CPI Card Group NASDAQ: PMTS executives said the company got off to a “solid start” in 2026, reporting first-quarter revenue growth of 20% and reaffirming its full-year outlook as it continues integrating its Arroweye acquisition and investing in its technology and go-to-market initiatives.
First-quarter results: revenue up 20%, Adjusted EBITDA up 9%
President and CEO John Lowe said CPI exceeded internal expectations in the quarter, with results supported by “another strong contribution from Arroweye” and growth across the company’s secure card solutions businesses. Interim CFO Terra Grantham reported first-quarter revenue rose 20% to $147 million.
Grantham said first-quarter net income declined 57% to $2.1 million, “primarily affected by $3 million of pre-tax integration costs,” while Adjusted EBITDA increased 9% on sales growth, including Arroweye.
Cash generation improved in the period. Grantham said cash flow from operating activities increased to $13.6 million from $5.6 million a year earlier, driven by working capital, and free cash flow rose to $10.1 million from $0.3 million.
Segment performance: Secure Card Solutions leads; Prepaid down; PayTech modestly higher
Secure Card Solutions was the key driver in the quarter. Grantham said segment revenue increased 35%, including a $16 million contribution from Arroweye. Lowe attributed the performance to strength in contactless solutions—“led by continued strength of contactless metal”—and “increased sales of personalization services.”
Prepaid Solutions revenue declined 17% in the first quarter. Grantham said the decrease reflected “timing of orders from key customers,” partly offset by better-than-expected closed-loop card sales. Lowe said the company anticipated a slow start for prepaid in 2026 but continues to expect growth for the full year, adding that closed-loop prepaid performed “very well” off fourth-quarter 2025 levels.
Integrated PayTech revenue increased 1% due to a strong prior-year comparison, according to Grantham, while the segment maintained “strong growth margins at over 55%.” Management reiterated its expectation that Integrated PayTech will grow more than 15% for the full year.
Margins pressured by prepaid mix, tariffs, and depreciation
Grantham said gross profit margin fell to 30.0% from 33.2%, reflecting lower sales and margins in prepaid and higher production costs, partially offset by increased Secure Card Solutions volume. She cited $2 million of higher depreciation—primarily tied to Arroweye and the company’s new secure card production facility—and $1.2 million of tariff expenses in the quarter.
Grantham said CPI expects prepaid margins to improve in the second quarter on higher revenue levels, and expects overall company margins to be “much stronger in the second half of the year.” She added that margin comparisons should improve going forward as Arroweye depreciation and tariffs “primarily began impacting results in the second quarter of 2025.”
SG&A expenses increased $6.5 million year over year, which Grantham attributed mainly to Arroweye integration costs, inclusion of Arroweye operating expenses, higher incentive compensation, increased severance, and higher technology spending.
Strategy update: Fiserv marketing relationship, digital “pipes,” and prepaid chip pilot
Lowe said CPI is executing its strategy to “grow and diversify the business” by expanding its proprietary technology platform, broadening its “marketable base” of relationships, and evolving payment solutions. He pointed to growing demand for digital solutions among financial institutions and increased focus on prepaid security.
On Integrated PayTech, Lowe described CPI’s instant issuance Card@Once platform as a SaaS offering built “from the ground up” over “10+ years,” with “thousands of customers across the U.S.” He said CPI expects instant issuance to be “a large chunk of the growth” in Integrated PayTech in 2026, and highlighted a referral/marketing relationship with Fiserv that management discussed at year-end and named publicly in the quarter.
Asked what changed with Fiserv, Lowe said “the main difference is we called out their name,” adding that CPI is “actively marketing our solutions with the help of Fiserv” and is seeing “positive customer interest.”
In prepaid, Lowe said CPI continues to test chip-embedded cards, referencing a pilot with a “large national retailer” around “card-to-safe-to-buy technology,” along with work involving Karta. He said CPI believes it is well positioned if the U.S. prepaid market transitions toward chip and contactless over time.
Outlook reaffirmed; Q2 revenue expected similar to Q1
Management reaffirmed the full-year outlook issued in March. Grantham said that outlook includes:
- High single-digit revenue growth
- Low to mid-single digit Adjusted EBITDA growth
- Free cash flow conversion at similar levels to 2025
- Year-end net leverage ratio between 2.5x and 3x
For the second quarter, Grantham said CPI expects revenue to be similar to first-quarter levels, while Adjusted EBITDA is expected to be “slightly lower than prior year” due to the timing of investment spending, including spending delayed from the first quarter.
On leverage and liquidity, Grantham said CPI ended the quarter with $19 million in cash, $15 million of borrowings on its ABL revolver, and $265 million of senior notes outstanding. Lowe said net leverage ended the quarter “just below 3x,” down from levels seen after the Arroweye acquisition.
About CPI Card Group NASDAQ: PMTS
CPI Card Group, Inc NASDAQ: PMTS is a leading provider of payment, identification and related credential solutions for financial institutions, governments and private enterprises. The company specializes in the design, manufacturing and personalization of secure plastic and metal cards, including EMV chip, magnetic-stripe and contactless cards. CPI Card Group also offers digital credentialing services and cloud-based card management tools that enable real-time controls, mobile wallet integration, fraud monitoring and analytics.
With a focus on security and innovation, CPI Card Group integrates advanced features such as holograms, microprinting, RFID/NFC technology and laser-engraved artwork into its card products.
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