NASDAQ:PMTS CPI Card Group Q2 2023 Earnings Report $26.36 +0.30 (+1.15%) Closing price 05/2/2025 04:00 PM EasternExtended Trading$26.36 0.00 (0.00%) As of 04:06 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast CPI Card Group EPS ResultsActual EPS$0.55Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ACPI Card Group Revenue ResultsActual Revenue$114.96 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ACPI Card Group Announcement DetailsQuarterQ2 2023Date8/8/2023TimeN/AConference Call DateTuesday, August 8, 2023Conference Call Time9:00AM ETUpcoming EarningsCPI Card Group's Q1 2025 earnings is scheduled for Tuesday, May 6, 2025, with a conference call scheduled at 9:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by CPI Card Group Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 8, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Welcome to CPI Car Group's 2nd Quarter 2023 Earnings Call. My name is Chris, and I'll be your operator today. If you are viewing on the webcast, you may advance the slides forward by pressing the arrow buttons. The call will be open for questions after the company's remarks. Now I'd like to turn the call over to Mike Salop, CPI's Head of Investor Relations. Speaker 100:00:27Thanks, operator, and good morning, everyone. Welcome to the CPI Card Group's Q2 2023 earnings webcast and conference call. Today's date is August 8, 2023. And on the call today from CPI Card Group are Scott Scheiderman, President and Chief Executive Officer Jeff Hoxteth, Chief Financial Officer and John Lowe, Executive Vice President, End to End Payment Solutions. Before we begin, I'd like to remind everyone that this call may contain forward looking statements as they are defined in the Private Securities Litigation Reform Act of 1995. Speaker 100:00:56These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements. For a discussion of such risks and uncertainties, please see CPI Card Group's most recent filings with the SEC. All forward looking statements made today reflect our current expectations only, And we undertake no obligation to update any statement to reflect the events that occur after this call. Also, during the course of today's call, The company will be discussing 1 or more non GAAP financial measures, including, but not limited to, EBITDA, adjusted EBITDA, adjusted EBITDA margin, Net leverage ratio and free cash flow. Reconciliations of these non GAAP financial measures to the most directly comparable GAAP measures are included in the press release and slide presentation that we issued this morning. Speaker 100:01:40Copies of today's press release as well as the presentation that accompanies this conference call are accessible on CPI's Investor Relations website, investor. Cpicardgroup.com. In addition, CPI's Form 10 Q for the quarter ended June 30, 2023 will be available on CPI's Investor Relations website. On today's call, all growth rates refer to comparisons with the prior year period unless otherwise noted. And now, I'd like to turn the call over President and Chief Executive Officer, Scott Scheirman. Speaker 200:02:09Thanks, Mike, and good morning, everyone. During today's call, I will give a brief overview and Highlight our ongoing strategy, John will discuss CPI's 2nd quarter performance and our updated outlook for the full year, And then Jeff will review the financial results in more detail before we open the call for questions. We will start on Slide 4. As you know, in early June, I announced my plans to retire in early 2024. This was a difficult decision for me As I've enjoyed leading CPI since becoming CEO in late 2017, but I need to give priority to my family. Speaker 200:02:47Given the company has a strong foundation with an excellent leadership team that has been executing our strategy successfully, I feel comfortable That the time is right for me to retire. Our Board is currently undergoing a search for the next CEO, evaluating both internal and external candidates and expects to name a new CEO in late 2023 or early 2024. I want to assure you that the company remains committed to the key strategic priorities that have guided our success, specifically deep customer focus, Market leading quality products and customer service, continuous innovation and a market competitive business model. Although we have adjusted our outlook for the year to reflect some near term challenges in the industry, I remain confident in the long term secular growth for the market And in CPI's competitive position. As you can see on Slide 5, payment cards issued to consumers continue to grow. Speaker 200:03:48The latest figures from Visa and Mastercard show cards in circulation in the U. S. Increased at a 10% CAGR for the 3 years ending March 31st And we're up 9% compared to the prior year period. Trends toward adoption of higher priced contactless and eco focused cards also support Long term market growth expectations. And as we have discussed in the past, the card business is reoccurring in nature, And our research shows that on average, about 90% of U. Speaker 200:04:18S. Payment card annual issuance is driven by replacement of existing cards. In short, banks and financial institutions need and want to issue cards. As the market grows over time, we are well positioned We continue to win share based on our differentiated products and end to end solutions portfolio, our strong customer service And our team's track record of gaining share through execution of our focused strategies. We are currently being affected by softness in customer demand, Which has caused us to adjust our sales outlook range for the year, but we believe the softness is temporary in nature as eventually cards will still need to be purchased and issued. Speaker 200:05:00Overall, given the market conditions, I am pleased with the results we posted in the Q2 and for the first half of the year, Including solid profitability growth. I would now like to turn the call over to John Lowe to further discuss the current environment, Our second quarter results and our outlook for 2023. For those of you who don't know John, he leads all of our debit and credit segment, Which represents approximately 80% of the company's net sales and previously served as the company's CFO. He has done a great job of bringing our end to end payment solutions businesses together and driving our business forward. John? Speaker 300:05:39Thanks, Scott, and good morning, everyone. Happy to be on the call today. Let me first go through some of the results for the quarter on Slide 6 Before reviewing our full year outlook, for the quarter, we delivered a 1% increase in net sales, driven by 14% growth in our prepaid business, Which is led by Peggy O'Leary and her team. Our debit and credit business declined 1%, which reflects both challenging comparisons with the prior year quarter And cautious spending by some of our customers. As you may recall, our Debit and Credit segment net sales increased 29% in the Q2 of 2022. Speaker 300:06:16This was driven by a large card order related to an eco focused portfolio addition with one of our largest customers. As a result, we sold nearly 15,000,000 more ECO focused cards in last year's Q2 than the current quarter. As a reminder, as of the end of the current quarter, we have sold nearly 100,000,000 Eco Focus Cards to our customers since late 2019. Aside from ECO Focused Cards, we delivered increases in debit and credit in this year's quarter, primarily from our other contactless cards, Contact cards and services businesses. Comparisons aside, customer demand is softer than we expected coming into the year, Which we believe is driven by a couple of factors. Speaker 300:06:59As we mentioned last quarter, we started to see some impact on orders following the banking stress that began in the spring. Although the turmoil that affected small and regional banks has dissipated and the current environment appears to have stabilized, We continue to see cautionary spending among many of our smaller and medium sized banking customers on cards and the related personalization. We're also hearing from our customers that they were utilizing more existing inventory. Our supply chain challenges that previously prompted them to carry more inventory have improved. We believe the ongoing economic slowdown concerns have also likely put more emphasis on customers optimizing inventory levels. Speaker 300:07:39As we talk to our customers, our belief is the softness in the market and inventory work downs will likely continue in the near term, But we believe the market will improve later in the year. As Scott noted, card issuance to consumers remains healthy, So we do expect sales to issuers to start to regain momentum once inventory levels are worked down. Turning back to 2nd quarter results. Despite the slight sales growth, we were able to increase adjusted EBITDA by effectively managing operating expenses. We grew net income by 6% And adjusted EBITDA by 18% in the quarter, with adjusted EBITDA margins increasing 290 basis points to 20.3%. Speaker 300:08:21For the first half of the year, we delivered solid 5% net sales growth, a 43% increase in net income And 15% growth in adjusted EBITDA. Jeff will give you more details on our results in a few minutes. But first, let's turn to Slide 7 to Our updated outlook for 2023. Today, we are adjusting the sales outlook provided in May, while affirming our outlooks for adjusted EBITDA growth, Free cash flow generation and net leverage. We have updated our full year sales outlook to a range of flat to low single digit growth, Down from our original outlook of mid single digit growth due to the factors mentioned previously. Speaker 300:09:01This change is attributable to the debit and credit segment As we continue to expect the prepaid segment to be similar to or slightly better than 2022 levels. Currently, We expect sales to decline in the Q3 and return to growth in the Q4 as the market starts to improve and the impact of our sales initiatives takes hold. As we mentioned last quarter, due to the softness we are seeing in the market, we are executing various initiatives to drive sales in 2023 And these will primarily benefit the Q4. On the profit side, we are affirming our outlook for mid to high single digit adjusted EBITDA growth. Given the lower sales expectation, we have increased our focus on managing discretionary expenses such as outside services costs And managing the timing of implementation of certain projects where possible. Speaker 300:09:51As noted, adjusted EBITDA increased 15% in the first half of the year. So we are off to a good start. Although there is still uncertainty in the economic environment and exactly when the market will improve, We have confidence in our teams and their focus on delivering our outlook and believe we have solid plans in place to do so. Longer term, the same positive secular trends remain intact. Cards in circulation growth, contactless card market penetration I will now turn the call over to Jeff to review our Q2 and year to date results And I'll look in more detail. Speaker 300:10:32Jeff? Speaker 400:10:33Thanks, John, and good morning, everyone. I will begin my overview on Slide 9. Net sales increased 1% in the quarter, a strong growth from our prepaid business offset the expected softness in debit and credit. Prepaid sales increased 14%, driven by higher sales to existing customers, while debit and credit segment sales decreased 1% As the previously implemented price increases helped offset some of the reduced demand. Looking at our products and services and debit and credit, Declines in eco focused card sales were largely offset by increases in sales of other contactless cards, contact cards, Personalization services, including our print on demand business, CardOnce, instant issuance processing fees and sales of non EMV cards. Speaker 400:11:241st quarter gross profit increased 1%, largely in line with sales growth. The gross profit margin decreased slightly from 35.8% 35.5 percent. We reduced SG and A expenses by $2,000,000 in the quarter, primarily due to lower expenses in prepaid And lower professional service expenses. Compensation expenses increased slightly in the quarter as the impact of increased headcount and salaries And the executive retention package noted in our early June 8 ks were offset by reduced short term employee incentive compensation expense. Most of the cash and equity expense impacts from the executive retention package will be amortized within SG and A through the end of February of next year And recorded as adjustment items to EBITDA. Speaker 400:12:15We had a relatively high tax rate of 38.9% in the quarter, which compared to 22.1% in the prior year and brought our year to date rate up to 28.6%. The increased rate in the quarter primarily reflects limitations on deductibility of executive compensation related to the CEO retention package. The year to date rate is still below last year's level due to higher interest expense deductibility and a favorable adjustment in the first quarter Reflective change in state tax law. We will project a normalized rate excluding any adjustment items of between 25% 30% And now expect the overall 2023 rate to be near the top of that range. Net income in the second quarter increased 6% to $6,500,000 And adjusted EBITDA increased 18 percent to $23,300,000 Adjusted EBITDA margin from 17.4% in the prior year to 20.3%, driven by reduced SG and A expenses, While net income growth also benefited from lower interest expense, partially offset by a higher tax rate. Speaker 400:13:29Turning now to our year to date results on Slide 10. For the first half of the year, net sales increased 5% Speaker 500:13:37With the Speaker 400:13:37debit and credit segment growing 5% and prepaid debit increasing 6%, debit and credit sales growth was driven by contactless cards, Card Personalization Services, CardOnce, Instant Issuance Solution Services and Non EMV Cards. Pricing contributed just under 4 percentage points of the overall growth in the first half, primarily related to actions taken in 2022, So this impact will lessen over the remainder of the year. First half gross profit increased 5% from the prior year, With gross profit margin increasing slightly to 35.6 percent, SG and A expenses decreased by approximately $1,000,000 in the first half As reduced professional service expenses, including for 3rd party SOX costs and lower expenses in prepaid were partially offset by increased Compensation expenses, primarily reflecting increased headcount. Net income in the first half increased 43% To $17,400,000 and adjusted EBITDA increased 15% to $48,400,000 Adjusted EBITDA margin improved from 18.8% in the prior year to 20.5%, driven primarily by reduced operating expenses, Well, net income growth also benefited from lower interest expense and a lower tax rate. Turning now to our segments on Slide 11. Speaker 400:15:04I mentioned the segment sales drivers earlier, so I will just discuss segment profitability on this slide. Income from operations for the debit and credit segment decreased 1% in the quarter to $25,100,000 in line with the sales decline. For the first half, debit and credit income from operations increased 11%, driven by sales growth, operating leverage, including Pricing increases and lower SG and A expenses. Prepaid debit segment income from operations increased 43% in the second quarter $7,600,000 First half income from operations was flat due to 1st quarter costs related to the labor conversion at our prepaid production facility. As was mentioned last quarter, we expected prepaid margins to improve from the Q1 as we gained efficiencies from the labor conversion And benefited from more favorable mix in operating leverage. Speaker 400:16:02Compared to prior year, prepaid income from Operations also benefited from lower SG and A expenses in the Q2. Turning to the balance sheet, liquidity and cash flow on Slide 12. On a year to date basis, we generated $10,300,000 of cash flow from operating activities and invested $6,600,000 on capital expenditures, which resulted in free cash flow of $3,700,000 This compared to the free cash flow usage $16,300,000 in the prior year period was the improvement driven by increased net income and reduced working capital usage compared to last year's first half. On the balance sheet at June 30, we had $11,000,000 of cash and $18,000,000 of borrowings outstanding On our $75,000,000 ABL revolver, we had $278,000,000 of senior secured notes outstanding at quarter end As we repurchased $7,000,000 of notes in the open market in the quarter, bringing our total to $15,000,000 year to date. Our net leverage ratio of 2.8 times at the end of the quarter compared to 3 times at year end and 4 times in the prior year Q2. Speaker 400:17:16Our capital structure and allocation priorities remain focused on maintaining ample liquidity, investing in the business, including possible strategic acquisitions, Deleveraging the balance sheet and returning funds to stockholders. As mentioned earlier, we have updated our sales outlook for 2023 From mid single digit growth to a range of flat to low single digit growth and affirmed our outlooks for mid to high single digit adjusted EBITDA growth, More than doubling free cash flow from last year's $13,500,000 and net leverage improvement to between 2.5x and 3x at year end. With sales lower than anticipated, we are focused on managing costs through initiatives and delaying certain project spending to drive adjusted EBITDA growth. I will now pass the call back to Scott for some closing remarks on Slide 13. Scott? Speaker 200:18:11Thanks, Jeff, And thank you to all of our employees for their efforts in delivering our first half results in a challenging environment. I also wanted to note that we are pleased to have had our stock added the Russell 3,000 in June, which should further help us in our efforts to increase liquidity for our shares. To summarize today's call, we faced expected demand challenges in the quarter, but delivered good profitability growth and have generated solid results Overall, for the first half, we expect the short term customer demand challenges to persist in the near term And have adjusted our sales outlook to reflect that, but are focused on profitability and free cash flows And have affirmed our adjusted EBITDA and free cash flow outlooks for the year. We expect the market to improve over time, we continue to remain confident in the long term secular transfer payment cards and in our ability to continue to gain share. Thank you for joining our call today, and we will now open the call for any questions. Speaker 200:19:11Operator? Operator00:19:14Thank you. We'll now open the call for your questions. The first question is from Jaeson Schmidt with Lake Street Capital Markets. Your line is open. Speaker 600:19:28Hey, guys. Thanks for taking my questions. Just Want to start with sort of your Q4 outlook, sort of that confidence in a return to growth in Q4. I mean is this based on recent customer order patterns or visibility into inventory levels or what gives you that confidence that you can return to Speaker 200:19:48growth here later this year? Speaker 700:19:51Yes, Jason, good morning. This is Scott. Let me give you a couple of thoughts and I'll let John add some color too as he works Even more closely with the customers than I do every day. But I would say based on recent conversations with customers about their project plans, We believe conditions will start to improve later in the year, Jason. But obviously, the timing The market improving could change depending upon a variety of factors, economic conditions, our customers' business objectives and so forth. Speaker 700:20:27I think what's really important to note here is the long term secular trends continue to be intact. Contactless cards will continue to transition in the U. S. Eco Focus cards are popular, will be very popular. We're the market leader there for sure. Speaker 700:20:43And 90% on average annually 90% of our revenue is reoccurring. So we have a model that has secular trends, reoccurring revenue in nature. But clearly we're going through some cautious spending with our customers. And again these are Based on recent conversations and we have in the last few months seen some customers push large projects into 24. I've had no one customer that canceled an order because they're tightening their credit a bit. Speaker 700:21:16But again, these are temporary conditions. But John, I'll let you give some more color on what gives us some confidence in Q4, although not without risk obviously for sure. Yes. Speaker 800:21:27Hey, good morning, Jason. Good to talk to you again. I mean, I think Scott covered it well, but the one thing I would say is we're talking to our customers all the time. If you think about what's changed since May, right, there's really been 2 drivers. Scott mentioned this, but we've seen the large banks Just be a little bit more, some of them at least focused on inventory. Speaker 800:21:51Some have moved projects out to next year. Some are tightening credit standards, which has impacted ordering. And then in the small to medium space, you've seen the trends that I would say That were occurring in Q2, they've continued to a certain extent in Q3. We do expect those to come back in Q4. And the reason being to answer your question directly It's really we're talking to our customers all the time. Speaker 800:22:14There's a significant amount of what I would say quoting activity projects we're working on. There's always risk in the outlook, but we feel good about the end of the year and things picking up in relation to where we are now. Speaker 600:22:32Okay. No, that's really helpful color. Appreciate it, guys. And then just looking At the prepaid segment, it seemed to be quite strong in Q2. Just curious if this would impact sort of your normal Seasonal patterns that you typically see in the second half of the year? Speaker 700:22:51Jason, it may have a A bit of an impact in each of our businesses. Timing can vary among quarters for sure. We're pleased with the prepaid business. Peggy O'Leary and the team are doing a great job of growing that business. And again, we see that business Probably being slightly better than where it ended up in 2022, but there is a bit of seasonality in Q3 for sure as Our customers prepare for the holiday season, the gifting season. Speaker 700:23:23But there could be a bit of timing of moves among the quarters. But Overall, I'd probably focus you on prepaid having a solid year for sure and should be a tad bit better in 'twenty three than Speaker 200:23:34it was in 'twenty two. Speaker 800:23:36Hey, Jason. The other thing I'd say is, the prepaid business and again, Peggy O'Leary running that business, she's doing a great job. They've been able to Diversify their products that to a certain extent we moved into HSA cards, some other areas, doing things more than just our typical prepaid Opaloupe gift cards. And that's reduced some of the seasonality in the business overall. So what you'll see from kind of the Q2 to Q3 to Q4, I think you see a little bit less lumpiness than what you would look at if you look back to our financials historically. Speaker 600:24:12Okay. That makes sense. And then just last one for me and I'll jump back into queue. How should we think about gross margin here in the second half of the year? Speaker 400:24:24Yes. Hi, Jason. This is Jeff. Thanks for the gross margin for the rest of the year. Obviously, when sales dip a little bit, we typically get a little bit of operating leverage With higher sales, so that will put a little pressure on the gross margin. Speaker 400:24:43Also, Our pricing is lapsing from last year that we implemented. It's been about a year or so. So Gross margin will be a little bit of pressure, but on the same token, we are managing our expenses Pretty effectively and we don't really give guidance per se on gross margin. But on the adjusted EBITDA, we still affirmed Our guidance for the year, there's a lot that we can again tighten our expenses in the second half and watch those closely. We feel good about the adjusted EBITDA guidance in light of slower revenue growth. Speaker 600:25:26Okay. That's really helpful. Thanks a lot guys. Speaker 300:25:30Thanks, Jason. Thanks. Operator00:25:36The next question is from Bill Charters with Sabahat Capital. Your line is open. Speaker 500:25:43Hi, guys. I just wanted to get some clarity on the guidance. Regarding 3rd quarter guidance, You mean 3rd quarter is down year over year and that's off of like $124,000,000 $28,000,000 last year. And so then you expect Q4 to grow somewhat and that's how you get to the almost $100,000,000 EBITDA per year. Am I thinking about that correctly? Speaker 200:26:07Yes, that's correct. Speaker 500:26:11Okay. And then in 2015 2016 with EMV, It created a cyclicality with lower maturities from 5 years down to 3 years and lower margins. What cyclicality, if any, do you expect from the contactless conversion? Speaker 800:26:32Yes. Hey, Bill, good to talk to you again. Contactless is very different from what we saw in 2015 2016, right? I mean, I think if you go back The mandate from Visa and Mastercard, there was a very clear set date that was October of 15. You fast forward to the contactless transition, Really started to pick up slightly in late 2018. Speaker 800:26:55If you look at the broader market, we've seen the penetration as of the end of 2022 At roughly 50% to 60%. We expect that to be in the 80%, mid-80s if you will in the next few years. So the transition has been slower. There's no mandate. So I wouldn't say this particular change in guidance or What's happening in the current year has anything to do with the contactless transition in its totality. Speaker 800:27:23I would say that's a much more Slow transition, which is good for our customers, it's good for us. And we do expect that to continue in the coming years. So the cyclicality from that, I would say isn't really comparable to what we saw from the inventory building and the boom in the Industry that we saw back in the 2015 2016 time period from the Visa and Mastercard mandate. Speaker 500:27:47Okay, great. Yes. And you expect everything to be fully, kind of, I guess, fully implemented by 2025? Is that kind of what you were thinking? Speaker 800:27:59Well, I mean you're never going to get to 100% penetration. So if you believe kind of 25%, 26% time period you're in the 80% to 85 But keep in mind our business, 1 third of our revenue on the debit and credit side comes from our largest Issuers, 2 thirds of our revenue comes from the small to medium issuers and those small to medium issuers are the ones that are much slower to Transition. So we expect even if you get to 80%, 85% there's a fairly long tail. And the other thing I would say is, the secular trends just broadly still remain. The cards in circulation, Scott mentioned this, They're up at a roughly 10% CAGR over the last 3 years. Speaker 800:28:46Overall, card issuance is roughly 90% recurring. And if you're looking at the Eco Focus market where we believe we're a leader, we sold nearly $90,000,000 or $100,000,000 of those through Q2 And we expect that market to grow to 50% CAGR over the next few years. So, I understand the question about the cyclicality and contactless, but we feel good about where we are in the market. Speaker 500:29:08Yes. Okay, great. And then the last question I have is on CapEx. What is maintenance CapEx? I noticed like last year was higher than historic. Speaker 500:29:17The Q1 was higher, but then this quarter is lower. What do you feel about CapEx and maintenance? Can you just give us some more color on that? Speaker 800:29:28Yes, John again. If you go back Several years ago where we were very tight on cash, I would say we were probably in the $8,000,000 $10,000,000 range. I think in the current environment, we're probably more in that $15,000,000 to $20,000,000 range. We do have Projects that are ongoing, we're always trying to improve our operations from an efficiency perspective, a capability perspective for our customers. In doing that, we expect to continue to spend kind of in that $15,000,000 to $20,000,000 range over the course of the future. Speaker 800:30:03And I'd break that down just to your question. There's CapEx for true maintenance for the organization. There's CapEx for projects and improvement. And the maintenance side is probably more in the $5,000,000 to $8,000,000 range if I had to put a number around it. Speaker 300:30:18Got it. Yes. And the Speaker 500:30:20rest is growth or efficiencies? Speaker 800:30:22That's right. Speaker 500:30:24Okay, great. Well, I have no other questions. Great quarter and great call. Thanks. Speaker 200:30:29Thank you. Thanks, Bill. Operator00:30:33We have no further questions at this time, and this will conclude today's CPI Car Group's 2nd quarter earnings call.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCPI Card Group Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) CPI Card Group Earnings HeadlinesCPI Card Group (NASDAQ:PMTS) Knows How To Allocate Capital EffectivelyMarch 25, 2025 | finance.yahoo.comCPI Card Group Inc. (PMTS) Q4 2024 Earnings Call TranscriptMarch 6, 2025 | seekingalpha.comThink NVDA’s run was epic? You ain’t seen nothin’ yetAsk most investors and they’ll probably tell you Nvidia is the undisputed AI stock of the decade. In 2023, it surged 239%. And in 2024, it soared another 171% on the year… But what if I told you there was a way to target those types of “peak Nvidia” profit opportunities in 24 hours or less?May 5, 2025 | Timothy Sykes (Ad)Long Canaan, Short CPI Card Group: A Statistical Arbitrage Opportunity (Technical Analysis)March 5, 2025 | seekingalpha.comCPI Card Group price target raised to $38 from $36 at DA DavidsonMarch 5, 2025 | markets.businessinsider.comCPI Card Group price target raised to $34 from $33 at B. RileyMarch 5, 2025 | markets.businessinsider.comSee More CPI Card Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like CPI Card Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on CPI Card Group and other key companies, straight to your email. Email Address About CPI Card GroupCPI Card Group (NASDAQ:PMTS), together with its subsidiaries, engages in the design, production, data personalization, packaging, and fulfillment of financial payment cards. It operates through Debit and Credit, and Prepaid Debit segments. The Debit and Credit segment produces financial payment cards and provides integrated card services to card-issuing financial institutions. Its products include Europay, Mastercard, and Visa (EMV) and non-EMV financial payment cards, including contact and contactless cards, plastic and encased metal cards, and Second Wave payment cards, as well as private label credit cards. This segment also provides on-demand services and various integrated card services, including card personalization and fulfillment, as well as instant issuance services. The Prepaid Debit segment primarily offers integrated card services comprising tamper-evident security packaging services to prepaid debit card providers. It also produces financial payment cards issued on the networks of the payment card brands. It serves issuers of debit and credit cards, Prepaid Debit Card program managers, community banks, credit unions, and group service providers in the United States. The company was formerly known as CPI Holdings I, Inc. and changed its name to CPI Card Group Inc. in August 2015. CPI Card Group Inc. was incorporated in 2007 and is headquartered in Littleton, Colorado.View CPI Card Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback PlanMicrosoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of Earnings Upcoming Earnings Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025)Mplx (5/6/2025)Brookfield Asset Management (5/6/2025)Arista Networks (5/6/2025)Duke Energy (5/6/2025)Zoetis (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 9 speakers on the call. Operator00:00:00Welcome to CPI Car Group's 2nd Quarter 2023 Earnings Call. My name is Chris, and I'll be your operator today. If you are viewing on the webcast, you may advance the slides forward by pressing the arrow buttons. The call will be open for questions after the company's remarks. Now I'd like to turn the call over to Mike Salop, CPI's Head of Investor Relations. Speaker 100:00:27Thanks, operator, and good morning, everyone. Welcome to the CPI Card Group's Q2 2023 earnings webcast and conference call. Today's date is August 8, 2023. And on the call today from CPI Card Group are Scott Scheiderman, President and Chief Executive Officer Jeff Hoxteth, Chief Financial Officer and John Lowe, Executive Vice President, End to End Payment Solutions. Before we begin, I'd like to remind everyone that this call may contain forward looking statements as they are defined in the Private Securities Litigation Reform Act of 1995. Speaker 100:00:56These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements. For a discussion of such risks and uncertainties, please see CPI Card Group's most recent filings with the SEC. All forward looking statements made today reflect our current expectations only, And we undertake no obligation to update any statement to reflect the events that occur after this call. Also, during the course of today's call, The company will be discussing 1 or more non GAAP financial measures, including, but not limited to, EBITDA, adjusted EBITDA, adjusted EBITDA margin, Net leverage ratio and free cash flow. Reconciliations of these non GAAP financial measures to the most directly comparable GAAP measures are included in the press release and slide presentation that we issued this morning. Speaker 100:01:40Copies of today's press release as well as the presentation that accompanies this conference call are accessible on CPI's Investor Relations website, investor. Cpicardgroup.com. In addition, CPI's Form 10 Q for the quarter ended June 30, 2023 will be available on CPI's Investor Relations website. On today's call, all growth rates refer to comparisons with the prior year period unless otherwise noted. And now, I'd like to turn the call over President and Chief Executive Officer, Scott Scheirman. Speaker 200:02:09Thanks, Mike, and good morning, everyone. During today's call, I will give a brief overview and Highlight our ongoing strategy, John will discuss CPI's 2nd quarter performance and our updated outlook for the full year, And then Jeff will review the financial results in more detail before we open the call for questions. We will start on Slide 4. As you know, in early June, I announced my plans to retire in early 2024. This was a difficult decision for me As I've enjoyed leading CPI since becoming CEO in late 2017, but I need to give priority to my family. Speaker 200:02:47Given the company has a strong foundation with an excellent leadership team that has been executing our strategy successfully, I feel comfortable That the time is right for me to retire. Our Board is currently undergoing a search for the next CEO, evaluating both internal and external candidates and expects to name a new CEO in late 2023 or early 2024. I want to assure you that the company remains committed to the key strategic priorities that have guided our success, specifically deep customer focus, Market leading quality products and customer service, continuous innovation and a market competitive business model. Although we have adjusted our outlook for the year to reflect some near term challenges in the industry, I remain confident in the long term secular growth for the market And in CPI's competitive position. As you can see on Slide 5, payment cards issued to consumers continue to grow. Speaker 200:03:48The latest figures from Visa and Mastercard show cards in circulation in the U. S. Increased at a 10% CAGR for the 3 years ending March 31st And we're up 9% compared to the prior year period. Trends toward adoption of higher priced contactless and eco focused cards also support Long term market growth expectations. And as we have discussed in the past, the card business is reoccurring in nature, And our research shows that on average, about 90% of U. Speaker 200:04:18S. Payment card annual issuance is driven by replacement of existing cards. In short, banks and financial institutions need and want to issue cards. As the market grows over time, we are well positioned We continue to win share based on our differentiated products and end to end solutions portfolio, our strong customer service And our team's track record of gaining share through execution of our focused strategies. We are currently being affected by softness in customer demand, Which has caused us to adjust our sales outlook range for the year, but we believe the softness is temporary in nature as eventually cards will still need to be purchased and issued. Speaker 200:05:00Overall, given the market conditions, I am pleased with the results we posted in the Q2 and for the first half of the year, Including solid profitability growth. I would now like to turn the call over to John Lowe to further discuss the current environment, Our second quarter results and our outlook for 2023. For those of you who don't know John, he leads all of our debit and credit segment, Which represents approximately 80% of the company's net sales and previously served as the company's CFO. He has done a great job of bringing our end to end payment solutions businesses together and driving our business forward. John? Speaker 300:05:39Thanks, Scott, and good morning, everyone. Happy to be on the call today. Let me first go through some of the results for the quarter on Slide 6 Before reviewing our full year outlook, for the quarter, we delivered a 1% increase in net sales, driven by 14% growth in our prepaid business, Which is led by Peggy O'Leary and her team. Our debit and credit business declined 1%, which reflects both challenging comparisons with the prior year quarter And cautious spending by some of our customers. As you may recall, our Debit and Credit segment net sales increased 29% in the Q2 of 2022. Speaker 300:06:16This was driven by a large card order related to an eco focused portfolio addition with one of our largest customers. As a result, we sold nearly 15,000,000 more ECO focused cards in last year's Q2 than the current quarter. As a reminder, as of the end of the current quarter, we have sold nearly 100,000,000 Eco Focus Cards to our customers since late 2019. Aside from ECO Focused Cards, we delivered increases in debit and credit in this year's quarter, primarily from our other contactless cards, Contact cards and services businesses. Comparisons aside, customer demand is softer than we expected coming into the year, Which we believe is driven by a couple of factors. Speaker 300:06:59As we mentioned last quarter, we started to see some impact on orders following the banking stress that began in the spring. Although the turmoil that affected small and regional banks has dissipated and the current environment appears to have stabilized, We continue to see cautionary spending among many of our smaller and medium sized banking customers on cards and the related personalization. We're also hearing from our customers that they were utilizing more existing inventory. Our supply chain challenges that previously prompted them to carry more inventory have improved. We believe the ongoing economic slowdown concerns have also likely put more emphasis on customers optimizing inventory levels. Speaker 300:07:39As we talk to our customers, our belief is the softness in the market and inventory work downs will likely continue in the near term, But we believe the market will improve later in the year. As Scott noted, card issuance to consumers remains healthy, So we do expect sales to issuers to start to regain momentum once inventory levels are worked down. Turning back to 2nd quarter results. Despite the slight sales growth, we were able to increase adjusted EBITDA by effectively managing operating expenses. We grew net income by 6% And adjusted EBITDA by 18% in the quarter, with adjusted EBITDA margins increasing 290 basis points to 20.3%. Speaker 300:08:21For the first half of the year, we delivered solid 5% net sales growth, a 43% increase in net income And 15% growth in adjusted EBITDA. Jeff will give you more details on our results in a few minutes. But first, let's turn to Slide 7 to Our updated outlook for 2023. Today, we are adjusting the sales outlook provided in May, while affirming our outlooks for adjusted EBITDA growth, Free cash flow generation and net leverage. We have updated our full year sales outlook to a range of flat to low single digit growth, Down from our original outlook of mid single digit growth due to the factors mentioned previously. Speaker 300:09:01This change is attributable to the debit and credit segment As we continue to expect the prepaid segment to be similar to or slightly better than 2022 levels. Currently, We expect sales to decline in the Q3 and return to growth in the Q4 as the market starts to improve and the impact of our sales initiatives takes hold. As we mentioned last quarter, due to the softness we are seeing in the market, we are executing various initiatives to drive sales in 2023 And these will primarily benefit the Q4. On the profit side, we are affirming our outlook for mid to high single digit adjusted EBITDA growth. Given the lower sales expectation, we have increased our focus on managing discretionary expenses such as outside services costs And managing the timing of implementation of certain projects where possible. Speaker 300:09:51As noted, adjusted EBITDA increased 15% in the first half of the year. So we are off to a good start. Although there is still uncertainty in the economic environment and exactly when the market will improve, We have confidence in our teams and their focus on delivering our outlook and believe we have solid plans in place to do so. Longer term, the same positive secular trends remain intact. Cards in circulation growth, contactless card market penetration I will now turn the call over to Jeff to review our Q2 and year to date results And I'll look in more detail. Speaker 300:10:32Jeff? Speaker 400:10:33Thanks, John, and good morning, everyone. I will begin my overview on Slide 9. Net sales increased 1% in the quarter, a strong growth from our prepaid business offset the expected softness in debit and credit. Prepaid sales increased 14%, driven by higher sales to existing customers, while debit and credit segment sales decreased 1% As the previously implemented price increases helped offset some of the reduced demand. Looking at our products and services and debit and credit, Declines in eco focused card sales were largely offset by increases in sales of other contactless cards, contact cards, Personalization services, including our print on demand business, CardOnce, instant issuance processing fees and sales of non EMV cards. Speaker 400:11:241st quarter gross profit increased 1%, largely in line with sales growth. The gross profit margin decreased slightly from 35.8% 35.5 percent. We reduced SG and A expenses by $2,000,000 in the quarter, primarily due to lower expenses in prepaid And lower professional service expenses. Compensation expenses increased slightly in the quarter as the impact of increased headcount and salaries And the executive retention package noted in our early June 8 ks were offset by reduced short term employee incentive compensation expense. Most of the cash and equity expense impacts from the executive retention package will be amortized within SG and A through the end of February of next year And recorded as adjustment items to EBITDA. Speaker 400:12:15We had a relatively high tax rate of 38.9% in the quarter, which compared to 22.1% in the prior year and brought our year to date rate up to 28.6%. The increased rate in the quarter primarily reflects limitations on deductibility of executive compensation related to the CEO retention package. The year to date rate is still below last year's level due to higher interest expense deductibility and a favorable adjustment in the first quarter Reflective change in state tax law. We will project a normalized rate excluding any adjustment items of between 25% 30% And now expect the overall 2023 rate to be near the top of that range. Net income in the second quarter increased 6% to $6,500,000 And adjusted EBITDA increased 18 percent to $23,300,000 Adjusted EBITDA margin from 17.4% in the prior year to 20.3%, driven by reduced SG and A expenses, While net income growth also benefited from lower interest expense, partially offset by a higher tax rate. Speaker 400:13:29Turning now to our year to date results on Slide 10. For the first half of the year, net sales increased 5% Speaker 500:13:37With the Speaker 400:13:37debit and credit segment growing 5% and prepaid debit increasing 6%, debit and credit sales growth was driven by contactless cards, Card Personalization Services, CardOnce, Instant Issuance Solution Services and Non EMV Cards. Pricing contributed just under 4 percentage points of the overall growth in the first half, primarily related to actions taken in 2022, So this impact will lessen over the remainder of the year. First half gross profit increased 5% from the prior year, With gross profit margin increasing slightly to 35.6 percent, SG and A expenses decreased by approximately $1,000,000 in the first half As reduced professional service expenses, including for 3rd party SOX costs and lower expenses in prepaid were partially offset by increased Compensation expenses, primarily reflecting increased headcount. Net income in the first half increased 43% To $17,400,000 and adjusted EBITDA increased 15% to $48,400,000 Adjusted EBITDA margin improved from 18.8% in the prior year to 20.5%, driven primarily by reduced operating expenses, Well, net income growth also benefited from lower interest expense and a lower tax rate. Turning now to our segments on Slide 11. Speaker 400:15:04I mentioned the segment sales drivers earlier, so I will just discuss segment profitability on this slide. Income from operations for the debit and credit segment decreased 1% in the quarter to $25,100,000 in line with the sales decline. For the first half, debit and credit income from operations increased 11%, driven by sales growth, operating leverage, including Pricing increases and lower SG and A expenses. Prepaid debit segment income from operations increased 43% in the second quarter $7,600,000 First half income from operations was flat due to 1st quarter costs related to the labor conversion at our prepaid production facility. As was mentioned last quarter, we expected prepaid margins to improve from the Q1 as we gained efficiencies from the labor conversion And benefited from more favorable mix in operating leverage. Speaker 400:16:02Compared to prior year, prepaid income from Operations also benefited from lower SG and A expenses in the Q2. Turning to the balance sheet, liquidity and cash flow on Slide 12. On a year to date basis, we generated $10,300,000 of cash flow from operating activities and invested $6,600,000 on capital expenditures, which resulted in free cash flow of $3,700,000 This compared to the free cash flow usage $16,300,000 in the prior year period was the improvement driven by increased net income and reduced working capital usage compared to last year's first half. On the balance sheet at June 30, we had $11,000,000 of cash and $18,000,000 of borrowings outstanding On our $75,000,000 ABL revolver, we had $278,000,000 of senior secured notes outstanding at quarter end As we repurchased $7,000,000 of notes in the open market in the quarter, bringing our total to $15,000,000 year to date. Our net leverage ratio of 2.8 times at the end of the quarter compared to 3 times at year end and 4 times in the prior year Q2. Speaker 400:17:16Our capital structure and allocation priorities remain focused on maintaining ample liquidity, investing in the business, including possible strategic acquisitions, Deleveraging the balance sheet and returning funds to stockholders. As mentioned earlier, we have updated our sales outlook for 2023 From mid single digit growth to a range of flat to low single digit growth and affirmed our outlooks for mid to high single digit adjusted EBITDA growth, More than doubling free cash flow from last year's $13,500,000 and net leverage improvement to between 2.5x and 3x at year end. With sales lower than anticipated, we are focused on managing costs through initiatives and delaying certain project spending to drive adjusted EBITDA growth. I will now pass the call back to Scott for some closing remarks on Slide 13. Scott? Speaker 200:18:11Thanks, Jeff, And thank you to all of our employees for their efforts in delivering our first half results in a challenging environment. I also wanted to note that we are pleased to have had our stock added the Russell 3,000 in June, which should further help us in our efforts to increase liquidity for our shares. To summarize today's call, we faced expected demand challenges in the quarter, but delivered good profitability growth and have generated solid results Overall, for the first half, we expect the short term customer demand challenges to persist in the near term And have adjusted our sales outlook to reflect that, but are focused on profitability and free cash flows And have affirmed our adjusted EBITDA and free cash flow outlooks for the year. We expect the market to improve over time, we continue to remain confident in the long term secular transfer payment cards and in our ability to continue to gain share. Thank you for joining our call today, and we will now open the call for any questions. Speaker 200:19:11Operator? Operator00:19:14Thank you. We'll now open the call for your questions. The first question is from Jaeson Schmidt with Lake Street Capital Markets. Your line is open. Speaker 600:19:28Hey, guys. Thanks for taking my questions. Just Want to start with sort of your Q4 outlook, sort of that confidence in a return to growth in Q4. I mean is this based on recent customer order patterns or visibility into inventory levels or what gives you that confidence that you can return to Speaker 200:19:48growth here later this year? Speaker 700:19:51Yes, Jason, good morning. This is Scott. Let me give you a couple of thoughts and I'll let John add some color too as he works Even more closely with the customers than I do every day. But I would say based on recent conversations with customers about their project plans, We believe conditions will start to improve later in the year, Jason. But obviously, the timing The market improving could change depending upon a variety of factors, economic conditions, our customers' business objectives and so forth. Speaker 700:20:27I think what's really important to note here is the long term secular trends continue to be intact. Contactless cards will continue to transition in the U. S. Eco Focus cards are popular, will be very popular. We're the market leader there for sure. Speaker 700:20:43And 90% on average annually 90% of our revenue is reoccurring. So we have a model that has secular trends, reoccurring revenue in nature. But clearly we're going through some cautious spending with our customers. And again these are Based on recent conversations and we have in the last few months seen some customers push large projects into 24. I've had no one customer that canceled an order because they're tightening their credit a bit. Speaker 700:21:16But again, these are temporary conditions. But John, I'll let you give some more color on what gives us some confidence in Q4, although not without risk obviously for sure. Yes. Speaker 800:21:27Hey, good morning, Jason. Good to talk to you again. I mean, I think Scott covered it well, but the one thing I would say is we're talking to our customers all the time. If you think about what's changed since May, right, there's really been 2 drivers. Scott mentioned this, but we've seen the large banks Just be a little bit more, some of them at least focused on inventory. Speaker 800:21:51Some have moved projects out to next year. Some are tightening credit standards, which has impacted ordering. And then in the small to medium space, you've seen the trends that I would say That were occurring in Q2, they've continued to a certain extent in Q3. We do expect those to come back in Q4. And the reason being to answer your question directly It's really we're talking to our customers all the time. Speaker 800:22:14There's a significant amount of what I would say quoting activity projects we're working on. There's always risk in the outlook, but we feel good about the end of the year and things picking up in relation to where we are now. Speaker 600:22:32Okay. No, that's really helpful color. Appreciate it, guys. And then just looking At the prepaid segment, it seemed to be quite strong in Q2. Just curious if this would impact sort of your normal Seasonal patterns that you typically see in the second half of the year? Speaker 700:22:51Jason, it may have a A bit of an impact in each of our businesses. Timing can vary among quarters for sure. We're pleased with the prepaid business. Peggy O'Leary and the team are doing a great job of growing that business. And again, we see that business Probably being slightly better than where it ended up in 2022, but there is a bit of seasonality in Q3 for sure as Our customers prepare for the holiday season, the gifting season. Speaker 700:23:23But there could be a bit of timing of moves among the quarters. But Overall, I'd probably focus you on prepaid having a solid year for sure and should be a tad bit better in 'twenty three than Speaker 200:23:34it was in 'twenty two. Speaker 800:23:36Hey, Jason. The other thing I'd say is, the prepaid business and again, Peggy O'Leary running that business, she's doing a great job. They've been able to Diversify their products that to a certain extent we moved into HSA cards, some other areas, doing things more than just our typical prepaid Opaloupe gift cards. And that's reduced some of the seasonality in the business overall. So what you'll see from kind of the Q2 to Q3 to Q4, I think you see a little bit less lumpiness than what you would look at if you look back to our financials historically. Speaker 600:24:12Okay. That makes sense. And then just last one for me and I'll jump back into queue. How should we think about gross margin here in the second half of the year? Speaker 400:24:24Yes. Hi, Jason. This is Jeff. Thanks for the gross margin for the rest of the year. Obviously, when sales dip a little bit, we typically get a little bit of operating leverage With higher sales, so that will put a little pressure on the gross margin. Speaker 400:24:43Also, Our pricing is lapsing from last year that we implemented. It's been about a year or so. So Gross margin will be a little bit of pressure, but on the same token, we are managing our expenses Pretty effectively and we don't really give guidance per se on gross margin. But on the adjusted EBITDA, we still affirmed Our guidance for the year, there's a lot that we can again tighten our expenses in the second half and watch those closely. We feel good about the adjusted EBITDA guidance in light of slower revenue growth. Speaker 600:25:26Okay. That's really helpful. Thanks a lot guys. Speaker 300:25:30Thanks, Jason. Thanks. Operator00:25:36The next question is from Bill Charters with Sabahat Capital. Your line is open. Speaker 500:25:43Hi, guys. I just wanted to get some clarity on the guidance. Regarding 3rd quarter guidance, You mean 3rd quarter is down year over year and that's off of like $124,000,000 $28,000,000 last year. And so then you expect Q4 to grow somewhat and that's how you get to the almost $100,000,000 EBITDA per year. Am I thinking about that correctly? Speaker 200:26:07Yes, that's correct. Speaker 500:26:11Okay. And then in 2015 2016 with EMV, It created a cyclicality with lower maturities from 5 years down to 3 years and lower margins. What cyclicality, if any, do you expect from the contactless conversion? Speaker 800:26:32Yes. Hey, Bill, good to talk to you again. Contactless is very different from what we saw in 2015 2016, right? I mean, I think if you go back The mandate from Visa and Mastercard, there was a very clear set date that was October of 15. You fast forward to the contactless transition, Really started to pick up slightly in late 2018. Speaker 800:26:55If you look at the broader market, we've seen the penetration as of the end of 2022 At roughly 50% to 60%. We expect that to be in the 80%, mid-80s if you will in the next few years. So the transition has been slower. There's no mandate. So I wouldn't say this particular change in guidance or What's happening in the current year has anything to do with the contactless transition in its totality. Speaker 800:27:23I would say that's a much more Slow transition, which is good for our customers, it's good for us. And we do expect that to continue in the coming years. So the cyclicality from that, I would say isn't really comparable to what we saw from the inventory building and the boom in the Industry that we saw back in the 2015 2016 time period from the Visa and Mastercard mandate. Speaker 500:27:47Okay, great. Yes. And you expect everything to be fully, kind of, I guess, fully implemented by 2025? Is that kind of what you were thinking? Speaker 800:27:59Well, I mean you're never going to get to 100% penetration. So if you believe kind of 25%, 26% time period you're in the 80% to 85 But keep in mind our business, 1 third of our revenue on the debit and credit side comes from our largest Issuers, 2 thirds of our revenue comes from the small to medium issuers and those small to medium issuers are the ones that are much slower to Transition. So we expect even if you get to 80%, 85% there's a fairly long tail. And the other thing I would say is, the secular trends just broadly still remain. The cards in circulation, Scott mentioned this, They're up at a roughly 10% CAGR over the last 3 years. Speaker 800:28:46Overall, card issuance is roughly 90% recurring. And if you're looking at the Eco Focus market where we believe we're a leader, we sold nearly $90,000,000 or $100,000,000 of those through Q2 And we expect that market to grow to 50% CAGR over the next few years. So, I understand the question about the cyclicality and contactless, but we feel good about where we are in the market. Speaker 500:29:08Yes. Okay, great. And then the last question I have is on CapEx. What is maintenance CapEx? I noticed like last year was higher than historic. Speaker 500:29:17The Q1 was higher, but then this quarter is lower. What do you feel about CapEx and maintenance? Can you just give us some more color on that? Speaker 800:29:28Yes, John again. If you go back Several years ago where we were very tight on cash, I would say we were probably in the $8,000,000 $10,000,000 range. I think in the current environment, we're probably more in that $15,000,000 to $20,000,000 range. We do have Projects that are ongoing, we're always trying to improve our operations from an efficiency perspective, a capability perspective for our customers. In doing that, we expect to continue to spend kind of in that $15,000,000 to $20,000,000 range over the course of the future. Speaker 800:30:03And I'd break that down just to your question. There's CapEx for true maintenance for the organization. There's CapEx for projects and improvement. And the maintenance side is probably more in the $5,000,000 to $8,000,000 range if I had to put a number around it. Speaker 300:30:18Got it. Yes. And the Speaker 500:30:20rest is growth or efficiencies? Speaker 800:30:22That's right. Speaker 500:30:24Okay, great. Well, I have no other questions. Great quarter and great call. Thanks. Speaker 200:30:29Thank you. Thanks, Bill. Operator00:30:33We have no further questions at this time, and this will conclude today's CPI Car Group's 2nd quarter earnings call.Read morePowered by