CPI Card Group Inc【PMTS】株式ニュース

Is this correct? CPI Card Group reports Q3 results

Nov. 3, 2020 8:18 AM ET
By: Gaurav Batavia, SA News Editor

CPI Card Group (OTC:PMTS): Q3 GAAP EPS of $0.52.

Revenue of $82.7M (+15.4% Y/Y)

The devil is in the details and I've missed a lot of the details in the past 10 months. - FUNMAN

CPI Card Group Inc. Reports Third Quarter and Year-to-Date 2020 Results
Tue November 3, 2020 8:08 AM|Business Wire|About: PMTS
Net Sales of $82.7 Million, Up 15% and 11% Year-over-Year in the Third Quarter and First Nine Months

Net Income of $5.8 Million, Up 984% and 425% Year-over-Year in the Third Quarter and First Nine Months

Adjusted EBITDA of $17.5 Million, Up 43% and 39% Year-over-Year in the Third Quarter and First Nine Months

Cash of $50 Million at Quarter End

LITTLETON, Colo.--(BUSINESS WIRE)-- CPI Card Group Inc. (PMTS) (“CPI” or the “Company”) today reported financial results for the third quarter and nine months ended September 30, 2020.

“As we continue to navigate these unprecedented times, we are pleased with our strong third quarter performance,” said Scott Scheirman, President and Chief Executive Officer of CPI. “Our 15% top-line growth underscores the resilience of the business, our ability to capitalize on the dual interface card demand in the U.S. and the strong market for our innovative and differentiated products, including our eco-focused solutions. Operating margins also expanded significantly in the quarter, driven by operating leverage and ongoing efficiency initiatives. We continue to win new business with our existing customers, add new customers and pursue opportunities.”

Scheirman continued, “We remain steadfast and intensely focused on our strategies of deep customer focus, providing market-leading quality products and customer service, delivering innovative solutions and a market-competitive business model.”

Third Quarter and First Nine Months 2020 Financial Highlights

Net sales increased 15% and 11% year-over-year to $82.7 million and $228.0 million in the third quarter and first nine months of 2020, respectively. Gross profit increased 21% and 15% year-over-year in the third quarter and first nine months of 2020, respectively. Gross profit margins increased to 37.0% in the third quarter of 2020, compared to 35.4% in the prior year period, primarily due to higher net sales and operating leverage in the Debit and Credit segment. Gross profit margins increased to 34.8% from 33.7% in the first nine months of 2020 compared to the prior year.

Income from operations was $13.5 million and $26.0 million in the third quarter and first nine months of 2020, respectively, compared with $7.7 million and $21.1 million in the third quarter and first nine months of 2019, respectively. In the first nine months of 2019, the Company recognized a $6.0 million gain related to the cash settlement of litigation, which was included in income from operations.

Third quarter 2020 net income was $5.8 million, or $0.52 per diluted share, compared to a net loss of $0.7 million, or a $0.06 loss per diluted share, in the third quarter of 2019. For the first nine months, net income was $8.8 million, or $0.79 per diluted share, in 2020 compared to a net loss of $2.7 million, or a $0.24 loss per diluted share, in 2019.

Adjusted EBITDA increased 43% and 39% year-over-year to $17.5 million and $40.0 million in the third quarter and first nine months of 2020, respectively.

Third Quarter and First Nine Months 2020 Segment Information

Debit and Credit:

Net sales increased 22% and 19% year-over-year to $62.7 million and $180.9 million in the third quarter and first nine months of 2020, respectively. Growth for the third quarter and first nine months of 2020 was driven primarily by higher volumes of dual-interface EMV® card sales, including Second WaveTM cards featuring a core made with recovered ocean bound plastic. In addition, net sales increased from CPI On-Demand card personalization due to new customer wins and higher volumes from our existing customers, and from COVID-19 related government disbursement work. This growth was partially offset by COVID-19 impacts, including reduced volumes in card personalization stemming from fewer new accounts and requests for replacement cards. Card@Once® product sales were also impacted by COVID-19 due to reduced hours of operation, lack of access or closure of certain bank branches.

Prepaid Debit:

Net sales were up 1% and down 8% year-over-year to $20.6 million and $48.7 million for the third quarter and first nine months of 2020, respectively. Growth for the third quarter was primarily due to timing of certain customer sales, partially offset by reduced sales volumes primarily associated with COVID-19 impacts, including lower retail store traffic, which also impacted the decline in net sales for the first nine months of 2020.

Balance Sheet, Liquidity, and Cash Flow

As of September 30, 2020, cash and cash equivalents was $50.3 million. Cash used in operating activities was $1.8 million and capital expenditures were $1.7 million in the third quarter of 2020, yielding Adjusted Free Cash Flow use of $3.5 million. For the first nine months of 2020, cash provided by operating activities was $10.2 million and capital expenditures were $3.3 million, yielding Adjusted Free Cash Flow of $6.9 million. This compares with the first nine months of 2019 when cash used in operating activities was $3.0 million, or a $9.0 million cash usage when excluding the $6.0 million cash received from a litigation settlement, and capital expenditures were $3.3 million, resulting in Adjusted Free Cash Flow use of $12.3 million. For the first nine months of 2020, cash provided by operating activities and Adjusted Free Cash Flow increased $13.2 million and $19.2 million year-over-year, respectively.

Total long-term debt principal outstanding, comprised of the Company’s $30 million Senior Credit Facility and its $312.5 million First Lien Term Loan, was $342.5 million at September 30, 2020. Net of debt issuance costs and discount, total long-term debt was $335.8 million as of September 30, 2020. The Company’s Senior Credit Facility matures in May 2022 and the First Lien Term Loan matures in August 2022.

John Lowe, Chief Financial Officer, stated, “Top-line net sales growth and our commitment to operating efficiently resulted in strong year-over-year growth in Net Sales, Net Income, and Adjusted EBITDA. We are sharply focused on continuing to execute on our strategy and capitalizing on market opportunities.”

Additional Investor Commentary

The Company has provided additional written commentary regarding its quarterly performance and other business matters. This earnings press release and additional written commentary are available at investor.cpicardgroup.com.

EMV® is a registered trademark in the U.S. and other countries and an unregistered trademark elsewhere. The EMV trademark is owned by EMVCo, LLC.

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, all reported on a continuing operations basis: EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Free Cash Flow. These non-GAAP financial measures are utilized by management in comparing our operating performance on a consistent basis between fiscal periods. 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 to this press release.

EBITDA

EBITDA represents earnings before interest, taxes, depreciation and amortization, all on a continuing operations basis. EBITDA is presented because it is an important supplemental measure of performance, and it is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA is also presented and compared by analysts and investors in evaluating our ability to meet debt service obligations. Other companies in our industry may calculate EBITDA differently. EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net (loss) income or net (loss) income from continuing operations as indicators of operating performance or any other measures of performance derived in accordance with GAAP. Because EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business.

Adjusted EBITDA

Adjusted EBITDA is presented on a continuing operations basis and is defined as EBITDA adjusted for litigation and related charges incurred in connection with certain patent and shareholder litigation; stock-based compensation expense; estimated sales tax expense (benefit); restructuring and other charges; loss on Revolving Credit Facility termination; foreign currency gain or loss; litigation settlement gain; and other items that are unusual in nature, infrequently occurring or not considered part of our core operations, as set forth in the reconciliation on Exhibit E. Adjusted EBITDA is also a defined computation in our First Lien Term Loan and Senior Credit Facility agreements, which generally conforms to the definition above, and impacts certain credit measures and covenants, including a covenant requiring the Company to have at least $25 million Adjusted EBITDA (as defined in our Senior Credit Facility) for the previous four consecutive fiscal quarters in total, at the end of each quarterly period ending on or after March 31, 2020. 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 lenders 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 (loss) 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. Further, although not included in the calculation of Adjusted EBITDA presented in this release, the measure as defined in our credit facilities may at times allow us to add estimated cost savings and operating synergies related to operational changes ranging from acquisitions to dispositions to restructurings and/or exclude one-time transition expenditures that we anticipate we will need to incur to realize cost savings before such savings have occurred. Adjusted EBITDA margin percentage as shown in Exhibit E is computed as Adjusted EBITDA divided by total net sales.

Adjusted Free Cash Flow

We define Adjusted Free Cash Flow as cash flow provided by (used in) operating activities - continuing operations, less capital expenditures from continuing operations, adjusted for cash received from a litigation settlement gain in the second quarter of 2019. 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 service our debt, nor does it reflect the cash impacts of our discontinued operations. Adjusted Free Cash Flow should not be considered in isolation, or as a substitute for, cash (used in) provided by operating activities - continuing operations or any other measures of liquidity derived in accordance with GAAP.

About CPI Card Group Inc.

CPI Card Group® is a payment technology company and leading provider of credit, debit and prepaid solutions delivered physically, digitally and on-demand. CPI helps our customers foster connections and build their brands through innovative and reliable solutions, including financial payment cards, personalization, and Software-as-a-Service (SaaS) instant issuance. CPI has more than 20 years of experience in the payments market and is a trusted partner to financial institutions and payments services providers. Serving customers from locations throughout the United States, CPI has a large network of high security facilities, each of which is registered as PCI compliant by one or more of the payment brands: Visa (V), Mastercard®, American Express® and Discover®. Learn more at www.cpicardgroup.com.

Forward-Looking Statements

Certain statements and information in this earnings 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 words “believe,” “estimate,” “project,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” “guides,” “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 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: the potential effects of COVID-19 on our business, including our supply-chain, customer demand, workforce, operations and ability to comply with certain covenants in our credit facilities; a decline in U.S. and global market and economic conditions and resulting decreases in consumer and business spending; our lack of eligibility to participate in government relief programs related to COVID-19 or inability to realize material benefits from such programs; our substantial indebtedness, including inability to make debt service payments or refinance such indebtedness; costs and impacts to our financial results relating to the obligatory collection of sales tax and claims for uncollected sales tax in states that impose sales tax collection requirements on out-of-state businesses, and challenges to our income tax positions; the restrictive terms of our credit facilities and covenants of future agreements governing indebtedness and the resulting restraints on our ability to pursue our business strategies; our limited ability to raise capital in the future; system security risks, data protection breaches and cyber-attacks; failure to comply with regulations, customer contractual requirements and evolving industry standards regarding consumer privacy and data use and security, including with respect to possible exposure to litigation and/or regulatory penalties under applicable data privacy and other laws for failure to so comply; interruptions in our operations, including our IT systems, or in the operations of the third parties that operate the data centers or computing infrastructure on which we rely; disruptions in production at one or more of our facilities; our inability to adequately protect our trade secrets and intellectual property rights from misappropriation or infringement, claims that our technology is infringing on the intellectual property of others, and risks related to open source software; defects in our software; problems in production quality, materials and process; a disruption or other failure in our supply chain; our failure to retain our existing customers or identify and attract new customers; a loss of market share or a decline in profitability resulting from competition; our inability to recruit, retain and develop qualified personnel, including key personnel; our inability to sell, exit, reconfigure or consolidate businesses or facilities that no longer meet with our strategy; our inability to develop, introduce and commercialize new products; the effect of legal and regulatory proceedings; failure to meet the continued listing standards of the Toronto Stock Exchange or the rules of the OTCQX® Best Market; a continued decrease in the value of our common stock combined with our common stock no longer being traded on a United States national securities exchange, which may prevent investors or potential investors from investing or achieving a meaningful degree of liquidity; developing technologies that make our existing technology solutions and products obsolete or less relevant or a failure to introduce new products and services in a timely manner; quarterly variation in our operating results; our inability to realize the full value of our long-lived assets; our failure to operate our business in accordance with the Payment Card Industry (“PCI”) Security Standards Council security standards or other industry standards; costs relating to product defects and any related product liability and/or warranty claims; maintenance and further imposition of tariffs and/or trade restrictions on, or slow-downs or interruptions in our ability to obtain, goods imported into the United States; our dependence on licensing arrangements; risks associated with international operations; non-compliance with, and changes in, laws in the United States and in foreign jurisdictions in which we operate and sell our products; our ability to comply with a wide variety of environmental, health and safety laws and regulations and the exposure to liability for any failure to comply; risks associated with the controlling stockholders’ ownership of our stock; potential conflicts of interest that may arise due to our board of directors being comprised in part of directors who are principals of our largest stockholder; and other risks that are described in Part I, Item 1A – Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2019 and filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2020, Part II, Item 1A – Risk Factors of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, and filed with the SEC on November 3, 2020, and our other reports filed from time to time with 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 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, free of charge, the reports that the company files or furnishes with the SEC, corporate governance information and press releases. CPI uses its investor relations site (http://investor.cpicardgroup.com) as a means of disclosing material information and for complying with its disclosure obligations under Regulation FD.

CPI Card Group Inc. Earnings Release Supplemental Financial Information

CPI Card Group EPS misses by $0.12, misses on revenue

Nov. 6, 2019 8:21 AM ET
About: CPI Card Group Inc. (PMTS)
By: Pranav Ghumatkar, SA News Editor

CPI Card Group (NASDAQ:PMTS): Q3 GAAP EPS of -$0.06 misses by $0.12.

Revenue of $71.68M (+1.0% Y/Y) misses by $3.5M.

I think they are going to be the last buggy whip manufacturer.

CPI Card Group Inc. Reports Third Quarter and Year-to-Date 2019 Results
Wed November 6, 2019 8:15 AM|Business Wire|About: PMTS
Third Quarter Net Sales Up 1% Year Over Year, 3% Excluding Canada

Net Sales Up 10% Through First Nine Months, 13% Excluding Canada

Continuing Operations - GAAP Net Loss of $0.7 Million in Third Quarter and Net Loss of $2.2 Million through First Nine Months, an Improvement of 40% and 71% Year Over Year, Respectively

Adjusted EBITDA of $12.3 Million and $28.8 Million in Third Quarter and First Nine Months, Up 34% and 31% Year Over Year, Respectively

Cash of $14.3 Million, Available Revolver of $20.0 million, Available Liquidity of $34.3 Million at Quarter End

Call scheduled for Wednesday, November 6, 2019 at 9:00 a.m. Eastern Time

LITTLETON, Colo.--(BUSINESS WIRE)-- CPI Card Group Inc. (PMTS) (“CPI Card Group” or the “Company”) today reported financial results for the third quarter and nine months ended September 30, 2019.

“We delivered solid results once again this quarter as we continue to execute on our customer-centric strategy,” said Scott Scheirman, President and Chief Executive Officer of CPI. “During the third quarter, our U.S. Debit and Credit segment performed well, delivering 7% net sales growth, expanding operating margins and securing a meaningful new business win with the launch of Second Wave™ financial payment cards made with recovered ocean-bound plastic. This solid performance, along with our strong U.S. Prepaid segment results, further propelled our business to improve our bottom-line results and significantly increase Adjusted EBITDA in the quarter and year to date. Through commitment to our key strategies, we continue to execute towards achieving our vision of being the partner of choice for our customers by providing market-leading quality products and customer service with a market-competitive business model.”

Financial results for the comparative 2018 periods, including non-GAAP measures, discussed in this press release reflect continuing operations unless otherwise noted. The sale of CPI U.K., which occurred in August 2018 and had historically been reported as the U.K. Limited segment, was accounted for as discontinued operations and comparative financial information has been restated in accordance with U.S. GAAP (“GAAP”) requirements.

Third Quarter and First Nine Months 2019 Consolidated Financial Highlights from Continuing Operations

Net sales increased 1.0% to $71.7 million in the third quarter of 2019, bringing year-to-date net sales to $205.4 million, a year-over-year increase of 9.7%. Excluding Canada, net sales were up 3.3% and 12.9% for the third quarter and year to date, respectively. Third quarter income from operations was $8.0 million, up 70.0% year over year. For the year-to-date period, income from operations increased $16.7 million year over year to $21.6 million, which includes a previously disclosed $6.0 million cash litigation settlement gain received in the second quarter of 2019.

Third quarter 2019 net loss from continuing operations was $0.7 million, or $0.06 per share, compared to a net loss of $1.1 million, or $0.10 per share in the third quarter of 2018. For the year-to-date periods, net loss from continuing operations was $2.2 million, or $0.20 per share, in 2019 compared to a net loss of $7.6 million, or $0.68 per share, in the first nine months of 2018.

Adjusted EBITDA was $12.3 million for the third quarter of 2019. For the year-to-date period, Adjusted EBITDA, which excludes the $6 million cash litigation settlement gain recorded in the second quarter, was $28.8 million. Year over year, Adjusted EBITDA increased 34.4% and 30.7% in the third quarter and first nine months of 2019, respectively.

Third Quarter and First Nine Months Segment Information from Continuing Operations

U.S. Debit and Credit:

Third quarter net sales of $51.5 million represented an increase of 7.3% year over year. This contributed to a year-over-year net sales increase of 17.5% in the year-to-date period, to $151.5 million. These increases were driven by continued strong performance in personalization and fulfillment services, a shift towards higher-priced dual-interface EMV cards, and strong net sales from Card@Once.

U.S. Prepaid Debit:

Net sales were $20.5 million in the third quarter of 2019, representing a decline of 3.5% compared with the third quarter of 2018. For the first nine months of 2019, net sales were $53.2 million, an increase of 2.0% compared with the year-ago period, which benefited from strong 2018 net sales including portfolio wins that, as expected, did not recur in the 2019 periods.

Balance Sheet, Liquidity, and Cash Flow from Continuing Operations

During the third quarter of 2019, cash used in operating activities was $2.0 million and included continued investments in inventory to support the growth of the business. Third quarter capital expenditures were $0.6 million. This resulted in negative adjusted free cash flow during the third quarter of $2.7 million. Year to date, cash used in operating activities was $3.0 million, inclusive of the $6.0 million cash litigation settlement gain recorded in the second quarter. Year to date, and consistent with seasonal patterns, adjusted free cash flow was negative $12.3 million, and was impacted by year-to-date inventory investments of $12.3 million.

As of September 30, 2019, cash and cash equivalents was $14.3 million and no borrowings were outstanding on the Company’s revolving credit facility. The revolving credit facility had available borrowings of $20.0 million and matures August 17, 2020.

Total debt principal outstanding, comprised of the Company’s First Lien Term Loan, was $312.5 million at September 30, 2019, unchanged from December 31, 2018. Net of debt issuance costs and discount, total debt was $307.3 million as of September 30, 2019. The Company’s First Lien Term Loan matures in August 2022.

John Lowe, Chief Financial Officer, stated, “We are encouraged by the progress we have made driving top-line and profit growth by executing on our key strategies, which enhanced our operating leverage as we continue to focus on the long-term growth of the business. As we continue to build upon this success, we believe we have adequate cash and operating cash flows to support our business plan.”

EMV® is a registered trademark or trademark of EMVCo LLC in the United States and other countries.

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, all reported on a continuing operations basis: EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Free Cash Flow, and Total Net Sales Growth Excluding Canada. These non-GAAP financial measures are utilized by management in comparing our operating performance on a consistent basis between fiscal periods. 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 to this press release.

EBITDA

EBITDA represents earnings before interest, taxes, depreciation and amortization, all on a continuing operations basis. EBITDA is presented because it is an important supplemental measure of performance, and it is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. EBITDA is also presented and compared by analysts and investors in evaluating our ability to meet debt service obligations. Other companies in our industry may calculate EBITDA differently. EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net (loss) income or net (loss) income from continuing operations as indicators of operating performance or any other measures of performance derived in accordance with GAAP. Because EBITDA is calculated before recurring cash charges, including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should not be considered as a measure of discretionary cash available to invest in the growth of the business.

Adjusted EBITDA

Adjusted EBITDA is presented on a continuing operations basis and is defined as EBITDA adjusted for litigation and related charges incurred in connection with certain patent and shareholder litigation; a litigation settlement gain in the second quarter of 2019; stock-based compensation expense; restructuring and other charges; foreign currency gain or loss; and other items that are unusual in nature, infrequently occurring or not considered part of our core operations, as set forth in the reconciliation on Exhibit E. Adjusted EBITDA is also a defined term in our existing credit agreement, which generally conforms to the definition above, and impacts certain credit measures and compliance targets within the credit agreement. 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, non-cash 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 lenders 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-cash, non-operating or non-recurring charges that are deducted in calculating net (loss) 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 can represent the reduction of cash that could be used for other purposes. Further, although not included in the calculation of Adjusted EBITDA, the measure may at times allow us to add estimated cost savings and operating synergies related to operational changes ranging from acquisitions to dispositions to restructurings and/or exclude one-time transition expenditures that we anticipate we will need to incur to realize cost savings before such savings have occurred. Further, management and various investors use the ratio of total debt less cash to Adjusted EBITDA, or "net debt leverage", as a measure of our financial strength and ability to incur incremental indebtedness when making key investment decisions and evaluating us against peers. The metric “total debt less cash” includes borrowed long term debt, letters of credit, and capital lease obligations, less cash. Adjusted EBITDA margin percentage as shown in Exhibit E is computed as Adjusted EBITDA divided by total net sales.

Adjusted Free Cash Flow

We define Adjusted Free Cash Flow as cash flow from continuing operations less capital expenditures from continuing operations, adjusted for cash received from a litigation settlement gain in the second quarter of 2019. 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 service our debt, nor does it reflect the cash impacts of our discontinued operations.

Total Net Sales Growth Excluding Canada

Total Net Sales Growth Excluding Canada, is a computation of the change in the Company’s Net Sales over the prior year period, excluding the net sales attributable to the Canadian operations. Canada sales were included in the Other segment during 2018 and the first quarter of 2019. The Canadian subsidiary was sold April 1, 2019, and the sale agreement excluded the portion of the business relating to Financial Payment Cards. That business migrated to the Company’s operations in the U.S. or to other service providers in 2019. The Canada-related sales in the second and third quarter of 2019 represents the Financial Payment Card business sales that migrated to the Company’s operations in the U.S. We computed the Total Net Sales excluding Canada, and the resulting year over year Total Net Sales Growth percentage excluding Canada, in Exhibit E. We believe that this financial measure is useful to investors in their analysis of our results of operations and provides improved comparability between fiscal periods.

About CPI Card Group Inc.

CPI Card Group® is a payment technology company and leading provider of credit, debit and prepaid solutions delivered physically, digitally and on-demand. CPI helps our customers foster connections and build their brands through innovative and reliable solutions, including financial payment cards, personalization and fulfillment, and Software-as-a-Service (SaaS) instant issuance. CPI has more than 20 years of experience in the payments market and is a trusted partner to financial institutions and payments services providers. Serving customers from locations throughout the United States, CPI has a large network of high security facilities, each of which is registered as PCI compliant by one or more of the payment brands: Visa (V), Mastercard®, American Express and Discover®. Learn more at www.cpicardgroup.com.

Conference Call and Webcast

CPI Card Group Inc. will hold a conference call on November 6, 2019 at 9:00 a.m. ET to review its third quarter and year-to-date 2019 results. To participate in the Company's conference call via telephone or online:

Participant Toll-Free Dial-In Number: (800) 860-2442
Participant International Dial-In Number: (412) 858-4600
Webcast Link: https://services.choruscall.com/links/pmts191106.html

Participants are advised to login for the live webcast 10 minutes prior to the scheduled start time.

A replay of the conference call and webcast will be available until November 20, 2019 at:

Replay: (877) 344-7529 or (412) 317-0088;
Conference ID: 10135256
Webcast replay: http://investor.cpicardgroup.com

Forward-Looking Statements

Certain statements and information in this earnings release may 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 (the “1933 Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “1934 Act”). The words “believe,” “estimate,” “project,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us and other information available. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. We are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated. These risks and uncertainties include, but are not limited to: our substantial indebtedness, including inability to make debt service payments or refinance such indebtedness; the restrictive terms of our credit facility and covenants of future agreements governing indebtedness and the resulting restraints on our ability to pursue our business strategies; our limited ability to raise capital in the future; system security risks, data protection breaches and cyber-attacks and possible exposure to litigation and/or regulatory penalties under applicable data privacy and other laws for failure to prevent such incidents; interruptions in our operations, including our information technology systems, or in the operations of the third parties that operate the data centers or computing infrastructure on which we rely; our failure to maintain our listing on the NASDAQ Capital Market; our inability to adequately protect our trade secrets and intellectual property rights from misappropriation or infringement, claims that our technology is infringing on the intellectual property of others, and risks related to open source software; defects in our software; problems in production quality and process; our failure to retain our existing customers or identify and attract new customers; a loss of market share or a decline in profitability resulting from competition; our inability to recruit, retain and develop qualified personnel, including key personnel; our inability to sell, exit, reconfigure or consolidate businesses or facilities that no longer meet with our strategy; our inability to develop, introduce and commercialize new products; the effect of legal and regulatory proceedings; developing technologies that make our existing technology solutions and products less relevant or a failure to introduce new products and services in a timely manner; quarterly variation in our operating results; our inability to realize the full value of our long-lived assets; our failure to operate our business in accordance with the PCI Security Standards Council (“PCI”) security standards or other industry standards such as Payment Card Brand certification standards; costs relating to the obligatory collection of sales tax and claims for uncollected sales tax in states that impose sales tax collection requirements on out-of-state retailers; disruption or delays in our manufacturing operations or supply chain; a decline in U.S. and global market and economic conditions and resulting decreases in consumer and business spending; costs relating to product defects and any related product liability and/or warranty claims; maintenance and further imposition of tariffs and/or trade restrictions on goods imported into the United States; our dependence on licensing arrangements; non-compliance with, and changes in, laws in the United States and in foreign jurisdictions in which we operate and sell our products; risks associated with the controlling stockholders’ ownership of our stock; 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, 2018 filed with the SEC on March 6, 2019 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 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, free of charge, the reports that the company files or furnishes with the SEC, corporate governance information and press releases. CPI uses its investor relations site (http://investor.cpicardgroup.com) as a means of disclosing material information and for complying with its disclosure obligations under Regulation FD.

CPI Card Group Inc. Earnings Release Supplemental Financial Information