CPI Card Group Inc. reported financial results for the quarter and full year ended December 31, 2025, and provided its initial financial outlook for 2026.

CPI Card Group Inc. (Nasdaq: PMTS) ("CPI" or the "Company"), a payments technology company providing a comprehensive range of physical and digital payment solutions for U.S. financial institutions, processors, fintechs, prepaid program managers and more, today reported financial results for the quarter and full year ended December 31, 2025, and provided its initial financial outlook for 2026.

CPI's fourth quarter revenue increased 22% to $153.1 million, driven by the addition of Arroweye and increased sales of contactless cards. Net income in the quarter increased 9% to $7.4 million and Adjusted EBITDA increased 34% to $29.4 million.

For the full year, revenue increased 13% to $543.5 million, driven by Arroweye, contactless cards, and instant issuance solutions. Net income was impacted by acquisition and integration costs and decreased 23% to $15.0 million, while Adjusted EBITDA increased 5% to $96.5 million. The Company generated operating cash flow of $60 million, a 37% increase from $43 million in the prior year, and Free Cash Flow of $41 million, a 21% increase from $34 million in 2024.

"Our teams delivered exceptional fourth quarter performance, leading to solid results in a year defined by significant strategic and operational advancements," said John Lowe, President and Chief Executive Officer. "In addition to the acquisition and successful integration of Arroweye's on-demand solutions, we also completed our new state-of-the-art secure card production facility, entered the closed loop prepaid market, and added new digital solutions integrations, expanding our payments ecosystem penetration."

Through years of investment and development, CPI has evolved to become a key player in the U.S. payments ecosystem, building a proprietary technology platform that enables payment programs to offer their customers the payment options they want, both physically and digitally. The Company's value proposition is driven by its proprietary technology platform, its marketable base of thousands of deep and broad relationships across the U.S. payments market, and its proven track record of delivering payment solutions that reflect evolving market needs.

Lowe added, "Our proprietary platform and expertise uniquely position CPI to deliver today, tomorrow, and into the future as our markets expand and payment methods continue to evolve. We continue to transform alongside the market, extending our long track record of building deep connections in the payment ecosystem and providing flexible solutions for our customers, enabling them to win with their customers."

To advance CPI's strategies and drive long-term growth, the Company has implemented a new operating structure. The new structure consists of three business units, which will also reflect the Company's financial reporting segments in 2026:

Secure Card Solutions, wherein CPI is a leading U.S. provider of debit and credit cards and personalization services, focusing on quality, innovation, and customer service to drive share gains in growing markets. Secure Card Solutions also includes our Arroweye on-demand solutions.

Prepaid Solutions, wherein CPI is the leader in U.S. open loop prepaid cards and secure packaging solutions. Prepaid Solutions also includes closed loop and healthcare payment solutions.

Integrated Paytech, which includes our relatively stronger growth, higher margin payment solutions that leverage our technology platform and deep connections into the U.S. payments ecosystem. Integrated Paytech includes our Software-as-a-Service-based instant issuance and other digital solutions.

CPI today also provided its initial financial outlook for 2026, which projects high single-digit revenue growth and low-to-mid single-digit Adjusted EBITDA growth. The Adjusted EBITDA outlook reflects significant investments to accelerate market penetration and growth of our Integrated Paytech segment, as well as other technology investments. The Company expects growth from each of its new business segments in 2026, led by the Integrated Paytech segment, where we are targeting greater than 15% revenue growth for the year.

The Company continues to believe long-term growth trends for the U.S. card market remain strong, led by ongoing consumer card growth. Based on figures released by the networks, Visa and Mastercard® U.S. debit and credit cards in circulation increased at a compound annual growth rate of 7.5% for the three-year period ending September 30, 2025.

2025 Strategic, Business, and Capital Highlights

Strategic Highlights

On May 6, 2025, CPI acquired Arroweye Solutions, Inc. ("ASI"), a leading provider of on-demand payment card solutions for the U.S. market, for a purchase price of $46 million. A press release providing details of the acquisition can be found on CPI's investor relations website at https://investor.cpicardgroup.com. In the approximately 8 months following acquisition, ASI delivered $43 million of revenue and $6 million of Adjusted EBITDA, with additional synergies expected to take effect in mid-2026 and beyond.

On October 7, 2025, the Company entered into a strategic relationship with Karta (Gift Card Co Pty Ltd), an Australia-based payments technology firm also backed by the Commonwealth Bank of Australia, that included acquisition of a 20% equity interest for total consideration of $10 million. CPI and Karta are teaming to integrate Karta's SafeToBuy technology with CPI's prepaid solutions in the U.S. market, with ongoing pilots underway with a large national retailer.

Business Highlights

CPI continues to be the leading provider of Software-as-a-Service-based instant issuance solutions in the U.S., with growth of approximately 20% in 2025, and installations across more than 2,500 financial institutions. This business generates strong recurring revenue streams due to high customer retention rates and a unique value proposition in the market. The Company recently signed a new referral agreement with a large national processor resulting in CPI being a preferred partner with preferential access to more than 450 additional financial institutions over the next several years.

CPI continues to advance its market and product expansion strategies, including healthcare payment solutions, digital offerings such as push provisioning capabilities for mobile wallets and payment card fraud solutions, and closed loop prepaid solutions.

Capital Highlights

On July 15, 2025, CPI exercised the optional redemption feature on its 10% Senior Notes due 2029 and retired $20 million of principal at a redemption price of 103% of par, plus accrued interest. Following the retirement, the Company had $265 million of Senior Notes outstanding.

The Company's major investments in 2025 included the acquisition of Arroweye for $45.8 million, the $10 million equity investment in Karta ($2.5 million upfront cash), and the completion of a new secure card production facility in Indiana.

The Company ended 2025 with a Net Leverage Ratio of 3.1x.

Fourth Quarter 2025 Financial Highlights

Revenue increased 22% to $153.1 million in the fourth quarter of 2025, compared to the prior year period.

Debit and Credit segment revenue increased 40% to $128.9 million, driven by the addition of Arroweye, which contributed $18 million of revenue in the quarter, and increased sales of contactless cards. Sales of instant issuance solutions and other personalization services also increased in the quarter.

Prepaid Debit segment revenue decreased 27% to $24.4 million, primarily due to comparisons with strong sales of higher-value packaging solutions in the prior year period.

Gross profit increased 13% to $48.3 million and gross profit margin of 31.5% decreased from 34.1% in the prior year, as benefits from increased sales were offset by increased production costs, including the impact of higher depreciation expense and tariffs, and unfavorable sales mix.

Net income increased 9% to $7.4 million, or $0.62 diluted earnings per share, primarily due to sales growth, partially offset by Arroweye integration costs. Adjusted EBITDA increased 34% to $29.4 million, driven by sales growth and operating leverage.

Full Year 2025 Financial Highlights

Revenue increased 13% year-over-year to $543.5 million in 2025, or 15% excluding the impact of an accounting change implemented in the second quarter related to revenue recognition timing for work-in-process orders.

Debit and Credit segment revenue increased 20% to $451.5 million, driven by the addition of Arroweye, which contributed $43 million of revenue for the year, and increased sales of contactless cards, including metal cards, and instant issuance solutions.

Prepaid Debit segment revenue decreased 12% to $93.6 million, or decreased 3% excluding the accounting change, due to comparisons with strong sales of higher-value packaging solutions to existing customers in the prior year.

Gross profit decreased 1% to $170.1 million and gross profit margin of 31.3% decreased from 35.6% in the prior year, as benefits of operating leverage from increased sales were offset by impacts from increased production costs, including the impact of tariffs and higher depreciation expense, and unfavorable sales mix.

Net income decreased 23% to $15.0 million, or $1.25 diluted earnings per share, impacted by Arroweye acquisition and integration costs and a higher tax rate, partially offset by lower debt retirement costs. Adjusted EBITDA increased 5% to $96.5 million, as benefits from increased sales were partially offset by the impact of unfavorable sales mix and tariff expenses.

Balance Sheet, Liquidity and Cash Flow

The Company generated cash from operating activities of $59.5 million in 2025, which compared to $43.3 million in the prior year period; and Free Cash Flow of $41.3 million, which compared to $34.1 million in the prior year. The increase in Free Cash Flow was primarily driven by strong working capital management, partially offset by an $8.9 million increase in capital expenditures, including spending related to the new Indiana secure card production facility.

As of December 31, 2025, the Company had $21.7 million of cash and cash equivalents, $265 million of 10% Senior Secured Notes due 2029, and $25 million of borrowings from its ABL revolving credit facility outstanding.

The Company's capital structure and allocation priorities are focused on investing in the business, including strategic acquisitions; deleveraging the balance sheet; and returning funds to stockholders.

Outlook for 2026

The Company anticipates growth across its portfolio in 2026. The initial financial outlook for the year projects:

Revenue: high single-digit growth

Adjusted EBITDA: low-to-mid single-digit

Free Cash Flow conversion similar to 2025 levels

Year-end Net Leverage Ratio between 2.5x and 3.0x

The Adjusted EBITDA outlook assumes benefits from sales growth and cost savings activities are partially offset by incremental operating expense, including approximately $4 million of costs related to accelerating Integrated Paytech growth and market penetration and other technology investments. The outlook also reflects approximately $6 million of tariff expenses.

Conference Call and Webcast

CPI Card Group Inc. will hold a conference call on March 5, 2026 at 9:00 a.m. Eastern Time to review its fourth quarter results.

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