Q4 2024 CPI Card Group Inc Earnings Call

Speaker Change: [music].

Operator: Thanks for watching!

Operator: Welcome to CPI Card Group's 4th Quarter 2024 Earnings Call.

Welcome to C. P. I card group's fourth quarter 2024 earnings call.

Julianne: My name is Julianne, and I will be your operator today. If you are viewing on the webcast, you may advance the slides forward by pressing the arrow button.

My name is Julian and I will be your operator today.

If you are viewing on the webcast you may advance the slides forward by pressing the arrow buttons.

Operator: The call will be open for questions after the company's remarks.

Speaker Change: The call will be opened for questions. After the company's remarks, if he would like to get in queue for questions. Please press star one on your telephone keypad to withdraw any questions Press star one again.

Operator: If you would like to get in queue for questions, please press star 1 on your telephone keypad.

Operator: To withdraw any questions, press star 1 again.

Mike Salop: Now I'd like to turn the call over to Mike Salop, CPI's Head of Investor Relations. Thanks, Operator. Welcome to the CPI Card Group fourth quarter 2024 earnings webcast and conference call.

Speaker Change: Now I'd like to turn the call over to Mike Shea, let GTI as head of Investor Relations.

Thanks, Operator, welcome to the CPI card group fourth quarter 2024 earnings webcast and conference call. Today's date is March 4th 2025 and on the call today from CPI card group are John Lowe, President and Chief Executive Officer, and Jeff <unk> Chief Financial Officer.

Mike Salop: Today's date is March 4th, 2025, and on the call today from CPI Card Group are John Lowe, President and Chief Executive Officer, and Jeff Hochstadt, Chief Financial Officer. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements, as they are defined under the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For discussion of such risks and uncertainties, please see CPI Card Group's most recent filings with the SEC. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect the events that occur after this call.

Speaker Change: 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 a discussion of such risks and uncertainties. Please see CPI card group's most recent filings with the SEC.

Speaker Change: All forward looking statements made today reflect our current expectations only and we undertake no obligation to update any statement to reflect the events that occur after this call.

Mike Salop: Also, during the course of today's call, the company will be discussing one or more non-GAAP financial measures, including but not limited to EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Net Leverage Ratio, and Free Cash Flow. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the press release and slide presentation we issued this morning. Copies of today's press release as well as the presentation that accompanies this conference call are accessible on CPI's Investor Relations website, investor.cpicardgroup.com. In addition, CPI's Form 10-K for the year into December 31st, 2024, will be available on CPI's Investor Relations website.

Speaker Change: 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 that 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.

Speaker Change: Copies of today's press release as well as a presentation that accompanies this conference call are accessible on Cpi's Investor Relations website investor not CPI card group Dot Com. In addition, Cpi's Form 10-K for the year ended December 31, 2024 will be available on Cpi's Investor Relations website.

Mike Salop: On today's call, all growth rates refer to comparisons with the prior year period unless otherwise noted.

Speaker Change: On today's call all growth rates refer to comparisons with the prior year period, unless otherwise noted.

Mike Salop: The agenda for today's call is on slide three.

Speaker Change: The agenda for today's call is on slide three.

John Lowe: John will give a brief overview of business performance and our strategies.

Speaker Change: John will give a brief overview of business performance and our strategy, Jeff will provide more detail on our financial results and our 2025 outlook and then we will open the call for questions. We can start on slide four and I'll turn the call over to John.

Jeff Hochstadt: Jeff will provide more detail on the financial results in our 2025 outlook. And then we will open the call for questions.

Mike Salop: We can start on slide four, and I'll turn the call over to John.

John Lowe: Thanks, Mikey. Good morning, everyone. Overall, we are pleased with the fourth quarter results and what we accomplished in 2024. Looking back on my first year as CEO, there are several important areas I would like to highlight. First, we refined and advanced our strategy, maintaining our emphasis on customers and quality while also increasing our focus on innovation and diversification. This includes intensifying efforts to expand into adjacent markets by providing new offerings for our existing customer base and delivering existing solutions to new customer verticals.

John: Thanks, Mike and good morning, everyone.

John: Overall, we were pleased with fourth quarter results and what we accomplished in 2024.

Speaker Change: Looking back on my first year as CEO.

John: Several important areas I would like to highlight.

John: First we refined and advanced our strategy, maintaining our emphasis on customers and quality, while also increasing our focus on innovation and diversification.

John: This includes intensifying efforts to expand into adjacent markets by providing new offerings for our existing customer base and delivering existing solutions to new customer verticals.

John Lowe: We also enhance the management. Promoting from within to balance our leadership, talent, and skills, and bringing in outside expertise to support our next stage of growth. And we delivered good results, returning to growth despite the channel inventory challenges in our debit and credit card business. Our prepaid business produced exceptional performance, growing 26% for the year and exceeding $100 million in net sales. This growth was driven by strong demand for our PaxGene solutions focused on fraud prevention and expansion of one of our adjacencies, the healthcare payment solutions vertical. Our debit and credit business increased 4% for the year with strong growth in the second half led by sales of EcoFocus contactless cards.

John: We also enhanced the management team promoting from within to balance our leadership talent and skills and bringing in outside expertise to support our next stage of growth.

John: And we delivered good results returning to growth despite the channel inventory challenges in our debit and credit card business.

John: Our prepaid business produced exceptional performance growing 26% for the year and exceeding $100 million and net sales.

John: This growth was driven by strong demand for our packaging solutions focused on fraud prevention and expansion of one of our Adjacencies to health care payment solutions vertical are.

John: Our debit and credit business increased 4% for the year with strong growth in the second half led by sales of eco focused contactless cards.

John Lowe: in addition to our recovered ocean bound plastic and other more environmentally friendly debit and credit card offers. We're also seeing strong marker response to our eco-focused offerings in the prepaid space. In total, we have sold more than 350 million EcoFocus credit, debit, and prepaid card or packaging solutions since launch, with prepaid contributing more than $200 million of these in certification in 2023. Overall, we continue to win business across our portfolio in 2024 and believe we gain market share during the year. We also generated strong free cash flow, exceeding $34 million for the full year while increasing our capital spending investment.

John: In addition to our recovered ocean bound plastic and other more environmentally friendly debit and credit card offerings.

John: We're also seeing strong market response to our Eagle focused offerings in the prepaid space.

John: In total we have sold more than 350 million equal focus credit debit and prepaid card packaging solution since launch with prepaid contributing more than $200 million of these and certification in 2023.

John: Overall, we continue to win business across our portfolio in 2024 and believe we gained market share during the year.

John: We also generated strong free cash flow exceeding $34 million for the full year, while increasing our capital spending investments.

John Lowe: And we completed several key capital structure actions during the year that we believe enhance our market position. We purchased $9 million of stock at an average price of just over $18, which we view as a strong investment for our shareholders. We refinanced our debt, including issuing $285 million of new senior notes that extended our debt maturities to 2029. And we completed a 1.4 million share secondary offering of common stock on behalf of our majority shareholder, which reduced its holdings from 56 percent to 43 percent of shares outstanding, increased our public float, and brought in new shareholders.

John: And we completed several key capital structure actions during the year that we believe enhance our market positioning.

John: We purchased $9 million of stock at an average price of just over $18, which we view as a strong investment for our shareholders.

John: We refinanced our debt, including issuing $285 million of new senior notes that extended our debt maturities to 2029.

John: And we completed a $1 4 million share secondary offering of common stock on behalf of our majority shareholder which reduced its holdings from 56% to 43% of shares outstanding increased our public float and brought in new shareholders turning to our 2025 outlook. We currently project mid to high single digit net sales grew.

John Lowe: Turning to our 2025 outlook, we currently project mid- to high-single-digit net sales growth for the year, led by our debit and credit business, which reflects our goal to continue to gain market share. We believe the channel inventory situation is much improved, but it's still above historical levels, and we expect the market to continue to normalize during the year. We expect adjusted EBITDA growth of mid- to high-single digits in 2025 as well, which reflects increased investments for the future, including for our innovation and diversification strategy. We also expect to generate strong free cash flow and reduce net leverage by a year.

John: For the year led by our debit and credit business, which reflects our goal to continue to gain market share.

John: We believe the channel inventory situation is much improved but it's still above historical levels and we expect the market to continue to normalize during the year.

John: We expect adjusted EBITDA growth of mid to high single digits in 2025, as well, which reflects increased investments for the future, including for our innovation and diversification strategies.

John: We also expect to generate strong free cash flow and reduce net leverage by year end.

John Lowe: Jeff will provide you more detail on the results and outlook in a few minutes, but first let me highlight our strategy on slide 5. Our vision is to be the most trusted partner for innovative payments technology solutions. We aim to support that vision by providing market-leading, high-quality payment solutions and best-in-class customer service.

John: Jeff will provide you more detail on our results and outlook in a few minutes, but first let me highlight our strategy on slide five.

John: Our vision is to be the most trusted partner for innovative payments technology solutions, we aimed to support that vision by providing market, leading high quality payment solutions and best in class customer service in.

John Lowe: In managing our business, we focus on four main strategic pillars, customer focus, quality and efficiency, innovation and diversification, and people and culture. Our focus on the customer is evidenced by our net promoter scores, where we have consistently ranked high relative to peers and continue to get better.

John: In managing our business, we focus on four main strategic pillars.

John: Our focus on efficiency innovation and diversification and people and culture are.

John: Focus on the customer as evidenced by our net promoter scores, where we have consistently ranked high relative to peers and continue to get better.

John Lowe: The innovation and diversification pillar includes our efforts to expand our addressable markets by offering new solutions to existing customers and existing solutions to new customer verticals. We have already made significant progress in advancing these expansion strategies, including increasing our addressable market through offerings of health care payment solutions, which contributed to our strong prepaid growth in 2024. The new areas we have entered have increased our total addressable market from $1.5 billion related to our traditional core businesses to approximately $2 billion and there is more opportunity to come. For example, we are in the early stages of investment to support the penetration of the closed-loop prepaid market in the U.S., where many customers are shifting to higher-value secure packaging solutions due to regulation or proactive moves to combat fraud.

John: The innovation and diversification pillar includes our efforts to expand our addressable markets by offering new solutions to existing customers and existing solutions to new customer verticals.

John: We have already made significant progress advancing these expansion strategies, including increasing our addressable market through offerings of health care payment solutions, which contributed to our strong prepaid growth in 2024.

John: The new areas. We have entered have increased our total addressable market from $1 5 billion related to our traditional core businesses do approximately $2 billion.

John: And there was more opportunity to come.

John: For example, we are in the early stages of investment to support the penetration of the closed loop prepaid market in the U S where many customers are shifting to higher value secure packaging solutions due to regulation or proactive moves to combat fraud.

John Lowe: And we continue to advance our digital solutions, such as push provisioning for mobile wallets, with more integrations and implementations underway with additional mobile banking app providers and platforms, as we continue to make our services more available to the broader market.

John: And we continue to advance our digital solutions, such as push provisioning for mobile wallets with more integrations and implementations underway with additional mobile banking app providers and platforms as we continue to make our services more available to the broader market.

John Lowe: While new solutions generally take time to gain adoption and turn into meaningful revenue, these opportunities leverage existing strengths, and we believe they will allow us to further expand our total addressable market in the future. We also remain confident in the long-term growth of our traditional markets as payment card issuance continues to grow in the U.S. We are stepping up investments in 2025 to take advantage of these opportunities through both CAPEX and OPEX. This includes investment in our Indiana factory, our developing digital solutions, and closed-loop prepaid capabilities, among other initiatives, as we balance generating strong profitability in the near term with accelerating our long-term growth.

John: While new solutions generally take time to gain adoption and turn into meaningful revenue these opportunities leverage existing strengths and we believe they will allow us to further expand our total addressable market in the future.

John: We also remain confident in the long term growth of our traditional markets as payment card issuance continues to grow in the U S.

John: We are stepping up investments in 2025 to take advantage of these opportunities through both Capex and Opex.

John: This includes investment in our Indiana factory are developing digital solutions and closed loop prepaid capabilities. Among other initiatives as we balance generating strong profitability in the near term with accelerating our long term growth.

John Lowe: Overall, we expect 2025 to be a good year, and we also plan to make strong progress on our various market expansion initiatives.

John: Overall, we expect 2025 to be a good year and we also plan to make strong progress on our various market expansion initiatives.

Jeff Hochstadt: I would now like to turn the call over to Jeff to review your financial results and outlook in more detail. Thanks, John, and good morning, everyone.

Jeff: I would now like to turn the call over to Jeff to review, our financial results and outlook in more detail.

John: Jeff.

Jeff: Thanks, John and good morning, everyone I will begin my overview on slide seven.

Jeff Hochstadt: I will begin my overview on slide 7. Net sales increased 22% in the fourth quarter, led by great performance from prepaid, as well as growth in debit and credit card volumes and personalization services. Adjusted EBITDA increased 10% and net income more than doubled. Free cash flow was very strong as we generated more than $34 million for the year despite higher capital spending.

Jeff: Net sales increased 22% in the fourth quarter led by great performance from prepaid as well as growth in debit and credit card volumes and personalization services.

Jeff: Adjusted EBITDA increased 10% and net income more than doubled.

Jeff: Free cash flow was very strong as we generated more than $34 million for the year, Despite higher capital spending.

Jeff Hochstadt: Turning to the detailed fourth quarter results on slide 8, the overall 22 percent sales increase reflected a 59 percent increase in our prepaid segment and a 12 percent increase in our debit and credit segment. Prepaid growth was driven by continued strong demand for higher-priced, fraud-focused packaging solutions, as well as incremental growth from non-financial customer verticals, including our healthcare payment solution. Debit and credit card growth was led by contactless, with strong growth from eco-focused cards. Gross profit increased 20% in the quarter, while gross margins decreased from 34.4% in the prior year quarter to 34.1% as operating leverage was offset by some negative product mix.

Turning to the detailed fourth quarter results on slide eight the overall, 22% sales increase reflected a 59% increase in our prepaid segment and a 12% increase in our debit and credit segment.

Jeff: Prepaid growth was driven by continued strong demand for our higher priced fraud focused packaging solutions as well as incremental growth from nonfinancial customer verticals, including our health care payment solutions.

Jeff: Debit and credit card growth was led by contactless with strong growth from eco focused cards.

Jeff: Gross profit increased 20% in the quarter, while gross margins decreased from 34, 4% in the prior year quarter to 34, 1% as operating leverage was offset by some negative product mix.

Jeff Hochstadt: SG&A, including depreciation and amortization, increased $1.8 million from the prior year, primarily due to increased compensation expenses, including higher employee performance-based incentive compensation expense, partially offset by expense related to the previous CEO retention agreement in the prior year. The tax rate in the quarter of 17.9% reflected benefits related to a statute of limitations expiration. Net income increased 148%, driven by sales growth, a lower effective tax rate, and the impact of the CEO retention expense in the prior year. Adjusted EBITDA increased 10% to $21.9 million, while adjusted EBITDA margins declined from 19.3% to 17.5%.

Jeff: SG&A, including depreciation and amortization increased $1 8 million from the prior year, primarily due to increased compensation expenses, including higher employee performance based incentive compensation expense, partially offset by expense related to the previous CEO retention agreement in the prior year.

Jeff: Tax rate in the quarter of 17, 9% reflected benefits related to a statute of limitations exploration.

Jeff: Net income increased 148% driven by sales growth, a lower effective tax rate and the impact of the CEO retention expense in the prior year.

Jeff: Adjusted EBITDA increased 10% to $21 9 million while.

Jeff: While adjusted EBITDA margin declined from 19, 3% to 17, 5%.

Jeff Hochstadt: Turning now to our full-year results on slide 9. Net sales increased 8% for the full year, which reflected 26% growth from the prepaid segment and 4% from debit and credit. Prepaid delivered an exceptional year, well above our original expectations. The debit and credit segment increase was driven by growth in contactless cards, card at once, instant issuance, and personalization services. Card growth was led by strong performance from EcoFocus contactless cards, and contactless overall represented approximately 90% of our chip card volume in 2024, up from just over 80% in the prior year. Full year gross profit increased 10% as gross margin increased from 35.0% to 35.6%, driven by operating leverage from sales growth.

Jeff: Turning now to our full year results on slide nine.

Jeff: Net sales increased 8% for the full year, which reflected 26% growth from the prepaid segment and 4% from debit and credit.

Jeff: Prepaid delivered an exceptional year well above our original expectations. The debit and credit segment increase was driven by growth in contactless cards card at once.

Jeff: <unk> and personalization services.

Jeff: Card growth was led by strong performance from Eco focused contactless cards and contactless overall represented approximately 90% of our chip card volume in 2024.

Jeff: From just over 80% in the prior year.

Jeff: Full year gross profit increased 10% as gross margin increased from 35.0% to 35, 6% driven by operating leverage from sales growth.

Jeff Hochstadt: SG&A increased $14.5 million from the prior year, driven by increased employee performance-based incentive compensation as we return to growth following a challenging year in 2023, investments in people, and increased medical costs. Interest expense increased $7.2 million for the year, primarily due to the $5.8 million call premium paid to redeem our senior notes due in 2026 in the third quarter. Other expense reflects a $3 million loss on debt extinguishment, which was also recorded in the third quarter. The full year tax rate of 22% declined versus the prior year rate of 30.4% due to increased stock compensation deductibility and the benefits realized related to a statute expiration in 2024, as well as limitations on executive compensation deductibility in the prior year.

Jeff: SG&A increased $14 5 million from the prior year driven by increased employee performance based incentive compensation as we returned to growth following a challenging year in 2023 investments in people and increased medical costs.

Jeff: Interest expense increased $7 2 million for the year, primarily due to the $5 $8 million call premium paid to redeem our senior notes due in 2026% in the third quarter.

Jeff: Other expense reflects a $3 million loss on debt extinguishment, which was also recorded in the third quarter the.

Jeff: The full year tax rate of 22% decline versus the prior year rate of 34% due to increased stock compensation deductibility and the benefits realized related to a statute expiration in 2024 as well as limitations on executive compensation deductibility in the prior year.

Jeff Hochstadt: We would expect the rate to be in the mid to high 20% range moving forward. Net income for the full year decreased 19% to $19.5 million, with the reduction primarily due to the $8.8 million of pre-tax debt refinancing costs incurred in 2024 and increased SG&A, partially offset by sales growth, gross margin expansion, and a lower effective tax rate. Adjusted EBITDA increased 3% to $91.9 million and adjusted EBITDA margin declined from 20.1% to 19.1% primarily due to increased employee performance-based incentive compensation expense.

Jeff: We would expect the rate to be in the mid to high 20% range moving forward.

Jeff: Net income for the full year decreased 19% to $19 $5 million with the reduction primarily due to the $8 8 billion of pre tax debt refinancing costs incurred in 2024 and increased SG&A, partially offset by sales growth gross margin expansion and a lower effective tax rate.

Jeff: Adjusted EBITDA increased 3% to $91 $9 million.

Jeff: Adjusted EBITDA margin declined from 21% to 19, 1%, primarily due to increased employee performance based incentive compensation expense.

Jeff Hochstadt: Turning now to our segments on slide 10. I discussed the segment sales drivers earlier, so I will highlight segment profitability on this slide.

Jeff: Turning now to our segments on slide 10.

Jeff: I'll discuss the segment sales drivers earlier, so I will highlight segment profitability on this slide.

Jeff Hochstadt: Income from operations for the debit and credit segment decreased 7% in the fourth quarter, primarily due to negative product mix, and 2% for the year, primarily driven by the impact of increased compensation-related expenses.

Jeff: Income from operations for the debit and credit segment decreased 7% in the fourth quarter, primarily due to negative product mix and 2% for the year, primarily driven by the impact of increased compensation related expenses.

Jeff Hochstadt: Prepaid debit segment income from operations increased 106% in the quarter and 49% for the year, driven by sales growth and margin expansion from operating leverage.

Prepaid debit segment income from operations increased 106% in the quarter and 49% for the year driven by sales growth and margin expansion from operating leverage.

Jeff Hochstadt: Turning to the balance sheet, liquidity, and cash flow on slide 11. We generated $43.3 million of cash from operating activities in 2024 and invested $9.3 million in capital expenditures, which resulted in free cash flow of $34.1 million. This compares to operating cash flow of $34 million and free cash flow of $27.6 million in 2023. The increased generation in 2024 was primarily driven by higher net income, excluding the debt refinance costs, and improved working capital, including lower senior note interest payments due to refinancing timing, partially offset by a $3 million increase in capital spending. On the balance sheet at year-end, we had $33.5 million of cash, no borrowings on our ABL revolver, and $285 million of senior notes outstanding.

Turning to the balance sheet liquidity and cash flow on slide 11.

Jeff: We generated $43 $3 million of cash from operating activities in 2024, and invested $9 3 million in capital expenditures, which resulted in free cash flow of $34 1 million.

Jeff: This compares to operating cash flow of $34 million and free cash flow of $27 6 million in 2023 the.

Jeff: The increased generation in 2024 was primarily driven by higher net income excluding the debt refinance costs.

Jeff: <unk> working capital, including lower senior note interest payments due to the refinancing timing, partially offset by a $3 million increase in capital spending on.

On the balance sheet at year end, we had $33 $5 million of cash no borrowings on our ABL revolver and $285 million of senior notes outstanding.

Jeff Hochstadt: Our net leverage ratio was 3.0 times down from the 2023 year-end level at 3.1 times despite cash outflows during the year for share repurchase and the debt refinance.

Jeff: Our net leverage ratio was 3.0 times down from the 2020 through year end level of $3. One times, despite cash outflows during the year for share repurchase and the debt refinancing.

Jeff Hochstadt: Our capital structure and allocation priorities remain focused on investing in the business, including possible strategic acquisitions, deleveraging the balance sheet, and returning funds to stockholders. In 2024, we bought back approximately $9 million of our common stock and our authorization expired at year end.

Jeff: Our capital structure and allocation priorities remain focused on investing in the business, including possible strategic acquisitions deleveraging the balance sheet and returning funds to stockholders and.

Jeff: In 2024, we bought back approximately $9 million of our common stock and our authorization expired at year end.

Jeff Hochstadt: Before we move on to our 2025 outlook, we have provided the latest U.S. cards and circulation trends from Visa and MasterCard on slide 12. For the three years ending September 30th, cards and circulation in the U.S. increased at a 9% CAGR. In addition, the February Nielsen Report indicated the total number of general-purpose credit cards in the U.S. increased 7% in 2024. This was driven by both growth in the number of cardholders and a 3.5% increase in the number of cards per cardholder, which stood at more than five credit cards per holder in 2024. Nielsen also reported a 9% increase in the total number of credit and debit cards for the year, including general purpose prepaid cards.

Jeff: Before we move on to our 2025 outlook. We have provided the latest U S cards in circulation trends from visa and Mastercard on slide 12 for.

Jeff: For the three years ending September 30th cards in circulation in the U S increased at a 9% CAGR. In addition, the February Nielsen report indicated that total number of general purpose credit cards in the U S increased 7% in 2024.

Jeff: This was driven by both growth in the number of cardholders and a three 5% increase in the number of cards per cardholder.

Jeff: Stood at more than five credit cards per holder in 2024.

Jeff: Nielsen also reported a 9% increase in the total number of credit and debit cards for the year, including general purpose prepaid cards.

Jeff Hochstadt: The latest earnings reports from large bank issuers have indicated healthy account growth and card business outlooks as well. The data continues to show positive issuance trends, as well as cards remaining the predominant form of payment for in-person transactions in the U.S., further supporting the card growth dynamic.

Jeff: The latest earnings reports from large bank issuers have indicated healthy account growth and card business outlooks as well.

Jeff: The data continues to show positive issuance trends as well as cards remaining the predominant form of payment for in person transactions in the U S. Further supporting the card growth dynamic.

Jeff Hochstadt: Turning now to our 2025 Outlook on slide 13. We expect a good year in 2025. Although channel inventories of credit and debit cards are still being worked down, positions are better than last year, and we expect the market to continue to normalize. Our outlet projects mid to high single-digit net sales growth for 2025 led by our debit and credit segment.

Jeff: Turning now to our 2025 outlook on slide 13.

Jeff: We expect a good year in 2025.

Jeff: So channel inventories of credit and debit cards are still being worked out positions are better than last year, and we expect the market to continue to normalize.

Jeff: Our outlet projects mid to high single digit net sales growth for 2025 led by our debit and credit segment.

Jeff Hochstadt: We are not planning significant growth from our prepaid segment coming off the record levels reached in 2024, but we do expect to make some inroads into the closed-loop market late in the year as our capabilities become operational. We expect adjusted EBITDA growth to also be mid- to high-single digits as we ramp up investments in digital, our Indiana factory, and other areas to drive long-term growth. From a quarterly perspective, we expect net sales and adjusted EBITDA growth to be strongest in the second half of the year.

Jeff: Not planning significant growth from our prepaid segment coming off the record levels reached in 2024, but we do expect to make some inroads into the closed loop market late in the year as our capabilities become operational.

Jeff: We expect adjusted EBITDA growth to also being mid to high single digits as we ramp up investments in digital are India, and the factory and other areas to drive long term growth.

Jeff: From a quarterly perspective, we expect net sales and adjusted EBITDA growth to be strongest in the second half of the year for the first quarter, we expect sales to increase but currently anticipate adjusted EBITDA to be slightly down due to the timing of spending and mix.

Jeff Hochstadt: For the first quarter, we expect sales to increase, but currently anticipate adjusted EBITDA to be slightly down due to timing of spending and mix. We expect our full year 2025 free cash flow to be slightly below the 2024 level due to increased cash interest expense, driven by the timing of our refinancing last year, and higher rates and increased capital spending. The increased CapEx in 2024 and 2025 for our Indiana production facility and other sales-related machinery will also impact depreciation and amortization expense in our P&L, and we expect DNA and cost of sales to increase by approximately $3 million in 2025, although this does not impact EBITDA.

Jeff: We expect our full year 2025 free cash flows it would be slightly below the 2024 level due to increased cash interest expense driven by the timing of our refinancing last year and higher rates and increased capital spending.

Jeff: The increased Capex in 2024, and 2025 for our India and a production facility and other sales related machinery will also impact depreciation and amortization expense in our P&L and we expect DNA and cost of sales to increase by approximately $3 million in 2025, although this does not impact EBIT.

Jeff: <unk>.

Jeff Hochstadt: Finally, we expect to reduce our net leverage ratio to below 3.0 times by year-end, driven by growth in adjusted EBITDA and strong cash flow generation.

Jeff: Finally, we expect to reduce our net leverage ratio to below $3 zero times by year end driven by growth in adjusted EBITDA and strong cash flow generation.

John Lowe: I will now pass the call back to John for some closing remarks on slide 14. John? Thanks, Jeff.

John: I will now pass the call back to John for some closing remarks on slide 14, John.

John: Thanks, Jeff.

John Lowe: To summarize, we made a lot of strategic progress in 2024, generated good results, and finished the year strong. Our prepaid business was outstanding, our debit and credit business grew despite challenges, and we generated strong free cash flow while investing for the future. We also completed significant capital activities which should benefit our company and shareholders in future years.

John: To summarize we made a lot of strategic progress in 2024 generated good results and finished the year strong our prepaid business was outstanding our debit and credit business grew despite challenges and we generated strong free cash flow, while investing for the future.

John: We also completed significant capital activities, which should benefit our company and shareholders in future years.

John Lowe: We are projecting a good year in 2025 and we'll continue to execute our strategies to gain share and expand our addressable markets and drive long-term growth. We look forward to reporting our progress.

John: Projecting a good year in 2025, and we will continue to execute our strategies to gain share and expand our addressable markets and drive long term growth. We look forward to reporting our progress operator, we will now open the call up for questions.

Operator: Operator, we will now open the call up for questions. We will now open the call for your questions. If you would like to ask a question, please press star 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

John: We will now open the call for your questions. If you would like to ask a question. Please press star one on your telephone keypad, well pause for just a moment to compile the Q&A roster.

Andrew Scutt: Our first question comes from Andrew Scutt from Roth Capital Partners. Please go ahead. Your line is open. Good morning, guys. Thank you for taking my questions. So the first one here, I'm going to try and tie a couple of questions into one. But the prepaid results were very strong. You guys kind of touched on the sales drivers there. Could you kind of give some detail around the gross margins, which were also very chunky? And then also kind of dig a little bit more into some of those verticals you touched on that are performing well in prepaid, including, I think you said, some health care payments and as well as your eco-friendly cards.

John: Our first question comes from Andrew Scott from Roth Capital Partners. Please go ahead. Your line is open.

Andrew Scott: Hey, good morning, guys Scot. Thank you for taking my questions. So the first one here a minute trying a couple of questions into one.

Andrew Scott: But that prepaid results were very strong are you guys kind of touched on the sales drivers there could you.

Andrew Scott: Kind of give some detail around the gross margins, which were also very chunky and then also.

Andrew Scott: Digging a little bit more into some of those verticals touched on.

Andrew Scott: And are outperforming well in prepaid, including I think you said that some healthcare payments.

Andrew Scott: And as well as your eco Pan the cards, so any details there would be great.

John Lowe: So any details there would be great.

John Lowe: Yeah, Andrew, good morning. So let me, I'll cover part of your two questions and then I'll pass off to Jeff. But yeah, our prepaid team did a great job. We've seen a lot of progress in the prepaid space in terms of higher value packaging due to fraud protection and the innovation of our team up in Minnesota working with our customers. And that really benefited us in 2024 and we're happy about that performance. In terms of our verticals, healthcare definitely has been a vertical that has been a good adjacency for us. We started that a couple years ago and really saw great progress in 2024.

Andrew Scott: Yeah, Andrew good morning.

Andrew Scott: So let me.

Jeff: I'll cover part of your two questions and then I'll pass off to Jeff.

Jeff: Our prepaid team did a great job.

Jeff: Progress in the prepaid space in terms of higher value pack.

Jeff: Packaging due to fraud protection and the innovation of our team up in Minnesota and are working with our customers and that really benefited us in 2024.

Jeff: We're happy about that performance.

Jeff: In terms of our verticals.

Jeff: Healthcare definitely has been a vertical that's been a good adjacency for US we started that couple of years ago and really saw great progress in 2024, that's part of the reason for the growth in prepaid, especially Q4, I believe was up nearly 60% so kudos to the team.

Jeff Hochstadt: That's part of the reason for the growth in prepaid, especially Q4, I believe, was up nearly 60%. So kudos to the team. In eco, we've actually been doing that. We became certified under FSC certification in 2023. And since that point in time, along with the rest of our company, prepaid has really taken a position of moving most of what we produce from a paper perspective into eco-focused in some way, shape, or form. And so they've contributed significantly to our eco-focused production along with what we do in our card manufacturing side. So happy about that as well.

Jeff: In eco we've actually been doing that we became certified.

Jeff: Under FSC certification in 2023, and since that point in time, along with the rest of our company prepaid has really taken a position move.

Jeff: Moving most of what we produce from a paper perspectives into eco focused in some way shape or form and so they have contributed significantly to our <unk>.

Jeff: <unk> production.

Jeff: Along with what we do on our card manufacturing side, so happy about that as well let me let Jeff.

Jeff Hochstadt: But let me let Jeff cover the gross margin side. Yeah. Hey, Andrew. You're right on the gross margin. For the year, we were able to increase gross margins by 60 basis points. So we feel good about continuing to generate operating leverage. But I think Q4, you kind of probably see that really strong gross margins and prepaid, obviously, really, really strong growth in Q4 and prepaid leading to more operating leverage in that segment. In debit and credit, we've talked about this from time to time. There are some mixed issues. We had a couple of sales in Q4 that were particularly lower margin sales, a little bit more unusual.

Andrew Scott: The gross margin side, Yeah, Hey, Andrew.

Andrew Scott: Youre right in the gross margin for the year.

Andrew Scott: We did that we were able to increase gross gross margins by 60 basis points. So we feel good about continuing to generate operating leverage but I think.

Andrew Scott: Before you probably see that really strong gross margins and prepaid obviously.

Andrew Scott: Really really strong growth in Q4, and prepaid leading to more operating leverage in that segment and debit and credit.

Andrew Scott: We've talked about this from time to time, there are some mix issues we had.

Andrew Scott: A couple of sales in Q4 that were particularly.

Andrew Scott: No.

Andrew Scott: Lower margin sales that.

Jeff Hochstadt: But that happens from time to time. And we still feel really good about our operating model as we continue to be able to gain operating leverage. And in the future, it's just about balancing how much we reinvest back in the business from an EBITDA perspective. Great.

Andrew Scott: A little bit more unusual but.

Andrew Scott: That happens from time to time.

Andrew Scott: We still feel really good about our operating model as we grow continue to be able to gain operating leverage.

Andrew Scott: In the future, it's just about how much balancing how much we reinvest back in the business from an EBITDA perspective.

Operator: Well, thank you for the caller.

Andrew Scott: Great well, thank you for the color.

Andrew Scutt: And second one from me, you guys gave some details around the inventory clearance. It sounds like second half of 25. We should really see some progress there. You guys did liquidate, looked like around $20 million in inventory.

Speaker Change: Second one from me you guys gave some decent details around the inventory clearance it sounds like a second half of 'twenty five.

Speaker Change: We should really see some progress there you guys did liquidate it looked like around $20 million in inventory can you just any any additional color from what you provided on the prepared remarks would be great.

Jeff Hochstadt: Can you just, any additional caller from what you provided on the prepared remarks would be great. Yeah. If you look at our inventory balance, I think that's what you're talking to on the balance sheet. You did see that we have this longer-term agreement commitment of purchasing chips. It goes through the beginning of 2026. So, it really has to do with the timing of purchasing. We do feel like throughout 2025, the inventory balance might go up a little bit, but by the end of the year, similar to what happened, what you saw in 2024, we should be able to bring that balance, that inventory balance down.

Speaker Change: Yes.

Speaker Change: If you look at our inventory balance I think thats, what youre talking to you on the balance sheet you did see that.

Speaker Change: We have this longer term agreement commitment purchasing chips it goes through.

Speaker Change: At the beginning of 2026, so it really has to do with the timing of purchasing we do feel like throughout 2025 by the inventory balance might go up a little bit by bit but by the end of the year similar to what happened. What you saw in 2024, we should be able to bring that balance that inventory balance down.

Jeff Hochstadt: So, it's really about the timing of committed purchasing.

Speaker Change: So it's really about the timing of the <unk>.

Speaker Change: <unk> purchases.

Operator: Great.

Andrew Scutt: Well, thanks for the answers and the continued progress, and I'll hop back into the queue. Thanks, Andrew.

Speaker Change: Great well thanks for the yes, no. Thanks for the answers and the continued progress and I'll hop back in the queue.

Speaker Change: Thanks, Andrew.

Peter Heckmann: Our next question comes from Peter Heckmann from D.A. Davidson. Please go ahead. Your line is open. Hey, good morning.

Speaker Change: Our next question comes from Peter Heckmann from D. A Davidson. Please go ahead your line is open.

Peter Heckmann: Hey, good morning could you talk a little bit about a little bit more about what you need to do.

Peter Heckmann: Could you talk a little bit about, a little bit more about what you need to do as a company and just the marketing efforts to penetrate that prepaid closed loop market? And can you talk about kind of the size of it and where you might start? I mean, I would assume you're already working with a lot of those customers on the open loop side. But yeah, the thoughts about entering that closed loop in a more significant way and how big that could be.

Speaker Change: Company, just the marketing efforts.

Speaker Change: Well penetrated but prepaid closed loop market and can you talk about kind of the size of that.

Speaker Change: Where you might start.

Speaker Change: I would assume you're already working with a lot of those customers on the open loop side.

Speaker Change: Yes.

Speaker Change: Thoughts about entering that closed loop and a more significant way and how big that could be.

John Lowe: Yeah, Pete, good morning. Yeah, the closed loop side is definitely, it is larger than the open loop. And just as a reminder for those following us, you know, we are predominantly in open loop secure packaging of gift cards. That's been our bread and butter for a number of years. Closed loop historically has been lower value. You know, it's what you see when you walk into a Starbucks, if you will, to get a Starbucks card, you know, that you can only use a Starbucks. But given the change of regulatory environment, given the need for fraud protection that's actually bleeding into the closed loop side as well, that market, which we believe is, you know, four to five times greater in size than the open loop market, is a good opportunity for us.

Speaker Change: Yes, good morning.

Speaker Change: Yes. The closed loop side is definitely it is larger than the open loop and just as a reminder for those following US we are predominantly an open loop.

Speaker Change: Secure packaging of gift cards, that's been our bread and butter for number of years closed loop historically has been lower value.

Speaker Change: It's what you see when you walk into us Starbucks, if you will to get a Starbucks card.

Speaker Change: You can only Starbucks.

Speaker Change: Given the change in regulatory environment, given the need for fraud protection Thats actually bleeding into the closed loop side as well that market, which we believe is 4% to five times greater in size than the open loop market.

Speaker Change: As a good opportunity for us, it's a longer term opportunity.

John Lowe: It's a longer term opportunity. And Pete, to your point, our customers that we are selling open loop into also have relationships on the closed loop side. So that benefits us as well.

Speaker Change: And to your point.

Speaker Change: Our customers that we are selling open loop into also have relationships on the closed loop side, so that benefits us as well so we are making investments.

John Lowe: So we are making investments to move into closed loop expansion. We have been doing some closed loop on a very small scale, but those investments won't necessarily arrive and give us the capacity and capabilities to expand until late in 2025. So we would expect a small impact on 2025. But the punchline is the closed loop market is a great market for us. And we are the leader in secure packaging from a gift card perspective in the U.S. And because of that, we feel like we're well positioned to capitalize on the closed loop. Okay, that's good to hear.

Speaker Change: Investments to move into.

Speaker Change: Closed loop expansion, we have been doing some closed loop on a very small scale.

Speaker Change: But those investments.

Speaker Change: Not necessarily.

Speaker Change: Arrives and give us the capacity and capabilities to expand until late in 2005. So we would expect a small impact on 2025.

Speaker Change: The punch line is the closed loop market is a great market for us and we are the leader in secure packaging from in gift card perspective in the U S and because of that we feel like we're well positioned to capitalize on the close of the market.

Speaker Change: Okay. That's good to hear that's good to hear and then just an update on the facility in Indiana.

Operator: That's good to hear.

John Lowe: And then just an update on the facility in Indiana. Do you expect that to go online here later this year? Yeah, our Indiana facility is on track. We expect to be up and running in the second half of 2025, but Jeff, would you add any color to that? Yeah, no, I think, you know, we're excited about getting this facility online. We've talked about it in the past. We're buying some new equipment, some automation, you know, we're really looking forward to putting some of the production through the new facility and being able to gain some efficiency.

Speaker Change: We expect that to go.

Speaker Change: Online here later this year.

Speaker Change: Yes.

Speaker Change: The facility is on track, we expect to be up and running in the second half of 'twenty five, but Jeff would you add any any color yeah, no I think.

Jeff: We're excited about getting that facility online we've talked about it in the past we're buying some new equipment.

Speaker Change: Some automation.

Speaker Change: We're really looking forward to putting some of the production through the new facility and being able to gain some efficiencies. So.

Jeff Hochstadt: So, we're quite excited. You know, right now, it's pretty much, you know, on schedule. There are no significant hiccups and we should be operational, you know, like John said, second half of the year.

Speaker Change: We're quite excited.

Speaker Change: Right now it's pretty much on schedule there no significant hiccups and we should be operational like John said second half of the year.

Jeff Hochstadt: Okay, great. So any CapEx related to that that would likely be in the first half, you think? Yeah, I mean, yes, we will have, you're right, this year, there will be some more CapEx associated with Indiana. And John was just talking about the closed-loop opportunity. There will be some CapEx there to buy some more capacity, some equipment that will be more specialized to the closed-loop opportunity. So, we do feel like, you know, just in terms of CapEx, you know, if you look at the last few years, our CapEx has been a little bit lumpy, anywhere from 6 million a year to 18 million a year.

Speaker Change: Okay, great. So any capex related to that when they would likely be in the first half do you think.

Speaker Change: Yes.

Speaker Change: Yes, we will have youre right. This year, there will be some more capex associated with Indiana.

Speaker Change: John was just talking about the closed loop opportunity there will be some capex there to buy some more capacity.

Speaker Change: Equipment that will be.

Speaker Change: More specialized to the close to the opportunity.

Speaker Change: We do feel like it.

Speaker Change: Just in terms of Capex.

Speaker Change: If you look at the last few years, our Capex has been a little bit lumpy anywhere from $6 million a year to $18 million a year. If you go back the last three years.

Jeff Hochstadt: If you go back the last 3 years, we'll probably be closer to the higher end of that in 2025 in terms of CapEx, just because of these 2, mainly because of these 2 areas and some other equipment we're purchasing as well.

Speaker Change: We'll probably be closer to the higher end of that.

Speaker Change: In 2025 in terms of Capex, just because of these two mainly because of these two areas and some other other.

Speaker Change: Other equipment, we're purchasing as well.

Jeff Hochstadt: Okay, great. And I think you said in the press release, you would expect free cash flow to be, you know, maybe down just a little bit or close to the level of 2024, correct? Yeah, we do have not only the higher capex that we just mentioned, but relative to 2024, we do. In 2024, we actually only had 10 months of cash interest paid, if you will, just based on our refi. So we'll go back to more normal 12 months of cash interest expense in 2025. So on a relative basis, that also is an impact. So it's, you know, that kind of offsets the higher, the higher profitability.

Speaker Change: Okay great.

Speaker Change: <unk> said in the press release here I mean, you would expect free cash flow to be.

Speaker Change: Yes.

Speaker Change: Maybe down just a little bit or close to the level of.

Speaker Change: 2024, correct.

Speaker Change: Yes, we do have.

Speaker Change: We do have not only the higher capex that we just mentioned that.

Speaker Change: Relative to 2024, we do in 2024, we actually only had 10 months of cash interest paid if you will just be based on a refi. So we'll go back to a more normal 12 months of <unk>.

Speaker Change: Cash interest expense in 2020 fives on a relative basis.

Speaker Change: That also has an impact.

Speaker Change: But.

Speaker Change: That kind of offsets the higher the higher profitability in 2000 22025.

Peter Heckmann: 2025. Okay, great. That's helpful. Thanks, Pete.

Speaker Change: Okay, Great that's helpful.

Speaker Change: Thanks Pete.

Operator: For additional questions, please press star followed by one on your telephone keypad.

Speaker Change: For additional questions. Please press star followed by one on your telephone keypad.

Jacob Steffen: Our next question comes from Jacob Steffen from Lake Street. Please go ahead. Your line is open. Hey, guys. I appreciate you taking the questions and congrats on the quarter.

Speaker Change: Our next question comes from Jacob Stefan from Lake Street. Please go ahead. Your line is open.

Jacob Stefan: Hey, guys I appreciate you, taking the questions and congrats on the quarter.

Jacob Steffen: Maybe just to start off, you know, I want to delve into kind of the healthcare market a little bit. Obviously, you gave some good color, 60% growth in Q4. But, you know, when I think of healthcare, I think donor incentives, co-pay programs. What are kind of the verticals within prepaid that you're seeing strength within the healthcare?

Speaker Change: Maybe just to start off.

Speaker Change: I wanted to delve into kind of the health care market a little bit. Obviously, you gave some good color 60% growth in Q4, but.

Speaker Change: When I think of health care, I think donor incentives co pay programs, what what are kind of the verticals within prepaid debt.

Speaker Change: Youre seeing strength within the health care.

John Lowe: Yeah, Jacob, just good morning. The 60% growth was actually our broader prepaid business, just to make that clear. But the health has been a strong contributor of ours. Think about when you're receiving an FSA card, an HSA card in the mail, it's got all the marketing materials around it. You've got to do that in high volume, high variability, high accuracy in that benefits timeframe late in the year. And then throughout the year, that's another area of the broader US payment card market where people lose their cars. They switch companies for whatever reason. They need a replacement or something new sent to them.

Jacob Stefan: Yes, Jacob just.

Speaker Change: Good morning.

Speaker Change: The 60% growth was actually our broader prepaid business just to.

Speaker Change: That clear path, but to help.

Speaker Change: Been a strong contributor of ours.

Speaker Change: Think about when you're receiving an FSA card in HSA card in the mail, it's got all the marketing materials around it.

Speaker Change: You've got to do that in high volume high variability high accuracy.

Speaker Change: And that benefits timeframe late in the year and then throughout the year.

Speaker Change: That's another area of the broader U S payment card market, where.

Speaker Change: People lose their cars.

Speaker Change: Which companies for whatever reason.

Speaker Change: They need a replacement.

John Lowe: So that's a vertical that we haven't been in, if you go back and look at us historically. So, we entered into that last couple of years and it's a good market for us. It's a growing market with the broader economy. And in addition, it's a very much a recurring market once you get in and you do it well. So, a lot of these types of issuance cycles that occur annually and are, again, high volume, high variability, and you have to be highly accurate. That's where we excel. And they are quasi prepaid cards. That's why they fit in our prepaid.

Something NUCYNTA them so.

Speaker Change: That's a vertical that we haven't been and if you go back and look at us historically.

Speaker Change: So we entered into that in the last couple of years.

Speaker Change: It's a good market for us, it's a growing market with the broader economy and in addition, it's a very much a recurring market once you get in and you do it well so.

Speaker Change: A lot of these types of.

Speaker Change: Issuance cycles that occur annually and are again high volume high variability and you have to be highly accurate that's where we.

Speaker Change: Sell in they are quasi prepaid card since why they fit in our prepaid asset.

Jacob Steffen: Got it understood. That's really helpful.

Speaker Change: Got it understood that's really helpful.

John Lowe: And maybe just, you know, kind of to dig a little bit deeper on the kind of margin impact of that health care, you know, business, our margins relatively similar to kind of the prepaid credit and debit, or the slightly higher given the secure packaging nature and kind of customization. Yeah, I mean, I don't know if we'd comment specifically on the margins for healthcare in general, but it's a good vertical to move into. Margins, as well as pricing, it's all based on value proposition of what you're providing your customers. You know, our goal is to provide innovative, differentiated solutions and hold strong margins across the business.

Speaker Change: Maybe just kind of to dig a little bit deeper.

Speaker Change: On the kind of margin impact of that health care.

Speaker Change: Business, our margins relatively similar to kind of the prepaid.

Speaker Change: Credit and debit or.

Speaker Change: Higher given the.

Speaker Change: Secure packaging nature and kind of customization.

Speaker Change: Yes.

Speaker Change: I don't know if we would comment specifically on the margins for health care in general.

Speaker Change: But it's a good <unk>.

Speaker Change: Vertical to move into.

Speaker Change: Margins as well as pricing, it's all based upon value proposition of what Youre, providing your customers. Our goal is to provide innovative differentiated solutions.

Speaker Change: Hole.

Speaker Change: Strong margins across the business, but our prepaid business broadly does have strong margins.

Jacob Steffen: But our prepaid business broadly does have strong margins. It has for a number of years, and that's because of the value proposition that we provide to our customers. Okay, got it. Understood. I appreciate you taking the questions. Yep. Thanks, Jacob.

Speaker Change: As for a number of years and that's because the value proposition that we provide to our customers there.

Speaker Change: Okay got it understood I appreciate you taking the questions.

Jacob Stefan: Yeah. Thanks Jacob.

Harold Goetsch: Our last question will come from Harold Goetsch from B. Reilly. Please go ahead, your line is open. Hey, guys. Terrific Quarter and Outlook. I wanted to ask about the prepaid segment in Q4. You might have covered this, but I just want to make sure I understand it. The revenue was up 26% in the commentary of the existing customers, and you had sales of higher value-added packaging. It implies, like, you know, the higher value-added packaging has higher pricing. And just kind of curious, what's the tradeoff between, you know, volume and price to get to that 26%?

Speaker Change: Our last question will come from <unk> <unk> from B Riley. Please go ahead. Your line is open.

Speaker Change: Hey, guys.

Speaker Change: Terrific quarter and outlook I wanted to ask about the prepaid segment. In Q4, you might have covered this I just want make sure I understand it the revenue was up 26%.

Speaker Change: The commentary I think existing customers and sales of higher value added packages it implies like.

Speaker Change: The higher value added packaging has higher pricing and just kind of curious what's the what's the trade off between volume and price to get to that 26%.

John Lowe: Yeah, just to clarify how 26% was for the full year. Yeah, we don't break out necessarily volume versus value. I'd say, you know, the healthcare is volume driven. That's in criminal units. A lot of the other business was more value driven, just higher value solutions with our customer. Okay, and maybe in retail and high, you know, is there like a completely shift in pricing for, you know, more security, things you've mentioned that you'll, you'll lap that at some point where all the installed base and inventory in the channel is the higher is the more secure, you know, and the better packaging that's it?

Speaker Change: Yes, just to clarify how 26% for the full year, the 14th 15th desk.

Speaker Change: Yes, we don't break out necessarily volume versus Val.

Speaker Change: <unk> I'd say, the healthcare is volume driven incremental units.

Speaker Change: Lot of the other business was more value driven just higher value solutions with our customers.

Speaker Change: Okay.

Speaker Change: And maybe in retail.

Speaker Change: Is there like.

Speaker Change: Completely.

Speaker Change: Shifting in pricing.

Speaker Change: For more security things you've mentioned that.

Speaker Change: You'll lap that at some point, where all the installed base and the inventory in the channel is higher because the more secure.

Speaker Change: And the better packaging thats. It how many is that largely complete or we are still early in that.

John Lowe: How many? Is that largely complete? Are we still early in that?

John Lowe: Yeah, Hal, it's a good question. And we haven't necessarily commented on you know, the entire retail prepaid market transition to all the higher value packaging. There are pockets that we've been moving to higher value packaging to protect against fraud. That said, even in 2024, as we did that, there were also pockets where we were doing replacements of what's out there in the market today. So you saw probably a little bit of, you know, one time, if you will, from that, which we haven't necessarily quantified. But my point is prepaid had a great year in 24.

Speaker Change: Yes, it's a good question.

Speaker Change: And we haven't necessarily comments dawn.

Speaker Change: The entire retail prepaid market transition fueled a higher value in packaging.

Speaker Change: There are pockets that we have been moving to higher value packaging to protect against fraud.

Speaker Change: That said even in 2024 as we did that there were also pockets, where we were doing replacements of what's out there in the market today. So you saw.

Speaker Change: A little bit of.

Speaker Change: One time, if you will from that which we haven't necessarily quantified, but my point is prepaid.

Speaker Change: <unk> had a great year of 'twenty four.

Harold Goetsch: In 25, you know, we expect it to be relatively flat for the most part. And that's because of some of that lumpiness that occurred in 2024. But broadly, if you look at the market longer term, we are well positioned if that market continues to transition further. But it's hard to say how much the penetration of the entire prepaid market will move to higher value packaging to protect against fraud. Okay, terrific.

Speaker Change: In 'twenty five.

Speaker Change: We expect it to be relatively flat for the most part.

Speaker Change: And that's because of some of that Lumpiness that occurred in 2024, but broadly if you look at the market longer term.

Speaker Change: We are well positioned as that market continues to transition further but it is hard to say how much the penetration of the entire prepaid market will move to higher value packaging to protect against fraud. Okay terrific. Thank you guys.

Operator: Thank you, guys. Thank you.

Speaker Change: Thank you.

John Lowe: As there are no further questions in the queue, I would like to turn the call back over to John Lowe for closing remarks. Thanks, Operator. I want to again acknowledge and thank all of our CPI employees for everything they do for our company and our customers as they execute on our vision, values, and strategies every day and continue to drive our business forward.

Speaker Change: As there are no further questions in the queue I would like to turn the call back over to John Melo for closing remarks.

Speaker Change: Thanks, operator, and once again acknowledge and thank all of our CPI employees for everything they do for our company and our customers as they execute on our vision values and strategies everyday and continue to drive our business forward.

Operator: Thank you all for joining our call this morning, and we hope you have a great day. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: Thank you all for joining our call. This morning, and we hope you have a great day.

This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: [music].

Speaker Change: Thanks.

Speaker Change: [music].

Okay.

Speaker Change: Okay.