CPI Card Group Inc.

Welcome to CPI Card Group's fourth quarter 2025 earnings call. My name is Kate, and I will be your operator today. If you are viewing on the webcast, you may advance the slides forward by pressing the arrow buttons. The call will be open for questions after the company's remarks. If you would like to get in the queue for questions, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Now, I would like to turn the call over to Mike Thaler.

Thanks, operator. Welcome to CPI's fourth quarter 2025 earnings webcast and conference call. Today's date is March 5th, 2026, and on the call today from CPI Card Group are John Lowe, President and Chief Executive Officer, and Tara Grantham, Interim 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, free cash flow, and net sales growth, excluding the impact of the accounting change in the second quarter. 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 2025 Form 10-K 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 can be found on slide three, and we will open the call for questions after our remarks. I'll now send the call over to John Lowe.

Thanks, Mike, and good morning, everyone. We are very pleased to report strong fourth quarter performance and solid results for 2025. a year which featured significant strategic, operational, and technological advancements. As we discussed throughout the year, we anticipated our business to accelerate in the fourth quarter, and we successfully executed to deliver that growth with a record quarter, growing revenue 22%. In addition to the contribution from ROI, this performance exceeded our expectations. We delivered strong growth across our debit and credit portfolio in the fourth quarter, driven by sales of contactless cards and ongoing double-digit growth from our software-as-a-service-based instant issuance solution. Revenue growth in the resulting operating leverage contributed to a 34% increase in adjusted EBITDA in the quarter and a 170 basis point increase in margins, and we generated exceptional cash flow. For the full year, we delivered 13% revenue growth and 5% adjusted EBITDA growth, despite more than $4 million of tariff expenses. We generated $60 million of cash from operating activities and $41 million of free cash flow, both large increases over 2024, allowing us to maintain net leverage around three times at year end. Overall, I'm proud of our team's execution, which resulted in a solid end to 2025 and significant advances with our strategic initiatives. Now, before I cover some of our significant accomplishments of 2025, I'd like to take you to slide five covering how CPI is continuing to evolve with the market and the successes we are having executing on that strategic evolution. After being CEO for two years and after nearly eight years here at CPI, I have recognized we are a company that is constantly adapting with our markets, evolving with technology, and finding new solutions for our customers in whatever forms they need. Historically, the company has been and remains a leading producer of debit and credit cards for the U.S. market, and chances are we're in your wallet. However, while debit and credit card production and personalization are solutions we focus on advancing every day, they do not define CPI or the key role that we play in the U.S. payments market. We are broader than that, with deep value in what we have built over many years and continue to build. We are a connector, an innovator, a company that educates our customers on the next big thing and how their customers can pay, and more importantly, how they can stay top of wallet both physically and digitally. At our core, our solutions help our customers win, allowing them to enable their customers to pay, whether in the form of a physical debit, credit, or prepaid card, a digital mobile wallet, a digital card, a service that provides cloud-based instant issuance or other evolving digital alternatives. To summarize, CPI has evolved into a payment technology company that provides a comprehensive range of physical and digital payment solutions for thousands of U.S. financial institutions, processors, fintechs, prepaid program managers, and more. Our proprietary platform and expertise uniquely position us to deliver today and into the future as the market expands and payment methods evolve. Our strategy is to continue providing payment technology solutions that help our customers win, driven by three primary growth pillars that underpin our value proposition. These include, first, a proprietary technology platform with a vast reach into the U.S. payments ecosystem. Second, a marketable base of thousands of deep and broad relationships across the U.S. payments market. our proven track record of delivering evolving payment solutions that reflect changing market needs. Let me spend a few minutes discussing each of these pillars, starting with our proprietary technology platform and vast reach into the U.S. payment ecosystem. Our capabilities make it simple for any customer to offer flexible payment solutions to their customers. Over more than 15 years, CPI has built a vast network of technology integrations and connections. In simple terms, We call these connections into the payments ecosystem pipes, so an issuer's payment programs can be agnostic to any service provider, maintaining their sticky, long-term relationship with CPI while offering their customers, U.S. consumers and businesses, the payment options they want. Our connections are broad and include thousands of financial institutions, fintechs, credit union service organizations, program managers, processors, core banking systems, payment brands, mobile providers, and mobile app development companies, among others. We prove this every day when we see our customers change their processor or banking core, where we simply move the pipes to maintain our relationships. CPI enables payments and informs the market once. Today, it's debit, credit, and prepaid accounts accessed via cards, mobile wallets, and apps. And while probably many years away, we may see other forms for consumers to pay gain broader market acceptance. such as crypto, biometrics, and more. CPI's platform expands with our customers' growth and their ambitions to meet market needs. Our second pillar is our marketable base. As CPI has evolved, our long-standing deep and broad relationships continue to grow. Through a robust network of thousands of customers, partners, and service providers, CPI solutions reach deep into the U.S. consumer base. As the market shifts to add new payment methods, fundamental need to securely deliver payment credentials does not change. That's where CPI shines with our reach. As consumer needs evolve beyond the physical, in complementary digital issuance and usage grows, issuers count on CPI to enable innovative solutions to meet those needs, and we've kept their trust by always delivering. That trust, built over decades, is why our customers count on CPI for their ongoing payments innovation. They know we'll execute. And if you're developing an innovative service that adds value for issuers, CPI can connect you to a broad marketable base, further solidifying our value. Our final pillar is our evolving payment solutions. By leveraging our proprietary technology platform and our marketable base, CPI has a proven track record of delivering evolving payment solutions that reflect changing market needs. Through significant investments in digital solutions, we're increasing CPI's value to customers. driving new and incremental recurring revenue streams, and expanding access to CPI's platform to enable future digital capabilities. So why are we doing this? According to a prominent study, digital issuance was the number one new capability debit issuers plan to introduce in 2024 and remain the most cited priority for 2025. And we hear the same directly from many of our customers. Additionally, we expect digital issuance to not only be incremental, but to outnumber physical cards as penetration grows. That would be positive for CPI, as we would expect digital to have greater economics than physical. Let me give you one example to demonstrate what all this means, and that's our software as a service-based instant issuance business. The value of instant issuance is not rooted in delivering a payment card. It is about enabling issuers to instantly provide account access to their customers through a cloud-based service that is plug and play for a financial institution. We spent over a decade building the pipes to deliver the service to virtually any financial institution in the U.S. We integrated with and connected to all the major players in the financial ecosystem, resulting in CPI being able to offer the service to nearly any issuer, regardless of the processor, banking core system, or other relationship they operate through. With Instant Issuance, we leveraged our proprietary technology platform provided a service to our marketable base, and evolved our solutions to provide a plug-and-play cloud-based service meeting the needs of the market. In this case, the solutions enable account access leveraging a payment card, but we have been evolving to use these pillars to provide access to mobile wallets and other forms as well, which indicates where we see our solutions going in the future. To summarize our evolving strategy, our decades-long in the making connections, people, and solutions enable payments both physically and digitally for a broad and expanding customer base, and these customers count on us to deliver what's next. CPI will continue to evolve with the market, delivering market evolution to our customers, while creating more value for our shareholders along the way. Let me take you to slide six for how we will execute and share our progress. To advance our strategy and drive long-term growth, we recently announced a new organizational structure, promoting several leaders to new roles. tightening the focus on our customers, our operations, and our digital capabilities. Along with the structure change, we are also reorganizing our reporting segments, driven by the success of our software-as-a-service-based instant issuance and other digital solutions, and to better reflect how we manage CPI today. This change will provide more visibility on our technology-driven solutions, as well as highlight the growth and diversification of our business. Our new reporting structure includes three segments, Secure Card Solutions, Prepaid Solutions, and Integrated Paytech. Secure Card Solutions represents our business as a leading debit and credit payment card and personalization provider in the U.S. market, and we estimate we produce about one out of every four cards in the U.S. We believe we have gained significant market share over the years. and we will continue to push to gain more share in growing markets through innovation, quality, and customer service. Prepaid solutions consist of our market-leading open-loop prepaid card and secure packaging solutions, as well as our growing prepaid healthcare payment solutions. We intend to grow our value in the prepaid market by creating innovative packaging for our open-loop market, expanding into the larger closed-loop market, and providing fraud-preventing ship-based solutions to the broader prepaid market, which we believe should further expand its value. Integrated Paytech, our newest segment, which was formerly a part of our debit and credit segment, has reached the success level where it now represents more than 20% of CPI's profitability. We need the integrated Paytech to reflect its value proposition of integration CPI has built over the last decade into the U.S. payments ecosystem, enabling it to provide ever-evolving payment technology to our customers. This segment represents an incremental addressable market opportunity, added to physical payment cards. When we help our customers stay top of wallet digitally, we're not only creating greater value for our customers, we're adding incremental growth per customer for CPI. And we expect those who adopt digital usage to do so in greater numbers than they do with physical cards. Using that same credential across multiple mediums, such as a mobile phone, watch, tablet, or laptop, As we continue to grow our pipes into the US payment ecosystem, our addressable market for these solutions continues to grow. For a bit more context on integrated Paytex profile, it has roughly 55% gross margins, approximately 40% EBITDA margins, a 95% plus customer retention rate, and an expected growth rate of over 15% in the coming years, as we intend to invest to accelerate our digital solutions growth faster than we did with our instant issuance solutions. Now, let's turn back to the 2025 results, and I would like to highlight some key accomplishments on slide seven. In Secure Card Solutions, we acquired Airway and made significant integration progress, paving the way for future revenue and cost synergies while driving strong results during the process. Airway contributed $43 million of revenue and more than $6 million of adjusted EBITDA in less than eight months in 2025, implying approximately 9 million of adjusted EBITDA on an annualized basis, even before most of our expected synergies have been realized. Post-acquisition, Airway has signed more than a dozen new customers, showing the value proposition they have in the market when combined with CPI's packing. We also completed the build out and transition to our new state-of-the-art secure car production facility in Indiana. which will provide operational efficiencies, increased capacity, and additional capabilities. And we invested in automation in our Colorado facility, which we believe will drive even more efficiencies. We believe these investments have already helped us gain share in 2025, including being a key driver to winning another four years with Valera. Valera is one of our larger, longstanding secure payment card customers and the premier payments credit union service organization in the U.S. servicing 4,000 financial institutions. We made significant improvements to our personalization operations, which allow us to continue to increase capacity and maintain high quality, all while driving greater efficiency as we grow. We believe these advancements were a key contributor to winning one of the largest credit unions in Texas in 2025. And we expanded our metal card offerings, providing market-competitive options to our marketable base. while still small relative to the overall market position, contributed to our strong contactless cart growth during the year with nearly $15 million in metal sales in 2025. In prepaid solutions, we developed production and operational capabilities to enter the closed-loop prepaid market, which we believe has volumes greater than five times the open-loop market and will increase in value as fraud prevention features are further adapted. We had a successful start in the fourth quarter and have already signed multiple deals since launch, including with the leading provider, CDS Gift Cards, who services many blue chip customers in the U.S., such as Uber, DoorDash, and others. Our reputation for quality, innovation, and execution in the open-loop market is proven, and we are leveraging these attributes to drive our closed-loop expansion. While our prepaid business was down in 2025, We see strong signs of the transition starting to occur in the prepaid market. Fraud continues to drive either higher-value packaging or greater use of chip-embedded gift cards, both of which would result in a unique market position for CPI, as we are the only U.S. company that is a leader in both categories. And in our new integrated pay tax segment, we grew revenue nearly 20% as we continue to increase our instant issuance penetration and further build out integrations and customer pipelines for our evolving proprietary technology platform, including to expand the addressable market for push provisioning for mobile wallets. We expect to continue to see great things out of this segment, including strong growth and high margins, leveraging our market-leading value proposition. One driver of our expected growth is our recently signed deal with a large U.S. processor and global leader in payments and financial technology, where we have gained preferential access to more than 450 financial institutions and 3,500 banking locations, representing an opportunity to grow our software-as-a-service-based instant issuance solution footprint by 25% over the coming years. We also invested in an Australian fintech and program manager, CarTech. to introduce into the U.S. chip-embedded prepaid cards, which enhance security and provide user-friendly physical to digital experience. Our ownership in CARTA after our investment is 20%, with the option to purchase an additional 31%. As we have worked with the CARTA team, we continue to be impressed by their growth as a program manager in Australia, the large opportunity to grow their digital card validation solution, branded as safe to buy in the U.S. prepaid market, and their potential value as a program manager in the U.S. Our agreement with Carta also makes us their exclusive U.S. supplier of their safe-to-buy solution, providing contactless prepaid cards with chip technology, embedding Carta's safe-to-buy applet. Carta's solution eliminates the need for data to be printed on cards, significantly reducing the risk of prepaid fraud. And as a reminder, prepaid gift cards in the U.S. rarely are embedded with chip technology. So, between Carta's technology to reduce fraud and CPI's prepaid and chip solutions, we were a perfect fit to drive meaningful and positive change in the prepaid market. We are currently in the second stages of a pilot for this solution with a large national retailer across hundreds of locations in the U.S., and we are seeing encouraging results. Overall, we are proud of what our teams delivered in 2025, and we look forward to continuing to advance these initiatives and their benefits over the next several years. In 2026, we expect to deliver good growth again, and Tara Grantham, our new interim CFO, will give you more color on our outlook in a few minutes. Tara brings a wealth of CPI and industry knowledge and experience to this role, including most recently leading CPI's enterprise growth and strategy area and previous leadership of our financial planning and analysis and treasury teams, among others. She has been with the company for nearly 10 years, and I want to congratulate Tara for being promoted into this new role and I'm happy to have her join us for the call today. Sarah will now take us through the fourth quarter results and 2026 outlook in more detail. Sarah?