CPI Card Group Inc.

Welcome to CPI Card Group's fourth quarter 2024 earnings call. My name is Julianne and I will be your operator today. If you are viewing on the webcast, you may advance the slides forward by pressing the arrow button. The call will be open for questions after the company's remarks. If you would like to get in queue for questions, please press star one on your telephone keypad. To withdraw any questions, press star one again. Now I'd like to turn the call over to Mike Salep, CPI's head of investor relations.

Thanks, Operator. Welcome to the CPI Card Group fourth quarter 2024 earnings webcast and conference call. Today's date is March 4th, 2025, and on the call today from CPI Card Group are John Lowe, President and Chief Executive Officer, and Jeff Hochstaff, 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 and 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 FCC. 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 to 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-K for the year ended December 31, 2024, will be available on CPI's investor relations website. On today's call, all growth rates refer to comparisons with the prior year period unless otherwise noted. The agenda for today's call is on slide three. John will give a brief overview of business performance and our strategies. Jeff will provide more detail on the financial results in our 2025 outlook, and then we will open the call for questions. We can start on slide four, and I'll turn the call over to John.

Thanks, Mike, and good morning, everyone. Overall, we are pleased with the fourth quarter results and what we accomplished in 2024. Looking back on my first year as CEO, there are several important areas I would like to highlight. First, we refined and advanced our strategy, maintaining our emphasis on customers and quality, while also increasing our focus on innovation and diversification. This includes intensifying efforts to expand into adjacent markets by providing new offerings for our existing customer base and delivering existing solutions to new customer verticals. We also enhanced the management team, promoting from within to balance our leadership, talent, and skills, and bringing in outside expertise to support our next stage of growth. And we delivered good results, returning to growth despite the channel inventory challenges in our debit and credit card business. Our prepaid business produced exceptional performance, growing 26% for the year and exceeding $100 million in net sales. This growth was driven by strong demand for our packaging solutions focused on fraud prevention and expansion of one of our adjacencies, the healthcare payment solutions vertical. Our debit and credit business increased 4% for the year. with strong growth in the second half, led by sales of eco-focused contactless cards. In addition to our recovered ocean-bound plastic and other more environmentally friendly debit and credit card offerings, we are also seeing strong market response to our eco-focused offerings in the prepaid space. In total, we have sold more than 350 million eco-focused credit, debit, and prepaid card or packaging solutions since launch, with prepaid contributing more than 200 million of these and certification in 2023. Overall, we continue to win business across our portfolio in 2024 and believe we gain market share during the year. We also generated strong free cash flow, exceeding $34 million for the full year while increasing our capital spending investments. And we completed several key capital structure actions during the year that we believe enhance our market positioning. We purchased $9 million of stock at an average price of just over $18, which we view as a strong investment for our shareholders. We refinanced our debt, including issuing $285 million of new senior notes that extended our debt maturities to 2029. And we completed a 1.4 million share secondary offering of common stock on behalf of our majority shareholder, which reduced its holdings from 56% to 43% of shares outstanding, increased our public float, and brought in new shareholders. Turning to our 2025 outlook, we currently project mid to high single-digit net sales growth for the year, led by our debit and credit business, which reflects our goal to continue to gain market share. We believe the channel inventory situation is much improved, but it's still above historical levels, and we expect the market to continue to normalize during the year. We expect adjusted EBITDA growth of mid to high single digits in 2025 as well, which reflects increased investments for the future, including for our innovation and diversification strategies. We also expect to generate strong free cash flow and reduce net leverage by year-end. Jeff will provide you more detail on our results and outlook in a few minutes, but first let me highlight our strategy on slide five. Our vision is to be the most trusted partner for innovative payments technology solutions. We aim to support that vision by providing market-leading, high-quality payment solutions and best-in-class customer service. In managing our business, we focus on four main strategic pillars, customer focus, quality and efficiency, innovation and diversification, and people and culture. Our focus on the customer is evidenced by our net promoter scores, where we have consistently ranked high relative to peers and continue to get better. The innovation and diversification pillar includes our efforts to expand our addressable markets by offering new solutions to existing customers and existing solutions to new customer verticals. We have already made significant progress in advancing these expansion strategies, including increasing our addressable market through offerings of healthcare payment solutions, which contributed to our strong prepaid growth in 2024. The new areas we have entered have increased our total addressable market from $1.5 billion related to our traditional core businesses to approximately $2 billion, and there is more opportunity to come. For example, We are in the early stages of investment to support the penetration of the closed-loop prepaid market in the U.S., where many customers are shifting to higher-value secure packaging solutions due to regulation or proactive moves to combat fraud. And we continue to advance our digital solutions, such as push provisioning for mobile wallets, with more integrations and implementations underway with additional mobile banking app providers and platforms, as we continue to make our services more available to the broader market. While new solutions generally take time to gain adoption and turn into meaningful revenue, these opportunities leverage existing strengths, and we believe they will allow us to further expand our total addressable market in the future. We also remain confident in the long-term growth of our traditional markets as payment card issuance continues to grow in the US. We are stepping up investments in 2025 to take advantage of these opportunities through both CapEx and OpEx. This includes investment in our Indiana factory, for developing digital solutions and closed-loop prepaid capabilities, among other initiatives, as we balance generating strong profitability in the near term with accelerating our long-term growth. Overall, we expect 2025 to be a good year, and we also plan to make strong progress on our various market expansion initiatives. I would now like to turn the call over to Jeff to review our financial results and outlook in more detail. Jeff?