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CPI Card Group (PMTS) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Aug 6, 2026

Source: earnings call transcript

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

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

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%——

Deals & partnerships

TRISM Instant 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.

ArrowEye Contributed to Secure Card Solutions revenue and customer growth.

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

Blossom Lead-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 Answers Leading 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.

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

Extended relationship spanning more than two decades.

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

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

Risks & headwinds

Market choppiness in prepaid solutions into 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 margins Q2 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 increase Q2 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

Prepaid market recovery

next quarter
Current choppy, softness expected to continue into late 2026
Target Signs 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.

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Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.