CPI Card Group Inc (PMTS) 2024 Q1 法說會逐字稿

Welcome to the CPI Card Group's first-quarter 2024 earnings call.

歡迎參加 CPI 卡集團 2024 年第一季財報電話會議。

My name is Kathleen, and I will be your operator today.

我叫凱瑟琳，今天我將成為你們的接線生。

(Operator Instructions)

（操作員說明）

And now, I would like to turn the call over to Mike Salop, CPI's Head of Investor Relations.

現在，我想將電話轉給 CPI 投資者關係主管 Mike Salop。

Please go ahead.

請繼續。

Thanks, operator, and good morning, everyone.

謝謝接線員，大家早安。

Welcome to the CPI Card Group first-quarter 2024 earnings webcast and conference call.

歡迎參加 CPI 卡集團 2024 年第一季財報網路廣播與電話會議。

Today's date is May 7, 2024, and on the call today from CPI Card Group are John Lowe, President and Chief Executive Officer; and Jeff Hochstadt, Chief Financial Officer.

今天的日期是 2024 年 5 月 7 日，CPI 卡集團總裁兼執行長 John Lowe 今天接聽了電話；和財務長 Jeff Hochstadt。

Before we begin, I'd like to remind everyone that this call may contain forward-looking statements, as they are defined under the Private Securities Litigation Reform Act of 1995.

在開始之前，我想提醒大家，本次電話會議可能包含前瞻性陳述，這些陳述是根據 1995 年《私人證券訴訟改革法案》定義的。

These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.

這些陳述受到某些風險和不確定性的影響，可能導致實際結果與前瞻性陳述中表達的結果有重大差異。

For a discussion of such risks and uncertainties, please see CPI Card Group's most recent filings with the SEC.

有關此類風險和不確定性的討論，請參閱 CPI 卡集團最近向 SEC 提交的文件。

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.

今天發表的所有前瞻性聲明僅反映我們目前的預期，我們沒有義務更新任何聲明以反映本次電話會議後發生的事件。

Also, during the course of today's call, the company will be discussing one or more non-GAAP financial measures including, but not limited to, EBITDA, adjusted EBITDA, adjusted EBITDA margin, net leverage ratio, and free cash flow.

此外，在今天的電話會議期間，公司將討論一項或多項非公認會計準則財務指標，包括但不限於 EBITDA、調整後 EBITDA、調整後 EBITDA 利潤率、淨槓桿率和自由現金流。

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the press release and slide presentation we issued this morning.

我們今天早上發布的新聞稿和幻燈片簡報中包含了這些非公認會計原則財務指標與最直接可比較的公認會計原則指標的調節表。

Copies 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 March 31, 2024 will be available on CPI's investor relations website.

今天的新聞稿以及本次電話會議附帶的簡報的副本可在 CPI 投資者關係網站 Investor.cpicardgroup.com 上取得。此外，CPI 截至 2024 年 3 月 31 日的季度的 10-Q 表將在 CPI 的投資者關係網站上發布。

On today's call, all growth rates refer to comparisons with the prior year period, unless otherwise noted.

在今天的電話會議上，除非另有說明，所有成長率均指與去年同期的比較。

And now, I'd like to turn the call over to President and Chief Executive Officer John Lowe.

現在，我想將電話轉給總裁兼執行長約翰·洛 (John Lowe)。

Thanks, Mike, and good morning, everyone.

謝謝麥克，大家早安。

On today's call, I will give a brief overview of the quarter and our ongoing strategies.

在今天的電話會議上，我將簡要概述本季和我們正在進行的策略。

Jeff will go into more detail on the results and our 2024 financial outlook, and then we will open the call up for questions.

Jeff 將更詳細地介紹結果和我們 2024 年的財務前景，然後我們將開始提問。

Let's start on slide 4.

讓我們從幻燈片 4 開始。

Overall, we're pleased with the first-quarter performance, which puts us solidly on track to achieve our full-year net sales and adjusted EBITDA financial outlook.

總體而言，我們對第一季的業績感到滿意，這使我們穩步實現全年淨銷售額和調整後 EBITDA 財務前景。

As we discussed when we reported our fourth-quarter results, we anticipated the first half of this year would be challenging, as customers continue to work down their card inventory levels.

正如我們在報告第四季度業績時所討論的那樣，我們預計今年上半年將充滿挑戰，因為客戶將繼續降低卡片庫存水準。

While card sales declined as expected, this impact was partially offset by strong growth from our prepaid business, as well as from our instant issuance and card personalization services businesses within debit and credit.

雖然卡片銷售額如預期下降，但這種影響被我們的預付費業務以及借記卡和信用卡內的即時發卡和卡個性化服務業務的強勁增長所部分抵消。

This resulted in a total net sales decline of 7% in the quarter and sequential growth compared to the fourth quarter in net sales, net income, and adjusted EBITDA.

這導致本季總淨銷售額下降 7%，但淨銷售額、淨利潤和調整後 EBITDA 較第四季環比成長。

Compared to the prior year first quarter, we delivered gross margin improvement and relatively stable adjusted EBITDA margins and also generated solid cash flow.

與去年第一季相比，我們實現了毛利率改善和相對穩定的調整後 EBITDA 利潤率，並產生了穩定的現金流。

Additionally, we made significant progress advancing our strategies and executing our share repurchase program.

此外，我們在推動策略和執行股票回購計畫方面取得了重大進展。

Jeff will go into more detail on our financial results in a few minutes, but first, I would like to briefly review our strategies on slide 5.

Jeff 將在幾分鐘內更詳細地介紹我們的財務業績，但首先，我想簡要回顧一下幻燈片 5 上我們的策略。

Our strategies reflect the opportunities to grow and gain share in our traditional businesses while also enhancing growth by expanding into adjacent markets, including digital solutions, over the long term.

我們的策略反映了在傳統業務中成長和獲得份額的機會，同時也透過長期擴展到鄰近市場（包括數位解決方案）來促進成長。

Our traditional portfolio includes Secure Card, card personalization services, instant issuance solutions, trends on demand, and prepaid solutions.

我們的傳統產品組合包括安全卡、卡片個人化服務、即時發行解決方案、隨選趨勢和預付費解決方案。

Our goal is to continue to gain share in these markets by being the leader in customer service, quality, and innovation.

我們的目標是透過成為客戶服務、品質和創新方面的領導者來繼續獲得這些市場的份額。

One recent example is a contract we signed in the first quarter to expand the relationship with one of our larger customers, which will result in increased share and incremental sales over the life of the contract, which runs through 2029.

最近的一個例子是我們在第一季簽署的一份合同，旨在擴大與我們的一個大客戶的關係，這將導致在合約有效期內（直至 2029 年）份額增加和銷售額增加。

It will take some time to transition the incremental business, but this agreement should aid our growth in 2025 and over the next several years.

增量業務的轉型需要一些時間，但該協議應該有助於我們 2025 年及未來幾年的成長。

As we discussed last quarter, we believe we can supplement core growth over the next few years by expanding into additional markets that are adjacent to our core businesses today.

正如我們上季度討論的那樣，我們相信我們可以透過擴展到與我們今天的核心業務相鄰的其他市場來補充未來幾年的核心成長。

There are two paths for this expansion.

這種擴張有兩條路徑。

One path is leveraging our existing customer base of thousands of financial institutions, most of which are small to medium issuers who rely on third parties for many of their payment services, to provide additional solutions and service offerings to help their customers with their payment needs.

一種途徑是利用我們現有的數千家金融機構客戶群（其中大多數是中小型發行人，他們的許多支付服務依賴第三方）提供額外的解決方案和服務，以幫助客戶滿足支付需求。

An example is digital push provisioning, where we can offer our customers the ability to let their customers seamlessly push their card credentials onto a digital wallet through their mobile banking app, which serves as a complementary offering to physical card personalization.

一個例子是數位推送配置，我們可以為客戶提供能力，讓他們的客戶透過行動銀行應用程式將他們的卡片憑證無縫推送到數位錢包上，該應用程式作為實體卡個性化的補充產品。

In the first quarter, we advanced this initiative, including signing a referral agreement with MEA Financial Enterprises, one of the national leaders in providing software solutions to US financial institutions.

第一季度，我們推進了這項舉措，包括與 MEA Financial Enterprises 簽署推薦協議，MEA Financial Enterprises 是向美國金融機構提供軟體解決方案的國家領導者之一。

Through this agreement, we will have the ability to offer push provisioning services to MEA's mobile app users, which include approximately 300 financial institutions.

透過這項協議，我們將能夠向 MEA 的行動應用程式用戶（包括約 300 家金融機構）提供推播設定服務。

This is one step in opening up the service to both existing and new customers.

這是向現有客戶和新客戶開放服務的一步。

The second adjacent expansion path involves taking existing products and solutions to new customer types, such as health savings account payment cards and instant issuance for customers beyond the financial institution space.

第二條相鄰的擴張路徑涉及將現有產品和解決方案應用於新的客戶類型，例如健康儲蓄帳戶支付卡以及為金融機構領域之外的客戶即時發行卡。

Many of these areas will take some time to develop and drive customer adoption, but we believe there are substantial opportunities to supplement our core growth over the next few years.

其中許多領域需要一些時間來開發和推動客戶採用，但我們相信未來幾年有大量機會來補充我們的核心成長。

In the near term, we remain confident in the overall health of the US card market.

短期內，我們對美國信用卡市場的整體健康狀況仍然充滿信心。

As you can see on slide 6, US cards in circulation continue to grow.

正如您在幻燈片 6 中看到的，美國信用卡的流通量持續增長。

The latest figures from Visa and Mastercard show cards in circulation in the US increased at a 9% CAGR for the three years ending December 31 and were up 7% compared to the prior year quarter.

Visa 和 Mastercard 的最新數據顯示，截至 12 月 31 日的三年間，美國流通的銀行卡複合年增長率為 9%，與去年同期相比增長 7%。

Card issuance trends continue to give us confidence that issuers will eventually need to replenish their inventories, which is consistent with the indications we're hearing from our customers.

發卡趨勢繼續讓我們相信發卡機構最終需要補充庫存，這與我們從客戶那裡聽到的跡像是一致的。

The most recent quarterly earnings reports from the large banks have also demonstrated positive momentum for card programs, and we expect the US debit and credit market will continue to grow over the long term, aided by ongoing preferences for cards and the recurring nature of the industry, as well as trends towards higher value eco-friendly and other contactless cards.

大型銀行最近的季度收益報告也顯示了信用卡項目的積極勢頭，我們預計，由於信用卡的持續偏好和該行業的經常性，從長遠來看，美國借記卡和信用卡市場將繼續增長以及更高價值的環保卡片和其他非接觸式卡片的趨勢。

Another recent data point on the ongoing adoption of contactless cards came from Visa, who stated in its latest earnings report that tap-to-pay penetration at point of sale in the US is nearing 50%.

關於非接觸式卡持續採用的另一個最新數據來自 Visa，該公司在其最新收益報告中表示，美國銷售點的觸碰支付滲透率已接近 50%。

We will continue to keep you apprised of market trends and our strategic progress, but I would now like to turn the call over to Jeff to discuss our first-quarter financial results and 2024 outlook in more detail.

我們將繼續向您通報市場趨勢和我們的策略進展，但我現在想將電話轉給 Jeff，更詳細地討論我們第一季的財務表現和 2024 年的前景。

Jeff?

傑夫？

Thanks, John, and good morning, everyone.

謝謝約翰，大家早安。

I will begin my overview on slide 8.

我將從幻燈片 8 開始概述。

The first quarter environment was generally what we expected for card volumes, as customers continued to work down their inventory levels.

第一季的卡片銷售環境整體符合我們的預期，因為客戶持續降低庫存水準。

Overall results improved compared to recent trends, as card declines were partially offset by strong growth in prepaid, Card@Once, instant issuance, and our other card personalization services.

與近期趨勢相比，整體業績有所改善，預付卡、Card@Once、即時發卡和其他卡片個人化服務的強勁成長部分抵消了卡片的下滑。

We also increased gross margins and generated solid cash flow in the quarter.

我們還提高了毛利率，並在本季度產生了穩定的現金流。

Overall, first-quarter net sales declined 7%, net income decreased 50%, and adjusted EBITDA declined 8% compared to the prior year period.

整體而言，與去年同期相比，第一季淨銷售額下降 7%，淨利潤下降 50%，調整後 EBITDA 下降 8%。

The net income decrease was impacted by the final accrual for the previously announced executive retention award and other costs related to the CEO transition, as well as lower tax rate in the prior year period.

淨利潤下降是由於先前宣布的高階主管留任獎勵的最終應計費用和與執行長過渡相關的其他成本以及上一年期間較低的稅率的影響。

Our net leverage ratio was consistent with year-end at 3.1 times.

我們的淨槓桿率與年底一致，為 3.1 倍。

Sequentially, we posted increases in net sales, net income, and adjusted EBITDA compared to the fourth quarter, thanks primarily to growth in prepaid and the other services businesses.

隨後，與第四季度相比，我們的淨銷售額、淨利潤和調整後 EBITDA 均有所成長，這主要歸功於預付費和其他服務業務的成長。

Turning to the detailed first-quarter results on slide 9, the overall 7% sales decline was comprised of a 14% decrease in our debit and credit segment and a 26% increase in prepaid.

轉向幻燈片 9 上詳細的第一季業績，整體銷售額下降 7%，其中藉記卡和貸記業務下降 ​​14%，預付業務增長 26%。

Within debit and credit, both contactless and contact card sales decreased as expected compared to the prior year first quarter.

在藉記卡和信用卡領域，非接觸式卡和接觸式卡銷售額與去年第一季相比均預期下降。

Those declines were partially offset by strong growth from Card@Once, instant issuance solutions, and other card personalization services.

這些下降被 Card@Once、即時發卡解決方案和其他卡片個人化服務的強勁成長所部分抵消。

Increases in both processing fees and solution sales aided Card@Once as we continued to grow our installation base, while our other card personalization services sales benefited from strong demand for our print-on-demand services and incremental fintech business, including services related to tax refund cards.

隨著我們繼續擴大安裝基礎，處理費和解決方案銷售的增加幫助了Card@Once，而我們的其他卡片個人化服務銷售則受益於對我們的按需列印服務和增量金融科技業務（包括與稅務相關的服務）的強勁需求退款卡。

The increase in prepaid reflects both strong demand from existing customers, including for our leading tamper-evident packaging solutions, as retailers continue to combat fraud and some timing between quarters.

預付費的增加反映了現有客戶的強勁需求，包括隨著零售商繼續打擊詐欺行為以及季度之間的一些時間安排，對我們領先的防篡改包裝解決方案的強勁需求。

Gross profit in the quarter declined 4% from prior year due to the sales decline.

由於銷售額下降，本季毛利較上年同期下降 4%。

Our gross profit margin improved from 35.7% to 37.1% due to lower production costs primarily related to labor efficiencies and costs incurred in the prior year quarter when we transitioned our prepaid production facility workforce from temporary to permanent.

我們的毛利率從 35.7% 提高到 37.1%，原因是生產成本降低，這主要與勞動力效率和去年季度我們將預付生產設施勞動力從臨時員工轉變為永久員工時產生的成本有關。

SG&A expenses, including depreciation and amortization, increased $5 million from the prior year period, primarily due to increased compensation costs, partially offset by lower professional services fees.

SG&A 費用（包括折舊和攤提）比去年同期增加了 500 萬美元，主要是由於薪資成本增加，但部分被專業服務費用下降所抵銷。

The compensation expense includes the final $2 million accrual related to the previous CEO's retention award, as well as some other CEO transition-related items that should come down over the course of the year, primarily relating to executive severance and stock compensation amortization from special grants issued in 2023.

薪酬費用包括與前任執行長保留獎相關的最終200 萬美元應計費用，以及其他一些與執行長過渡相關的項目，這些項目應在一年內減少，主要與高階主管遣散費和特別補助的股票薪酬攤銷有關2023 年發布。

Compared to the prior year quarter, compensation expense also reflects increased salary costs and medical expenses.

與去年同期相比，補償費用也反映出工資成本和醫療費用的增加。

While the majority of the SG&A increase in the quarter was driven by compensation items that should decrease over time, we expect some of that benefit to be partially offset by strategic growth investments in the coming quarters.

雖然本季的銷售、管理及行政費用(SG&A) 成長大部分是由薪酬項目推動的，而薪酬項目應隨著時間的推移而減少，但我們預計其中一些收益將被未來幾季的策略成長投資部分抵消。

Our tax rate in the quarter increased to 28.7% from 20.7% in the first quarter of last year, as the prior year period benefited from a favorable adjustment item.

由於去年同期受益於有利的調整項目，我們本季的稅率從去年第一季的 20.7% 上升至 28.7%。

Net income in the first quarter decreased 50% to $5.5 million, and adjusted EBITDA decreased 8% to $23 million.

第一季淨利潤下降 50% 至 550 萬美元，調整後 EBITDA 下降 8% 至 2,300 萬美元。

Adjusted EBITDA margin of 20.5% was down slightly from 20.7% in the prior year, as the impact of lower sales and higher operating expenses was largely offset by improved gross margins.

調整後 EBITDA 利潤率為 20.5%，較上年的 20.7% 略有下降，因為銷售額下降和營運費用增加的影響在很大程度上被毛利率的提高所抵消。

As mentioned, the net income decline also reflects the impact of the executive retention award accrual and other CEO transition-related costs, which are not included in adjusted EBITDA and a higher tax rate.

如前所述，淨利潤下降也反映了應計高階主管保留獎勵和其他執行長過渡相關成本的影響，這些成本不包括在調整後的 EBITDA 和更高的稅率中。

Turning now to our segments on slide 10, I discussed the segment sales drivers earlier, so I will highlight segment profitability on this slide.

現在轉向投影片 10 上的細分市場，我之前討論了細分市場的銷售驅動因素，因此我將在這張投影片上強調細分市場的獲利能力。

Income from operations for the debit and credit segment decreased 24% to $22.8 million in the first quarter, driven by the sales decline and increased compensation expenses.

由於銷售額下降和薪酬支出增加，第一季借記卡和貸記卡部門的營運收入下降了 24%，至 2,280 萬美元。

Prepaid debit segment income from operations increased 138% to $8.7 million, driven by sales growth and lower production costs, including labor efficiencies, as the prior year first quarter reflected additional expenses related to the staffing transition in our prepaid production facility.

受銷售成長和生產成本（包括勞動力效率）下降的推動，預付借方部門的營運收入成長了138%，達到870 萬美元，因為去年第一季反映了與我們的預付生產設施人員配置過渡相關的額外費用。

Turning to the balance sheet, liquidity, and cash flow on slide 11, for the first quarter, we generated $8.9 million of cash flow from operating activities and invested $1.5 million in net capital expenditures, which resulted in free cash flow of $7.4 million.

轉向幻燈片11 上的資產負債表、流動性和現金流，第一季度，我們從營運活動中產生了890 萬美元的現金流，並投資了150 萬美元的淨資本支出，從而產生了740 萬美元的自由現金流。

This compared to operating cash flow of $8 million and free cash flow of $3.9 million in the prior year first quarter.

相較之下，去年第一季的營運現金流為 800 萬美元，自由現金流為 390 萬美元。

The higher generation of this year's period was driven by further improvement in working capital and lower net capital spending, as we expect CapEx to ramp during the course of the year.

今年這段期間的較高發電量是由營運資本的進一步改善和淨資本支出的下降所推動的，因為我們預計資本支出將在今年期間增加。

On the balance sheet, we had $17.1 million of cash, no borrowings outstanding on our $75 million ABL revolver, and $268 million of senior secured notes outstanding at quarter-end.

在資產負債表上，我們有 1,710 萬美元的現金，7,500 萬美元的 ABL 左輪手槍沒有未償還的借款，季度末未償還的優先擔保票據為 2.68 億美元。

The net leverage ratio of 3.1 times was consistent with the year-end level.

淨槓桿率為3.1倍，與年末水準一致。

Our 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.

我們的資本結構和分配優先事項仍然集中在保持充足的流動性、投資業務（包括可能的策略性收購）、去槓桿化資產負債表以及向股東返還資金。

We have made good progress on our share repurchase program, buying back or committing to purchase approximately $6 million against our $20 million authorization through the end of the first quarter.

我們的股票回購計畫取得了良好進展，截至第一季末，我們已獲得 2,000 萬美元的授權，回購或承諾購買約 600 萬美元。

We spent $1.25 million to repurchase 68,000 shares of common stock in the open market in the first quarter, and early in the second quarter, we completed the purchase of an additional 244,000 shares for $4.4 million from our majority shareholder pursuant to the stock purchase agreement announced in December.

第一季我們花費125萬美元在公開市場回購了68,000股普通股，第二季初，我們根據公佈的股票購買協議以440萬美元完成了從大股東手中額外購買244,000股普通股在十二月。

Under that agreement, we committed to repurchase shares from our majority shareholder at a ratio of 3-to-1 to the number of shares we repurchased in the open market from December to March at a price of 98% of the average open market repurchase price over that period.

根據該協議，我們承諾以 12 月至 3 月在公開市場回購股份數量的 3 比 1 的比例從大股東回購股份，價格為公開市場平均回購價格的 98%在那段時間。

We have a similar agreement for the second quarter that was signed in March.

我們在三月簽署了第二季的類似協議。

Turning to our 2024 financial outlook on slide 12, today, we are affirming the full-year net sales and adjusted EBITDA financial outlook provided in March.

今天，轉向幻燈片 12 上的 2024 年財務展望，我們確認 3 月份提供的全年淨銷售額和調整後 EBITDA 財務展望。

Specifically, we continue to project slight increases for the year for both net sales and adjusted EBITDA.

具體來說，我們繼續預期今年淨銷售額和調整後 EBITDA 均略有成長。

We maintain our view that the market will gradually return to growth over the course of the year, and we expect sales declines in the first half of the year to be offset by growth in the second half, which will also reflect anticipated share gains.

我們維持市場將在年內逐漸恢復成長的觀點，預計上半年的銷售下降將被下半年的成長所抵消，這也將反映預期的份額收益。

As John mentioned, we recently won greater share with one of our large customers that will provide us incremental business and share over the next several years.

正如約翰所提到的，我們最近贏得了一位大客戶的更大份額，這將在未來幾年為我們提供增量業務和份額。

This contract requires certain upfront incentives that will negatively impact our cash flow in 2024.

這份合約需要一定的前期激勵措施，這將對我們 2024 年的現金流產生負面影響。

Consequently, we have adjusted our full-year free cash flow outlook to be approximately past the 2023 level of $27.6 million, which reflects the increased capital spending we discussed in March, as well as the incentives related to this contract.

因此，我們將全年自由現金流前景調整為大約超過 2023 年 2760 萬美元的水平，這反映了我們在 3 月份討論的資本支出增加以及與該合約相關的激勵措施。

We continue to expect our year-end net leverage ratio to be between 3.0 and 3.5 times.

我們繼續預期年末淨槓桿比率將在 3.0 至 3.5 倍之間。

I will now pass the call back to John for some closing remarks on slide 13.

我現在將把電話轉給 John，請他對投影片 13 做一些總結發言。

John?

約翰？

Thanks, Jeff.

謝謝，傑夫。

To summarize, we are pleased with the first quarter performance.

總而言之，我們對第一季的業績感到滿意。

Our prepaid, Card@Once, and other card personalization businesses helped offset expected debit and credit card declines in the quarter, and overall results improved sequentially compared to the fourth quarter.

我們的預付卡、Card@Once 和其他卡片個人化業務幫助抵消了本季度借記卡和信用卡的預期下滑，整體業績較第四季度環比有所改善。

While challenges remain in the market, we are on track for the full year and have affirmed our net sales and adjusted EBITDA outlook.

儘管市場仍然存在挑戰，但我們全年的業績仍處於正軌，並確認了我們的淨銷售額和調整後的 EBITDA 前景。

Card issuance remains healthy, as cards in circulation in the US continue to grow, which gives us confidence the industry will return to more normalized dynamics once inventories are worked down.

隨著美國銀行卡流通量持續成長，銀行卡發行依然健康，這讓我們相信，一旦庫存減少，該產業將恢復更正常化的動態。

Long-term market trends are still strong, and we will continue to focus on gaining share in our traditional businesses by leading in customer service, quality, and innovation, while increasing our addressable market through expansion into adjacencies over time.

長期市場趨勢仍然強勁，我們將繼續專注於透過領先的客戶服務、品質和創新來贏得傳統業務的份額，同時透過逐步擴展到鄰近地區來擴大我們的潛在市場。

Operator, we will now open the call up for questions.

接線員，我們現在開始提問。

(Operator Instructions) Jaeson Schmidt, Lake Street.

（操作員指示）Jaeson Schmidt，湖街。

Hey, guys.

大家好。

Thanks for taking my questions.

感謝您回答我的問題。

I just want to start with that multi-year contract.

我只想從這份多年合約開始。

How should we think about the size and scope of this?

我們應該如何考慮其規模和範圍？

Is there a minimum volume level each year, or is that over the life of the contract?

每年是否有最低交易量水平，或在合約有效期內是否有最低交易量水平？

And I guess, relatedly, are there opportunities to pursue long-term contracts with other customers?

我想，與此相關的是，是否有機會與其他客戶簽訂長期合約？

Hey, Jason.

嘿，傑森。

Good morning.

早安.

It's John here.

約翰在這裡。

Yeah, we're excited about it.

是的，我們對此感到興奮。

It's a good deal.

這是一個很好的交易。

With one of our larger customers, it's a little bit more than a five-year deal, actually goes through 2029.

對於我們的一個大客戶來說，這比一份為期五年的協議要長一點，實際上會持續到 2029 年。

And just for context, we do have contracts with a number of our customers, large, small, across the business.

就背景而言，我們確實與整個企業的許多客戶簽訂了合同，無論大小。

This one does provide committed values over the next five-plus years, and it's a big win for us.

這確實為未來五年多提供了承諾的價值，這對我們來說是一個巨大的勝利。

We had to provide incentives on the front end to win this deal, but at the same time, we're getting fairly large committed volumes on the back end.

我們必須在前端提供激勵措施才能贏得這筆交易，但同時，我們在後端獲得了相當大的承諾量。

So it's a share gain and, ultimately, will benefit our debit and credit side of the business over the next five-plus years.

因此，這是一種份額收益，最終將有利於我們未來五年多業務的借方和貸方業務。

Okay, that's great to hear.

好的，很高興聽到這個消息。

And it sounds like the prepaid segment was a little stronger than expected.

聽起來預付費市場比預期強。

Was this driven by a single customer, or was it more broad-based?

這是由單一客戶驅動的，還是具有更廣泛的基礎？

The prepaid business has been performing pretty well over the last number of years.

預付費業務在過去幾年表現良好。

It's less seasonal than it used to be, and there's a few things happening there.

現在的季節性比以前少了，而且那裡發生了一些事情。

One, we do see fraud as a greater challenge in the prepaid market.

第一，我們確實認為詐欺是預付費市場面臨的更大挑戰。

Our team does a good job of building out packages that protect against fraud.

我們的團隊在建立防止詐騙的軟體包方面做得很好。

We can charge slightly higher prices for those types of packages, so that benefits us.

我們可以對這些類型的套餐收取稍高的價格，這對我們有利。

We have been expanding in one of our adjacencies that we do out of our prepaid business, which is in the health savings account space, so that's been benefiting us.

我們一直在擴展預付費業務的一項週邊業務，即健康儲蓄帳戶領域，因此這使我們受益。

But the prepaid business was strong.

但預付費業務表現強勁。

We did have strong performance with one of our larger customers, but keep in mind, it's a lumpy business as well, so there's a little bit of timing there, but a good quarter for our prepaid business.

我們確實在一個較大的客戶中表現強勁，但請記住，這也是一項不穩定的業務，因此存在一些時機，但對於我們的預付費業務來說是一個很好的季度。

No, that's helpful.

不，這很有幫助。

And just last one from me, and I'll jump back in the queue.

就我的最後一篇，我會跳回隊列。

When do you think the excess inventory situation will be fully resolved?

您認為庫存過剩的情況什麼時候能徹底解決？

Jason, it's hard to put a specific point in time on when inventories will be completely worked out and normalized, but we did see our expectations met in terms of card performance in Q1.

傑森，很難確定庫存何時完全解決並正常化的具體時間，但我們確實看到第一季卡片性能達到了我們的預期。

Card volumes were actually slightly up in Q1 from Q4.

實際上，第一季的卡片交易量比第四季略有上升。

But keep in mind, there are other businesses that are, let's say, less susceptible to a certain extent, and our personalization services, that's our personalization issuance side, as well as our Card@Once instant issuance side, both of those performed better than expected.

但請記住，還有其他業務，比如說，在某種程度上不太容易受到影響，我們的個人化服務，就是我們的個人化發行端，還有我們的Card@Once即時發行端，這兩個方面的表現都比Card@Once更好。

We also had some tax season benefits on that side.

我們在這方面也有一些稅季福利。

So the card inventories, if you think about the broader market, cards in circulation are still really healthy, 9% growth over the last three years from a CAGR perspective for Visa and Mastercard stats.

因此，如果考慮到更廣泛的市場，信用卡庫存仍然非常健康，從 Visa 和 Mastercard 統計數據的複合年增長率的角度來看，過去三年增長了 9%。

And so we still feel that cards are -- as they become worked down, ultimately we'll see the market normalized, but it's hard to put a specific date on when that'll occur.

因此，我們仍然認為，隨著卡片的消退，最終我們將看到市場正常化，但很難確定特定的日期。

Okay, understood.

好的，明白了。

Appreciate all the color.

欣賞所有的顏色。

Thanks a lot, guys.

非常感謝，夥計們。

Andrew Scutt, Roth Capital.

安德魯·斯卡特，羅斯資本。

Hey, good morning.

嗨，早安。

Congrats on the strong results, and thanks for taking my questions.

恭喜我們取得了優異的成績，並感謝您回答我的問題。

First one from me here is on gross margin.

我的第一個問題是毛利率。

You guys had some healthy expansion in the quarter, and I was wondering if that was kind of primarily due to mix or if there were other efficiencies kind of mixed in there that kind of helped drive the margin growth.

你們在本季實現了一些健康的擴張，我想知道這是否主要是由於混合所致，或者是否有其他效率混合在一起，有助於推動利潤成長。

Hi, Andrew.

嗨，安德魯。

This is Jeff.

這是傑夫。

I mean, we did have a good quarter from a margin perspective, but most of it was really due to our production costs and really primarily related to labor efficiencies.

我的意思是，從利潤率的角度來看，我們確實有一個不錯的季度，但大部分實際上是由於我們的生產成本，並且主要與勞動力效率有關。

If you recall, Q1 last year, we transitioned in our Minnesota facility from temporary workforce to a more permanent workforce, and so we had some costs associated with that move.

如果您還記得，去年第一季度，我們在明尼蘇達州的工廠從臨時勞動力轉變為更長期的勞動力，因此我們產生了與這項舉措相關的一些成本。

Obviously, we don't have those costs in this quarter, so year over year, we were able to improve margin from that standpoint.

顯然，我們本季沒有這些成本，因此從這個角度來看，我們能夠提高利潤率。

Also, just labor efficiencies across the board, we've been focusing on that, and you see some of that realization in Q1.

此外，我們一直在關注全面的勞動力效率，您將在第一季看到其中的一些實現。

Now, when you look at prepaid, a lot of times when we grow sales, we get some operating leverage, operating leverage benefit.

現在，當你看看預付時，很多時候當我們增加銷售時，我們會獲得一些營運槓桿，營運槓桿收益。

And so if you look at our prepaid business, we had strong growth there, and that generated some operating leverage.

因此，如果你看看我們的預付費業務，我們的成長強勁，這產生了一些營運槓桿。

When you look year over year at debit and credit, we had sales decline and so you had a lower margin year over year in debit and credit.

當您逐年查看借方和貸方時，我們的銷售額有所下降，因此借方和貸方的利潤率逐年下降。

But ultimately, those are the puts and takes, but across the board, it was really these labor efficiencies that drove the margin.

但歸根結底，這些都是看跌期權和賣出期權，但總的來說，確實是這些勞動效率推動了利潤率。

Great.

偉大的。

Thank you for the color.

謝謝你的顏色。

And my second one here is, so a lot of your ancillary services that you guys provide, Card@Once and push provisioning, it seems like those areas have been strong.

我的第二個問題是，你們提供的許多輔助服務，Card@Once 和推送配置，看起來這些領域都很強大。

Just kind of want to talk about the MEA Financial partnership you signed.

只是想談談您簽署的 MEA Financial 合作夥伴關係。

One, kind of how long does it take for a partnership for that to ramp to kind of see some meaningful revenues, and are there other opportunities in the market space to sign similar agreements?

第一，合作關係需要多長時間才能看到一些有意義的收入，市場空間是否有其他機會簽署類似協議？

I mean, so another good agreement we're excited about.

我的意思是，我們對又一項良好的協議感到興奮。

MEA is a good provider of software solutions to financial institutions in the US, and what we're specifically working with them on is them being a mobile app provider for our push provisioning services.

MEA 是一家為美國金融機構提供軟體解決方案的優秀供應商，我們與他們合作的具體內容是讓他們成為我們的推播組態服務的行動應用程式供應商。

They have about 300 financial institutions that they service.

他們為大約 300 家金融機構提供服務。

That kind of creates our addressable market there.

這就是我們在那裡創造的潛在市場。

But just for context, what we do on the push provisioning side is a little bit similar from a market -- addressable market perspective, if you will, to what we've done in our Card@Once instant issuance side over the years.

但就上下文而言，我們在推送供應方面所做的事情與我們多年來在 Card@Once 即時發行方面所做的事情有點相似，如果你願意的話，從可尋址市場的角度來看。

So as a reminder, our Card@Once business, we're in about 15,000 branches across the US.

提醒一下，我們的 Card@Once 業務在美國約有 15,000 個分支機構。

We have about 2,200 financial institutions that we've penetrated thus far, and that's taken us 10 years to do that.

到目前為止，我們已經滲透了大約 2,200 家金融機構，這花了我們 10 年的時間。

This is a slow growth kind of penetration, if you will, but it's a strong value proposition for our customers, and it's a good margin business for us as well.

如果你願意的話，這是一種緩慢成長的滲透，但它對我們的客戶來說是一個強大的價值主張，對我們來說也是一個很好的利潤業務。

So it's fairly early days, but we're excited about the deal with MEA and excited about what we're going to do on our broader digital solution side.

所以現在還為時過早，但我們對與 MEA 的交易感到興奮，並對我們將在更廣泛的數位解決方案方面所做的事情感到興奮。

Thanks.

謝謝。

I appreciate the detail.

我很欣賞細節。

And last for me, I know we're kind of early days in the Indiana facility expansion, but it seems like you guys might have a little more visibility on CapEx here in the year.

最後對我來說，我知道我們在印第安納州設施擴張方面還處於早期階段，但看來你們今年可能對資本支出有更多的了解。

Is there -- just any updates you guys can give us on the new facility?

你們能給我們提供有關新設施的任何更新嗎？

We mentioned this in the last call.

我們在上次通話中提到了這一點。

We expect about $5 million worth of CapEx related to Indiana this year.

我們預計今年與印第安納州相關的資本支出約為 500 萬美元。

So that's still the case.

所以還是這樣。

In the back half of the year, we'll probably have some OpEx also that hits the SG&A line, but that's what we expected so far.

在今年下半年，我們可能會有一些營運支出也達到SG&A線，但這正是我們迄今為止的預期。

Nothing different than what we expected at the beginning of the year.

與我們年初的預期沒有什麼不同。

Perfect.

完美的。

Well, thanks.

非常感謝。

Congrats again on the strong results, and I'll hop back into queue.

再次恭喜我們取得的優異成績，我將重新回到隊列中。

(Operator Instructions) As there are no further questions in the queue, I would now like to turn the call back over to John Lowe for closing remarks.

（操作員說明）由於佇列中沒有其他問題，我現在想將電話轉回給 John Lowe 進行結束語。

Thanks, operator.

謝謝，接線生。

Before we sign off, I want to acknowledge and thank all of our CPI employees for everything they do for our company and our customers every single day.

在我們結束之前，我要感謝所有 CPI 員工每天為我們公司和客戶所做的一切。

We have outstanding teams who are dedicated and passionate about our business and results.

我們擁有優秀的團隊，他們對我們的業務和成果充滿奉獻精神和熱情。

Thank you all for joining our call this morning, and we hope you have a great day.

感謝大家今天早上參加我們的電話會議，希望您有個愉快的一天。

Ladies and gentlemen, that concludes today's call.

女士們、先生們，今天的電話會議到此結束。

Thank you all for joining.

感謝大家的加入。

You may now disconnect.

您現在可以斷開連線。