CPI Card Group (NASDAQ: PMTS) lifts Q2 2026 revenue to $149M
CPI Card Group Inc. generated solid top-line growth for the quarter ended June 30, 2026, with revenue of approximately $149.2 million, up 15.0% year over year, and gross margin improving to . Net income increased to about $2.0 million, or $0.17 per diluted share, and quarterly EBITDA rose to roughly $17.9 million.
For the first six months of 2026, revenue grew 17.3% to around $296.3 million. Secure Card Solutions drove most of the expansion, aided by higher contactless card volumes, personalization services, and the Arroweye acquisition, while Prepaid Solutions softened versus a strong prior year. Tariff refunds supported gross profit, partially offset by higher depreciation and increased selling, general and administrative expenses tied to compensation and technology investments.
Liquidity strengthened as operating cash flow rose to about $42.1 million year to date, compared with $9.9 million a year earlier, and cash ended at roughly $21.4 million. Long-term debt stood at $262.1 million, primarily 10.000% Senior Secured Notes due 2029, alongside a stockholders’ deficit of $11.5 million and $92.3 million of available ABL revolver capacity. After quarter-end, the company redeemed $26.5 million of Senior Notes using new ABL borrowings.
Positive
- Revenue grew 17.3% year to date to approximately $296.3M, with Q2 revenue up 15.0% to about $149.2M and EBITDA increasing to $35.2M, driven mainly by Secure Card Solutions volume growth and contributions from Arroweye.
- Operating cash flow improved to $42.1M for the first six months of 2026, up from $9.9M a year earlier, bolstering liquidity alongside $21.4M of cash and $92.3M of available borrowing capacity under the ABL Revolver.
Negative
- Net income declined 22.6% year to date to $4.1M, with diluted EPS falling to $0.34 from $0.44, reflecting higher income tax expense and equity in losses of unconsolidated affiliates.
- Leverage remains elevated with $265.0M of 10.000% Senior Secured Notes outstanding and total long-term debt of $262.1M against a stockholders’ deficit of $11.5M, implying projected principal and interest payments of $355.3M, including $26.1M of interest over the next 12 months.
Filing Explained
The filing records a $6.3 million cash acquisition and 64,098 issued shares that reduce existing ownership percentages; projected debt service is $355.3 million.
CPI Card Group’s Form 10-Q, an unaudited quarterly report, reports that the company acquired an on-premise instant-issuance software solution for
During the six months ended
Issuing additional shares increases the total share count and reduces an existing holder’s percentage ownership absent offsetting changes. The filing therefore documents an ownership-dilution mechanic for existing common holders, although it does not quantify the resulting percentage change.
As of
A specified follow-up is the integration of Arroweye’s controls and processes into the control environment, which management expects to include in its internal-control assessment at the end of 2026.
Key Figures
Q2 2026 Revenue: $149,181 (thousands)
Q2 2026 Net Income: $2,040 (thousands)
Six-Month 2026 Revenue: $296,289 (thousands)
+5 more
8 metrics
Q2 2026 Revenue
$149,181 (thousands)
Three months ended June 30, 2026
Q2 2026 Net Income
$2,040 (thousands)
Three months ended June 30, 2026
Six-Month 2026 Revenue
$296,289 (thousands)
Six months ended June 30, 2026
Six-Month 2026 EBITDA
$35,198 (thousands)
Reconciliation of net income to EBITDA for six months ended June 30, 2026
Operating Cash Flow H1 2026
$42,149 (thousands)
Net cash provided by operating activities for six months ended June 30, 2026
Cash and Cash Equivalents
$21,368 (thousands)
Balance as of June 30, 2026
Long-Term Debt
$262,139 (thousands)
Senior Notes and ABL Revolver net of deferred financing costs as of June 30, 2026
Stockholders’ Deficit
$(11,474) (thousands)
Total stockholders’ deficit as of June 30, 2026
Key Terms
EBITDA, ABL Revolver, Senior Notes, Prepaid Debit Cards, +2 more
6 terms
EBITDA financial
"As the Company uses the term, “EBITDA” is defined as income before interest expense"
EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It measures a company's profitability by focusing on the money it makes from its core operations, ignoring expenses like taxes and accounting adjustments. Investors use EBITDA to compare how well different companies are performing financially, as it provides a clearer picture of operational success without the influence of financial structure or accounting choices.
ABL Revolver financial
"an asset-based, senior secured revolving credit facility (the “ABL Revolver”) of up to $75.0 million"
Senior Notes financial
"10.000% Senior Secured Notes due 2029 (the “Senior Notes”) and related guarantees"
Senior notes are a type of loan that a company borrows from investors, promising to pay it back with interest. They are called "senior" because in case the company faces financial trouble, these lenders are paid back before others. This makes senior notes safer for investors compared to other types of loans or bonds.
Prepaid Debit Cards financial
"a market leader in the production of “Prepaid Debit Cards,” defined as debit cards issued"
Prepaid debit cards are plastic or digital cards you load with money ahead of time and then use to pay or withdraw cash, like a refillable gift card that works anywhere debit is accepted but isn’t linked to a bank account. For investors, they matter because issuers earn fees and interest on the stored balances, attract customers who prefer controlled spending, and generate payment data that can signal consumer activity and revenue trends.
ASC 606 financial
"reassessed certain aspects of its revenue recognition practices under Accounting Standards Codification (“ASC”) 606"
A U.S. accounting standard that sets consistent rules for when and how companies record revenue from contracts with customers, focusing on the transfer of promised goods or services. It matters to investors because it affects the timing and amount of reported sales and profit—like deciding whether a contractor can count payment when a job starts, progresses, or finishes—so it improves comparability and helps assess a company's true economic performance.
Monte Carlo simulation model financial
"two performance cash awards (PCAs) with a total grant date fair value of $3.1 million using a Monte Carlo simulation model"
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FAQ
How did CPI Card Group (PMTS) perform financially in Q2 2026?
CPI Card Group reported Q2 2026 revenue of $149.2 million, up 15.0% year over year, and net income of about $2.0 million, or $0.17 per diluted share. EBITDA reached roughly $17.9 million, supported by higher Secure Card Solutions volumes and tariff refunds.
What were CPI Card Group (PMTS)’s results for the first half of 2026?
For the six months ended June 30, 2026, CPI Card Group generated revenue of $296.3 million, up 17.3% from 2025. Net income was $4.1 million versus $5.3 million a year earlier, while EBITDA increased to $35.2 million, reflecting stronger Secure Card Solutions performance.
How did CPI Card Group (PMTS)’s segments perform in the first half of 2026?
Secure Card Solutions revenue rose to $220.7 million, up 25.2%, with higher contactless card and personalization volumes plus Arroweye contributions. Prepaid Solutions revenue was $44.7 million, down 2.7%, while Integrated Paytech revenue was $39.5 million, up 2.4% with stable gross margins above 55%.
What is CPI Card Group (PMTS)’s debt and liquidity position as of June 30, 2026?
CPI Card Group had $262.1 million of long-term debt, mainly $265.0 million of 10.000% Senior Secured Notes due 2029, and cash of $21.4 million. The company also had $92.3 million of available borrowing capacity under its ABL Revolver, supporting ongoing liquidity needs.
What recent financing actions has CPI Card Group (PMTS) taken with its Senior Notes and ABL Revolver?
On July 15, 2026, CPI Card Group borrowed $30.0 million under its ABL Revolver and redeemed $26.5 million of its $265.0 million Senior Secured Notes at 103% of par plus accrued interest, modestly reducing future interest and principal obligations.
How strong were CPI Card Group (PMTS)’s operating cash flows in the first half of 2026?
Operating activities provided $42.1 million of cash in the first half of 2026, compared with $9.9 million in 2025. The improvement mainly reflected lower working capital usage, including reduced inventory purchases, incentive payments, severance costs, and tax payments.
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||||||
For the Quarterly Period Ended June 30, 2026
or
| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||||||
For the Transition Period from to
Commission File Number: 001-37584
(Exact name of the registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification no.) | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
(720 ) 681-6304
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | x | ||||||||||||||||||
| Non-accelerated filer | o | Smaller reporting company | ||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
Number of shares of Common Stock, $0.001 par value, outstanding as of July 28, 2026: 11,530,669
Table of Contents
Table of Contents
| Page | |||||
Part I — Financial Information | |||||
Item 1 — Condensed Consolidated Financial Statements (Unaudited) | 3 | ||||
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 | ||||
Item 3 — Quantitative and Qualitative Disclosures About Market Risk | 26 | ||||
Item 4 — Controls and Procedures | 26 | ||||
Part II — Other Information | |||||
Item 1 — Legal Proceedings | 27 | ||||
Item 1A — Risk Factors | 27 | ||||
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds | 27 | ||||
Item 3 — Defaults Upon Senior Securities | 27 | ||||
Item 4 — Mine Safety Disclosures | 27 | ||||
Item 5 — Other Information | 27 | ||||
Item 6 — Exhibits | 27 | ||||
Signatures | 28 | ||||
2
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PART I - Financial Information
Item 1. Financial Statements
CPI Card Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(Unaudited)
| June 30, 2026 | December 31, 2025 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Inventories, net | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Plant, equipment, leasehold improvements and operating lease right-of-use assets, net | |||||||||||
Intangible assets, net of accumulated amortization of $ | |||||||||||
| Goodwill | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and stockholders’ deficit | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses | |||||||||||
| Deferred revenue and customer deposits | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred income taxes | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 9) | |||||||||||
| Stockholders’ deficit: | |||||||||||
Series A Preferred Stock; $ | |||||||||||
Common stock; $ | |||||||||||
| Capital deficit | ( | ( | |||||||||
| Accumulated earnings | |||||||||||
| Total stockholders’ deficit | ( | ( | |||||||||
| Total liabilities and stockholders’ deficit | $ | $ | |||||||||
See accompanying notes to condensed consolidated financial statements
3
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CPI Card Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
(in thousands, except share and per share amounts)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of goods sold | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Other expense, net: | |||||||||||||||||||||||
| Interest, net | ( | ( | ( | ( | |||||||||||||||||||
| Other (expense) income, net | ( | ( | ( | ||||||||||||||||||||
| Total other expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Income before income taxes and equity in losses of unconsolidated affiliates | |||||||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | |||||||||||||||||||
| Equity in losses of unconsolidated affiliates | ( | ( | |||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Basic and diluted earnings per share: | |||||||||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | |||||||||||||||||||
| Basic weighted-average shares outstanding | |||||||||||||||||||||||
| Diluted weighted-average shares outstanding | |||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Total comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
See accompanying notes to condensed consolidated financial statements
4
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CPI Card Group Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Deficit
(in thousands, except share amounts)
(Unaudited)
| Common stock | Capital deficit | Accumulated earnings | Stockholders deficit | ||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| March 31, 2026 | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||
| Shares issued under stock-based compensation plans | ( | — | ( | ||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
| Components of comprehensive income: | |||||||||||||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||
| June 30, 2026 | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||
| Common stock | Capital deficit | Accumulated earnings | Stockholders deficit | ||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| December 31, 2025 | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||
| Shares issued under stock-based compensation plans | ( | — | ( | ||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
| Components of comprehensive income: | |||||||||||||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||
| June 30, 2026 | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||
| Common stock | Capital deficit | Accumulated earnings | Stockholders deficit | ||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| March 31, 2025 | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||
| Shares issued under stock-based compensation plans | — | ( | — | ( | |||||||||||||||||||||||||
| Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
| Components of comprehensive income: | |||||||||||||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||
| June 30, 2025 | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||
| Common stock | Capital deficit | Accumulated earnings | Stockholders deficit | ||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| December 31, 2024 | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||
| Shares issued under stock-based compensation plans | — | ( | — | ( | |||||||||||||||||||||||||
| Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
| Components of comprehensive income: | |||||||||||||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||
| June 30, 2025 | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements
5
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CPI Card Group Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating activities | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation expense | |||||||||||
| Amortization expense | |||||||||||
| Stock-based compensation expense | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Deferred income taxes and other, net | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventories | ( | ||||||||||
| Prepaid expenses and other assets | ( | ||||||||||
| Income taxes, net | ( | ||||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other liabilities | ( | ||||||||||
| Deferred revenue and customer deposits | ( | ||||||||||
| Cash provided by operating activities | |||||||||||
| Investing activities | |||||||||||
| Capital expenditures for plant, equipment and leasehold improvements, net | ( | ( | |||||||||
| Cash paid for acquisition, net of cash acquired | ( | ( | |||||||||
| Other | |||||||||||
| Cash used in investing activities | ( | ( | |||||||||
| Financing activities | |||||||||||
| Proceeds from borrowings on debt | |||||||||||
| Payments on debt | ( | ( | |||||||||
| Payments on financing lease obligations | ( | ( | |||||||||
| Taxes withheld and paid on stock-based compensation awards | ( | ( | |||||||||
| Cash (used in) provided by financing activities | ( | ||||||||||
| Net decrease in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
| Supplemental disclosures of cash flow information | |||||||||||
| Cash paid (refunded) during the period for: | |||||||||||
| Interest paid | $ | $ | |||||||||
| Income taxes paid | $ | $ | |||||||||
| Income taxes refunded | $ | ( | $ | ( | |||||||
| Right-of-use assets obtained in exchange for lease obligations: | |||||||||||
| Operating leases | $ | $ | |||||||||
| Financing leases | $ | $ | |||||||||
| Accounts payable and accrued expenses for capital expenditures for plant, equipment and leasehold improvements | $ | $ | |||||||||
| Non-cash equity in losses of unconsolidated affiliates | $ | ( | $ | ||||||||
See accompanying notes to condensed consolidated financial statements
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CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(dollars in thousands, except share and per share amounts or as otherwise indicated)
(Unaudited)
1. Business Overview and Summary of Significant Accounting Policies
Business Overview
CPI Card Group Inc. (which, together with its subsidiary companies, is referred to herein as “CPI” or the “Company”) is 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. CPI is a leader in several areas of the U.S. payment card solutions market, including debit and credit card production, personalization, and a cloud-based instant issuance solution. CPI is also a market leader in the production of “Prepaid Debit Cards,” defined as debit cards issued on the networks of the “Payment Card Brands” (Visa, Mastercard®, American Express® and Discover®) but not linked to a traditional bank account, and related secure packaging solutions.
CPI’s revenues are primarily generated from the production of and related offerings of secure debit and credit cards that are issued on the networks of the Payment Card Brands, including Prepaid Debit Cards. In connection with the Company’s increased strategic focus on expanding and developing additional proprietary integrated technological solutions for its customer base and to reflect the manner in which the Company’s Chief Operating Decision Maker (“CODM”), the Chief Executive Officer (“CEO”), manages the Company’s business, the Company implemented a revised segment structure to assess performance and allocate resources, beginning in the first quarter of 2026. The changes in the Company’s segment structure primarily relate to the separation of the results of the Company’s proprietary integrated technological related solutions into a separate segment from the former Debit and Credit segment. As of June 30, 2026, the Company’s business consists of the following reportable segments:
•Secure Card Solutions: primarily produces secure debit and credit cards and provides card personalization services for U.S. card-issuing financial institutions, including highly customizable, on-demand payment card solutions acquired through the purchase of Arroweye Solutions, Inc. (“Arroweye”) during the second quarter of 2025;
•Prepaid Solutions: primarily provides prepaid debit cards and secure packaging solutions and other integrated prepaid card services to prepaid program managers in the U.S.; and
•Integrated Paytech: primarily provides cloud-based and on-premise solutions, which give customers the ability to issue an instant personalized debit or credit card within a customer location; and other digital payment solutions such as push provisioning for mobile wallets.
On June 23, 2026, the Company entered into an asset purchase agreement to acquire an on-premise instant issuance solution, which includes the development, marketing, sale, licensing, and servicing of on-premise instant payment card issuance software solutions. The financial results of the acquired business are included in the Company's Integrated Paytech segment.
Refer to Note 11, “Segment Reporting,” for segment results for the three and six months ended June 30, 2026 and 2025 under the revised segment structure.
Basis of Presentation
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the results of the interim periods presented. The condensed consolidated balance sheet as of December 31, 2025 is derived from the audited financial statements as of that date. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
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Use of Estimates
Management uses estimates and assumptions relating to the reporting of assets and liabilities as of the date of the financial statements, the reported revenues and expenses recognized during the reporting period, and certain financial statement disclosures in the preparation of the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, leases, valuation allowances for inventories and deferred taxes, revenue recognized for work performed but not completed, recognition of amounts and timing of contract costs, and uncertain tax positions. Actual results could differ from those estimates.
Revenue Recognition
During the second quarter of 2025, the Company reassessed certain aspects of its revenue recognition practices under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), and the legal enforceability of certain contract terms based on evolving business practices where the Company and a customer deviate from contract terms after an order is placed but before it is shipped. This assessment highlights the Company’s approach relating to goods that are in production but have not yet shipped, reflecting its emphasis on maintaining long-term customer relationships.
Such deviations may impact the legal enforceability of payment terms for goods that are in the process of being produced but have not shipped. As a result, the Company concluded that certain contracts no longer meet the criteria for over-time revenue recognition under ASC 606. Effective prospectively beginning in the second quarter of 2025, the Company began recognizing revenue for these contracts at a point in time, typically upon shipment or customer acceptance. Additionally, in connection with the acquisition and integration of Arroweye during the second quarter of 2025, the Company assessed Arroweye’s customer contracts and determined that Arroweye revenue should also be recognized at point-in-time.
Customer Contracts
The Company often enters into Master Services Agreements (“MSAs”) with its customers. Generally, enforceable rights and obligations for goods and services occur only when a customer places a purchase order or statement of work to obtain goods or services under an MSA. The contract term as defined by ASC 606 is the length of time it takes to deliver the goods or services promised under the purchase order or statement of work. As such, the Company's contracts are generally short term in nature.
Costs to Obtain a Contract with a Customer
Costs to obtain a contract (“contract costs”) include only costs that the Company would not have incurred if the contract had not been obtained. For contracts in which the term is greater than one year, these costs are recorded as an asset and amortized consistent with the timing of the related revenue over the life of the contract. The current portion of the asset is included in “Prepaid expenses and other current assets” and the noncurrent portion is included in “Other assets” on the Company's condensed consolidated balance sheets. Contract costs incurred but unpaid are included in “Accrued expenses” on the Company's condensed consolidated balance sheets. Contract costs are expensed as incurred when the amortization period is one year or less.
Recent Accounting Pronouncements
Recently Issued Accounting Pronouncements
In December 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments are effective for the Company for interim reporting periods in fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact of adoption of this standard and does not anticipate that it will have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
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In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which will require disclosure of disaggregated information about certain expense captions presented in the income statement. Adoption of this accounting standard is effective for the Company for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The requirements should be applied on a prospective basis while retrospective application is permitted. The Company is evaluating the impact of adoption of this standard and does not anticipate that it will have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
2. Inventories
Inventories consisted of the following:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Total inventories, net | $ | $ | |||||||||
3. Plant, Equipment, Leasehold Improvements and Operating Lease Right-of-Use Assets
Plant, equipment, leasehold improvements and operating lease right-of-use assets consisted of the following:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Machinery and equipment | $ | $ | |||||||||
| Machinery and equipment under financing leases | |||||||||||
| Furniture, fixtures and computer equipment | |||||||||||
| Leasehold improvements | |||||||||||
| Construction in progress | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Less accumulated depreciation and amortization | ( | ( | |||||||||
| Total plant, equipment, leasehold improvements and operating lease right-of-use assets, net | $ | $ | |||||||||
4. Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In determining fair value, the Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
•Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
•Level 2— Observable inputs other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term for the assets or liabilities.
•Level 3— Valuations based on unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
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The Company’s financial assets and liabilities that are not required to be re-measured at fair value in the condensed consolidated balance sheets were as follows:
| Carrying Value as of June 30, 2026 | Estimated Fair Value as of June 30, 2026 | Fair Value Measurement at June 30, 2026 (Using Fair Value Hierarchy) | |||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Senior Notes | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| ABL Revolver | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Carrying Value as of December 31, 2025 | Estimated Fair Value as of December 31, 2025 | Fair Value Measurement at December 31, 2025 (Using Fair Value Hierarchy) | |||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Senior Notes | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| ABL Revolver | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
The aggregate fair value of the Company’s Senior Notes (defined in Note 6, “Long-Term Debt”) was based on quoted prices for identical or similar liabilities in markets that are not active and, as a result, they are classified as Level 2 inputs. The fair value measurement associated with the ABL Revolver (defined in Note 6, “Long-Term Debt”) approximates its carrying value as of December 31, 2025, given the applicable variable interest rates.
The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable each approximate fair value due to their short-term nature.
5. Accrued Expenses
Accrued expenses consisted of the following:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Accrued payroll and related employee expenses | $ | $ | |||||||||
| Accrued employee performance-based incentive compensation | |||||||||||
| Employer payroll taxes | |||||||||||
| Accrued rebates | |||||||||||
| Accrued interest | |||||||||||
| Current operating and financing lease liabilities | |||||||||||
| Other | |||||||||||
| Total accrued expenses | $ | $ | |||||||||
Other accrued expenses as of June 30, 2026, and December 31, 2025, consisted primarily of accrued restructuring and severance, miscellaneous accruals for invoices not yet received, accrued sales and use tax and self-insurance claims incurred but not yet reported.
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6. Long-Term Debt
As of June 30, 2026, and December 31, 2025, long-term debt consisted of the following:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Senior Notes | $ | $ | |||||||||
| ABL Revolver | |||||||||||
| Unamortized deferred financing costs | ( | ( | |||||||||
| Total long-term debt | |||||||||||
| Less current maturities | |||||||||||
| Long-term debt, net of current maturities | $ | $ | |||||||||
Senior Notes
On July 11, 2024 (the “Closing Date”), the Company completed a private offering by its wholly-owned subsidiary, CPI CG Inc., of $285.0 million aggregate principal amount of 10.000 % Senior Secured Notes due 2029 (the “Senior Notes”) and related guarantees at an issue price of 100 %. The Senior Notes mature on July 15, 2029 and interest is payable on January 15 and July 15 of each year.
The Company has obligations to make an offer to repay the Senior Notes requiring prepayment in advance of the maturity date upon the occurrence of certain events, including a change of control and certain asset sales.
ABL Revolver
On the Closing Date, the Company and CPI CG Inc. as borrower (the “Borrower”), entered into a credit agreement with JPMorgan Chase Bank, N.A., as lender, administrative agent and collateral agent (“JPMorgan”), providing for an asset-based, senior secured revolving credit facility (the “ABL Revolver”) of up to $75.0 million. The ABL Revolver matures on the earliest to occur of July 11, 2029, and the date that is 91 days prior to the maturity of the Senior Notes.
On July 2, 2025, the Company, the Borrower, and JPMorgan entered into Amendment No. 1 to Credit Agreement (the “Amendment”), which amends the ABL Revolver to, among other things, increase the available borrowing capacity from $75.0 million to $100.0 million. The Amendment did not modify the maturity date of the ABL Revolver nor the interest rate.
Borrowings under the ABL Revolver bear interest at a rate per annum that ranges based on the applicable term secured overnight financing rate as administered by the Federal Reserve Bank of New York plus 1.50 % to 1.75 % (subject, in each case, to a credit spread adjustment of 0.10 %), based on the average daily borrowing capacity under the ABL Revolver over the most recently completed month. The unused portion of the ABL Revolver commitment accrues a commitment fee, which ranges from 0.375 % to 0.50 % per annum, based on the average daily excess availability under the ABL Revolver over the immediately preceding month.
Deferred Financing Costs
Certain costs incurred with borrowings are reflected as a reduction to the long-term debt balance. These costs are amortized as an adjustment to interest expense over the life of the borrowing. As of June 30, 2026, the remaining unamortized debt issuance costs recorded on the Senior Notes were $2.9 million and were reported as a reduction to the long-term debt balance.
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7. Income Taxes
The Company’s effective tax rates on pre-tax income were 48.3 % and 61.4 % for the three months ended June 30, 2026 and 2025, respectively, and 42.3 % and 32.0 % for the six months ended June 30, 2026 and 2025, respectively. The decrease in the Company’s effective tax rate for the three months ended June 30, 2026, compared to the prior year was primarily due to deferred state tax expense recognized as part of the Arroweye Solutions, Inc. acquisition in the prior-year period. The increase in the Company's effective tax rate for the six months ended June 30, 2026, compared to the prior year was primarily attributable to the write off of a deferred tax asset associated with vested stock options that expired unexercised, as well as an increase in the valuation allowance related to a certain state decoupling from various favorable federal tax provisions.
For the six months ended June 30, 2026 and 2025, the effective tax rates differ from the U.S. federal statutory income tax rate as follows:
| June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Tax at federal statutory rate | % | % | |||||||||
| State taxes, net | |||||||||||
| Valuation allowance | |||||||||||
Permanent items (1) | |||||||||||
| Tax credits | ( | ( | |||||||||
| Other | |||||||||||
| Effective income tax rate | % | % | |||||||||
____________________________________________
(1)Includes the deductibility limitations on excess compensation.
8. Earnings per Share
Basic and diluted earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if outstanding stock options at the presented dates are exercised and shares of restricted stock have vested. For the three months ended June 30, 2026 and 2025, 19,248 and 9,363 potentially dilutive securities, respectively, and for the six months ended June 30, 2026 and 2025, 35,348 and 10,693 potentially dilutive securities, respectively, were excluded from the calculation of diluted earnings per share. The effect of these shares was anti-dilutive under the treasury stock method, as the assumed proceeds of the options and restricted stock per unit were above our average share price during the periods.
The following table sets forth the computation of basic and diluted earnings per share:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Basic weighted-average common shares outstanding | |||||||||||||||||||||||
| Dilutive shares | |||||||||||||||||||||||
| Diluted weighted-average common shares outstanding | |||||||||||||||||||||||
| Basic earnings per share | $ | $ | $ | $ | |||||||||||||||||||
| Diluted earnings per share | $ | $ | $ | $ | |||||||||||||||||||
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9. Commitments and Contingencies
Contingencies
In accordance with applicable accounting guidance, the Company establishes an accrued expense when loss contingencies are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. As a matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. Once the loss contingency is deemed to be both probable and estimable, the Company will establish an accrued expense and record a corresponding amount of expense. The Company expenses professional fees associated with litigation claims and assessments as incurred. The Company is subject to routine legal proceedings in the ordinary course of business. The Company believes that the ultimate resolution of any such matters will not have a material adverse effect on its business, financial condition or results of operations.
10. Stock-Based Compensation
In October 2015, the Company adopted the CPI Card Group Inc. Omnibus Incentive Plan (as amended and supplemented, the “Omnibus Plan”) pursuant to which cash and equity-based incentives may be granted to participating employees, advisors, and directors. Effective January 30, 2024, the Company’s stockholders approved an amendment to the Omnibus Plan to increase the total number of shares of the Company’s common stock reserved and available for issuance thereunder by 1,000,000 shares, resulting in a total of 3,200,000 shares issuable under the Omnibus Plan. As of June 30, 2026, there were 649,465 shares of common stock available for grant under the Omnibus Plan.
In 2026, the Company granted certain executives two performance cash awards (PCAs) with a total grant date fair value of $3.1 million using a Monte Carlo simulation model. These PCAs will vest on December 31, 2026 and December 31, 2028 and are expected to settle in the first quarters of 2027 and 2029, respectively, subject to continuous employment and the achievement of certain Company performance goals including the Company’s relative total shareholder return of stock against the Russell 2000 index. As the awards are liability-classified, the awards are remeasured at fair value at each reporting date and at settlement, with changes recognized as stock-based compensation expense.
During the six months ended June 30, 2026, the Company granted 165,235 16.29 565,320 outstanding restricted stock units at a weighted average grant date fair value of $18.99 .
As of June 30, 2026, there were 570,166 options outstanding at a weighted average exercise price of $15.44 . No seven-year terms and are issued with exercise prices equal to the fair market value of the Company’s common stock on the grant date.
All equity awards are contingent and issued only upon approval by the compensation committee of the Company’s board of directors, or as otherwise permitted under the Omnibus Plan. The Company accounts for stock-based compensation pursuant to ASC 718, Share-Based Payments. All stock-based compensation is required to be measured at fair value and expensed over the requisite service period, generally defined as the applicable vesting period. The Company accounts for forfeitures as they occur and reverses previously recognized expenses for the unvested portion of the forfeited shares. Upon the exercise of stock options, shares of common stock are issued from authorized common shares.
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11. Segment Reporting
The Company’s CODM is its CEO, who is charged with the management of the Company and is responsible for the evaluation of operating performance and decision-making about the allocation of resources to operating segments based on the measures of revenue and EBITDA.
As the Company uses the term, “EBITDA” is defined as income before interest expense, income taxes, depreciation and amortization. The Company’s CODM believes EBITDA is a meaningful measure and is useful as a supplement to GAAP measures as it represents a transparent view of the Company’s operating performance that is unaffected by fluctuations in property, equipment and leasehold improvement additions. The Company’s CODM uses EBITDA to perform periodic reviews and comparison of operating trends and to identify strategies to improve the allocation of resources amongst segments.
Effective for the quarter ended March 31, 2026, the Company implemented a change in the structure of its reportable segments to align with its internal management reporting and operating structure and consistent with the Company’s increased strategic focus on expanding and developing additional proprietary integrated technological solutions for its customer base. This change was made to reflect the revised manner in which the Company’s CODM manages the Company’s business, including for performance assessment and resource allocation. Operating results for prior periods have been recast to conform to the current period presentation. The updated information reflects only reclassification of prior period segment data and does not represent a restatement of previously issued financial statements.
As of June 30, 2026, the Company’s reportable segments were as follows:
•Secure Card Solutions: primarily produces secure debit and credit cards and provides card personalization services for U.S. card-issuing financial institutions, including highly customizable, on-demand payment card solutions acquired through the purchase of Arroweye during the second quarter of 2025;
•Prepaid Solutions: primarily provides prepaid debit cards and secure packaging solutions and other integrated prepaid card services to prepaid program managers in the U.S.; and
•Integrated Paytech: primarily provides cloud-based and on-premise solutions, which give customers the ability to issue an instant personalized debit or credit card within a customer location; and other digital payment solutions such as push provisioning for mobile wallets.
On June 23, 2026, the Company entered into an asset purchase agreement to acquire an on-premise instant issuance solution, which includes the development, marketing, sale, licensing, and servicing of on-premise instant payment card issuance software solutions. The financial results of the acquired business are included in the Company's Integrated Paytech segment.
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Performance Measures of Reportable Segments
Revenue and EBITDA of the Company’s reportable segments, as well as a reconciliation of total segment EBITDA to income from operations and net income for the three and six months ended June 30, 2026 and 2025, were as follows:
| Three Months Ended June 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Secure Card Solutions | Prepaid Solutions | Integrated Paytech | Total Reportable Segments | Intersegment Eliminations | Corporate | Consolidated | |||||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | ( | $ | — | $ | ||||||||||||||||||||||||||||||||
| Cost of goods sold | ( | — | |||||||||||||||||||||||||||||||||||||||
| Gross profit | — | — | |||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | — | ||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| EBITDA by segment: | |||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | — | ||||||||||||||||||||||||||||||||||||||||
| Other expense, net | ( | ( | ( | — | ( | ( | |||||||||||||||||||||||||||||||||||
| EBITDA | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Gross profit margin | % | % | % | % | * | * | % | ||||||||||||||||||||||||||||||||||
| EBITDA margin | % | % | % | % | * | * | % | ||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Secure Card Solutions | Prepaid Solutions | Integrated Paytech | Total Reportable Segments | Intersegment Eliminations | Corporate | Consolidated | |||||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | ( | $ | — | $ | ||||||||||||||||||||||||||||||||
| Cost of goods sold | ( | — | |||||||||||||||||||||||||||||||||||||||
| Gross profit | — | — | |||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | — | ||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| EBITDA by segment: | |||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | — | ||||||||||||||||||||||||||||||||||||||||
| Other income (expense), net | ( | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||
| EBITDA | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Gross profit margin | % | % | % | % | * | * | % | ||||||||||||||||||||||||||||||||||
| EBITDA margin | % | % | % | % | * | * | % | ||||||||||||||||||||||||||||||||||
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| Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Secure Card Solutions | Prepaid Solutions | Integrated Paytech | Total Reportable Segments | Intersegment Eliminations | Corporate | Consolidated | |||||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | ( | $ | — | $ | ||||||||||||||||||||||||||||||||
| Cost of goods sold | ( | — | |||||||||||||||||||||||||||||||||||||||
| Gross profit | — | — | |||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | — | ||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| EBITDA by segment: | |||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | — | ||||||||||||||||||||||||||||||||||||||||
| Other (expense) income, net | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||
| EBITDA | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Gross profit margin | % | % | % | % | * | * | % | ||||||||||||||||||||||||||||||||||
| EBITDA margin | % | % | % | % | * | * | % | ||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||
| Secure Card Solutions | Prepaid Solutions | Integrated Paytech | Total Reportable Segments | Intersegment Eliminations | Corporate | Consolidated | |||||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | ( | $ | — | $ | ||||||||||||||||||||||||||||||||
| Cost of goods sold | ( | — | |||||||||||||||||||||||||||||||||||||||
| Gross profit | — | — | |||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | — | ||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| EBITDA by segment: | |||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | — | ||||||||||||||||||||||||||||||||||||||||
| Other (expense) income, net | ( | ( | — | ||||||||||||||||||||||||||||||||||||||
| EBITDA | $ | $ | $ | $ | $ | — | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Gross profit margin | % | % | % | % | * | * | % | ||||||||||||||||||||||||||||||||||
| EBITDA margin | % | % | % | % | * | * | % | ||||||||||||||||||||||||||||||||||
______________________________________________________
*Calculation not meaningful.
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Reconciliation of Net Income to EBITDA
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Interest, net | |||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| EBITDA | $ | $ | $ | $ | |||||||||||||||||||
Goodwill by Reportable Segment
Under the Company’s reportable segment structure as of December 31, 2025, the Company reported all of its goodwill in the former Debit and Credit segment. In connection with the implementation of the Company’s revised segment structure in the first quarter of 2026, a portion of the Company’s goodwill in the former Debit and Credit segment as of December 31, 2025 is now included in the Integrated Paytech segment. The increase in goodwill resulting from the acquisition of the on-premise instant issuance solution is recognized in the Integrated Paytech segment. As a result, total goodwill of the Company’s reportable segments as of June 30, 2026, and December 31, 2025, were as follows under the revised segment structure:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Secure Card Solutions | $ | $ | |||||||||
| Integrated Paytech | |||||||||||
| Total goodwill | $ | $ | |||||||||
Balance Sheet Data and Capital Expenditures of Reportable Segments
The Company does not report assets or capital expenditures by segment as the Company’s CODM does not use this information to evaluate reportable segments. Accordingly, the Company does not regularly provide such information by segment to the CODM.
12. Subsequent Events
Senior Notes Redemption
On July 15, 2026, the Company redeemed $26.5 million of its outstanding $265.0 million aggregate principal amount Senior Notes. The redemption was made pursuant to the terms of the indenture governing the terms of the Senior Notes, at a redemption price of 103.000 % of par plus accrued and unpaid interest to the date of redemption.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the “Company,” “our,” “us” or “we” refer to CPI Card Group Inc. and its subsidiaries. For an understanding of the significant factors that influenced our results, the following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2026. Management’s Discussion and Analysis should also be read in conjunction with the management’s discussion and analysis and consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”).
Cautionary Statement Regarding Forward-Looking Information
Certain statements and information in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 (as well as information included in other written or oral statements we make from time to time) may contain or constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “believe,” “estimate,” “project,” “expect,” “anticipate,” “affirm,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” “continue,” “committed,” “attempt,” “aim,” “target,” “objective,” “guides,” “seek,” “focus,” “provides guidance,” “provides outlook” or other similar expressions are intended to identify forward-looking statements, which are not historical in nature. These forward-looking statements, including statements about our strategic initiatives and market opportunities, are based on our current expectations and beliefs concerning future developments and their potential effect on us and other information currently available. Such forward-looking statements, because they relate to future events, are by their very nature subject to many important risks and uncertainties that could cause actual results or other events to differ materially from those contemplated.
These risks and uncertainties include, but are not limited to: (i) risks relating to our business and industry, such as a deterioration in general economic conditions, including due to inflationary conditions, resulting in reduced consumer confidence and business spending, and a decline in consumer credit worthiness impacting demand for our products; the unpredictability of our operating results, including an inability to anticipate changes in customer inventory management practices and its impact on our business; our failure to retain our existing key customers or identify and attract new customers; the highly competitive, saturated and consolidated nature of our marketplace; our inability to develop, introduce and commercialize new products and related services, including due to our inability to undertake research and development activities; new and developing technologies that make our existing technology solutions and products obsolete or less relevant or our failure to introduce new products and related services in a timely manner or at all; system security risks, data protection breaches and cyber-attacks; the usage, or lack thereof, of artificial intelligence technologies; disruptions, delays or other failures in our supply chain, including as a result of inflationary pressures, single-source suppliers, failure or inability of suppliers to comply with our code of conduct or contractual requirements, trade restrictions, tariffs, foreign conflicts or political unrest in countries in which our suppliers operate, and our inability to pass related costs on to our customers or difficulty meeting customers’ delivery expectations due to extended lead times; changes in U.S. and global trade policy and the impact of tariffs on our business and results of operations; interruptions in our operations, including our information technology systems, or in the operations of the third parties that operate computing infrastructure on which we rely; defects in our software and computing systems; disruptions in production at one or more of our facilities due to weather conditions, climate change, political instability, or social unrest; problems in production quality, materials and process and costs relating to product defects and any related product liability and/or warranty claims and damage to our reputation; our inability to recruit, retain and develop qualified personnel, including key personnel, and implement effective succession processes; our substantial indebtedness, including the restrictive terms of our indebtedness and covenants of future agreements governing indebtedness and the resulting restraints on our ability to pursue our business strategies; our inability to make debt service payments or refinance such indebtedness; our inability to successfully execute on, integrate, or achieve the anticipated benefits of acquisitions, including the acquisition of Arroweye Solutions, Inc. (“Arroweye”), or execute on divestitures, strategic relationships, or investments; our status as an accelerated filer and complying with the Sarbanes-Oxley Act of 2002 and the costs associated with such compliance and implementation of procedures thereunder; our failure to maintain effective internal control over financial reporting and risks relating to investor confidence in our financial reporting; environmental, social and governance (“ESG”) preferences and demands of various stakeholders and the related impact on our ability to access capital, produce our products in conformity with stakeholder preferences, comply with stakeholder demands and comply with any related legal or regulatory requirements or restrictions; negative perceptions of our products due to the impact of our products and production processes on the environment and other ESG-related risks; damage to our reputation or brand image; our inability to adequately protect our trade secrets and intellectual property rights from misappropriation, infringement claims brought against us and risks related to open source software; our inability to renew licenses with key technology licensors; our limited ability to raise capital, which may lead to delays in innovation or the abandonment of our strategic initiatives; costs and impacts related to additional tax collection efforts
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by states, unclaimed property laws, or future increases in U.S. federal or state income taxes, resulting in additional expenses which we may be unable to pass along to our customers; our inability to realize the full value of our long-lived assets; costs and potential liabilities associated with compliance or failure to comply with laws and regulations, customer contractual requirements and evolving industry standards regarding consumer privacy and data use and security; our failure to operate our business in accordance with the Payment Card Industry Security Standards Council security standards or other industry standards; the effects of ongoing foreign conflicts on the global economy; adverse conditions in the banking system and financial markets, including the failure of banks and financial institutions; our failure to comply with environmental, health and safety laws and regulations that apply to our products and the raw materials we use in our production processes; (ii) risks relating to ownership of our common stock, such as those associated with concentrated ownership of our stock by our significant stockholders and potential conflicts of interests with other stockholders; the impact of concentrated ownership of our common stock and the sale or perceived sale of a substantial amount of common stock on the trading volume and market price of our common stock; potential conflicts of interest that may arise due to our Board of Directors being comprised in part of directors who are principals of or were nominated by our significant stockholders; the influence of securities analysts over the trading market for and price of our common stock, particularly due to the lack of substantial research coverage of our common stock; the impact of stockholder activism or actual or threatened securities litigation on the trading price and volatility of our common stock; certain provisions of our organizational documents and other contractual provisions that may delay or prevent a change in control and make it difficult for stockholders other than our significant stockholders to change the composition of our Board of Directors; and (iii) general risks, such as relating to our ability to comply with a wide variety of complex evolving laws and regulations and the exposure to liability for any failure to comply; the effect of legal and regulatory proceedings and the adequacy of our insurance policies; and other risks that are described in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 5, 2026, and our other reports filed from time to time with the SEC.
We caution and advise readers not to place undue reliance on forward-looking statements, which speak only as of the date hereof. These statements are based on assumptions that may not be realized and involve risks and uncertainties that could cause actual results or other events to differ materially from the expectations and beliefs contained herein. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.
Company Overview
CPI is 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. We are a leader in several areas of the U.S. payment card solutions market, including debit and credit card production, personalization, and a cloud-based instant issuance solution. We are also a market leader in the production of “Prepaid Debit Cards,” defined as debit cards issued on the networks of the “Payment Card Brands” (Visa, Mastercard®, American Express® and Discover®) but not linked to a traditional bank account, and related secure packaging solutions. We serve thousands of customers through direct and indirect sales channels and have maintained long-standing relationships with our top customers.
Our revenues are primarily generated from the production of and services related to secure debit and credit cards that are issued on the networks of the Payment Card Brands, including Prepaid Debit Cards.
Segment Overview
In connection with our increased strategic focus on expanding and developing additional proprietary integrated technological solutions for our customer base and to reflect the manner in which the Company’s Chief Operating Decision Maker (“CODM”), the Chief Executive Officer (“CEO”), manages our business, we implemented a revised segment structure to assess performance and allocate resources, beginning in the first quarter of 2026. The changes in our segment structure primarily relate to the separation of the results of our proprietary integrated technological related operations into a separate segment from the former Debit and Credit segment. Our business consists of the following reportable segments:
•Secure Card Solutions: primarily produces secure debit and credit cards and provides card personalization services for U.S. card-issuing financial institutions, including highly customizable, on-demand payment card solutions acquired through the purchase of Arroweye in the second quarter of 2025;
•Prepaid Solutions: primarily provides prepaid debit cards and secure packaging solutions and other integrated prepaid card services to prepaid program managers in the U.S.; and
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•Integrated Paytech: primarily provides cloud-based and on-premise solutions, which give customers the ability to issue an instant personalized debit or credit card within a customer location; and other digital payment solutions such as push provisioning for mobile wallets.
On June 23, 2026, we entered into an asset purchase agreement to acquire an on-premise instant issuance solution, which includes the development, marketing, sale, licensing, and servicing of on-premise instant payment card issuance software solutions. The financial results of the acquired business are included in our Integrated Paytech segment.
Operating results for prior periods have been recast to conform to the current period presentation. The updated information reflects only reclassification of prior period segment data and does not represent a restatement of previously issued financial statements.
Results of Operations
The following table presents the components of our condensed consolidated statements of operations and comprehensive income for each of the periods presented:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
Revenue (1) | $ | 149,181 | $ | 129,753 | $ | 19,428 | 15.0 | % | $ | 296,289 | $ | 252,514 | $ | 43,775 | 17.3 | % | |||||||||||||||||||||||||||||||
Cost of goods sold (1) | 100,695 | 89,633 | 11,062 | 12.3 | % | 203,679 | 171,698 | 31,981 | 18.6 | % | |||||||||||||||||||||||||||||||||||||
| Gross profit | 48,486 | 40,120 | 8,366 | 20.9 | % | 92,610 | 80,816 | 11,794 | 14.6 | % | |||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | 36,622 | 30,697 | 5,925 | 19.3 | % | 69,752 | 57,289 | 12,463 | 21.8 | % | |||||||||||||||||||||||||||||||||||||
| Income from operations | 11,864 | 9,423 | 2,441 | 25.9 | % | 22,858 | 23,527 | (669) | (2.8) | % | |||||||||||||||||||||||||||||||||||||
| Other expense, net: | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest, net | (7,405) | (8,069) | 664 | 8.2 | % | (15,061) | (15,754) | 693 | 4.4 | % | |||||||||||||||||||||||||||||||||||||
| Other (expense) income, net | (35) | (13) | (22) | * | (3) | 5 | (8) | * | |||||||||||||||||||||||||||||||||||||||
| Income before taxes and equity in losses of unconsolidated affiliates | 4,424 | 1,341 | 3,083 | * | 7,794 | 7,778 | 16 | 0.2 | % | ||||||||||||||||||||||||||||||||||||||
| Income tax expense | (2,137) | (823) | (1,314) | * | (3,295) | (2,486) | (809) | (32.5) | % | ||||||||||||||||||||||||||||||||||||||
| Equity in losses of unconsolidated affiliates | (247) | — | (247) | * | (403) | — | (403) | * | |||||||||||||||||||||||||||||||||||||||
| Net income | $ | 2,040 | $ | 518 | $ | 1,522 | 293.8 | % | $ | 4,096 | $ | 5,292 | $ | (1,196) | (22.6) | % | |||||||||||||||||||||||||||||||
| Gross profit margin | 32.5 | % | 30.9 | % | 31.3 | % | 32.0 | % | |||||||||||||||||||||||||||||||||||||||
________________________________________________________
*Calculation not meaningful.
(1)For the three months ended June 30, 2026 and 2025, revenue and cost of goods sold each include $4.5 million and $3.5 million of intersegment eliminations, respectively. For the six months ended June 30, 2026 and 2025, revenue and cost of goods sold each include $8.6 million and $8.3 million of intersegment eliminations, respectively.
The following discussion of our condensed consolidated results of operations and segment results refers to the three and six months ended June 30, 2026, compared to the corresponding prior year period. The results of operations should be read in conjunction with the discussion of our segment results of operations, which provide more detailed discussions concerning certain components of the condensed consolidated statements of operations and comprehensive income.
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Revenue:
Revenue increased for the three months ended June 30, 2026, primarily due to increased revenue in our Secure Card Solutions segment excluding contributions from Arroweye, driven by increased volumes of contactless cards and higher personalization services; as well as higher revenue in our Prepaid Solutions segment. Additionally, revenue partially increased in our Secure Card Solutions segment due to contributions from the acquisition of Arroweye.
Revenue increased for the six months ended June 30, 2026, primarily due to increased revenue in our Secure Card Solutions segment excluding contributions from Arroweye, driven by increased volumes of contactless cards and higher personalization services. Additionally, revenue partially increased in our Secure Card Solutions segment due to contributions from the acquisition of Arroweye.
Gross Profit and Gross Profit Margin:
Gross profit increased for the three and six months ended June 30, 2026, primarily due to the factors discussed above and net tariff refunds totaling approximately $3.5 million and $2.5 million, respectively, partially offset by unfavorable changes in sales mix between segments and increased depreciation expenses. Additional changes in tariff rates could further impact our results of operations during 2026.
Gross profit margin increased for the three months ended June 30, 2026, primarily due to increased revenue and tariff refunds, partially offset by unfavorable changes in sales mix between segments and increased depreciation expenses.
Gross profit margin decreased for the six months ended June 30, 2026, primarily due to unfavorable changes in sales mix between segments and increased depreciation expenses, partially offset by increased revenue and tariff refunds.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses increased for the three and six months ended June 30, 2026, primarily due to higher compensation and related expenses, non-recurring acquisition and integration costs, and increased investments in technology. The increase in compensation and related expenses was primarily attributable to employee-related costs associated with the Arroweye acquisition and the development of our Integrated Paytech segment. The increase in Arroweye costs reflects the addition of personnel to our workforce and is expected to continue as part of ongoing operations. Investments in technology increased primarily due to the development of our Integrated Paytech segment and our acquisition of Arroweye.
Interest, net:
Interest expense was relatively consistent for the three and six months ended June 30, 2026.
Other Income, net:
Other income, net, was relatively consistent for the three and six months ended June 30, 2026.
Income Tax Expense:
Our effective tax rates on pre-tax income were 48.3% and 61.4% for the three months ended June 30, 2026 and 2025, respectively, and 42.3% and 32.0% for the six months ended June 30, 2026 and 2025, respectively. The decrease in our effective tax rate for the three months ended June 30, 2026, compared to the prior year was primarily due to deferred state tax expense recognized as part of the Arroweye Solutions, Inc. acquisition in the prior-year period. The increase in our effective tax rate for the six months ended June 30, 2026, compared to the prior year was primarily attributable to the write off of a deferred tax asset associated with vested stock options that expired unexercised, as well as an increase in the valuation allowance related to a certain state decoupling from various favorable federal tax provisions.
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Segment Discussion
Secure Card Solutions:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 110,867 | $ | 94,673 | $ | 16,194 | 17.1 | % | $ | 220,718 | $ | 176,315 | $ | 44,403 | 25.2 | % | |||||||||||||||||||||||||||||||
| Gross profit | $ | 30,869 | $ | 23,918 | $ | 6,951 | 29.1 | % | $ | 58,571 | $ | 44,737 | $ | 13,834 | 30.9 | % | |||||||||||||||||||||||||||||||
| Income from operations | $ | 21,020 | $ | 15,636 | $ | 5,384 | 34.4 | % | $ | 38,288 | $ | 29,946 | $ | 8,342 | 27.9 | % | |||||||||||||||||||||||||||||||
| Gross profit margin | 27.8 | % | 25.3 | % | 26.5 | % | 25.4 | % | |||||||||||||||||||||||||||||||||||||||
Revenue:
Revenue for Secure Card Solutions increased for the three and six months ended June 30, 2026, primarily due to contributions from the acquisition of Arroweye as described above, increased volumes of contactless cards and higher personalization services.
Gross Profit and Gross Profit Margin:
Gross profit and gross profit margin for Secure Card Solutions increased for the three and six months ended June 30, 2026, primarily due to increased revenue and tariff refunds, partially offset by increased depreciation expenses.
Income from Operations:
Income from operations for Secure Card Solutions increased for the three and six months ended June 30, 2026, primarily due to increased gross profit, partially offset by increased selling, general and administrative expenses driven by higher compensation and related expenses and investments in technology primarily due to the acquisition of Arroweye.
Prepaid Solutions:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 22,645 | $ | 19,222 | $ | 3,423 | 17.8 | % | $ | 44,694 | $ | 45,935 | $ | (1,241) | (2.7) | % | |||||||||||||||||||||||||||||||
| Gross profit | $ | 6,419 | $ | 5,471 | $ | 948 | 17.3 | % | $ | 12,085 | $ | 14,913 | $ | (2,828) | (19.0) | % | |||||||||||||||||||||||||||||||
| Income from operations | $ | 4,982 | $ | 4,171 | $ | 811 | 19.4 | % | $ | 9,075 | $ | 12,170 | $ | (3,095) | (25.4) | % | |||||||||||||||||||||||||||||||
| Gross profit margin | 28.3 | % | 28.5 | % | 27.0 | % | 32.5 | % | |||||||||||||||||||||||||||||||||||||||
Revenue:
Revenue for Prepaid Solutions increased for the three months ended June 30, 2026, primarily due to the change in accounting that was implemented in the second quarter of 2025 resulting in reduced revenue recognition for work-in-process orders, partially offset by comparisons with strong sales of higher-value packaging solutions in the prior year period. Excluding the change in accounting, revenue would have decreased $1.6 million, or 6.7%.
Revenue for Prepaid Solutions decreased for the six months ended June 30, 2026, primarily due to comparisons with strong sales of higher-value packaging solutions in the prior year period, partially offset by the change in accounting that was implemented in the second quarter of 2025 resulting in reduced revenue recognition for work-in-process orders. Excluding the change in accounting, the decrease in revenue would have been $6.6 million, or 12.9%.
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Gross Profit and Gross Profit Margin:
Gross profit for Prepaid Solutions increased for the three months ended June 30, 2026, primarily due to increased revenue, including the change in accounting that was implemented in the second quarter of 2025 resulting in reduced revenue recognition for work-in-process orders; partially offset by unfavorable sales mix.
Gross profit margin was relatively consistent for Prepaid Solutions for the three months ended June 30, 2026.
Gross profit and gross profit margin for Prepaid Solutions decreased for the six months ended June 30, 2026, primarily due to decreased revenue and unfavorable sales mix, partially offset by the change in accounting that was implemented in the second quarter of 2025 resulting in reduced revenue recognition for work-in-process orders.
Income from Operations:
Income from operations for Prepaid Solutions increased for the three months ended June 30, 2026 and decreased for the six months ended June 30, 2026, primarily due to the factors discussed in “Gross Profit and Gross Profit Margin” above.
Integrated Paytech:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 20,141 | $ | 19,326 | $ | 815 | 4.2 | % | $ | 39,523 | $ | 38,579 | $ | 944 | 2.4 | % | |||||||||||||||||||||||||||||||
| Gross profit | $ | 11,198 | $ | 10,731 | $ | 467 | 4.4 | % | $ | 21,954 | $ | 21,166 | $ | 788 | 3.7 | % | |||||||||||||||||||||||||||||||
| Income from operations | $ | 6,576 | $ | 7,417 | $ | (841) | (11.3) | % | $ | 13,441 | $ | 14,810 | $ | (1,369) | (9.2) | % | |||||||||||||||||||||||||||||||
| Gross profit margin | 55.6 | % | 55.5 | % | 55.5 | % | 54.9 | % | |||||||||||||||||||||||||||||||||||||||
Revenue:
Revenue for Integrated Paytech was relatively consistent for the three and six months ended June 30, 2026.
Gross Profit and Gross Profit Margin:
Gross profit and gross profit margin for Integrated Paytech were relatively consistent for the three and six months ended June 30, 2026.
Income from Operations:
Income from operations for Integrated Paytech decreased for the three and six months ended June 30, 2026, primarily due to increased selling, general and administrative expenses driven by increased compensation-related expenses and technology costs.
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Liquidity and Capital Resources
At June 30, 2026, we had $21.4 million of cash and cash equivalents. Our primary source of liquidity has been cash generated from our operating activities, which has been driven by net income and fluctuations in working capital. Our working capital fluctuates primarily due to timing and size of tax payments, collections from customers, inventory purchases, payments of employee incentive programs, and interest payments on our outstanding Senior Notes, with the interest payments being due in the first and third quarters of the year.
Our ability to make investments in and grow our business, service our debt, and improve our debt leverage ratios, while maintaining strong liquidity, depends on our ability to generate excess operating cash flows. Although we can provide no assurances, we believe that our cash flows from operations, combined with our current cash levels and our senior secured revolving credit facility (the “ABL Revolver”) with available borrowing capacity of $92.3 million as of June 30, 2026, will be adequate to fund debt service requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations and working capital needs. Our future cash flows could be impacted by a variety of factors, some of which are beyond our control. Factors include, but are not limited to, demand from some of our customers for certain products and related services; changes in economic conditions, especially those impacting our customers; the pricing, terms and availability of goods and services that we purchase; and financings that we enter into.
Cash Flows from Operating Activities
Cash provided by operating activities for the six months ended June 30, 2026, increased to $42.1 million from $9.9 million for the six months ended June 30, 2025, primarily due to reduced working capital usage. Working capital benefited from decreased incentive payments related to a customer contract originally entered into in the first quarter of 2024, lower inventory purchases, decreased employee performance-based incentive compensation and severance payments, and decreased tax payments. These benefits were partially offset by timing of payments on accounts payable and prepaid expense balances.
Cash Flows from Investing Activities
Acquisition of an On-Premise Instant Issuance Solution
On June 23, 2026, we acquired an on-premise instant issuance solution for a purchase price of $6.3 million. The acquisition was funded through cash on hand. Refer to Note 1, “Business Overview and Summary of Significant Accounting Policies” of the condensed consolidated financial statements in this report for information regarding the acquisition.
Capital Expenditures
During the six months ended June 30, 2026, capital expenditures, including investments to support the business, such as machinery and information technology equipment, totaled $6.1 million.
Cash Flows from Financing Activities
As of June 30, 2026, and December 31, 2025, we had the following outstanding borrowings:
| June 30, 2026 | December 31, 2025 | ||||||||||
| (dollars in thousands) | |||||||||||
| Senior Notes | $ | 265,000 | $ | 265,000 | |||||||
| ABL Revolver | — | 25,000 | |||||||||
| Unamortized deferred financing costs | (2,861) | (3,332) | |||||||||
| Total long-term debt | $ | 262,139 | $ | 286,668 | |||||||
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Senior Notes
On July 11, 2024 (the “Closing Date”), we completed a private offering by our wholly-owned subsidiary, CPI CG Inc. (the “Borrower”), of $285.0 million aggregate principal amount of 10.000% Senior Secured Notes due 2029 (the “Senior Notes”) and related guarantees at an issue price of 100%. The Senior Notes mature on July 15, 2029 and interest is payable on January 15 and July 15 of each year.
The Company has obligations to make an offer to repay the Senior Notes, requiring prepayment in advance of the maturity date, upon the occurrence of certain events including a change of control and certain asset sales.
ABL Revolver
On the Closing Date, the Company and the Borrower entered into a credit agreement with JPMorgan, (the “ABL Revolver”) providing for up to $75.0 million. The ABL Revolver matures on the earliest to occur of July 11, 2029, and the date that is 91 days prior to the maturity of the Senior Notes. We primarily utilize our ABL Revolver to provide general liquidity and to support shorter term financing requirements.
On July 2, 2025, the Company, the Borrower, and JPMorgan entered into the Amendment, which amends the ABL Revolver to, among other things, increase the available borrowing capacity from $75.0 million to $100.0 million. The Amendment did not modify the maturity date of the ABL Revolver nor the interest rate.
Borrowings under the ABL Revolver bear interest at a rate per annum that ranges based on the applicable term secured overnight financing rate as administered by the Federal Reserve Bank of New York plus 1.50% to 1.75% (subject, in each case, to a credit spread adjustment of 0.10%), based on the average daily borrowing capacity under the ABL Revolver over the most recently completed month. The unused portion of the ABL Revolver commitment accrues a commitment fee, which ranges from 0.375% to 0.50% per annum, based on the average daily excess availability under the ABL Revolver over the immediately preceding month.
During the six months ended June 30, 2026, we made principal payments of $25.0 million on the ABL Revolver. On July 15, 2026, we borrowed $30.0 million under the ABL Revolver and redeemed $26.5 million of the outstanding $265.0 million aggregate principal amount Senior Notes.
Amounts borrowed and outstanding under the ABL Revolver and Senior Notes are required to be repaid in full, together with any accrued and unpaid interest, no later than July 15, 2029 and may be subject to earlier mandatory prepayment upon certain events.
Material Cash Requirements
Our material cash requirements include interest payments on our long-term debt, operating and finance lease payments, and purchase obligations to support our operations.
Debt Service Requirements
As of June 30, 2026, the total projected principal and interest payments on our borrowings are $355.3 million, primarily related to the Senior Notes, of which $26.1 million of interest is expected to be paid in the next 12 months.
The remaining interest payments are expected to be paid over the remaining term of the Senior Notes, which mature in 2029, and the principal is due upon maturity. We have estimated our future interest payments including an additional $30.0 million of borrowings under the ABL Revolver and early redemptions of principal of $26.5 million on the Senior Notes, both of which occurred on July 15, 2026. This also assumes no debt issuances or renewals upon the maturity dates of our notes. However, we may borrow additional amounts under the ABL Revolver, redeem principal on the Senior Notes early, or refinance all or a portion of our borrowings in future periods.
Leases
We lease equipment and real property for production and services. Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 9, “Financing and Operating Leases,” in our Annual Report on Form 10-K for the year ended December 31, 2025, for details on our leasing arrangements, including future maturities of our operating lease liabilities.
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In February 2024, we entered into a build-to-suit lease agreement to relocate and modernize our operations at our Fort Wayne, Indiana production facility, which commenced in the first quarter of 2025, and with payments beginning in 2026. Under this lease agreement, we will pay an annual base rent of $0.9 million, subject to an annual rent increase of 2.0%. The lease is for 10 years and includes two consecutive options to extend the term of the lease by five years for each such option.
Purchase Obligations
A purchase obligation is an agreement to purchase goods or services that is enforceable, legally binding, and specifies all significant terms. As of June 30, 2026, there have not been any material changes to the purchase obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements and accompanying notes. Actual results could differ from those estimates. Our Critical Accounting Policies and Estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, for which there were no material changes as of June 30, 2026, included:
•Revenue recognition, including estimates of work performed but not completed,
•Income taxes, including estimates regarding future compensation for covered individuals, valuation allowances and uncertain tax positions,
•Business combinations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required due to smaller reporting company status.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our controls and procedures related to our reporting and disclosure obligations (as defined by Rules 13a-15(e) and 15d-15(e) within the Exchange Act of 1934) as of June 30, 2026, which is the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2026, the disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported, as applicable, within the time periods specified in the rules and forms of the SEC, and are designed to ensure that information required to be disclosed by us in the reports that we file or submit is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
On May 6, 2025, the Company acquired Arroweye. We are currently in the process of integrating Arroweye's controls and processes into our control environment and will incorporate Arroweye in our assessment of the effectiveness of our internal control over financial reporting as of the end of 2026. Other than the change related to the integration of Arroweye, there were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – Other Information
Item 1. Legal Proceedings
Refer to Note 9, “Commitments and Contingencies” of the condensed consolidated financial statements in this report for information regarding legal proceedings.
Item 1A. Risk Factors
The risk factors disclosed in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025 set forth information relating to various risks and uncertainties that could materially adversely affect our business, financial condition and operating results. Such risk factors continue to be relevant to an understanding of our business, financial condition and operating results. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes with respect to such risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the six months ended June 30, 2026, no directors or officers of the Company adopted terminated
Item 6. Exhibits
| Exhibit Number | Exhibit Description | |||||||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CPI CARD GROUP INC. | |||||
| August 6, 2026 | /s/ John Lowe | ||||
John Lowe | |||||
President and Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
| August 6, 2026 | /s/ Terra Grantham | ||||
Terra Grantham | |||||
Chief Financial Officer | |||||
| (Principal Financial Officer) | |||||
| August 6, 2026 | /s/ Donna Abbey Carmignani | ||||
Donna Abbey Carmignani | |||||
Chief Accounting Officer | |||||
| (Principal Accounting Officer) | |||||
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