CPI Card Group Inc.

and welcome to cpi cards group's third quarter 2022 earnings call my name is sam and i'll be your operator today if you are viewing on the webcast you may advance a slide by pressing the arrow buttons this call will open for questions after the company's remarks if you'd like to get in the key for questions you can register a question by pressing star follow by one on your telephone keypad and now i'd like to turn the call over to mike salop cpi's head of investor relations to begin mike please go ahead thanks operator and good morning everyone

Welcome to the CPI Card Group third quarter 2022 earnings webcast and conference call. Today's date is November 3rd, 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 Form 10-Q for the quarter ended September 30, 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 Shireman.

Thanks, Mike, and good morning, everyone. During today's call, I will provide an overview of CPI's performance in the third quarter, update our 2022 expectations, and review our long-term strategy. Amateur 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 had an outstanding third quarter with strong sales growth across our portfolio, which generated operating leverage and significant increases in profitability. Net sales increased 25% to $125 million, our third consecutive record quarterly sales level, led by 31% growth in our debit and credit segments and 8% growth in our prepaid debit segments. Our debit and credit business was again driven by strong growth from higher price contactless cards, but we saw good increases across our portfolio of solutions. Card sales growth in this segment resulted primarily from unit volume increases, as more than 85% of secure card growth was due to volume, with remainder from higher average selling prices due to price increases and favorable mix. We sold 7 million EcoFocus cards in the quarter, increasing our total to approximately 85 million cards sold since launch in late 2019. As we mentioned last quarter, EcoFocus card sales will vary by quarter based on deliveries of large customer orders, but demand for our recovered ocean-bound plastic card offering remains very strong. Our sales growth generated strong operating leverage, with net income increasing 80% to $12 million, and adjusted EBITDA increasing 32% to $28 million in the quarter, despite inflationary impacts on production costs. Given these results and ongoing strong customer demand for our portfolio of innovative solutions, we have again increased our full-year financial outlook. We now expect net sales growth for the full year to be in the low 20 percentage range, up from high teens in our previous outlook, and adjusted EBITDA growth in the high teens, up from low double digits previously. We continue to expect our full year adjusted EBITDA margin to be slightly below 20%. This is shaping up to be another strong year of double digit top line and bottom line growth for CPI despite the global macro challenges. Turning to slide five, we believe the strategies we have been executing for the past several years allowed us to deliver strong results and continue to position us well for the future. Our ongoing strategic priorities include deep customer focus, market-leading quality products and customer service, continuous innovation, and a market-competitive business model. Some of the successes we experienced in the third quarter resulting from our strategies including leveraging innovative packaging solutions to win more business from existing prepaid customers and meeting the needs of fintech customers for print-on-demand services. We also continue to be a leader in the U.S. EcoFocus card solution, a fast-growing area that is expected to have strong adoption over the coming years, and software-as-a-service-based instant issuance solutions for small and medium financial institutions. Our focus on customer service has resulted in deep and longstanding relationships with financial institution issuers of all sizes, bank platforms and resellers, prepaid program managers, and FinTech. The strategic emphasis on operating a market-competitive business model encompasses driving efficiency and productivity throughout our business, with ongoing process improvements, operational automation, and technology and equipment advancement. This emphasis has helped contribute to our 2022 results, as we are delivering record sales levels despite supply chain challenges, a competitive labor environment, and inflationary pressures. Customer demand has been very strong but we would not have been able to deliver against it without the improvements we have made in our business. Statistically, we have invested in equipment and technology and made process changes that allowed us to increase our secure card capacity by nearly 50% this year. We've also worked to reduce customer lead time from the high levels prompted last year by supply chain disruptions, which have affected the entire industry. To summarize, our strategic priorities have contributed greatly to our success, driving sales growth, market share gains, and operating leverage, and we will continue to focus on these areas moving forward. Now I will turn the call over to Amitur to review our third quarter results in more detail.