CPI Card Group Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Third quarter revenue increased 15% year-over-year to a record $158.4 million.
• Net income increased 117% year-over-year to $5.0 million ($0.41 diluted EPS).
• Adjusted EBITDA increased 17% year-over-year to $27.5 million.
• Gross profit increased 23% year-over-year to $50.3 million, with gross margin expanding 200 basis points to 31.7%.
• Year-to-date revenue increased 16% to $454.6 million.
• Year-to-date net income increased 20% to $9.1 million ($0.76 diluted EPS).
• Year-to-date Adjusted EBITDA increased 11% to a record $74.7 million.
• Cash from operating activities for the first nine months reached a record $57.3 million, compared to $19.9 million in the prior year period.
• Free Cash Flow for the first nine months reached a record $46.1 million, compared to $6.1 million in the prior year period.
• Net leverage ratio decreased to 2.6x as of September 30, 2026, down from 3.6x in the third quarter of 2025.
• Balance sheet includes $15 million in cash and cash equivalents, $15 million in ABL Revolver borrowings, and $238.5 million of 10% Senior Secured Notes due 2029.

Guidance and Future Outlook:

• 2026 revenue growth guidance raised to low-double-digit growth (previously high-single-digit to low-double-digit).
• 2026 Free Cash Flow guidance raised to $50 million to $55 million (previously $45 million to $50 million).
• 2026 Adjusted EBITDA guidance reaffirmed at low-to-mid single-digit growth.
• 2026 year-end Net Leverage Ratio guidance reaffirmed toward the low-end of the 2.5x to 3.0x range.
• Integrated Paytech segment revenue growth is expected to more than double in the fourth quarter compared to the third quarter.

Business Segments and Product Lines:

• Secure Card Solutions: Q3 revenue increased 13% to $111.9 million; gross margin increased 220 basis points to 25.3%. YTD revenue increased 21% to $332.6 million, driven by contactless card volumes and the Arroweye acquisition.
• Prepaid Solutions: Q3 revenue increased 15% to $26.9 million; gross margin increased 340 basis points to 34%. YTD revenue increased 3% to $71.6 million.
• Integrated Paytech: Q3 revenue increased 20% to $23.5 million; gross margin remained consistent at over 55%. YTD revenue increased 8% to $63.0 million, driven by the TRISM acquisition and Card@Once solution.
• Arroweye Integration: Nearing completion; secured over 30 new customer wins since the May 2025 acquisition, including a top 15 issuer.
• TRISM Integration: Acquired in June 2026; performing on track with strong customer retention and early commercial wins.
• Karta Investment: Progressing with a U.S. national retailer pilot for chip-embedded payment technology; working to bring Karta's technology to the U.S. market.
• Digital Strategy: Expanded cloud-based Push Provisioning solution through new go-to-market relationships to deliver tokenization capabilities.

Market and Competitive Landscape:

• Company reported double-digit growth across all business segments.
• Management stated the company is gaining market share while executing its growth strategy.
• The marketplace is described as highly competitive, saturated, and consolidated.
• CPI serves thousands of U.S. financial institutions, processors, fintechs, and prepaid program managers.

Risks and Challenges:

• Risks include deterioration in general economic conditions, inflationary pressures, and reduced consumer confidence.
• Potential supply chain disruptions, trade restrictions, tariffs, and foreign conflicts affecting suppliers.
• Risks related to data security, cyber-attacks, and system failures.
• Substantial indebtedness and restrictive covenants governing future agreements.
• Risks associated with the successful integration of acquisitions (Arroweye, TRISM) and execution of strategic investments (Karta).
• Concentrated ownership by significant stockholders and potential conflicts of interest.

Management Commentary and Tone:

• John Lowe, President and CEO, described the quarter as exceeding expectations with strong revenue, Adjusted EBITDA, and Free Cash Flow growth.
• Management highlighted "double-digit growth across each of our segments" and "improved profitability."
• Terra Grantham, CFO, expressed pleasure with benefits from disciplined investments in acquisitions, automation, and technology.
• Tone is confident regarding the execution of the growth strategy, diversification of the business, and creation of long-term shareholder value.

Other Key Points:

• Successfully completed a secondary offering of remaining shares held by Parallel49, fully concluding their nearly 20-year ownership position.
• The secondary offering expanded the shareholder base, increased public float, and positioned the company to engage more institutional investors.
• CPI incurred approximately $1.0 million of offering-related expenses under its registration rights agreement for the secondary offering.
• Acquisition and integration costs for the quarter were $1.2 million, primarily related to TRISM and Arroweye.
• Year-to-date acquisition and integration costs were $7.1 million, mainly related to Arroweye.
• The company reassessed revenue recognition accounting in Q2 2025, moving from over-time to point-in-time recognition for certain contracts.
• CPI holds a 20% equity interest in Karta, an Australia-based payments technology firm.