CPI Card Group Inc.

Hello and welcome to the CPI Card Group's second quarter 2022 earnings conference call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you may press star 2. If you're joining us via the webcast, you can move the slides independently by using the arrow keys on your keyboard. I would now like to hand over to our host, Mike Salip, Head of Investor Relations. Mike, over to you.

Thanks, Operator, and good morning, everyone. Welcome to the CPI Card Group second quarter 2022 earnings webcast and conference call. Today's date is August 8, 2022, and on the call today from CPI Card Group are Scott Shireman, President and Chief Executive Officer, and Amitur Shankar, Chief Financial Officer. Before we begin, 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 discussion of such risks and uncertainties, please see CPI Card Group'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 the events that occur after this call. Also, during the course of today's call, the company will be discussing one or more non-GAAP financial measures. including but not limited to EBITDA, adjusted EBITDA, adjusted EBITDA margin, net leverage ratio, and free cash flow. Reconciliations of these non-GAAP financial measures, the most directly comparable GAAP measures, are included in the press release and slide presentation we issued this morning. Copies of today's press release, as well as the presentation that accompanies this conference call, are accessible on CPI's investor relations website, investor.cpicardgroup.com. In addition, CPI's Forum 10Q for the quarter ended June 30th, 2022, will be available on CPI's Investor Relations website. And now, I'd like to turn the call over to President and Chief Executive Officer, Scott Shearman.

Thanks, Mike, and good morning, everyone. During today's call, I will provide an overview of CPI's performance in the second quarter, update our 2022 expectations, and review our long-term strategy. Amit will review the quarterly financial results in more detail. and then we will open up the call for questions. We will start on slide four. We continued our strong start to the year with second quarter sales increasing 22% to $113 million, another record quarterly sales level driven by strong customer demand across our business. Second quarter sales growth was led by our debit and credit segment, which increased 29% and included strong contributions from contact with cars, including EcoFocus cards and our software-as-a-service-based Card at Once instant issuance solutions. We sold more than 18 million EcoFocus cards in the quarter, led by our recovered ocean-bound plastic offering, increasing our total to nearly 80 million cards sold since launch in late 2019. Although the higher average selling prices of contactless cards benefit our revenue and continue to be an increased part of the mix, the majority of our card sales growth in the quarter was due to unit volume increases. Our SaaS-based instant issuance solution, Card at Once, was also a major growth driver for the debit and credit segments in the second quarter, as small and medium-sized financial institutions continue to desire our plug-and-play solution. Prepaid segment sales declined 6% compared to the exceptionally strong performance in 2021, which benefited from a significant new portfolio addition and retail inventory replenishment related to COVID impacts. Based on first half results and anticipated orders, we now expect 2022 full-year prepaid sales to be similar to the 2021 record level. Adjusted EBITDA increased 2% to $20 million in the quarter as the strong sales growth offset continued inflation impacts on cost. Our objective is to pass on inflationary cost increases when possible while maintaining strong customer relationships for the long term. Based on our strong first half performance driven by the exceptional sales growth and our visibility for orders for the rest of the year, we are again increasing our full year outlook. We have increased our net sales growth outlook for the full year to high teens, which is up from our previous outlook of low double digits. as customer demand remains strong and we expect to have inventory supply and production capacity to reach these levels. We are also increasing our adjusted EBIT expectations to low double digits, up from mid to high single digits in the previous outlook, while we continue to expect our full-year adjusted EBIT margin to be slightly below 20%. Current inflationary pressures are affecting margins for us as well as other companies, But we believe in more normalized times, sales growth should lead to further operating leverage, and we remain focused on having a market competitive business model and driving efficiencies over the long term. So we anticipate 2022 to be another very good year for CPI as a combination of market demand and our high-quality, innovative solutions is leading to healthy double-digit growth expectations for both sales and adjusted EBITDA. Turning to slide five. Before Amator goes into more detail on financial results, I would like to review the strategic priorities we have in place that are critical to our success. As noted on slide five, these strategic priorities include deep customer focus, market leading quality products and customer service, continuous innovation, and a market competitive business model. The implementation and execution of these strategic priorities has led to significant gains in market share and we believe we have become a U.S. market leader for eco-focused cards, personalization, and instant issuance solutions for small and medium-sized financial institutions and prepaid debit card solutions. We've built deep and long-standing customer relationships with financial institution issuers of all sizes, bank platforms and resellers, prepaid program managers, and fintechs. A particular area of strength that we have developed is our solutions for small and medium-sized financial institutions. About two-thirds of our debit and credit segment sales are to those customers as they typically need a full suite of end-to-end solutions and often want a provider that can bring program expertise and marketing and technology support. Small and medium-sized financial institutions typically work with one provider and services are often heavily integrated, so relationships tend to be very sticky. One example of CPI solutions that appeal to small and medium-sized financial institutions is our Card at Once instant issuance service. Our solution is easy to implement, easy to manage, and integrates with major card management platforms in the U.S. Providing a software-as-a-service-based offering rather than a hosted solution, has enhanced our appeal to small and medium-sized financial institutions, and our innovative solutions have helped us broaden and strengthen customer relationships. Another example of winning business with our end-to-end solutions, which includes consultation, design, production, personalization, and fulfillment, is with fintechs. Both small and scaling fintechs have turned to us to develop card programs that match their unique styles and requirements, allowing them to provide their customers with cards and services consistent with their brand and business goals. These are just two examples of how innovation, quality, and customer service have driven sales and market share growth over the last few years. As mentioned in the past, we believe we operate in healthy, growing markets, and our strategic positioning gives us strong opportunities for additional share gains in the coming years. Now I would turn the call over to Amitur to review our second quarter results in more detail. Amitur. Thank you, Scott.