since closing the acquisition in May of last year.

S. commercial banks and credit unions, and a customer relationship that spans more than two 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. , further strengthening our position as the center of the prepaid market and creating new opportunities to deliver our secure packaging solutions.

S. national retailers and we are seeing encouraging signs in the adoption of closed loop, a market where we estimate is approximately five times 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 three 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. 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 Tara to provide more detail on our financial results and outlook for the remainder of the year. Tara Grantham, Chief Financial Officer Thanks, John. Before I begin, I'd like to thank John, our Board of Directors, and the entire CPI Card 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 EROI. Excluding EROI, total organic revenue grew 12% in the second quarter, reflecting the underlying strength of our business.

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 enterprise-wide 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 at Once and digital integration, and transaction-related costs primarily related to EROI 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 worksite 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 and 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 EROI contribution. Excluding EROI, 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 Carta. Within Integrated PayTech, second quarter revenue increased 4% driven by increased Card at 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 at 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, and accelerated inventory optimization initiatives. Our free cash flow through the first six 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. 5 million senior note redemption in mid-July. 6 times 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.