CPI Card Group Inc (PMTS) Reports 15% Decrease in Q3 Net Sales and 68% Decrease in Net Income
Third quarter net sales decreased 15% to $106 million, net income decreased 68% to $4 million, and adjusted EBITDA decreased 25% to $21 million.
For the first nine months, net sales decreased 2%, net income decreased 12%, and adjusted EBITDA decreased 1%.
The company updated its 2023 outlook, projecting mid-single digit declines for both net sales and adjusted EBITDA.
A $20 million share repurchase authorization was announced.
On November 7, 2023, CPI Card Group Inc (NASDAQ:PMTS), a leading provider of credit, debit, and prepaid solutions, reported its financial results for the third quarter ended September 30, 2023. The company experienced a decline in sales and earnings compared to prior year levels, with net sales decreasing 15% to $105.9 million, net income decreasing 68% to $3.9 million, and adjusted EBITDA decreasing 25% to $21.2 million.
Financial Performance and Challenges
The decline in sales reflects cautious spending and inventory rationalization by certain customers and was also impacted by comparisons with the 2022 third quarter, when the company posted net sales growth of 25%. The company's President and Chief Executive Officer, Scott Scheirman, attributed the decline to cautious customer spending due to a variety of factors, including a focus on managing inventory levels following robust purchases in a challenging supply-chain environment last year.
Financial Highlights
For the third quarter of 2023, net sales decreased 15% year-over-year to $105.9 million. Gross profit decreased 25% to $36.2 million and gross profit margin was 34.1%, compared to 38.9% in the prior year third quarter. Income from operations decreased 45% to $13 million, net income decreased 68% to $3.9 million, and adjusted EBITDA decreased 25% to $21.2 million.
For the first nine months of 2023, net sales decreased 2% year-over-year to $341.7 million. Gross profit decreased 6% to $120.1 million and gross profit margin was 35.1%, compared to 36.7% in the prior year. Income from operations decreased 10% to $51.1 million, net income decreased 12% to $21.3 million, and adjusted EBITDA decreased 1% to $69.6 million.
Outlook and Share Repurchase Authorization
The company updated its full year outlook for 2023, projecting mid-single digit declines for both net sales and adjusted EBITDA. However, free cash flow is projected to be approximately double the 2022 level. Additionally, the company's Board of Directors approved a $20 million share repurchase authorization, expiring December 31, 2024.
Despite the challenging market conditions, the company believes long-term growth trends for the U.S. card market remain strong, led by consumer card growth, widespread adoption of eco-focused cards, and the ongoing conversion to contactless cards.
Explore the complete 8-K earnings release (here) from CPI Card Group Inc for further details.
This article first appeared on GuruFocus.
