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    PMTS
    Earnings call· Jun 2026(Q2 FY26)

    CPI Card Group Q2 FY26 earnings call PMTS

    Aug 6, 2026 Source

    Executive summary

    CPI Card Group Q2 FY26 — Record Free Cash Flow and Raised Outlook

    CPI Card Group delivered a strong second quarter, marked by record first-half free cash flow and significant deleveraging, driven by robust Secure Card Solutions performance and strategic acquisitions. The company raised its full-year revenue and free cash flow guidance, reflecting confidence in its diversified strategy and digital solutions momentum, despite ongoing choppiness in the prepaid market.

    Highlights

    5

    • Revenue grew 15% in Q2 and 17% in H1, achieving record first half revenue.

    • Adjusted EBITDA increased 7% to $24 million in Q2.

    • Generated record free cash flow of $36 million in H1.

    • Net leverage reduced to 2.7 times at quarter-end from 3.6 times a year ago.

    • Raised full-year revenue growth and free cash flow guidance.

    Concerns

    3

    • Market choppiness in prepaid solutions, with softness expected to continue into late 2026.

    • Unfavorable segment mix due to softness in higher-margin prepaid revenue impacting gross and adjusted EBITDA margins.

    • SG&A expenses increased to $37 million in Q2 from $31 million in the prior year, partly due to ArrowEye integration.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year revenue growth
    high single digits to low double digits
    high materiality
    High
    Full-year Adjusted EBITDA growth
    low to mid single digits
    high materiality
    High
    Full-year Free Cash Flow
    $45 million to $50 million
    high materiality
    High
    Year-end net leverage
    2.5 times to 3.0 times
    high materiality
    High
    Integrated PayTech segment revenue growth
    approximately 20%
    medium materiality
    High
    Q3 revenue and Adjusted EBITDA
    slightly better than the second quarter
    medium materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Secure Card Solutions
    Driven by increased volumes of contactless cards and higher personalization.
    Organic revenue growth: 13% (excluding ArrowEye)ArrowEye contribution: $5 million
    		$111 million17%——
    Prepaid Solutions
    Primarily due to an accounting change implemented in Q2 2025, partially offset by comparisons with strong sales of higher value packages. Experienced slower-than-expected start to the year with uneven customer ordering patterns.
    		$23 million18%——
    Integrated PayTech
    Driven by increased Card-at-Once revenue and small contribution from TRISM. Expected to deliver approximately 20% growth for the full year.
    TRISM contribution: very small (closed late June)
    		—4%——

    Operational metrics

    13
    Cash and investments balance
    $21 million
    Q2 FY26
    Net leverage ratio
    2.7 timesdown from 3.6 times at this point last year
    Q2 FY26
    Capital expenditures
    $6 milliondown from $9 million in prior year period
    H1 FY26
    SG&A expenses
    $37 millioncompared to $31 million in the prior year period
    Q2 FY26
    Tariff refunds benefit
    more than $3 million
    Q2 FY26
    Available borrowing capacity
    $92 million
    Q2 FY26
    Senior Notes outstanding
    $265 million
    Q2 FY26
    Organic revenue growth
    12%
    Q2 FY26
    ArrowEye new customer wins
    25
    Since May 2025
    Prepaid program managers served
    all
    Q2 FY26
    Closed-loop market size vs open-loop
    approximately five times
    Q2 FY26
    TRISM gross margin profile
    over 50%
    FY26
    TRISM instant issuance locations
    nearly 20,000
    Q2 FY26

    Industry KPIs

    4
    MetricValueDetails
    Capital return FCF$36 million (FCF H1); $26.5 million (Senior Notes redeemed)USD
    Gross margin drivers32.5%%
    Services peripheral attach25new customers
    Revenue mix by end market segmentSecure Card Solutions: $111 million; Prepaid Solutions: $23 million; Integrated PayTech: 4% growthUSD

    Deals & partnerships

    6
    TRISMInstant issuance solution, expands leadership in U.S. instant issuance market, enables serving larger financial institutions with on-premise solutions.

    Roughly doubles CPI's instant issuance addressable market. Increases instant issuance presence to nearly 20,000 locations across over 3,000 financial institutions. Recurring revenue and long-term customer relationships, creates cross-selling opportunities.

    ArrowEyeContributed to Secure Card Solutions revenue and customer growth.

    Exceeding original expectations, hit 25th new customer win since acquisition.

    BlossomLead-in solution for digital banking and payments platform.

    Expands reach of cloud-based push provisioning and Card-at-Once solutions, serving 350+ credit unions.

    CU AnswersLeading core processing and digital banking provider.

    Expands reach of cloud-based push provisioning and Card-at-Once solutions, serving more than 400 credit unions across the U.S.

    VeracastData-driven fintech servicing roughly 60% of U.S. commercial banks and credit unions.

    Extended relationship spanning more than two decades.

    CARTAJoint pilot to launch prepaid packages with safe-to-buy chip-embedded technology.

    Pilot with one of the largest U.S. national retailers.

    Risks & headwinds

    3
    Market choppiness in prepaid solutionsinto late 2026

    Softness expected to continue

    Mitigation: Well-positioned to capture new revenue opportunities in closed-loop market and through strategic partnership with Carta; leveraging leadership in prepaid packaging and chip-enabled solutions.

    Unfavorable segment mix impacting marginsQ2 FY26 (current impact)

    Softness in higher-margin prepaid revenue partially offset by growth in lower-margin Secure Card Solutions

    Mitigation: Driving initiatives to improve margins over time, including supplier negotiations, acquisition synergies, worksite optimization, and automation. Focusing on expanding growth in higher-margin solutions like metal cards.

    SG&A expenses increaseQ2 FY26

    $37 million in Q2 FY26 vs $31 million in prior year

    Mitigation: Driven by ArrowEye integration expenses and investments in digital and technology to fuel growth in higher-margin, more recurring revenue businesses. Integration expenses expected to be significantly lower in H2.

    What to watch in Q3 FY26

    4

    Prepaid market recovery

    next quarter
    Currentchoppy, softness expected to continue into late 2026
    TargetSigns of stabilization or improvement in ordering patterns.

    Why it matters

    Prepaid is a higher-margin segment, and its recovery is crucial for overall margin expansion and revenue mix.

    These successes were partially offset by some market choppiness in prepaid as we continue to see softness within that segment, which we expect will continue into late 2026.

    Q&A highlights

    5

    Asked about the expected incremental revenue from TRISM for 2027 and the strategic rationale for the deal, especially regarding competitive positioning in instant card issuance.

    John Lowe explained TRISM expands CPI's addressable market by serving larger banks with on-premise solutions, effectively doubling their instant issuance market. He estimated TRISM would contribute roughly $3.5M-$4M in revenue for the latter part of 2026, with expectations to double or more in 2027.

    “Trism is a great strategic acquisition for us. You think about our position in the instant issuance market broadly. We historically have been the market leader by far in software as a service, kind of cloud-based solution where you're servicing those small to medium banks that don't have the ability to manage their own technology... So it really grows our addressable market essentially double from where we were.”

    asked by Peter Heckman · answered by John Lowe

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Acquisitions and Diversification

    CPI completed the acquisition of TRISM, an instant issuance solution, which expands its leadership in the U.S. instant issuance market and roughly doubles its addressable market by serving larger financial institutions. This acquisition is expected to increase Integrated PayTech growth to approximately 20% in 2026 and maintain a gross margin profile over 50%. The company also continues to see strong momentum from its ArrowEye acquisition, exceeding original expectations.

    02

    Digital Solutions Momentum

    The company is building go-to-market momentum across its cloud-based and digital solutions, expanding the reach of its push provisioning and Card-at-Once solutions with Blossom and CU Answers, serving over 750 credit unions. These initiatives are generating new recurring revenue streams and deepening customer relationships, leveraging tokenization capabilities.

    03

    Prepaid Market Dynamics

    While the prepaid market remains choppy with slower-than-expected recovery, CPI is strengthening its position by serving all top prepaid program managers in the U.S. The company is piloting chip-embedded technology for prepaid packages with a large national retailer and sees significant long-term opportunities in the closed-loop market, estimated to be five times the size of open-loop, driven by fraud reduction efforts.

    04

    Operational Efficiency and Margin Improvement

    CPI is driving initiatives to improve margins, including supplier negotiations, realizing incremental acquisition synergies (e.g., freight, scale efficiencies), advancing worksite optimization across Secure Card Solutions, and progressing automation initiatives. These efforts are expected to yield a larger impact on margins in the latter half of the year.

    05

    Balance Sheet Strength and Capital Allocation

    The company continued to strengthen its balance sheet, reducing net leverage to 2.7 times from 3.6 times a year ago and redeeming $26.5 million of senior notes. This progress reflects a disciplined approach to capital allocation, balancing strategic acquisitions like TRISM with deleveraging and interest expense reduction.

    06

    Fort Wayne Facility Contribution

    The Fort Wayne production facility is successfully absorbing additional volumes and allowing for streamlined operations with the Colorado site, enabling efficient work allocation for optimal margins. The facility was built with long-term capacity in mind, ensuring ample room for future growth and modernization.

    AI-generated summary of the company’s earnings call. Not investment advice.