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spk_0: welcome to see the i cuts groups fourth quarter twenty twenty two earnings call my name is clean and i'll be on the operator today if you're willing onto that cause you may have plans to slice while it by pressing to buttons the call will be open for questions after the quickly brief remarks if you like to get into queue for questions county press star all about one on tap on keep it now i would like to turn a call over to make fallon sleepy ice helping mathematicians mike
spk_1: thank operator a good morning everyone welcome to the think i card group fourth quarter twenty twenty two or were and conference call it a dated march eight twenty twenty three non the call today from ppl park group or scott chairman president chief executive officer and amateur cycle chief financial officer before we begin like to remind everyone that com they contain forward looking statements that they are defined and the private security litigation reform dept of nineteen ninety five it statements are subject to certain restaurants or did they could cause actual results to differ materially note expressed in the forward looking statements or it doesn't have such risk and uncertainty please ppp i could smoke sweeper falling into the sep a forward looking statements make it a reflector current expectations only and we undertake no application that take any statement to reflect the events that occur after the call also during the course of do they call the company will be getting one or more non get financial measures including but not limited to he better adjusted but that adjusted ebitda margin that leverage ratio and precast them i can tell you some of the non get financial measures that the most most directly comparable gap measures are included the gradually and slide reputation with you this morning happy that at a press release his wealthy the presentation that accompanies the carpet cop or accessible on pp i think that to relations website investors that i kartik that come in addition pp i want him cape we're in december thirty first two thousand twenty two will be available on if he hadn't better relations with like an hour like trying to collaborative hasn't did chief executive ah officers got ironman they might and good morning everyone during today's call i will discuss it gets performance and twenty twenty two of i thought that are initial outlook for twenty twenty three and reiterate our long term strategy i or or view i guess we're both more detail and then will open up the call for question we'll start a slight for what is twenty two with a great year for cpr we increase sales twenty seven percent for the four year to a record level four hundred and seventy six million dollars and we believe we gained significant overall market share we grew adjusted ebitda twenty eight percent to ninety eight million dollars an increase be adjusted ebitda market slightly to twenty point five percent despite significant inflationary impacts on cough we also improved our that leverage ratio twenty twenty two ending to hear it three times and retired twenty five million dollars principal on our senior secured notes during the year and we ended twenty twenty two and a hideout with fourth quarter death failed increasing thirty six percent and adjusted ebitda increasing our hundred percent as we look back on twenty twenty two there are four main drivers that were critical to our success first with are differentiated innovative products and services and in the end solutions jacket or market leading quality and customer service bert are strong supply chain execution while the industry face challenges and forth we benefited from a strong wrote year for the card markets in the us are differentiated and insulation reading quality and customer service and strikes the pike and execution eight contribute meaningfully to our marketshare games one example with are innovative ecosoc with cards which posted a seventy percent increase in sales for the year led by our cards made with recovered ocean bout plastic core we sold more than forty million equal focus cards and twenty twenty two thing in our or had more than ninety million sold since the launch in mid twenty nine paid another example is are differentiated software as a service instant issue and solution card at once which were delivered another excellent year wrote with driven by new customer installation broad printer upgrade failed and ongoing services rapid it at the end of the year card it with inflation across the us all the more than fourteen thousand and customer locations across your portfolio or market leading quality customer service helpless gain more business with existing and new customers including a prepaid where he added new customer type be out the traditional retail channel in addition we were able to sit next to expand your car production capacity during the year make has really answer to fill the man in the market and we believe our strike execution supply chain including proactive inventory management during the here while the industry was challenged also allowed it to gain more business and twenty twenty two as you may recall we enter baster withdrawn customer demand that face significant supply chain and labor shortage challenges and the impact of inflation on our caught with escalated i'd like to thank all of our employees for their dedication and effort to tackle those challenges
spk_2: and deliver a record year
spk_1: exactly increasing capacity navigating global supply chain and serving our customers before descriptor twenty twenty three outlook i would like to person personally think i'm into or shank for his strong contributions for a success during cpr i'm a toward has informed as you will be leaving the company this year due to family related personal reasons but will stay on while we searched for his replacement the help transition the news the cold was named in addition to his role in helping us dry profitability and improve our financial position i'm a tore his letters towards successful fox compliance and further develop our financial organization leaving us with a strong financial pain i'm a torrent get some remarks and a further finance review and a few minutes but first let's turn to our twenty twenty three outlook on flight five or twenty twenty three were focused on concealing the attitude on our strategies grow the business when share in the marketplace increased cash flow and reduce leveraged we believe we are well positioned to continue to gain overall market share and twenty twenty three with our portfolio differentiated solutions and market leading quality and customers service we anticipate continued benefited from the ongoing transition to contact with cards more progress on providing in the and solutions to small and medium sized issuers and further instant issuance penetration our additional financial outlook for twenty twenty three projects met single digit growth for that sales but higher expected net sales growth and are debit and credit segment which comprise eighty two percent of net sales last year and prepaid debit segment that failed said no to the twenty twenty two levels net sales outlet reflect the expectations for smaller market growth and twenty twenty three and last year benefited from robust customer demand we anticipate issuers being more classes regarding us economic environment i remembering spending and orders at best that the consumer trams and their own inventory levels and potentially and creaking credit underwriting standards debit cards which today make up the majority of the market and to be less affected by economic conditions doric way around ninety percent a payment card issuance is for reassurance and replacements so we still expect the market to grow a girl but not as strong as twenty twenty two up with a challenging comparisons with her twenty twenty two performance as the twenty seven percent net sales growth last benefited from significant contributions by large portfolio additions of existing customers particularly eco progress cards a strong card at once printer upgrade fails as we did last year will remain dembele and ready to adapt at the market and economic conditions of all and customers plans change and the profitability by we expect adjusted ebitda growth for twenty twenty three and then bed for high single get your range despite continued inflationary impact on cause as we managed expenses tightly and achieve more operating leverage and are debit and credit segment will also focused that significantly increasing free cash flow and reducing our net leverage ratio which homage world scott and a few minutes overall effect continued share gain power grow another strong urging here in twenty twenty three as we continue the momentum we have established over the past few years now that turned to fight back to discuss our long term strategy over the past five years we have consistently focused on for key strategic priorities each customer focus
spk_3: market leading quality products the customer service
spk_1: and tenuous innovation and a martyr competitive business model except for asked to snippy strategy have allowed to gain market share rate and expand market leadership and key categories and deliver strong financial results and two thousand and seventeen where the cheap compounded annual growth rate of sixteen percent in that fail and thirty three percent and adjusted ebitda over the same period we have a creek gross margins from thirty percent to thirty seven percent and reduce that leverage from over twelve times to three times at the end up twenty twenty two i'm example but strategy success and twenty twenty two as mentioned earlier include winning new business with are innovative a cookbook his cards and prepaid solutions expanding our fast pace is an issue distribution providing personalization and print on demand solutions for pentax and enhancing or market competitive business model to improve capacity and reduce customer time falling supply chain driven spikes throughout the industry at the end of twenty twenty two we reorganized are structured to help us better execute our strategy going forward pathetically we're like secure parts or salvation and it's an issue it's under one later which we believe will optimize our ability to focus on providing ended in solution for customers we are created that leadership position dedicated to creep eight and a position focused on new growth opportunities including new product and business development and digital solutions a new product and business examples include providing prepaid payment cards for non retail channel as just our health savings accounts and the support businesses that need to provide been to get workers and contractors were also exploring opportunity for instance issue and solutions beyond financial institution locations that's just with retailers it's summer i actually teach our strategic priority has contributed greatly to our success over the past five years writing fails growth marketshare game product diversification and operating leverage and we believe there are many opportunities to further expand operating and capabilities and drive growth and the years to come now i will turn the color gamut or thank you or fourth quarter and full year twenty twenty two result in more detail i'm at work thank you god and good morning everyone i will begin mile the landslide eight fourth quarter net failed a three thirty six percent to one hundred twenty six point four million dollars compared to the prior quarter with strong growth across are gathering credit portfolio in a prepaid the debit and credit segment that failed in three thirty five percent withdraw contributions from contact with color purple day conservative current ones and been issued solution and various other products prepaid debit segment that failed in three thirty nine percent compared with the prior year driven by new customer addition outside the traditional retail chain of and growth with existing customers what quarter gross profit or forty seven point five million dollars a creek fifty four percent from the prior year what wrote profit margin increased from thirty three point two percent to thirty seven point six percent bringing by offering leverage from sales will include benefits and price increases partially offset by the impact of inflation up production car primarily on the tools to us as dna and the decreed by proxy trillion dollars in the corner compared to the prior year family to support a growth and strategic execution this included approximately three million dollars of treat compensation expenses would like higher headcount and higher salaries partially offset by a reduction in stock compensation expense of five hundred thousand dollars our tax rate will likely point four percent in the coil it it's a fable adjustment items related to unrecognized tax benefits as they had settled which brought up for your way to twenty five point seven percent the fourth quarter late with down from sixty two point three percent in the prior quarter which included unpayable adjustments related to stay check and uncertain pack edition items we projected tax rate of slightly less than thirty percent for twenty twenty two the excluding any adjustment items that may arise net income and fourth quarter increase from seven hundred thousand dollars in the prior year to twelve point five million dollars twenty twenty two and a jet to the bitter a priest one hundred percent to twenty seven point two million dollars i just read the rj improved from forty six percent in the prior year to twenty one point five percent driven by offering leverage from the slog things including price benefits turning out here a year to date me to about on slide net sales for the for your recollected level one hundred seventy five point seven million dollars a twenty seven percent increase compared to the criteria by stagnant every credit segment sales a creek thirty two percent and prepaid debit segment a creep nine percent that many credit sales will not benefit from strong sales a contact with cars including large orders for eager focus cause a project seventy five percent our secure card wine and twenty twenty two which record tackles cause up from just under seventy percent and twenty twenty one we estimate contact with penetration for the us market and twenty twenty two at about fifty to sixty percent of college in circulation they continued expect the level to grow to more than eighty percent by twenty twenty five we off spread stronger than twenty twenty two from card at once it's an issue and solutions which represented just under ten percent of total catholic games and get road from personalization services contact college and other products a prepaid with back to the challenging year twenty twenty two at the previous year benefited from significant retail is utterly him and he didn't have a large new customer portfolio back to a very stop what were we able to grow the prepaid business nine percent or twenty twenty two to another record level driven by growth million existing customers and pricing kansas overall pricing amounted to a low single digits contribution to the nice twenty seven percent well for the year and to the growth of each said for secure cars eighty percent of field school with dw with your main do the next from the conversion to contact with and pricing for your gross profit of one hundred seventy five point eight million dollars and creep twenty four percent from the prior year like wrote profit margin decreased from thirty seven point seven percent to thirty six point nine percent didn't play canary impact on production costs primarily material partially offset by offering lavish including the benefit the price increases after an expenses and creep back rugby fifty nine dollars for the four years primarily due to approximately eight million dollar to increase propagation expensive and approximately point five million dollars a female professional services car the computation advance increase reflect increase had counted valley at one of the truck me too many dog of additional star compensation partially offset by fucking one nine dollars at lower severance expense for your net income increased one hundred twenty nine percent to thirty six point five million dollars primarily due to the sales growth and the impact of that written and costs incurred and funny twenty on for school though i just read either crease twenty percent to ninety seven point seven million dollars while you get leaving to more arjun increased from twenty point four percent in the prior year to twenty point five percent and twenty twenty two the increase in adjusted ebitda with driven by sales girl and the resulting operating leverage partially offset by increase production and asking in a car sure out or segments thoughts like him i mention the segment sale drivers are all several just discuss segment pop billy on the boy hm from operations for the debit and credit segment increased sixty eight percent in the corner to thirty one point two million dollars driven by the higher in have failed and operating partially offset by higher production costs primarily materials so the foyer debit credit segment a trump an operation that three thirty percent driven by the same factors at the poor poor prepaid debit segment income from operation a three thirty five percent in the fourth quarter to five point two million dollars driven by higher net field and offering leverage these benefits were partially offset by a great operating expenses which also draw the prepaid operating margin decline in the corner for the foyer prepaid debit segment income cooperation between five percent primarily due to the inflationary impact on production from what the majority of the impact of materials in an increase our brings bounces partially offset by higher sales including the benefit of price increases turning to the balance sheet liquidity careful on flight eleven we continue to straighten up in a position to twenty twenty two any the year with in net leverage ratio three times we generated thirty one point three million dollars cash from are pretty activity during a year and abetted seventy point nine million dollars i capital expenditures which was open and free cash flow thirteen point five million this was an increase from the ten point two million dollars at a check for generating the prior year period despite significantly increase capital spending twenty twenty two and prairie benefits of nine point eight million dollars related pack casually funds accounts receivable bound increased twenty million dollars or twenty twenty two good strong sales were within the forecourt inventory increase ten million dollars during the year as a manager business with poor captain the man and a challenging supply chain environment although we reduced inventory four million dollars compared to and of the third quarter and the fourth quarter regenerated strongly casual a sixteen point three million dollars on the balance sheet at december thirty first we had eleven million dollar the cash and five million dollars ball and outstanding on or seventy five million dollar a be our we had three hundred eighty five million dollars a few secured notre dame year and and were deemed twenty nine dogs and notes in the first quarter of twenty twenty two and repurchase an additional five million dollars in the open market in the fourth quarter subscribe to year and we were purchased another five million dollars and note and the open market in the first quarter twenty twenty three our capital structure and allocation priory we make progress on maintaining apple liquidity investing in the business and included of strategic acquisition the leveraging the balance sheet and potentially returning punts to stockholders what the priorities we continue to target furthermore going on that leverage ratio the time similar the last year she the working capital needs may increase met leverage in the early part of twenty twenty three or we do expect the ratio to improve on a quarterly year and and the year between two point five and three times to reiterate our outlook for twenty twenty three weeks back sales growth in the mid single digit range gaining share any slower growth market which back adjusted even a good in the mid to high single digit rage at we manage expenses tightly while still battling for the future and ride more operating on the try given credit second we expect for casual conversion and week project free cash flow to more than doubled from the thirteen point five million dollars generated twenty twenty two at all is our first priority is to serve customers sub business needs the supply chain environment changes we may prioritize additional inventory worthless but our current outlook with strong working capital improvement and more than doubling free cash flow what they're free cash flow we expect capital spending to be somewhere the twenty twenty two levels and respect improve or net leverage ratio to somewhere between two point five times and three times by year and through even to grow and net debt reduction we delivered regularly long for twenty twenty two and further strengthen up on here to position and we picked another year program and financial permanent twenty twenty three despite the more challenging environment i'm also pleased to be able to give you an update on a thought that it based on the result of our most recent evaluation of been determined that internal control financial reporting is effective as of year and twenty twenty two and the previously disclosed mature weaknesses have been on mediate we have devoted significant time resources to threatening our positively controls and are pleased are completed the remediation finally got mention i will be leaving cpr this year due to personal family reasons i am proud of the campus with we have achieved and results we haven't delivered since i joined the company we withdraw financial team in place which is well prepared to get funny picture leading to the tropics success and i intend to stay on board to ensure there's an orderly transition to the me fearful as we look to the future i the copies well positioned to execute strategy to bracketing you grow and financial improvement i will now have to call back to go with and closing remarks on flight well scott they found mentor it's a twenty twenty two with outstanding year for cpr we delivered strong sales profit growth countering inflation and supply chain challenges we believe we continue to gain overall market share and a growing market we continue to provide innovative solutions and product enhancements deliver high quality and customer service and further diversified a product portfolio we made investment and process improvements to increase capacity advance our capabilities and we improved our balance sheet and financial position or twenty twenty three are focused on consenting to execute our strategy robot business when share in the marketplace crete cash flow and reduce leverage
spk_0: thank you for joining a club today and will now open up the call for question thank you right now open to call for your questions if you like to ask a question please press start on upon one on tap on keep up now
spk_4: when asking a question please ensure your phone is a milton know county
spk_2: with office question was jason smith from the extra capital g july is now open
spk_1: hey guys this is max on for james and congrats on the really strong quarter i'm just what's jump into the guide in tears or revenue outlook of mid single digit was wondering i know years them god quarterly but i was wondering if you could help me maybe with the when the energy throughout the year is second half waited or is more balanced throughout the year ah good morning back this is that cast iron thanks for joining our call today you don't we're we're confident with our guidance riley reid and don't break it into a quarterly or color from that standpoint i mean you can it depends on customer demand and and some other factors but i would feel wrong maps
spk_5: we we're very pleased with twenty twenty two we believe are well positioned in twenty twenty three and longer term to continue to gain share and can grow
spk_4: in dark continent with the guidance and where we're headed
spk_0: i thank you and then
spk_1: so prepaid debit looked caught flat for twenty twenty three is is a function of slower customer addition to grow up with in cause existing customers or maybe i'll keep going to help me out with a prepaid debit between twenty three yeah well we really like that business on the and and twenty twenty two week we had a bit of a stronger than we anticipated revenues rep nine nine percent so i in the fourth quarter in particular was wrong so i just given birth it's have come from twenty twenty two
spk_4: do i you know we're gonna call twenty twenty three flattish you if you will but again we been through a lot of opportunity in that business to grow long term and also just and different use cases with prepaid whether it's for our health savings accounts
spk_1: are supporting the the gig economy so they're the don't think that we're looking at you know just beyond the reach channels where we traditionally partake them i think you in in the last one from me and helped them back and you are just given the macro supply chain can you help me out what given you guys carbon into that can secure why maybe some put the take their thank you yeah it again we we work closely with with our suppliers you know at the end of the day we we are reliance on family like a strike on south partnerships with one of our primary ship suppliers we've reached into a long term reached our inner into a long term supply agreement
spk_4: which gives us more comfort that we are gonna have bad ships as we move forward again they have to perform mac as you can expect but i you i've been are strong supply chain team and and working closely with our partners and benders i you know we we feel like will have the supplying a we need to
spk_2: come forward and and serve our customers well
spk_6: and i thank you and your up on the shrunk oregon
spk_0: the i think mac thanks for joining the call it it thank you matt actually my the ladies and gentlemen if you like to ask a question please press staff and about one on pack on keepin now
spk_7: my be trying to ask your question please ensure you from the some you can look me
spk_0: with our next question comes home for sockeye steamboat capital on your lifestyle open okay great you are congratulations on a good quarter guys are scott a just a couple questions for you i guess i'll start with the kind of the investor awareness on the company
spk_1: as you know your primary a publicly traded competitor ah recently got picked up for coverage by from cold compass points another other covered by jp morgan campus point ah need i'm ann beattie to our interest or how many of these animals have you guys reached out to to see if they would be interested in picking a computer be a company yeah i'll let you know we've been working very hard on it or not investor relations program and hypocritical priority for us or between reaching out to a potential analysts attending conferences with working really hard about might say look has done a terrific job and michael that you get some color commentary of the things you've been not working on to yeah personally a year where we we talk to you
spk_8: many firms with the alice really going against and they were hoping to get additional coverage of in the future
spk_0: ah obviously comparison with other companies are challenging and some some elements are just hadn't crypto some analysts may have done particularly confirms me up it is a in turn to actually put those companies that work we're talking to sagal animals
spk_7: he noted
spk_0: you think comparisons with this company or or rather than not as difficult kid in that video her are roughly the same size and on a similar margins to in summer leverage i'm very similar product line and the earnings contribution or almost entirely from not hard man so i think the comparison is rather act and i would suggest that you you guys have done a great job getting will leverage
spk_1: where it needs to be providing conservative guidance getting your numbers would your stock is very erratic as you are obviously aware he had that period last month where think in today's your stock so maybe twenty six twenty seven percent on absolutely no news i think it does your shareholders
spk_9: a service when you're stuck exists in a vacuum of this nature whereas i think with these for analysts that were mentioned in addition to lake street you can have more and didn't get more attention if you get more focus on the company and you can allow
spk_10: an orderly share price so that if someone that wants to come in or to come out they could do that and more reasonable price
spk_1: or or doyle originally we don't have yeah go ahead i of it
spk_11: yeah it or that you know any repeating repeating we we don't disagree with you i agree gates with many analysts is a lot of things we go into analysts coverages you know
spk_7: but you know we're attempting to get more coverage and more awareness of the stock and will continue working on it look at ah
spk_1: another question for his research on can you elaborate further on what what would it take for you to expand into the premium medals card just given the margins that your your competitor in that space has why this is not and it something that at least should be attended by the company yeah i would say at that a couple things ah you know first we'd been ah regular focused on you know for five team market segment and if you look over the last five years i think we've been incredibly successful about with revenue growing at a sixteen percent khader from seventeen to twenty two even a growing at a thirty three percent cake during that time period you know our leverage are you pointed to have gone down from over twelve times to have three the time so i think the area that wheat really focused on our we continue to gain share and we gained significant share over that period of time with the middle card segment are heavy carve we do our cake and that it's it's not a major revenue source obviously for us but we continue to have some product offerings are we generate some revenue from that
spk_0: that is a you know a different line of our investments are significant investments that we need to be made and just trying to balance investments with investing in other areas where been very successful and also paying down our down so it's just the about that we have to move forward
spk_1: and we think we got the right strategy that to move forward to continue to properly again share
spk_12: okay
spk_1: okay and lastly on what is the incremental capital expenditures on it being used for can you give us a little color as the know when you look at seventeen million of callbacks what is what is the breakdown above what is the kind of needed to operate the business yeah i'm at our let you go ahead
spk_7: and answer that
spk_13: yeah yeah we would all like provide a specific breakdown
spk_7: as it relates to those i had his but you're clearly as we think about kind of the expenditures that we have the capital you know typically always a max out on making sure that our capitals a current or equipment state correct but then also been on weapon for all future items as well you know one thing that we know that are pretty good
spk_14: lee is that you know we get a free our ability to produce by fifty percent during twenty twenty two and that was definitely reason for some the increasing in the capital span that you know as you might imagine them a bit the ball there's also the new that has to take place as as time goes on as well
spk_0: look at the moment orca thank you for your contribution and good luck with everything on and else be the gentlemen know shortly offline don't get thank you for type thank you yeah
spk_1: thank you
spk_14: as a reminder ladies and gentlemen if you like to ask a question please press star for about one on happen keep her now
spk_0: we have no further questions on the comments
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