CPI Card Group Inc. Q4 FY2025 earnings call

John mentioned 2025 had strong fourth quarter performance with revenue growth, adjusted EBITDA growth and margin improvement, and excellent cash flow. The company has strategic, operational, and technological advancements, with three growth pillars: proprietary technology platform, broad marketable base, and evolving payment solutions. Reorganized reporting segments to Secure Card Solutions, Prepaid Solutions, and Integrated PayTech. In 2025, Secure Card Solutions completed ArrowEye acquisition and integration, invested in new production facility; Prepaid Solutions entered closed - loop prepaid market and signed deals; Integrated PayTech grew nearly 20%. Tara detailed fourth quarter and full - year financial results, including revenue, margins, SG&A expenses, tax rate, and cash flow. 2026 outlook includes high single - digit revenue growth, low - to mid - single - digit adjusted EBITDA growth, similar capital spending to 2025, and net leverage ratio between 2.5 and 3 times at year end.

Fourth quarter revenue reached a record $153,000,000, up 22%, with a strong $18,000,000 contribution from ArrowEye and double - digit organic growth from debit and credit portfolio. Debit and Credit segment revenue increased 40% including ArrowEye, with organic growth of 20% driven by contactless card sales and instant issuance solutions. Full - year revenue grew 13%, with ArrowEye contributing $43,000,000. Secure Card Solutions is a leading debit and credit payment card and personalization provider, estimating about one in every four cards in the US are produced by it. Prepaid Solutions includes open - loop prepaid cards, secure packaging, and growing prepaid healthcare payment solutions; prepaid revenue declined in 2025 but expected to ramp up in closed - loop in 2026. Integrated PayTech, the newest segment, grew nearly 20% in 2025, with roughly 55% gross margins, approximately 40% EBITDA margins, a 95% plus customer retention rate, and expected growth over 15% in coming years.

2026 expects high single - digit revenue growth, led by double - digit growth from Integrated PayTech segment; adjusted EBITDA outlook is low - to mid - single - digit growth, partially offset by incremental spending for Integrated PayTech growth and other technology investments; expects $6,000,000 tariff expenses; tax rate between 30% - 35%; cash flow conversion strong; capital spending likely similar to 2025; completion of ArrowEye integration in 2026 expected to have $5,000,000 - $7,000,000 final integration costs; adjusted EBITDA in first half of 2026 flat to down slightly due to digital and technology investments and slow start of prepaid business.

Q: Hey, guys. Good morning. Congrats on the results. Welcome, Tara. Maybe just to touch on something that you kind of talked on, the closed - loop market being five times larger, so pretty significant opportunity for you guys. How are these sales cycles any different from, you know, potentially other prepaid deals? And, you know, do you have to change anything internally to kind of capture this market?

A: Yeah, Jacob, good morning. So it is interesting. The closed - loop market, you are right, five times larger in volume, probably slightly higher than that. The value of closed - loop we expect to continue to grow and become even greater as we expect packaging to become more pervasive, if you will, across the United States mainly due to regulatory changes and fraud. From the sales cycle perspective, we actually have a slightly accelerated sales cycle versus our normal, just our broader portfolio in general. And that is because, you know, on the open - loop side, we have been working for most all the program managers that are out there. With the addition of ArrowEye, now we work for all of the major program managers. So we have relationships with, I would say, more than half the market that is already selling into the closed - loop space. So as we build out our capabilities, we have the proven ability to execute and deliver, and so that has given us the right, if you will, to move into the closed - loop market fairly quickly, winning some deals, locking down contracts, and really building out the whole operation in late last year. And, ultimately, we believe we are going to have a decent growth out of that in 2026.

Q: So, John, when I look at my wallet, I am seeing new cards from Chase, Wells Fargo, and Fidelity, provided by CPI Card Group Inc. These are large issuers. Now I am not asking you to comment about any of these specific large issuers, but I am sure there are probably others. Can you maybe just give us a high - level commentary on, you know, these customers that I do not think you did a lot of business with over the last several years? Are you seeing an increased capture rate with large issuers? You know, what was the contribution, if you could give us color, on the 40% growth there in debit and credit from large issuers?

A: Yeah. Craig, thanks for the callout. We will be happy to have you on our marketing team anytime you want to join. But, no, in all seriousness, the largest—we are based—I mean, we have said this over time. We work with about half of them. You know, you mentioned a couple different names there. One of those we are actually doing metal with as part of our metal growth. I will not name names, but—so very positive in terms of our relationships we have with the large issuers. We have been growing share over the last, I would say, five years with the larger issuers. But I would not comment specifically on their growth rates in Q4 or 2025. What I would say is just broadly the larger players in general. So go beyond the large issuers that are the names you are thinking of. Think of the credit union service organizations. We mentioned Valera this morning, that we signed another four - year deal with. Think of the large processors out there. There are a number of partners that we have that are fairly large that we also have been growing share with. And so we are excited about our position in the debit and credit market. Our Secure Card Solutions side, between our card production, our personalization business, the acquisition of ArrowEye, really gives us a unique value proposition and allows us to continue to execute on our strategy and win share not only in the large issuer market but in the broader FI, fintech, and other markets.

Q: Hey. Questions on CapEx. CapEx was up, you know, from $8,000,000 to in the high teens. You said it is going to be similar to that in 2026. Is this a number we should expect going forward, or is this a number that might come back down after, you know, a two - or two - year investment period.

A: Yeah. That is a good question, Hal. I would say it probably will come down in the outer years. It has grown, you know, quite a bit in 2025 as we built out closed loop. We built out Indiana. But I would say it is more on the physical side in 2025 than more on the digital side in 2026 and what we might expect in coming years. But, Tara, do you want to add to that?

A: Yeah, just to add to that, we did spend about $5,000,000 in CapEx in 2025 on our new factory in Indiana. So that is going away. But we are replacing that with higher investments in our technology spend. So that is on the CapEx side to the growth of our Integrated PayTech business and also to help upgrade some of our other technology as well. I will say that even with that CapEx spend, we are expecting similar cash flow conversion in 2026 as we had in 2025. So we are happy to be investing in the business and continuing to convert on the cash flow side as well.