CPI Card Group Stock

CPI Card Group Inc. (CPI) operates as a payment technology company. The company provides comprehensive Financial Payment Card solutions in the United States. The company defines Financial Payment Cards as credit, debit and Prepaid Debit Cards issued on the networks of the Payment Card Brands (Visa, Mastercard, American Express and Discover).

The company defines Prepaid Debit Cards as debit cards issued on the networks of the Payment Card Brands, but not linked to a traditional bank account. The company also offers an instant card issuance solution, which provides customers the ability to issue a personalized debit or credit card within the bank branch to individual cardholders. The company has established a leading position in the Financial Payment Card solutions market.

The company serves a diverse set of several thousand customers which includes direct customers and indirect customer relationships, whereby CPI provides Financial Payment Card solutions to a customer through a Group Service Provider (as defined below). The company’s customers include some of the largest issuers of debit and credit cards in the United States, the largest Prepaid Debit Card program managers in the United States, numerous financial technology companies (fintechs), as well as independent community banks, credit unions and Group Service Providers. The company defines Group Service Providers as reseller or card processor organizations that assist small card issuers, such as credit unions, with managing their credit and debit card programs, including managing the Financial Payment Card issuance process, core banking operations and other financial services.

The company serves its customers through a network of high-security production and card services facilities in the United States, each of which is audited for compliance with the standards of the Payment Card Industry Security Standards Council (the PCI Security Standards Council) by one or more of the Payment Card Brands. Many of the company’s customers require it to comply with PCI Security Standards Council requirements that relate to the provision of its products and services. The company’s network of high-security production facilities allows it to optimize its solutions offerings and to serve the needs of its diverse customer base.

The company’s business consists of the following segments:

Debit and Credit, which primarily produces Financial Payment Cards and provides integrated card services to card-issuing financial institutions primarily in the United States; and

Prepaid Debit, which primarily provides integrated prepaid card services to Prepaid Debit Card program managers primarily in the United States.

Strategy

The company is a payment technology company that provides end-to-end debit, credit and prepaid payment solutions delivered physically, digitally and on-demand. The company focuses on its four strategic priorities: deep customer focus, market-leading quality products and customer service, continuous innovation, and market competitive business model.

Products and Services

EMV Financial Payment Cards (Contact and Contactless Dual-Interface)

The company produces plastic EMV cards, including its eco-focused solutions that encased metal contact EMV cards. These EMV cards feature an integrated circuit that interfaces with an EMV payment terminal over a contact plate on the surface of the card when inserted into an EMV-enabled payment terminal. The company also produces contactless EMV cards which feature a radio-frequency identification (RFID) antenna that utilizes near field communications (NFC) technology to allow transactions to process on a contactless basis when the card is brought within the requisite proximity to an NFC-enabled payment terminal. Dual-interface EMV cards also have contact EMV technology, and the company generally refers to all cards it produces with an RFID antenna as ‘contactless’ cards.

Earth Elements Eco-Focused Cards

The company is a leading provider of eco-focused card solutions in the U.S., having sold more than 90 million eco-focused contactless payment cards since launch in 2019. The company’s Earth Elements portfolio offers eco-focused solutions, including its Second Wave cards that feature a core made with ROBP and its Earthwise cards made with upcycled plastic. Dependent upon design and card construction, Earth Elements cards incorporate varying types and amounts of upcycled plastic content, including ROBP, recycled PVC and recycled PET-G. Cards in the Earth Elements portfolio are available in all forms of EMV Financial Payment Cards (contact and contactless dual-interface), and have been approved by two of the major Payment Card Brands. These solutions aim to satisfy increasing consumer demand for more eco-focused products and help support the company’s and its customers’ environmental, social and governance (ESG) objectives.

Non-EMV Financial Payment Cards

The company produces non-EMV cards that utilize magnetic stripes, contactless cards that utilize NFC technology, and cards that include both magnetic stripes and NFC technology. In addition, the company produces non-EMV cards that are issued on the networks of the Payment Card Brands, including prepaid debit cards. In 2020, the company began producing non-EMV cards for the purpose of government disbursement in the U.S., and has produced non-EMV transit cards and health savings account cards. The company also produces retail gift cards that are not issued on the networks of the Payment Card Brands.

Card Data Personalization and Fulfillment

The company provides data preparation and card data personalization solutions for debit, credit and Prepaid Debit Cards in contact, contactless, and dual-interface EMV, and non-EMV card formats. The company’s personalization services are technology-driven with full color printing and edge-to-edge coverage, and provides a wide range of card customization options, using advanced processes to personalize (encode, program and emboss or print with data, such as cardholder name and account number) and fulfill cards to individual cardholders. The company’s services provide customers with an inventory of their card stock and fulfillment materials. In addition, the company provides EMV data preparation services for its customers and in certain cases generate PIN numbers and mailers on their behalf. The company also provides consultation and card design services to further assist customers in card customization.

Print-On-Demand Solution

Through its print-on-demand services, the company is able to produce images, personalized payment cards and related collateral on a one-by-one, on-demand basis for its customers, enabling individualized offerings and reducing inventory. The company’s service offering includes online ordering of a customized payment card through a program manager, with direct fulfillment to a consumer. The company’s print-on-demand solution further differentiates it with its financial institution and prepaid debit card program manager customers and enables it to access business-to-business and business-to-consumer verticals such as healthcare, transit, payroll, corporate incentives, government disbursement, benefits and insurance.

Instant Card Issuance Systems and Services

In addition to centralized personalization services performed at its facilities, the company’s customers may also utilize personalization services through Card@Once, its proprietary and patented instant card issuance system and software-as-a service (SaaS) solution, which provides its customers the ability to issue a completely personalized, permanent debit or credit card within the bank branch to individual cardholders upon demand. The company’s instant issuance system is enabled by cloud-based software that securely transfers data from its servers to encode a magnetic stripe card, a contact EMV card or a contactless dual-interface Europay, Mastercard and Visa (EMV) card, and personalize the card on a desktop printer solution provided by CPI. These processes are audited for PCI data security standards compliance annually. The company’s instant issuance system generates both initial sales revenue for the printer solution and recurring revenue from card personalization and sales of cards and consumables. The company offers multiple Card@Once solutions, including its premium Spectrum solution that enables issuers to produce a high resolution payment card with over-the-edge printing capability.

Digital Services

The company provides digital services and issuance technologies, including online card ordering, order lifecycle management, customer inventory management, self-service card customization, push provisioning, and other innovative solutions.

Tamper-Evident Secure Packaging Solutions

The company offers specialized and innovative tamper-evident secure packaging products and services to customers aimed at reducing fraud for Prepaid Debit Cards sold through the retail channel. In certain cases, it also manages the fulfillment of fully-completed Prepaid Debit Card packages to retail locations on behalf of its customers utilizing this solution.

Customers

The company categorizes its customers as follows: large issuers, small to mid-sized issuers, fintechs, prepaid debit issuers and program managers and Group Service Providers. The company considers large issuers to be the top 10 card issuers in the United States based on an average of cards issued during the past three years. The company’s diverse customer base includes some of the largest issuers of credit and debit cards in the United States and the largest Prepaid Debit Card program managers in the United States.

The company had one customer that accounted for 10% or more of its net sales in 2022.

Production and Services

The company has a network of high-security facilities that it leverages to fulfill customer orders, with an array of products and services available to its customers. The company has designed its facilities and operating processes to target providing exceptional service to all customers, with capabilities to execute high-volume production runs; execute lower-volume production runs of smaller orders, as well as on-demand solutions; and meet the specific needs of its Prepaid Debit Card customers, as an industry leader in tamper-evident secure card packaging, through its expertise and capabilities specifically designed for this prepaid retail market.

As of December 31, 2022, the company operated facilities comprising approximately 386,000 square feet in the United States where it focuses on Financial Payment Card production, personalization services, card printer provisioning and fulfillment, card packaging and fulfillment services.

Sales and Marketing

The company markets itself as a leader and trusted partner in payments, seeking to meet or exceed the needs of its customers through high quality, flexibility and meaningful, innovative products at value-driven pricing. The company strategizes and collaborates with its customers to bring them valuable and innovative solutions. The company has sales representatives, customer relationships and partners that provide a wide geographic reach across the United States to sell and market its solutions. The company’s sales representatives offer a complete end-to-end solution that incorporates the full spectrum of its products and services from concept to delivery. The company’s sales and marketing strategy focuses on strengthening its relationships with existing customers through a consultative approach that includes cross-selling expanded services and sharing expertise to enhance customers’ card programs. The company’s marketing efforts focus on the needs of its specific types of customers. The company uses an array of different marketing communications and thought leadership across various industry publications, editorial white papers, case studies, conferences and trade shows, print and digital advertisements, educational webinars, podcasts, and blogs to introduce its existing customers and new customers to innovations in the payments market.

Intellectual Property

As of December 31, 2022, the company had 48 U.S. and foreign trademark registrations and applications, 39 existing U.S. patents, 42 existing foreign patents, as well as 45 pending U.S. and foreign patent applications. The company’s U.S. and foreign patents and applications have an average remaining maturity of approximately 13 years, and its trademarks will be due for renewal for additional ten year periods on an ongoing basis.

Regulation

As a service provider to financial institutions in the United States, the company is subject to certain Federal Trade Commission requirements, certain privacy provisions of the Gramm-Leach-Bliley Act and its implementing regulations, various other federal and state privacy statutes and regulations, and certain of the PCI Security Standards Council’s requirements, and the Health Insurance Portability and Accountability Act (HIPAA), each of which is subject to change at any time. Outside of the United States, the company is subject to privacy laws and regulations of certain countries and jurisdictions.

Under the PCI Security Standards Council’s requirements, the company must meet certain security standards in order to achieve compliance that allows it to produce and personalize Financial Payment Cards issued on their networks. These standards include extensive requirements with respect to the physical characteristics of its facilities, as well as its electronic treatment and storage of cardholder data.

In order to comply with its obligations under applicable laws, the company is required, among other things, to comply with reporting requirements, to implement operating policies and procedures to comply with Office of Foreign Assets Control requirements, to protect the privacy and security of its customers’ information and to undergo periodic audits and examinations.

The Consumer Financial Protection Bureau (CFPB) has issued guidance that applies to ‘supervised service providers’, which the CFPB has defined to include service providers, like the company, as well as CFPB supervised banks and nonbanks.

History

The company, a Delaware corporation, was founded in 2007. It was incorporated in 2007. The company was formerly known as CPI Holdings I, Inc. and changed its name to CPI Card Group Inc. in 2015.