Q4 2021 CPI Card Group Inc Earnings Call

March 8, 2022

Welcome to CPI card group fourth quarter 2021 earnings call. My name is daily and I will be your operator for today.

Operator 3: Welcome to CPI Card Group's Q4, Q2, Q1 earnings call. My name is Bailey, and I will be your operator for today. 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 one on your telephone keypad. Now, I would like to turn the call over to Mike Salop, CPI's Head of Investor Relations. Please go ahead.

Call will be opened for questions. After the Companys remarks, if you would like to get in the queue for questions. Please press star followed by one on your telephone keypad.

I would now I would like to turn the call over to Mike Silo, Cpi's head of Investor Relations.

Please go ahead, thanks, operator, and good morning, everyone. Welcome to the CPI card group fourth quarter 2021 earnings webcast and conference call. Today's date is March eight 2022 and on the call today from CPI card group are Scott Fireman, President and Chief Executive Officer, now mature cycle Chief Financial Officer.

Mike Salop: Thanks, operator, and good morning, everyone. Welcome to the CPI Card Group Q4 2021 earnings webcast and conference call. Today's date is 8 March 2022, and on the call today from CPI Card Group are Scott Scheuermann, President and Chief Executive Officer, and Amitosh Shankel, 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 statements to reflect the events that occur after this call.

Before we begin I'd like to remind everyone that this call may contain forward looking statements as they are defined in 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 a discussion of such risks and uncertainties. Please see CPI card group's most recent filings with the SEC.

Forward looking statements made today reflect our current expectations only and we.

Undertakes no obligation to update any statements to reflect events that occur after this call.

Mike Salop: 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 of the company's conference call, are accessible on CPI's Investor Relations website, investor.cpicardgroup.com. In addition, CPI's Form 10-K for the year ended 31 December 2021 will also be available on CPI's Investor Relations website. Now, I'd like to turn the call over to President and Chief Executive Officer, Scott Scheuermann.

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 our press release and slide presentation.

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 of the company's conference call, are accessible on CPI's Investor Relations website, investor.cpicardgroup.com. In addition, CPI's Form 10-K for the year ended 31 December 2021 will also be available on CPI's Investor Relations website. Now, I'd like to turn the call over to President and Chief Executive Officer, Scott Scheuermann.

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 CPI card group Dot Com. In addition, Cpi's Form 10-K for the year ended December 31, 2021 will also be available on Cpi's Investor Relations website.

And now I'd like to turn the call over to <unk>.

Didn't chief Executive Officer, Scott Fireman.

Thanks, Mike and good morning, everyone.

Scott Scheuermann: Thanks, Mike, and good morning, everyone. During today's call, I will provide an overview of CPI's performance in 2021, give some thoughts on our strategy, future, and 2022 expectations. Amitosh will review the quarterly and annual financial results in more detail, then we will open up the call for questions. Overall, as we look back at 2021, we delivered very strong performance for the year. Net sales increased 20%, raising our compounded annual growth rate in sales to 14% over the last four years. Profitability has improved at even a greater rate than the top line, moving from a net loss of $22 million in 2017 to 2021 net income of $16 million and adjusted EBITDA exceeding $76 million, which translates to a compounded annual growth rate of 35% over the past four years.

Scott Scheirman: Thanks, Mike, and good morning, everyone. During today's call, I will provide an overview of CPI's performance in 2021, give some thoughts on our strategy, future, and 2022 expectations. Amitosh will review the quarterly and annual financial results in more detail, then we will open up the call for questions. Overall, as we look back at 2021, we delivered very strong performance for the year. Net sales increased 20%, raising our compounded annual growth rate in sales to 14% over the last four years. Profitability has improved at even a greater rate than the top line, moving from a net loss of $22 million in 2017 to 2021 net income of $16 million and adjusted EBITDA exceeding $76 million, which translates to a compounded annual growth rate of 35% over the past four years.

During today's call I will provide an overview of <unk> performance in 2020 , one give some thoughts on our strategy future in 2022 expectations on them until our overview of the quarterly and annual financial results in more detail. Then we will open up the call for questions.

Overall as we look back at 2021, we delivered very strong performance for the year.

Net sales increased 20% raising our compounded annual growth rate in sales to 14% over the last four years.

<unk> ability has improved that even a greater rate than the topline moving from a net loss of $22 million in 2017 to 2021 net income of $16 million and adjusted EBITDA exceeding $76 million, which translates to a compounded annual growth rate of 35% over the past four.

Yes.

Scott Scheuermann: We believe our high-quality and innovative products and solutions have propelled us to significantly outpace market growth over the past four years. In addition, we believe our team's ability to navigate the supply chain and labor environment has given us a competitive advantage. Some of the highlights from 2021 include strong sales from new customer additions, as our comprehensive end-to-end solutions helped us gain business from fintech customers, as well as traditional financial services providers. We also continue to help facilitate the US market's gradual transition to higher-priced contactless cards. We believe approximately 40% of the estimated 2 billion financial payment cards outstanding in the US at the end of 2021 were contactless, with small and mid-sized financial institutions well below that level.

We believe our high-quality and innovative products and solutions have propelled us to significantly outpace market growth over the past four years. In addition, we believe our team's ability to navigate the supply chain and labor environment has given us a competitive advantage. Some of the highlights from 2021 include strong sales from new customer additions, as our comprehensive end-to-end solutions helped us gain business from fintech customers, as well as traditional financial services providers. We also continue to help facilitate the US market's gradual transition to higher-priced contactless cards. We believe approximately 40% of the estimated 2 billion financial payment cards outstanding in the US at the end of 2021 were contactless, with small and mid-sized financial institutions well below that level.

We believe our high quality and innovative products and solutions and propelled us to significantly outpaced market growth over the past four years.

In addition, we believe our team's ability to navigate the supply chain or labor environment has given us a competitive advantage.

Some of the highlights from 2021 include strong sales from new customer additions as our comprehensive end to end solutions helped us gain business from fintech customers as well as traditional financial services providers.

We also continued to help facilitate the U S markets gradual transition to higher priced contactless cards.

We believe approximately 40% of the estimated 2 billion financial payment cards outstanding in the U S. At the end of 'twenty, 'twenty, one where contactless with small and mid sized financial institutions well below that level.

For C. P I almost 70% of the secure cards, we sold in 2020 , one or the higher average selling price contactless cards, which was up more than 10 percentage points from the prior year and contributed to our operating margin growth.

Scott Scheuermann: For CPI, almost 70% of the secure cards we sold in 2021 were the higher average selling price contactless cards, which was up more than 10 percentage points from the prior year and contributed to our operating margin growth. Secure cards include EMV contact and dual interface, which we refer to as contactless, and account for the significant majority of our card revenue in the debit and credit segment. We expect the contactless sales percentage to grow further as our customers continue to convert to issuing these faster-to-use, and more convenient cards. The card networks have noted that tap-to-pay increases card usage, which gives additional incentive to issuers to drive the transition in the US. We remain a leading market provider of eco-focused payment card solutions in the US, selling more than 20 million cards in 2021 to reach nearly 50 million cards sold since launch in late 2019.

For CPI, almost 70% of the secure cards we sold in 2021 were the higher average selling price contactless cards, which was up more than 10 percentage points from the prior year and contributed to our operating margin growth. Secure cards include EMV contact and dual interface, which we refer to as contactless, and account for the significant majority of our card revenue in the debit and credit segment. We expect the contactless sales percentage to grow further as our customers continue to convert to issuing these faster-to-use, and more convenient cards. The card networks have noted that tap-to-pay increases card usage, which gives additional incentive to issuers to drive the transition in the US. We remain a leading market provider of eco-focused payment card solutions in the US, selling more than 20 million cards in 2021 to reach nearly 50 million cards sold since launch in late 2019.

Secure cars include M b contact and dual interface, which we refer to as contactless and account for the significant majority of our card revenue and the debit and credit segment.

We expect the contactless sales percentage to grow further as our customers continue to convert to issuing these faster to use and more convenient cards. The card networks have noted that tap to pay increases card usage, which gives additional incentive to issuers to drive the transition in the U S.

We remain a leading market provider of equal focus payment card solutions in the U S selling more than 20 million cards in 2020 one to reach nearly 50 million cards sold since launch in late 2019.

As these cars were predominantly contactless. They also helped drive higher average selling prices.

Scott Scheuermann: As these cards were predominantly contactless, they also helped drive higher average selling prices. Card at Once, our market-leading SaaS-based instant issuance solution, grew faster than the company overall in 2021, reaching nearly 10% of the company's net sales and delivering strong profitability. Card at Once's growth was aided by expanded distribution channels and success with our high-end spectrum solution, and we now have nearly 13,000 installations across financial institutions in the US. Our personalization business brought us growth from new customers, including fintechs, who are attracted to our end-to-end solution offerings, including design, production, packaging, and fulfillment capabilities. Our prepaid business had a record year as we leveraged our innovative tamper-evident packaging solutions to enhance our leadership in the US retail prepaid card and packaging market.

As these cards were predominantly contactless, they also helped drive higher average selling prices. Card at Once, our market-leading SaaS-based instant issuance solution, grew faster than the company overall in 2021, reaching nearly 10% of the company's net sales and delivering strong profitability. Card at Once's growth was aided by expanded distribution channels and success with our high-end spectrum solution, and we now have nearly 13,000 installations across financial institutions in the US. Our personalization business brought us growth from new customers, including fintechs, who are attracted to our end-to-end solution offerings, including design, production, packaging, and fulfillment capabilities. Our prepaid business had a record year as we leveraged our innovative tamper-evident packaging solutions to enhance our leadership in the US retail prepaid card and packaging market.

Card at once our market, leading SaaS based instant issuance solution grew faster than the company overall in 2021, reaching nearly 10% of the company's net sales and delivering strong profitability.

<unk> growth was aided by expanded distribution channels.

First with our high end spectrum solution and we now have nearly 13000 installations across financial institutions in the U S. A.

Personalization business brought us growth from new customers, including Pentax, who are attracted to our end to end solution offerings, including design production packaging and fulfillment capabilities.

And our prepaid business had a record year as we leveraged our innovative tamper evident packaging solutions to enhance our leadership in the U S retail prepaid card and packaging market.

Scott Scheuermann: Net income for the year was down 1% due to prior year income tax benefits and debt refinancing costs in Q1 2021, but adjusted EBITDA increased 33%, and the adjusted EBITDA margin increased 200 basis points to 20.4%. We also improved our balance sheet in 2021, reducing outstanding debt by more than $30 million during the year and driving our net leverage ratio down below 4x as of year-end. As we noted in our Q3 earnings release, we expected our Q4 results to be impacted by increased labor, materials, and certain other costs. Those impacts largely happened as anticipated, bringing Q4 margins down from prior year and the first nine-month levels. However, as we look forward, we believe the full year 2021 adjusted EBITDA margin of 20.4% is more indicative of the full year 2022 expected profitability level than the Q4 margin.

Net income for the year was down 1% due to prior year income tax benefits and debt refinancing costs in Q1 2021, but adjusted EBITDA increased 33%, and the adjusted EBITDA margin increased 200 basis points to 20.4%. We also improved our balance sheet in 2021, reducing outstanding debt by more than $30 million during the year and driving our net leverage ratio down below 4x as of year-end. As we noted in our Q3 earnings release, we expected our Q4 results to be impacted by increased labor, materials, and certain other costs. Those impacts largely happened as anticipated, bringing Q4 margins down from prior year and the first nine-month levels. However, as we look forward, we believe the full year 2021 adjusted EBITDA margin of 20.4% is more indicative of the full year 2022 expected profitability level than the Q4 margin.

Net income for the year was down 1% due to prior year income tax benefits and debt refinancing costs in the first quarter of 2021 , but adjusted EBITDA increased 33% and the adjusted EBITDA margin increased 200 basis points to 24%.

We also improved our balance sheet in 2020 , one reducing outstanding debt by more than $30 million during the year and driving our net leverage ratio down below four times as of yearend.

As we noted in our third quarter earnings release, we expected our fourth quarter results to be impacted by increased labor materials and certain other costs those impacts largely happened as anticipated, bringing fourth quarter margins down from prior year and the first nine months levels.

However, as we look forward, we believe the full year 2021 adjusted EBITDA margin of 24% is more indicative of the full year 2022 expected profitability level than the fourth quarter margin.

Scott Scheuermann: This is a result of implementation of various business initiatives, including price increases, operating leverage from higher expected sales, and expected reductions in the levels of certain Q4 expense items. Turning to slide 5, given the current market dynamics with labor and supply chain challenges, and the related inflationary environment, as well as some specific comparison items for our prepaid business, today we are providing some high-level expectations for 2022 performance. First, let me state that I'm very confident in our future. We continue to experience strong customer demand, and we believe our innovative and differentiated payment solutions, long-standing customer relationships, and participation in attractive, growing markets position us well for continued market share gains and long-term growth.

This is a result of implementation of various business initiatives, including price increases, operating leverage from higher expected sales, and expected reductions in the levels of certain Q4 expense items. Turning to slide 5, given the current market dynamics with labor and supply chain challenges, and the related inflationary environment, as well as some specific comparison items for our prepaid business, today we are providing some high-level expectations for 2022 performance. First, let me state that I'm very confident in our future. We continue to experience strong customer demand, and we believe our innovative and differentiated payment solutions, long-standing customer relationships, and participation in attractive, growing markets position us well for continued market share gains and long-term growth.

This is a result of implementation of various business initiatives, including price increases.

Operating leverage from higher expected sales and expected reductions in the level of certain fourth quarter expense items.

Turning to slide five.

Given the current market dynamics with labor and slot supply chain challenges and their related inflationary environment as well as some specific comparison items for our prepaid business today, we are providing some high level expectations for 2022 performance.

First let me state that I'm very confident in our future we.

We continue to experience strong customer demand and we believe our innovative and differentiated payment solutions long standing customer relationships and participation in attractive growing markets position us well for continued market share gains and long term growth.

Over four years ago, we focused the company on a vision of being the partner of choice and payment solutions by providing market, leading quality products and customer service, while operating a market competitive business model.

Scott Scheuermann: Over four years ago, we focused the company on a vision of being the partner of choice in payment solutions by providing market-leading quality products and customer service while operating a market-competitive business model. We made deep customer focus and continuous innovation key strategic priorities, increasing our capabilities to offer tailored products and services, and comprehensive end-to-end solutions. Since that time, we have established ourselves as a top payments card solution provider in the US, serving thousands of banks, credit unions, and fintechs. Today, we are a leading provider of eco-focused payment card solutions in the US, which is a rapidly growing space. We are also a leader in personalization and software-as-a-service-based instant issuance solutions for small and medium-sized US financial institutions, as well as for US retail prepaid debit card solutions. Our markets are healthy and growing. Based on figures reported by Visa and Mastercard, US.

Over four years ago, we focused the company on a vision of being the partner of choice in payment solutions by providing market-leading quality products and customer service while operating a market-competitive business model. We made deep customer focus and continuous innovation key strategic priorities, increasing our capabilities to offer tailored products and services, and comprehensive end-to-end solutions. Since that time, we have established ourselves as a top payments card solution provider in the US, serving thousands of banks, credit unions, and fintechs. Today, we are a leading provider of eco-focused payment card solutions in the US, which is a rapidly growing space. We are also a leader in personalization and software-as-a-service-based instant issuance solutions for small and medium-sized US financial institutions, as well as for US retail prepaid debit card solutions. Our markets are healthy and growing. Based on figures reported by Visa and Mastercard, US.

We made deep customer focus and continuous innovation key strategic priority, increasing our capabilities to offer tailored products and services and comprehensive end to end solutions.

Since that time, we've established ourselves as a top payments card solution provider in the U S serving thousands of banks credit unions and fin techs.

We are a leading provider of eco focused payment card solutions in the U S, which is a rapidly growing space. We're also a leader in personalization and software as a service based instant issuance solution for small and medium sized U S financial institutions.

As well as for U S retail prepaid debit card solutions are.

Our markets are healthy and growing.

Based on figures reported by visa and Mastercard U S credit debit and prepaid cards in circulation have grown at a compounded annual growth rate of 8% over the three year period, ending September 30 F. 2021 .

Scott Scheuermann: Credit, debit, and prepaid cards in circulation have grown at a compounded annual growth rate of 8% over the three-year period ending 30 September 2021. In addition, a recent report by credit data agency TransUnion noted that a record 196 million Americans held credit cards at the end of 2021, and US lenders issued more payment cards than ever last year. According to the report, an all-time high of 20 million new payment cards were issued in Q4 2021, the latest period for which detailed numbers were available. As a reminder, we estimate that historically 90% of annual card issuance has been for replacement cards, so we believe increases in new card customers will have positive, ongoing, long-term effects. We expect US.

Credit, debit, and prepaid cards in circulation have grown at a compounded annual growth rate of 8% over the three-year period ending 30 September 2021. In addition, a recent report by credit data agency TransUnion noted that a record 196 million Americans held credit cards at the end of 2021, and US lenders issued more payment cards than ever last year. According to the report, an all-time high of 20 million new payment cards were issued in Q4 2021, the latest period for which detailed numbers were available. As a reminder, we estimate that historically 90% of annual card issuance has been for replacement cards, so we believe increases in new card customers will have positive, ongoing, long-term effects. We expect US.

In addition, a recent report by credit data agency Trans Union noted that a record 196 million Americans held credit cards at the end of 2021 and U S lenders issued more payment cards than ever last year. According.

According to the reports an all time high of 20 million new payment cards were issued in the third quarter of 2021, the latest period for which detailed numbers were available.

As a reminder, we estimate that historically, 90% of annual card issuance has been for replacement cards. So we believe increases in new card customers will have a positive ongoing long term effects.

We expect U S market revenue growth will continue to be aided by further financial payment card issuance growth as well as the gradual transition to higher priced contactless cards, including eco focus carts.

Scott Scheuermann: Market revenue growth will continue to be aided by further financial payment card issuance growth, as well as the gradual transition to higher-priced contactless cards, including eco-focused cards. We believe we have gained significant overall market share over the last four years with our high-quality products and services, and end-to-end solutions, and see strong opportunities for additional share gains going forward. For 2022, we do have some unique dynamics. Supply chain and labor shortage challenges continue to impact the industry, affecting lead times, raw materials, availability, and costs. We have navigated these challenges with proactive inventory management, hiring and retention incentives at our production facilities, and other operational actions, and expect to continue to be able to be nimble and adapt.

Market revenue growth will continue to be aided by further financial payment card issuance growth, as well as the gradual transition to higher-priced contactless cards, including eco-focused cards. We believe we have gained significant overall market share over the last four years with our high-quality products and services, and end-to-end solutions, and see strong opportunities for additional share gains going forward. For 2022, we do have some unique dynamics. Supply chain and labor shortage challenges continue to impact the industry, affecting lead times, raw materials, availability, and costs. We have navigated these challenges with proactive inventory management, hiring and retention incentives at our production facilities, and other operational actions, and expect to continue to be able to be nimble and adapt.

We believe we have gained significant overall market share over the last four years with our high quality products and services and end to end solutions and see strong opportunities for additional share gains going forward.

For 2022, we do have some unique dynamics.

Supply chain and labor shortage challenges continue to impact the industry affecting lead times raw materials availability and costs.

We have navigated these challenges with proactive inventory management hiring and retention incentives at our production facilities and other operational actions and expect to continue to be able to be nimble and adapt.

Our current high level financial expectations for 2022 are to deliver mid single digit net sales and adjusted EBITDA growth compared to last year with an adjusted EBITDA margin similar to last year's full year level of 24%.

Scott Scheuermann: Our current high-level financial expectations for 2022 are to deliver mid-single-digit net sales and adjusted EBITDA growth compared to last year, with an adjusted EBITDA margin similar to last year's full-year level of 20.4%. We expect our debit and credit segment, which includes our secure card, personalization, and instant issuance solutions, and represented 79% of 2021 net sales, to provide strong growth as demand remains robust, and we are in a good position to serve our customers and benefit from the contactless trends, including with eco-focused card solutions. Based on current orders, we expect our eco-focused card sales to increase by more than 50% in 2022. Customer demand for our debit and credit segment is generally higher than our outlook, but we have factored certain capacity and material constraints into our forecast.

Our current high-level financial expectations for 2022 are to deliver mid-single-digit net sales and adjusted EBITDA growth compared to last year, with an adjusted EBITDA margin similar to last year's full-year level of 20.4%. We expect our debit and credit segment, which includes our secure card, personalization, and instant issuance solutions, and represented 79% of 2021 net sales, to provide strong growth as demand remains robust, and we are in a good position to serve our customers and benefit from the contactless trends, including with eco-focused card solutions. Based on current orders, we expect our eco-focused card sales to increase by more than 50% in 2022. Customer demand for our debit and credit segment is generally higher than our outlook, but we have factored certain capacity and material constraints into our forecast.

We expect our debit and credit segment, which includes our secure card personalization and instant issuance solution and represented 79% of 2021 that fails to provide strong growth as demand remains robust and we are in a good position to serve our customers and benefit from the contactless trends, including with <unk>.

<unk> focused card solutions.

Based on current orders, we expect our eco focused card sales to increase by more than 50% in 2022 .

Customer demand for our debit and credit segment is generally higher than our outlook, but we have factored certain capacity and material constraints in to our forecast.

Scott Scheuermann: We will attempt to alleviate some of these constraints through operational initiatives by partnering with our suppliers where we can throughout the year. We expect debit and credit segment growth to be partially offset by declines in sales and EBITDA in our prepaid debit segment. Prepaid had a record year in 2021, growing sales 25% in what is usually a slower growth market. Last year's prepaid sales were aided by a large new portfolio addition, as well as retail inventory replenishment by our customers, who reduced purchases in 2020 due to COVID-related concerns. Although we expect a decline for prepaid in 2022 due to the comparisons with a record 2021, the business remains healthy, and customer relationships are strong, and we would expect prepaid sales to be between the 2020 and 2021 levels.

We will attempt to alleviate some of these constraints through operational initiatives by partnering with our suppliers where we can throughout the year. We expect debit and credit segment growth to be partially offset by declines in sales and EBITDA in our prepaid debit segment. Prepaid had a record year in 2021, growing sales 25% in what is usually a slower growth market. Last year's prepaid sales were aided by a large new portfolio addition, as well as retail inventory replenishment by our customers, who reduced purchases in 2020 due to COVID-related concerns. Although we expect a decline for prepaid in 2022 due to the comparisons with a record 2021, the business remains healthy, and customer relationships are strong, and we would expect prepaid sales to be between the 2020 and 2021 levels.

We will attempt to alleviate some of these constraints through operational initiatives by partnering with our suppliers, where we can throughout the year.

We expect debit and credit segment growth to be partially offset by declines in sales and EBITDA in our prepaid debit segment pre.

Prepaid had a record year in 2020 , one growing sales, 25% in what is usually a slower growth market last year's prepaid sales were aided by a large new portfolio edition as well as retail inventory replenishment by our customers who reduced purchases in 2020 due to COVID-19 related concerns.

Yeah.

Although we expect a decline for prepaid in 2020 to do the comparisons with a record 2021, the business remains healthy and customer relationships are strong and we would expect prepaid sales to be between the 'twenty to 'twenty and 2021 levels.

Finally, before I turn the call over to onshore I would like to mention our announcement today that we have notified holders that we plan to redeem $20 million of our 8.625% senior secured notes due in 2026 at a redemption price of one O three.

Scott Scheuermann: Finally, before I turn the call over to Amitosh, I would like to mention our announcement today that we have notified holders that we plan to redeem $20 million of our 8.625% senior secured notes due in 2026 at a redemption price of 103. We expect this retirement to help improve our leverage ratio by year-end and provide ongoing interest expense savings. As we generate more cash flow, we will continue to review capital allocation alternatives to maximize value for our stockholders. Now I will turn the call over to Amitosh to review our Q4 and full-year financial and operating results in more detail. Amitosh? Thank you, Scott, and good morning, everyone. I will begin my overview of 2021 with the Q4 results on slide 7.

Finally, before I turn the call over to Amitosh, I would like to mention our announcement today that we have notified holders that we plan to redeem $20 million of our 8.625% senior secured notes due in 2026 at a redemption price of 103. We expect this retirement to help improve our leverage ratio by year-end and provide ongoing interest expense savings. As we generate more cash flow, we will continue to review capital allocation alternatives to maximize value for our stockholders. Now I will turn the call over to Amitosh to review our Q4 and full-year financial and operating results in more detail. Amitosh?

We expect this retirement to help improve our leverage ratio by year end and providing ongoing interest expense savings as we generate more cash flow. We will continue to review capital allocation alternatives to maximize value for our stockholders.

Now I will turn the call over to Amit to review, our fourth quarter and full year financial and operating results in more detail our mature.

Thank you Scott and good morning, everyone. I will begin my overview of 2021 with the fourth quarter results on slide seven.

Amintore Schenkel: Thank you, Scott, and good morning, everyone. I will begin my overview of 2021 with the Q4 results on slide 7.

Fourth quarter net sales of $93 $2 million represented an increase of 11% compared to the prior year quarter.

Scott Scheuermann: Q4 net sales of $93.2 million represented an increase of 11% compared to the prior year quarter, driven by an 11% increase in our debit and credit segment, and a 6% increase in the prepaid debit segment. The debit and credit segment increase was primarily due to the ongoing transition to higher-priced contactless cards, including strong growth in our eco-focused cards, strong increases in Card at Once instant issuance solutions, and new customer growth. Prepaid debit segment growth in the quarter was driven by higher volumes with existing customers. As we noted in our Q4 earnings release, we expected Q4 sales growth and profit margins would not be as strong as the first nine months, and we expected increased labor, materials, and certain other costs to be more impactful than earlier in the year. We did see those factors materialize and impact our Q4 results.

Q4 net sales of $93.2 million represented an increase of 11% compared to the prior year quarter, driven by an 11% increase in our debit and credit segment, and a 6% increase in the prepaid debit segment. The debit and credit segment increase was primarily due to the ongoing transition to higher-priced contactless cards, including strong growth in our eco-focused cards, strong increases in Card at Once instant issuance solutions, and new customer growth. Prepaid debit segment growth in the quarter was driven by higher volumes with existing customers. As we noted in our Q4 earnings release, we expected Q4 sales growth and profit margins would not be as strong as the first nine months, and we expected increased labor, materials, and certain other costs to be more impactful than earlier in the year. We did see those factors materialize and impact our Q4 results.

Driven by an 11% increase in our debit and credit segment and a 6% increase in the prepaid debit segment.

Evident credit segment increase was primarily due to the ongoing transition to higher priced contactless cards, including strong growth in our eco focus card strong increases in card at one instant issuance solution and new customer growth.

Prepaid debit segment growth in the quarter was driven by higher volumes with existing customers.

As we noted in our third quarter earnings release, we expected fourth quarter sales growth and profit margins would not be as strong as the first nine months and we expected to increase labor materials and certain other cost to be more impactful than earlier in the year we.

We did see those factors materialize and impact our fourth quarter results. Our fourth quarter 2021 gross profit of $39 million was essentially flat with prior year, while gross profit margin decreased 360 basis points to 33, 2%.

Scott Scheuermann: Our Q4 2021 gross profit of $30.9 million was essentially flat with prior year, while gross profit margin decreased 360 basis points to 33.2%. The decrease in margin was primarily driven by higher labor costs and, to a lesser extent, increased freight and material costs, with declines partially offset by operating leverage from sales growth. SG&A expenses increased by $3.4 million in the quarter compared to the prior year, primarily due to $1.3 million of increased consulting and accounting costs related to Sarbanes-Oxley, and increased healthcare and other employee-related expenses. We are continuing to work on remediation efforts regarding identified internal control deficiencies, so we do expect incremental SOX costs to continue into 2022. Our plan is to complete remediation by the end of the year.

Our Q4 2021 gross profit of $30.9 million was essentially flat with prior year, while gross profit margin decreased 360 basis points to 33.2%. The decrease in margin was primarily driven by higher labor costs and, to a lesser extent, increased freight and material costs, with declines partially offset by operating leverage from sales growth. SG&A expenses increased by $3.4 million in the quarter compared to the prior year, primarily due to $1.3 million of increased consulting and accounting costs related to Sarbanes-Oxley, and increased healthcare and other employee-related expenses. We are continuing to work on remediation efforts regarding identified internal control deficiencies, so we do expect incremental SOX costs to continue into 2022. Our plan is to complete remediation by the end of the year.

The decrease in margin was primarily driven by higher labor costs and to a lesser extent increased freight and material costs with decline, partially offset by operating leverage from sales growth.

SG&A expenses increased by $3 $4 million in the quarter compared to the prior year, primarily due to $1 $3 million of increased consulting and accounting costs related to Sarbanes Oxley and increased health care and other employee related expenses.

We're continuing to work on remediation efforts regarding identified Imperial control deficiency. So we do expect incremental sacco to continue into 2022, our plan is to complete remediation by the end of the year.

Employee healthcare expenses, which vary by quarter, depending on employee usage increased $700000 compared to the prior year fourth quarter and we also incurred a 600000 dollar expense.

Scott Scheuermann: Employee healthcare expenses, which vary by quarter depending on employee usage, increased $700,000 compared to the prior year Q4, and we also incurred a $600,000 expense tied to a new state law regarding paid time-off compensation. Net income in the quarter decreased 91% to $700,000, primarily due to increased income tax expense compared to an income tax benefit in the prior year Q4, and increased interest expense. The 62% income tax rate in the 2021 Q4 reflects the effect of some state tax and uncertain tax position adjustment items. Adjusted EBITDA decreased 23% to $13.6 million, as the benefits of higher net sales were offset by increased labor costs and the SG&A items previously mentioned. Adjusted EBITDA margins declined from 20.8% in the prior year to 14.6% in the 2021 Q4. As Scott mentioned, we do not expect the Q4 adjusted EBITDA margin to be the ongoing level.

Employee healthcare expenses, which vary by quarter depending on employee usage, increased $700,000 compared to the prior year Q4, and we also incurred a $600,000 expense tied to a new state law regarding paid time-off compensation. Net income in the quarter decreased 91% to $700,000, primarily due to increased income tax expense compared to an income tax benefit in the prior year Q4, and increased interest expense. The 62% income tax rate in the 2021 Q4 reflects the effect of some state tax and uncertain tax position adjustment items. Adjusted EBITDA decreased 23% to $13.6 million, as the benefits of higher net sales were offset by increased labor costs and the SG&A items previously mentioned. Adjusted EBITDA margins declined from 20.8% in the prior year to 14.6% in the 2021 Q4. As Scott mentioned, we do not expect the Q4 adjusted EBITDA margin to be the ongoing level.

To a new state law regarding paid time off compensation.

Net income in the quarter decreased 91% to $700000.

I'm merely due to increased income tax expense compared to an income tax benefit in the prior year fourth quarter and increased interest expense.

The 62% income tax rate in the 2021 fourth quarter reflect the effect of some state tax and uncertain tax position adjustment items.

Adjusted EBITDA decreased 23% to $13 $6 million as the benefits of higher net sales were offset by increased labor cost and the SG&A items previously mentioned.

Adjusted EBITDA margin declined from 28% in the prior year to 14, 6% in 2021 and fourth quarter.

As Scott mentioned, we do not expect a fourth quarter adjusted EBITDA margin to be the ongoing level, we expect improvements in 2022 from pricing and other initiatives.

Scott Scheuermann: We expect improvements in 2022 from pricing and other initiatives, operating leverage from sales growth, and reductions from certain high Q4 expenses to result in the full-year 2022 adjusted EBITDA margin to be similar to the 2021 full-year level, although sales growth and margins may vary by quarter. Turning to the full-year results on slide 8, while the Q4 results were impacted by the items discussed, overall for the year, we again delivered very strong results. Net sales increased 20% to $375.1 million, driven by strong growth from both segments. Debit and credit sales increased 18% to $296.2 million, and prepaid debit sales increased 25% to $79.2 million. Sales growth was strong in 2021 across our portfolio of products and services. The primary drivers of the increase in the debit and credit segment included new customer growth, and sales of contactless cards and related card personalization.

We expect improvements in 2022 from pricing and other initiatives, operating leverage from sales growth, and reductions from certain high Q4 expenses to result in the full-year 2022 adjusted EBITDA margin to be similar to the 2021 full-year level, although sales growth and margins may vary by quarter. Turning to the full-year results on slide 8, while the Q4 results were impacted by the items discussed, overall for the year, we again delivered very strong results. Net sales increased 20% to $375.1 million, driven by strong growth from both segments. Debit and credit sales increased 18% to $296.2 million, and prepaid debit sales increased 25% to $79.2 million. Sales growth was strong in 2021 across our portfolio of products and services. The primary drivers of the increase in the debit and credit segment included new customer growth, and sales of contactless cards and related card personalization.

Operating leverage from sales growth and reductions from certain high fourth quarter expenses to result in the full year 2022, adjusted EBIT margin to be similar to the 2021 full year level, although sales growth and margins may vary by quarter.

Turning to the full year results on slide eight.

While the fourth quarter results were impacted by the items discussed overall for the year, we again delivered very strong results.

Net sales increased 20% to $375 $1 million driven by strong growth from both segments.

Debit and credit sales increased 18% to $296 $2 million and prepaid debit sales increased 25% to $79 $2 million.

Sales growth was strong at 2021 across our portfolio of products and services.

The primary drivers of the increase in the debit and credit segment included new customer growth and sales of contactless cards and related card personalization.

Kartik wants instant issuance and C. P. I N demand were also strong contributors to growth.

Scott Scheuermann: Once instant issuance and CPI on demand were also strong contributors to growth. Prepaid debit sales growth for the year was driven by higher volumes from existing customers, including the acquisition of new portfolios and replenishment of inventory by those customers. Full-year gross profit for the company increased 28% to $141.4 million, while gross profit margin increased 240 basis points to 37.7%, primarily due to operating leverage from higher net sales, partially offset by increased labor costs. SG&A expenses increased $9.9 million for the year, primarily due to higher compensation-related expenses, including performance incentive compensation, higher professional fees, and other compliance costs, which were primarily related to Sarbanes-Oxley and increased healthcare expenses. The compensation-related increase included $2.2 million of higher performance incentive compensation, and $1.1 million of stock compensation. SOX-related consulting and accounting fees accounted for $2.1 million of the SG&A increase.

Once instant issuance and CPI on demand were also strong contributors to growth. Prepaid debit sales growth for the year was driven by higher volumes from existing customers, including the acquisition of new portfolios and replenishment of inventory by those customers. Full-year gross profit for the company increased 28% to $141.4 million, while gross profit margin increased 240 basis points to 37.7%, primarily due to operating leverage from higher net sales, partially offset by increased labor costs. SG&A expenses increased $9.9 million for the year, primarily due to higher compensation-related expenses, including performance incentive compensation, higher professional fees, and other compliance costs, which were primarily related to Sarbanes-Oxley and increased healthcare expenses. The compensation-related increase included $2.2 million of higher performance incentive compensation, and $1.1 million of stock compensation. SOX-related consulting and accounting fees accounted for $2.1 million of the SG&A increase.

Prepaid debit sales growth for the year was driven by higher volumes from existing customers, including the acquisition of new portfolios and replenishment of inventory by those customers.

Full year gross profit for the company increased 28% to 141 $4 million, while gross profit margin increased 240 basis points to 37, 7%, primarily due to operating leverage from higher net sales, partially offset by increased labor costs.

SG&A expenses increased $9 $9 million for the year, primarily due to higher compensation related expenses, including performance incentive compensation.

Higher professional fees and other compliance costs, which were primarily related to Sarbanes Oxley and increased health care expenses.

The compensation related increase included $2 $2 million of higher performance incentive compensation and $1 $1 million of stock compensation.

Sox related consulting and accounting fees accounted for $2 $1 million of the SG&A increase in employee healthcare cost increased $1 $6 million for the year.

Scott Scheuermann: Employee healthcare costs increased $1.6 million for the year. Net income for the full year of $15.9 million decreased 1% due to income tax benefits in the prior year and debt refinancing costs in 2021, including $5 million of debt extinguishment costs incurred in the first quarter and $2.6 million of make-whole interest expenses. As a reminder, in 2020, we recorded income tax benefits for the year as a result of discrete items, including benefits related to the CARES Act. Our 2021 income tax rate of 33% was a more normalized rate, and we expect the 2022 rate to be slightly higher due to the impact of regulatory changes that will further limit interest expense deductions. Adjusted EBITDA in 2021 increased 33% to $76.4 million, primarily due to net sales growth and the related operating leverage. The adjusted EBITDA margin increased 200 basis points to 20.4% for the year.

Employee healthcare costs increased $1.6 million for the year. Net income for the full year of $15.9 million decreased 1% due to income tax benefits in the prior year and debt refinancing costs in 2021, including $5 million of debt extinguishment costs incurred in the first quarter and $2.6 million of make-whole interest expenses. As a reminder, in 2020, we recorded income tax benefits for the year as a result of discrete items, including benefits related to the CARES Act. Our 2021 income tax rate of 33% was a more normalized rate, and we expect the 2022 rate to be slightly higher due to the impact of regulatory changes that will further limit interest expense deductions. Adjusted EBITDA in 2021 increased 33% to $76.4 million, primarily due to net sales growth and the related operating leverage. The adjusted EBITDA margin increased 200 basis points to 20.4% for the year.

Net income for the full year of $15 $9 million decreased 1% due to income tax benefits in the prior year and debt refinancing costs in 2021, including $5 million of debt extinguishment costs incurred in the first quarter and $2 6 million of make whole interest defenses.

As a reminder, in 2020, we recorded an income tax benefit for the year as a result of discrete items, including benefits related to the cares Act.

Our 2021 income tax rate of 33% with a more normalized rate and we expect that 2022 rate to be slightly higher due to the impact of regulatory changes that will further limit interest expense deductions adjust.

Adjusted EBITDA in 2021 increased 33% to $76 $4 million, primarily due to net sales growth and the related operating leverage.

The adjusted EBITDA margin increased 200 basis points to 24% for the year.

Turning now to our segments on slide nine.

Scott Scheuermann: Turning now to our segments on slide 9, I mentioned the debit and credit and prepaid debit segment sales drivers earlier, so I will just discuss segment profitability on this slide. Income from operations for the debit and credit segment increased 10% in the quarter to $18.6 million, and 45% for the full year to $79.5 million. Higher net sales and operating leverage drove the increases, although these benefits were partially offset by increased labor costs. The Q4 income was also impacted by increased freight costs. Prepaid debit segment income from operations decreased 16% in the quarter to $3.9 million, and increased 35% for the year to $26.9 million. The full-year profitability increase was driven by the 25% sales growth, while the Q4 was negatively impacted by increased labor, materials, and freight costs.

Turning now to our segments on slide 9, I mentioned the debit and credit and prepaid debit segment sales drivers earlier, so I will just discuss segment profitability on this slide. Income from operations for the debit and credit segment increased 10% in the quarter to $18.6 million, and 45% for the full year to $79.5 million. Higher net sales and operating leverage drove the increases, although these benefits were partially offset by increased labor costs. The Q4 income was also impacted by increased freight costs. Prepaid debit segment income from operations decreased 16% in the quarter to $3.9 million, and increased 35% for the year to $26.9 million. The full-year profitability increase was driven by the 25% sales growth, while the Q4 was negatively impacted by increased labor, materials, and freight costs.

I mentioned, the debit and credit and prepaid debit segment sales drivers earlier, so I will just discuss segment profitability on this slide.

Income from operations for the debit and credit segment decreased 10% in the quarter to $18 $6 million and 45% for the full year to $79 $5 million.

Our net sales and operating leverage drove the increases although these benefits were partially offset by increased labor costs.

The fourth quarter income was also impacted by increased freight costs.

Prepaid debit segment income from operations decreased 16% in the quarter to $3 $9 million and increased 35% for the year to $26 $9 million before.

Full year profitability increase was driven by the 25% sales growth while the fourth quarter was negatively impacted by increased labor materials and freight costs.

Turning to the balance sheet liquidity and cash flow on slide 10.

Scott Scheuermann: Turning to the balance sheet, liquidity, and cash flow on slide 10, our cash balance as of 31 December 2021 was $20.7 million, and we had no borrowings outstanding on our $50 million ABL revolver, which gave us total liquidity of more than $70 million at the end of the year. Total debt principal outstanding of $310 million was down more than $30 million from year-end 2020, and our net leverage ratio as of 31 December 2021 was less than 4x. For the year, we generated $20.2 million in cash from operating activities and utilized $10.1 million on capital expenditures. This resulted in free cash flow of $10.2 million. This was down from $15 million in the prior year, primarily due to increased investment in inventories, partially offset by collections of tax refunds.

Turning to the balance sheet, liquidity, and cash flow on slide 10, our cash balance as of 31 December 2021 was $20.7 million, and we had no borrowings outstanding on our $50 million ABL revolver, which gave us total liquidity of more than $70 million at the end of the year. Total debt principal outstanding of $310 million was down more than $30 million from year-end 2020, and our net leverage ratio as of 31 December 2021 was less than 4x. For the year, we generated $20.2 million in cash from operating activities and utilized $10.1 million on capital expenditures. This resulted in free cash flow of $10.2 million. This was down from $15 million in the prior year, primarily due to increased investment in inventories, partially offset by collections of tax refunds.

Our cash balance as of December 31, with $27 million and we had no borrowings outstanding on our $50 million ABL revolver, which gave us total liquidity of more than $70 million at the end of the year.

Total debt principal outstanding of $310 million was down more than $30 million from year end 2020, and our net leverage ratio as of December 31 was less than four times.

For the year, we generated $22 million in cash from operating activities and utilized $10 $1 million on capital expenditures.

This resulted in free cash flow of $10 2 million. This was down from $15 million in the prior year, primarily due to increased investment in inventories, partially offset by collections of tax refunds.

We invested more than $33 million in incremental inventory to support the business and helped mitigate supply chain constraints during the year and collected $9 $8 million in income tax refunds related to the cares Act.

Scott Scheuermann: We invested more than $33 million in incremental inventories to support the business and help mitigate supply chain constraints during the year, and collected $9.8 million in income tax refunds related to the CARES Act. Given our strengthened financial position, our capital structure and allocation priorities now focus on maintaining ample liquidity, investing in the business, including possible strategic acquisitions, deleveraging the balance sheet, and potentially returning funds to stockholders. If we were to return funds to stockholders in the future, our priority would be to do so through share repurchases. Although we filed an S-3 last September that registered shares for possible future issuance, we currently do not have any plans for the company to sell shares to raise capital.

We invested more than $33 million in incremental inventories to support the business and help mitigate supply chain constraints during the year, and collected $9.8 million in income tax refunds related to the CARES Act. Given our strengthened financial position, our capital structure and allocation priorities now focus on maintaining ample liquidity, investing in the business, including possible strategic acquisitions, deleveraging the balance sheet, and potentially returning funds to stockholders. If we were to return funds to stockholders in the future, our priority would be to do so through share repurchases. Although we filed an S-3 last September that registered shares for possible future issuance, we currently do not have any plans for the company to sell shares to raise capital.

Given our strengthened financial position, our capital structure and allocation priorities now focused on maintaining ample liquidity investing in the business, including possible strategic acquisitions.

Deleveraging the balance sheet and potentially returning funds to stockholders.

If we were to return funds to stockholders in the future.

I already would be to do so through share repurchases.

Although we filed an S. Three last September that registered shares for possible future issuance. We currently do not have any plans for the company to sell shares to raise capital.

Scott Scheuermann: The registration simply provides us flexibility over the next three years if an opportunity were to arise, as well as registered the shares of our private equity investor for possible future sales. As Scott mentioned earlier, we are in the process of redeeming $20 million of our senior secured 8.625% notes, which will reduce our long-term debt levels and save us significant interest expense on an annualized basis. Finally, to provide us additional liquidity and flexibility, we recently expanded our ABL revolving credit facility from $50 million to $75 million. This facility is committed through December of 2025. I will now pass the call back to Scott for some closing remarks. Scott? Thanks, Amitosh. As mentioned, overall 2021 was another strong year for CPI, with growth across our portfolio, and I would like to thank all of our employees for working hard to deliver these results.

The registration simply provides us flexibility over the next three years if an opportunity were to arise, as well as registered the shares of our private equity investor for possible future sales. As Scott mentioned earlier, we are in the process of redeeming $20 million of our senior secured 8.625% notes, which will reduce our long-term debt levels and save us significant interest expense on an annualized basis. Finally, to provide us additional liquidity and flexibility, we recently expanded our ABL revolving credit facility from $50 million to $75 million. This facility is committed through December of 2025. I will now pass the call back to Scott for some closing remarks. Scott?

The registration of simply provide us flexibility over the next three years, if an opportunity were to arise as well as registered the shares of our private equity investor for possible future sale.

As Scott mentioned earlier, we are in the process of redeeming $20 million of our senior secured 862, 5% notes, which will reduce our long term debt levels and see what significant interest expense on an annualized basis.

Finally to provide us additional liquidity and flexibility, we recently expanded our ABL revolving credit facility from $50 million to $75 million. This.

This facility is committed through December of 2025, I will now pass the call back to Scott for some closing remarks.

Scott.

Scott Scheirman: Thanks, Amitosh. As mentioned, overall 2021 was another strong year for CPI, with growth across our portfolio, and I would like to thank all of our employees for working hard to deliver these results.

Thanks, Aman tour as I mentioned overall 2021 was another strong year for CPI with growth across our portfolio I would like to thank all of our employees for working hard to deliver these results.

Scott Scheuermann: Since implementing our vision to being the partner of choice in payment solutions by providing market-leading quality products and customer service through a market-competitive business model, we have now posted four consecutive years of strong sales and profitability growth, and believe we have gained significant overall market share over that time. We are well-positioned in attractive, growing markets with strong capabilities and customer relationships. Although the industry continues to face near-term labor and supply chain-related challenges, we have various initiatives that we expect to benefit from in 2022. We are also pleased to be able to pay down $20 million of our senior notes in the first quarter of this year, and we will continue to pursue capital strategies that provide value to our stockholders. We are excited about our long-term growth opportunities, and we look forward to updating you on our progress as we move forward.

Since implementing our vision to being the partner of choice in payment solutions by providing market-leading quality products and customer service through a market-competitive business model, we have now posted four consecutive years of strong sales and profitability growth, and believe we have gained significant overall market share over that time. We are well-positioned in attractive, growing markets with strong capabilities and customer relationships. Although the industry continues to face near-term labor and supply chain-related challenges, we have various initiatives that we expect to benefit from in 2022. We are also pleased to be able to pay down $20 million of our senior notes in the first quarter of this year, and we will continue to pursue capital strategies that provide value to our stockholders. We are excited about our long-term growth opportunities, and we look forward to updating you on our progress as we move forward.

Implementing our vision to being the partner of choice in payment solutions by providing market, leading quality products and customer service through a market competitive business model. We have now posted four consecutive years of strong sales and profitability growth and believe we have gained significant overall market share over that time.

We are well positioned in attractive growing markets with strong capabilities and customer relationships.

Although the industry continues to face near term labor and supply chain related challenges, we have various initiatives that we expect to benefit from in 2022.

We're also pleased to be able to pay down $20 million of our senior notes in the first quarter of this year and we will continue to pursue capital strategies that provide value to our stockholders.

We are excited about our long term growth opportunities and we look forward to updating you on our progress as we move forward.

Scott Scheuermann: Thank you for joining our call today, and we will now open the call for any questions. Thank you. If you would like to ask a question, please press Star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press Star followed by 2. Again, to ask a question, that is Star followed by 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question today comes from Jason Schmidt of Lake Street. Jason, please go ahead. Your line is now open. Hey, guys. Thanks for taking my questions.

Thank you for joining our call today, and we will now open the call for any questions.

Thank you for joining our call today, and we'll now open the call for any questions.

Operator 3: Thank you. If you would like to ask a question, please press Star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press Star followed by 2. Again, to ask a question, that is Star followed by 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question today comes from Jason Schmidt of Lake Street. Jason, please go ahead. Your line is now open.

Uh huh.

Thank you.

If you would like to ask a question. Please press star followed by one on your telephone keypad is there any reason you would like to remove that question. Please press star followed by two again to ask a question that is star followed by one.

As a reminder, if you all using a speaker phone. Please remember to pick up your handset before asking your question.

Yeah.

Our first question today comes from Jason Schmidt Lake Street, Jason. Please go ahead. Your line is now open.

Jaeson Schmidt: Hey, guys. Thanks for taking my questions.

Hey, guys. Thanks for taking my questions. Scott you mentioned factoring in capacity and material constraints into your outlook, which makes complete sense, but just curious if you could quantify the impact or the amount of demand do you think you are unable to be satisfied just given these current dynamics.

Scott Scheuermann: Scott, you mentioned factoring in capacity and material constraints into your outlook, which makes complete sense. Just curious if you could quantify the impact or the amount of demand you think you're unable to be satisfied just given these current dynamics. Yeah. Again, I won't give you specifics, Jason, and I appreciate you joining the call today. If I just walk you back through our guidance to kind of give you some color on that, again, for the company, we guided mid-single-digit revenue growth, mid-single-digit adjusted EBITDA growth, but it's the tale of two business units. In our debit and credit segment, for sure, demand is generally higher than our outlook. To your point, we do have some constraints with supply chain and labor, and we're working hard with our partners and our suppliers to alleviate that.

Scott, you mentioned factoring in capacity and material constraints into your outlook, which makes complete sense. Just curious if you could quantify the impact or the amount of demand you think you're unable to be satisfied just given these current dynamics.

Scott Scheirman: Yeah. Again, I won't give you specifics, Jason, and I appreciate you joining the call today. If I just walk you back through our guidance to kind of give you some color on that, again, for the company, we guided mid-single-digit revenue growth, mid-single-digit adjusted EBITDA growth, but it's the tale of two business units. In our debit and credit segment, for sure, demand is generally higher than our outlook. To your point, we do have some constraints with supply chain and labor, and we're working hard with our partners and our suppliers to alleviate that.

Yeah. It is.

Again, I won't give you specifics, Jason and I. Appreciate you joining the call today, but if I just walk you back through our guidance to kind of give you. Some color on that again for the company. We guided mid single digit revenue growth a mid single digit adjusted EBITDA growth, but.

It's the tale of two business units.

And in our debit and credit segment for sure demand is generally higher than our outlook, but to your point.

We do have some constraints with supply chain and labor and we're working hard with our.

Partners and our suppliers to deviate that but customer demand is very strong in the debit and credit segment is robust.

Scott Scheuermann: Customer demand is very strong, and the debit and credit segment is robust, but we'll continue to work through that. The other business unit is prepaid. Prepaid has been a great business for us. We have strong customer relationships. It's a business in really good shape. It had a record 2021 where sales were up 25% due to two primary factors. One is COVID inventory replenishment that happened in 2021. With one of our partners, we won a large portfolio, and there was some initial stocking there. The good news is that'll be recurring business as we move forward. Prepaid has a tough comparison in 2022 versus 2021, so we see the sales of prepaid for 2022 to be somewhere between what we did in 2020 and 2021. Again, I'd come back to customer demand is really strong.

Customer demand is very strong, and the debit and credit segment is robust, but we'll continue to work through that. The other business unit is prepaid. Prepaid has been a great business for us. We have strong customer relationships. It's a business in really good shape. It had a record 2021 where sales were up 25% due to two primary factors. One is COVID inventory replenishment that happened in 2021. With one of our partners, we won a large portfolio, and there was some initial stocking there. The good news is that'll be recurring business as we move forward. Prepaid has a tough comparison in 2022 versus 2021, so we see the sales of prepaid for 2022 to be somewhere between what we did in 2020 and 2021. Again, I'd come back to customer demand is really strong.

But we'll continue to work through that are you know.

The other business unit is as prepaid prepaid is it's been a great business for US we have a strong customer relationship it's a business in.

Good shape, but it had a record 2021, where sales were up 25% due to two primary factors won't mind is COVID-19 inventory replenishment that happened in 'twenty one.

And then with one of our partners, we want a large portfolio and so there was some initial stocking there the good news that'll be reoccurring business as we move forward, but prepaid has a tough comparison in 'twenty two versus 21, so we see the.

The sales of prepaid for 'twenty two to be somewhere between what we did in 'twenty.

2020 in 'twenty, 'twenty, one, but again I'd come back to.

Customer demand is really strong we've probably gained market share over the last four years. That's our objective on a go forward basis, and we believe our high quality our differentiated products such as eco focused cards are SaaS based instant issuance solution.

Scott Scheuermann: We've probably gained market share over the last four years. That's our objective on a go-forward basis, and we believe our high quality, our differentiated products such as Eco-focused cards, our SaaS-based instant issuance solution, prepaid quality, innovative packaging, all those things we believe will help us to continue to win share. Okay. That's helpful. Just looking at gross margin, I understand the dynamics that impacted Q4, but given sort of the supply chain and labor costs, which likely will persist at least here in the near term, how should we think about gross margin trending here in 2022? Relatedly, are you able to pass along some of these inflationary costs? Yes. To your second question, we are passing along the inflationary costs.

We've probably gained market share over the last four years. That's our objective on a go-forward basis, and we believe our high quality, our differentiated products such as Eco-focused cards, our SaaS-based instant issuance solution, prepaid quality, innovative packaging, all those things we believe will help us to continue to win share.

Prepaid quality innovative packaging you know all those things, we believe will help us to continue to win share.

Jaeson Schmidt: Okay. That's helpful. Just looking at gross margin, I understand the dynamics that impacted Q4, but given sort of the supply chain and labor costs, which likely will persist at least here in the near term, how should we think about gross margin trending here in 2022? Relatedly, are you able to pass along some of these inflationary costs?

Okay. That's helpful. And then just looking at gross margin I understand the dynamics that is.

Impacted Q4, but given sort of the supply chain and labor costs, which likely will persist at least here in the near term how should we think about gross margin trending here in 2022, and Relatedly are you able to pass along some of these inflationary costs.

Scott Scheirman: Yes. To your second question, we are passing along the inflationary costs.

Yes to your second question, we are passing along the inflationary costs.

Scott Scheuermann: What I'd probably take you back to is just broadly our guidance where we guided mid-single-digit adjusted EBITDA growth, but also we believe our 2022 margins will be similar to our 2021 margins that were 20.4%. There were some things that we expected in the fourth quarter with labor, inflation, and so forth. To your question on customer pricing, many of our pricing initiatives are going into effect in the first half of 2022. We also believe the sales we generate, the operating leverage will be helpful to the gross margins and also to the adjusted EBITDA. We're also, like we always have, continuing to try and drive efficiencies, operational improvements. We're quite comfortable that we believe our 2022 adjusted EBITDA margins will be similar to 2021 full year of 20.4%.

And so what I would probably take you back to is just broadly our guidance, where we guided to mid single digit adjusted EBITDA growth, but also we believe our 2022 margins will be similar to our 2021 margins that were 24% and so.

What I'd probably take you back to is just broadly our guidance where we guided mid-single-digit adjusted EBITDA growth, but also we believe our 2022 margins will be similar to our 2021 margins that were 20.4%. There were some things that we expected in the fourth quarter with labor, inflation, and so forth. To your question on customer pricing, many of our pricing initiatives are going into effect in the first half of 2022. We also believe the sales we generate, the operating leverage will be helpful to the gross margins and also to the adjusted EBITDA. We're also, like we always have, continuing to try and drive efficiencies, operational improvements. We're quite comfortable that we believe our 2022 adjusted EBITDA margins will be similar to 2021 full year of 20.4%.

There were some things that we expected in the fourth quarter with a book.

Labor inflation, and so forth, but to your question on customer pricing in many of our pricing initiatives are going into effect in the first half of 'twenty 'twenty. Two are also what we believe are the sales we generate the operating leverage will be helpful.

The gross margin and also to the adjusted EBITDA and then we're also like we always have is continuing to try and drive efficiencies.

<unk> improvements and so we're you know we're quite comfortable that.

We believe our 2022 adjusted EBITDA margins will be similar to.

2021, full year of 24% and knowing Jason that gross margins kind of.

Scott Scheuermann: Knowing, Jason, that gross margin's kind of a number in between sales and adjusted EBITDA, right? It's kind of all the things work together to drive strong margins as we move forward. Okay. Just the last one for me, and I'll jump back into Q. I mean, you mentioned taking share over the past few years. I assume you expect that to continue going forward, but just curious if you've seen any change in the competitive landscape, and I guess specifically sort of with the rumors surrounding Idemia. Yeah. I won't speak to any specific competitor, but clearly there are some competitors out there that are struggling in the marketplace. It's evident that over the last four years, we've gained share. We've significantly outpaced the market growth.

Knowing, Jason, that gross margin's kind of a number in between sales and adjusted EBITDA, right? It's kind of all the things work together to drive strong margins as we move forward.

Number in between.

Sales and adjusted EBITDA right, but it's kind of all the things work together to drive strong margins as we move forward.

Jaeson Schmidt: Okay. Just the last one for me, and I'll jump back into Q. I mean, you mentioned taking share over the past few years. I assume you expect that to continue going forward, but just curious if you've seen any change in the competitive landscape, and I guess specifically sort of with the rumors surrounding Idemia.

Okay, and just the last one for me and I'll jump back into queue. I mean, you mentioned taking share over the past few years I assume you expect that to continue going forward, but just curious if you've seen any change in the competitive landscape and I guess, specifically you saw with the rumors surrounding idea me huh.

Scott Scheirman: Yeah. I won't speak to any specific competitor, but clearly there are some competitors out there that are struggling in the marketplace. It's evident that over the last four years, we've gained share. We've significantly outpaced the market growth.

Okay.

Yeah, I won't speak to any specific competitor, but.

Clearly there are some competitors out there that are struggling in the marketplace.

And it's evident that over the last four years, we've gained share we significantly outpaced that.

Market growth.

Jason I'd say, just broadly I feel theres two reasons, we're gaining share you know a variety of reasons for sure, but if I put them in two broad buckets. One is I would put around our quality are.

Scott Scheuermann: Jason, I'd say just broadly, I feel there's two reasons we're gaining share, a variety of reasons for share, but if I put them in two broad buckets, one is I would put around our quality. Included in that quality, I would say, is some of the strategic decisions we made to purchase inventory. Our inventory increased over $33 million in 2021, as Amitosh mentioned on the call. I believe we've got very strong quality with the quality of our products, on-time delivery. We've been able to, I believe, navigate the supply chain better than some of our competitors. The second thing that I think is critically important too is we have really got some innovative and differentiated products that are in high demand in the market. To give you a couple of examples, one is our Eco-focused cards. Again, financial institutions have ESG goals.

Jason, I'd say just broadly, I feel there's two reasons we're gaining share, a variety of reasons for share, but if I put them in two broad buckets, one is I would put around our quality. Included in that quality, I would say, is some of the strategic decisions we made to purchase inventory. Our inventory increased over $33 million in 2021, as Amitosh mentioned on the call. I believe we've got very strong quality with the quality of our products, on-time delivery. We've been able to, I believe, navigate the supply chain better than some of our competitors. The second thing that I think is critically important too is we have really got some innovative and differentiated products that are in high demand in the market. To give you a couple of examples, one is our Eco-focused cards. Again, financial institutions have ESG goals.

And included in that quality I would say is some of the strategic.

Strategic decisions, we made to purchase inventory we spent ah.

Our inventory increased over $33 million in 2020 , one as Amit mentioned on the call. So I believe we've got very strong quality are with the quality of our products are on time delivery, we've been able to I believe navigate the supply chain better than some of our compare.

<unk>, but the second thing that I think is critically important to us.

We've really got some innovative and differentiated products that are in high demand in the market.

To give you a couple of examples one is our eco smokers cards again financial institutions have ESG goals all of us as consumers. Once the businesses are we do business with to be more environmentally conscious. So our equal focus cards are clearly differentiated we sold <unk>.

Scott Scheuermann: All of us as consumers want the businesses we do business with to be more environmentally conscious. Our Eco-focused cards are clearly differentiated. We've sold 50 million of those since we launched them in 2019. More importantly, in 2022, we believe sales of Eco-focused cards will be up over 50%. Another key, just as an example of a differentiated product, is our SaaS-based Card at Once instant issuance. It is clearly the market leader for SMEs. There is no one that is even a close second, in my opinion. With that business, it's a great business in that it's plug-and-play. It's easy for the bank or the credit union to use. We get initial revenue from the sale of the machine, but it's got a great recurring revenue model with a click charge. Every time a card is printed, we earn a fee.

All of us as consumers want the businesses we do business with to be more environmentally conscious. Our Eco-focused cards are clearly differentiated. We've sold 50 million of those since we launched them in 2019. More importantly, in 2022, we believe sales of Eco-focused cards will be up over 50%. Another key, just as an example of a differentiated product, is our SaaS-based Card at Once instant issuance. It is clearly the market leader for SMEs. There is no one that is even a close second, in my opinion. With that business, it's a great business in that it's plug-and-play. It's easy for the bank or the credit union to use. We get initial revenue from the sale of the machine, but it's got a great recurring revenue model with a click charge. Every time a card is printed, we earn a fee.

$50 million of both since we launched them in.

2019 and.

And more importantly in 2022, we believe sales of eco focused cards will be up over 50%.

Another key just as an example of a differentiated product is our SaaS base.

It wants instant issuance.

It is clearly the market leader for Smes There was no one that is even a close second in my opinion and with that business. It's a great business in that it's plug and play it's easy for the bank or the credit Union to use.

We get an initial.

Revenue from the sale of the machine, but it's got a great reoccurring.

The new model with a quick charge everytime cardis printed we earn a fee there's fees for some consumables printer ribbons things of that nature. So highly differentiated but I'd also have to our prepaid business you know.

Scott Scheuermann: are fees for some consumables, printer ribbons, things of that nature, so highly differentiated. I'd also hop to our prepaid business. Record sales year in 2021 with 25% growth. Again, high quality there. We've got innovative packaging that helps prevent fraud, drives shelf appeal, so a consumer pulls that package off the J-hook versus somebody else's package. We do see competitors struggling. I believe our quality, our proactive strategy with inventory, supply chain management, and just our highly differentiated products are allowing us to win over the last four years. I'm really confident that our objective is to continue to gain market share as we move forward. Okay. Appreciate the color. Thanks, guys. Thanks, Jason. Thanks, Jason. Thank you, Jason. As a reminder, if you would like to ask a question, please press Star followed by 1 on your telephone keypad.

are fees for some consumables, printer ribbons, things of that nature, so highly differentiated. I'd also hop to our prepaid business. Record sales year in 2021 with 25% growth. Again, high quality there. We've got innovative packaging that helps prevent fraud, drives shelf appeal, so a consumer pulls that package off the J-hook versus somebody else's package. We do see competitors struggling. I believe our quality, our proactive strategy with inventory, supply chain management, and just our highly differentiated products are allowing us to win over the last four years. I'm really confident that our objective is to continue to gain market share as we move forward.

Record sales year in 2021, with 25% growth, but again high quality. There. We've got an innovative packaging that is helps prevent fraud drive shelf appeal. So a consumer pulls that package off the J hook versus somebody else's package. So again.

We do see competitors struggling I believe our quality, our proactive strategy with inventory supply chain management, and then just our highly differentiated products are allowing us to win.

Over the last four years and I'm really confident that our you know our objective is to continue to gain market share as we move forward.

Jaeson Schmidt: Okay. Appreciate the color. Thanks, guys.

Okay I appreciate the color thanks, guys.

Scott Scheirman: Thanks, Jason.

Thanks, Thanks, Jason.

Thanks, Jason Thank you Jason.

Amintore Schenkel: Thanks, Jason.

Operator 3: Thank you, Jason. As a reminder, if you would like to ask a question, please press Star followed by 1 on your telephone keypad.

As a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.

The next question today comes from Joseph Thomas from Voya investment Joseph Please go ahead.

Scott Scheuermann: The next question today comes from Joseph Thomas from Voyer Investment. Joseph, please go ahead. Hi. Good morning. Quick question on how you see margins progressing through the year. I mean, you noted that higher pricing is coming into effect during the first half. Does that imply margins will be stronger in the second half versus first half? I have a follow-up. Yeah. The color I would give you is we provided full-year guidance. Any given quarter, there could be some variability both in sales and margins, and it could relate to the timing of onboarding customers. Our prepaid business has seasonality in the third quarter. That's generally the highest demand going into the holiday season. Some of it can be when the pricing initiatives kick in or investments we make.

The next question today comes from Joseph Thomas from Voyer Investment. Joseph, please go ahead.

Joseph Thomas: Hi. Good morning. Quick question on how you see margins progressing through the year. I mean, you noted that higher pricing is coming into effect during the first half. Does that imply margins will be stronger in the second half versus first half? I have a follow-up.

Hi, good morning.

Quick question on how you see margins progressing through the year I mean, you noted.

That pricing higher pricing as is coming into effect. During the first half does that does that imply you know margins would be stronger in the second half versus first half and I have a follow up.

Yeah I would.

Scott Scheirman: Yeah. The color I would give you is we provided full-year guidance. Any given quarter, there could be some variability both in sales and margins, and it could relate to the timing of onboarding customers. Our prepaid business has seasonality in the third quarter. That's generally the highest demand going into the holiday season. Some of it can be when the pricing initiatives kick in or investments we make.

The color I would give you is we provided our full year guidance. So.

Any given quarter there could be some variability.

Sales and margins and it could relate to the timing of Onboarding customers.

Our prepaid business has seasonality in the third quarter, that's generally the highest demand going into the holiday season.

Some of it can be a wind pricing initiatives kick in where investments we make so.

Scott Scheuermann: I don't want to give you specific color quarter by quarter, but I think the important thing is that on a full-year basis for 2022, we expect our adjusted EBITDA margins to be similar to 2021 adjusted EBITDA margins of 20.4%. Perfect. Okay. From a leverage standpoint, what is your target leverage range? If I just walk you back through our priorities for our capital, first is to have ample liquidity. Second is to invest in the business, including if there's acquisitions that would make sense for us. The third item to your question, Joseph, is reducing our leverage. Our leverage at the end of the year was about 3.8x. Today, we announced we're paying down the senior secured notes by $20 million. I would describe that we would like our leverage to be less compared to where it was at year-end.

I don't want to give you specific color quarter by quarter, but I think the important thing is that on a full-year basis for 2022, we expect our adjusted EBITDA margins to be similar to 2021 adjusted EBITDA margins of 20.4%. Perfect. Okay. From a leverage standpoint, what is your target leverage range? If I just walk you back through our priorities for our capital, first is to have ample liquidity. Second is to invest in the business, including if there's acquisitions that would make sense for us. The third item to your question, Joseph, is reducing our leverage. Our leverage at the end of the year was about 3.8x. Today, we announced we're paying down the senior secured notes by $20 million. I would describe that we would like our leverage to be less compared to where it was at year-end.

I don't want give you specific color quarter by quarter, but I think the important thing is that on a full year basis for 2022, we expect our adjusted EBITDA margins to be similar to 2021, adjusted EBITDA margins of 24%.

Perfect, Okay and from a leverage standpoint, what is your target leverage range.

If I just walk you back through our priorities for our capital.

First is to have.

We have ample liquidity second is to test in the business, including if there's acquisitions that would make sense for us the third item two to your question Joseph is producing arms coverage our leverage at the end of the year was about three eight turns.

We announced we're paying down the senior secured notes by $20 million. So I would describe that we would like our leverage to be less compared to where it was at year end, but I think the other important thing to keep in mind is that we have a much improved financial.

Scott Scheuermann: I think the other important thing to keep in mind is that we have a much improved financial condition compared to about a year ago, stronger balance sheet. That really gives us, I'd say, more strategic flexibility, whether that's to make more investments in the business through acquisitions, paying down the debt, or returning funds to shareholders. If we were to do that, that would likely be through stock buyback. Again, I'd like the leverage to be less, but I don't have a target that we want to share publicly, just so that as we move forward, we've got some flexibility with investing in the business, acquisitions, including reducing the leverage, and returning funds to shareholders. Thank you. That was helpful. Final question from me. Obviously, working capital was a headwind last year as you had stock inventory.

I think the other important thing to keep in mind is that we have a much improved financial condition compared to about a year ago, stronger balance sheet. That really gives us, I'd say, more strategic flexibility, whether that's to make more investments in the business through acquisitions, paying down the debt, or returning funds to shareholders. If we were to do that, that would likely be through stock buyback. Again, I'd like the leverage to be less, but I don't have a target that we want to share publicly, just so that as we move forward, we've got some flexibility with investing in the business, acquisitions, including reducing the leverage, and returning funds to shareholders.

<unk> compared to about a year ago.

A stronger balance sheet, so that really gives us I'd say more strategic flexibility.

Whether that's too.

Make more investments in the business through acquisitions paying down the debt or rich.

Returning funds to shareholders. If we were to do that that would likely be through stock buyback. So.

Again, I'd like to leverage to be less but I don't have a target that would be willing to share publicly just so that as we move forward we've got some flexibility.

Flexibility with testing in the business acquisitions, and including reducing the leverage and returning funds to shareholders.

Joseph Thomas: Thank you. That was helpful. Final question from me. Obviously, working capital was a headwind last year as you had stock inventory.

Okay and thing that that was helpful and final question from me, obviously, our working capital was a headwind last year.

You have to stock inventory, how do you see working capital move this year.

Scott Scheuermann: How do you see working capital moves this year? Yeah. I'll let Amitosh, our Chief Financial Officer, walk you through our thinking there. Yeah. Joseph, I think one of the things that's a little difficult to predict this year is when you think about kind of the inflation and supply chain issues that exist out there, those were obviously two key drivers that caused us to increase our inventory investment. Ultimately, inventory kind of caused our working capital to be a use of about $17 million. That was a primary driver. We're going to continue to kind of monitor supply chain situations out there. We would anticipate that the increases would not be as high as what we had in 2021, but that clearly will be something that we'll continue to monitor out there.

How do you see working capital moves this year?

Scott Scheirman: Yeah. I'll let Amitosh, our Chief Financial Officer, walk you through our thinking there.

Yeah, I'll, let Amit to our Chief Financial Officer will walk you through our thinking there.

Amintore Schenkel: Yeah. Joseph, I think one of the things that's a little difficult to predict this year is when you think about kind of the inflation and supply chain issues that exist out there, those were obviously two key drivers that caused us to increase our inventory investment. Ultimately, inventory kind of caused our working capital to be a use of about $17 million. That was a primary driver. We're going to continue to kind of monitor supply chain situations out there. We would anticipate that the increases would not be as high as what we had in 2021, but that clearly will be something that we'll continue to monitor out there.

Yeah, you know I think you know one of the things that's a little difficult to predict this year as you know when you think about kind of the inflation and supply chain issues that exist out. There you know those were obviously two key drivers that caused us to increase our inventory investment and ultimately inventory kind of caused our.

<unk> capital to be a use of about $17 million and that was the primary driver, but you know we're going to continue to kind of monitor supply chain situations out there we would anticipate that.

Good.

Increases would not be as high as what we had in 2021 , but you know that clearly will be something that we'll continue to monitor out there you know the key for US is making sure that you know, we're managing the business well and continuing to grow our sales and our profits overall, but.

Scott Scheuermann: The key for us is making sure that we're managing the business well, continuing to grow our sales and our profits overall. I do think 2021 was kind of a year that was a bit unique in terms of us having to build up our inventory reserves in order to make sure that we had appropriate inventory to make sure we can deliver on what we're planning to deliver on here in 2022. Thanks so much. Thank you, Joseph. The next question today comes from Bill Charters from Sable Capital. Bill, please go ahead. Hi. Thanks for taking my call. If I look at your guidance, that kind of implies a little over $2 of earnings, maybe $2.40. If you normalize that, what that comes out to is roughly a 20% free capital yield at this point.

The key for us is making sure that we're managing the business well, continuing to grow our sales and our profits overall. I do think 2021 was kind of a year that was a bit unique in terms of us having to build up our inventory reserves in order to make sure that we had appropriate inventory to make sure we can deliver on what we're planning to deliver on here in 2022.

I do think 2021 was kind of a year that was a bit unique in terms of us having to build up our inventory reserves in order to make sure that we had appropriate inventory to make sure. We can deliver on what we're planning to deliver on here in 2022.

Joseph Thomas: Thanks so much.

Thanks, so much.

Operator 3: Thank you, Joseph. The next question today comes from Bill Charters from Sable Capital. Bill, please go ahead.

Thank you Joseph.

The next question today comes from Bill charters from Sable capsule Bill. Please go ahead.

William Charters: Hi. Thanks for taking my call. If I look at your guidance, that kind of implies a little over $2 of earnings, maybe $2.40. If you normalize that, what that comes out to is roughly a 20% free capital yield at this point.

Hi, Thanks for taking my call.

I look at your guidance.

That kind of implies.

A little over $2 of earnings maybe $2.40.

If you normalize that.

What that comes out to roughly a 20% free cash flow yield at this point and I believe leading your indentures.

Scott Scheuermann: I believe reading your indentures, you have an ability to buy $20 million of stock. I didn't know if the $20 million of buying bonds reduced that amount. I guess that's my first question. The follow-up to that question, obviously, is with a 20% free capital, I would strongly encourage you to buy stock because there's very few returns out there that you can get that would exceed 20%. Yeah. This is Mike. Bill, I appreciate your—sorry. Hey, Bill. This is Mike. Go ahead, Mike. Yeah. I was going to say the bond redemption does not affect the basket available for the renewed share repurchase. Okay. I appreciate your input on how we should utilize our capital. I appreciate that for sure, Bill. Thank you. Yeah. Thank you. That's all the questions I had. Thank you, Bill.

I believe reading your indentures, you have an ability to buy $20 million of stock. I didn't know if the $20 million of buying bonds reduced that amount. I guess that's my first question. The follow-up to that question, obviously, is with a 20% free capital, I would strongly encourage you to buy stock because there's very few returns out there that you can get that would exceed 20%.

You have the ability to buy 20 million of stock.

I didn't know if the $20 million in buying bonds.

Reduce that amount, but I guess, that's my first question and then the follow up to that question, obviously is with a 20% free cash flow.

We encourage you to buy stock because there's very few return out there that you can get that exceed 20%.

Mike Salop: Yeah. This is Mike.

Yeah.

Hi, Yeah. This is bill I appreciate your.

Scott Scheirman: Bill, I appreciate your—sorry.

Sure.

Sorry Bill.

Mike Salop: Hey, Bill. This is Mike.

Mike.

Scott Scheirman: Go ahead, Mike.

Go ahead Mike.

Mike Salop: Yeah. I was going to say the bond redemption does not affect the basket available for the renewed share repurchase.

I was going to say the bond redemption does not affect the basket available for the share repurchase.

Okay.

And I appreciate your input on how we should.

William Charters: Okay.

Scott Scheirman: I appreciate your input on how we should utilize our capital. I appreciate that for sure, Bill. Thank you.

We utilize our capital so I appreciate that for sure Bill. Thank you.

Yeah. Thank you. That's all the questions I had.

Yes.

Thank you that's all the questions I had.

Operator 3: Thank you, Bill.

Thank you Bill.

There are no further questions registered so I'd like to hand, the call back over to Mike <unk> for closing remarks.

Scott Scheuermann: There are no further questions registered, so I'd like to hand the call back over to Mike Salop for closing remarks. Thank you. I'd like to thank everybody for joining our call today. Feel free to contact the company or myself if you have any follow-up questions. I hope everyone has a good day. Thanks. That concludes today's CPI Card Group fourth-quarter earnings call. Thank you. You may now disconnect your line.

There are no further questions registered, so I'd like to hand the call back over to Mike Salop for closing remarks.

Mike Salop: Thank you. I'd like to thank everybody for joining our call today. Feel free to contact the company or myself if you have any follow-up questions. I hope everyone has a good day. Thanks. That concludes today's CPI Card Group fourth-quarter earnings call. Thank you. You may now disconnect your line.

Thank you.

Thank everybody for joining our call today feel free to contact the company or myself do you have any follow up questions.

I hope everyone has a good day thanks.

That concludes todays CPI card group fourth quarter earnings call. Thank you you may now disconnect your lines.

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Q4 2021 CPI Card Group Inc Earnings Call

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