Summary of CPI's Q2 2026 Earnings Call

1Key Financial Results and Metrics

Revenue Growth: Q2 revenue increased by 15% to $149 million, with a 17% growth for the first half, marking a record first half for the company.

Adjusted EBITDA: Rose 7% to $24 million in Q2, driven by revenue growth and tariff refunds.

Gross Profit Margin: Improved to 32.5%, up 160 basis points year-over-year, aided by over $3 million in tariff refunds.

Free Cash Flow: Reached a record $36 million in the first half, compared to $1 million in the prior year.

Net Leverage Ratio: Reduced to 2.7x, down from 3.6x year-over-year.

2Strategic Updates and Business Highlights

Acquisition of TRISM: This strategic acquisition enhances CPI's position in the instant issuance market, expected to double the addressable market and contribute to Integrated Paytech growth, projected at 20% for 2026.

Secure Card Solutions: Continued strong performance, with Q2 revenue up 17%, driven by contactless card volumes and personalization solutions.

Integrated Paytech Growth: Despite a slower start, growth is expected to accelerate in the second half, supported by Card@Once and contributions from TRISM.

Market Positioning: CPI is focusing on expanding its digital and cloud capabilities, enhancing customer relationships, and leveraging tokenization for new revenue streams.

3Forward Guidance and Outlook

Revenue Growth: Full-year revenue growth guidance raised to high single digits to low double digits.

Free Cash Flow: Expected to range from $45 million to $50 million, an increase from previous guidance.

Adjusted EBITDA: Guidance remains unchanged, with expectations of low to mid-single-digit growth.

Net Leverage: Projected to remain between 2.5x to 3.0x by year-end.

4Challenges and Points of Concern

Prepaid Solutions Segment: Experiencing softness, with expectations of continued challenges into late 2026 due to uneven customer ordering patterns and tough year-over-year comparisons.

Market Choppiness: The prepaid market is anticipated to remain volatile, impacting overall performance.

Increased SG&A Expenses: Rising costs due to Arroweye integration and investments in digital technology, which may pressure margins.

5Notable Q&A Insights

TRISM Acquisition Impact: Expected to contribute $3.5 million to $4 million in revenue for the latter part of 2026, with potential doubling in 2027.

Secure Card Solutions Growth: Organic growth in this segment remains strong, with expectations to maintain momentum in the second half.

Free Cash Flow Drivers: Strong performance attributed to inventory optimization, but some timing issues in accounts receivable and payables may affect future cash flow.

Prepaid Market Dynamics: CPI is well-positioned to capitalize on the closed-loop prepaid market, which is significantly larger than open-loop, despite current market challenges. Overall, CPI demonstrated strong financial performance in Q2 2026, with strategic acquisitions and growth initiatives positioning the company well for the future, despite facing challenges in the prepaid segment.